In your working years, cash is the money between paychecks. In retirement it does a bigger job, because the paycheck is gone and your portfolio has to produce the income instead. Hold too little and you get forced to sell investments during a downturn, locking in losses at the worst possible time. Hold too much and you drag on the growth you still need for a retirement that could run thirty years.
A simple way through it is an income reserve. You keep a set amount of near-term spending in cash and safe short-term holdings, enough to cover a stretch of expenses without touching the market. When stocks are down, you spend from the reserve and leave your investments alone to recover. When things are calm, you refill it.
The right size depends on your spending, your other income like Glossary of Financial ClaritySocial SecuritySocial Security is the federal program that sends monthly checks to retirees, along with some disabled workers and survivors. You pay into it through payroll taxes your whole working life, and what you eventually collect depends on your earnings history and the age you start claiming. For most retirees it's the one paycheck that lasts as long as they do.General education only. Not tax or investment advice. Read the full story or a pension, and how much market movement you can stomach. There is no single magic number. There is a number that fits your plan, and it is worth setting on purpose instead of by accident.
Hosted byNick GeorgeCFP®, ChFC®, CLU®, IWA™FounderView bio →
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