Retirement Answer Man

This is the third episode in the Market Correction Fire Drill series. On this episode, we discuss how much cash you need to have on hand to be prepared for the inevitable market correction. When investing for retirement it is imperative to keep thinking about your long-term goals. It can be easy to lose sight of this if and when the markets take a tumble. One way to always focus on the long-term is by making sure that you have liquidity on your balance sheet to get you through the short-term. This ensures that your investment strategy has the time to make a recovery in the event of a market correction. My goal today is to ensure that you have enough cash reserves on hand in your retirement investments to help you ride out a market correction with grace. If you’re curious to hear how much cash you need to have on hand, then you’ll need to listen to the full episode.

What is the magic number you need to have in liquid assets?

How much cash reserves do you really need to have on hand? The basic rule of thumb is that you need to have 3-6 months of cash on hand for an emergency. This money is specifically for an emergency. The exact number really depends on the stability of your income and employer. In the next bucket of cash, you’ll need the extraordinary cash reserves that will be needed within the next year. For instance, a child going off to college or a new roof for your house. Listen to the full episode to learn how to calculate just how much liquid assets you need to have to be prepared for any eventuality.

You can’t use short-term thinking for long-term assets

By having cash reserves, you can appropriate your long-term investments exactly how long-term investments need to be managed. If you constantly have to worry about the next eventuality, you won’t have the piece of mind to manage your investments the way that they need to be. By having a reserve set aside for the short term you’ll be able to concentrate on getting the most out of your retirement investments. Remember that you can’t use long-term assets in the short term. Learn how to make the most out of your retirement investments on this episode of Retirement Answer Man.

The real return on cash reserves

The ROI of cash on hand doesn’t come from the cash itself obviously. The real return comes from the power of not having to sell investments that are down or not having to pay extra taxes or capital gains because you weren't prepared. The real return on having cash on hand is having emotional resilience and flexibility in financial decision making. Life is not a simple math problem and neither are your investments. You must be able to position yourself to create the kind of lifestyle that you really want in your retirement. If you want to be able to invest your long-term assets in a way that is free of worry then you’ll need to hear about the real return on investment of having cash reserves in this episode.

Achieving a happy balance with your investments

Thinking about a market correction can be a daunting thought when planning for retirement, but being well prepared mitigates the risk. Just because the S&P is at all time highs does not mean that you should get comfortable. If your investments are going well and have been over the past few years, that’s great! But, having enough cash on hand to see you through everything that may pop up at you over the next couple of years will ensure that you will be able to make the most of your long-term investments. If you want to invest your long-term assets in a way that is free of worry then you’ll need to hear how to achieve the balance that I lay out in this episode.




  • [3:31] When investing for retirement keep the long term in the long-term
  • [5:13] The first line of defense
  • [7:00] The next line of expenses
  • [11:18] What is the ROI for cash reserves?


  • [16:02] How to repurpose a nondeductible contribution to an IRA?
  • [18:32] What are the risks of the lump sum vs. single life annuity?
  • [20:33] What is the best vehicle to save when you have a pension?
  • [22:25] When you should consider purchasing earthquake insurance


  • [24:18] What can you reflect on with pride from the past year

Resources Mentioned In This Episode

Ask Roger a question

Work with Roger

3-video Series: 5 Minute Retirement Makeover

Roger’s Retirement Learning Center

The Retirement Answer Man Facebook Page

Direct download: RAM202.mp3
Category:general -- posted at: 6:00am CST