Do You Need an Emergency Fund in Retirement?

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Learn why an emergency fund is crucial for retirement. Discover safe money alternatives to secure your financial future. Explore more at SafeMoney.com. Time and again, we are told of the importance of having an emergency fund. It makes sense, especially for retirement. After all, retirees are likely to have unexpected costs creep up, just like everyone else does. But according to a BankRate survey, even a small unexpected expense could be a struggle for many households.    In the survey, nearly 60% didn’t have enough savings to pay for emergency expenses. Almost half (45%) said they or immediate family had incurred a major emergency expense in the last 12 months. Among high-income households and college graduates, nearly half lacked enough savings to handle emergency costs. While emergency expenses can affect anyone, they may create harmful setbacks for retired households. Many retirees live on a fixed income. Without the fallback of healthy earned income, like that in the working years, they could find unexpected expenses to be disruptive. All of this underscores the practical wisdom of having financial cushioning for emergencies. So, what’s a target amount to have in an emergency fund? And what are some ways you can build up emergency reserves? Here’s a quick look at some strategies. Saving for the Unexpected So, how much should retirees have in emergency reserves? A common axiom for younger working-age households is to keep 3-6 months’ worth of living expenses stashed away. That way they’ve covered in case of a job loss or another income-disrupting event. Some take it a step further, pegging an optimal goal for younger persons at 6-12 months of money. However, for people near retirement, things are different. Once you leave the workforce, you no longer have full-time employment wages as an income source. And while Social Security is a steady income source for many older Americans, it isn’t meant to be the only one. So, you will need to have some savings for emergencies. Building an Emergency Fund While Working For people below age 65 and still working, financial experts say a solid target is 12-18 months’ worth of living expenses. Why so much? Because Americans falling within the retirement age bracket can encounter costly, unexpected expenses in two area