Retirees: how much cash?

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tennisplyr
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Retirees: how much cash?

Post by tennisplyr » Sat Jul 28, 2018 6:46 am

For those already retired, how much/what percent of your portfolio is cash (savings, checking, MM, CDs). How do you decide how much is cash? Do you expect to hold more/less as you age? Currently I'm holding ~7%, it seems a tad high.
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Re: Retirees: how much cash?

Post by RadAudit » Sat Jul 28, 2018 6:58 am

About, one month's expenses in checking. < 3% in MM and short term bonds, just in case.

The money in MM and short term bonds approximately equals the one year's expenses net of a small pension, a little RMD (less taxes and reinvesting) and SS.

Apparently, YMMV.
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Re: Retirees: how much cash?

Post by scrabbler1 » Sat Jul 28, 2018 7:10 am

I have about one month of expenses in cash in my local bank's checking account. I have a steady inflow of cash coming from bond fund's dividends every month to replenish the cash. For the lumpier expenses, I have quarterly dividends coming from a stock fund. I leave a small buffer, or cushion, in my checking account to cover smaller, unforeseen expenses.

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Re: Retirees: how much cash?

Post by jebmke » Sat Jul 28, 2018 7:30 am

Almost none. Typical balance is probably 2-3 weeks of spending. I refresh at the beginning of the month right before direct debits hit. Then the balance ratchets down until mid month when the credit cards are paid. By then there is almost none.
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Re: Retirees: how much cash?

Post by indexonlyplease » Sat Jul 28, 2018 7:34 am

I have about 2 years of living expenses sitting in cd, checking and savings. Why, don't know since my pension covers everything and wife still works. But I figure if I need to make any large purchase car ect. The money will be there. So, I don't have to touch my taxed deferred investments.

Most would state to much in savings but If we are in a bad market I don't want to touch my investments.

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Re: Retirees: how much cash?

Post by ruralavalon » Sat Jul 28, 2018 7:52 am

tennisplyr wrote:
Sat Jul 28, 2018 6:46 am
For those already retired, how much/what percent of your portfolio is cash (savings, checking, MM, CDs). How do you decide how much is cash? Do you expect to hold more/less as you age? Currently I'm holding ~7%, it seems a tad high.
Age 72, retired, no pension.

It varies, we usually have a couple of months worth of living expenses (net of Social Security) in a checking account and a few thousand in a money market fund (from dividends not yet reinvested). Right now the total cash is about $9k, less than 1% of our portfolio.
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Re: Retirees: how much cash?

Post by Sheepdog » Sat Jul 28, 2018 8:00 am

2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
Last edited by Sheepdog on Sat Jul 28, 2018 8:06 am, edited 1 time in total.
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Re: Retirees: how much cash?

Post by UpperNwGuy » Sat Jul 28, 2018 8:06 am

Almost none. Just enough for the current month’s expenses. Been retired five years.

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Re: Retirees: how much cash?

Post by Dandy » Sat Jul 28, 2018 8:51 am

Age 70. About 18% cash-like, another 18% or so in short term bond funds and about 21% in intermediate bond funds.

I roughly follow Dr. Bernstein's suggestion i.e. have 20 years of current draw down in cash-like and short term bond funds. I don't overly fuss about how much of what type of cash or cash vs short term bond funds. Make minor adjustments based on rates/safety. e.g. VG Fed Money Market is paying 1.86% so not moving it to on line savings paying 1.75%. Did buy a 2yr CD paying 2.8%.

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Re: Retirees: how much cash?

Post by junetree » Sat Jul 28, 2018 8:55 am

20% cash and 20% bonds / 60% stocks / etc. Cash equals two years or so of expenses. Our annual expenses are quite high and we have a high net worth, so we don't feel we have to be overly aggressive with investments.

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Re: Retirees: how much cash?

Post by jebmke » Sat Jul 28, 2018 8:58 am

junetree wrote:
Sat Jul 28, 2018 8:55 am
20% cash and 20% bonds / 60% stocks / etc. Cash equals two years or so of expenses. Our annual expenses are quite high and we have a high net worth, so we don't feel we have to be overly aggressive with investments.
This suggests that you are retired with a total portfolio equal to about 10 years of expenses. Is that correct?
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Re: Retirees: how much cash?

Post by bertilak » Sat Jul 28, 2018 9:27 am

tennisplyr wrote:
Sat Jul 28, 2018 6:46 am
For those already retired, how much/what percent of your portfolio is cash (savings, checking, MM, CDs). How do you decide how much is cash? Do you expect to hold more/less as you age? Currently I'm holding ~7%, it seems a tad high.
I don't keep a specific cash balance. Quicken shows me 35 days pf projected cash balance. As long as that stays positive I'm OK. There are un-reinvested dividends in my taxable account that I occasionally re-invest. This gives me a little backup if I need to top up my checking account due to occasional high expenses (e.g. travel). I can generally feed that back to the investment account over time.
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Re: Retirees: how much cash?

Post by AlwaysaQ » Sat Jul 28, 2018 9:52 am

I have 12% of portfolio in taxable cash and short term CDs and another 10% in EE and I bonds. However, I am embarking on a series of expensive home improvements so after they are done I will rethink the portfolio. My pension, social security, and RMD have provided enough for normal expenses.

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Re: Retirees: how much cash?

Post by Prudence » Sat Jul 28, 2018 10:02 am

I am 71, retired for two years, and my portfolio is in cash. I don't like the stock or bond market so I am comfortable with cash for now. I am open to investing in stocks and bonds at some point, but, not now.

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Re: Retirees: how much cash?

Post by indexonlyplease » Sat Jul 28, 2018 10:02 am

Sheepdog wrote:
Sat Jul 28, 2018 8:00 am
2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
You have stated this perfect. You went through what many have not, so you have the experience. This is especially important to those who don't retire with a pension. Retire in the great market has been easy. When the market turns many will wish more cash or fixed income so they don't have to do like you stated "had to sell stock in down market".

I am lucky to have a pension to cover all. But I still have 2 years in cash and a 50/50 AA. Being conservative just feels good. And a market change won't make a difference to me. I THINK

Thanks for the post.

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Re: Retirees: how much cash?

Post by ruralavalon » Sat Jul 28, 2018 10:18 am

indexonlyplease wrote:
Sat Jul 28, 2018 10:02 am
Sheepdog wrote:
Sat Jul 28, 2018 8:00 am
2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
You have stated this perfect. You went through what many have not, so you have the experience. This is especially important to those who don't retire with a pension. Retire in the great market has been easy. When the market turns many will wish more cash or fixed income so they don't have to do like you stated "had to sell stock in down market".

I am lucky to have a pension to cover all. But I still have 2 years in cash and a 50/50 AA. Being conservative just feels good. And a market change won't make a difference to me. I THINK

Thanks for the post.
The OP's question was about "cash (savings, checking, MM, CDs)". We have just a couple of months worth of living expenses (net of Social Security) in cash, in a checking account and money market fund.

The answer is different if we consider bonds.

We are age 72, retired, with no pension, and our asset allocation 50/50. We have about 15 years worth of living expenses (net of Social Security) in a high credit quality, intermediate-term bond fund. Fifteen years is longer than our life expectancy.
Last edited by ruralavalon on Sat Jul 28, 2018 10:30 am, edited 1 time in total.
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Re: Retirees: how much cash?

Post by Golf maniac » Sat Jul 28, 2018 10:27 am

Answers will vary depending on situation. I have a pension and COULD live on that if I had to. In addition I have about 6 months of living expenses in cash in case I want to make a big purchase and not hit my investments. I just consider it ready liquidity for any unusual expenses. My budget is bigger than my pension so I have my retirement funds in target date funds for when I may need them. I ran calculations and I should never run out of money even with very conservative returns. Personally I like target date funds as they become more conservative as you move closer to the date you may need the money. Then when I hit a target date I reassess and see where I stand and if I want to move any of the money in the target funds.

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Re: Retirees: how much cash?

Post by friar1610 » Sat Jul 28, 2018 10:34 am

73/71 with cash flow replenished monthly by pension/SS. Goal is about 4% cash (MM funds, CU savings acct), currently 2.8%. Of note, we have CDs and I-Bonds that we categorize for AA purposes as bonds but which could easily be tapped for a cash emergency.
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Re: Retirees: how much cash?

Post by Rick Ferri » Sat Jul 28, 2018 10:51 am

Let’s differenciat types of “cash”. There are two, IMO.

The first type is working capital. This is the cash we have on hand to pay known bills. These bills are paid weekly (food, gas), monthly (utilities, insurance, mortgage), quarterly (water, taxes) and annually (property tax).

The proper investment for this money is a checking account or money market fund. There’s not a lot of interest, but very liquid and no risk of principle.

The second type of cash is liquid capital that may be used in the next 24 months, but not matched to recurring current liabilities. This is reserve money for 1) large planned expenses such as an automobile, vacation, known medical procedure and 2) known unknown expenses that happen in life (health problem, wedding, death of a spouse or other close person, emergencies).

A short-term bond fund is ideal for these longer-term known unknown expenses.
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Re: Retirees: how much cash?

Post by indexonlyplease » Sat Jul 28, 2018 11:02 am

ruralavalon wrote:
Sat Jul 28, 2018 10:18 am
indexonlyplease wrote:
Sat Jul 28, 2018 10:02 am
Sheepdog wrote:
Sat Jul 28, 2018 8:00 am
2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
You have stated this perfect. You went through what many have not, so you have the experience. This is especially important to those who don't retire with a pension. Retire in the great market has been easy. When the market turns many will wish more cash or fixed income so they don't have to do like you stated "had to sell stock in down market".

I am lucky to have a pension to cover all. But I still have 2 years in cash and a 50/50 AA. Being conservative just feels good. And a market change won't make a difference to me. I THINK

Thanks for the post.
The OP's question was about "cash (savings, checking, MM, CDs)". We have just a couple of months worth of living expenses (net of Social Security) in cash, in a checking account and money market fund.

The answer is different if we consider bonds.

We are age 72, retired, with no pension, and our asset allocation 50/50. We have about 15 years worth of living expenses (net of Social Security) in a high credit quality, intermediate-term bond fund. Fifteen years is longer than our life expectancy.
You are right. I should of stay with the cash topic. Thanks

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Re: Retirees: how much cash?

Post by Rwsawbones » Sat Jul 28, 2018 11:07 am

77 years old and still working as an MD. Relished the sell off of 2008-9 as last chance to buy low. Now concerned with my own psychology and have as what JP Morgan supposedly told a friend sold down to my sleeping point. Have about 7 years in MM and short term treasury funds

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Re: Retirees: how much cash?

Post by Ron » Sat Jul 28, 2018 11:24 am

When I retired in early 2007 at age 59, the only asset I could draw against was my portfolio, in which I held four years of cash in a tax-deferred MM account, which was just under 19% of my total portfolio at the time. I had no pension nor was I able to claim SS. SS was at least seven years away (at FRA). As it is, with the gains in the market after 2009, along with purchase of an SPIA after I retired, I was able to delay SS until this year - at age 70.

Some (most?) would say that I lost out with a heavy cash position rather than keep more of it in the market. However, when the downturn came about in 2008-09, I didn't lose a moment of sleep. Besides, I had the rest of my portfolio to be able to participate in the future gains from 2010 to last year.

Today, I have income (age 70 SS, SPIA, VA disability) that more than covers my budgeted expenses and I don't keep much in cash other than to cover current month's expenses. Current cash in my MM account is less than 1% (actually, it's .0079% as of yesterday's market close), and does not include cash held within the funds I'm invested in.

The cash will build up during the year, since I started RMD's this year and changed my tax-deferred funds from reinvestment of distributions/gains to go to cash in order to accumulate a stash for RMD withdrawals. After I pay taxes on the RMD's along with taxes due on my SS and SPIA income, I'll take the remainder and reinvest it on the taxable side.

FWIW,

- Ron
Last edited by Ron on Sat Jul 28, 2018 1:48 pm, edited 1 time in total.

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Re: Retirees: how much cash?

Post by delamer » Sat Jul 28, 2018 12:17 pm

We are semi-retired now; fully retired in 1.5 years.

Our retirement portfolio is 70% stocks/10% bonds/20% cash.

I prefer to take my risk with stocks and not with bonds. I am comfortable with the higher-than-usual stock allocation because of the cash. Also, a big chunk of the cash is in the TSP G Fund, which is the mother of all stable value funds.

Worth a read about 75 stocks/25 cash versus 60 stocks/40 bonds:

http://awealthofcommonsense.com/2015/03 ... portfolio/

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Re: Retirees: how much cash?

Post by birdy » Sat Jul 28, 2018 1:44 pm

Hi everyone:
I totally also agree with what Sheepdog did. I myself, due to the 2008-09 recession increased my cash (CD's) allocation as to not be forced to sell stock funds when the market does this again! What I have is broken down (largest $$$ amount first to lowest):
16%---CD's, savings accounts
10%---EE series bonds/ Intermed. Term tax exempt bonds
4%-----401b / annuity
My allocation has gotten up to 70/30, so I need to do some rebalancing!
Spouse & I 64 yrs and retired. No ss yet and no pension. Have been selling some after tax stock funds to reduce stock allocation back to my 60/40. I just had a CD mature which I will be putting back into my ladder at a 5 year APY of 3.25%. Because of the great advice from this site we saved early, often and wisely so we should have no problems with money in retirement. We have kept our same home of 22 years, drive same old cars (2003 and 2007) but we have increased travel spending (our great pleasure in life!). I keep $5000 in checking account for monthly expenses and transfer from MM account when needed.

birdy

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Re: Retirees: how much cash?

Post by Sandtrap » Sat Jul 28, 2018 1:47 pm

Sheepdog wrote:
Sat Jul 28, 2018 8:00 am
2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
Again, like your approach and logic.

For myself and DW.
Retired.
No pension.
10% in fixed. 45% in Bond Index. 45% Equities.
Some in R/E.
Substantial. Should be able to weather most storms.
Great sleep factor.
j
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Re: Retirees: how much cash?

Post by catdude » Sat Jul 28, 2018 2:01 pm

Almost 63 yo, retired with pension. Got enough in cash (checking & savings accounts, money market funds) to cover about a year's expenses...
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Re: Retirees: how much cash?

Post by 2015 » Sat Jul 28, 2018 2:54 pm

Sheepdog wrote:
Sat Jul 28, 2018 8:00 am
2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
I don't want to have to learn that lesson during the next crash (I learned other sad lessons during 2008-09), so you're approach is what I'm doing. I've liability matched so I can remain oblivious to the market.

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Re: Retirees: how much cash?

Post by B'Falls_JT » Sat Jul 28, 2018 4:18 pm

We retired in our late 50s and are not yet collecting SS or pensions (roughly a 6-year window of living on investments). I would consider our risk tolerance and capacity to be moderately low especially until SS starts. Echoing what some others have said here... We are concerned with managing sequence of returns risk, and to that end, we hold 4-5 years of expenses/taxes in "cash" with up to one year in checking/savings and up to four years in CDs and a few savings bonds. The cash allocation is replenished each year through re-balancing. Once SS and pension income begins, the amount of income needing to be generated by the portfolio will shrink significantly; although it is likely that we will continue to protect 4-5 years of portfolio-based income in cash and cash-like instruments. So, on an ongoing basis, the amount of cash that we keep will be tied directly to the amount of income that we need to generate from the portfolio for the upcoming 4-5 year window. This means the portfolio-generated income is the underlying driver of how much cash we'll hold, and the corresponding % of cash will change (we expect it to drop significantly). At this time, cash is at about 19%.

JT

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Re: Retirees: how much cash?

Post by Mr.BB » Sat Jul 28, 2018 4:21 pm

Sheepdog wrote:
Sat Jul 28, 2018 8:00 am
2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
It will be nice when CD's and regular savings get a little high interest rates so people can reduce their risk factors.
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Re: Retirees: how much cash?

Post by merr14 » Sat Jul 28, 2018 5:12 pm

Early retirees, 33+% in cash or cash equivalents. No excuse for that and I know it's a problem but I'm working on it! :D

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Re: Retirees: how much cash?

Post by radiowave » Sat Jul 28, 2018 6:37 pm

Rick Ferri wrote:
Sat Jul 28, 2018 10:51 am
Let’s differenciat types of “cash”. There are two, IMO.

The first type is working capital. This is the cash we have on hand to pay known bills. These bills are paid weekly (food, gas), monthly (utilities, insurance, mortgage), quarterly (water, taxes) and annually (property tax).

The proper investment for this money is a checking account or money market fund. There’s not a lot of interest, but very liquid and no risk of principle.

The second type of cash is liquid capital that may be used in the next 24 months, but not matched to recurring current liabilities. This is reserve money for 1) large planned expenses such as an automobile, vacation, known medical procedure and 2) known unknown expenses that happen in life (health problem, wedding, death of a spouse or other close person, emergencies).

A short-term bond fund is ideal for these longer-term known unknown expenses.
I agree with Rick, this is a good was to categorize short term assets and cash flow. I'm mid 60s and under 5 years to retirment. My IPS calls for a 2 year cash for expenses at retirement (cash in bank, CDs and T Bills) and a 50/50 asset allocation. Plans are to transition to a new retirement home, travel, and enjoy life :).
Last edited by radiowave on Sat Jul 28, 2018 9:54 pm, edited 1 time in total.
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Re: Retirees: how much cash?

Post by Peter Foley » Sat Jul 28, 2018 6:54 pm

Using Rick Ferri's definitions of working capital:

Age 67.5, retired 6 years with a pension that covers about half of our annual spending needs. We average holding about 6 months worth of cash. This fluctuates a bit during the year. I only replenish cash when I get down to about 2-3 months worth of expenses. At that point I bump it up to about 6 to 8 months. We have sold a couple investment properties over the past 3 years so the cash inflow has been irregular.

Sales of investment properties were followed by gifts to children and 529 plans for great grandchildren. The gifts would drop us into the 6 month of cash we like to hold.

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Re: Retirees: how much cash?

Post by Chaconne » Sat Jul 28, 2018 7:20 pm

Sheepdog wrote:
Sat Jul 28, 2018 8:00 am
2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
This is very much in line with what Jane Bryant Quinn recommends in her book, "How to Make Your Money Last," and it makes a whole lot of sense to me.

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Re: Retirees: how much cash?

Post by CaliJim » Sat Jul 28, 2018 7:39 pm

In our case... now retired and in our early 60s.

AA: 45/65 (EQ / FI)

Of the 65% - FI:

1 to 3 months of expenses is in checking account or FDIC savings or Money Market,

2 to 3 years expenses is in Short Term Muni Bond Fund.

Remainder of FI allocation is in Intermediate Bond Fund (Both VG CA Muni fund and VG Total Bond Fund) depending on which account (taxable, tira)

A wise man learns from those who are wiser .... in this case... Sheepdog.
See also this great thread: viewtopic.php?t=25126
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Sheepdog
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Re: Retirees: how much cash?

Post by Sheepdog » Sat Jul 28, 2018 8:24 pm

CaliJim wrote:
Sat Jul 28, 2018 7:39 pm

A wise man learns from those who are wiser .... in this case... Sheepdog.
See also this great thread: viewtopic.php?t=25126
Thanks for your thoughts and comments. That thread keeps coming back and back over these 10 years. What a time that was.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

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Re: Retirees: how much cash?

Post by aj76er » Sat Jul 28, 2018 9:00 pm

indexonlyplease wrote:
Sat Jul 28, 2018 10:02 am
Sheepdog wrote:
Sat Jul 28, 2018 8:00 am
2008-09 taught me, a 20 year retired person living off of savings and SS only, to keep 3 to 5 years of normal withdrawals in safety (cash, checking, money market, CDs. fixed term immediate annuities and short term bond funds) so that I won't have to sell and draw from stock containing investments in a major downturn. (During that recession I was having to sell stock containing investments and that hurt.) For me, at present, that means that I have 12.8% of my holdings in those safe holdings which is, presently, 3.7 years worth of normal withdrawals. So, in a major recession, I won't have to sell stock containing investments for at least 3.7 years which could be extended to 5 years by not too major reduced discretionary spending.
Reminding you, those safe holdings are still earning something....2 to 3%, so all is not lost..)
You have stated this perfect. You went through what many have not, so you have the experience. This is especially important to those who don't retire with a pension. Retire in the great market has been easy. When the market turns many will wish more cash or fixed income so they don't have to do like you stated "had to sell stock in down market".

I am lucky to have a pension to cover all. But I still have 2 years in cash and a 50/50 AA. Being conservative just feels good. And a market change won't make a difference to me. I THINK

Thanks for the post.
But were you really selling stock in a down market? if you had bonds you were likely selling stock in your taxable account and then rebalancing into stock from bonds in your tax-sheltered accounts. Government and investment-grade bonds held their own during the 2008-2009 crisis, and even had positive returns during the worst of it. So is the cash more of a psychological benefit here?
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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Re: Retirees: how much cash?

Post by Sheepdog » Sun Jul 29, 2018 1:40 am

aj76er wrote:
Sat Jul 28, 2018 9:00 pm
But were you really selling stock in a down market? if you had bonds you were likely selling stock in your taxable account and then rebalancing into stock from bonds in your tax-sheltered accounts. Government and investment-grade bonds held their own during the 2008-2009 crisis, and even had positive returns during the worst of it. So is the cash more of a psychological benefit here?
Yes, I was really selling stock in that market. I wouldn't have written it if I had not. In the first 5 years after I retired in 1998 I sold most of our taxable accounts, most of which for expenses, to go along with SS and just before RMDs. That was my plan to reduce taxes in retirement to sell off taxable first. (By the way, I was not a "millionaire". I had a moderate investment portfolio. ) in 2008 I was occasionally selling my traditional IRA investments, much of which were the RMDs, for expenses and those sold stocks were within balanced funds like Wellesley and others, so they were part stocks and part bonds. I had little straight bond funds in 2008. So, I had to sell stock containing mutual funds. Since then and today, I would likely not have to do so because within my traditional IRAs I have a short term bond fund from which I take my RMDs, and occasionally more than the RMDs, and those short term bond funds are mostly replenished each year by sending the invested fund's dividends and capital gains to it. (My RMDs in my 20th retirement year are increasing percentage wise, presently 6.8%, and I use for expenses or money market holdings for future spending.)
Note, in case anyone wonders, I reinvest the dividends and capital gains within my Roth IRAs. It is just within the tIRAs that I do not.
It's not what you gather, but what you scatter which tells what kind of life you have lived---Helen Walton

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Re: Retirees: how much cash?

Post by tennisplyr » Sun Jul 29, 2018 7:04 am

Sheepdog wrote:
Sun Jul 29, 2018 1:40 am
aj76er wrote:
Sat Jul 28, 2018 9:00 pm
But were you really selling stock in a down market? if you had bonds you were likely selling stock in your taxable account and then rebalancing into stock from bonds in your tax-sheltered accounts. Government and investment-grade bonds held their own during the 2008-2009 crisis, and even had positive returns during the worst of it. So is the cash more of a psychological benefit here?
Yes, I was really selling stock in that market. I wouldn't have written it if I had not. In the first 5 years after I retired in 1998 I sold most of our taxable accounts, most of which for expenses, to go along with SS and just before RMDs. That was my plan to reduce taxes in retirement to sell off taxable first. (By the way, I was not a "millionaire". I had a moderate investment portfolio. ) in 2008 I was occasionally selling my traditional IRA investments, much of which were the RMDs, for expenses and those sold stocks were within balanced funds like Wellesley and others, so they were part stocks and part bonds. I had little straight bond funds in 2008. So, I had to sell stock containing mutual funds. Since then and today, I would likely not have to do so because within my traditional IRAs I have a short term bond fund from which I take my RMDs, and occasionally more than the RMDs, and those short term bond funds are mostly replenished each year by sending the invested fund's dividends and capital gains to it. (My RMDs in my 20th retirement year are increasing percentage wise, presently 6.8%, and I use for expenses or money market holdings for future spending.)
Note, in case anyone wonders, I reinvest the dividends and capital gains within my Roth IRAs. It is just within the tIRAs that I do not.
I consider myself very fortunate to have retired in 2011!
Those who move forward with a happy spirit will find that things always work out.

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Re: Retirees: how much cash?

Post by SGM » Sun Jul 29, 2018 8:36 am

We are keeping more cash than usual as we are fixing up a house for sale and a house to move into. It is difficult to know how much the repairs will cost in houses that are 200 years and 150 years old. In about one year things will be more stable. I will probably be speaking to a fixed income specialist at Vanguard sometime soon. In about 1 year I will purchase a SPIA as the first part of a ladder of SPIAs.

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Re: Retirees: how much cash?

Post by dwickenh » Sun Jul 29, 2018 8:49 am

I keep 10-12 months expenses in high yield checking(2.07%) and 12-14 months in short term Treasuries at Vanguard in my taxable account.

That is about 6% of my investments.

Retired 28 months ago with minor pension and holding off on SS for DW and I to maximize ACA subsidies.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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Re: Retirees: how much cash?

Post by Chaconne » Sun Jul 29, 2018 9:12 am

Sheepdog wrote:
Sat Jul 28, 2018 8:24 pm
CaliJim wrote:
Sat Jul 28, 2018 7:39 pm

A wise man learns from those who are wiser .... in this case... Sheepdog.
See also this great thread: viewtopic.php?t=25126
Thanks for your thoughts and comments. That thread keeps coming back and back over these 10 years. What a time that was.
As I prepare to embark on retirement (holding more cash than many here might advise), Sheepdog's words from that old thread have an extraordinary effect on my thinking, made especially poignant given that they were written in the darkness and chaos of the 2008 abyss:

"If I had followed the advice of many here, and sometimes myself, I would have kept 3 to 5 years of normal annual distribution for expenses in cash so that when times like this occur, I would not have to sell."

Thank you.

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Re: Retirees: how much cash?

Post by Leif » Sun Jul 29, 2018 10:23 am

Cash is one part of my portfolio that I don't think of in terms of % of portfolio, tho' I have that stat.

Cash I think of in terms of cash flow and time. People think of cash in different ways. To me cash is immediately spendable without selling and no risk of market loss. That is primarily money markets and some FDIC insured savings. Not CDs. Not bonds or T-Bills.

Based on my cash flow I have 2+ years of cash. That is 2 years of expense - income - cash = 0.

I expect my cash to lower once my income increases with SS and RMDs at 70 and I'm no longer paying estimated taxes for Roth conversions.
Last edited by Leif on Sun Jul 29, 2018 1:15 pm, edited 1 time in total.

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Re: Retirees: how much cash?

Post by birdy » Sun Jul 29, 2018 10:35 am

Leif:

I have a CD (5 year) ladder in which two CD's mature per year. One around the beginning of the year, and one in the middle of the year. I count my CD's as cash because of my ability to decide when they mature, if I want to use that money or put it back into another CD because I don't need it right now. I keep enough liquid immediate money in my savings account which can cover emergencies etc. By having CD's that mature twice a year, I have never had a cash flow problem.


birdy

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Re: Retirees: how much cash?

Post by welderwannabe » Sun Jul 29, 2018 10:58 am

Sheepdog wrote:
Sun Jul 29, 2018 1:40 am
Yes, I was really selling stock in that market. I wouldn't have written it if I had not. In the first 5 years after I retired in 1998 I sold most of our taxable accounts, most of which for expenses, to go along with SS and just before RMDs. That was my plan to reduce taxes in retirement to sell off taxable first. (By the way, I was not a "millionaire". I had a moderate investment portfolio. ) in 2008 I was occasionally selling my traditional IRA investments, much of which were the RMDs, for expenses and those sold stocks were within balanced funds like Wellesley and others, so they were part stocks and part bonds. I had little straight bond funds in 2008. So, I had to sell stock containing mutual funds. Since then and today, I would likely not have to do so because within my traditional IRAs I have a short term bond fund from which I take my RMDs, and occasionally more than the RMDs, and those short term bond funds are mostly replenished each year by sending the invested fund's dividends and capital gains to it. (My RMDs in my 20th retirement year are increasing percentage wise, presently 6.8%, and I use for expenses or money market holdings for future spending.)
Note, in case anyone wonders, I reinvest the dividends and capital gains within my Roth IRAs. It is just within the tIRAs that I do not.
I am still working, and was working through 2008 and 2000 both times in the tech industry. I have been fortunate in that I have never been laid off. However, living those experiences and the fear and trepidation at the time taught me the importance of cash. I didn't have much cash during those times, and while I came out unscathed it was largely by luck working for the right companies at the right time.

About 7% of my total net worth is cash right now and I like it that way. That ebbs and flows a little as I make large purchases (automobile, home improvement etc). However, if it goes below 5% I start to sweat.

I am 20 years away from retirement and I don't think I would ever be comfortable with less than 12-18 months of expenses in cash.

Probably not the best plan to maximize returns, but I spend less money on therapy this way so I consider it a wash.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

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Re: Retirees: how much cash?

Post by ByThePond » Sun Jul 29, 2018 12:18 pm

Just retiring at 63/67, and holding 5% as true cash in savings acct.
That represents about 4 years of our expected net expenses.
It might be a bit high a percentage, but it lets DW sleep well at night, and if Mama's happy...

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Re: Retirees: how much cash?

Post by Leif » Sun Jul 29, 2018 12:57 pm

birdy wrote:
Sun Jul 29, 2018 10:35 am
Leif:

I have a CD (5 year) ladder in which two CD's mature per year. One around the beginning of the year, and one in the middle of the year. I count my CD's as cash because of my ability to decide when they mature, if I want to use that money or put it back into another CD because I don't need it right now. I keep enough liquid immediate money in my savings account which can cover emergencies etc. By having CD's that mature twice a year, I have never had a cash flow problem.


birdy
As I say, people have different views on "cash". I also have a 5 year CD ladder, with one CD coming due each year. But, if I needed the money sooner I could not use the CD without paying a penalty. So I don't consider it "cash". But it doesn't matter that much for normal cash flow. As long as the cash is available when needed to pay the bills. Sort of like Rick's "working capital" definition of cash (tho' I got longer term items, vacations, insurance bills, emergency money) also covered.

If you have a no penalty CD, then I would consider that as cash.
Last edited by Leif on Sun Jul 29, 2018 1:27 pm, edited 2 times in total.

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Re: Retirees: how much cash?

Post by aj76er » Sun Jul 29, 2018 1:03 pm

Sheepdog wrote:
Sun Jul 29, 2018 1:40 am
aj76er wrote:
Sat Jul 28, 2018 9:00 pm
But were you really selling stock in a down market? if you had bonds you were likely selling stock in your taxable account and then rebalancing into stock from bonds in your tax-sheltered accounts. Government and investment-grade bonds held their own during the 2008-2009 crisis, and even had positive returns during the worst of it. So is the cash more of a psychological benefit here?
Yes, I was really selling stock in that market. I wouldn't have written it if I had not. In the first 5 years after I retired in 1998 I sold most of our taxable accounts, most of which for expenses, to go along with SS and just before RMDs. That was my plan to reduce taxes in retirement to sell off taxable first. (By the way, I was not a "millionaire". I had a moderate investment portfolio. ) in 2008 I was occasionally selling my traditional IRA investments, much of which were the RMDs, for expenses and those sold stocks were within balanced funds like Wellesley and others, so they were part stocks and part bonds. I had little straight bond funds in 2008. So, I had to sell stock containing mutual funds. Since then and today, I would likely not have to do so because within my traditional IRAs I have a short term bond fund from which I take my RMDs, and occasionally more than the RMDs, and those short term bond funds are mostly replenished each year by sending the invested fund's dividends and capital gains to it. (My RMDs in my 20th retirement year are increasing percentage wise, presently 6.8%, and I use for expenses or money market holdings for future spending.)
Note, in case anyone wonders, I reinvest the dividends and capital gains within my Roth IRAs. It is just within the tIRAs that I do not.
Okay, so if I understand correctly, it sounds like you held stock funds in taxable and balanced funds in tax deferred. In this configuration, one can't control their AA too closely and I can see how this would force stock sells in the event of a downturn.

Anyway, to respond to the OP's question, I currently hold 5% of cash equivalents: 2.5% in 3mo T-bills and 2.5% in I-bonds. This represents about 2yrs of expenses.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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Re: Retirees: how much cash?

Post by John151 » Sun Jul 29, 2018 1:41 pm

I’m a conservative retiree in my seventies. For many years I kept about 5% of my investments in cash, defined as my checking account and a money market fund. Then came the Great Recession. When the yield on my money market fund dropped to almost zero, I responded by moving money that I could have kept in cash into a short term bond fund instead. Now that interest rates are rising again, I’ve increased my cash allocation back to 5%. Everything else is in bonds (60%) and stocks (35%).

Cash still isn’t paying very much, but I like knowing that it’s there if I need it.

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Re: Retirees: how much cash?

Post by cfs » Sun Jul 29, 2018 2:07 pm

Sheepdog wrote:
Sat Jul 28, 2018 8:24 pm
CaliJim wrote:
Sat Jul 28, 2018 7:39 pm

A wise man learns from those who are wiser .... in this case... Sheepdog.
See also this great thread: viewtopic.php?t=25126
Thanks for your thoughts and comments. That thread keeps coming back and back over these 10 years. What a time that was.
Yes Mister Sheep Dog, it keeps coming back, and that is a good thing. As the original poster YOU helped a LOT of investors, and in my opinion your thread should be required reading in this forum. Thanks for all you do, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

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Re: Retirees: how much cash?

Post by cfs » Sun Jul 29, 2018 2:14 pm

"For those already retired, how much/what percent of your portfolio is cash (savings, checking, MM, CDs)"

Good question. Member of the Active Retired Force since 2014 and I hold mucho cash (money market, savings, checking). To all retirees, good luck with your cash position, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

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