This week, we’re talking about cash savings in retirement. Deciding how much cash you should have on hand at all times in retirement is more important in you might think. Having enough cash on hand will help prevent you from liquidating your investments for emergencies and will help stabilize your portfolio during the inevitable stock market downturns, since you’ll be able to curtail your portfolio withdrawals if and when that happens when you have enough cash. 

So far this week, we’ve covered why you need cash for emergencies and stock market downturns. Yesterday, I gave you some guidelines about how much cash to keep on hand, so today, let’s talk about where to park all that cash so it can earn some interest. 

Of course, for maximum safety and FDIC coverage, you can just park it in savings at your bank. This will yield you the lowest amount of interest on your money, since bank deposits are still paying laughable amounts of interest. 

Another option is a money market account, which doesn’t have the FDIC insurance coverage of the bank account, but is still very safe, since it only invests in ultra-short term cash like investments. Currently, money market accounts pay in the 2-2.3% range, which is pretty good. Money markets are my preferred place to park cash for clients.

Lastly, CDs are another great place for your cash. It does require that you tie your money up, but you do have the FDIC insurance, and the penalties for selling early in an emergency are typically worth it for the higher rate of interest that you can often earn. 

Talk to your financial advisor about CDs and money markets. Often they have access to CDs from banks all across the country and plenty of money market options to choose from, so you can let them shop around for the best rate for you. 

That’s it for today. Thanks for listening!

My name is Ashley Micciche and this is the One Minute Retirement Tip.

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