Tips for a Recession
If you’ve been watching the headlines—tariffs, interest rates, trade deficits, market swings might be making your stomach do that rollercoaster thing—you’re not alone. Many retiring or already-retired engineers are asking the same question: What should I be doing right now?
This isn’t your first market rodeo, but if you’re within a few years of retirement or just settling into it, the stakes feel higher. That’s because this phase of life isn't about aggressive accumulation anymore—it's about protecting what you’ve built and converting it into income without triggering unnecessary taxes or sequence-of-return risk.
And if you're the spouse of a spreadsheet-loving engineer? This guide is for you too. Especially if you've been hearing things like, “Don't worry, I've modeled it out,” while you're trying to figure out how this all fits together.
Let’s walk through some questions to help you plan wisely—based on CFP® best practices, economic history, and what we know about the current landscape.
1. Is Your Cash Flow Secure Enough to Ride This Out?
Whether it’s tariffs or a tech correction, volatility affects people differently depending on how much income they’re pulling from investments.
Ask yourself:
Can your current cash reserve cover at least 6–12 months of living expenses?
Have you reviewed your budget recently, cutting discretionary expenses where needed?
If you're withdrawing from your portfolio, can you adjust the timing or amount?
👉 Tip for Engineers: Think of your cash reserve like a battery backup system for your retirement plan. When the grid (market) is unstable, your backup keeps the lights on.
2. Should You Rebalance While Valuations Are Down?
Market corrections can be uncomfortable—but they’re also an opportunity. If your asset allocation is off balance, this may be a great time to rebalance by:
Harvesting tax losses to offset gains
Trimming concentrated positions with low cost basis while prices are depressed
Reinvesting excess cash strategically
This isn’t market timing. It’s disciplined engineering applied to your portfolio design.
3. What About Roth Conversions and IRA Contributions?
If market values are down, you may be able to:
Convert more traditional IRA assets to Roth while keeping taxes in check (especially useful in lower-income years post-retirement but pre-RMD)
Make IRA or Roth IRA contributions (or backdoor Roth if eligible) at low valuations
This works especially well if you’re in a lower tax bracket than usual—which could happen if you've just retired or been laid off.
4. How Could Tariffs Affect You (Even If You're Not Importing Widgets)?
The proposed Trump-era tariffs being discussed again in 2025 target foreign goods but have ripple effects across supply chains, prices, and market sentiment. For investors, this could:
Pressure profit margins of companies you hold
Drive inflation higher in some sectors (e.g., construction, electronics)
Prompt retaliatory measures from other countries, impacting global portfolios
For retirees, it’s not about guessing the outcome. It’s about making sure your income and spending aren’t overly dependent on what happens next in Washington or Beijing.
Source: Brookings Institution – Trump Tariffs
5. Have You Reviewed Your Debt Strategy?
Low interest rates may still make refinancing appealing. Even if rates rise due to inflation pressure from tariffs, it’s not too late to:
Lock in lower rates
Pay down high-interest debt
Consider reverse mortgage planning (if appropriate and well-reviewed)
6. What If You Want to Help the Kids or Grandkids Right Now?
Economic downturns hit younger generations hard too. If you’re in a good spot financially:
Use your annual gift exclusion ($18,000 in 2024; $19,000 in 2025 per person)
Consider intrafamily loans using the low Applicable Federal Rate (AFR), which allows for flexible payback without triggering gift taxes
This isn’t just generous—it’s tax smart.
7. Have You Updated Your Estate Plan for the New Landscape?
Falling asset values and low interest rates could make this a good time for:
Grantor Retained Annuity Trusts (GRATs)
Charitable Lead Annuity Trusts (CLATs)
Intrafamily sales or loans through Intentionally Defective Grantor Trusts (IDGTs)
Even if you’re not using advanced planning tools, it’s worth checking:
How changes in asset values affect planned inheritances
Whether probate vs. non-probate assets are still in balance
If your beneficiaries (or your own wishes) have changed
| Area | Action Step |
|---|---|
| Cash Flow | Confirm reserves, cut spending, adjust distribution timing |
| Investments | Rebalance, harvest losses, deploy idle cash |
| Taxes | Consider Roth conversions, loss harvesting, gifting |
| Debt | Review refinancing options |
| Legacy | Update estate plan, consider gifts or intrafamily loans |
Final Thoughts from Your Financial GPS
Markets will always swing. Presidents will come and go. Tariff policies will change. The key is not to react in panic—but to adapt with purpose.
As a fee-only CFP® who’s worked with many engineers navigating this phase, I help clients build plans that absorb shocks and keep moving forward—even when headlines get noisy.
If you’re unsure how exposed your current plan is to economic disruptions—or if you're the spouse who’s always been "just along for the ride"—now’s a great time to check in.
