AN ESTIMATED $2.4 TRILLION disappeared almost overnight from Americans’ 401(k)s and IRAs when the market crashed in 2008, devastating many of their retirement prospects.
Stocks have since recovered spectacularly, and in March the bull market celebrated its 10th birthday. Still, there’s a growing sense that this really is on borrowed time, and as economists warn that another recession is likely to happen in the next two to three years, many people are asking themselves what they can do to prepare for the next financial disaster.
Those who are near retirement are especially vulnerable to drops in the stock market, owing to the lack of time they have to recover and the fact that—in the case of those already retired—they’re drawing down savings instead of working and adding to them. But if you plan ahead, you can build a financial buffer to help ensure you survive the passing storm.
Here are a few basic steps you should take:
BUILD YOUR CUSHION
“If you commit to an emergency fund, it protects the rest of the financial plan,” says Sharon Allen, president, and co-founder of Sterling Wealth Management based in Champaign, Ill. She suggests a minimum of three to six months’ expenses for this fund. Once you’ve filled that emergency savings bucket, aim to pay down as much debt as possible. That’s key to feeling secure once you leave the workforce because it mean