Pascal Broze | ONOKY | Getty Images
As retirees kick off the new year, high inflation and strong market returns may leave many wondering how much cash they need to have handy.
Annual inflation grew by 6.8% in November, rising at the fastest pace since November 1982, according to the U.S. Department of Labor.
The average savings interest rate is still 0.06%, making piles of cash less appealing, but the Federal Reserve’s planned rate hikes may improve options in the coming months.
More from Personal Finance:
Now’s the time to boost 401(k) contributions for 2022
Here is the age when many Americans hope to retire
Don’t count on that tax refund yet. Why it may be smaller this year
Still, the right level of cash depends on each retiree’s situation, according to financial experts.
“There’s not a silver bullet or a magic answer,” said certified financial planner Brad Lineberger, president of Seaside Wealth Management in Carlsbad, California.
Advisors may suggest keeping three months to six months of living expenses in cash during a client’s working years.
However, the number may shift higher as they transition to retirement, said Marisa Bradbury, CFP and wealth advisor at Sigma Investment Counselors in Lake Mary, Florida.
Many advisors recommend retirees keep a larger cash buffer to cover an economic downturn. A retiree with too little cash may have to dip into their portfolio and sell assets to cover living expenses.
The worst thing you want to do…