6 Things Retirees Can Do Now To Protect Themselves From A Recession

When the Great Recession hit between 2007 and 2009, millions of retirees found their golden years turning into anxious ones. For starters, the housing market fell, which lead to a 20% drop in home prices in just three years. This decline eroded home equity, which is a critical asset for many seniors. The stock market also plummeted, with the S&P 500 falling 56.8% from October 2007 to March 2009, slashing the value of many retirement accounts. In fact, American workers saw an estimated $2 trillion vanish from their retirement savings during this period.

Many have wondered if another recession could be on the way again in 2025. Not only have prices climbed, with inflation sitting at 2.8% as of February 2025, according to the Bureau of Labor Statistics, but anyone watching the stock market has probably noticed some wild ups and downs — with the S&P 500 losing more than 7%, the Dow down 6.8%, and the Nasdaq down 10.2% all from February to March 2025.

To add to the mix, Federal Reserve rate hikes have made borrowing money more expensive – adding strain to the cost of things like housing, vehicles, and everyday goods. For retirees on fixed incomes, these factors can all combine to make budgets even thinner, and anxiety even higher. This can make learning how to protect yourself, and your money, from a recession more important than ever.

A key way to help yourself ahead of a potential recession is to assess your investment portfolio and consider spreading it around. By moving your money away from riskier stocks and into safer places like Treasury bonds, stable dividend stocks (think power companies), or sectors that stay steady even when the economy's wobbly — like healthcare or everyday essentials (the stuff you buy no matter what's happening, like toothpaste, groceries, shampoo, or toothpaste) — you can help protect yourself against volatility. Companies like Kimberly-Clark Corporation or Johnson & Johnson — which are behind popular staples like Kleenex, Huggies, and Band-Aids — tend to hold up pretty well when times get tough.

However, it's important not to forget about investments designed to grow, like real estate funds (REITs) or special bonds that protect your money from rising prices called inflation-protected securities. Remember to take a peek every few months in order to tweak, balance, or move your money as the economy changes. For instance, you might decide to shift to longer-term bonds when interest rates hit their high point. If you'd rather not spend too much time managing your money yourself, it could be worth finding a financial advisor to do the heavy lifting.

Another important financial protection is to have an emergency fund. A good rule of thumb is to keep enough to cover your basic living costs for at least 6 months — preferably 12. For example, if your monthly expenses total around $4,000 each month, you should set aside between $24,000 and $48,000. This stash can also help you avoid pulling cash out of your portfolio when the market is down. If your investments drop by 20%, withdrawing $20,000 at that point would mean locking in your losses. You should also explore leaving your stash in a high-yield savings account and/or money market account (MMAs). This will help to grow your emergency fund without losing easy access to your cash. For instance, as of March 2025, high-yield savings accounts are offering up to 5% APY per year.

You can also stash your savings in certificates of deposit (CDs) — accounts where you agree to keep your money untouched for a set amount of time, earning in the low to mid-4% range (as of March 2025) for the duration of your term. Instead of putting all your money into one long-term CD, you can split it. For instance, splitting $30,000 into five individual CDs worth $6,000, with each one maturing one month apart. This would give you access to some of your money every month without any penalties for withdrawing early.

You don't want to head into retirement with debt — especially during a recession. In particular, avoiding high-interest credit card debt can be key. As of March 2025, the average credit card interest rate was over 24%, according to Investopedia. That means a $10,000 debt grows by over $2,400 every year if you don't pay it off. Instead, you might want to consider debt consolidation. Say you've racked up $30,000 on three different credit cards, each charging you a 24% interest rate. By rolling those debts into one personal loan — with average interest rates around 12% instead – you can save several hundred dollars every month. Similarly, if you refinance your mortgage from 6% down to 5% interest on a $200,000 balance, you could knock around $120 off your monthly payments. 

If you have federal student loans still hanging around in retirement, you may qualify for an income-driven repayment plan. These plans can cap your monthly payments to fit your monthly income, making it way easier to handle each month. You could also consider the debt avalanche method; Paying off debts with the highest interest rates first to save the most cash in the long run. Another trick is getting a balance transfer card. These cards offer 0% interest for a limited time (usually 12–18 months), but can often come with transfer fees (around 3–5%), so crunch the numbers first to make sure you're actually saving money.

It could be worth considering delaying your Social Security retirement benefits. Waiting a bit longer to start collecting your Social Security can help not only help you combat inflation, but each year you hold off on collecting — after your full retirement age — your monthly check grows by 8%, until age 70. According to the Social Security Administration, the average monthly benefit as of January 2025 was $1,976. This means waiting until age 70 can bump your monthly amount close to $2,500. While claiming Social Security early can be tempting, it can cost you big in the long run. For example, someone who starts collecting benefits at 62 would experience a reduction of between 25% and 30% in their monthly benefits amount. Over 20 years, that can add up. 

On the flip side, waiting until you're 70 means bigger monthly checks and extra security for your spouse. If one partner passes away first, the other continues collecting those higher benefits, making this an important safety net. Delaying Social Security can also give you a tax advantage since benefits become taxable when your income crosses certain levels ($25,000 if you're single or $32,000 if married filing jointly).

A retired person worried about a recession could find relief in mixing up their income sources with part-time work — especially in busy fields like healthcare or education. You could potentially use skills you already have, earn extra cash, and still keep plenty of free time. Or, if you're a pro in marketing, accounting, or similar fields, consider consulting gigs. Depending on your experience, you could make anywhere from $50 to over $350 per hour without locking yourself into full-time hours. For retirees who enjoy crafts or hobbies, there can also be good money in sharing your skills. You could sell your handmade items on Etsy or run workshops teaching something like woodworking.

There are also passive income options — like stocks that pay dividends. Companies like Chevron Corp. (CVX) currently pay around the mid-4%, which can drop cash into your account regularly. Investing $10,000 could earn you around $450 a year without lifting a finger. Or, if you have extra space, using Airbnb or other short term rental options can make renting flexible. You can rent a spare room just 10 nights a month at $75 per night to add an easy $9,000 to your annual income (before taxes, of course).

Since costs are a major concern for retirees on fixed incomes, ensuring your healthcare costs are safeguarded before a recession can be especially important. A 2022 research brief from the Center for Retirement Research at Boston College found that out-of-pocket healthcare costs for seniors averaged $21,400 annually. This can make reviewing your Medicare options every year especially important. Deciding to switch from Original Medicare (which includes Parts A and B) to a Medicare Advantage Plan (Part C) might be the right option depending on your needs. This can includes extras like vision, dental, and prescription drug coverage. 

Medicare covers a lot, but not everything. That's where Medigap comes in. It can cover copays, deductibles, and even medical emergencies while traveling abroad. Medigap Plan G covers all of Medicare Part B's extra charges, which could save you money on visits to specialists. If you have a chronic condition that requires frequent doctors visits, physical therapy, or dialysis, low copays can make a difference long-term.

Another thing retirees often overlook is long-term care (LTC) insurance, a coverage that protects against massive nursing home bills, which can average $9,277 per month for a shared room, according to Genworth's 2024 Cost of Care Survey. Buying an LTC policy before age 65 can keep premiums lower, and some hybrid life insurance policies even combine long-term care coverage with a death benefit, so if you never need the LTC portion, your family still gets a payout.