Frequently Asked Questions About Retirement Income

Navigating retirement finances brings up many common questions. Here are answers to a few that we hear often.

How much of an emergency fund do I need in retirement?

The standard advice of three to six months of expenses still applies, but many financial planners suggest retirees aim for a larger cushion, perhaps even 12 months’ worth of essential living expenses. This money should be kept in a safe, easily accessible place like a high-yield savings account. It’s not for investing; it’s your safety net for unexpected events like a major medical bill or a home repair, so you don’t have to sell investments at a bad time.

What if the market crashes right after I retire?

This is the exact scenario where sequence of returns risk becomes a reality. This is why having a plan is so important. A cash emergency fund is your first line of defense. It allows you to pay your bills for a year or so without having to sell stocks when they are down. Having a balanced portfolio with a mix of stocks and less volatile assets like bonds also helps cushion the blow. Finally, being flexible with your spending—perhaps postponing a big trip—can make a huge difference in allowing your portfolio to recover.

Can I still work part-time and collect Social Security?

Yes, you can. However, if you are under your Full Retirement Age, there is an annual earnings limit. If you earn more than that limit, the Social Security Administration will temporarily withhold some of your benefits. The money is not lost forever; your benefit will be recalculated at your Full Retirement Age to give you credit for those withheld amounts. Once you reach Full Retirement Age, there is no limit on how much you can earn. You can find the current year’s earnings limit on the SSA.gov website.