As a senior, you'll ideally have a number of income sources available to you. These could include withdrawals from your 401(k) or IRA, Social Security benefits, and maybe even income from a part-time job.

But while having a steady flow of money coming in is a good thing, it doesn't negate the need for a solid emergency fund. Just as workers should aim to have three to six months' worth of living expenses sitting in cash in a savings account, retirees should have reserves on hand for unknown expenses.

You may be thinking: "Why do I need emergency savings in the bank when I have other income sources available?" And here's the reason: If a very expensive, unanticipated bill lands in your lap and you just spent your last Social Security payment, you'll be waiting a month until your next one comes in. Meanwhile, your paycheck from a part-time job may only cover a fraction of that bill.

Of course, there's still your retirement savings, but what if the market is down? In that case, pulling out a chunk of cash at the wrong time may leave you with a serious loss on your hands. And that can easily happen.

Glass jar filled with bills labeled emergency savings


That's why you should really keep some money in the bank -- so you can access it whenever you need to without having to worry about losing out on principal. If you're nearing retirement and aren't sure what your emergency fund should look like, here's how to get started.

Step 1: Figure out where your unplanned or unusually large bills might come from

Most workers are told to set aside three to six months' worth of living expenses in cash to cover that long a period of potential unemployment. But if you're retired, that same logic doesn't apply, since you'll already be mostly, if not fully, unemployed. Instead, think about the reasons you might encounter a large bill out of the blue.

Maybe you have an aging house with a heating system that's been on the fritz or a water heater that's on the verge of failing. Maybe you drive an older car that will likely need work at some point or another. Or maybe your health isn't the best, and you can't discount the possibility of costly medical bills when the condition you have flares up.

There are so many reasons why you might encounter unusually large expenses in retirement, so think about what your circumstances entail, and aim to calculate the cost of specific issues you fear might result in a whopping set of bills. That will guide you toward a savings target to aim for.

Step 2: Put a price on peace of mind

Setting aside money in the bank for emergencies isn't just about footing those bills as they come; it's also a matter of helping yourself sleep at night, knowing that if an unplanned expense were to pop up, you wouldn't have to scramble. Once you've landed on an initial emergency savings target, figure out if padding it a little makes sense from a peace-of-mind perspective. If so, aim to divert a little extra cash into your savings account.

Step 3: Cut back on expenses between now and retirement to boost your savings

If you're already contributing to an IRA or 401(k), eking out extra cash for your retirement emergency fund will be easier said than done, but if you're a few years away from retirement, making modest spending cuts could easily do the trick. Go out to dinner one or two fewer times per month, or pick a small luxury you can live without and give it up for a year. Taking a couple of less costly vacations could also do the trick.

If you're closer to retirement, you may need to cut back on spending more aggressively to build extra cash reserves before bringing your time in the workforce to an end. Working a side gig will also help in this regard, and as an added plus, if you wind up liking that extra work, you may be able to carry it with you into retirement and buy yourself more financial flexibility down the line.

Just as it's important to have emergency savings during your working years, it's also important to have cash reserves throughout your senior years. Calculating that emergency fund, however, is a bit more complex, so figure out the right savings target for you and make spending adjustments to hit it. Doing so will give you one less thing to worry about when you're older.