With a possible economic recession on the horizon, investors may be starting to worry. One concern is the impact a recession may have on your retirement investment portfolio.

A key worry is the potential decline in the value of your investments. When the economy is sluggish, the stock market tends to be more volatile. Stocks, bonds, and other investments may lose value compared to your purchase price.

Counting on dividends from stocks or interest from corporate bonds to grow your savings or for income? A recession could hurt company profits, which may cause companies to cut their payouts to investors.

An investment portfolio is also likely to grow less during a recession. These lost returns can affect your estimated retirement timeline. Years of slower growth could eat away at how much you’ve saved for retirement.

A recession can also lead to unemployment. A bleaker economic outlook may force some companies to cut jobs to stay afloat. If you lose your job, you should reevaluate your financial situation. You may need to use some of your retirement savings as a cushion to cover more pressing basic needs. This could lead to rethinking or even postponing your target retirement date.

How to deal with the impact of a recession on your retirement

1. Stay invested

A potential loss in your investments will only become a reality if you sell them. Over time, that investment could recover, but only if you keep your money in the market. In fact, a recession can be a good time to invest. When markets are down, you can often buy stocks or funds at a lower cost.

2. Rethink your risk tolerance

A recession may cause you to reevaluate your investment strategy. This is especially true if you’re concerned about the poor economic outlook associated with a recession. To protect your portfolio during a recession, you may need to:

  • Adjust your asset allocation
  • Further diversify your portfolio
  • Reduce risky investments
  • Switch to safer investments, such as bonds

3. Review your investment strategy with an advisor

If you’re worried about the prospect of a recession, an outsider’s perspective can help ease your concerns. It may be time to review your investment strategy with an advisor. Or find one if you don’t already have one.

Let your advisor walk you through all your options. Advisors who are licensed in investments or mutual funds and/or life and health insurance can offer diverse solutions. They can also discuss products designed to protect your principal. For example, segregated funds and annuities offer this type of protection.

How Sun Life Global Investments can help

A recent Sun Life survey revealed that over half of Canadians said they didn’t have a financial plan notes. It also said that only 56% were confident they would have enough money saved for retirement.1 In difficult times, a plan matters more than ever.

Ensuring the financial security of our Clients is a cornerstone of our mission at Sun Life Global Investments. This is especially true in times of economic turmoil.

1 2023 Sun Life Designed for Savings Report

The information provided is not intended to be investment advice. Investors should consult their own professional advisor for specific investment and/or tax advice tailored to their needs when planning to implement an investment strategy to ensure that individual circumstances are considered properly and action is taken based on the latest available information.

Views expressed regarding a particular company, security, industry or market sector are the views of the writer and should not be considered an indication of trading intent of any investment funds managed by SLGI Asset Management Inc. These views are subject to change at any time and are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.