Retirement Preservation, the key step in securing your retirement.  It's been 11 years since the Great Recession.  While a decade has now passed, the wounds that were caused are still fresh.  A number of Americans had to delay their plans to retire when the economic crisis hit in 2008. Some lost their jobs, some took serious losses to their 401(k) plans and some had to go back to work because of the shortfall in their retirement savings.

A survey conducted by Harris Poll on behalf of Career Builder states that 75% of workers age 60 or older are delaying retirement due to the Great Recession of 2008.  Even with these gains we've experienced during this 10+ year bull run, many are just getting back to even.  That's 10 years of lost time and money due to significant losses that were experienced in 2008.

Whether you're retirement accounts have reached new heights or you're just getting back to even, it's time to start thinking defensively.  It's time to consider some alternatives. With slowing global growth, trade wars, and inverted yield curves, it seems everywhere you look someone is talking about a recession. Will we have one? When? Will it be mild or severe?

With just one year out to the next presidential election, CNBC Invest in You and Survey Monkey polled 2,776 adults about the state of their finances, opinions about candidates and how they might affect the economy. The survey, with a margin of error of plus or minus 3 percentage points, was conducted Oct. 20 through Oct. 25.

More than two-thirds of respondents said they believe the economy is going to weaken going into 2020. People who identify themselves as Republican are far less likely to agree, with 46% saying a recession is coming, compared with 84% of Democrats.

Will we have another recession?

The only question anyone can accurately answer is the first one. Yes, we will have a recession. Recessions are part of normal economic cycles. When? No one knows for sure. Mild or severe? No one knows for sure.

Having a Recession Proof Plan

During times of economic uncertainty, many investors may convert their retirement assets to cash, transfer to CDs or convert to other cash equivalents.  While doing this may be protecting your assets from any loss, you're also sacrificing any potential growth that could be had.  Is there a better way? Yes. It’s called having a plan. Businesses have them to manage their cash flow, inventory, expenses and such, and they use them to help navigate the constantly changing economic environments. Retirees and near-retirees need a plan, too. A plan keeps you from making quick and all-too-often misguided emotional decisions that may derail your retirement.

The type of plan you need isn’t one that tries to predict recessions. That’s akin to roulette. It either works, or it doesn’t. Instead, the type of plan you need is one that acknowledges that recessions will come along during your pre-retirement years or during retirement. Rather than the constant guessing game of trying to avoid them, you make an action plan, so you know how to power right through.  This plan is called your Retirement Preservation Account.

How and When to Implement Your Retirement Preservation Account

In designing our Retirement Preservation Account strategy, our #1 priority was that it provided a recession proof strategy to secure the #1 asset of retirement, and that is your income.  This sensible type of plan models out your income and expenses over varying market conditions and provides indicators on when you may need to reduce spending or adjust your income. You know ahead of time the specific actions you will take if your financial plan metrics fall below predefined threshold amounts.

With a recession-proof plan, it doesn’t mean the recession won’t affect you. It means you know what to do when it comes along.  With your income base being stabilized with guarantees for life, you can navigate a recession much more confidently.

When to Implement:  Within 10 years of retirement is optimal but implementing it even after you've retired is still recommended.

What is a Retirement Preservation Account?

A Retirement Preservation Account is an account which contracts with Top Rated Insurance Companies to provide guarantees on your principal and retirement income.  In exchange for a lump sum of money or premium, the insurance company will give you safe growth options using indexing strategies with indexes such as the S&P 500, allowing your money to participate in a portion of the gains of the assigned index, without experiencing any of the losses.  Depending on the indexing strategy and crediting method selected, when your account has grown, you lock in the gains.  If the index goes down, your money stays where it is.  This is called a guaranteed floor of 0% which means it will never be less than it's highest locked in gain point.  In addition,  the contract also has a Guaranteed Lifetime Income feature added.  When you are approaching retirement, the contract with the Insurance Company will also have your Guaranteed Retirement Income for Life options outlined, showing you the amount of income you can expect to receive each year, which is guaranteed for life.  When you're ready, signal the insurance company to turn on your income stream. The longer you defer, the higher the income payout will be. 

Let’s look at an example:

Suppose you’re 10 years out from retirement and you’re 55 years old. You plan to retire at 65. You need $80,000 a year to be comfortable. You plan on delaying your Social Security to age 70 at which time you’ll get about $37,000 a year. From age 65 to 70, you’ll need to withdraw $80,000 a year from savings and investments.  After age 70, only $43,000 a year. You want to plan for a 30-year withdrawal time horizon.  Rather than relying on only your investments in the market which are exposed to market risk, you would instead convert a portion of your retirement nest egg to a Fixed Indexed Annuity with a Lifetime Income feature.  You would move enough assets over to the FIA to provide you a guaranteed income stream.  Doing this establishes a guaranteed income base essentially making your retirement recession proof. Lastly, having your money in a Fixed Indexed Annuity allows you to participate in a portion of the gains of the under-lying index while having guarantees of no loss.  This is the best of both worlds and an optimal strategy leading up to retirement.

But, What if I need access to my money?

Most Fixed Indexed Annuity contracts offer access up to 10% of your principal each contract year with no penalty.  For most, this is plenty if needed.  Certain FIAs have features that will allow full access to the principal in the event of an emergency such as a terminal, critical, or chronic illness.  FIAs work very similar to a Certificate of Deposit with a bank in the sense that you give a lump sum of money for a certain period of time in exchange for safe growth and other benefits.