How Much Do You Keep in Your Checking Account

[Midwest Player]

I'm not really interested in a dollar amount, but more interested in just how many months of living expenses you keep in your checking account. I'm more interested in what folks over 65 do as young folks tend to have less savings.

Anyway, over the last few years my checking account balance has been creeping upwards mostly due to income tax refunds that I let sit in the checking account. Overall, the way I have things set up now there is a slight amount more going into my checking account each month than going out. My inputs are social security, pension, 401(k), and some dividends, but the majority of my dividends are reinvested. The inputs are all direct deposited.

Now as I get older I want a large checking account balance as most of my withdrawals are automatic. I'm afraid I might die or have a stoke and my wife won't know shit and I surely want our health insurance premiums to be paid. However, after just receiving our last income tax refund we now have about x months of living expenses in the checking account and I think that is too much.

So I'm interested in what others do. A money reserve for blackjack is not a concern as I play such low limits replenishing my bankroll is not a concern, and I almost always take a blackjack replenishment out of savings instead of checking. I also have interest on checking, but the interest rate is still very low.

So my thinking now is at least x months of living expenses in my checking account is about right. Anybody agree or disagree?
https://www.thebalance.com/how-much-...ccount-4177181

[Meistro123]

11 months? Surely that money would be better put in a high interest savings account.

[21forme]

Vehemently disagree! I always had the impression that you were financially savvy based on your knowledge of tax issues. However, seems your finance choices are as bad as your living location choices.

First, a tax refund?! Why are you giving the gov't an interest-free loan? At your age, your taxable income should be fairly predictable, so why are you withholding more than necessary?

Checking accounts pay squat in interest, so I only keep enough in it to cover monthly bills for the current month. If something unexpected comes up, I do electronic transfers (which clear instantly) from my linked savings account (which also doesn't pay much in interest) either from my home computer or my cell phone app. Most of the money I have in cash is in an online bank money market acct currently paying 2.4% in interest. The transfers from the MM acct to my checking acct clear in 3 days.

I don't do any automatic withdrawals for bills due. I don't trust anyone to stick their electronic fingers in my account. I use electronic billpay, but schedule every payment myself.

[Sharpe]

I’m a CFP (Financial planner) so I run into this scenario often. As always, it all really depends on your situation and this forum isn’t the best place to get financial advice.

A couple of thoughts... I do think 11 months of living expenses in a “Checking account” is too much. Without knowing anything about your other investable assets (401k, IRA, Brokerage, etc), it may not be too much to have in “cash equivalents”. First, you should find out your income gap. This is the amount above your fixed income (SS, Pension, or annuity). Keeping 12 months of your income gap in “cash equivalents” isn’t always a bad idea... unless you have very little invested. So if you spend $5k per month, and your fixed income is $4k per month, you have a monthly income gap of $1k; or $12k per year.

Inflation SHOULD be factored into your long term planning. Does your pension have a cost of living adjustment? If so, then $12k annual income gap may stay pretty consistent from a purchasing power aspect.

If you have 11 months in living expenses in a checking account, I would assume it’s on your total monthly spending and not your income gap. If so, then you have way more cash on hand then needed.

Again, without knowing anything about your unique scenario, and please do not take this advice as gospel, a laddered CD portfolio for some of your excess cash may be a valid option. Perhaps pay off the mortgage if you haven’t already done so. Side note, your mortgage should be the only possible liability on the books... if not, paying those debts would probably be the way to go.

There might be some gifting/ deduction strategies you could implement as well but that would take an in-depth analysis of your finances and a discussion on your financial goals.

There’s a lot to this question and I suggest hiring a financial planner to take a look. Don’t just hire your local Edward Jones broker, or insurance sales person since they have built in conflicts of interest and are looking to “sell” you something rather than give you advice. Look for a CFP, or perhaps a “fee only” planner and interview them.

Hope this helps. Feel free to message me if you have any other questions!

[Midwest Player]

A couple of thoughts... I do think 11 months of living expenses in a “Checking account” is too much. Without knowing anything about your other investable assets (401k, IRA, Brokerage, etc), it may not be too much to have in “cash equivalents”. First, you should find out your income gap. This is the amount above your fixed income (SS, Pension, or annuity). Keeping 12 months of your income gap in “cash equivalents” isn’t always a bad idea... unless you have very little invested. So if you spend $5k per month, and your fixed income is $4k per month, you have a monthly income gap of $1k; or $12k per year.

Inflation SHOULD be factored into your long term planning. Does your pension have a cost of living adjustment? If so, then $12k annual income gap may stay pretty consistent from a purchasing power aspect.

I not sure what you mean by an income gap. I don't think I have one. More money is going into my checking account on average each month than is going out. I don't spend $5,000 a month from checking, but it is somewhere between $4,000 and $5,000. Lets say it is around $4,500. So on average, I would guess a couple hundred more is going into than out of checking each month.

My house is paid off, and no car payments. I paid cash for my last new car a few years ago and probably will pay cash again in 2021 or 2022 when I hope to buy my next new car. All credit cards are paid off in full each month.

Now with inflation that surplus going into my checking account will probably dry up. My pension is not indexed for inflation, but social security is somewhat indexed. I am withdrawing slightly more than my min required distribution from my 401(k). At the present rate I'm withdrawing from my 401(k), it will last a little over 18 years assuming I make no interest, dividends or capital gains which is unlikely or if I don't have any huge losses. My 401(k) is invested approx 60% bonds and cash and 40% stock. However outside my 401(k) I have about 8 mutual funds that are all invested in stock funds with a total value equal to whats in my 401(k). So you can see I'm really heavy on the stock side. Plus I have about 4 or 5 individual stocks which makes me even more heavy on the stock side.

At one time I had a lot of money market accounts, but closed them all when interest rates went to hell. Just lately I started up a money market account again and started to buy CD's again. Most of my CD's are worth below par with the rising interest rate environment. I also have a local savings account which is the only account that doesn't have internet access. Still have some EE bonds that I didn't use for the kids education. I got to cash those as 30 years will be up I think next year.

I'm sure 21forme and Dbs6582 are really interested in this. I spent a total of $1,680 on snow removal this winter. Roof was shoveled twice for a total of 11 man hours. Payloader came twice to move and pile up snow. I fell about 4 times and cracked a rib once. Now they are saying possible snow again this weekend.

[ShipTheCookies]

Have you guys forgotten...he's snowed in 9 months of the year!

[Dbs6582]

Have you guys forgotten...he's snowed in 9 months of the year!

Excellent point! Best post in this thread. He also spends a lot of time on his roof shoveling snow. Somehow I think that's relevant too.

[GMass]

In today's age of identity theft, skimming, etc., my checking account runs dry every two weeks. A partial direct-deposit from my employer provides just enough to satisfy 1/2 of my month's regular recurring payments.

All other expenses are paid using a credit card which is paid off several times per week from another checking account.

My "emergency:" money is in a third account that has no external access - I can only transfer out of it internally.

[Captain Colon]

You’re assuming that you will die before your wife. Those accounts solely in your name will be frozen until released by probate. Those accounts held jointly will be temporarily frozen.

Since you have no faith in your wife’s ability to handle the family finances after your death, she should not be executor of your estate. You should appoint someone whom you trust, a son or daughter, for example. You should then insure that instructions, via letter or some other means, are clearly communicated. Those instructions should include timing of automatic withdrawals, as well as account numbers of accounts, with pins, contact names, as well as recent transaction summaries indicating approximate value.

Disposition on of your estate will then be done in accordance with your will. Most (happily) married couples will likely have mirror wills, which I’m assuming is the case with you, other than different executors as mentioned above.

Then, perhaps you will give some thought to reducing the bloated value of your checking account.

[Midwest Player]

You’re assuming that you will die before your wife. Those accounts solely in your name will be frozen until released by probate. Those accounts held jointly will be temporarily frozen.

I don't think accounts held jointly with right of survivorship will be frozen at all. The only portion that might get a freeze is the social security payment for the month you died as this will have to be returned.
https://finance.zacks.com/can-bank-h...dies-9396.html

All of our accounts are joint with right of survivorship and only one signature is needed so my wife can clean me out and run off with the mailman if she wants. My pension will continue to her after I die at the 100% rate. I had to take a pension reduction to get this option. Other accounts like my 401(k) and Roth IRA's that can't be in her name she is listed as beneficiary.

[21forme]

I don't think accounts held jointly with right of survivorship will be frozen at all.

I agree, but easy enough to call your bank and ask.

[DoubleDownSoft21]

I'm not really interested in a dollar amount, but more interested in just how many months of living expenses you keep in your checking account. I'm more interested in what folks over 65 do as young folks tend to have less savings.

Anyway, over the last few years my checking account balance has been creeping upwards mostly due to income tax refunds that I let sit in the checking account. Overall, the way I have things set up now there is a slight amount more going into my checking account each month than going out. My inputs are social security, pension, 401(k), and some dividends, but the majority of my dividends are reinvested. The inputs are all direct deposited.

Now as I get older I want a large checking account balance as most of my withdrawals are automatic. I'm afraid I might die or have a stoke and my wife won't know shit and I surely want our health insurance premiums to be paid. However, after just receiving our last income tax refund we now have about 11 months of living expenses in the checking account and I think that is too much.

So I'm interested in what others do. A money reserve for blackjack is not a concern as I play such low limits replenishing my bankroll is not a concern, and I almost always take a blackjack replenishment out of savings instead of checking. I also have interest on checking. It is the highest tier the bank offers, but the interest rate is still very low.

So my thinking now is at least 6 months of living expenses in my checking account is about right. Anybody agree or disagree?
https://www.thebalance.com/how-much-...ccount-4177181

I don't think there is a right or wrong answer. If you're worried your wife "won't know shit", why not review everything with her?

[Midwest Player]

Or prepare a "death file" containing instructions, account numbers, usernames and passwords if there is online access...in the event of your untimely demise.

Funny you mention this. I actually wrote up a 14 item list on what to do if I would die. I think I emailed it to all my kids and my younger brother. My wife will have help from our kids, or at least she better.