How might retirees prepare their finances for unexpected expenses?

Retirees can prepare their finances for unexpected expenses by having a liquid emergency fund readily available. This approach is crucial because it allows retirees to access cash quickly without needing to sell investments, which may not be favorable at the time or may incur losses. A liquid emergency fund typically consists of cash or easily accessible savings that can cover immediate costs, such as medical expenses, home repairs, or other unforeseen bills. This financial cushion provides peace of mind and financial stability, ensuring that retirees do not have to disrupt their long-term investment strategies or resort to debt during emergencies.

In contrast, keeping all funds in high-risk investments could expose retirees to volatility and potential losses, which is not ideal for managing unexpected expenses. Avoiding any use of cash may hinder their ability to respond to immediate needs, as certain transactions may require cash or might not accept card payments. Relying solely on credit cards presents the risk of accruing debt and high-interest charges, which can lead to financial strain rather than providing a safeguard against unexpected costs.