What is 'Recession Rich'

Recession rich is a slang term for someone who manages to do relatively well financially during a recession. Recession rich does not necessarily mean rich. Sometimes it simply means a person has a job and can pay the household bills, unlike others in the neighborhood. Or it may mean their retirement account didn’t lose more than a third of its value, like most everyone else’s did.

BREAKING DOWN 'Recession Rich'

Recession rich referred to a class of individuals during the Great Recession of 2007-2009, for example. During this time, unemployment and home foreclosures spiked. Cities such as Stockton, California, where housing prices rose particularly acutely prior to the recession, experienced some of the worst financial pain; the city itself eventually declared bankruptcy. Unemployment in the Stockton-Lodi area reached 18% in January 2011, according to the St. Louis Federal Reserve, and remained well above average until early 2018.

Consider a homeowner in Stockton in 2009 who owned a home outright, lived on a guaranteed pension, bought a new Toyota that year and went out to eat most nights of the week. Many in Stockton that year would call that person recession rich.

Some who are truly wealthy also are recession rich, while some are not. For example, an owner of a gold mining operation that rises in value with increasing market instability indeed is both rich and recession rich. The same can be said for the owner of a local dollar store that sees business change very little when the economy contracts. However, a local real estate baron with significant debt is not recession rich, as this formerly wealthy person may be overleveraged and in financial trouble.

Asset Classes for the Recession Rich

Back in 2009 and 2010, many working-class people continued to deal with elevated unemployment, lower property values and other financial constraints. The median income in the U.S. dropped to $49,445 in 2010, down from $52,823 in 2007, according to the U.S. Census Bureau. Meanwhile, as most who invested in a 401k during this time can tell you, lower equity values crushed many people’s retirement plans.

However, some wealthy individuals who placed money in hedge funds that invested in timberland and other assets that held up fairly well in recessions not only didn’t feel the pinch, their wealth increased during the recession. Others invested in managed futures, which also tend to hold up well in difficult financial times.

While most 401k investors can’t buy timberland or managed futures easily, they can invest in some other more liquid investments that have done well in past recessions, such as government bonds. For example, this asset class gained about 12% in 2008. Another is gold, which rose about 3.5% in 2008. In comparison, the S&P 500 stock index declined 37% in the same year.

  1. Global Recession

    A global recession is an extended period of economic decline ...
  2. Economic Recovery

    An economic recovery is a period of increasing business activity ...
  3. W-Shaped Recovery

    An economic cycle of recession and recovery that resembles a ...
  4. Pale Recession

    A pale recession is a phrase used in May 2008 by Alan Greenspan ...
  5. Tortoise Economy

    A tortoise economy is an economy that is growing slowly over ...
  6. Business Cycle

    The business cycle describes the rise and fall in production ...
Related Articles
  1. Insights

    Top 4 Things To Know About The Last Double-Dip Recession

    The financial media and investors are haunted with the prospect of a double-dip recession. We look to the past to see if a double-dip recession is in our future.
  2. Insights

    Will Your Net Worth Be Affected By A Recession?

    Here's a look at how a potential recession could impact your net worth in a negative way.
  3. Insights

    Do Declining Corporate Margins Point To Recession in 2016?

    Learn how declining profit margins have foretold nearly every recession of the past 50 years, and analyze whether they may signal economic contraction in 2016.
  4. Investing

    5 Long-Term Consequences Of The Recession

    Apart from the headlines about jobs, this recession is doing damage in other areas that goes unnoticed.
  5. Personal Finance

    Next Housing Recession in 2020, Predicts Zillow

    With Fed action weighing on real estate, a recent survey shows that many experts think a housing recession will kick off in the first quarter of 2020.
  6. Personal Finance

    Budgeting For A Recession

    A recession can be tough on your finances, but by planning ahead you can increase your financial resiliency.
  7. Financial Advisor

    Can the Market Predict a Recession?

    Is a bear market an indication that a recession is on the horizon?
  8. Managing Wealth

    Profiting In A Post-Recession Economy

    When the dust from a recession settles, there are often many opportunities for portfolio growth - both locally and internationally.
  9. Investing

    4 Ways to Hedge the Next Recession (MDY, ASHR)

    Discover how the next recession will be different and how you can use hedging strategies to ensure a positive outcome for your investments.
  10. Insights

    5 Big Names That Profited From The Recession

    While the recession was a terrible event for many, some savvy parties managed to make it work for them.
  1. What's the best investing strategy to have during a recession?

    Figure out how to take advantage of recessions, what assets to buy and which ones to avoid. Recessions are where some great ... Read Answer >>
  2. What causes a recession?

    A recession is a significant decline in economic activity lasting more than a few months, normally visible in real GDP, income ... Read Answer >>
  3. What are the three major economic components necessary for stagflation to occur?

    Dig deeper into the three components of stagflation -- inflation, unemployment and declining output -- as understood by economic ... Read Answer >>
Trading Center