Soon-to-be retirees might have concerns — especially if the value of their IRAs has dropped with the stock market. Average retirement savings have plunged by nearly $10,000, according to data from financial services company Northwestern Mutual.

But if you take some precautionary measures to get your finances in order, you might not be severely impacted by an economic downturn.

What soon-to-be retirees can do to prepare

Fortify your emergency fund

During a recession, when economic activity is stifled and unemployment starts to spike, older workers tend to be at higher risk of losing their jobs compared to those in the middle of their careers.

You can prepare for this possibility by beefing up your emergency fund. Experts generally recommend setting aside three to six months’ worth of living expenses in normal circumstances.

Read more: ‘Stay out of 'Financial La La Land': Suze Orman says most Americans need to do this now to survive their next crisis

However, if you’re barely making ends meet in the midst of rampant inflation, start with smaller savings. You can build up your cash cushion over time, but be realistic about how much you can conserve.

Scoop up shares on the cheap

Although the market’s been down, this might be a good opportunity to purchase shares while they’re cheap — and benefit over the long-term.

If you’re in a strong financial position, consider building a diversified portfolio with sectors that traditionally perform well throughout economic cycles, like health care, utilities and consumer staples.

Short-term assets, like cash, prepaid expenses and short-term investments, can also help you ride out a recession. They’re meant to be used within a year, which can help you avoid tapping into your long-term investment funds.

Take advantage of low tax rates

The market downturn might actually make for a good opportunity to convert your traditional IRA into a Roth IRA.

A traditional IRA lets you grow your money tax-free until you make withdrawals in retirement. With a Roth IRA, you’ll need to pay your taxes upfront but can benefit from tax-free withdrawals in retirement instead.

So why might it make sense to convert over to a Roth IRA now? While the market’s down, your portfolio value has likely shrunk as well, which means there’s less to pay taxes on.

You’re also currently benefiting from 2017’s tax cuts — which will no longer apply by Dec. 31, 2025.

If you think you might be in a higher tax bracket in the future, consider taking on a lower tax burden now and gaining from tax-free withdrawals in your retirement.

What to read next

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.