Liquid Money in Retirement is Essential

Shark Tank’s Mr. Wonderful, aka Kevin O’Leary, loves cash flow, so much so that he over-emphasizes its pronunciation. And if cash is king (and Kevin sure thinks so), then cash flow is queen, especially during retirement. Cash equivalent resources can really make your golden years more enjoyable than living under a tight-fisted monetary policy because you can’t spend your monies dedicated to income. At the same time you don’t want your cash money to rot in low yielding passbook accounts that can’t even keep up with the real cost of goods and services.

There are some choices to consider for cash flow management to service emergencies, medical deductibles and investment opportunities. Besides the best interest rates credited to your money, principle preservation is a key component in selecting cash management accounts: Transaction Accounts, Savings Accounts, Government Issued Bonds and Fixed Rate Annuities. The various elements of an asset management account may or may not be protected by federal deposit insurance. For example, funds kept in a bank checking account are usually protected by federal deposit insurance. Dollar amounts kept in a money market fund, however, are not protected by government deposit insurance.

One thing in life is certain. Things happen. And in retirement the things that happen are magnified because of the aging process. Medical and long-term care costs can be expensive. But even the facts of eldercare haven’t inspired most retirees to spend money on long-term care policies and hybrid products. Many retirees use Medicare Advantage alternatives instead of a Medicare supplement policy because there are no premiums to pay, but the limited exposure could cost $5,500-$6,000 in any one year if there were a medical event. The house and car will need repair. And perhaps the home needs to be retrofitted for geriatric living. These are all legitimate expenses that require cash reserves on hand to pay them. 

One last thought: As a senior over age 62, you can open an appreciating line of credit under the Home Equity Conversion Mortgage program that gives you access to your home equity without paying any loans back. It may be a suitable solution to consider if cash on hand is limited.