How To Protect Your Solo 401k From A Recession: Here´s How

Whenever something goes even a little bit wrong in the government or an official is elected that a group of people don’t like, people start panicking about recessions. Sometimes it’s with merit, and other times it’s not. Whatever the reason, it’s a good idea to take action and protect your investments from a recession whenever possible, and that includes your Solo 401(k) retirement plan.

Here are some ways to protect your Solo 401(k) from a recession:

• Diversify Your Portfolio

• Stay Calm

• Assess Your Risk and Assets

• Keep Your Fees Low

• Continue to Contribute

Does doing all of this guarantee everything is going to be hunky dory? Not necessarily. Nothing is perfect, but with these tips, you can do your best and protect as much as possible. So, keep reading for ways to protect your Solo 401(k) from and during a recession.

Diversify Your Portfolio

A recession usually happens when the stock market crashes, however it was also seen in the early 2000s when the housing market crashed. If you keep all of your eggs in one basket and that basket lights on fire, you’re going to cook all of those eggs. That’s why one of the biggest bits of advice anyone will ever share is to diversify your investment portfolio.

Consider a combination of these assets to invest in:

• Traditional Investments: Such as Stocks, Bonds, Annuities, CDs, and EFTs

• Real Estate: Both residential and commercial

• Alternative Assets: Such as precious metals, financing, foreign currency, and energy

Doing a selection of risky and safe investments helps to keep money coming in no matter what happens. Nothing is 100% safe and sure, so trying to do only safe investments means that you might just get burned just as badly as doing only risky investments. Seeking a competent tax legal or investment advisor on you side is worth the its weight in gold. 

Stay Calm

It can be extremely stressful once the word “recession” gets thrown around. The last big one is still in recent memory for many adult Americans, and it was scary enough then. However, the market always ebbs and flows. 

It will always have minor recessions and dips, and then eventually recover. This is a sign of a healthier economy. While the US doesn’t have a fail safe economic structure, it is healthy enough that it won’t go completely bust when a recession hits.

Therefore, stay calm in the face of a recession. Don’t panic sell, don’t stop making contributions, and don’t cash out early if you don’t have to. Besides, if you’re well set up, with a diverse portfolio and good management, you won’t be affected too badly.

Assess your Risk and Assets

You may need to assess your risk and assets from time to time regardless of an impending recession. Ensure your Solo 401(k) assets are constantly rebalanced and managed. 

Just because one tactic or asset paid off well in the past doesn’t mean it’s always going to. Having an expert in your corner who can help you assess, manage, and record keep like those at SEPira(k) can help make this easy and as stress-free as possible.

Keep Your Fees Low

There are always going to be fees. Depending on your provider, you might have to pay administrative fees and all sorts of odds and ends. Keep your fees as low as possible surrounding your Solo 401(k) in order to help recession-proof your Solo 401(k).

Continue to Contribute

One big problem many people do during a recession is to stop contributing to their retirement plans. This is almost always a huge mistake. A down market creates opportunities.  There may be investments that can be purchased at bargain prices due to a down market. 

The saying “buy low, sell high,” is a motto that usually pays off in the end. Having more cash in your retirement plan positions you to be able to capitalize on those opportunities.  Remember that the IRS wants those contributions to be recurring and substantial to keep the plan active!

Things to NOT Do

A few of these points have already been briefly touched on, but it’s worth reiterating some things to not do in order to protect your Solo 401(k) plan from a recession.

Here are some of those things:

• Don’t always hop onto the newest bandwagon

• Don’t attempt to time or play the market

• Don’t cash out early

• Don’t panic sell assets

• Don’t pay for expensive protections or fall for scams

Nobody can totally predict what the market is going to do. It’s volatile and changes frequently. However, experts can guarantee that eventually the market will recover as a whole, so it’s best to plan ahead and stay calm.

Conclusion

Saving for retirement shouldn’t be stressful, but with all the work that goes into maintaining the plans, whispers of a recession, and everything else that goes into them, it is. The biggest thing to help recession-proof a Solo 401(k) is to diversify your portfolio. Make it a mix of safe and risky bets in various areas in order to ensure that if something happens to one, the others can still carry on.

Another thing is to have a good team in your corner. Your current tax, legal and investment advisors can work with SEPIRAk’s team of retirement plan experts who are highly qualified  in both technology and retirement rules and they have a state-of-the-art secure platform to make recordkeeping and managing a 401(k) plan simple and easy. 

It’s customized to the client rather than being prepackaged plans, meaning you can be as involved and self-directing as you want and need in order to reach your retirement goals. There’s no being left alone with Excel spreadsheets while the IRS painstakingly looks for a flaw so it can disqualify the plan, and there’s such high-quality aid and a robust backup that should there be a recession, your money stays safe and secure.

Resources

• How to Protect Your 401(k) From a Market Crash or Recession

• https://www.sec.gov/education/capitalraising/building-blocks/risk-diversification

• https://www.sec.gov/about/reports-publications/investor-publications/investor-pubs-asset-allocation

• https://www.investor.gov/

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