Video FAQ: Retirement Emergency Funds & Cash Reserves

When it comes to emergency funds, how much is the right amount? In this video, we look at two different scenarios that would affect the amount of cash reserves that you would want on hand during retirement.

We often get the question, “in retirement, how much should I have in my emergency fund or cash reserves?” Typically, it depends on your financial plan and your situation, and the calculation is based on various factors. There’s a rule of thumb in the industry that when you’re in retirement, you should have six months to a year. But let’s examine that a bit closer. The following are two examples of why you may want to have more than that and why you may want to have less than that.

In the first example, let’s think about an extremely aggressive portfolio that has a lot of stocks, which can also bring a lot of volatility and ups and downs. In this case, it is probably wise to have a larger cash reserve. If you need access to liquidity and your stocks are down, you’re going to want to have cash on hand that you can use instead of selling stocks at a large discount or a loss.

Alternatively, maybe your portfolio is extremely conservative, or you have a lot of pension income, Social Security annuity income, rental properties, etc., and that income far exceeds how much you’re actually spending. In this case, you probably don’t need as much in emergency funds because you always have excess income coming in.

As you can see, emergency funds or cash reserve needs really depend on an individual’s financial plan and situation. Client First Capital works with our clients to ensure access to liquidity regardless of market cycles. If you have questions about your portfolio, please do not hesitate to reach out to us as info@clientfirstcap.com. We’re here to help!