Saving emergency funds is not something you are unfamiliar with. During the working years, everyone encourages six months of living expenses put aside. This advice does not stop in retirement. You may experience many of the same potential emergencies that require access to that savings. However, in addition, during retirement, you are solely responsible for providing your own paycheck.

What emergencies may happen during retirement?

Much like your working years, you may run into those events where you need to tap into your rainy-day fund—house repairs, car breaks down. You may even help family members who run into unexpected financial needs. Building up your emergency fund provides ease if the unexpected does occur.

Another unforeseen emergency expense may be surprise medical bills. Health care costs are rising and having money set aside should you need to cover these costs will greatly impact your wellbeing down the road.

The golden rule emergency funds before and during retirement: have saved 6 months of living expenses.

Can I invest my emergency funds?

While the answer is yes, you need to make sure that all you have saved is protected. Your first option would be a traditional savings account. Easily accessible, the only downside is that your money earns next to nothing with interest.

Some folks may consider a CD, but you must be careful with early withdrawal penalties if you need the money before its maturity date. You may even designate your emergency funds to another retirement account such as an IRA. However, tax-deferred accounts such as an IRA or 401(k) are not like withdrawing from a savings account. If you pull from one of these as emergency money, it will add to your taxable income. And if you are under a certain age, you may be penalized for early withdrawal.

Can a reverse mortgage serve as an emergency fund?

If you or your spouse are over 62 years of age, using the equity on your home is an option. You may take monthly payments or only a lump sum of what is needed. Make sure what you are using it for is an emergency.

How can I reduce the need to use my emergency funds?

While having the funds handy is highly encouraged, a certain way to reduce the need to use your emergency funds significantly is evaluating the unforeseen expense. Can the car repairs be covered under your insurance? Is the roof of your home leaking, and will your home insurance cover any of it? Carrying insurance on certain things like the car and home will help with those unexpected events.

It is still very important to keep in mind the need for at least six months of living expenses to be set aside.