Most people heading into retirement spend years fixated on a single target: accumulating enough money in a 401(k) or IRA to cross the finish line. What gets far less attention is how much of that money should be sitting outside the market, liquid and ready to use, when things go sideways.
The answer depends on who you ask. And the range of expert opinions is wider than many retirees expect.
The Standard Rule, and Why Critics Push Back
The conventional guidance has long been to maintain three to six months of living expenses in an emergency fund. For working adults, that makes reasonable sense. For retirees drawing down savings, many financial professionals say it falls short.
The concern is straightforward: retirees can’t wait out a bad market the same way a 35-year-old can. When your portfolio drops 30% and you still need to pay rent, you’re either selling at a loss or dipping into accessible cash. Having only three months of cushion doesn’t leave much room.
Suze Orman’s Recommendation
Personal finance expert Suze Orman has been direct on this point for years, and her position sits well above the mainstream. On her “Women & Money” podcast, Orman recommended that retirees keep at least three to five years of living expenses in an account that can be accessed without selling any stocks or bonds.
“If you really wanna be on the safe side, it’s five years,” Orman said. “If you wanna just play it so that you have at least three years, okay, you can do that, as well. Maybe you split it, and you do four years.”
The Logic Behind a Multi-Year Buffer
Orman’s reasoning tracks with one of the more persistent risks in retirement planning: sequence of returns risk. If the market drops sharply in the first few years of retirement and a retiree is forced to sell investments to cover expenses, those losses become permanent. There’s no paycheck arriving to offset withdrawals, and fewer years remain for the portfolio to recover.
“Sometimes everything can go down,” Orman noted, pointing to years like 2022 when both stocks and bonds fell together, briefly dismantling the protective logic of the traditional 60/40 portfolio.
Where to Keep That Cash
Orman specifies that the buffer should not be tied to market performance. That rules out stocks and most bond funds. Practical options include high-yield savings accounts, certificates of deposit, money market accounts, or a dedicated checking account used only for living expenses.
The goal is liquidity with stability. A high-yield savings account earning around 4% annually in 2026 covers inflation reasonably well without locking up the money. CDs can work too, provided the maturity dates are staggered so funds are consistently available.
What T. Rowe Price and Others Suggest
Not every advisor goes as far as Orman. Experts at T. Rowe Price recommend holding enough cash to cover one to two years of living expenses beyond predictable Social Security and pension income, on top of whatever is needed for day-to-day spending on gas, groceries, and utilities.
Financial advisors broadly agree that the right number varies by person. Someone with a pension and substantial Social Security income may need less accessible cash than someone relying almost entirely on portfolio withdrawals. The baseline, though, is rarely less than one year.
The 18-to-24-Month Middle Ground
Certified financial planner Kristen Beckstead, vice president at First Horizon Advisors, has recommended that retirees target 18 to 24 months of essential expenses in accessible accounts. That lands between the conservative one-year standard and Orman’s more aggressive three-to-five-year position.
For retirees who find the idea of holding five years of expenses in low-yield accounts uncomfortable, that middle range offers a reasonable compromise: enough runway to weather a meaningful downturn without sacrificing too much long-term growth.
The Retirement Target Is Climbing
Context matters here. According to Northwestern Mutual’s 2026 Planning and Progress Study, the average American now believes they need $1.46 million to retire comfortably, up $200,000 from the prior year. Nearly 48% of those surveyed said they believe it is somewhat or very likely they will outlive their savings.
That anxiety is partly what makes accessible cash reserves so important. If retirement is already a financial stretch, being forced to sell investments at a loss during an early downturn can accelerate a bad situation quickly.
Don’t Forget Unplanned Expenses
A 2026 blog post from Orman cited research from Boston College’s Center for Retirement Research showing that 83% of retired households face unplanned expenses in any given year. Healthcare is the usual culprit: dental work, hearing aids, or in-home support that Medicare doesn’t cover.
The Medicare Part B premium alone reached $202.90 per month in 2026. That’s a line item that shrinks the gap between Social Security income and monthly expenses faster than many retirees anticipate.
Building the Buffer Before Retirement
If retirement is still a few years away, the time to build accessible reserves is before leaving work, not after. Orman’s math is practical: for someone spending $50,000 a year, a three-year buffer means $150,000 set aside outside of market-linked accounts. Five years means $250,000.
That’s a substantial sum to hold in lower-return accounts, and some retirees will reasonably settle for less. The floor, according to most credible guidance, is at least one year. The ceiling, per Orman, is five. Where someone lands in that range depends on income sources, risk tolerance, and how well they sleep at night when the market has a bad week.
