Suze Orman's advice to keep eight to 12 months of expenses in emergency savings may not fit all retirees. Some retirees need more cash on hand, while others with steady income streams like Social Security or pensions may need less.
Retirees face different risks than working people. They don't face job loss, but many financial advisors recommend keeping one to three years of expenses in cash-like savings to cover surprise health bills and other costs that arise without a steady paycheck.
Where you store emergency funds matters. Traditional savings accounts earn very little. High-yield savings accounts currently offer 3% to 4% annual percentage yields, especially through online banks. A tiered approach works well: keep up to six months of living expenses in a high-yield savings account, then place remaining emergency funds in money market funds, Treasuries, and short-term certificates of deposit.
Money sitting in cash carries its own risk. Inflation erodes purchasing power over time. Assets like stocks and bonds can generate returns that outpace inflation.
Start by moving idle cash from checking to a high-yield savings account. Then set a specific emergency fund goal. Once you know how much you need available without penalty, invest the rest of your money for growth. Review your total liquidity picture each year to confirm you can access funds quickly while still maintaining growth potential in your portfolio.