Cash buffer vs. Investments: Finding the right balance in retirement in Switzerland

When you receive a lump sum from your pension, it can feel overwhelming to decide what to do with it. Should you keep it in your bank account for security, invest it for potential returns, or find a middle ground? Without a clear strategy, there’s a risk of either depleting your savings too quickly or missing out on opportunities to make your money work for you.

Let’s break it down in simple terms so you can find the right balance for security, flexibility, and long-term financial stability.

Why do you need a cash buffer in retirement? 

A cash buffer is money set aside in easily accessible accounts (like savings or current accounts) to cover short-term expenses and unexpected costs (for example broken household appliances or medical emergencies). It acts as a safety net, ensuring you don’t have to sell investments at the wrong time if markets are down.

How much cash is enough?

Once you retire, your income often no longer fully covers your monthly expenses. This difference — known as the "income gap" — needs to be covered by your savings. To ensure stability, it's a good idea to keep enough cash on hand to cover this gap for the next 2 to 3 years.

Wanna learn more about the income gap? Then we have here all the info you need

💡 Tip: Try to keep your cash in a high-interest savings account to earn a tiny bit on it!

Once you’ve set aside your cash buffer, any additional wealth can be invested so it continues to work for you — helping you grow your reserves over the long term and maintain financial stability.

Why you shouldn’t hold too much cash

While cash is safe, it has a downside named inflation. Inflation eats away your money’s value over time. 

Holding excessive cash (more than 2-3 years of expenses) means:

• Your money loses purchasing power over time
• You miss out on potential investment returns
• You might outlive your savings if you're not generating returns

How to invest for growth – without taking all the risk

Once your cash buffer is set, the rest of your wealth should be working for you. Remember that not all investments are equal in retirement – the goal is to balance safety with steady returns.

Things to consider when investing in retirement

When deciding how to invest, it’s important to think about:

• Stability vs. Growth – Some assets provide steady income, while others focus on long-term returns.
• Diversification – Spreading investments across different asset types can help manage risk.
• Flexibility – Having access to your money when needed is crucial.

Many pensioners opt for diversified investment portfolios that balance lower-risk assets for stability with growth-oriented investments to protect against inflation.

Finding the right balance for you

Your ideal mix of cash and investments depends on:

• Your risk comfort
  Do market drops stress you out? Then a larger cash buffer should help you keep calm.
• Your monthly expenses
  Higher costs may require more liquidity.
• Your withdrawal plan
  If you withdraw from investments monthly, you need a stable strategy.

With Selma, you can get your personalised investment strategy and portfolio that adjusts over time, is based on your needs and, takes away the worries and guess work about what to do next with your hard earned retirement funds. 

Final thoughts: Security & growth can go hand-in-hand

The key to a successful retirement strategy is having enough cash to feel secure while letting the rest of your money grow.

• Keep 2-3 years worth of cash to cover the income gap 
• Invest the rest in low-risk, income-generating assets
• Avoid holding too much cash – inflation is the silent killer

By striking the right balance, you can enjoy retirement with peace of mind, knowing you’re financially secure today and set for the future.

Looking for a simple way to manage your retirement money?

Selma creates a tailored investment strategy based on your needs as a pensioner, using cost-efficient ETF portfolios for diversification and stability. Your investments stay 100% liquid, with free and flexible withdrawals whenever needed. Selma fully automates portfolio management while offering expert support – so you can enjoy retirement without the hassle of manual investing.