How much cash should you have in retirement?

How much cash should you have when you are in retirement? Too much or too little can cost you.

In today’s video we’ll discuss the following:

– What should be your primary objectives for cash.

– How to determine the amount of cash to keep on hand.

– And, we’ll conclude with where to park your cash so it works best for you.

How much cash should you have in retirement?


Full transcript:


Alex Okugawa & Anthony Saffer

Alex Okugawa 0:00
How much cash should you have in retirement, too much or too little can cost you. So, today we’re going to talk about the purpose of cash in retirement, determining how much cash you should actually have, and then if you are going to hold cash, where’s the best place to put it, stay tuned. Hey, there, it’s Alex and Anthony, from One Degree Advisors, and we help you gain confidence in your retirement. So Anthony, knowing how much cash to keep in retirement is important because you’re no longer working for a paycheck. And so having cash is important for things like emergencies. But it also can be really important when the investment markets are down, right, you’re no longer working to get that paycheck. And if you’re relying upon your portfolio to create income, it can be nice to have an extra bit of cash there as a safety net that you could pull on, rather than your portfolio that is maybe down. So today, we want to talk to folks about how much cash is best for them, and where to park their cash. But first, let’s talk about again, real basic, what is the primary objective of cash.

Anthony Saffer 0:58
And we’re really talking about cash savings at the bank, that it’s accessible, you’re preserving your capital, it’s not subject to market fluctuation, it’s liquid and available. And even earning an interest rate is good. And that it’s where things have changed a little bit where we actually can earn something on our cash. But it’s not the highest priority just to get growth out of it, you really want to preserve capital.

Alex Okugawa 1:19
I mean, several years ago, there was that common phrase, cash is trash, right? Because it wasn’t earning anything. And now that cash is earning more, so you’re earning more last year, and especially at the beginning of this year, in 2023. A lot of people are evaluating, well, should I have more cash? And I think it’s so important for us to identify the objective, first and foremost, because if you’re not grounded in the objective of your cash, you’re gonna be swayed in the wind with whatever people say, is the most popular thing. And when things get scary, oh, I can just load up on more cash. And that’s not the goal there. So let’s jump into the solutions here. Let’s talk about five ways to determine how much cash you should have in retirement.

Anthony Saffer 2:01
Yeah number one is your experience in retirement. Are you just transitioning into retirement? If so, then you probably want to have a little bit of a bigger reserve because you’re all your income sources are changing. It gives you more flexibility and more cushion. Or are you more steady and experienced you’ve been in retirement a while you kind of know what you’re cashflow is.

Alex Okugawa 2:21
That’s exactly where the experience piece comes in. After walking families through this process, having a higher allocation to cash in the early years is so critical, it can give an extra layer of peace of mind. And as you mentioned, once you start getting into the rhythm of retirement, and you see how your income sources flow and how everything works, then you get a little bit more confident. And maybe you don’t need as much cash. But in those early years, not only can it help with all the income changes, but it really can provide some of that peace of mind that folks are looking for.

Anthony Saffer 2:21
Yeah, that’s right, and number two is emergencies, it’s good to have an emergency fund. And the good rule of thumb is three to six months of expenses. But you also want to look at it from the standpoint of what’s really your propensity for emergencies that could come up. If you own multiple properties, if you have dependents, while you’re in retirement, these are all things that could add to the possibility of more emergencies. The next thing is sources of income. If you have a steady income, and your social security, maybe you have a good pension on top of that. Maybe you have a rental property where you’ve had a renter in there for quite a while and that income is just you’re getting that check every month. Those are all reasons why maybe you could keep a little bit less cash, simply because your income is steady.

Alex Okugawa 3:28
And conversely, people may want to have a little bit more cash, let’s say if most if not all their income is coming from a portfolio that could be subject to market fluctuations. So the more income you have from steady guaranteed income sources, maybe you don’t need as much cash. But if you have income coming from sources that can fluctuate as you mentioned, maybe you need some more cash to make sure that you can have stability there.

Anthony Saffer 3:53
Number four is debt. And you can also relate this to other big near-term expenses. If you have obligations that are there every month, or you have a near-term project that’s coming up, then you want to have more cash to be able to take care of these obligations. And then the last thing is just what will help you sleep better at night. It’s this idea of if there’s a certain amount of cash in the bank that helps you be a better investor, then you really want to latch on to that target.

Alex Okugawa 4:20
And there is no one size fits all answer to this. Some folks are going to say, hey, you know, $20,000 in the bank, I feel good, I can sleep at night other folks go I need $100,000 in the bank to be able to sleep well at night. The other thing from experience that we’ve learned is that there will be differences very often between spouses. So one spouse might say, hey, you know what, $20,000 in the bank totally fine. I feel comfortable and the other spouse goes No way. I need like closer to 80 to $100,000 in the bank to feel comfortable and sleep at night. It’s not saying one answer is right and the other is wrong. But we have to have a family meeting, if you will, unity around this to say what’s the right number for us together as a family because if one spouse is not happy in this regard, it messes up the whole homeostasis of the home and you know, then nobody’s happy. Now again, we talked about it, some banks are paying higher interest than others. Some online high-yield savings accounts and some online banks are paying higher rates. Meanwhile, traditional brick-and-mortar banks, even to this day are still paying relatively low interest. So we made a video where retirees should park their cash, folks, and watch that above. Once again, this is Alex Okugawa with One Degree Advisors, and if you’d like to learn how we can help you with your retirement, visit our website at

Transcribed by

The One Degree Blog

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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you. Disclosures:

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