Should You Retire in a Recession? Here Are the Facts

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Having a retirement plan is great for anyone to think about; you’ll definitely be thanking yourself whenever that time comes around. But there are many questions surrounding retirement as it isn’t always as simple as “save a lot of money, live the rest of your life at ease.” Many people have questions regarding if retiring during a recession is a good idea or not, and that’s why we are here today to discuss exactly this! 

You should not retire in a recession because it can be risky, especially if you keep your funds in a 401k and do not have enough saved up to take a financial blow. It’s always good to carefully analyze if you are really ready to retire or if you should wait a few more years.

Everyone’s situation is different, so this is more of a general guide, but you should still weigh your options before deciding to retire at any time. We understand that a recession can seriously throw a wrench in retirement plans, which is frustrating, but if you would like to learn more, we encourage you to keep reading. 

What Is a Recession, Exactly?


Should You Retire in a Recession? Here Are the Facts

The economy can be thought of as an ecosystem; anything that happens impacts the “organisms” or people’s invested stocks. Sometimes disasters can happen, and the economy cannot produce and circulate money as much as it used to, in this case, “food” when using ecosystem terms. 

There are different kinds of recessions; in some instances, there isn’t enough money circulating because people aren’t buying as much stuff as they used to, whether it be due to a widespread economic crisis, failing banks, large companies going out of business. 

When people buy products and businesses make healthy profits, the economy is largely in a good state.

On the other hand, there are recessions where there is too much money in circulation, often when too much money is being printed, which lowers the dollar’s value. Sometimes it can get so bad that you need a wheelbarrow full of cash to buy bread. 

If you have your money invested in a 401k, as many people do, how the economy is doing directly affects how much your money is growing or depleting. 

Retirement During a Recession: Is it Risky? 

It’s worth remembering that recessions can vary in severity. A slight decline in the economy shouldn’t have a huge impact on your retirement plans as long as you have a game plan that calculates how long you can realistically live off of your retirement funds with your spending habits. 

If you need to look into an accountant or financial advisor to find this out, then we recommend doing so, you don’t want to end up making the mistake of realizing that you didn’t have enough to retire when it’s too late. 

But in a general sense, is retiring during a recession a good idea? Or should you postpone your retirement plans to see if the economy gets better?

Consider What Type of Retirement You Are Planning

Retirement for many people means not working at all and having all the time in the world to lay down by the ocean with a beach chair and for hobbies as well as traveling, but that’s only one type of retirement. 

Some people choose to work part-time during retirement to give them something to do and/or have income coming in as a cushion. This can be a decent idea if you don’t have enough money or barely enough money to retire, but you don’t want to continue working a full-time job. 

Here is a good example from Investopedia:

“If you work 20 hours a week at a job paying $12 per hour, you will earn $960 per month or $12,000 per year. That is equivalent to a 12% annual distribution on a portfolio valued at $100,000. Work-at-home jobs are also becoming increasingly viable.”

While $12,000 a year doesn’t sound like a lot, it can make up a pretty portion of your overall portfolio, and that’s $12,000 that can be used to support hobbies, pay bills, and in general, slow down how much you are burning through your retirement funds. 

Working part-time during retirement can make retiring during a recession easier, and there are quite a few jobs you can do on your computer these days. For example, if you have good to great writing abilities, some websites and companies need content. If you are experienced in a certain niche, you could be a great candidate to write articles on that subject. 

Consider How Much You Can Afford To Lose

As we mentioned above, knowing if you can retire successfully by analyzing what you have is incredibly important. If you plan to retire on $200,000 and are still wanting to keep your cash in the market, it’s worth considering how much you can afford to lose should the recession last for a long time or get worse. 

If you are still a few to several years away from retirement, it’s worth considering putting the money in CDs, which if they pay back even 5% over five years, it can make up for market losses. 

Here is another example of how this can work from Investopedia:

“Your portfolio will have time to recover if you have sustained market losses over the past few years. If the $200,000 that was in your 401(k) plan a year ago is now worth only $150,000, then consider socking it away in five-year CDs while you continue working. If the CDs pay 5%, your portfolio would be worth over $190,000 at maturity with no market risk.”

As you can see in that example, putting the money that is for your 401(k) plan into CDs for several years can greatly help soften the blow of an economic recession. 

Think About Your Health

Some people might simply need to retire for health reasons. For example, if you’ve been with a company for 30 years doing backbreaking work, you are going to slow down as you start reaching your later years. Overexertion in older folks can cause major health problems, and some simply don’t have the luxury to delay retirement for that reason. 

If you already had a retirement planned out, but a recession makes you worried, consider if you can make changes here and there to your budgeting to ease the blow. If you know that you need to stop working for health reasons, it’s worth analyzing the situation as a whole. 

Are You Debt-Free or Mostly Debt-Free?

One of the largest considerations on if you should retire in general is your debt situation. If you still have a debt to work on, then a recession will only put an even bigger damper on whether or not you can or should retire. You can look to the 28/36 rule to get a good idea of whether or not you are fit to retire, especially during a recession. 


Whether or not you should retire during a recession will be based on your own individual situation and how bad the recession is. If you think that you can barely retire, we will encourage reconsidering it until you can comfortably retire. A recession can throw a big wrench into your retirement if you aren’t prepared for the blow. If you need help in deciding if retirement is right for you, consider hiring a financial advisor specializing in retirement.

If you’d like more insight on this topic, we’ve linked a video below:



Hey there, my name is Ruth, I'm in my late fifties. My life was turned upside down a few years ago as I experienced a burn-out. But I saw it as a sign that something had to change in my life. I'm happy I used this tough experience as a stepping stone. I now feel happier than ever and hope to inspire you to do the same, no matter how old you are.

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