How a 2023 Recession May Impact the Elderly

As the economy continues to show uncertainty, many people are asking themselves how a potential recession in 2023 may impact their finances and future plans. This is especially vital for the elderly population: People living on fixed incomes are facing heightened levels of financial concern alongside retirees-to-be with fewer working-age years left before retirement age. 

Even financially independent families and individuals should be aware of the potential risks posed by a 2023 recession. It’s vital to understand which actions taken now are most likely to protect your financial security and that of elderly loved ones.

Please join us for a discussion of these topics:

• Caring for aging parents is a common concern
• The economy hit some seniors hard in 2022
• Consider updating your investment portfolio
• Heritage Capital LLC is ready to help you prepare

Caring for Aging Parents Is a Common Concern

If you’re nearing retirement age, you may already have started thinking about how you’ll spend your golden years. For many people, part of that planning includes arrangements for how they will care for aging parents, as well. Most adult children eventually find themselves in the role of caregiver at some point in their lives. 

This can be a rewarding experience, but it’s important to be prepared for the challenges that come with it. One of the first things you’ll need to do is have a conversation with your parent(s) about their wishes and expectations. This can be a difficult or even intimidating consideration, but it’s important to get you both on the same page. 

An open, honest discussion about their expectations is a good place to start. However, it’s also a good idea to take a close look at your own finances and familiarize yourself with the resources available to caregivers. Proper planning and preparation can help make sure that both you and your parents are well taken care of during this period.

The Economy Hit Some Seniors Hard in 2022

The U.S. economy has always been volatile at times. Seemingly stable markets can suddenly change, leaving those who were depending on income from their assets in a difficult position. This was especially true for some senior citizens, who often live on a fixed income when the markets took a turn for the worse in 2022. 

The news wasn’t all bad, but many industries were hit hard by lingering supply chain issues, alongside growing inflation, a bear market in stocks, and extreme and historic volatility in the bond market. Investors whose portfolios had been properly balanced and diversified were able to see less impact. However, the stress of concern over the situation took a toll on some retirees’ health, both mentally and physically. 

Good things may still be in store, but a bull market looks unlikely this year. In fact, talk of a recession has gone from a source of derisive laughter to resigned questions of “How soon?” So, if you haven’t already, this is a wise time to verify that senior loved ones will be well taken care of should we see another downturn. 

Consider Updating Your Investment Portfolio

During a recession, those who are retired or nearing retirement age may be particularly vulnerable due to the limited time horizon before they need access to their money. This is why having a proactive strategy already in place is essential to protecting retirees from any financial harm caused by a potential recession. 

Proactive investing means taking measures to adjust your investment portfolio in anticipation of economic storms. By making these adjustments before things get worse, you can potentially ensure that your assets are as well-prepared as possible. Possible measures include, for example, diversifying your investments across multiple asset classes.

In other words, we can spread your equity across more than just stocks or bonds. You might, for example, gather holdings in real estate or commodities, as well. This prevents over-investment in any single asset type—limiting the impact should any single type of investment take losses. 

To illustrate, imagine that your investment portfolio hasn’t been balanced in a while: The longest position you hold is a citrus grower’s stock. Suddenly, that company is unexpectedly hit by severe flooding. A whole year’s crops are decimated within days as a result. 

Without a diversified portfolio, your goose, as an investor, is cooked; (possibly significant) losses are certain. Other assets might rise enough to offset things somewhat, but that could take a long time. Your nest egg, like your ability to provide for loved ones, is reduced.

However, if your portfolio was rebalanced before this happened, you’re probably in a lot better shape: Since the citrus grower was only one of many assets in your portfolio, the losses are minimal. Better yet, because you hold a much wider variety of investment types, the odds of another investment making gains sooner are greater. You might see enough profits to offset your losses (and possibly, generate even more returns).

Getting proactive with your portfolio also means being mindful of investment costs—such as commissions or transaction fees—as these can add up over time and eat away at your returns. Similarly, it should include getting strategic about when you buy or sell certain assets. Timing, after all, can be key when it comes to minimizing your losses or maximizing gains.

Heritage Capital LLC Is Ready To Help You Prepare

We know, personally and professionally, that it can be difficult navigating the various aspects of caring for an elderly family member. That’s why Heritage Capital LLC wants to help you face these challenges with confidence. We provide comprehensive information on long-term care insurance and other options such as trusts, annuities, and life insurance policies to help clients select and secure the best plan for meeting their individual needs. 

I wish I were still able to ponder, “Is a recession coming?” 

Unfortunately, it’s no longer a matter of if, only when. That is why the sooner you prepare, the better off you and your family’s finances are likely to be. This economic storm could linger a while yet, but it doesn’t have to harm your savings or assets. 

Take it from an Accredited Investment Fiduciary® (AIF®) to high-net-worth individuals and families: It’s still possible to retire with confidence in Woodbridge. Contact us or schedule a free consultation to learn more about high-net-worth retirement planning, preparing your financial legacy, and more.

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