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How much liquidity does your portfolio need during ages 30, 40, 50, 60+ ?
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The global market’s volatility and increasing inflation is likely a cause for concern as you manage your portfolio. With these challenges, it’s advisable to incorporate liquidity into your planning.
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Liquidity is described as the amount of cash you can readily access, or how quickly you can convert assets to cash. The need for liquidity can vary depending on your age and risk tolerance, and short and long term financial goals. We’ve asked financial experts for their advice about how to plan your liquidity strategy as you age.
Liquid emergency savings for unforeseen life events
According to financial experts, you should have about six months of liquid living expenses set aside in an emergency fund, if you encounter a job loss, experience a medical emergency or have a sudden expense like a car repair.
“At any age we recommend an emergency fund in cash or cash investments to cover roughly six-month expenditures.”
"At any age we recommend an emergency fund in cash or cash investments to cover roughly six-month expenditures," says Rob Williams, CFP®, CRPC®, managing director, financial planning, retirement income and wealth management, Schwab Center for Financial Research. "They can cover a one-time surprise expense or tide you over if you have an illness, change jobs, or have another expense, to help avoid the need to sell investments."
How your age factors in on your liquidity path
According to Williams, investors aged 30 to their early 60s and still working and who do not need money from their portfolio soon could start with around 5% of their portfolio in cash and cash investments, based on the time horizon and risk tolerance.