Six months Emergency Savings Necessary for Pensioners?

barnstar2077

It depends on individual circumstances.  When I retire I will go into drawdown, so having a cash buffer / emergency fund will not only pay for a new boiler, but also ride out a few waves of volatility in my investments.  In other words, live off of cash for a while to let the stock market recover before removing funds.

I feel sorry for people that haven't managed to save up a few grand by retirement age though.  I can't imagine the circumstances that they must have endured to not manage it after sixty odd years of working.

Sailtheworld

Eco_Miser said:

Sailtheworld said:

MisterMotivated said:

Sailtheworld said:

MovingForwards said:

New boiler, new washing machine, new fridge, new cooker, the sofa suddenly decides to break, a freak incident and the front or back door decides to split open.

How will any of these get paid for? That's why an emergency fund is recommended as it's not always viable to wait and save. 

Those aren't emergencies as I see them. They're known future expenditure so either stick them on a credit card and pay it off out of future income or run a float to smooth income vs outgoings.

They could be if one (or more) of those items suddenly packs in completely.  I suppose you could live with no heating/hotwater, with microwave dinners, non-refrigerated food/milk/etc, smelly clothes and dirty undies for a few months, but many people would consider these circumstances as legitimate emergencies.

Also, my pensioner dad's car was written off last year and the insurance company valued it about £2k less than the same model/age/spec was selling for at the time.  He argued the case but they wouldn't budge, so he had to make up the difference when buying a new car.

These are relatively trivial as they're expenses which are expected / likely and can easily budgeted for just by keeping a small float of cash.

For me an emergency would be something more serious to cover the unlikely i.e. all of the white goods needing replacing at the same time as the dog's operation and the boiler and car packing up. An event which you hope doesn't happen but isn't really feasible to insure against.

That's the difference between a float and an emergency fund. The float is to cover spending that's likely to be needed but the timing isn't known which is an efficient use of cash savings. The emergency fund is to cover spending which is unlikely to be needed; hence the discussion what is a suitable amount.

I agree with the post above. It's better to think about absolute amounts of money; multiples of income / spending are useful but only really as a blunt rule of thumb.

It's a matter of terminology: what you're calling a float others call an emergency fund.

Further, what you are calling an emergency is merely the  temporal coincidence of several of the events you claim to be relatively trivial expenses which are expected / likely and can easily budgeted for just by keeping a small float of cash.

So I just keep a bigger float of cash and call it my spending/avoiding-selling-while-the-market-is-down fund.

When discussing emergencies with another person it's important to talk the same language. I'm coming at it from the more usual angle of a washing machine breaking down being a minor annoyance rather than an emergency. Terminology matters. Keeping a float is just a budgeting tool to smooth income against known(ish) expenditure. Others are available.

It matters because an emergency fund is something you hope you won't have to spend and will still be safe in the bank when the grim reaper calls. It's dead money so too big a fund and you'll limit your lifestyle; too small and you might not easily cope with an emergency.

For sure some people do manage to make an emergency of the washing machine packing up. It's not relevant to them that you call a tomato a tomato and so do I.

garmeg

DiggerUK said:

Sailtheworld said:

DiggerUK said:

Sailtheworld said:

DiggerUK said:

nownewretiredin2011 said: I was watching Martin last night and he keeps going on about having 3 to 6 months equivalent of salary as savings for emergencies.

What about pensioners who get pensions and know what their income is for years ahead?.......

I can't understand why anybody keeps up the poppycock about needing emergency funds. The unemployed and low paid can't afford it, the rich don't need it and all the rest should have access to adequate savings, investments and lines of credit.

To cover for emergencies needs a plan, but that plan should only identify were instant liquidity can be sourced. A well thought through savings plan can sort out the issue, all it needs is the financial equivalent of a 'break glass in emergency' source of finance.

Pensioners with known income streams are the least in need of something so preposterous..._

You're suggesting emergency funds aren't required...........

The concept of an emergency fund is plain daft. Freezing up funds that might be needed is fear factor at play, it's how purveyors of death insurance get rich.

Sources for emergency funding need to be identified in advance, but they certainly aren't required to be on permanent standby. It's a luxury many can't afford and others don't need..._
 

So rather than an emergency fund people should have liquid funds available identified that could be spent in an emergency?...........

Pickey I know, but I guessed I'd win you round eventually..._

Picky, even.

Alexland

Sailtheworld said:
I'm coming at it from the more usual angle of a washing machine breaking down being a minor annoyance rather than an emergency. 

If you have ever had this happen with young kids its an emergency. About the only time in my life I have paid extra for ASAP delivery.

Prism

Sailtheworld said:

Eco_Miser said:

Sailtheworld said:

MisterMotivated said:

Sailtheworld said:

MovingForwards said:

New boiler, new washing machine, new fridge, new cooker, the sofa suddenly decides to break, a freak incident and the front or back door decides to split open.

How will any of these get paid for? That's why an emergency fund is recommended as it's not always viable to wait and save. 

Those aren't emergencies as I see them. They're known future expenditure so either stick them on a credit card and pay it off out of future income or run a float to smooth income vs outgoings.

They could be if one (or more) of those items suddenly packs in completely.  I suppose you could live with no heating/hotwater, with microwave dinners, non-refrigerated food/milk/etc, smelly clothes and dirty undies for a few months, but many people would consider these circumstances as legitimate emergencies.

Also, my pensioner dad's car was written off last year and the insurance company valued it about £2k less than the same model/age/spec was selling for at the time.  He argued the case but they wouldn't budge, so he had to make up the difference when buying a new car.

These are relatively trivial as they're expenses which are expected / likely and can easily budgeted for just by keeping a small float of cash.

For me an emergency would be something more serious to cover the unlikely i.e. all of the white goods needing replacing at the same time as the dog's operation and the boiler and car packing up. An event which you hope doesn't happen but isn't really feasible to insure against.

That's the difference between a float and an emergency fund. The float is to cover spending that's likely to be needed but the timing isn't known which is an efficient use of cash savings. The emergency fund is to cover spending which is unlikely to be needed; hence the discussion what is a suitable amount.

I agree with the post above. It's better to think about absolute amounts of money; multiples of income / spending are useful but only really as a blunt rule of thumb.

It's a matter of terminology: what you're calling a float others call an emergency fund.

Further, what you are calling an emergency is merely the  temporal coincidence of several of the events you claim to be relatively trivial expenses which are expected / likely and can easily budgeted for just by keeping a small float of cash.

So I just keep a bigger float of cash and call it my spending/avoiding-selling-while-the-market-is-down fund.

When discussing emergencies with another person it's important to talk the same language. I'm coming at it from the more usual angle of a washing machine breaking down being a minor annoyance rather than an emergency. Terminology matters. Keeping a float is just a budgeting tool to smooth income against known(ish) expenditure. Others are available.

It matters because an emergency fund is something you hope you won't have to spend and will still be safe in the bank when the grim reaper calls. It's dead money so too big a fund and you'll limit your lifestyle; too small and you might not easily cope with an emergency.

For sure some people do manage to make an emergency of the washing machine packing up. It's not relevant to them that you call a tomato a tomato and so do I.

I agree. An emergency fund in retirement is there for unexpected expenditure. A cash float or buffer is there for expected volatility in income and growth from investments.

AnotherJoe

MovingForwards said:

New boiler, new washing machine, new fridge, new cooker, the sofa suddenly decides to break, a freak incident and the front or back door decides to split open.

How will any of these get paid for? That's why an emergency fund is recommended as it's not always viable to wait and save. 

Credit card?

MovingForwards

Not all 'pensioners' have a CC. Even if they do, it's finding the money to pay it off each month and having a knock-on effect with (fixed) income.

AnotherJoe

MovingForwards said:

Not all 'pensioners' have a CC. Even if they do, it's finding the money to pay it off each month and having a knock-on effect with (fixed) income.

Well in that case they should have an EF.

In the context of the OP having spare money each month then its likely they would have a CC and could pay off a modest short term emergency such as a washing machine or car repair over a few months out of the excess after "basics" being simply spent because thats their aim.

The standard advice / reason for an emergency fund is to cover being out of work and not being able to cover mortgage/rent food etc which doesn't apply in this case. Though it is all a bit hypothetical, is OP really just spending up every single penny every month just because they can (rather than need to)?  Bear in mind the original premise, spare money but they'd rather just splurge it all every month than put some aside

Eco_Miser

Sailtheworld said:

Eco_Miser said:

Sailtheworld said:

MisterMotivated said:

Sailtheworld said:

MovingForwards said:

New boiler, new washing machine, new fridge, new cooker, the sofa suddenly decides to break, a freak incident and the front or back door decides to split open.

How will any of these get paid for? That's why an emergency fund is recommended as it's not always viable to wait and save. 

Those aren't emergencies as I see them. They're known future expenditure so either stick them on a credit card and pay it off out of future income or run a float to smooth income vs outgoings.

They could be if one (or more) of those items suddenly packs in completely.  I suppose you could live with no heating/hotwater, with microwave dinners, non-refrigerated food/milk/etc, smelly clothes and dirty undies for a few months, but many people would consider these circumstances as legitimate emergencies.

Also, my pensioner dad's car was written off last year and the insurance company valued it about £2k less than the same model/age/spec was selling for at the time.  He argued the case but they wouldn't budge, so he had to make up the difference when buying a new car.

These are relatively trivial as they're expenses which are expected / likely and can easily budgeted for just by keeping a small float of cash.

For me an emergency would be something more serious to cover the unlikely i.e. all of the white goods needing replacing at the same time as the dog's operation and the boiler and car packing up. An event which you hope doesn't happen but isn't really feasible to insure against.

That's the difference between a float and an emergency fund. The float is to cover spending that's likely to be needed but the timing isn't known which is an efficient use of cash savings. The emergency fund is to cover spending which is unlikely to be needed; hence the discussion what is a suitable amount.

I agree with the post above. It's better to think about absolute amounts of money; multiples of income / spending are useful but only really as a blunt rule of thumb.

It's a matter of terminology: what you're calling a float others call an emergency fund.

Further, what you are calling an emergency is merely the  temporal coincidence of several of the events you claim to be relatively trivial expenses which are expected / likely and can easily budgeted for just by keeping a small float of cash.

So I just keep a bigger float of cash and call it my spending/avoiding-selling-while-the-market-is-down fund.

When discussing emergencies with another person it's important to talk the same language. I'm coming at it from the more usual angle of a washing machine breaking down being a minor annoyance rather than an emergency. Terminology matters. Keeping a float is just a budgeting tool to smooth income against known(ish) expenditure. Others are available.

It matters because an emergency fund is something you hope you won't have to spend and will still be safe in the bank when the grim reaper calls. It's dead money so too big a fund and you'll limit your lifestyle; too small and you might not easily cope with an emergency.

For sure some people do manage to make an emergency of the washing machine packing up. It's not relevant to them that you call a tomato a tomato and so do I.

To me, an emergency is something that needs to be dealt with ASAP, like water coming through the roof, or a freezer full of food defrosting, or a boiler breakdown in the middle of winter. It may need cash, or just money available on a card. It may be cheap(ish) to fix, or very expensive.

If the cost exceeds the cash at the bank, then it's very expensive, and time to start cashing in the investments.

When the Grim Reaper calls, it doesn't matter what's in the bank and what's in the investments, if there's any left I haven't been spending enough in my lifetime.

Re-reading this, I realise I'm very lucky, I don't need an emergency fund as such, just enough cash to cover any reasonable unplanned expenditure. Until recently that cash was earning at inflation-matching or -beating promotional rates.

I still think everyone should have enough cash available to cover unexpected spending though.

newatc

Another factor ,maybe, is the one (or ones) who you are leaving behind. My wife is not financially aware and is very nervous of conducting online transactions. Therefore I keep a fund of 20k in an account that is easy to access( no restrictions and at our main bank playing lousy interest) which I hope will tide her over for the first months after I've left (on top of the pensions she will be paid) until she gets on top of the finances.