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Keep in mind that the financial goal you set is distinct to your situation. What suits one person may not be ideal for another, meaning your target investment figure can vary considerably. Renowned personal finance expert Suze Orman has shared advice aimed at safeguarding your funds during uncertain market conditions.
During a recent conversation on the Women & Money podcast, Orman stressed the need for caution when planning your retirement. She recommended against relying solely on retirement accounts such as 401(k)s, Roth IRAs, or traditional IRAs. While many consistently contribute to these plans, market conditions can shift unexpectedly. Orman explained that it is possible for both stocks and bonds to drop at the same time—a scenario that might put a retirement portfolio at risk if it depends entirely on these instruments.
The question then arises: how much cash should be available at any moment? To protect against possible market declines, Orman suggests keeping a reserve that covers three to five years of living expenses. Saving this amount in a liquid account—such as a high-yield savings or checking account—means you can access funds immediately while steering clear of market volatility.
Orman noted that a five-year reserve offers a higher level of security, though a cushion of three or four years may be workable for some. Adjusting your savings plan to match your comfort level with risk is key.
Recent data from a Federal Reserve survey shows that the average American household has set aside roughly $333,000 for retirement. This figure serves as a reference point when planning your own savings, prompting a reserve that can safeguard your finances during economic changes.
