Emergency Fund Calculator

One to two years of the money your portfolio sends you. In retirement the emergency fund stops being insurance against losing a paycheck. It becomes the cash bucket: a reserve held outside the investment portfolio so that you can keep paying the bills through a market decline without selling stocks at low prices, and so that a roof or a set of hearing aids does not force a sale either.

In the Retired setting, the calculator sizes the reserve by the withdrawals your portfolio has to fund, which is what the cash is really for. It works in four steps:

1. Add up monthly spending you want protected. Housing costs such as property tax, insurance and upkeep; utilities; food; transportation; Medicare premiums, supplemental coverage and out-of-pocket care; any loan payments; and the travel, gifts and family help you would keep up even in a bad year.
2. Subtract guaranteed income. Social Security, pensions and annuity payments keep arriving in a bear market, so the reserve only has to cover the rest: the monthly withdrawal.
3. Multiply by the years you choose. One, one and a half, two or three years of that withdrawal, then add a reserve for big bills you can see coming. The target never falls below three months of total spending.
4. Compare with what you hold. The calculator shows how many years of withdrawals your cash covers today and how long a monthly top-up from the portfolio takes to close the gap.

With the calculator's defaults, spending is $6,000 a month ($1,600 housing, $450 utilities, $1,100 food, $550 transportation, $1,300 health care, $1,000 other) and guaranteed income is $3,000, so the portfolio funds $3,000 a month. Two years of that is $72,000; with $15,000 set aside for one-off bills, the target is $87,000. A $60,000 reserve covers 1.7 years of withdrawals, and topping up $1,500 a month closes the $27,000 gap in 18 months. Still working? The Still working setting keeps the classic rule of three to six months of essential expenses, adjusted for job stability, household income and the people who rely on you.

Usually one to two, and the share of spending your guaranteed income covers is the best guide. The more of your spending arrives as Social Security, pension or annuity income, the smaller the withdrawal a bear market can interrupt, and the less cash you need to hold against it.

Lean toward more if most of the portfolio is in stocks, if you are in the first years of retirement when a downturn does the most damage, or if you are paying for your own health insurance before Medicare. Lean toward less if you would rather keep the money invested and are willing to trim spending in a bad year. The retirement withdrawal calculator shows how much a bad sequence of returns can cost.

Because the order of returns matters once you are withdrawing. Two retirees with the same average return can end up far apart if one of them meets a bear market in the first years of retirement: selling shares to pay bills after a 25% fall means fewer shares left to recover. A reserve breaks that link. For a year or two you spend cash, sell nothing, and let the stock portfolio recover on its own schedule.

The cost is the gap between what cash and the portfolio earn. On a $60,000 reserve, a return three percentage points below the portfolio costs about $1,800 a year before tax. For most retirees that is a reasonable price for not having to sell at the bottom, and for the calm that makes it easier to stay invested. It is also why the reserve should count toward your bond and cash allocation rather than sit on top of it. The guide to retirement withdrawal order covers which accounts to draw from once you do sell.

Somewhere its value cannot fall and you can reach it within days. Split it by when you will need it:

• High-yield savings or a money market account. The next few months of spending. Deposits are insured up to $250,000 per depositor, per insured bank, per ownership category (FDIC); joint accounts and trust accounts are separate categories, and a reserve larger than the limit can be spread across banks.
• Money market mutual funds. Common at brokerages, uninsured but designed to hold a stable value, and usually available the next business day. Convenient for reserves held inside an IRA.
• Treasury bills. The rest of the reserve, laddered so a bill matures every month or quarter. Interest is subject to federal income tax but exempt from state and local income tax (TreasuryDirect).
• CDs. A ladder of short CDs works like a Treasury ladder, with early-withdrawal penalties if plans change. The CD ladder calculator shows what each would pay after state tax.
• I bonds, only at the far end. They cannot be cashed in the first 12 months, and cashing before five years forfeits the last three months of interest (TreasuryDirect).

Keep the reserve in accounts only you and your spouse or trusted agent control, and be suspicious of anyone who calls urging you to move cash "to keep it safe". The guide to investment scam red flags lists the common approaches.

Several that commonly hit a reserve. Original Medicare does not cover long-term care such as a nursing home stay, most dental care, or hearing aids and the exams to fit them (Medicare.gov). A crown, an implant or a pair of hearing aids is exactly the kind of bill the reserve exists for.

Premiums belong in the monthly spending line. The standard Part B premium is $202.90 a month per person in 2026, with a $283 annual deductible (CMS, 2026), before any supplemental plan, Part D coverage or income-related surcharge. A large unplanned IRA withdrawal can trigger that surcharge in a later year, which is one more reason to keep the reserve outside your IRAs where you can; the Medicare and IRMAA guide explains the brackets. Long-term care is a different scale of risk, usually planned for with insurance or a dedicated part of the portfolio rather than the cash reserve; see the long-term care planning guide.

Hold more, because the portfolio pays nearly everything in those years. Enter only the guaranteed income you already receive, so the withdrawal the reserve has to cover is realistic, and choose two or three years. Add health insurance before 65 to your monthly spending: continuing an employer plan under COBRA can cost up to 102% of the full premium, including the share your employer used to pay (U.S. Department of Labor). Once Social Security starts, re-run the calculator; the target usually falls.

If you are delaying Social Security to 70 to raise a lifetime, inflation-adjusted benefit, the bridge years are the period of greatest exposure to a market fall. Some retirees hold the whole bridge, several years of withdrawals, in cash and short Treasuries. The guide to claiming Social Security weighs that choice.

• Taxes on withdrawals. Spending figures are after tax. If the reserve will be refilled from a traditional IRA, the gross withdrawal will be larger.
• Inflation. A reserve sized today buys less each year. Re-run the calculator annually with current spending; the inflation calculator shows how fast fixed amounts erode.
• Known large purchases. A car in three years or a kitchen remodel is a planned expense, not an emergency. Fund it separately so the reserve stays whole.
• Tax on interest. The months-to-target figure grows the reserve at the yield you enter, before tax, so in a taxable account it is slightly optimistic.