An economic downtime can often have a much more significant impact on seniors due to a larger percentage of their wealth being invested in the stock market. Understanding how to hedge against the effects of a recession is essential in today’s uncertain financial landscape.
The Great Recession in 2007 resulted in a decline in median wealth of around $72,000 for adults between 55-64 years of age. These figures will likely be much higher in the next economic downturn. Learning from mistakes in the last recession while preparing for the future is key to protecting your wealth.
How Does a Recession Affect Seniors?
A recession’s impact often hurts seniors because they have more money to lose and even less time to catch up. A significant economic dip can only lead to substantial financial losses quickly. Double-checking your asset allocation is critical to minimizing the damage of a recession. Your portfolio needs to be more conservative as you get older, which means more investments in bonds instead of the stock market due to them being less affected by economic changes.
Financial Options for Seniors
One way to reduce the effect of a recession is to consider leveraging the value of an existing life insurance policy. A life settlement can provide much-needed income during a recession while providing greater peace of mind. Unfortunately, too many seniors let their life insurance coverage lapse during the Great Recession while dealing with financial distress. Reaching out to a company specializing in policy appraisal is essential if you consider selling a life insurance policy.
Additional Challenges of a Recession
The Great Recession greatly impacted many seniors due to much of their wealth being heavily invested in the stock market, while the wealth of younger adults is mostly in their homes. Another challenge is that around 30% of the money managers weren’t even working in the financial industry during the last recession. Many of these financial advisors are under the age of 35, as they may not understand the impact of a recession, and they may struggle to prepare their clients for an economic downturn. Inflation is already negatively impacting seniors, as a recession will have an even more significant effect over the long term.
How to Overcome the Impact of a Recession?
Seniors will need to perform a detailed review of their current assets and spending habits to understand if their existing life insurance policy is helping them reach their goals. The sale of a life insurance policy on the secondary market can be an excellent option for seniors struggling with the uncertainty of economic downtime.
Discussing your options with a policy appraisal company is recommended to help you choose the best solution to meet your financial needs for now and in the future. Selling a life insurance policy can provide immediate cash, but looking at multiple offers is important to ensure you get the best deal available.
Here is an overview of the main reasons to sell your life insurance policy during a recession:
Unable to Pay Premiums
Paying the premiums on your life insurance can be difficult if cash is tight. Selling your life insurance policy allows you to receive money, and it’s much more valuable than letting your policy lapse.
Gain Immediate Cash
One of the most significant advantages of a life settlement is that it provides immediate cash. You can easily use this money to help limit the financial impact of a recession.
Cover Unexpected Costs
Dealing with unexpected costs can happen to anyone. Covering these expenses can be challenging, as a life settlement is an excellent alternative for gaining much-needed cash.
Flexible Options
Selling a life insurance policy allows you to use this money to meet your needs best. You can use this cash to supplement your retirement, cover health care costs, or even give it to a family member in need.
Closing Thoughts
The last recession caused many problems and dramatically reduced the median wealth of seniors. Taking a proactive approach is critical in limiting the impact of a recession. Revaluating your assets and selling an existing life insurance policy can help you lessen the effects of a recession to ensure you are well-prepared for these challenging times.
