The stock market is down nearly 10% from its all-time high, based on S&P 500 returns through the end of April. A recession may be looming.
There are times to sit back and admire the balance on your retirement account. This is not one of those times.
If you are approaching retirement, or already there, you may be looking for ways to pad your savings. You may also be wondering how to avoid spending them, when they are already diminished.
Take heart: There are ways to build savings in a depressed financial market, and ways to avoid drawing them down.
Here are six tips from the experts.
Max out tax-advantaged savings
If you aren’t strapped for cash, one way to boost retirement savings in a downturn is to set aside as much as you can in tax-favored accounts, including 401(k)s, IRAs and HSAs.
The 401(k) already has high contribution limits, $23,500 in 2025. If you’re near retirement, consider pushing your savings as close to the max as you can afford.
Americans 50 and over can save even more with “catch-up contributions,” which push the annual 401(k) limit to $31,000. A smaller subset of savers, in the 60-63 age range, get an even higher catch-up limit of $34,750, thanks to the SECURE 2.0 Act.
“People may not realize the importance of catch-up contributions,” said Maria Bruno, senior financial planning strategist at Vanguard.
Individual Retirement Account contribution limits are lower: $7,000, or $8,000 for those 50 and older.
An older worker might not see the point in maxing out retirement savings close to retirement, because the savings won’t have as much time to grow.
Keep in mind, though, that the savings don’t stop growing when you retire. If you retire at 65 and live to 85, then those savings will continue to accrue interest for up to 20 more years.
Think of your savings as an investment that will grow “through” retirement, not just “to” retirement, Bruno said.
A Health Savings Account is another potential tool to build retirement savings. The annual limit is $8,550 for a family in 2025, and people over 55 can contribute another $1,000. You can save any money you don’t spend.
“Ideally, you want to think of that as a retirement account,” Bruno said.
Automate retirement contributions
For long-term retirement savers, a depressed market spells opportunity to buy stocks at a discount.
Automating your retirement contributions is a good way to keep buying through the downturn. It “keeps you consistent and takes emotion out of investing,” said Michelle Crumm, a certified financial planner in Ann Arbor, Michigan.
If your contributions aren’t automatic, you might miss out on buying equities on the cheap.
“When markets are down, too many people freeze,” Crumm said.
Postpone your retirement
If you are on the eve of retirement, perhaps the last thing on your mind is working another year or two.
But postponing your retirement, even by a year or two, can be a powerful tool for building retirement savings.
A Stanford University study found that delaying retirement by just three to six months has the same impact on retirement savings as raising your 401(k) contribution rate by a full percentage point for 30 years.
Let’s say you put off retirement for a year. In that year, you can max out retirement savings, potentially adding tens of thousands of dollars to your account. And you won’t be drawing down your savings, which means they’ll last longer once you do retire.
“It allows for continued income. You get savings from that income, while delaying portfolio withdrawals,” Bruno said.
Staying in the workforce is especially attractive in a down market: It means you won’t have to raid your retirement savings while their value is depressed.
The downside to working longer is that you’ll have less time to enjoy your retirement later.
As a compromise, consider working part-time.
“This way, your nest egg doesn’t take as large of a hit in those first years of retirement,” said Colin Day, a certified financial planner in St. Louis. And a part-time schedule “provides you with more flexibility to do the things you enjoy.”
Build up cash savings
The closer your retirement date, the more likely you will soon need to tap your savings for living expenses. Ideally, you should have some of those savings in cash.
A wise goal, retirement experts say, is to amass at least a year’s worth of living expenses in cash or cash-equivalent accounts, such as high-yield savings or money market funds.
“These dollars will be the first that you will deplete to generate your new retirement paychecks,” said Heather Winston, head of product strategy, individual solutions at Principal Financial Group.
Cash is especially important in a downturn, so you can avoid selling depressed investments.
Shift from spending to saving
One trusty way to pad retirement savings is to shift your focus from spending to saving.
“Start by separating nonessential expenses from essential expenses,” said Niv Persaud, a certified financial planner in Atlanta. “Pause spending on non-essential expenses, even if that means your adult kid needs to pay their own mobile phone bill. Shift money you would have spent on non-essential items to your retirement savings.”
And look for other ways to trim your expenses, Crumm said.
“Small adjustments today – refinancing insurance, downsizing subscriptions, paying off high-interest debt – can reduce the income you’ll need in retirement,” she said. “That means you’ll be able to withdraw less from your investments during down markets, giving your portfolio more time to recover.”
Consider delaying Social Security
Think of this tip as protection against future downturns.
If you wait to claim Social Security, your monthly check gets larger. Your benefit rises in value every year you wait, from age 62 to 70.
“If you can use other assets to bridge the gap, delaying Social Security can act as a form of longevity insurance, providing more guaranteed income,” Crumm said.
A larger check can be especially helpful “if your portfolio’s growth is temporarily stalled,” she said, as in a down market.
This article originally appeared on USA TODAY: 6 ways to recession-proof your retirement savings
