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  • With a 2023 recession looming, I’ve been searching for ways to earn more and protect my money.
  • Experts told me to put my cash in interest-bearing vehicles, like Treasury bonds and CDs.
  • They also recommended tax-loss harvesting to reduce my tax bill, and looking into Roth conversions.

Over the past couple of months, I’ve started to worry that I should switch up my financial strategy as we continue to navigate choppy financial waters. After spending years working on finding ways to save more and spend less, my primary focus in 2022 has become trying to outsmart a looming recession.

I’ve been eager to find ways to bring in more streams of income, tighten my monthly budget so I can save more in my emergency fund, and have kept my eyes out for new investment opportunities.

But in order to continue to build my overall wealth in the upcoming years, I wanted to find out exactly what I should start doing now with my money so that it doesn’t succumb to any negative effects that a recession can bring.

I asked financial experts to share the top ways a person can build up their wealth during a recession. Here’s what they had to say. 

1. Reassess your cash holdings 

One of my biggest ongoing financial mistakes is that my overall financial portfolio is too cash heavy. I’m scared to take any big investment risks with a potential recession just a few months away. But even so, financial planner Adam Pawloski says that there are low-risk options that can help your cash grow more than just keeping it in a checking or savings account.

“There are many investments that offer liquidity similar to cash, but provide interest,” says Pawloski.

Depending on how much access you’d need to that cash in the near future, Pawloski says that you can earn some money without putting it in the stock market. Options include placing the cash in a CD, buying US Treasury bonds, or finding a high-interest savings account. 

2. Consider tax-loss harvesting 

When we’re thinking about how to plan for a recession, we sometimes just look at what to do with our current cash and assets while ignoring what we can do in the near-term to help lower our tax bill. Chartered financial analyst Philip Mock advises speaking to your accountant to see if you can do any tax-loss harvesting. 

“If markets are down, chances are you may have losses in your portfolios,” says Mock. “If you sell a security at a loss, you can generally use it to offset other capital gains.”

He advises discussing this strategy with your accountant and using it to reduce capital gains in the near-term. Plus, Mock says, one extra benefit of this strategy is that if you generate more capital losses than you are permitted to deduct in the current year, you can carry these forward to offset gains in the future.

3. Look into Roth conversions

When you’re looking at your recession strategy, Mock advises paying attention to your retirement accounts and looking to see if you can do a Roth conversion, which is when you take money from a traditional IRA and transfer it to a Roth IRA. 

Wealthfront Wealthfront IRA


Fees

0.25%; 0.06 – 0.13% for low-cost investment funds


Account Types

Traditional IRAs, Roth IRAs, and SEP IRAs


Investment Types

ETFs, index funds, and crypto trusts

Wealthfront Wealthfront IRA


Fees

0.25%; 0.06 – 0.13% for low-cost investment funds


Account Types

Traditional IRAs, Roth IRAs, and SEP IRAs


Investment Types

ETFs, index funds, and crypto trusts


Fees

0.25%; 0.06 – 0.13% for low-cost investment funds


Account Types

Traditional IRAs, Roth IRAs, and SEP IRAs

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Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.

Mock says when you make a Roth conversion, and pay tax on the conversion amount, you’ve now made it post-tax money. When you make Roth conversions in down-market years, you accomplish two things.

“First, you can convert a smaller amount potentially since the value has fallen, and in doing so generate a smaller amount of taxable income in the current year,” says Mock. “Second, when the market is rebounding, the rebound occurs in a post-tax vehicle, which is advantageous.”

Seek advice from a financial planner or advisor if you’re considering this strategy.

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