Episode 83: How Much Cash Should Retirees Really Hold?

Published September 14, 2026

When markets feel uncertain, holding more cash can feel like the safest move.

In this episode of Money Monday, Darren Devine, Financial Planner with Sun Life and President of Devine & Associates, tackles a question that often becomes more important when markets are uncertain:

How much cash should retirees really hold?

Cash has an important role in retirement planning. It can provide liquidity for everyday spending, flexibility for unexpected expenses, and a source of funds that may help avoid selling long-term investments during a temporary market decline.

But more cash does not automatically mean more financial security.

This episode explores several important considerations, including:
→ The role cash can play within a retirement income plan
→ Why some retirees maintain a reserve for anticipated short-term spending
→ The concept of keeping approximately 6–24 months of anticipated spending needs in cash or other lower-→ volatility assets
→ How cash reserves may help manage sequence of returns risk
→ Why inflation can gradually reduce the purchasing power of cash
→ How holding too much cash may limit long-term growth
→ How short-, medium-, and long-term assets can serve different purposes within a retirement strategy

One of the biggest risks for retirees is being forced to sell long-term investments during a market decline simply because money is needed for current expenses.

Maintaining appropriate liquidity may provide more flexibility during those periods.

At the same time, retirement can last decades. If too much of a portfolio remains in cash for too long, inflation may gradually erode purchasing power and potentially make it harder for retirement assets to support future spending.

That's why the objective isn't necessarily maximum safety.

It's sustainable safety.

There is no universal cash percentage or dollar amount that is appropriate for every retiree. The amount that makes sense depends on factors such as your spending needs, risk tolerance, retirement timeline, and income from sources such as CPP, OAS, or workplace pensions.

The important question is whether your cash is serving a deliberate purpose within your retirement plan—or whether it has accumulated because uncertainty made doing nothing feel safer.

A well-structured retirement income strategy can help provide money for today while keeping longer-term needs in focus.

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Money Monday Related Episodes

Cash can provide valuable stability in retirement, but it works best as part of a larger strategy. These episodes explore retirement income, investment risk, longevity, and staying disciplined when markets become uncertain.

Episode 22: Generating Retirement Income in a Volatile Market
Market declines can feel very different once you're withdrawing money instead of contributing to your investments. This episode explores how retirement income planning can help you navigate volatility without allowing short-term market movements to dictate long-term decisions.
Episode 27: Does Your Investment Strategy Match Your Life Stage?
The right balance between stability and growth can change as you move into retirement. This episode explores why your investment strategy should reflect your current stage of life, goals, and tolerance for risk.
Episode 56: What Will Your Paycheque Be in Retirement in 2026?
Cash reserves make more sense when viewed alongside your complete retirement income picture. This episode explores how CPP, OAS, pensions, investments, and other income sources can work together to create your retirement paycheque.
Episode 60: Will You Outlive Your Money… or Will Your Money Outlive You?
Holding significant amounts of cash may feel safe today, but retirement assets may need to support you for decades. This episode explores longevity and why retirement planning needs to balance today's security with tomorrow's income needs.
Episode 62: Navigating Uncertain Markets Without Losing Sight of Your Plan
Uncertain markets can tempt investors to make defensive decisions based on fear. This episode explores why staying grounded in your financial plan can be more productive than reacting to short-term volatility.

How Much Cash Should Retirees Really Hold?

Presented by Darren Devine, CFP®, CLU®, Financial Planner, Sun Life and President of Devine and Associates Financial Services Inc.

When markets feel uncertain, many retirees ask the same question:
“Should I move more into cash?”

It feels safe.
It feels stable.
It feels responsible.

But holding too much cash in retirement can quietly create a different kind of risk.
So how much cash should retirees really hold?

Hello, and welcome to Money Monday, where we help simplify your financial journey.
I'm Darren Devine, Financial Planner with Sun Life and President of Devine & Associates. I’ve been helping families across Ontario plan, protect, and enjoy their retirement income for over 20 years.

And whenever markets fluctuate — which they naturally do over time — this conversation tends to resurface.

Because volatility creates uncertainty.

And uncertainty often leads to cash decisions.

1. The Role of Cash in Retirement

Cash absolutely has a place in retirement planning.
It provides:

  • Stability
  • Liquidity
  • Flexibility

The goal isn’t to avoid volatility completely — that’s impossible over long periods.

The goal is to avoid being forced to sell long-term investments at the wrong time.

2. The 6–24 Month Liquidity Rule

A common planning approach is to hold between 6 and 24 months of anticipated spending needs in low-volatility assets.

That may include:

  • Cash
  • High-interest savings
  • Short-term fixed income

Why?

Because if markets decline temporarily, you can draw income from stable reserves while long-term investments have time to recover.

This helps manage what’s known as sequence of returns risk — the risk of experiencing market declines early in retirement while you’re withdrawing income.

It’s not about predicting markets.

It’s about preparing for normal market cycles.

3. Cash Drag and Inflation

Here’s where balance matters.

Over a retirement that may last 25 or 30 years, inflation becomes a real factor.

If inflation averages 2–3% over time, and cash earns less than that, purchasing power declines.

That’s often referred to as “cash drag.”

Too little cash can create stress during downturns.

Too much cash can reduce long-term growth and purchasing power.

The objective is not maximum safety.

It’s sustainable safety.

4. A Structured Approach

Many retirees benefit from a tiered strategy:

  • Short-term reserves for immediate spending
  • Medium-term stability assets
  • Long-term growth investments

This approach allows income needs to be met while still maintaining exposure to long-term growth.

It provides both structure and psychological comfort.

The Bigger Picture

There isn’t a universal percentage that works for everyone.

Your appropriate cash level depends on:

  • Your spending needs
  • Your risk tolerance
  • Other income sources like CPP, OAS, or pensions
  • The length of your retirement horizon

Cash should serve a purpose.

It should provide flexibility and confidence — not be a reaction to temporary market movements.

If you’re unsure whether you’re holding too much cash or not enough, that’s a strategic conversation worth having.

Because retirement planning isn’t about eliminating volatility.

It’s about designing a structure that allows you to stay steady through it.

Thanks for tuning into Money Monday. Don’t forget to like and comment for more episodes filled with tips to help make your financial journey a breeze. Until next time, I'm Darren Devine, and you can always talk to us today at DevineAndAssociates.ca!

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