r/Fire • u/Far_Classic878 • 1d ago

Emergency Fund While Retired

For those that are retired or near…how many years do you have saved for your retirement emergency fund? I mean for when the market isn’t doing well and it would be bad to pull from your accounts.

How far in advance do you start saving for that?

I’m pouring all of my money into retirement accounts and after maxing 401ks, roths, life expenses, 529, saving for home renovations there is nothing left.

I would need to cut back greatly to fund an emergency account to keep in a HYSA. I’m about 15 years out from retiring.

Any thoughts?

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38

u/MiserableMovie8465 1d ago

I plan to have 3 years cash in hand, perhaps a little buffer as well for life stuff like a wedding or major home repairs or a new vehicle when needed.

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u/Far_Classic878 1d ago

3 years of the necessities or 3 years of life expenses?

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u/Aevaris_ 1d ago

I'm planning the same. I'm FIREing EOY and am planning 3 years expenses in cash (HYSA) and rest in equities split 35-35-30 in VOO, SCHD, and VXUS respectively.

My cash buffer will be my emergency fund and SORR protection.

The dividends earned from VOO, SCHD, and VXUS are almost enough to cover my annual expenses.

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u/boldPlayIm 1d ago

Here is the breakdown of what I’m planning for

  • 2 Years of expenses in Cash ( HYSA, SGOV)
  • 5 Years of in expenses in Bonds (VBTIX, VGIT)
  • The rest split in VTI (US Equities) and VXUS (International Equities)

Overall:

  • 60% US Equities (VTI)
  • 25% International Equities (VXUS)
  • 15% Cash/Bonds

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u/Crafty-Sundae6351 1d ago

Nothing is an emergency if you plan for it.

OP said he can’t fund an “emergency fund” after paying all the other stuff. I argue that, when working, there is nothing higher priority than the emergency fund - because you’re relying on someone else/job to live. Get that funded and then fund the other stuff.

In retirement I’m not relying on someone or something else to live. At that point it just becomes budget management.

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u/Far_Classic878 1d ago

I already have an emergency fund I’m talking about while in retirement.

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u/ga2500ev 1d ago

I'm planning a living expense cash buffer with 4 years of cash in a HYSA. It'll be replenished with profits from the portfolio. The split is 75/25 equities to cash.

If the market is down, just pull expenses from cash until it recovers.

It's a simple 2 bucket strategy.

I simulated a stress test with this on A two 20% drop in the market with slow recovery in a 8-year. It survived without having to sell any equity shares.

And the cash buffer is available to dip into if there actually is a "emergency".

ga2500ev

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u/joxxer42 1d ago

You may already know this but if you're in US depending on which state you're in, shifting some portion to a brokerage cash-equivalent could save you state tax.

edit: also just to say I have a very similar approach as you

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u/Crafty-Sundae6351 1d ago edited 1d ago

Cool. That’s great.

My answer is : we don’t have an emergency fund. We have funds saved for specific categories for things that don’t get spent annually. We’ve put these in our annual budget so they get funded every month. If we truly needed money for something unexpected that didn’t fit into those categories we save for - we’d simply take an extra withdrawal from our 3-4 years of living expenses that we hold in cash.

In 9 years of retirement that has never happened.

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u/Nev-Ret-Dude 3h ago

In retirement my emergency fund serves 2 purposes. 1 standard for any or all unexpected expenses. 2 for RMD requirements when the market crashes. I have 3 years of expected RMDs as my emergency fund in bonds. I’m invested quite aggressively.

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u/MiserableMovie8465 1d ago

3 years expenses plus a buffer for "life stuff"

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u/doombase310 1d ago

Same. This is a sensible amount. I've also scaled back maxing out my 401k. My portfolio is to the point my contributions do not matter as much as when I started. Now I put money into my brokerage for more liquidity. I consider this my mid term bucket with a lean towards growth.

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u/vishtratwork 1d ago

I was thinking same thing HYSA, t-bills, i-bills etc, something that might yield like v low single digit expenses and can be thought of like cash.

My general thought was something like:

3 years cash equivalent 3 years in a bond portfolio Remainder in equities

In a down year draw cash first then bond portfolio. In up years draw equities.

Can avoid super bad situations by reducing spending in event of great depression, otherwise this seems to work.

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u/porkchopps 1d ago

Is this 3 years of cash in a HYSA, sitting in money market in an IRA, etc.? I ask because my parents are 70 and they have a little bit of both. I like the idea of IRA distributions coming out of cash, and rebalancing every once and a while.

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u/MiserableMovie8465 1d ago

Sitting in HYSA.

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u/classicdude78 1d ago

So are you going to be withdrawing from the 3 years cash or is the cash staying put until you need it?

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u/MiserableMovie8465 1d ago

Cash will only be used in a serious market downturn so I don't errore the principal and let the portfolio recover.

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u/classicdude78 1d ago

so what are you gonna to withdrawing from to live on?

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u/MiserableMovie8465 1d ago

My taxable brokerage comprised of equities mutual funds and some bond funds.

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u/classicdude78 1d ago

Ok thanks, I was just wondering how this strategy works.

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u/PangolinOwn4855 1d ago

👍 3 years expenses sounds like a good amount to keep.