In Northern Michigan, summer often revolves around water. Lake days, boat rides, and family time at the cottage are part of what many families have worked hard to enjoy.
They’re also a good reminder to ask a practical question: if you needed cash, how easily could you access it?
For families within 5 to 10 years of retirement or already retired, liquidity matters more than it may have during the wealth-building years. Net worth can look strong on paper, but wealth may be tied up in real estate, retirement accounts, a business, private investments, concentrated stock, or family property.
That doesn’t mean those assets are a problem. It means your plan should be clear about what is liquid, what is not, and what tradeoffs may come with accessing cash.
Start with a cash reserve
A common rule of thumb is to keep three to six months of living expenses in an emergency fund. That is a useful starting point, but retirement changes the conversation.
If you are nearing or already in retirement, you may want a larger reserve because regular paycheck income is ending or has already ended. Our article on preparing for a market correction notes that those nearing retirement may consider keeping one to two years of living expenses in an emergency fund so they are not forced to sell investments during a downturn.
The right amount depends on your spending, income sources, pensions, Social Security timing, property costs, health care needs, insurance coverage, debt, and how easily other assets can be accessed.
Know where liquid cash should sit
Liquid money should usually be easy to access, stable, and matched to when it may be needed. Common options include:
- High-yield savings accounts
- Bank money market accounts
- Money market funds inside brokerage accounts
- Treasury bills
- Short-term CDs
- Short-term bond strategies
Each option plays a different role. High-yield savings accounts can work well for immediate cash needs, while bank money market accounts or brokerage money market funds may be useful for cash that should remain accessible while still earning a competitive yield. CDs can make sense when the timing of a future expense is known, but early withdrawals can trigger penalties. Short-term bond strategies may offer more income potential, but they also carry more price movement as interest rates change.
The point is not to chase yield with every dollar. Money needed soon should usually prioritize access and stability. Money needed later may be able to earn more, but it should still avoid unnecessary risk.
Match liquidity to your retirement timeline
A basic liquidity review should separate cash needs into time frames:
- Next 12 months: living expenses, taxes, insurance, property costs, travel, and known commitments.
- Next three to five years: major purchases, home projects, family support, charitable gifts, or planned account withdrawals.
- Unexpected needs: health events, market downturns, repairs, business disruption, or family transitions.
If the answer to “where would the cash come from?” is unclear, the plan may need attention.
Not every asset should be liquid. Some investments are designed for long-term growth, income, or appreciation, and making everything easily accessible can limit return potential. The issue is whether you have enough liquidity in the right places before life requires it.
Build flexibility before you need it
Liquidity planning is not just about holding cash, it’s about knowing what you would use first, what you would avoid selling if possible, and what tax consequences may follow.
A good review should answer:
- How much cash is available today?
- What cash may be needed in the next one, three, and five years?
- Which assets could be accessed without disrupting the plan?
- Which assets are tax-sensitive or emotionally difficult to sell?
- Should credit, insurance, or withdrawal strategies be reviewed?
At Black Walnut, we help families look beyond the surface of net worth and understand how their wealth can support the life they want to live. That includes reviewing where wealth is held, how accessible it is, what tradeoffs may exist, and whether the plan provides enough flexibility for the years ahead.
A strong balance sheet matters. But when life changes, opportunity appears, or family needs arise, liquidity can matter just as much.
If you’d like to learn more about how we help families navigate financial decisions with clarity and confidence, we invite you to explore our approach or reach out for a conversation.
