Sleepwalking into the Imminent Recession

Saving for Retirement? Get Ready For This Imminent Economic Shift

From Peter Reagan at Birch Gold Group

Get prepared, because it looks as though some form of economic downturn is brewing, and the markets could start suffering impacts later this year.

Of course, we’ve been sounding the alarm for quite some time, but now it also appears that mainstream strategists are catching on.

In fact, one senior financial advisor recently went on the record with a pretty grim forecast:

The latest U.S. economic data suggests a recession is coming, according to the chief executive of financial advisory firm Longview Economics, and investors may need to prepare for some pain…

Chris Watling said he believed a recession was on its way, citing what he described as “pretty compelling” and “brutally bad” leading economic indicators.”

The article continued to predict a recession within the next 12 months.

A recession is more than “a bad spell of data”

It’s easy to get caught up in the numbers and forget that “recession” is more than just a word. Behind the economic data are real American families, whose jobs and financial futures are at stake.

This article captures the recessionary feedback loop very well:

Recession-fearing investors make markets volatile; that, in turn, limits publicly traded firms’ access to cash. Fewer consumers out shopping weighs on firms’ sales – forcing businesses to cut costs to make ends meet. Joblessness can further exacerbate belt tightening among consumers, perpetuating even more unemployment.

In addition to that, the impacts from a recession don’t stop the moment the economy contracts, though this leads to panic as the contagion spreads.

Just how big a deal is that for you?

Knowing exactly where you are in the three phases of retirement saving can help you evaluate exactly how concerned you should be. (There’s a longer discussion at the link.)

During the accumulation phase, a recession and plunging asset prices might actually be good news.

If you’re in the preservation phase, a recession is bad news if your savings are over-invested in riskier assets. As Kristian Finfrock, an investment advisor writing for Kiplinger’s, said:

…you should dial down your portfolio risk to better protect your money. Change your mindset. Instead of focusing strictly on growth, think about how much you’re comfortable losing at this time in your life.

And the closer you are to retirement, the more important this question becomes.

Recessions are an inevitable fact of life. They’re unavoidable.

Since we can’t control the economy, let’s focus on the things we can control…

Building a recession-resistant financial plan

There are a few practical steps you can take to ensure your savings are recession-resistant. Probably the most important consideration is whether you’re taking on too much risk – that’s an easy trap to fall into during good times. If you haven’t reflected on how much you’re comfortable losing at this time in your life, it’s a good idea to do so! As Mike Tyson famously said, “Everyone has a plan until they get punched in the mouth.”

You do not want to discover the sick feeling in the pit of your stomach that you’ve been taking too much financial risk in the middle of an economic crisis.

Practical steps you can take:

Build an emergency fund if you haven’t already.
If you don’t have a retirement plan, make one.
Determine which phase of retirement saving you’re currently in.
Evaluate your overall risk exposure.
Consider whether you’ve sufficiently diversified with inflation-resistant investments.

Speaking of diversification, Dr. Ron Paul told us he thinks of diversification with gold as insurance:

I would think people who are in it for the long term, it looks to me like this would be a very good time to buy … I look at gold as insurance.”

Historically, demand for gold as a safe haven surges during economic downturns. That means it’s smart to diversify your savings with gold before a recession begins.

As Precious Metals Specialist Phillip Patrick says, “When’s the best time to buy gold? Fifty years ago. When’s the second-best time to buy gold? Today.”

Just like a fire extinguisher or car insurance, it’s better to buy gold before you need it.

2023, Featured, recession, retirement plan, retirement savings