Retiring in 2026? Here's How Much Cash You Should Have on Hand.

By Maurie Backman – Dec 10, 2025 at 12:18PMKey PointsIt's important to have cash in retirement in case the stock market crashes.A good rule of thumb is to have enough cash to cover two years of expenses.The sum you land on should hinge on your portfolio composition, Social Security benefits, and tolerance for risk. These 10 Stocks Could Mint the Next Wave of Millionaires ›Make sure you're well protected.If you're gearing up to retire in 2026, there are probably a host of decisions you're suddenly facing. And some of them may be daunting. You'll need to figure out when to claim Social Security, whether to enroll in Medicare, and what to do about your investment portfolio. And it's important to get the latter decision right. Image source: Getty Images. Some retirees make the decision to largely dump their stocks to reduce volatility within their portfolios. That could end up being a mistake, though. You need stocks in your portfolio during retirement to allow your savings to keep growing. If you scale back on stocks to too much of an extreme, you may be very limited in how much you can withdraw each year from your IRA or 401(k) plan. But if you're going to stay invested in stocks as a retiree, it's important to protect yourself in the event that the market crashes. And chances are, over a decades-long retirement, the stock market is going to experience a decline several times over.Advertisement That's why it's crucial to keep cash on hand. Here's a guideline you can follow if you're not sure how much. Two years' worth of cash may do the trick Working folks are often advised to maintain a three- to six-month emergency fund to get through a layoff or cope with a large unplanned bill. But your cash reserves in retirement should ideally be a lot more substantial. It's a good idea to keep enough cash on hand to cover two years of living expenses as a retiree. So if you expect to spend $60,000 a year in retirement, it's a smart bet to keep $120,000 in cash. The reason? Stock market downturns are not always short-lived. It could take a few years for the market to recover from a major decline. Having two years of cash gives you the option to leave your portfolio untouched while it's trying to recover. And that could be the key to preserving your savings for the long haul. Of course, this doesn't mean your two years of cash should sit there doing nothing. Find a high-yield savings account to take advantage of today's interest rates. Or, put your cash into a CD ladder to lock in strong rates while they're still available. That way, your cash can earn something -- even if it's a lower return than what your portfolio continues to earn. Two years is just a starting point While it may make sense for some retirees to have two years' worth of living expenses in cash, there's wiggle room in that formula. You can, and should, adjust that guidance to suit your personal situation. Maybe you have a portfolio that isn't too concentrated in stocks. If so, you may feel OK with having 12 months' worth of living expenses in cash. Or, maybe you've delayed your Social Security claim past your full retirement age and are now in line for boosted benefits. If you have more guaranteed income coming your way each month from Social Security, then those larger benefits could make the case for having less cash. That said, you may be someone who has a very low tolerance for risk. If having three years' worth of cash on hand helps you sleep at night, do it. Of course, you don't want to keep too much cash on hand, namely because that could mean limiting your returns -- especially if interest rates fall in the coming years. The key, however, is to figure out what amount makes sense for you -- and shift some of your assets into cash before you reach the point where you're actually starting to live off of your portfolio.About the AuthorMaurie Backman is a contributing Motley Fool retirement and Social Security expert with more than a decade of experience writing about personal finance, investing, and retirement planning. Maurie previously worked in finance analyzing distressed companies. She studied finance at Binghamton University.TMFBookNerdRead NextDec 10, 2025 •By Adam LevySocial Security Beneficiaries Just Got Hit With the Same Cruel Math for the 3rd Straight Year -- and the Problem's Only Getting Worse in 2026Dec 10, 2025 •By Katie Brockman3 Huge Social Security Changes Taking Effect in January 2026Dec 10, 2025 •By Maurie BackmanIs 4% a Safe Withdrawal Rate in 2026? Here's What the Experts SayDec 10, 2025 •By Dana GeorgeSocial Security Not Cutting It? Here's How to Adopt Smart Financial Habits in 2026Dec 10, 2025 •By Maurie Backman3 Things You Must Know About Social Security Before You Claim Benefits in 2026Dec 9, 2025 •By Selena Maranjian5 Retirement Moves You'll Regret You Made