27 Sep Do I still need an emergency fund?

Q. I’m retired now and my pension and Social Security cover my expenses. How much money do I still need in an emergency fund?
— In good shape

A. Congratulations on your retirement.

And congratulations on having all of your expenses covered by “fixed” vehicles — monthly income that you can depend on to cover all your bills. You are fortunate.

But that doesn’t mean you’re off the hook with for an emergency fund.

An emergency fund however, is just that — an account to cover unforeseen expenses above and beyond what is anticipated, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

She recommends you still have three to six months of liquid investments to cover medical costs, home or auto repairs, a family crisis, or whatever may come happen.

“These crop up, and without a source of cash that is readily available, you may have to go into debt,” D’Agostini said.

Or, you might need to sell investments that were meant for the long-term, causing yourself to sell at the wrong time, pay extra taxes or throw your overall plan into a messy spot.

If you never need the money for an emergency, that’s just fine. It will come in handy at some point.

“Medical costs have been rising higher than inflation at over 5 percent annually,” she said. “If you eventually need long-term care, you will need the extra investments that hopefully you are saving and growing.”

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This post was first published in September 2016.