Here's How Much Cash Financial Advisors Say Retirees Should Hold
How much cash is too much, and how much is not enough?
For retirees navigating an uncertain market, the answer matters more than most people realize. Scott Ashline, founder and private wealth advisor at Ashline Financial, a Northwestern Mutual Private Client Group, breaks down the right way to think about cash reserves in 2026.
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The One-to-Two Year Rule
Ashline's starting point for most retired clients is one to two years of living expenses held in accessible cash reserves. "We typically encourage our retired clients to have one to two years of living expenses available in cash reserves, providing a buffer during stock market downturns and avoiding the need to sell investments at a loss," he said.
A retiree spending $60,000 annually, for example, might keep $60,000 to $120,000 in cash — enough runway to wait out a significant market correction without touching the portfolio.
The Risks of Holding Too Much
Ashline is equally clear that cash is not a neutral choice. "Holding too much cash comes with its own set of risks," he said. "While it provides stability, it can also lose value over time due to inflation drag, create tax inefficiencies depending on where it's stored, and limit your ability to capture long-term growth that typically comes from staying invested."
That last point is one retirees consistently underestimate. Playing it safe with cash has a real opportunity cost that compounds quietly over a long retirement.
The Portfolio Percentage Alternative
For retirees who prefer a different framework, Ashline described an approach that sizes cash as a percentage of total portfolio rather than as a fixed dollar amount; typically 2% to 10% depending on risk profile, guaranteed income sources and spending flexibility. This pairs modest cash holdings with diversified investments and preserves more growth potential for the long term.
No Universal Answer
Ashline was direct about the limits of any rule of thumb. "There is no one-size-fits-all," he said. "Lots of different factors can shape the right cash level, from individual spending needs and Social Security timing to personal risk tolerance and emotional comfort."
A financial advisor who understands the full picture can help retirees strike the balance between cash reserves and invested assets that neither sacrifices stability nor gives up too much growth.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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