Is an Emergency Fund Necessary in Retirement?

In a discussion on one of my favorite financial forums, "Bogleheads",  frequent contributor Taylor Larimore made an interesting suggestion.  Mr. Larimore's view is that if your retirement savings are large enough (and accessible without negative tax consequences), you don’t necessarily need a separate “emergency fund.”


Mr. Larimore explained it this way:

"Like most retirees, our portfolio is the largest it has ever been. Accordingly, if we have an unexpected expense, I just sell shares of whatever is overweight in our asset-allocation plan. We value simplicity so an unneeded separate emergency fund is a no-brainer decision for us.

For an invester with a small portfolio, I think it is reasonable to keep enough in a bank account for "home repair/car repair, vacations, etc?" To me, it is not worth a separate small fund, with restricted liquidity, to try and eke out a bit more return.

A Roth can be an excellent emergency fund for an emergency described as a large unexpected expense. Roth contributions are available without tax or penalty at any time. Earnings are tax-free unlike a savings account or CDs.

There is more than one road to Dublin."

Personally, I am not at that point, but definitely something to consider and ponder for the future.

You can read the entire post and Taylor’s full post here.