With all the talk lately about a looming recession, I’ve been thinking about strategies that retirees and pre-retirees can adopt to protect themselves from severe financial disruptions if the predicted recession lands on our doorstep. It reminded me of how my parents retired and recession-proofed their retirement.

In the fall of 2008, I asked my 87-year-old, widowed mother how she was doing, given the stock market crash that triggered the Great Recession. “I’m doing fine,” she told me, “but I’m worried about what you kids will inherit, since my retirement investments have dropped a lot.” At the time, I assured her that “we kids” don’t worry about our inheritance and are much more interested in her well-being.

My mother was retired for 31 years after a full life of parenting and teaching preschool. She lived to age 92 and never worried about running out of money. There’s a lot we all can learn from my parents’ situation, and their lessons still apply to this day:

  • She had a lifetime monthly pension from my father, who had worked until age 65 as a professor at USC. That pension and her Social Security income never dropped in value and kept being deposited automatically in her checking account in spite of the stock market economic meltdown. This income covered her basic living expenses, so she didn’t worry that the stock market crash would seriously disrupt her life.

At the time my parents retired, they didn’t have the opportunity to maximize their Social Security benefits with smart claiming strategies, which can now significantly boost Social Security benefits for today’s pre-retirees.

While most retirees today don’t have substantial pensions from their employer, they can buy a “personal pension” by using a portion of their retirement savings to buy a low-cost income annuity.

  • She supplemented her pension and Social Security benefits with interest and dividend income from her retirement investments, which were invested significantly in the stock market. While the value of her stocks had dropped significantly, the amount of her dividend income dropped by a smaller, tolerable amount. Research supports the observation that dividend income from stocks fluctuates less than the underlying value of the stocks.
  • Her dividend income covered her discretionary living expenses, such as entertainment, travel, and gifts for her kids and grandkids. She could cut back on these expenses if that was necessary.
  • She had paid off the mortgage on her house, which substantially reduced her living expenses. The house was modest by today’s standards, but it met her needs just fine. Because it was small, it was easy to maintain and didn’t generate expensive utility bills.
  • She kept her living expenses low and had no credit card debt. She was driving a 7-year-old car at the time and she kept it for the rest of her life.
  • She stayed in good health, and she kept her weight at healthy levels. She ate lots of fruits and vegetables, and she exercised by walking, swimming, and gardening. She even grew some of her own food.
  • She supplemented her Medicare coverage with a Medicare Supplement Plan, so that she had low, out-of-pocket medical expenses.
  • She volunteered once a week in a nonprofit thrift store. She did the same tasks she would do if she were working for wages, so in theory, she could have found a job that would offer a small paycheck if she needed it.
  • She kept in touch with friends and relatives and saw family members at least once a week (all her adult kids lived nearby).

The 2008 financial meltdown really didn’t change her life very much. She still had about the same amount of income and living expenses, and she continued to do what gave her joy in life. When thinking about my parents’ retirement, I realized that my mother and father made some smart choices that recession-proofed their retirement. My mother ended up successfully navigating through seven recessions, crashes, market selloffs, and/or bear markets after my father retired in 1981.

Compared to my parents, today’s retirees have more tools at their disposal to help protect against financial disruptions. These include online shopping for CDs and annuities to help maximize your income, easy access to government bond investments such as I-bonds, and reverse mortgages. There’s also a plethora of health insurance products for retirees in addition to original Medicare, such as Medicare Advantage Plans and Part D Prescription Drug Plans.

Let’s be realistic; taking these steps to recession-proof your retirement doesn’t mean that you won’t feel any financial disruption during economic downturns. The goal is to survive these downturns so that you can still live a good life.

If you’re like most retirees, you’ll be retired for 20 to 30 years. It’s inevitable that you’ll need to survive a handful of financial downturns during the rest of your life, so, it’s smart to adopt strategies today that will help you sail through future economic storms.