How recessions can affect retirement savings
Are you worried about how the economy, especially a recession, might affect your retirement savings? You’re not alone—42% of workers and 45% of retirees share your concern.¹ But a recession doesn’t have to derail your financial life. Let’s explore what a recession is and how you can help keep your savings on track, no matter what the economy throws your way.

[Updated article; original publish date 6/12/24]
Understanding recessions
Recessions are technically defined as when the country’s gross domestic product—which means how much we produce—shrinks two quarters in a row. Put simply, that means six months of the economy not growing. When you hear on the news that production and consumer spending are down while unemployment and the cost of living are up, those are usually telltale signs that we may be in or near a recession.
The United States has had 34 recessions since 1857. The longest recession lasted five years, but recessions in the past 50 years have been much shorter. Even the recession that was kicked off by the COVID-19 pandemic in 2020 was relatively short—although it was more sudden and sharper than most.2
Recessions can often happen when there’s a major change in a key industry (such as real estate in 2007), a sudden shock to the economy (like COVID-19), or even psychological forces (such as extreme optimism with the dot-com bubble).
Managing retirement savings in a downturn
The stock market may go down quite a bit during a recession. If you have money in a 401(k) or other retirement accounts, the falling stock market could lower your account’s value. You may also see your house and other investments lose value.
In a recession, if you don’t plan on retiring and using your money right away, you might consider staying the course, even if you see your retirement savings balance go down. Whether market prices rise or fall, it’s not a gain or loss until you sell. So if you sell when the market is down, you’ll lose money. But if you can keep your money in the market, your balance could go back up when the stock market recovers.
It can be hard for you to watch the stock market—and your investments—go up or down, but try not to make decisions about your savings and investments out of fear and stress. If you’re confident that your money is invested based on your comfort with risk and how long before you plan on retiring, then you’re likely better off waiting for the market to rebound—because it has historically.
Helping build your retirement savings
Staying focused on your long-term goals might be better than letting your emotions make your financial decisions. Remember that recessions are a normal part of the economic cycle. You can consider working with a financial professional to help you manage risk, seek opportunities, and guide you in both up and down markets.
Visit our market volatility resource page for more helpful articles about the financial markets and the economy.
1 2024 John Hancock financial resilence and longevity report, a commissioned study. 2 "US Business Cycle Expansions and contractions," National Bureau of Economic Research, 3/14/23.
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Important disclosures
The content of this document is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made.
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