Protect and preserve your income with an emergency fund

When you start thinking about retirement, emergency expenses present a unique challenge.

Everyone needs an emergency fund: 7 out of 10 retirees have experienced a “shock” or major expense¹,so, how much is enough?

When you start thinking about retirement, emergency expenses present a unique challenge: Just because you may stop working, does not mean that life stops. You will likely have some of the same expenses in retirement that you have now, the difference is you will be drawing your income from other resources, including investments.

This is a good time to assess your savings and consider starting or beefing up an emergency savings in retirement. Emergency savings by nature need to be easily and quickly accessible and liquid for quick use. It is vital to have an emergency savings to avoid going into debt, having to convert some of your retirement assets into liquid cash or depleting your reserves too quickly.

How much is enough? Well, that will depends on your current lifestyle, assets and how you expect to live in retirement. Even if you have an emergency fund now, you may want to rethink your strategy, as retirees often need more reserves than someone who is still working.

You will want ask yourself a few things first.

  • How close am I to retiring?
  • How much can I save weekly?
  • Am I willing to sell things I do not need or forgo new purchases in order to build my savings?
  • Have I considered the two biggest concerns in retirement, healthcare and housing costs/repairs?
  • Do I have enough insurance (Life, disability, health and homeowners) to protect my income now and into retirement?
  • Do I have a budget to track my current and future expenses?
  • Is there a certain amount that feels comfortable and stress free?
  • How much access to principal do you have built into your other retirement investments?
  • How liquid are your assets currently?
  • Are you willing to give up a little potential return for more security?
  • Are you willing to take on debt if you do not have enough cash available?
  • Where can I put my emergency savings that will allow for easy access and is in an interest bearing account?
  • How quickly can I replace and replenish cash reserves in retirement should I have an emergency?
  • Do I have an income strategy for retirement?

Life is full of surprises so it will be important to protect yourself from unexpected expenses by building an emergency fund now and making sure you have more than you need for when life happens, now and well into retirement.


¹Society of Actuaries, What Employers Can Learn from Retirees 2016