Writing for Kiplinger, RetireOne CEO David Stone says recessions are a normal part of the economic cycle. He argues that during these market cycles, equities prices are ‘pruned’ back to allow for healthy future growth. Stocks are approaching historical highs anyway. A recession now could make future investments cheaper, which would be good in the long run.
In the short term, the story can be a bit different. Depending on their severity, economic downturns present different challenges for workers based on their age, and how close they are to retiring.
Folks in the five-year period just before retirement and in the first five years of retirement face something called “sequence of returns risk.” A recession early in retirement can lower the available overall rate of return and negatively impact the rest of retirement. Here’s how folks in that fragile decade can ‘insure’ themselves against this risk during this critical period using a low-cost, zero-commission variable annuity.