Is Cash Still King in Retirement?

For many Americans approaching or living in retirement, cash has become attractive again. After spending years earning little to nothing on savings accounts and money market funds, retirees suddenly found themselves able to earn yields exceeding 5% on many cash investments following the Federal Reserve’s interest rate increases that began in 2022.¹ ² ⁶ 

For retirees accustomed to living on portfolio income, these higher yields have been a welcome development. Earning meaningful interest on cash can help cover living expenses while reducing the need to withdraw assets from investment accounts during periods of market volatility. 

But as interest rates begin to decline, an important question emerges: Is cash still king for retirees? 

The answer depends on the role cash plays within your retirement income plan. 

Cash serves an essential purpose in retirement. Unlike someone still working, retirees often rely on their investment portfolios to supplement—or fully replace—a paycheck. Maintaining an adequate cash reserve can provide flexibility to cover monthly expenses, unexpected healthcare costs, major home repairs, or other unplanned expenses without having to sell investments during temporary market downturns.³ 

Many financial professionals recommend maintaining enough liquid assets to fund one to several years of anticipated withdrawals, depending on a retiree’s overall financial situation, guaranteed income sources, and comfort with market volatility. Having readily available cash can help reduce sequence-of-returns risk—the risk that poor market performance early in retirement permanently reduces the longevity of a portfolio. 

However, holding substantially more cash than necessary can create a different challenge. 

While cash provides stability and principal preservation, it has historically struggled to outpace inflation over long periods. As retirees are often planning for retirements that may last 20 to 30 years or longer, maintaining purchasing power becomes just as important as protecting principal. Even modest inflation can significantly reduce what a dollar will buy over time.⁴ ⁶ 

Another consideration is how cash behaves when interest rates fall. Unlike intermediate- and longer-term bonds, whose prices may increase as interest rates decline, yields on money market funds, Treasury bills, and high-yield savings accounts typically adjust downward relatively quickly. Investors enjoying today’s attractive cash yields may find that income decreases over time if the Federal Reserve continues lowering rates.¹ ² ⁶ 

Meanwhile, many investors continue to keep significant assets in cash. Money market fund balances remain near record highs, reflecting both caution and the appeal of recently elevated yields.² 

This does not mean retirees should eliminate cash from their portfolios. Rather, it reinforces the importance of viewing cash as one component of a well-designed retirement income strategy. 

A balanced retirement portfolio typically includes several types of investments serving different purposes. Cash provides liquidity and stability for near-term spending needs. Bonds can generate income while helping reduce overall portfolio volatility. Equities, despite experiencing short-term market fluctuations, have historically provided the long-term growth needed to help portfolios keep pace with inflation throughout retirement.⁴ 

Instead of asking whether cash is still king, retirees may benefit from asking a more practical question: How much cash do I need to support my retirement lifestyle while allowing the rest of my portfolio to continue working for me? 

The answer will differ for every retiree and should consider expected spending, pension or Social Security income, healthcare needs, legacy goals, and overall risk tolerance. Holding an appropriate amount of cash can provide confidence and flexibility. Holding too much cash, however, may reduce long-term growth potential and increase the risk that inflation erodes purchasing power over time. 

As with most retirement planning decisions, there is no one-size-fits-all answer. A thoughtful review of your retirement income strategy can help determine whether your current cash allocation continues to support your long-term financial goals.  

Interested in whether your cash position remains appropriate for your retirement plan? Schedule time with a Millstone Financial Group advisor by calling 732.385.8544 or emailing info@millstonefinancial.net. 

Sources: 

1. Board of Governors of the Federal Reserve System. Federal Open Market Committee Statements and Monetary Policy Decisions (2022–2025). Documents the Federal Reserve’s interest-rate increases to combat inflation and subsequent easing of monetary policy. 
2. Investment Company Institute. Money Market Fund Assets. Weekly Statistical Report. June 11, 2026. Reports total U.S. money market fund assets, net flows, and fund composition. 
3. Consumer Financial Protection Bureau. Emergency Savings. Guidance on maintaining liquid savings for unexpected expenses and financial resilience. 
4. Ibbotson Associates (Morningstar). Stocks, Bonds, Bills, and Inflation (SBBI® Yearbook). Annual historical return data for U.S. stocks, bonds, Treasury bills, and inflation. 
5. U.S. Securities and Exchange Commission. Money Market Fund Statistics – January 2026. Published February 17, 2026. Reports industry assets, yields, and portfolio composition. 
6. Federal Reserve Bank of St. Louis (FRED). Historical data series including: 

• • Effective Federal Funds Rate (EFFR) 

• • 3-Month Treasury Bill Secondary Market Rate (TB3MS) 

• • Consumer Price Index for All Urban Consumers (CPIAUCSL) 

Disclosure: 

Advisory services are offered through Millstone Financial Group Limited Liability Company, a Securities and Exchange Commission Registered Investment Advisor located in the State of New Jersey. Insurance products and services are offered through Millstone Financial Group Limited Liability Company. Millstone Financial Group is not affiliated with or endorsed by the Social Security Administration or any other government agency. 

All material discussed is for informational purposes only. Opinions expressed are solely those of Millstone Financial Group Limited Liability Company and staff. All topics covered are believed to be from reliable sources; however, Millstone Financial Group Limited Liability Company makes no representations as to its accuracy or completeness. Investing involves risk including the loss of principal. 

This information shall in no way be construed as a solicitation to sell securities or investment advisory services to residents of any state other than New Jersey, or where otherwise permitted. All information and ideas should be discussed in detail with your individual adviser prior to implementation. 

Millstone Financial Group Limited Liability Company dba Millstone Financial Group does not offer tax planning or legal services but may provide references to tax services or legal providers. This material is intended to provide general financial education and is not written or intended as tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Millstone Financial Group may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters. You should always consult with a qualified professional before making any tax or legal decisions.