We all hope to live a long life in retirement, and we’d be remiss to think that we won’t experience any financial hardship. From divorce to economic recession to losing a family business and anything in between, life guarantees ups and downs. It only makes sense to plan for such financial setbacks. Read on for ways to prepare for financial hardship in your golden years.

Establish an Emergency Fund

Most financial experts advise three to six months’ worth of living expenses to be set aside in an emergency fund. Financial shocks like a sudden medical expense or a pricey home repair are more easily absorbed when the funds are readily available and have been reserved for instances such as these.

Build Up Cash Reserves

Financial setbacks in retirement aren’t as easily absorbed because you’re no longer bringing in income. If you’re still in the workforce, prepare for the financial obstacles in your future by building cash reserves beyond an emergency savings fund. You can knock down debt, work extra hours or a side gig, and max out your retirement accounts. These strategies help create more of a financial footing for whatever the future holds.

Reduce or Eliminate Debt

Pay off consumer debt as quickly as possible, and stay debt free. Nothing eats away at your cash reserves like debt, and if you’re faced with a financial crisis in the future, having existing debt will only magnify the financial shock.

Weathering a Financial Hardship in Retirement

If you’ve already entered retirement when financial hardship hits, there are some options to help remedy your situation.

Alleviate Financial Strain

Reducing expenses where ever possible is vital when you’re faced with a financial setback. Additionally, if you’re able to, you could return to work temporarily, even part-time, in order to earn more income. Another possible way to help your situation is to adjust your investment strategy, which likely means pursuing more aggressive investments.

Take Out a 401(k) or a Personal Loan

Personal loans and 401(k) loans can offer relief when financial crisis hits. Keep in mind that many 401(k) plans have limits for how much of your balance you’re permitted to borrow and how many loans you’re permitted to take from your account each year. Be sure you have a plan to pay the loan back, and remember that if you had to leave your job before you’re able to repay a 401(k) loan in full, you might owe the balance of your loan right away.

Look Into a 401(k) Hardship Withdrawal

A 401(k) hardship withdrawal is different from a 401(k) loan. For starters, a hardship withdrawal isn’t a loan and you aren’t required to pay back the amount you withdraw, though you will owe income taxes on the amount you withdraw. You might also be liable for the 10% early withdrawal fee if you are younger than age 59 1/2, but this can typically be waived if you can prove your hardship (i.e., medical expenses). The eligibility of a 401(k) hardship withdrawal depends on your plan and the plan administrator’s rules, so check first that it’s an option for you if you decide you want to go this route.