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Retired Military Finances 101: How Big Should My Emergency Fund Be? Thumbnail

Retired Military Finances 101: How Big Should My Emergency Fund Be?

Managing Your Finances

Life in the military is unpredictable. Unexpected deployments, short-notice PCS moves can spice up life. But for the most part, finances are pretty predictable while you're in the military. You know when you'll get paid. You know when you'll get your next longevity pay increase. Pretty calm. But you won't be in the military forever and the outside world is a lot less financially calm.

One day, everything is running smoothly, and the next, you’re hit with a job loss or unexpected home repair. That’s why having an emergency fund is crucial. But how much should you save? The answer depends on your financial situation, lifestyle, and risk tolerance. Let’s dive in (but before we do, a robust emergency fund makes transition from the military a whole less stressful, too).

The General Rule: 3 to 6 Months of Expenses

Financial experts commonly suggest setting aside three to six months’ worth of essential living expenses. This range offers a buffer against unforeseen events such as medical emergencies, job loss, and major home repairs.

To determine your target amount:

  • Calculate your essential monthly expenses: Add up costs for housing (rent or mortgage), utilities, groceries, insurance premiums, transportation, and minimum debt payments.
  • Set your savings goal: Multiply your total monthly essential expenses by three to six, depending on your comfort level and job security. If you've retired from the military, you can count your retirement income and VA Disability Compensation when calculating your monthly "need".

For example, if your essential expenses total $3,000 monthly, aim for an emergency fund between $9,000 and $18,000.

When to Save More

While the three- to six-month guideline is a good starting point, individual circumstances may warrant saving more. Here are a few times when that might make sense:

Job Stability
If you’re in a volatile industry or role, consider saving more. Recent data indicates that the average duration of unemployment is 23.7 weeks (approximately 5.5 months), with some industries experiencing even more extended periods. This is the longest average since April 2022.1

Income Variability
Freelancers, contractors, or those with irregular income should aim for a larger cushion, possibly up to 12 months of expenses.

Dependents and Obligations
Having dependents or significant financial commitments may require a more substantial emergency fund.

Health Considerations
Additional savings can provide peace of mind if you or a family member have ongoing medical needs.

The Reality of Emergency Savings Among Americans

Despite recommendations, many Americans are unprepared for financial emergencies:

  • Approximately 37 percent of Americans can’t afford an unexpected expense over $400.2
  • The median emergency savings for Americans is $600.3
  • In 2022, 54 percent of adults had set aside money for three months of expenses in an emergency savings or “rainy day” fund, down from previous years.2

How to Build Your Emergency Fund

If you don’t have an emergency fund yet, here are some tips to help:

Start Small and Be Consistent
Begin by setting aside manageable amounts regularly. Consistency is key.

Automate Savings
Set up automatic transfers to your emergency fund to ensure regular contributions.

Reduce Unnecessary Expenses
Identify and cut discretionary spending, redirecting those funds to your savings.

Utilize Windfalls Wisely
Allocate bonuses, tax refunds, or monetary gifts to bolster your emergency fund.

Choose the Right Savings Vehicle
Keep your emergency fund in a liquid, easily accessible account, such as a high-yield savings account or money market account. This ensures you can access funds quickly without penalties.

The right emergency fund size depends on your unique situation. A solid savings cushion provides peace of mind and financial stability. Start where you can and build over time; your future self will thank you!).

Military Finances are Different

As mentioned above, if you retire from the military, you'll have a guaranteed source of income at a relatively young age. That affects the amount you need to have in an emergency fund. That's not the only way an Active or Retired military member's finances are different than a civilian's. That's why we think you should work with a financial advisor that deals with your unique issues each and every day. If you'd like to find out how we work with Active and Retired Senior Military Officers and NCOS, use the button below to schedule a free, initial consultation.

If you found this article useful, you might like the following blog posts:

Retired Military Finances 101: Temporary Retirement


Military Finances 101: Start Your Financial Plan


Military Finances 101: Managing Finances for Recently Commissioned Officers





  1. https://www.cnbc.com/2025/01/10/jobs-report-december-2024.html
  2. https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-expenses.htm
  3. https://www.benefitspro.com/2024/07/17/now-more-than-ever-employees-need-an-emergency-savings-account/?slreturn=20250311-14240

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