Retirees: How to Make it Through a 2023 Recession

Retirees might be pretty concerned about their investment performance these days, so it may be time to take a defensive approach with your advisor.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 15, 2023 10:00 am EST

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Investors continue to be told we’re expecting a recession in 2023. While economists continue to declare it’s going to likely be a “mild recession,” that’s not much help for retirees. It must be nice for those economists who don’t have to worry about how they’ll retain their livelihoods!

However, there’s certainly a way to make it through a recession relatively unscathed. In fact, I’m sure you’ve already taken the best step by meeting with your financial advisor. From there, it might be a good time to bring up with them some investment considerations for during the pandemic.

If you have some cash you’re willing to invest to help you through a recession, here’s where I would recommend retirees put it today.

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BMO International Dividend ETF

Diversification and dividends are the best of both worlds. That’s exactly what retirees can find with BMO International Dividend ETF (TSX:ZDI). The ZDI exchange-traded fund (ETF) offers an international portfolio of stocks, with the sole focus of creating strong dividends. It invests across the board in terms of holdings, with its largest investments in financial services and healthcare.

Investors can currently pick up a 4.04% dividend yield as of writing, with shares up 3% in the last year alone. This is a large increase since the fall in October, with shares up 25% since that time. And if you want long-term income, ZDI is up 52% in the last decade. That’s a compound annual growth rate (CAGR) of 5.3% as of writing, which beyond 2022 has been higher than inflation. So, you get all this, with a management expense ratio (MER) at just 0.40%.

TD Bank

If you’re looking for growth, then retirees may also want to consider Toronto-Dominion Bank (TSX:TD). You’ll get the safety and security of a Canadian Big Six bank, while also receiving the growth of TD stock. TD stock continues to climb from its expansion in the United States, but also from its partnerships with credit card companies and options for loans for its clients.

TD stock continues to trade in value territory for retirees seeking a deal right now and wanting to hold for years, even after the pandemic. Now is a great time, with shares down about 10% in the last year, trading at 9.13 times earnings. You can lock in a 4.44% dividend yield and look forward for another decade seeing 208% of growth! That’s a CAGR of 12% as of writing.

BMO Ultra Short-Term Bond ETF

Finally, retirees have already likely heard that they should be investing in bonds during a recession. I certainly agree, as do most economists. The rates for bonds are simply too good to pass up and mean fixed income during a period when you’re worried about your returns and investments. BMO Ultra Short-Term Bond ETF (TSX:ZST) is therefore a stellar option, as it allows you to re-evaluate in the coming months.

Economists predict a recession during the first half of 2023, but perhaps not the rest of the year. ZST ETF invests in Canadian government and corporate bonds with a maturity of less than one year. It has an insanely low 0.16% MER and a 2.27% dividend as of writing. Shares are up 1.4% in the last year and 15% in the last decade for a CAGR of 1.42%. So, you can certainly buy it up for that fixed income.