If you’re retired or approaching retirement, you’ve probably wondered: “How much should I keep in cash?”
In this short video, Brent Matthew reviews the real cost of holding too much cash in retirement and how to find the right balance between liquidity, stability, and long-term growth.
You’ll learn:
- What counts as “cash” in your portfolio
- Why holding too much could silently erode your wealth
- The 6–12 month cash rule most retirees overlook
- How the Three-Bucket Strategy can guide your income plan
- Why annuities may offer a smart middle ground between safety and performance
👉 Need help deciding if you’re holding too much or too little in cash? Book a complimentary session with Brent here: https://calendly.com/BrentMatthew or call us at (480) 247-9090.
Transcript
Hi, I’m Brent with Scottsdale Wealth Advisory. If you’re retired or getting close, you’ve probably asked yourself the question, “How much should I keep in cash?” It’s a great question, and having some money set aside in cash can help you feel secure, but having too much sitting on the sidelines can quietly hurt your long-term plan. Let’s talk about finding the right balance.
What Counts As Cash in Retirement?
First, let’s define what we mean by cash. We’re talking about things like checking accounts or savings accounts, money market funds, CDs, anything that’s easily accessible and doesn’t go up or down with the market. Cash is important for two main reasons. First is liquidity. You can access cash quickly. Second is stability. Cash doesn’t fluctuate when the market does.
The Hidden Risk of Holding Too Much Cash
So if you have too much in cash, inflation slowly eats away at your purchasing power, especially over a 20- or 30-year retirement. So what’s the right amount? For most people, I recommend keeping 6 to 12 months of expenses in cash or cash equivalents. This covers your short-term needs, helps you sleep better at night, and keeps you from having to sell investments during a market dip.
When It’s Okay to Hold More Cash Temporarily
If you’re more conservative, or if you’ve had a recent life change, like retirement, maybe you’ve recently sold a home or have a health-related issue, you might want to hold on to more temporarily. That’s totally fine. But beyond that, it’s usually better to move extra cash into assets that are designed to work harder for you.
The Three-Bucket Retirement Strategy Explained
This ties directly back to the Three-Bucket Strategy we talked about in an earlier video. Your first bucket is where cash lives for short-term needs and peace of mind. Your second bucket is designed to generate income. And your third bucket focuses on long-term growth. Once your short-term bucket is full, the rest of your money should have a job, whether it’s providing income, growing for the future, or protecting your nest egg.
How Annuities Can Help Reduce Cash Drag
This is also where annuities can help. If you’re keeping too much in cash because you’re nervous about market volatility, a fixed or fixed-indexed annuity can be a good middle ground. It offers protection from market losses, often pays more than a bank account, and can provide guaranteed income, something cash alone can’t do.
Finding the Right Balance for Your Financial Plan
So how much should you keep in cash? Enough to feel comfortable and cover those short-term needs, but not too much that it holds back your overall plan. If you’re not sure whether you’re holding too much or too little, I’d be happy to take a look and talk you through some options.
Thanks for watching and stay tuned for the next video in our Retirement Basics series.
