During a recession, many people fear that their retirement funds are going to be in great jeopardy. People begin to panic and start looking into what the best plans are for their retirement funds, from investing in defensive stocks to turning their investments back into cash. There are tons of different strategies out there that are all designed to help you safeguard your retirement funds, but for the most part that advice is not very solid because it does not hold up for the long term. Your best plan for your retirement funds during an economic recession is going to vary depending on where you are currently at in your career.

Here is a look at the best plan to follow during the different stages of your career.

Early career:
You should only be focused in making sure that you are putting enough money into your retirement accounts. You should not be focused on following the ups and downs of the economy. The reason for this is that you are in the early parts of your career so the economic recession is not going to affect your retirement funds for that long; you have a higher chance of not losing money than people who are having to access their funds now. To determine if you are saving enough for your future retirement you should use a retirement calculator. This calculator allows you to plug in your age, your annual salary, and the amount that you have currently saved. It will take that information and give you an estimate on the percentage of your salary that you need to be setting away to retire by age 65.

For investing your retirement funds, you want to focus on funds that will give you long-term capital growth. Even though this can create losses during a recession, you are still far enough away from your retirement that you can recover from the temporary losses. For example, in January 1973 people who invested in a diversified portfolio of stocks right before a bear market drove stock prices down to about 50% still earned an annualized 10.6% over the next 30 years. Therefore, there is no need to worry about losses during a recession this early in your career. You should devote about 90% of your retirement funds to low-cost mutual funds, no matter what the market is doing.

Mid-career:
By this point in your career you probably have, enough money invested in your 401K plan that a market downturn would give you a big enough loss that it would have your full attention. Most people would be tempted to abandon their long-term investment strategy so they could avoid losing any money in the short-term.

You want to resist this urge because you still have plenty of time to make up for any losses that you might suffer from due to the recession. Your goal should still be focused on the long-term growth options, including low-cost mutual funds. However, during a recession at this point on your retirement plan you want to be less aggressive than you were earlier in your career because you have less time to make up for any losses that you might suffer. You want a mix of about 70% to 75% of your retirement funds to be in stocks and you want the other 25% to 30% to be in bonds.

Also at this point in your career, you need to ensure that you are still setting aside enough money each month to meet your retirement goals. However at this point you will want to use a retirement planner to ensure that you are still setting aside enough money instead of a retirement calculator. The reason for this is that the retirement planner will allow you to run a couple of different scenarios using different assumptions about your savings rate and the investment strategy so that you can determine if you are on track or if you need to make adjustments.

Late career:
At this point in your career, you only have about 10 years left until you retire. In addition, with how close you are to retiring and the smaller amount of your debt this is a great time to increase how much money you are setting aside for your retirement income. However, with the economy in a recession you are going to have to play a delicate balancing act, you want to earn a big return on your investments so you can increase how much you have in your retirement accounts. Nevertheless, at the same time you do not want to take huge risks that can end up leading to huge losses. At this point if you suffer any losses, you might not be able to recover fully, although you should be able to recover most of the losses.

When it comes to investing your money during a recession at this point you still need to protect the money that you already have invested, but you also need to invest enough money to get you to retirement and enough money to see you through your retirement years. No matter how tempting it might be this is not the time to move your money in and out of cash, bonds, or defensive sectors. Instead, what you need to do is invest in a mix of stocks and bonds that will give you a shot at the long-term growth that you are looking for. However, at the same time they will provide you with enough protection so that if the market continues to go down you will not suffer a huge loss. To do this you need to invest about 60% of your portfolio in stocks and put the other 40% into bonds.

At this point, your main concern needs to be on figuring out how much retirement income your retirement funds can realistically generate, but you also need to think about growing and protecting your nest egg. To determine how much income your retirement funds will generate you need to use a retirement income planner. When using this you need to enter in your account balances, how much you are still saving, your estimated Social Security benefits, and your current investment mix. This will give you an estimate on how much money you can count on having during your retirement.

Already retired:
At this point, any kind of market slump can end up hurting you. The reason for this is the combination of the investment losses and you pulling out money from your retirement accounts depress the value of your portfolio, which can make it impossible for your portfolio to recover fully once the market turns back around. At this point your main focus need to be on protecting your retirement funds.

You can protect yourself from going through your retirement funds too soon in one of two ways. The first method involves scaling back your stock holdings. When doing this you want to scale them back enough to allow for modest growth, yet limit the damage from the down turning market. If you choose this method you are going to want to invest about 50% of your retirement funds in stocks and put the other half in bonds and cash. The older you get the more you should scale down the amount that is devoted to stocks, so that by the time you reach your 80's only 20% to 30% of your portfolio is in stocks.

Your second option is to carefully manage withdrawals from your savings. For example, if you want your retirement fund to support you for 30 years you should not withdraw more than 4% of your account value initially. Then you want to increase the dollar amount of your withdrawal each year so you can cover inflation. This can give you about a 90% chance of making your money last for 30 years or more. However, your odds will be lower if you have several years of subpar returns or a market downturn early in your retirement. With the market heading down in early retirement you should cut back your withdrawals. At the same time if you see your portfolio increase in size be generous to yourself so you can enjoy retirement.

Going through a recession can be very unnerving because of the effect it can have on your retirement funds. However, the biggest mistake that you can end up making is shifting your assets around while trying to outguess the market. This will most likely lead to more problems rather than solving them. Your best bet is to come up with a solid long-term plan, while leaving room for minor adjustments, and stick to it. In fact if you end up sticking to the long-term plan that you created early in your career after the crisis passes you will see how much of your money you can recover, making you glad that you stuck to your original plan rather than panicking.