As we enter an era of growing economic uncertainty, we could learn a lot from the last American generation to truly experience a financial hardship.

When people my age – I’m 51 this year – or younger casually discuss their worries of a coming recession or even a depression, I think they’re playing parlor games. We have never lived through The Great Depression. Most of us have never even had an emotionally honest conversation with someone who did. I don’t think we’ve got the foggiest idea what we’re talking about when we worry about a global crash or jokingly recommend stockpiling food. I’m trying to find the experience of a critical generation. I’m looking for someone from the last one to know what true economic hardship was like.

Why bother?

Because the future, the next 50 years or so, will be more uncertain than the past 50 years. Not as uncertain as the Great Depression, I believe (and hope), but unsettling enough.         `

The promise of the United States has always been work hard, save hard and invest in education.

In doing so, the future will be better for your children. I worry that the next 50 years could see that promise broken. The baby-boomer generation could mark a peak, at least an economic one, that members of the next generations won’t routinely surpass.

We need  an emotional understanding of how it felt to live with uncertainty and still get on with life. We should sill trust that hard work has a point and still believe that the future will be a time worth living in. I think the experience of a generation that faced a greater degree of uncertainty can teach us something about how to face our own economic uncertainty.

These days the only sound that’s louder and more determined than the parade of recession warnings, is the shouts of know-it-alls spouting strategies that will supposedly safeguard your retirement in the face of a downturn. Some advocate waiting out the turbulence in cash equivalents like money funds or CDs. Others suggest investing in foreign markets. And still others recommend moving into market sectors that have historically held up well in recessions past.

This is called “paper-mache advice”. A term I enjoy. It looks solid at first glance, but doesn’t hold up to closer examination. The main problem is that these recommendations assume you can move your retirement money in and out with impeccable timing. In reality, you run the risk of selling at a low point and buying in at inflated prices. Throw in the cost of trading, and you can seriously eat away at your long-term returns.

What can you do to prevent your nest egg from getting totally scrambled?

I offer strategies for four different stages of retirement planning that will get you through a recession or the threat of one, and a down market while still allowing you to prosper in the longer-term. I am not a financial adviser. What I mention here is only what I have picked up along the way.

But first I want to mention one thing that almost everyone should be doing in an iffy economic climate. While it’s always a good idea to have a cash reserve of three to six months’ living expenses to fall back on, it’s particularly crucial to have such a cushion now. Recessions dramatically heighten the risk of job loss. During the recession of March to November 2001, for example, the United States lost 1.6 million jobs. Having an emergency fund will reduce the chance that you’ll have to raid  your nest egg’s growth if you’re ever laid off. 

In the next few post I will give a general what to do where you are, Getting started, Mid carrier and so on… See you next week.