Personal finance expert Suze Orman warns that relying solely on 401(k)s and IRAs for retirement is risky, as market fluctuations can impact these investments. She advises having a cash cushion of three to five years' worth of living expenses in a liquid, low-risk account. This cash cushion provides a safety net, allowing retirees to avoid selling investments at a loss during market downturns. Orman's recommendation is particularly relevant as many Americans are far from their retirement savings goals, with the average person believing they need $1.26 million to retire comfortably, according to a 2025 Northwestern Mutual study.

While Orman suggests that the U.S. market remains a strong investment opportunity in 2026, she emphasizes the importance of diversifying investments to protect against market volatility. High-yield savings accounts are highlighted as a practical option for building this cash cushion, offering better interest rates than traditional savings accounts. This advice comes amid concerns about market instability and the potential for broad market declines, where both stocks and bonds could fall simultaneously.

The advice to maintain a cash cushion reflects a broader trend in retirement planning, where financial advisors increasingly stress the importance of liquid assets to navigate unexpected expenses and market fluctuations. This approach helps retirees avoid tapping into their investment portfolios during market downturns, preserving long-term growth potential. With emergency funds being a critical component of financial planning, Orman's guidance underscores the need for a balanced strategy that combines long-term investments with short-term liquidity.