How much cash should I have on hand in retirement?

Despite the ability to access retirement accounts, many experts recommend that retirees keep enough cash on hand to cover between six and twelve months of daily living expenses. Some even suggest keeping up to three years' worth of living expenses in cash. Your emergency fund must be easy for you to access at any time.

retirement.tips - How Much Cash Should I Have on Hand in Retirement?

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Most financial planners will tell you that having an emergency fund to cover unexpected bills is a key to financial security. A commonly suggested guideline for how much cash you need to have on hand in an emergency account is three to six months’ worth of living expenses. This buffer can help keep you from dipping into your retirement savings and incurring early withdrawal penalties if an unexpected large expense comes up.

But how much cash should you have on hand in retirement since there’s no penalty for withdrawing money from your retirement account in the event of an emergency?

Emergency Funds for Retirees

Despite the ability to access retirement accounts, many experts recommend that retirees keep enough cash on hand to cover between six and twelve months of daily living expenses. Some even suggest keeping up to three years’ worth of living expenses in cash. Your emergency fund must be easy for you to access at any time. You should also avoid putting it in any account that could lose value, like stocks or a stock mutual fund.

Why Should You Keep Your Emergency Fund in Cash?

First things first: your emergency fund must be easy for you to access at any time. Assuming most of your retirement savings is invested in various stock funds, if you withdraw money from those accounts during a severe market downturn, you will realize a loss. It’s just better for your bottom line to live off cash than to sell out of stocks at a low point. FDIC-insured bank accounts are insured for up to $250,000. If your account size is smaller, you’re not at risk of losing money if your bank goes under.

My Savings Exceed $250,000. What Now?

If you have more than $250,000, you can put it into another savings account at a different FDIC- insured bank as the FDIC’s insurance limit is per depositor, per FDIC-insured bank, per ownership category. There are also other savings vehicles that could provide higher returns, helping protect you from inflation. A money market account is one possibility. Be aware that some charge high fees that will deplete the value of your savings. You may also consider buying a certificate of deposit (CD). Getting money out of a CD isn’t always easy, though, so look carefully before you leap. Whatever you do, don’t stash it all under your mattress. Keep enough cash at home to buy a tank or two of gas for your car, plus a few days of groceries and water. If you aren’t sure how much cash you need to keep on hand, or where to keep it, a financial advisor can help you find the right answer for your situation. Request a complimentary, no obligation conversation with one of our advisors today to get started!

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Qonto is a Payment Institution licensed and supervised by the French Autorité de Contrôle Prudentiel et de Résolution (ACPR), under the registration number 16958. The entirety of the funds deposited by our customers is safeguarded in compliance with the relevant legislation. A part of these funds is held by our banking partners: Crédit Mutuel Arkéa or Natixis. The French Fonds de Garantie des Dépôts et de Résolution (FGDR) covers the deposits up to a limit of €100,000, for each of our banking partners and for each client, in the case of bankruptcy of Crédit Mutuel Arkéa or/and Natixis. The remaining part of the funds is fully covered by Crédit Agricole CIB, a subsidiary of Crédit Agricole S.A., or periodically invested in eligible short-term monetary funds.

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