Managing Your Finances During Economic Fluctuations: Strategies for Retirees

Bridget Handke, CFP®, CAP®
Mar 20, 2025 7:00:00 AM

When we live in times of uncertainty, it’s easy to feel anxious and overwhelmed. Economic fluctuations can feel like a roller coaster and may create insecurity, particularly for those approaching or in retirement. A well-thought-out financial strategy provides stability and adaptability to navigate these times confidently. Consider these simple strategies to help maintain financial peace of mind.

1. Revisit and Refine Your Budget

Economic changes can influence your day-to-day expenses, so it’s important to regularly review your budget and make changes as needed.

  • Track and adjust: Monitor your spending habits and adjust your discretionary expenses.
  • Plan for inflation: Anticipate higher costs for essentials and make sure your budget accounts for these changes.
  • Prepare for variable expenses: Set aside funds for unexpected price increases, such as rising utility or healthcare costs.

2. Strengthen Your Income Stability

Ensuring a steady flow of income is critical, especially during times of economic uncertainty. Consider these strategies to maximize your income during retirement.

  • Still working? Now is the time to strengthen your financial position for the years ahead. Take advantage of catch-up contributions to employer retirement accounts, which allow you to set aside extra funds beyond the standard limit. Consider investing in a Health Savings Account (HSA), which provides a triple tax advantage. Your contributions, any interest or earnings on your account, and withdrawals from your account to pay for qualified healthcare expenses are all tax-free.
  • Social Security: Ensure you’ve optimized your Social Security benefits based on your age, health and financial needs. Delaying benefits can provide a higher monthly payout.
  • Pensions: If you’re eligible for a pension, review your options for receiving payments (lump sum vs. annuity) and ensure that your choice aligns with your long-term goals.
  • Rental income opportunities: If you own property, renting out a portion of your home or another property can provide supplemental income. Options like vacation rentals may offer greater flexibility and a higher yield.
  • Part-time or freelance work: Engaging in part-time work or leveraging your skills for consulting or freelance opportunities can provide both financial and personal benefits.
  • Income timing strategies: Coordinate when you withdraw from retirement accounts, pensions and other income sources to maximize tax efficiency while ensuring that your financial needs are consistently met over time.

3. Maintain a Robust Cash Reserve

Liquidity is essential during times of economic uncertainty. Maintain readily available funds to make sure you can manage unexpected expenses without liquidating long-term investments.

  • Emergency fund: Aim to keep 6 to 18 months of living expenses in an easily accessible account.
  • Short-term investments: Consider low-risk, short-term instruments like high-yield savings accounts or money market funds to preserve liquidity. Many online banks currently offer interest rates in the 3-4% range.

4. Embrace Professional Financial Management

Professional financial management offers more than a diversified portfolio — it provides a comprehensive approach tailored to your personal financial needs and long-term goals.

  • Holistic financial planning: A financial advisor considers your portfolio, income needs, tax situation and estate planning goals to create a cohesive strategy.
  • Active monitoring and adjustment: Professionals continuously monitor market conditions and make timely adjustments to mitigate risk and capitalize on opportunities.
  • Behavioral guidance: Emotional decision-making can undermine financial success. Your advisor provides objective insights to help you focus on long-term goals rather than reacting to short-term market movements.
  • Advanced risk management: Professionals use sophisticated tools and strategies to balance risk and return, aiming for long-term growth while ensuring your investments align with your comfort level.
  • Access to specialized investments: Advisors often have access to institutional-grade investment opportunities not available to individual investors, offering additional avenues for growth and stability.

5. Anticipate Healthcare Costs

Healthcare remains one of the most significant expenses in retirement. Proactive planning can help prevent unexpected financial strain.

  • Review annually: Evaluate your Medicare or supplemental insurance yearly to ensure it provides the best value and coverage for your situation.
  • Long-term care insurance: Consider policies that protect against substantial future costs.
  • Preventive care: Allocate resources for regular health check-ups and wellness programs.

6. Protect Your Assets From Fraud

Retirees are often targeted by scams; vigilance is crucial to maintain financial security.

  • Educate yourself: Stay informed about common scams and tactics used by fraudsters.
  • Secure accounts: Use strong passwords, two-factor authentication and secure financial platforms. 
  • Monitor regularly: Review your bank and investment statements for any unauthorized transactions.

7. Refine Withdrawal Strategies

A flexible withdrawal strategy can adapt to economic changes, helping to ensure your retirement savings last.

  • Adjust withdrawals: Consider temporarily reducing spending during market downturns to preserve capital.
  • Tax-efficient withdrawals: Work with your advisor to optimize your retirement withdrawals to minimize tax liabilities and maximize net income. Take withdrawals from IRAs in lower tax brackets and utilize brokerage and Roth IRAs when withdrawals bump you to higher tax brackets.
  • RMD planning: Required minimum distributions (RMDs) from traditional retirement accounts are mandatory starting at age 73 or 75, depending on when you were born. Incorporate these withdrawals into your broader strategy to avoid tax penalties and ensure funds are used effectively.
  • Reassess regularly: Economic conditions, market performance and personal circumstances change. Periodically review your strategy with a financial advisor to ensure it remains aligned with your goals and risk tolerance. 

8. Leverage Tax Strategies

Optimizing your tax situation can help stretch your retirement savings further.

  • Roth conversions: Convert traditional IRA funds to a Roth IRA during low-income years to reduce future tax burdens.
  • Harvest tax losses: Offset gains by strategically selling underperforming assets. 
  • Utilize deductions: Take advantage of deductions for medical expenses, charitable donations and more.

Economic fluctuations are inevitable, but they don’t have to shake your financial confidence. You can navigate these challenges with clarity by being proactive and working with financial professionals. The key is to remain adaptable and focused on your long-term goals. Remember, peace of mind comes from knowing you have a plan — and the support — to weather any economic storm.

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Topics: Retirement, Bridget Handke

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