How to Make Recession Proof a Retirement Life Style

Right now, our country is in a world of hurt. The cost of oil is skyrocketing, food prices are going through the roof, and the government has spent billions of dollars bailing out those who gambled on the housing market and lost. Eventually, this situation will come to a head and everyone will be affected. But those on a fixed income will be subjected to the greatest hardship when the time comes for our friends in Washington to begin fixing the problem. There is much we can do to make it through the upcoming rough patch. Here are a few ways you can make your lifestyle in retirement recession-proof.

Instructions

Difficulty: Moderately Challenging

1. Consider a tiered approach to investing so you will be in a position to outlive what you have saved for retirement. A financial adviser is well schooled in this approach and hiring one to put you on the right track may be appropriate.
2. Divide your resources into three piles. Pile #1 is the money you'll need to live on for the next five years, or so. Pile #2 is to cover what you'll need to cover expenses for the next decade. And pile #3 will contain the remaining amount that you'll not need to touch for at least 15 to 20 years. This step is important because it will force you to think of how you should invest your money based on how soon you will spend it.
3. Pile #1, resources you will need for the next few years, should be kept really liquid and safe. This money should be kept in CDs, money market and savings accounts, and in high quality bonds that will mature quickly. Understand that safety is job #1, and you will be sacrificing interest rate, but those funds will be protected largely from loss. Besides, you may have an emergency need for some of those funds, so it pays to keep them safe.
4. Be very conservative in how you handle pile #2, probably larger than pile #1 because it will be needed for twice the number of years. It is hard to avoid the temptation to invest pile #2 in the stock market to increase returns. Unfortunately, you'll probably need those funds just as the stock market tumbles. Stay away from market fluctuation, and look at things like index funds or even annuities. They are somewhat complicated to understand so it would be smart to talk with an investment adviser or retirement planner about them.
5. Focus on growth in dealing with pile #3 but be prudent in how you approach that objective because this pile contains the majority of your assets. Since, theoretically, you won't be touching that money for at least fifteen years, investing it in mutual funds, individual stocks, long-term convertible bonds, REITs and other growth vehicles seems appropriate. But because most business cycles are about ten years long, be prepared to keep that money invested for at least that long to protect yourself from market fluctuation.