You have been diligently saving for your retirement and are on track for a comfortable life in your post-working years. However, the news headlines warn of the likelihood of an economic recession in the next two or three years. If they’re right, do you have a plan for how to recession-proof your retirement plan?

While no one knows for certain when a recession will hit, it's safe to assume the economy will face a downturn at some point. While you can’t control a recession, you can plan for one. And the earlier you plan, the better off you’ll be.

The following strategies will help you protect your financial plan in the event of a recession. 

Bulk Up Your Savings
If you don’t already have adequate cash reserves, building savings should be your priority. Financial emergencies can happen at any time. Out-of-pocket healthcare costs alone average $7,674 a year, according to a 2018 report from the Milliman Medical Index. Other often unpredictable events, such as sudden unemployment, can strain your finances. When disaster strikes before you’ve built a cushion of cash, you’re more likely to dip into your retirement savings, to the detriment of your long-term retirement goals.

During a recession, you could be forced to take a pay cut or be unemployed for an extended period of time. The rule of thumb is to save three to six months of expenses in your emergency fund. To protect your retirement income plan, plan to invest in a high-yield savings account. 

Pay Off Debt
Money can get tight during a recession. Take the time now to pay off debt and you’ll be in a much better position if the economy takes a downturn. You’ll avoid having to sacrifice income that could be used toward basic living expenses like housing, utilities and groceries to pay off debt. Otherwise, you might struggle to pay your bills and ruin your credit score from missing payments.

Maintaining your credit score is crucial if you want to get approved for new credit when the economy recovers. If you’re having trouble paying back your lenders, contact a financial planner. Together, you can come up with a plan to pay down debt without sacrificing your retirement income goals.

Keep Investments in the Market
Financial markets move in cycles and your best bet is to ride the wave. An impending recession might cause you to consider moving your money to safer options like a savings account or CD (certificate of deposit). Investing comes with some risk, but taking your retirement savings out of the market can put you at a bigger disadvantage in the long-term. 

In the short-term, you might protect your portfolio from taking a hit if the market dips. But you’ll miss out on the long-term benefits of staying in the market. 

You also should rebalance your portfolio at least once a year to adjust for risk tolerance. If appropriate, consider automatic rebalancing for your employer-sponsored retirement plan. Your investments should include a variety of stocks, bonds and cash. A mix of riskier investments can help with growth, but you also want some safer assets for stability. 

Work with a CFP® professional
No matter how much you know about managing your money, working with a financial planner can deliver exponential benefits. Financial planners are experts at helping people achieve their financial goals and can guide you toward a financial plan that suits your needs.

You might think paying a financial planner is a waste of money, but a trained professional can help you navigate the uncertainty of a volatile market.

The last thing you want to do is make a rash decision. Working with someone who understands the difficulties of the market can help you make decisions that protect your retirement income plan. 

What is Your Plan?
The best strategy to protect against a recession will depend on your age and financial situation, and your plan will likely look different from someone else’s. Remember that a little less flexibility or freedom in spending now can go a long way toward sustaining your retirement income plan. 

Work with a CFP® professional to build your savings, pay off debt and optimize your finances to recession-proof your retirement income plan. Even if you feel unprepared to face a recession, know that it’s never too late to get prepared.