My husband and I, both 75, have $1.5 million still invested and close to $500,000 sitting in cash. Is that too much cash, even at our age?

Take a couple, both 75 years old, with the wife retired after a career in education and the husband still working as a college professor. The spouses hold $1.5 million in their investment account, keep an additional $500,000 in a bank savings account, and are debt-free. Additionally, when the husband retires, he’ll receive a pension equal to about 80% of his annual salary.

In that instance, at first glance, $500,000 in cash seems heavy. However, keep in mind that the average U.S. 75-year-old man can expect to live to age 86, while the average 75-year-old woman can expect to live to age 88. Both will likely need more money than they think, and that’s where investing can fill the gap.

“Cash is important in retirement, but too much can become a problem,” Stacey Stark, a financial advisor and founder of Aurelia Capital Advisors, tells Moneywise. “Cash provides stability and liquidity, but inflation can erode purchasing power over time. Most retirees benefit from balancing cash reserves with investments that help maintain long-term growth and income.”

Keeping $500,000 in the bank isn’t putting needed money to work

Accumulating $500,000 sitting in a cash account is an unwise choice, money management gurus say.

“Typically, accounts are bank CD’s, money market accounts, savings and checking accounts that provide low interest rates that in most cases will not keep up with today’s inflation,” Charles Walt Wilson, owner at Private Pension by Design, tells Moneywise.

Other money management experts say that keeping $500,000 on the sidelines is simply a bad bet.

“For most folks, that’s too much,” Josh Katz, CPA & founder of Universal Tax Professionals, tells Moneywise. “It’s about a third of their portfolio doing almost no work.”

Katz says he understands the instinct to hoard as cash feels safe and at 75 you don’t have time to recover from a bad market year. “But cash quietly loses to inflation every single year, and over a 15- or 20-year retirement that erosion adds up fast,” he notes.

“I tell my clients to think in terms of what the cash is actually for, not just how it feels.”

Wilson, for his part, says having excess cash in retirement can be a good idea, especially if they take a creative step or two with it: “Older retirees like a liquidity safety net for unknown circumstances, like health issues, home repairs, vehicle issues, and other various unexpected issues.”

He advises a couple in that scenario to take $200,000 of their $500,000 to purchase an asset-based joint long-term care insurance policy. “I’d also suggest they use $200,000 and purchase a lifetime income annuity to pay for their basic living expenses or at least a portion of their living expenses,” he notes. “This plan still provides $100,000 cash liquidity for other unforeseen expenses.”

There’s an emotional side to the issue that needs addressing, too

Often, seemingly irrational money management decisions, such as large cash positions, are driven by more than investment strategy.

“In many affluent couples, excess cash serves as a psychological safety mechanism,” Joy Slabaugh, a financial planner and founder of the Wealth Alignment Institute, tells Moneywise. “It can be tied to investment needs like longevity concerns, market volatility, loss aversion, or differing risk tolerances between spouses.”

Retirees may keep extra cash close by leaning on ‘money scripts’, Slabaugh noted. “These are the stories we develop about money based on our own experiences with money, the traditions in our families of origin, and how we internalize broader cultural messaging around money,” she notes.

By and large, money managers say it’s perfectly fine for older couples to carry large cash balances, but depending on personal financial circumstance, it’s not necessary.

“It can work if the couple need the cash within the next 12 months for something specific,” Georgia Bruggeman, founder and CEO at Meridian Financial Advisors, tells Moneywise.