Building & Maintaining Cash Reserves in Retirement

On today’s episode of the Wiser Roundtable Podcast, the team talks about how much cash reserves retirees actually need.

Listen on Apple Podcasts or watch on YouTube:


The team begins the podcast by asking the question, how much cash reserves do you need as a retiree? This is calculated different in retirement versus in your working years. When you are working, your main focus is usually what would happen if you lost your job and had to replace your income for a period.

Money on Hand vs Money Invested

In retirement, there are two cash reserve categories. The first is the amount of cash reserves you have on hand inside a checking account. The second is how much cash you have in investments, if you are withdrawing from these accounts on a regular basis. However in retirement, you are living off of cash reserves or investments alone.

When you have cash reserves in retirement, you have to separate what is an investment versus what is not an investment. Having this extra cash on hand can help you sleep well at knowing that if an emergency occurs, you are financially prepared. These sort of emergencies include a new HVAC system, a new roof, car issues, health events or something similar and unexpected. Most average families should have no less than $50,000 in emergency cash reserves. For families with higher income in retirement, they should have close to $100,000 in reserves. Some people might even need to have closer to $300,000 depending on their unique situation.

Cash Bucket

At Wiser Wealth Management, we utilize what we call the “Cash Bucket” system. In this system, we keep two years worth of cash needs available at all times inside the individual’s investment portfolio. This cash can be withdrawn monthly if needed. The idea behind this is that if the market falls, you don’t have to liquidate securities at a loss.

Nature of the Market

Market downturns are bound to happen. There is usually a 5% drop in the market about 3-4 times a year, a 10% drop annually, and about every 5-6 years, we see it drop 20% from a bear market. We want to avoid the ups and downs of the market especially during retirement, so having cash reserves available can help.


1:30 Money on Hand vs Money Invested

5:58 Cash Bucket

8:45 Nature of the Market


Learn more about Casey Smith and connect with him on Twitter.

Learn more about Brad Lyons.

Learn more about Matthews Barnett.


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Learn more about the Wiser Wealth Management Roundtable podcast and access previous episodes.

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By Published On: August 25, 2021

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