What it Means to Have a Financial War Chest

We normally don’t think of our savings account as a war chest, but as you approach retirement it might be a good idea to put a little more energy into your rainy-day funds.
Some folks likely made this realization near the end of last year when the stock market suffered a ‘mini-crash,’ which led to many retirement funds taking a big hit to their value. The unknown circumstances that come with investments are exactly why Morris Financial Concepts advises their clients to maintain a financial war chest, especially if they are retired or approaching retirement.

What exactly is a financial war chest?

By definition, a war chest is a reserve of funds used for going to war. If your investments fall through, the stock market crashes or another unknown financial burden comes your way when approaching retirement, you can find a financial war chest with enough funds to help you get by to be a lifesaver. Building a war chest full of safe assets will help to keep you financially sound through any fund related hardships coming your way.

How much should I keep in my financial war chest?

It’s extremely difficult to predict the health of the stock market when nearing your retirement. In another five to ten years, the market might not be where it is now, forcing you to retire into an unhealthy stock market and sell risky assets at the wrong time. To avoid the timing issue many face when nearing retirement, those in the financial industry suggest building a war chest of safe assets that could last you at least five years, giving the riskier assets time to recover.

Building your war chest in advance can bring peace of mind to those who are retiring when the market is in a bad place. During this time, you can always pull funds from your war chest and refill when the market is back on an upward swing. It took less than five years for the S&P 500 to recover from the depths of the great recession in 2009, and those who had a significant war chest were not forced to sell their stock positions at a low price.

How do I start a financial war chest?

For a step-by-step guide on how to build an effective war chest before you retire, take a look at some of our posts about bond ladders and safe withdrawal rates, or consult with one of our team members directly to learn more about your financial options when approaching retirement. Morris Financial Concepts wants to help you make your retirement experience as seamless as possible, so you can focus on better enjoying your retirement.

The opinions expressed herein are those of Morris Financial Concepts, Inc. (“MFC”) and are subject to change without notice. This is not an offer to buy or sell a particular security. This material is for informational purposes only and should not be considered investment advice. MFC is an independent investment adviser registered under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about MFC, including our investment strategies, fees, and objectives can be found in our ADV Part 2, which is available upon request. MFC-19-15.