What Millennials Should Do With Their Money During a Recession

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  • A recession looks increasingly likely in 2023, but you can take steps to protect yourself.
  • According to Alex Alba, millennials with full-time jobs should start by filling their savings.
  • If you can afford it, consider investing outside of your company 401(k) after you’ve maxed out your match.

Economists predict a recession in 2023, meaning layoffs and stock market volatility could be on the horizon.

Financial planner Alex Alba of Merit Financial Advisors says, “I don’t think anyone knows exactly when the recession is going to be or when the stock market volatility is going to end.”

However, Alba says, the data points to the stock market “going back to normal and green” in late 2023 or early 2024. Given that a recession would be a temporary and natural part of the economic cycle, here are four money . moves Alba recommends for millennials who have full-time jobs.

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1. Top up your emergency fund

An emergency savings fund is three to six months’ worth of living expenses typically held in a high-yield savings account. A HYSA gives you easy access to your money if you’re fired from your job, have a car accident, or face any other type of emergency. Alba says it’s more important to fill your emergency fund now than ever, especially if you’re worried about layoffs.

2. Maximize your company’s 401(k) match

A 401(k) is a company-sponsored retirement plan that allows you to invest a percentage of your pre-tax salary in the stock market to passively grow until you retire. The company you work for may offer a 401(k) match, a percentage of your contribution that the company matches dollar for dollar and puts into your retirement account up to a certain dollar amount.

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For example, your company may offer a 401(k) match of 3% up to $3,000 per year. In that case, to maximize your company match, you would need to save at least 3% of your salary (or more depending on how much you earn) to get the maximum match from your employer.

Experts say tapping into a 401(k) match is one of the easiest ways to grow your money in the stock market. Alba says that if you haven’t already maxed out your company’s 401(k) match, now is a good time to make that change.

3. Start maxing out your 401(k) deferral.

Another strategy Alba suggests for millennials with full-time jobs is to maximize their 401(k) deferral. The 401(k) deferral rate is the percentage of wages contributed to a 401(k) plan through your employer.

Under the tax laws, if you make an annual salary of $330,000 or less, you can defer up to $22,500 of your annual salary and put it into your 401(k). Each year, the maximum deferral rate changes based on the IRS’s annual cost of living adjustments (COLAs). This year, the IRS increased the COLA by $2,000, from $20,500 in 2022 to $22,500 in 2023.

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For example, if you make $100,000 a year and contribute 3% to your 401(k), at the end of the year you’ll only contribute $3,000 to your 401(k), $19,500 less than your 2023 401(k) .deferral limit.

Alba recommends working with a financial planner to gradually increase your contributions until you max out your 401(k) deferral limit.

4. Invest outside of your 401(k)

Alba says a recession is a good time to start investing outside of your 401(k) in a brokerage account because you’ll get “discounts” on stocks. He adds that market volatility can reveal how much risk you’re willing to tolerate as an investor, which will help you make better long-term financial decisions when investing in the market.

He adds: “In addition to stocks, there are also great ETFs and funds. To get the right investment mix, I think having a relationship with the right financial professional is very important.”


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