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Berkshire Hathaway’s balance sheet offers a valuable lesson for retirees who are constructing their portfolios.
The company, which was under Warren Buffett’s leadership for decades, is sitting on $357 billion in cash. While Berkshire could quickly put that money to work in various stocks, keeping cash lets it swoop in when promising investments become available at a discount. Retirees also need a cash cushion, but not just because of dip-buying opportunities.
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Why Berkshire holds so much cash
Berkshire wrapped up its third quarter with around $357 billion in cash. That large position offers financial safety during market corrections and lets the company buy undervalued companies during high-fear economic cycles.
Buffett has historically been a cautious investor who waits patiently before pouncing on investment opportunities. His approach also makes the company less vulnerable during market corrections. Investors who don’t have enough cash on hand may be forced to liquidate their positions, while Berkshire can hold its assets and wait for a recovery.
What Berkshire says about it
Greg Abel, CEO of Berkshire Hathaway, wrote in the company’s 2025 letter that Berkshire “will always aim for ownership of productive businesses over U.S. Treasuries” while viewing the cash as “dry powder” that can readily be deployed into solid companies.
While some people rush to buy assets the moment their paycheck lands in their checking account, that may not always be the smart move. Buying right away can result in entering an overvalued stock that endures a correction.
Berkshire also holds stocks of many companies and doesn’t rely on a small number of them. This approach lets it wait for some companies on their radar to become significantly undervalued before accumulating shares.
What retirees can learn from Berkshire
Retirees won’t have that type of cash sitting around, but they can still take a page from Berkshire’s playbook. A significant cash position can allow retirees to cover living expenses without needing to sell their assets. That way, they aren’t forced to sell shares during corrections and can wait for the market to rebound. Financial advisors typically recommend people have enough cash to cover three to six months of expenses, but increase that to around one to two years in retirement. That buffer can allow retirees to avoid frantic selling.
You will have to have a good sense of your monthly expenses before determining how much cash is right for you. You can start by reviewing your credit card statements and checking account transactions. This is also a good time to check for any unnecessary expenses. Trimming your costs — such as by getting rid of unused subscriptions — reduces how much cash you need to save to cover the one-to-two years’ worth of living expenses.
Where to keep your cash
Having liquid cash can reduce risk and make retirement less stressful, but that doesn’t mean you should put it in a checking account that earns a 0.10% annual percentage yield (APY). You’ll get a higher, low-risk return from your money with a high-yield savings account (HYSA), short-term certificate of deposit (CD) or Treasury bills.
HYSAs have variable interest rates that can fluctuate, but you get to access your money at any time. CDs have fixed interest rates, but if you withdraw funds before the CD’s maturity date, you can face penalty fees. Treasury bills are similar to CDs with fixed rates and maturity dates. Some of the best savings accounts have APYs above 4%, which substantially outearn checking accounts.
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