You probably know the importance of an emergency fund while you’re working. The rule of thumb is to save three to six months’ worth of living expenses in case you lose your job or another unexpected expense occurs.

That advice doesn’t stop when you retire. If you’re retired, you may face many of the same potential emergencies that require quick access to cash – except you are now also responsible for creating your own "paycheck" for everyday expenses.

What kind of emergencies might occur during retirement?
Many uses for emergency cash in retirement are the same as they are before you retire with one key difference: You no longer have a steady stream of income from your full-time job. Broken appliances, house repairs or unexpected unemployment of your side gig can happen once you’ve retired. And don’t forget unexpected health expenses or dental work that insurance may not cover. Your adult children or other family members may also need financial help if an unforeseen event pops up in their lives. Building up your emergency fund can help prepare you and set your mind at ease if the unexpected should occur.

How much cash should I keep on hand for emergencies?
Your emergency fund should cover unexpected expenses and emergencies, any short-term savings goals and everyday spending. The chart below compares how much you need when you’re retired to how much you should plan for if you’re still working.

Source: Edward Jones

For unexpected expenses and emergencies, plan on saving three to six months of living expenses if you’re still employed and up to three months of living expenses if you’re retired. You should have access to a line of credit regardless of your work status. For a specific short-term savings goal, the amount depends on the goal regardless of your work status. For everyday spending, plan on saving one to two months of living expenses if you’re still working and 12 months of living expenses, excluding outside income sources, if you’re retired. For a source of investment, plan on holding up to 10% of fixed income (which is generally up to 5% of your investment portfolio) regardless of your work status.


It’s not too late to build an emergency fund
You have many different avenues to build up your emergency fund before retiring. You can use your tax refunds, bonuses if you are still working or extra money from a part-time job. Depending on your situation and financial strategy, you may also use required minimum distributions (RMDs) to build your emergency fund.

So, yes, it’s wise to keep a “rainy day” fund even in retirement. Your financial advisor can help you strategize how to build up your emergency fund and how to handle life’s unexpected events.