The purpose of an emergency fund is to access it quickly without losing its value. Liquidity is the key factor of any emergency fund. A risky asset that moves in value drastically up and down is not a suitable investment for an emergency fund. Certainly, retirees need emergency funds. Irrespective of age, everyone needs an emergency fund for hard times. However, here, we will focus on the need of an Emergency Fund After Retirement.

Higher Medical Expenses In Old Age

As people grow older, the immune system of their body weakens. Aged people are more prone to catching diseases compared to people of younger age group. Even with insurance, the amount may not suffice in cases of complex diseases. The insurance company’s cover may not be enough to pay the bills. In such cases, your emergency fund comes in handy.

You also need emergency funds for cases where the hospital does not accept cashless health insurance and you need to pay treatment bills from your pocket. You can claim reimbursement from the insurance company later on.

You May Need Funds For Family Purposes

Because of career priorities and professional commitments, people marry late. In many cases, children are still searching for jobs or doing higher studies while they retire. It is very common nowadays to marry at the age of 30+ and have kids after crossing the age of 35. In such cases, your children may need funds to start a business, go abroad for higher studies, or pursue MBA or PG courses. All these avenues are expensive. Even though we don’t anticipate such things, they may very well happen and demand your attention and money. An emergency fund often comes in handy in such situations.

You May Need Money For Several Other Purposes

You may have to help someone close in distress or financial need. You may have to gifts at events. You may have to spend on the renovation of your home. We usually do not anticipate such things in future, but these are real situations that occur in our lives.

Take renovation, for example. This will surely happen. In 5-10 years, your home will demand repair, and this will cost you. Since you are not earning, the cost will look bigger. Emergency funds can help you in such cases. Helping your friend in need is another situation. No matter how less we think we have, we tend to help our close ones with whatever our capacity permits.

The need for emergency funds is for everyone but with one key difference between retirees and professionals. Retirees do not earn, while professionals do. So, it is better to plan your emergency funds while you are working so that you have an emergency corpus ready when you need it. For retirees, an emergency fund is the financial cushion that they should maintain over and above their post-retirement planned expenses.

The author is an Independent Financial Journalist