NAVIGATING RECESSIONS: A GUIDE FOR INVESTORS AT EVERY STAGE

Today, we're diving into a crucial topic that affects investors of all ages: recession planning. Whether you're in the wealth-building phase (accumulation) or enjoying retirement (distribution), understanding how to navigate recessions is important - because the reality is you WILL face recessions in your investment lifetime. That I can guarantee! So having a plan ahead of time will bring confidence to your finances when those recessions hit.

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THE ACCUMULATION STAGE: TIPS FOR YOUNG INVESTORS

If you are a millennial like me - we have trauma from growing up with what seemed like crisis after crisis. We remember 9/11 and the economy after, we were graduating college (or close to it) during the Great Recession of 2008 and then just as we were settling in to our good earnings years we had to navigate a pandemic. It's no wonder that the word "recession" sparks serious anxiety. But it doesn't have to! Recessions are a potential challenge, but if you're prepared, you can actually make money. Here are some tips for those in the accumulation phase:

1. Emergency Fund

• Build an emergency fund covering three to six months of living expenses (maybe more if you are an entrepreneur or commission based)

• Consider high-yield savings accounts or money market investments for better returns.

2. Stash Cash

• Set aside extra cash for potential opportunities during a recession.

• Capitalize on lower prices for short-term savings goals like buying a car or real estate.

3. Automate Investments

• Keep your investments automated, ensuring consistent contributions.

• Dollar-cost averaging helps in acquiring shares at favorable prices during market downturns.

4. Side Hustle or Backup Plan

• Explore side hustles or backup job options if your current position is susceptible to recession impacts.

• Diversify income sources for added stability.

5. Budget Knowledge

• Understand your budget thoroughly, identifying areas that can be adjusted if needed.

• Be proactive in managing your finances during economic uncertainties.

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FOR RETIREES AND PRE-RETIREES (DISTRIBUTION PHASE): RECESSION PLANNING STRATEGIES

Retirees and pre-retirees face unique challenges during recessions because you rely on income from your accounts. Here's a breakdown of strategies to ensure financial stability:

1. Buckets Approach

• Divide investments into three buckets: 0-3 years, 4-9 years, and 10+ years.

• Allocate conservative investments for the shorter-term buckets and growth-oriented for the longer term.

• This will help insure that you have income to draw from during a 3 year period if the markets were to be down that long during a recession

2. Emergency Fund

• Maintain a three-to-six-month emergency fund, providing a financial safety net.

• Ensure quick access to cash-like investments or bonds for immediate needs.

3. Budget Understanding

• Know your budget intimately, identifying areas that can be adjusted in case of prolonged market downturns.

• Being flexible with spending during economic uncertainties enhances financial resilience.

4. Stash Cash

• Set aside extra cash for potential investment opportunities or to cover extended expenses.

• Cash reserves offer flexibility and the ability to capitalize on market conditions.

5. Avoid Panic Selling

• Resist the urge to panic sell during market downturns.

• Seek professional advice before making significant investment decisions during uncertain times.

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Recessions are an inevitable part of the economic cycle, and being prepared is the key to financial resilience. Whether you're in the wealth-building phase or enjoying retirement, understanding these recession planning strategies empowers you to face economic uncertainties with confidence. If you have specific questions or need personalized advice, don't hesitate to reach out. Stay informed & stay confident!🌟

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Past performance is no guarantee of future results.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This material was prepared by LPL Financial, LLC.