| In retirement, as in a number of other situations, | | | | you have more power over your cash. Most folks |
| balance is critical. It is important not to risk losing your | | | | would agree that it is important to have direct |
| retirement fund. On the other hand, you must not | | | | control over a portion of your portfolio at any point. |
| save too much of your funds in cash or cash | | | | Cash gives you a certain degree of power and |
| equivalents. At either extreme, there is too much risk. | | | | choice. In addition, they increase the mobility of your |
| However, there is merit in keeping a percentage of | | | | money- allowing you to take advantage of |
| your retirement savings in cash options. Cash options | | | | opportunities or address expenses as they arise. |
| remain an integral part of a diversified portfolio at | | | | Non-liquidation of long-term savings and investments |
| any point in time. | | | | Emergency funds are a vital aspect of financial |
| There are at least three primary benefits of using | | | | planning at any stage of your life. These funds should |
| cash options during retirement:i) Low riskii) More | | | | be highly liquid since they must be accessible on |
| flexibilityiii) Non-liquidation of long-term savings and | | | | demand. Cash, being the most liquid asset class, |
| investments | | | | satisfy the requirements for emergency funds. One |
| Low risk | | | | major benefit of having an emergency fund is that |
| Of the three asset classes, these offer the lowest | | | | you would not have to liquidate long-term |
| risk and lowest returns. As far as potential losses go, | | | | investments (especially your retirement account) |
| cash equivalents are the safest place for a portion of | | | | because of contingent expenses. Having adequate |
| your retirement fund. Unlike growth options where | | | | savings in cash options prevents you from being |
| you stand the chance of losing some or all of your | | | | illiquid in the event that circumstances that strain your |
| investment, cash options are the life saver for | | | | cash flow arise. |
| risk-averse retirees. Even for those who prefer to | | | | Although cash options are a necessary dimension of |
| invest and accumulate wealth, they provide a safety | | | | your retirement portfolio, over-exposure to them can |
| net. | | | | increase other risks by quickly devaluing your |
| More flexibility | | | | retirement fund. You should also consider that certain |
| With investments in the income and growth asset | | | | instruments are insured only up to a stipulated |
| classes, there are often restrictions governing how | | | | amount. |
| and when you can withdraw your money. With cash, | | | | |