Suze Orman says all retirees now need to have a five-year ‘just-in-case’ fund — in cash. But is this a realistic (or reasonable) goal for most Americans?

Orman’s ideal cushion is out of reach for many

According to the Federal Reserve’s 2022 Survey of Consumer Finances, the average retirement savings for American families is roughly $333,940.

Diving deeper, households headed by those under 35 are looking at a median retirement savings of just $18,880, while the median for those aged 65–74 is about $200,000. That makes Orman’s ideal "cushion" out of reach for many typical Americans.

The upside of Orman’s advice is clear: a five-year just-in-case fund provides a powerful buffer against market volatility, giving retirees the peace of mind that comes with not having to sell stocks in a slump. It’s a form of self-insurance that could save thousands in losses during bear markets and could help retirees with sleeping better at night.

But the downsides are just as real. Building up three-to-five years’ worth of cash funds, which likely means saving hundreds of thousands of dollars, requires one to have a level of wealth that many Americans just don’t have.

Plus, keeping so much cash on the sidelines comes with a hefty opportunity cost, since that money could be working harder in stocks or other investments with a higher yield.

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Balanced options for saving

Since Orman’s ideal just-in-case fund seems to be out of reach for many Americans, it’s key to consider a more balanced, attainable approach to saving for retirement.

First, try to figure out how much cash savings you want on hand — maybe one-to-two years' worth of living expenses — as well as how much money you'll need to save for retirement. Keep in mind that for many retirees, you don’t need to replace 100% of your pre-retirement income because once you stop working, some expenses disappear along with your commute.

You no longer need to put money away for retirement because that’s already taken care of. And the daily costs tied to working — like gas, public transit, office attire and going out for lunch — often vanish when you call it a career. Furthermore, if you’ve paid off your mortgage by the time you retire, that’s another major bill off your plate.

You can use the federal government’s retirement planner to help with crunching the numbers.

Building a smaller emergency fund — which is basically the same thing as a just-in-case fund — in high-yield savings accounts or short-term bond funds can offer liquidity without locking up a large chunk of your nest egg.

Another popular approach is the “retirement bucket strategy.” This is where you divide your savings into short-, mid-, and long-term buckets based on when you'll need the money. This method lets you tap into safer investments early in retirement while giving riskier assets time to grow before you need them.

Orman’s five-year just-in-case fund may be the gold standard for retirement security, but for many Americans it’s more of a dream than a realistic plan.

But her underlying message is that retirees shouldn't leave their retirement fate to the whims of the stock market. Whether it’s a five-year just-in-case fund or a scaled-back alternative, building a cash cushion could be the smartest move you make for your future self.