Here’s how much cash financial advisors say retirees really need

With inflation fears high and interest rates at rock-bottom lows, retirees may wrestle with how much cash they need during their golden years.

The consumer price index, a key measure of inflation, increased by 5.4% in July from the previous year, and the average savings interest rates are still 0.06%, making cash reserves less attractive.

While some retirees like easy access to their funds, others worry about their crumbling purchasing power. However, it can be tricky for retirees to know how much cash they need, financial experts say.

“There’s not a silver bullet or a magic answer,” said certified financial planner Brad Lineberger, president of Seaside Wealth Management in Carlsbad, California.

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Advisors may suggest keeping three to six months of living expenses in cash during a client’s working years.

However, the number may shift higher as they transition to retirement, said Marisa Bradbury, CFP and wealth advisor of Sigma Investment Counselors in Lake Mary, Florida.

Many advisors recommend retirees keep a larger cash buffer to cover an economic downturn. A retiree with too little cash may have to dip into their portfolio and sell assets to cover living expenses.  

The worst thing you want to do is sell your wonderful investments while they are at bargain-basement prices.

Brad Lineberger

President of Seaside Wealth Management

“The worst thing you want to do is sell your wonderful investments while they are at bargain-basement prices,” said Lineberger. 

Bradbury suggests retirees keep 12 to 24 months of living expenses in cash. However, the amount may depend on monthly costs and other sources of income.

For example, if their monthly expenses are $4,000, they receive $2,000 from a pension and $1,000 from Social Security, they may consider keeping $12,000 to $24,000 in cash.

Asset allocations

When to limit cash

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