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No. of Recommendations: 2
Primary checking with an online bank generally tops out at around 1 month expenses, but can go down to a couple hundred bucks as money flows in and out. We have a second checking account with a local institution that we just use for check deposits and cash withdrawals. It generally doesn't have a significant balance and pays no interest, but is free. We have a Money market fund that currently holds around 14 months expenses. It is both an emergency fund and a slush fund for special projects and larger lumpy expenses like property taxes and insurance. Pretty easy to draw on, though we do not currently have it set up for check-writing. Beyond that, we have a brokerage account that holds an inheritance we collected a couple of years ago. I have not added or spent from the account, but it also acts as an emergency account of more or less last resort and is conservatively invested mostly in CDs, Bonds & Treasuries with portions maturing around every 6 months or so. It would cover around 3 years of expenses, were we to draw from it.

My wife is approaching early retirement at the end of the year and we are both around age 57, so depending on how we decide to proceed, we may draw on the inheritance until we can draw from the IRAs and 401(k) plans without penalties and without using the 72(t) distribution option until reaching 59-1/2 in a couple of years.

In general, I feel our money market account with 12-14 months expenses is more than sufficient as an emergency fund for normal situations we might find ourselves in. We've spent most of our lives with a whole lot less than that in any kind of emergency fund.
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