Berkshire Hathaway holds $357 billion in cash, a position that CEO Greg Abel describes as "dry powder" ready to deploy into solid companies. The company maintains this cushion to buy undervalued investments during market downturns and to avoid forced asset sales when prices fall.
Retirees can apply this same principle on a smaller scale. Financial advisors typically recommend keeping three to six months of expenses in cash, but retirees should aim for one to two years of living expenses. This buffer prevents you from selling stocks during market corrections and lets you wait for recovery.
Start by reviewing your credit card and checking account statements to understand your monthly expenses. Trim unnecessary costs like unused subscriptions to reduce how much you need to save.
Don't keep this cash in a standard checking account earning 0.10% annual percentage yield. High-yield savings accounts offer APYs above 4%, short-term certificates of deposit have fixed rates, and Treasury bills provide similar fixed returns. HYSAs let you access money anytime. CDs and Treasury bills have maturity dates and may charge penalties for early withdrawal.