Richcession or Recession: Where Are We Heading?

By Chris Duderstadt

August 25, 2023

Richcession or Recession: Where Are We Heading?

Key Points – Richcession or Recession: Where Are We Heading?

  • The Components of a Richcession
  • Will the Fed Achieve the Soft Landing It Has Been Hoping for?
  • Comparing Data from the COVID-19 Recession to Today’s Potential Richcession
  • 5 Minutes to Read | 23 Minutes to Watch

What Is a Richcession?

You’ve probably heard of the term recession—especially over the past year or so—and at least have some understanding of what it means. But have you ever heard of the term “richcession?” If you haven’t, you’re far from being alone. It’s a newly coined term. We’re going to explain what is a richcession is, who it could affect, how it differs from a recession, and much more.

Who Is Impacted in a Richcession?

We don’t need to go far back in time to figure out when the term richcession originated. Wall Street Journal reporter Justin Lahart coined it in his column, Get Ready for the Richcession, in January 2023. He explains that whereas a recession is devastating for the poor and even the middle class, a richcession would negatively impact the ultra-wealthy.

But What About the Recession That’s Supposedly Been Looming?

Before we dive deep into the components of a potential richcession, we’d be remiss if we didn’t look back at the past year or so and all the talk of a recession that’s been in the news. For much of 2022 and into 2023, there were headlines upon headlines about an impending recession. The Federal Reserve has had a big challenge on its hands of figuring out how to kill inflation with throwing the economy into a prolonged recession.

While the Fed hasn’t attained its goal of getting inflation back to a 2% target rate, inflation has been slowing. It’s just important to remember that we’re talking about year-over-year inflation that’s been slowing, though. Not to be pessimistic, but it could take years for the high prices that we’ve seen at the grocery store, gas station, etc. to come back down. Keep in mind that it usually takes about nine to 12 months for an interest rate hike to be felt within the economy. So, we’re just now really feeling those 0.75% hikes from 2022.

“Prices are still way elevated from what they were pre-COVID. It’s still hurting a lot of people.” – Dean Barber

That’s also evidenced by record-high credit card debt. There are people who are putting their necessities on credit cards

A Recession Isn’t in the Fed’s Forecast

As the Fed has slowed its roll on increasing interest rates, maybe you’ve noticed that discussion about an impending recession has waned. Could the Federal Reserve actually achieve a soft landing despite the odds of doing so looking grim for so long? Federal Reserve Chairman Jerome Powell said that the Fed has even taken a recession out of its forecast. Do you believe that will be the case? We’re continuously monitoring the Fed’s actions and planning accordingly.

Speaking of reviewing the Fed’s actions, that’s exactly what Dean Barber will be doing with LSA Portfolio Analytics President and Founder Brad Kasper in an upcoming episode of The Guided Retirement Show. Make sure to subscribe to The Guided Retirement Show on YouTube or your favorite podcast app so you don’t miss it.

A Rolling Recession or a Richcession?

There have been some economists that have suggested that we’re actually in the midst of a rolling recession. While select industries are struggling, the economy at large keeps chugging along, accelerating to a 2.4% annual growth rate from April through June. For example, look at what’s been happening with all the layoffs in the technology sector. According to, here have been layoffs at 900-plus tech companies so far in 2023. That has resulted in more than 228,000 people losing their jobs.

“It’s not just the high-tech sector either; it’s the banking and finance sectors. There are likely more (layoffs) on the way as we see a slowing economy. Those companies are tightening their belt and getting rid of high-paid people.” – Dean Barber

Tech also happens to be one of the highest-paying industries. Hence why other economists are suggesting that we could be in a richcession rather than a recession. Dean and Bud Kasper have also mentioned on several occasions that tech stocks have been driving the stock market in recent months. Just check out Dean’s July Monthly Economic Update to get an idea of how much of the S&P 500’s return has been from the Magnificent Seven stocks.

“If tech companies are now having layoffs, this glorious ride that people have been on in the stock market could be disrupted.” – Bud Kasper

The last time we saw such a narrow group of stocks driving most of the return in the market was 1999. That was before the Dot-Com Bubble burst. We’re not saying there will be a repeat of that, but this situation is something that everyone needs to monitor. If we go into a recession and not just a richcession where the masses lose their jobs, that could snowball into something that negatively impacts our financial system.

Looking Back at the COVID Recession

Now, let’s look at data from the short-lived but brutal COVID-19 recession and compare it to some current data. While there was a 31.4% decline in GDP in Q2 2020, it recovered and then some in the third quarter. During the COVID-19 recession, employees earning $100,000 or more a year were the least likely to be laid off. That exact opposite appears to be happening now, though.

Evidence of a Richcession?

According to a recent Bank of America report, unemployment is rapidly increasing among households with an income of $125,000-plus. There were nearly 70% more those households receiving unemployment benefits in July 2023 compared to July 2022. Meanwhile, households with an income of $50,000 or lower were receiving unemployment benefits at less than half that rate over the same period.

“If you think about someone who was making $125,000 that loses their job and goes on unemployment, they’re not even coming close to replacing that income. We can tie that right into Fitch downgrading some of the regional banks.” – Dean Barber

Stress Testing Your Financial Plan

Those numbers certainly aren’t what we’re accustomed to seeing during a recession. It’s nearly impossible to predict what could happen next, but there’s one thing we can do. That’s making sure that you have a comprehensive financial plan that’s up to date. You need to be able to stress test your financial plan to see if it can survive things like multi-year market downturns.

“We can take an existing portfolio and take it back in time to a difficult time like 2000 or 2008. As we look at that, we can show you what would happen to your portfolio if we had a repeat of what happened then.” – Bud Kasper

More importantly, how would stress testing your plan affect the integrity of your plan. And how would it affect your ability to continue living your current retirement lifestyle? Would you still be able to get the same amount of income without worrying about running out of money?

“If your portfolio doesn’t hold up and it doesn’t allow you to maintain the integrity of your plan, what adjustments need to be made? That’s the beauty of stress testing because what you want is confidence that your plan will work and freedom from financial worry.” – Dean Barber

Retirement Planning During a Richcession or Recession

It’s hard to say how much steam there will continue to be behind the idea of a richcession is and whether we’re in one. But retiring during a recession can be a very uneasy feeling. As you and your spouse are planning for retirement, we encourage you to download and review our Retirement Plan Checklist. It consists of 30 yes-or-no questions and an age-based timeline of things to consider as you’re approaching and going through retirement. Download your copy below!


Retirement Plan Checklist

If you have retirement planning concerns that are being exacerbated by the threat of a richcession, we’re here to help. Get a conversation started with one of our CFP® Professionals by scheduling an in-person, virtual, or phone meeting below.

See Our Schedule

We can meet with you for a 20-minute “ask anything” session or complimentary consultation. And if you don’t feel like you’re quite ready to meet with a CFP® Professional, that doesn’t mean you can’t start planning. You can begin building your goals-based plan from the comfort of your own home with our industry-leading financial planning tool. Then, once you’ve built your plan, our team will review it and share their insight with you. Retirement planning is a team effort, especially during unsettling economic times like a potential richcession or recession. Our team is ready to work for you to help you gain more confidence, freedom, and time in retirement.

Richcession or Recession: Where Are We Heading? | Watch Guide

00:00 – Introduction
00:33 – What Is a Richcession?
04:03 – Inflations Impact and Recession Likelihood
09:05 – Bud’s Top 3 Reasons for Recession Concerns in Retirement
10:08 – Stress-Testing Your Plan
17:22 – What About Bonds?
20:56 – What Did We Learn Today?


Past Episodes


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The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Adviser. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.