Retirees: how much cash?

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Re: Retirees: how much cash?

Post by siamond »

Roughly a month of regular expenses in checking account. At most two additional months of expenses in savings account (when depleted, I sell some shares to replenish). Can't see the point of doing otherwise.
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Re: Retirees: how much cash?

Post by GerryL »

Leif wrote: 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.
Leif's comment is almost exactly what I was about to add to the thread (although I have been using CDs).
Cash is a convenience for the way I live. For the 4 years since I retired I've been living on a tiny pension, quarterly dividends, and cash from earlier savings and a severance package. When I start collecting SS in a few months and start taking RMDs about 6 months later, I will think about how much of my RMD I will keep in cash to accommodate planned (and some unplanned) expenses. Goal is to only tap my tIRA 2x a year: once for QCDs and once for the remainder of the RMD. I do not bother trying to calculate how much I have to lose or gain by moving between cash and investments.
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Re: Retirees: how much cash?

Post by Sheepdog »

aj76er wrote: Sun Jul 29, 2018 1:03 pm 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.
I don't think you do understand all of my comment, or I don't understand what you meant.

Anyway, let me try again by expanding my investment history a little bit. I don't think it means anything to anyone else, as my predicament was unique, but to keep my feeble mind working some, I will write it anyway. Bear with me?

In 2008 as the stock market was falling and the economy went into a recession, my taxable accounts were completely gone because I had sold them off years before for expenses of which they did include paying the income taxes on my 1998 - 2003 conversion from some of my tIRA to Roth IRAS. I also had purchased with my taxable funds some of those 3.0% to 3.6% fixed plus inflation I Bonds in 2000 and 2001 which added more tax deferred savings. Theoretically, those I Bonds could have been sold in 2008, but they earned 7% in 2008 while stocks crashed. It would have been foolish, in my opinion, to cash those in at that point. (I still haven't.) The only practical selling for needs at that time, I believe, was from my traditional IRA and that meant the stock containing funds in my IRAs.
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Re: Retirees: how much cash?

Post by rgs92 »

Isn't all your cash just part of your allocation to fixed income in your total portfolio?
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Re: Retirees: how much cash?

Post by moehoward »

I have 4 years of expenses in iBonds. (I've been buying them for a while)
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Re: Retirees: how much cash?

Post by rixer »

I've been retired a little over 5 years now. I have a three year cd ladder of minimum expenses less SS that I continue to roll over. I've never touched it so far. The rest is just in a balanced index fund.
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Re: Retirees: how much cash?

Post by Sconie »

Will be 70 this Fall; retired for six years. I am 70% stock, 25% CDs and 5% cash (savings accounts, MMs, etc.). The CD portion is in a 5 year CD ladder and I have been using that for the last couple of years, the same in lieu of bonds, bond mutual funds, etc.
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Re: Retirees: how much cash?

Post by furikake »

My husband doesn't agree with me, he'd rather not have cash at all. We have 2-3 years of expenses in cash. Not retired yet.
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Re: Retirees: how much cash?

Post by Dale_G »

73% equities, 26.6% bonds, 0.4% cash. I have always kept a minimal amount in cash. Cash is not bad these days compared to bonds, but I won't be moving any money there.

In the event of a need for loot, there is money available from muni funds (with negligible tax consequence) and I bonds. I just never saw the need to keep a bunch of cash around. My last "emergency" was sometime in the 1960s.

Everyone has to do what they feel comfortable with.

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Re: Retirees: how much cash?

Post by Nightowl99 »

I have roughly two years' worth of expenses in cash, split between a savings account, a money market fund, and c.d.s. I like Sheepdog's idea of reinvesting dividends in tax deferred accounts only. The dividends in my taxable account get sent to my savings account automatically.
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Re: Retirees: how much cash?

Post by Leif »

Dale_G wrote: Mon Jul 30, 2018 3:44 pm 73% equities, 26.6% bonds, 0.4% cash. I have always kept a minimal amount in cash. Cash is not bad these days compared to bonds, but I won't be moving any money there.
Some have enough income from taxable (dividends & capital gains, rental income, interest, pensions, annuities, SS) to keep the lights on. Some may utilize the RMDs over the year. Still others may sell their assets as needed. In the first two cases their cash can be low. In the third case they may feel the need to maintain more cash.

When I get to 70+ I believe my cash will also be relatively low. RMDs will be mostly to pay my taxes.
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Re: Retirees: how much cash?

Post by smectym »

I define cash more broadly to include other types of assets with no principal fluctuation such as savings bonds and CD’s, as well as standard cash equivalents such as money market funds and checking account balances. And on that more expansive definition we have a lot of it sloshing around. We’ve been through many market cycles. “Cash is King”—the old cliche much held in contempt these days, but when one of these days the broken clock is right, there’s nothing like holding a ton of liquidity far removed from market volatility.

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