How Much Cash Should You Keep in Retirement?

Knoxville Financial Q&A Episode 15 |How Much Cash Should You Keep in Retirement?

October 6, 2026

How much cash should you keep in retirement?

There isn't one number that's right for everyone.

In this episode of the Knoxville Financial Q&A Show, Paul Ragone and Brian Duncan of Integrity Wealth Services discuss how retirees can think about cash as part of an overall retirement plan.

Rather than starting with an arbitrary percentage or number of months, the conversation begins with a more important question: What is the cash supposed to do?

Paul and Brian discuss the importance of separating an emergency reserve from retirement-income needs, planning for upcoming expenses, understanding where retirement income will come from, and considering how cash may help during periods of market volatility.

They also explore the other side of the equation. While having cash available can provide flexibility and help some investors avoid emotional decisions during difficult markets, holding too much cash may create its own challenges.

The key is to give the cash a job.

Whether the money is intended for emergencies, travel, taxes, a future purchase, retirement income or simply added financial flexibility, understanding its purpose can help determine how much cash to keep and where it may belong within the overall plan.

At Integrity Wealth Services, we believe retirement planning isn't about finding one number that works for everyone. It's about understanding how each part of your financial life works together.

Key takeaways

• There is no single amount of cash that's appropriate for every retiree.
• Keep an emergency reserve separate from money intended to support retirement income.
• Consider where your regular retirement income will come from before determining how much cash you may need.
• Cash can provide flexibility during market downturns and may help reduce emotionally driven investment decisions.
• Too much cash can also have drawbacks, including taxes, inflation and lost investment opportunity.
• Give the cash a job: know what the money is for before deciding how much to hold.

Transcript

How Much Cash Should You Keep in Retirement?

Paul: How much cash should you keep in retirement? Enough to feel safe? Enough for six months? Enough for a year?

Brian: I don't think there's any real clear answer for a single person. But stick around and we'll talk about it.

Paul: Cash becomes a very different conversation when you're retired.

Brian: Yeah, there's no single number that fits perfectly for every person. One of the things I've always said is that life is a balance. You work too much and don't spend enough time with your family, you're out of balance. You eat too much and don't go to the gym, you're out of balance. I think everything in life comes down to finding the right balance.

Cash, investments, money and retirement are no different.

What Is the Cash Actually For?

Paul: The bottom line is: What is this cash actually for?

You've got all this money that you've saved in cash. What is it for? Does it have a reason? Is it an emergency reserve? You should have one anyway, regardless of anything we talk about today. Have an emergency reserve.

Brian: I use my own personal example all the time. We had our water main break and our HVAC go out within three days of each other. It was a $14,000 three-day period. If we didn't have cash to cover that, it would have been on a credit card at 20% or 30% interest.

Paul: Are you saving cash because you have a large purchase coming up? Is it taxes? Is it travel? Personally, taxes and travel put a big ding in my cash reserves every year.

So, what is the money for? Above all else, have an emergency fund. Don't even consider that part of your retirement funds.

Give the Cash a Job

Brian: I think having multiple accounts with separate objectives can help people separate different needs.

One of the most important things is separating your emergency reserve from your retirement income and portfolio. Just consider it like it doesn't even exist.

If you want a $25,000 emergency reserve, that needs to be in a separate account from the money you're going to use to weather something like sequence-of-returns risk. If you're in retirement and you want to make sure a market downturn doesn't jeopardize your cash pile, keep everything separate. Have separate buckets, all doing a separate task.

Paul: Basically, what Brian just said is: Give the cash a job.

Give it a job just like you would your investment accounts.

Where Will Your Retirement Income Come From?

Paul: I think the next thing we need to do is look at where your income is coming from.

Brian: Are you getting a pension? Are you working part-time? Are you getting Social Security?

One of the conversations I have with a lot of people is that you are the money machine when you're working. You are what replenishes your bank account. What happens when that goes away?

As I've said time and time again, especially in these videos, income is the only outcome that matters. So you start having that conversation: What happens when my income comes from investments and other areas instead of my job?

Paul: Someone whose regular income covers their normal expenses has a very different cash need than someone who is pulling heavily from their investments.

Brian: Exactly. Then you become subject to things like sequence-of-returns risk. Markets don't always go up. Occasionally they go down.

If you're withdrawing money with any regularity and suddenly we have a market downturn, this is where maybe I draw from my cash pile and let the markets come back—or at least try to come back.

Paul: How long is that actually going to take? Could it be a year? It might be two years. You never know.

Cash Can Help During Difficult Markets

One of the things about having a larger cash reserve is that it may help keep you from making poor investment decisions when markets go down.

Brian: Because you don't feel like you're squeezed. You have a backup.

Paul: Part of that matters too, though. How big is your cash pile? What is it earning while it's sitting there? Is it earning 1%, 2%, 3%, 4% or 5%? Are you being taxed on that interest?

Fear can sound like: I'm concerned about the market. I'm concerned about the economy. I'm concerned about running out of money.

The problem is, if you have too much cash just sitting there doing essentially nothing for you, and that's what you're relying on for income—or at least using part of it for income—you may create another problem.

Which brings us to behavioral finance. It's part of financial planning in general, but I think it's much more important than simply looking at a spreadsheet.

Cash, Fear and Behavioral Finance

We may have someone with a lot of money in cash and advise them, looking at their overall financial plan, that they probably have too much and might benefit from investing some of it.

And they say, “Well, then I won't be able to sleep well at night.”

That becomes an issue. That's behavioral finance.

People are always worried because there's always something going on. I've been in this business since 1997, and I can't think of a single year when there hasn't been something happening that affected people's emotions about investing and sometimes led to poor decisions. Pasted markdown

Brian: This goes back to keeping your head out of the headlines. That's probably some of the best advice you can be given. Don't run with every single news headline.

Paul: Exactly. Meanwhile, through all of that, we've had some serious dips in the market, obviously, and we've also had some serious returns.

When COVID hit, the S&P 500 was down about 34% in roughly a month to a month and a half. Did you pull out then? Some people did.

Brian: Hope not.

Paul: It came right back.

Education and a plan can provide confidence that cash alone can't.

Cash Is Part of the Overall Portfolio

Brian: If you view cash as part of the portfolio, you don't always have to view too much cash as a bad thing.

Paul: No. If a client comes in and says they want to keep a certain amount of cash regardless of whether we advise them to do something else with it, we can use that to our advantage because it may allow us to add a little more risk to their actual investments.

Brian: Because it brings down the overall risk and may allow us to try to make up some of the difference on the investment side.

Paul: And when we have those conversations with clients and help them understand, “You've already got all this safety. Let us put a little more risk into your portfolio,” they're often completely comfortable with that.

There Isn't One Right Amount

Brian: There's not really a set amount that works well for everybody.

A lot of it comes down to what we talked about: What job do you have for the money?

Do you have a new car purchase coming up? Is your car getting old or accumulating miles? Do you need to downsize your home or buy a different home? Do you have a trip coming up? Maybe you want to take family vacations.

Trips aren't necessarily where you need a large cash reserve. You can book a trip a year out, maybe pay half now, and then save in increments over the next year to cover the rest.

Paul: I think it all wraps back into giving the cash a job. It makes it much easier to figure out where you should put it and why you should put it there.

The goal isn't to save as much cash as possible. It's to have enough cash to do the things you want it to do for you.Pasted markdown

Brian: And it comes down to making sure we put that money in the right spot—whether that's a CD, a money market, municipal bonds, or something else appropriate for what you're trying to accomplish.

Give an advisor the role of saying, “Here's what we want this money to do. Where should we put it?”

And sometimes we have to push back when someone says, “I need this amount of cash or I don't feel good sleeping at night.”

Do you, though?

Paul: It's not going to work in your favor if it's just sitting there doing nothing.

Brian: I think Dave Ramsey said it best: Money is like manure. Spread it around and things will grow. Let it sit and it stinks.

Paul: There you go. So, with that said, signing off.

Brian: Signing off.