Why does keeping a cash buffer matter so much in the early years of FIRE?

A cash buffer is your defense against sequence-of-returns risk — the danger that a market crash in your first retirement years permanently damages your portfolio because you're forced to sell depressed shares to eat. Holding one to three years of expenses in cash and short-term bonds means that when stocks drop, you spend the buffer instead of liquidating equities at a loss, giving your portfolio time to recover. This single habit dramatically improves long-term survival rates in historical simulations, especially for early retirees with multi-decade horizons. The cost is opportunity: cash earns less than stocks over time, so you sacrifice a bit of expected return for stability when stability matters most. Many FIRE retirees refill the buffer in good years and let it run lower after gains. Pair it with spending guardrails for even more resilience. Test buffer sizes against market history at wealthserene.com/tools/wealth-simulator.