| |

Inside Recessions & Depressions: Strategies for Protecting Your Retirement Savings

As an economist with over 50 years of experience, I’ve seen my fair share of financial crises, including the 2008 recession and the COVID-19 pandemic-induced economic downturn. In this post, I’ll share two critical lessons I learned from my father, economist Herbert Stein, as well as time-tested strategies for battling recessions and depressions. I’ll also discuss how everyday Americans can protect their retirement savings in today’s challenging financial climate.

Lessons from Herbert Stein

My father, Herbert Stein, was a prominent economist who served as Chairman of the Council of Economic Advisers under Presidents Nixon and Ford. He taught me several crucial lessons about financial crises:

  1. Don’t Panic: During a recession or depression, it’s easy to become fearful and make rash decisions. However, it’s important to remember that financial crises are a normal part of the economic cycle. Rather than panic-selling your investments, stay calm and focus on your long-term goals.
  2. Keep a Diverse Portfolio: Diversification is key to weathering financial storms. During a recession or depression, certain sectors may be hit harder than others. By diversifying your investments across different sectors, asset classes, and geographic regions, you can reduce your overall risk.
  3. Keep an eye on inflation: Herbert Stein was a firm believer that inflation can be just as damaging to the economy as a recession or depression. He understood that if prices rise too quickly, it can cause people to stop spending and businesses to stop investing, which can lead to a vicious cycle of economic contraction. That’s why it’s important to keep an eye on inflation and take steps to curb it before it gets out of hand.
  4. Be cautious with debt: Herbert Stein also believed that too much debt can be dangerous for the economy. He understood that if individuals, businesses, and governments take on too much debt, it can lead to a cycle of borrowing and spending that’s difficult to break. That’s why it’s important to be cautious with debt and only take on as much as you can afford to pay back.
  5. Look for long-term opportunities: While it’s important to be cautious during a recession or depression, Herbert Stein also believed that there are always opportunities for long-term growth and success. He understood that downturns can create opportunities for innovative businesses to emerge and for new technologies to be developed. That’s why it’s important to keep an eye out for these opportunities and position yourself to take advantage of them when they arise.

By following these lessons from my father Herbert Stein, you can better navigate the ups and downs of the economy and come out on top.

Diversified investment portfolio

Time-Tested Strategies for Battling Recessions and Depressions

Here are some time-tested strategies that my father and I have both used to battle recessions and depressions:

  1. Keep Cash on Hand: During a recession or depression, it’s important to have cash on hand to cover your living expenses and take advantage of buying opportunities. Aim to have at least six months’ worth of living expenses in cash reserves.
  2. Invest in Defensive Stocks: Defensive stocks are those that tend to hold up well during economic downturns. These include companies that provide essential goods and services, such as healthcare, utilities, and consumer staples.
  3. Consider Alternative Investments: Traditional investments like stocks and bonds may not provide sufficient diversification during a recession or depression. Consider alternative investments like real estate, commodities, or gold to diversify your portfolio.
  4. Rebalance Regularly: During a recession or depression, your portfolio may become unbalanced as certain sectors perform better than others. Regularly rebalancing your portfolio can help you maintain your desired level of risk and return.

Protecting Your Retirement Savings

In today’s challenging financial climate, it’s more important than ever to protect your retirement savings. Here are some steps you can take:

  1. Avoid Common Mistakes: Many Americans make common mistakes that can derail their retirement savings, such as cashing out their 401(k) or failing to save enough. Avoid these mistakes by maxing out your contributions, avoiding unnecessary fees, and staying disciplined.
  2. Rethink Bonds: Bonds have traditionally been seen as a safe and dependable investment, but today’s low-interest-rate environment means they may not provide the same level of returns. Consider alternative fixed-income investments like high-yield bonds or dividend-paying stocks.
  3. Work with a Financial Advisor: A financial advisor can help you navigate the complexities of today’s financial markets and develop a personalized plan for protecting your retirement savings.
  4. Diversify your portfolio: While traditional strategies for diversifying your portfolio may not be enough in today’s challenging financial climate, it’s still important to diversify your investments. This means spreading your money across different asset classes, such as stocks, bonds, real estate, and commodities, to reduce the overall risk of your portfolio.
  5. Consider alternative investments: In addition to diversifying your portfolio, it may also be worth considering alternative investments that can provide better returns in today’s low-interest-rate environment. This could include investments in private equity, hedge funds, or even cryptocurrencies. Just be sure to do your due diligence and understand the risks before investing.
  6. Don’t forget about taxes: When it comes to protecting your retirement savings, it’s important to think about taxes as well. Consider investing in tax-advantaged accounts, such as 401(k)s, IRAs, or Roth IRAs, to minimize your tax burden and maximize your savings.
  7. Stay informed: Finally, it’s important to stay informed about the economy and financial markets so you can make informed decisions about your investments. This means keeping up with the news, reading financial publications, and seeking the advice of trusted financial advisors.

By following these lessons, you can better protect your retirement savings and position yourself for long-term financial success.

Retirement savings plan



What are some strategies for protecting my retirement savings during a recession?

One effective strategy for protecting your retirement savings during a recession is to diversify your portfolio with alternative investment options such as real estate, commodities, and private equity. You can also consider maximizing contributions to tax-advantaged accounts such as IRAs and 401(k)s. Another important step is to consult with a trusted financial advisor who can help guide you through these uncertain times.

Are bonds still a safe investment option in today’s financial climate?

Bonds may not be as safe and dependable as they once were due to the current low-interest-rate environment. As an alternative, you may want to consider investing in dividend-paying stocks, real estate investment trusts (REITs), or exchange-traded funds (ETFs) that focus on high-yield bonds. It’s important to consult with a financial professional to determine the best investment options for your unique situation.

How can I effectively diversify my investment portfolio?

Effective diversification involves spreading your investments across different asset classes, such as stocks, bonds, real estate, and commodities, to reduce overall risk. It’s also important to diversify within each asset class, for example, by investing in stocks of different sizes and sectors. Alternative investments such as hedge funds and private equity can also provide additional diversification benefits.

What lessons can we learn from Herbert Stein’s experiences with financial crises?

Herbert Stein’s experiences with financial crises teach us the importance of maintaining a long-term perspective, avoiding panic and knee-jerk reactions, and having a diversified investment portfolio that can withstand economic downturns. It’s also important to work with trusted financial professionals who can provide expert guidance and advice during times of uncertainty.


Financial crises are a normal part of the economic cycle, but by keeping a diverse portfolio, staying disciplined, and working with a financial advisor, you can protect your retirement savings and weather the storm. Remember the lessons of my father, Herbert Stein: don’t panic and keep a diverse portfolio. With these strategies in mind, you can prepare yourself for whatever the future holds.