A ‘Serious Saver’ Seeks Protection

From Market Volatility

How Can Retirees or Near-Retirees Cope With Market Swings?

  • Many experts recommend increasing cash reserves during and just-before retirement. 
  • Investing your cash reserves in certificates of deposit (CDs) is an option that offers stable, fixed interest rates.  
  • You can increase access to your money by investing in CDs with staggered maturity dates.  


With all the volatility in the market, many financial advisers say building up cash reserves is a smart move. Bari K. of Springfield, Virginia, has certainly taken that advice to heart.

The full-time data researcher has always been what she calls a serious saver. “I’ve typically put aside a high percentage of my income, but when the market dropped in early 2020, I upped my target to almost 50%,” she says. “I’m also delaying my retirement a few years. And if I get a tax refund this year, you can bet it’s going directly into savings.”

The goal? Bari wants to make sure she has three years of living expenses set aside in reasonably liquid investments she can tap if stocks take a deep dive during retirement. And she wants to make sure she can access a good portion of those assets quickly if she needs or wants to spend it — on a last-minute trip, for example.

“I absolutely love to travel,” she admits. In the years leading up to the pandemic, she visited Peru and Cuba. She also made multiple trips to visit her sons in California and Alabama, and took a cruise to Croatia, Italy and Greece. “Once I can travel again, I don’t want a market downturn to keep me from tackling my bucket list!”

How Much Extra Cash Retirees Need

At any age, cash gives you the flexibility to manage financial emergencies without tapping long-term savings. The amount of cash to set aside will vary depending on your situation, but experts typically recommend that everyone stockpile enough money to cover living expenses for three to six months.

Retirees — or near-retirees like Bari — who want extra security and­ flexibility may even consider setting aside one or two years’ worth of expenses, or as much as three years’ worth if they’re conservative. By having a sizable cash cushion, you will be able to tap those funds for living expenses during a stock market downturn rather than being forced to sell shares that have fallen in value. So, setting aside one or more years’ worth of expenses in relatively liquid assets can provide extra security and flexibility in the event of a prolonged market slide during or just before retirement.

Using CDs for Your Market Volatility Fund

Ideally, you want a safe place to stash your cash. One option is to invest your savings in an online certificate of deposit (CD). Generally, the longer the term of the CD, the higher the interest rate you earn on your money.

However, you’ll forfeit some interest if you pull money out of a CD before the term is up. To maintain access to a portion of your cash, you could consider investing in multiple CDs with different maturities, a strategy called “laddering.” For example, you can divide your dollars among five CDs — the first maturing in one year, the second in two years, and so on. When the one-year CD matures, you can reinvest the money if you don’t need it into a new five-year CD. By laddering, some of your money is earning the higher long-term rate while some of it is periodically freed up when the shorter-term CDs mature.

The good news is that Barclays CDs mature anywhere from three months to five years, so you can tailor your ladder to fit your needs. And of course, you still get the security of knowing your savings are protected. Like traditional savings accounts, the money invested in a Barclays CD is insured by the Federal Deposit Insurance Corporation, up to $250,000.

Cash Reserves Offer Freedom and Security

“Having enough cash set aside is really important to me,” says Bari K. “It represents both security and freedom. The security of knowing that I will have enough money to live comfortably in retirement, and the ability to say ‘yes’ when an opportunity to hit the road occurs.”