The second of the three cornerstones of a successful long-term retirement income plan is a liquidity strategy. You may think this should be an obvious one but I cannot tell you how many times I have come across huge mistakes when it comes to liquidity. It’s not about the pile of money sitting in a brokerage account invested into those great mutual funds the broker recommended, it’s about cash. If the market dips 20% or even 10% for that matter, are you really going to want to take a 20%, or 10%, hit getting the cash to fix the truck or to put a new roof on the house? Of course not. That’s why cash is so important.
Liquid assets in retirement (cash in the bank) is just as important as it is to any successful business owner. People, or businesses, need cash in the bank to cover ongoing needs and unforeseen expenses that are not predictable such as an emergency.
During one’s working years it has always been recommended that the family keeps between 3 and 6 months of expense money in their cash reserves. That’s in your working years, though. In retirement I would say that needs to jump up to at least 12 months. If your yearly core expenses run you $30,000 you should have at least that sitting in liquid assets.
Listen, regardless of what anyone tells you, the focus on your cash reserves cannot be the return on your investment., much more importantly its about easy access to those funds.
The main piece of advice I will tell you about a solid retirement income plan is to never put yourself in a position to have to liquidate an asset to cover an emergency or to try to take advantage of an opportunity. That right there is why an understood, easy access, liquidity strategy is one of the three major cornerstones of your successful retirement income plan that is build for now, today and tomorrow!
Stop being worried about tomorrow and live a happy, stress-free retirement.