Recession Finances Retirement Planning

How to Protect Your Retirement Savings in a Recession

byBalvinder Sandhu
  • Dec 20, 2023
  • 8 mins
planning for retirement

You’ve spent the last few years working hard while diligently building your retirement savings. It seems like you’re on track towards a comfortable retirement in Singapore. But then, the COVID-19 pandemic came out of nowhere, causing Singapore to enter a recession in 2020.

Even though things are looking brighter this year with a strong growth forecast, there's still some level of uncertainty involved as the pandemic situation keeps evolving. We won't know how long it'll take for the economy to recover, and there's no guarantee that you won't face financial challenges during this time. However, there are still ways to protect your nest egg from it.

Here are some tips on how to keep your retirement savings recession-proof.

The concept of retirement can mean many things to different people so it's important to first think about what kind of retirement you'd like to have.

What kind of lifestyle do you expect? Apart from having enough funds to cover your basic needs, do you still want to eat out and go on holidays? Or would you be happy living a more simple retiree life with your loved ones?

Once you determine the kind of activities you'd like to partake in when you retire, you should have a better idea of the financial commitment you'll need for it. However, be sure to factor in a buffer for unexpected events, such as economic recessions, which can eat into your savings and reduce your investment returns. Using a retirement calculator can help you get a realistic estimate of your retirement expenses as you plan for your retirement fund.

Financial emergencies can strike at any time, but they’re far more likely to happen during a recession. You might need to take a pay cut, go on unpaid leave, or go unemployed for several months. Without a cash safety net, you might end up borrowing from your retirement savings accounts, and risk the comfortable future that you’ve been saving so hard for.

If you don’t already have a robust emergency fund, now is the time to start building one. Ideally, you should have around three to six months of living expenses saved to financially protect yourself in case of emergencies. Keep this in a high-yield savings account that you can access in a pinch, and without penalties.

Next, take steps to protect your finances against accidents and medical emergencies. To ensure you’re prepared in case of medical situations or hospitalisations that may arise, make sure you have adequate health and life insurance. These will serve to ensure your retirement funds aren’t touched in the event you need to seek medical treatment.

Similarly, protect against emergencies involving your home, your car or critical illnesses by getting the appropriate insurance coverage. All this provides financial cushioning against emergencies that may arise and help you avoid taking money out of your retirement fund to deal with immediate needs.


In times of economic uncertainty, such as a recession, diversifying your investment portfolio becomes a pivotal strategy for protecting your retirement savings. This approach involves allocating investments across various asset classes, including stocks, bonds, real estate, and international markets, effectively spreading risk and reducing the likelihood of significant losses.

Such diversification is vital for retirees and those nearing retirement, ensuring their savings are not overly exposed to the volatility of a single asset class. For example, while stocks offer the potential for high returns, they come with increased risk during market turbulence. Conversely, bonds typically provide more stable, albeit lower, returns and can serve as a buffer during stock market downturns.

The art of diversification in retirement investments also requires considering personal factors such as your age, the timeline to retirement, and your risk tolerance. As you edge closer to retirement, adopting more conservative investment strategies to safeguard your capital becomes crucial. Younger individuals with more time until retirement may opt for more aggressive, growth-focused assets.

Beyond traditional asset classes, exploring alternative investments like commodities or private equity can add another layer of diversification, potentially offering unique advantages within a well-rounded portfolio. However, it's imperative to understand the risks associated with each investment type and how they fit into your broader retirement planning strategy.

Engaging with a financial advisor is particularly beneficial when refining your diversification strategies, especially concerning how to protect your retirement savings in a recession. Professional advisors can offer valuable insights into asset allocation, tailored to align with the latest market trends and economic forecasts. They can guide you in periodically rebalancing your portfolio to maintain an optimal mix of investments, adjusting to both market shifts and changes in your personal life.

The primary aim of diversification in this context is not solely to maximise returns but to strategically position your investment portfolio to withstand market ups and downs, ensuring you remain on track to meet your retirement goals. This approach is integral to what retirees should do in a recession to maintain financial stability and peace of mind.

In the face of a recession, effective tax planning becomes a cornerstone of safeguarding your retirement savings. It's critical for retirees and those nearing retirement to understand how to manage their finances efficiently to maintain the longevity of their retirement funds.

A primary method to achieve this is by maximising contributions to retirement accounts such as the Supplementary Retirement Scheme (SRS). The SRS offers tax benefits, making it an advantageous choice during economic downturns. When income levels dip during a recession, contributing to the SRS can reduce your taxable income due to its tax relief features, thereby protecting your retirement savings.

Another key aspect of recession-proof tax planning is reviewing your Central Provident Fund (CPF) contributions. In Singapore, while mandatory CPF contributions are a given, making voluntary top-ups to your CPF Special Account (for those under 55) or Retirement Account (for those over 55) can be a wise move. The CPF Special Account balances grow at a rate of up to 5% p.a. Additionally, members aged 55 and above benefit from up to 6% p.a. interest on their CPF Retirement Account savings.

To ensure increased monthly payouts during retirement, CPF Retirement Sums will see an annual increase of 3.5% for members turning 55 from 2023 to 2027. By enhancing your CPF savings, you lay a more robust foundation for your retirement, securing better interest rates and boosting your overall retirement corpus.

credit card

Taking on debts is common during good times because you can comfortably pay the monthly instalments without making a dent on your retirement savings. During a downturn, however, the risk of taking a pay cut or losing your job increases. If this happens, you’ll struggle to pay off your debt, and you might not have anything left to contribute to your retirement accounts.

While good debt like your mortgage can’t be paid off quickly, you should prioritise paying off bad debts and avoid taking on new debt altogether. Bad debt includes car loans (since cars depreciate in value very quickly in Singapore), credit card debt, and other unsecured short-term loans with high interest rates.

So make sure you pay your credit card bills on time to avoid the high interest rates, and avoid taking loans for big-ticket purchases until the economy gets better in order to protect your retirement savings in a recession.

The key to building recession-proof retirement savings is to live simply and cut down expenses. By doing so, you’re less likely to struggle with debt and expenses in times of financial emergencies, and more likely to live comfortably no matter how the economy fares.

When living within your means becomes a habit, you’ll still be able to protect your retirement savings even if you or your spouse gets retrenched during a recession because you’ll be used to living on less.

When planning for retirement, it’s important to consider long-term factors like healthcare costs, inflation, and life expectancy. These factors can significantly impact the amount you need to save. For instance, healthcare costs are rising, and as life expectancy increases, you may need to plan for a longer retirement period. It might be tempting to stop putting money aside for retirement, but you should keep contributing to your retirement accounts and adjust your savings plan to account for these variables and ensure your retirement fund is sufficient to cover these long-term needs.

Try to do so for as long as you can when you're still earning an income, even if you've hit the minimum retirement age. After all, you don't want to be caught out when you retire, only to realise that you don't have enough to lead your best retirement life.

Be on top of things when it comes to your finances. Check them regularly to ensure that you're on track to meeting your retirement goals. Have a clear grasp of what your savings and investments are worth, including your CPF savings.

To plan better, find out when (and how much) of your CPF funds you can withdraw, the schemes you're eligible for, and learn how to maximise its benefits for greater returns.

If you haven't started here's how you can start saving for your retirement.


For Those in Their 20s to 30s

At this age, you probably feel like retirement is too far off into the future to start preparing for. But recession or not, you should start thinking about getting a retirement plan as soon as you can afford it. This is the time to think strategically about how to protect your retirement savings and what your future financial needs might be. Assess when you aim to retire and estimate the funds you'll require to support your lifestyle.

The advantage of starting your retirement planning at a younger age is the luxury of time, which plays a significant role in wealth accumulation. Beginning your savings journey early allows you to recover from potential investment mistakes and adapt your strategy as needed. This phase of life typically involves fewer financial obligations, presenting an opportunity to save more aggressively and build a substantial nest egg. During economic downturns, having a robust retirement plan in place can be a significant relief, ensuring that you're on track regardless of market fluctuations.

If in doubt, you can always start small and adjust your plans in tandem with your career progression. By starting early, you’ll get to benefit from the effect of compounding, which is essentially earning interest on interest. Multiply that over the years and you’ll be able to save much more in the long run.

Consider insurance savings plans such as Gro Retire Flex Pro to help you save for the future, or top up your CPF Special Account (SA) to leverage on the interest rates of 4% per year on your savings.

For Those in Their 40s

In your 40s, balancing life's demands – like managing a home loan and funding your children's education – can be challenging, especially when considering how to protect your retirement savings in a recession. You may have a lot on your shoulders, but don’t forget to carve out time for yourself.

It’s a crucial time to take a step back and think about your retirement goals. If you haven’t started planning for it, it’s not too late to start now. Evaluate your current financial situation to determine what you need for a comfortable retirement, keeping in mind the economic challenges such as a recession, and plan how to bridge any gaps in your savings.

One way is to reduce your expenses. Besides cutting down on things you don’t need, find out if you are eligible for government schemes such as the Child Care Subsidy or Baby Support Grant to help alleviate the financial burden.

Alternatively, consider additional sources of income to supplement your savings. This could be embarking on a side hustle like that home baking business you’ve always been interested in, or investing to earn a passive income.

Remember, you have a good 20 years or so before retirement, and that’s sufficient time to build up your retirement portfolio. Even small monthly contributions will make a difference to your retirement fund, and you can tap on insurance savings plans such as Gro Retire Flex Pro to help you grow your savings further. The most important thing is to commit to your plan, even if it means making changes to your lifestyle now, so that you can have a better one tomorrow.

For Those in Their 50s to 65

At this point, you’re pretty close to retirement and the time for planning is now or never. Think hard about the kind of retirement lifestyle you want, and take a long honest look at your finances to decide if you need to adjust your retirement outlook. What is your expected retirement income and how does it measure up to what you have at the moment?

While it may require some work, it’s not too late to plan for a comfortable retirement in your 50s. At this stage in your life, you’re probably at the peak of your career and receiving the higher bracket of your earning potential. It's also likely that your dependents have become independent and are no longer as financially reliant on you. This is the perfect opportunity to make a last mile dash and save as much as you can, especially if you’re short on your retirement savings.

If you need more time, consider delaying your retirement by continuing to work or getting re-employed. You can also make voluntary contributions to your CPF Retirement Account (RA) if you have yet to reach the Enhanced Retirement Sum. Besides enjoying tax reliefs of up to $7,000 when you contribute to your own CPF accounts, you’ll also earn extra interest of up to 6% per year on your retirement savings.

Apart from these efforts, you may also consider life plans such as Income’s TermLife Solitaire, which not only provides guaranteed renewal1 of your policy so that you may be covered up to age 100 (last birthday), but also helps you with financial legacy planning. Such plans can be instrumental in ensuring a secure and comfortable retirement, even amidst the challenges posed by economic downturns. By taking these steps, you can effectively protect your retirement savings in times of a recession and prepare for a stable financial future.

When it comes to your retirement funds, it’s always better to have more than less. After all, retirement should be about enjoying life at your own pace rather than worrying about finances.

With the right foresight and financial preparation, a happy retirement can be achieved. Approach any of our financial advisors if you need help with your retirement plans.


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