Any retirees get through Covid crisis without large cash reserve?

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JoelT1
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Any retirees get through Covid crisis without large cash reserve?

Post by JoelT1 » Tue May 26, 2020 3:25 pm

As the dust begins to settle on the Covid pandemic and resulting stock market crash, and with the market making a strong comeback, I’m taking stock of my personal situation of *not* having had a sizeable cash reserve about 11 years into retirement and selling shares in the “down market.” Overall, I think I’m OK. My retirement account (tax-deferred), comprised of the Wellington & Wellesley funds, had previously totaled about $950,000 pre-Covid and currently totals about $895,000. Granted, my expenses are fairly modest, about $3,000 in monthly IRA withdrawals (not taking SS yet), but, in hindsight I think my account benefited more from being fully invested during the previous bull market than being hurt by selling shares in a down market.

Wondering if others are in retirement without large cash reserves.

jebmke
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by jebmke » Tue May 26, 2020 3:35 pm

We haven't had significant cash reserves in decades. Retired in 2007. I think I unwound our EF in the mid-90s.
When you discover that you are riding a dead horse, the best strategy is to dismount.

wm631
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by wm631 » Tue May 26, 2020 3:37 pm

Similar amounts, withdrawals from my own IRAs, though I'm also continuing to take pre-scheduled monthly withdrawals from two additional fixed rate annuities. No Social Security yet (trying to wait until 70 ... I'm gambling that the joke won't be on me either through my early death or future government cut-backs). Bottom line: life continues as is ... for many retirees.

HOWEVER ... there's these things called younger relatives who are being coronavirus job/income affected, so .....

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LilyFleur
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by LilyFleur » Tue May 26, 2020 3:46 pm

My portfolio is currently 46% index fund equities (except for 1.47% of an individual fund), and 54% cash. Hopefully the stock will regain value and become a larger % of the portfolio. I'm thinking about what to do with the cash. Most of it is in a stable value fund in my 401k. Cash in taxable is just sitting there but FDIC insured. I like the ability to pay for living expenses out of cash and leave equities untouched to recover.

macher
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by macher » Tue May 26, 2020 3:55 pm

JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic and resulting stock market crash, and with the market making a strong comeback, I’m taking stock of my personal situation of *not* having had a sizeable cash reserve about 11 years into retirement and selling shares in the “down market.” Overall, I think I’m OK. My retirement account (tax-deferred), comprised of the Wellington & Wellesley funds, had previously totaled about $950,000 pre-Covid and currently totals about $895,000. Granted, my expenses are fairly modest, about $3,000 in monthly IRA withdrawals (not taking SS yet), but, in hindsight I think my account benefited more from being fully invested during the previous bull market than being hurt by selling shares in a down market.

Wondering if others are in retirement without large cash reserves.
I know some who retired in the last year and both have pensions + SS and VERY little cash and are still doing good.

Broken Man 1999
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Broken Man 1999 » Tue May 26, 2020 3:56 pm

We did are doing just fine, and we have never had a large cash reserve, or even a small cash reserve.

I received somewhat of a windfall, and because of that I haven't removed funds from our retirement portfolio for months. Works out great as distributions from our TIRAs are taxable, so we are saving taxes as well.

Still, had I needed to do so I could have sold some of our treasury bond fund(s), and in fact both our short-term and intermediate-term treasury index funds are both sitting with a fair amount of capital gains.

I would think most retirees should have been able to slide right through this crisis. Hopefully their AA would be such that times like these are all part of what a retiree could see in retirement, and was considered when deciding their AA. Declines like this should be much easier for retirees as they wouldn't be suffering job losses, and for many SS would continue with no interruption.

Broken Man 1999
Last edited by Broken Man 1999 on Tue May 26, 2020 3:58 pm, edited 1 time in total.
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CyberBob
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by CyberBob » Tue May 26, 2020 3:58 pm

Rather than a dedicated cash allocation, I simply have all of the dividends from my taxable account go to my bank checking account. It’s like my paycheck never stopped :D

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Taylor Larimore
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Taylor Larimore » Tue May 26, 2020 3:59 pm

jebmke wrote:
Tue May 26, 2020 3:35 pm
We haven't had significant cash reserves in decades. Retired in 2007. I think I unwound our EF in the mid-90s.
Bogleheads:

Like others, I haven't had significant cash reserves in decades. If an emergency arrives I know I can get money from my bank, credit card, portfolio, etc..

I think it is usually a mistake to hold a separate low-yielding "emergency fund" that may never be needed.

The current pandemic is a good test.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success."
"Simplicity is the master key to financial success." -- Jack Bogle

RetiredAL
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by RetiredAL » Tue May 26, 2020 4:01 pm

JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic and resulting stock market crash, and with the market making a strong comeback, I’m taking stock of my personal situation of *not* having had a sizeable cash reserve about 11 years into retirement and selling shares in the “down market.” Overall, I think I’m OK. My retirement account (tax-deferred), comprised of the Wellington & Wellesley funds, had previously totaled about $950,000 pre-Covid and currently totals about $895,000. Granted, my expenses are fairly modest, about $3,000 in monthly IRA withdrawals (not taking SS yet), but, in hindsight I think my account benefited more from being fully invested during the previous bull market than being hurt by selling shares in a down market.

Wondering if others are in retirement without large cash reserves.
Deleted -- Somehow I got a duplicate during an edit. See the edited one below.
Last edited by RetiredAL on Tue May 26, 2020 4:14 pm, edited 1 time in total.

Northster
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Northster » Tue May 26, 2020 4:01 pm

I normally carry very little cash, having a fair amount in short term bonds, but in light of the recent uncertainty (which I am not sure is over) I boosted my cash to a whopping 7% just as a cushion. With bonds paying so little I doubt it will make much difference, but I will sleep better.

RetiredAL
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by RetiredAL » Tue May 26, 2020 4:02 pm

JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic and resulting stock market crash, and with the market making a strong comeback, I’m taking stock of my personal situation of *not* having had a sizeable cash reserve about 11 years into retirement and selling shares in the “down market.” Overall, I think I’m OK. My retirement account (tax-deferred), comprised of the Wellington & Wellesley funds, had previously totaled about $950,000 pre-Covid and currently totals about $895,000. Granted, my expenses are fairly modest, about $3,000 in monthly IRA withdrawals (not taking SS yet), but, in hindsight I think my account benefited more from being fully invested during the previous bull market than being hurt by selling shares in a down market.

Wondering if others are in retirement without large cash reserves.
Approaching retirement, I pondered about same kind of feelings you are having.

So when I retired 4 years ago, I setup single bucket for withdrawals from my IRAs and funded it with 18 months of withdrawals. That single bucket is invested in the Fidelity "short-term treasury fund" FUMBX. My normal monthly withdrawals come from this fund. Every 6 months, I replenish those 6 months of withdrawals as part of a re-balance activity, transferring $ out of equities or bonds as indicated. The withdrawal fund $ is included as part fixed income %. Per my Investment Policy, I am allowed to skip 1 replenish if both Bonds and Equities are down.

My last replenish was in January, the next will be in July. If we have another big dip in July like we had in March, I may elect to skip. If the market is about where today, I'll do the normal re-balance and replenish.

Since monthly withdrawals is basically a dollar-cost-averaging in reverse, I likely have not gained anything money-wise, but I have sure slept better the last few months knowing the withdrawals are covered no matter what the market is doing.
Last edited by RetiredAL on Tue May 26, 2020 4:21 pm, edited 1 time in total.

22twain
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by 22twain » Tue May 26, 2020 4:12 pm

JoelT1 wrote:
Tue May 26, 2020 3:25 pm
Wondering if others are in retirement without large cash reserves.
What is your definition of “large” or “sizable”?

Right now my cash allocation is about 3% which is larger than usual for me. Usually it’s about 1 +/- 0.5%. My spending rate is about 2% per year.

My stock allocation is about 50%, so my bonds and other fixed income are my real cushion.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!

hudson
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by hudson » Tue May 26, 2020 4:13 pm

JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic and resulting stock market crash, and with the market making a strong comeback, I’m taking stock of my personal situation of *not* having had a sizeable cash reserve about 11 years into retirement and selling shares in the “down market.” Overall, I think I’m OK. My retirement account (tax-deferred), comprised of the Wellington & Wellesley funds, had previously totaled about $950,000 pre-Covid and currently totals about $895,000. Granted, my expenses are fairly modest, about $3,000 in monthly IRA withdrawals (not taking SS yet), but, in hindsight I think my account benefited more from being fully invested during the previous bull market than being hurt by selling shares in a down market.

Wondering if others are in retirement without large cash reserves.
That used to be me, but now I have moderate cash reserves.

Nothing to do with the recent situation...not really an emergency fund...but a cash reserve.....not enough cash to buy a car.

Sometimes I've overdone being fully invested. I double paid a large credit card bill and didn't have enough in my checking account to fix it.
I also didn't think to get enough money in my checking account to pay a contractor as promptly as I wanted to. Both situations worked out OK, but I decided, no more. My plan is to be able to have a reasonable amount of cash available to put in my checking account instantly or at least in the same working day. I keep part of this reserve cash in a money market account; a few clicks dumps it into my checking account 24/7. Another part of the cash reserve is in AMEX Bank. At Amex, if I set up a "fast transfer" by 11:30 AM on a workday, it's in my checking account before 5 PM.

Bottom Line: I no longer have everything fully invested. Waiting 2 days to get funds from Vanguard is too long. I want to have a same business day cash reserve.

Dandy
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Dandy » Tue May 26, 2020 4:28 pm

I had large cash reserves because I roughly follow Dr Wm. Bernstein's idea for those who have enough i.e. having 20 or more years worth of draw down dollars in "safe" products. For me that is FDIC products, money market and safer short term bond funds. Overall my allocation is about 42/58 last time I looked.

I still didn't like the major correction of the market but still slept well.

Topic Author
JoelT1
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by JoelT1 » Tue May 26, 2020 4:31 pm

CyberBob wrote:
Tue May 26, 2020 3:58 pm
Rather than a dedicated cash allocation, I simply have all of the dividends from my taxable account go to my bank checking account. It’s like my paycheck never stopped :D
I used my time in quarantine in part to learn more about dividends, as an option for me has been to take dividends as cash, rather than selling shares. I don’t mean to derail my own original post with a heated dividend debate, however, I learned from Larry Swedroe and other experts that taking dividends as cash is essentially the same as selling shares, as share prices are generally reduced by the amount of the dividend. Forgive me if you already know this. I’m embarrassed to admit I had no idea.

Michread
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Michread » Tue May 26, 2020 4:48 pm

We have 6 months living expenses in cash. We retired 2 years ago and are a several years away collecting SS.
Early retirement 2018

Mr.BB
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Mr.BB » Tue May 26, 2020 4:55 pm

Taylor Larimore wrote:
Tue May 26, 2020 3:59 pm
jebmke wrote:
Tue May 26, 2020 3:35 pm
We haven't had significant cash reserves in decades. Retired in 2007. I think I unwound our EF in the mid-90s.
Bogleheads:

Like others, I haven't had significant cash reserves in decades. If an emergency arrives I know I can get money from my bank, credit card, portfolio, etc..

I think it is usually a mistake to hold a separate low-yielding "emergency fund" that may never be needed.

The current pandemic is a good test.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success."
I have to disagree with you in that point Taylor. I think it has to do with what stage of life you are at, more than anything else. If we were retired, collecting our SS checks and pension checks, and they covered most of our expenses, then I can see a reduced need for a separate EF. However, if a person is still in the accumulation stage ( along with a mortgage and/or other bills) and seeing how many people were laid off (same feeling from 2008), I think having at least 6 months of cash on hand for bills, etc and not have to worry about taking money from their 401 accts or start getting into credit card debt gives people a little piece of mind and reduced stress in their lives, even if it creates a little bit of a drag on their total return.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

jrbdmb
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by jrbdmb » Tue May 26, 2020 4:58 pm

JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic ...
I think it is premature to make any conclusions about the lessons from the Covid pandemic. This ain't over yet.

22twain
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by 22twain » Tue May 26, 2020 5:11 pm

Mr.BB wrote:
Tue May 26, 2020 4:55 pm
If we were retired, collecting our SS checks and pension checks, and they covered most of our expenses, then I can see a reduced need for a separate EF. However, if a person is still in the accumulation stage [...]
The OP specifically asked about retirees.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!

Mr.BB
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Mr.BB » Tue May 26, 2020 5:18 pm

22twain wrote:
Tue May 26, 2020 5:11 pm
Mr.BB wrote:
Tue May 26, 2020 4:55 pm
If we were retired, collecting our SS checks and pension checks, and they covered most of our expenses, then I can see a reduced need for a separate EF. However, if a person is still in the accumulation stage [...]
The OP specifically asked about retirees.
Sorry, I missed that. Thank you for the correction.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

Topic Author
JoelT1
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by JoelT1 » Tue May 26, 2020 5:23 pm

Taylor Larimore wrote:
Tue May 26, 2020 3:59 pm
jebmke wrote:
Tue May 26, 2020 3:35 pm
We haven't had significant cash reserves in decades. Retired in 2007. I think I unwound our EF in the mid-90s.
Bogleheads:

Like others, I haven't had significant cash reserves in decades. If an emergency arrives I know I can get money from my bank, credit card, portfolio, etc..

I think it is usually a mistake to hold a separate low-yielding "emergency fund" that may never be needed.

The current pandemic is a good test.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success."
Mr. Larimore, this article reaffirms my instinct to not hold a lot of cash, for me, although, I realize it’s a personal, often psychological, matter https://www.advisorperspectives.com/art ... wealth.pdf

Monster99
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Monster99 » Tue May 26, 2020 5:31 pm

jrbdmb wrote:
Tue May 26, 2020 4:58 pm
JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic ...
I think it is premature to make any conclusions about the lessons from the Covid pandemic. This ain't over yet.
+1
The pandemic is near the end of the begining - and is a long way from over....

Topic Author
JoelT1
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by JoelT1 » Tue May 26, 2020 5:36 pm

Monster99 wrote:
Tue May 26, 2020 5:31 pm
jrbdmb wrote:
Tue May 26, 2020 4:58 pm
JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic ...
I think it is premature to make any conclusions about the lessons from the Covid pandemic. This ain't over yet.
+1
The pandemic is near the end of the begining - and is a long way from over....
Not to get into a debate on the pandemic, however, just to keep the matter in proper perspective, the lockdown will prove to have been infinitely worse than the virus, in my view.

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Watty
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Watty » Tue May 26, 2020 5:48 pm

Monster99 wrote:
Tue May 26, 2020 5:31 pm
jrbdmb wrote:
Tue May 26, 2020 4:58 pm
JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic ...
I think it is premature to make any conclusions about the lessons from the Covid pandemic. This ain't over yet.
+1
The pandemic is near the end of the begining - and is a long way from over....
+1

That is likely the best case.

I can't find a current line but here is a graph, as of a few weeks ago, breaking out New York from the rest of the country and when you look at the rest of the country without New York it does not look good.

https://time.com/5832365/new-york-covid-cases-us/

For the rest of the US there may be a way to go to get to the end of the beginning.

With an international perspective it is hard to get a handle on(must less predict) just what is going on in South America, Africa, India, and Russia.

Topic Author
JoelT1
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by JoelT1 » Tue May 26, 2020 5:53 pm

22twain wrote:
Tue May 26, 2020 4:12 pm
JoelT1 wrote:
Tue May 26, 2020 3:25 pm
Wondering if others are in retirement without large cash reserves.
What is your definition of “large” or “sizable”?

Right now my cash allocation is about 3% which is larger than usual for me. Usually it’s about 1 +/- 0.5%. My spending rate is about 2% per year.

My stock allocation is about 50%, so my bonds and other fixed income are my real cushion.
Jonathan Clements recommends maintaining 5 years of expenses in cash—Even with fairly modest expenses of, say, $50,000/year, that a quarter of a million dollars sitting around in cash. Granted, he might be proven prudent, God forbid!

Monster99
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Monster99 » Tue May 26, 2020 5:59 pm

CD ladder of about 1 year expenses that roll over at 6 month intervals and the dividends and capital gains from taxable accounts to the sweep fund to be spent.

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Watty
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Watty » Tue May 26, 2020 6:06 pm

JoelT1 wrote:
Tue May 26, 2020 5:36 pm
Monster99 wrote:
Tue May 26, 2020 5:31 pm
jrbdmb wrote:
Tue May 26, 2020 4:58 pm
JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic ...
I think it is premature to make any conclusions about the lessons from the Covid pandemic. This ain't over yet.
+1
The pandemic is near the end of the begining - and is a long way from over....
Not to get into a debate on the pandemic, however, just to keep the matter in proper perspective, the lockdown will prove to have been infinitely worse than the virus, in my view.
It depends on what metric you are looking at. You don't hear much about it now but the big point of Social Distancing was to "flatten the curve" to slow it down so that hospitals did not overwhelmed. That could have increase the number of deaths when not only people with COVID could not get adequate medical care but people with things like heart attacks and car accidents could also not get adequate medical care. That seems to at least temporarily worked but there are still some states where ICU beds are in very short supply.

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ruralavalon
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by ruralavalon » Tue May 26, 2020 6:08 pm

JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic and resulting stock market crash, and with the market making a strong comeback, I’m taking stock of my personal situation of *not* having had a sizeable cash reserve about 11 years into retirement and selling shares in the “down market.” Overall, I think I’m OK. My retirement account (tax-deferred), comprised of the Wellington & Wellesley funds, had previously totaled about $950,000 pre-Covid and currently totals about $895,000. Granted, my expenses are fairly modest, about $3,000 in monthly IRA withdrawals (not taking SS yet), but, in hindsight I think my account benefited more from being fully invested during the previous bull market than being hurt by selling shares in a down market.

Wondering if others are in retirement without large cash reserves.
I retired January 2011, have no pension or annuity, we have no cash reserve, we ordinarily have a couple months expenses in our joint checking account, I have sold no funds other than Required Minimum Distributions (RMDs) automatically taken proportionally each month from all funds in my rollover IRA.

We are doing fine without any cash reserve.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

printer86
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by printer86 » Tue May 26, 2020 6:17 pm

JoelT1 wrote:
Tue May 26, 2020 5:36 pm
Monster99 wrote:
Tue May 26, 2020 5:31 pm
jrbdmb wrote:
Tue May 26, 2020 4:58 pm
JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic ...
I think it is premature to make any conclusions about the lessons from the Covid pandemic. This ain't over yet.
+1
The pandemic is near the end of the begining - and is a long way from over....
Not to get into a debate on the pandemic, however, just to keep the matter in proper perspective, the lockdown will prove to have been infinitely worse than the virus, in my view.
Yes, you did just get in a debate on the pandemic. :confused

Spirit Rider
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Spirit Rider » Tue May 26, 2020 6:23 pm

I find it rather humorous.

When someone who asks the question on here; "where should I invest money I will need in a year?" The near universal response will be to put it in a principal protected matched liquidity investment.

How is that any different when we are talking about money that is already invested, but needed short-term. The cognitive dissonance is dumbfounding.

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Toons
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Toons » Tue May 26, 2020 6:47 pm

Had 60k in cash in March
30k now.
Invested the last couple months
:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

rkhusky
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by rkhusky » Tue May 26, 2020 7:12 pm

I keep from 2-6 months of spending money in a MM account. Start with 6 months, spend down to 2 months, replenish and repeat.

almostretired1965
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by almostretired1965 » Tue May 26, 2020 7:23 pm

The main purpose of an emergency fund/cash reserve is to protect you against an unanticipated, large drop in current income. For most families this is typically associated with either a serious illness (particularly when coupled with inadequate insurance) and/or lost of employment. If you are retired and on medicare with decent gap coverage, neither comes into play. Sure, your interest and dividend income might take a hit, but is it going to be close to someone losing their job?

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2pedals
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by 2pedals » Tue May 26, 2020 7:36 pm

JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic and resulting stock market crash, and with the market making a strong comeback, I’m taking stock of my personal situation of *not* having had a sizeable cash reserve about 11 years into retirement and selling shares in the “down market.” Overall, I think I’m OK. My retirement account (tax-deferred), comprised of the Wellington & Wellesley funds, had previously totaled about $950,000 pre-Covid and currently totals about $895,000. Granted, my expenses are fairly modest, about $3,000 in monthly IRA withdrawals (not taking SS yet), but, in hindsight I think my account benefited more from being fully invested during the previous bull market than being hurt by selling shares in a down market.

Wondering if others are in retirement without large cash reserves.
Wellington & Wellesley are managed balanced funds. If you are withdrawing from them in a regular basis I don't see a need for a bucket of cash. Your asset allocation shouldn't change much if you withdraw from them equally. If the market has done well and you are expecting lumpy expenses, you could decide to limit volatility by harvesting from equity. Since you are using balanced funds you are effectively doing this automatically by keeping your asset allocation in check.

We have a steady stream of income from my pension and dividends. We also have some cash reserves to cover expected and unexpected lumpy expenses for the next 2 to 3 years. Retirees can have a lot of lumpy expenses. The COVID-19 craziness has decreased our expected lumpy travel expenses. So there is a less need to harvest money for lumpy expenses.

3504PIR
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by 3504PIR » Wed May 27, 2020 12:40 am

Spirit Rider wrote:
Tue May 26, 2020 6:23 pm
I find it rather humorous.

When someone who asks the question on here; "where should I invest money I will need in a year?" The near universal response will be to put it in a principal protected matched liquidity investment.

How is that any different when we are talking about money that is already invested, but needed short-term. The cognitive dissonance is dumbfounding.
Amen. Not holding more cash than usual currently is just dumbfounding. Good luck everyone though, honestly.

AlohaJoe
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by AlohaJoe » Wed May 27, 2020 4:19 am

I've been retired a few years and don't have a large cash reserve. I didn't really feel the need to make one in February/March either. I took a withdrawal from my portfolio in February and didn't lose any sleep over it.

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JoelT1
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by JoelT1 » Wed May 27, 2020 6:20 am

Watty wrote:
Tue May 26, 2020 6:06 pm
JoelT1 wrote:
Tue May 26, 2020 5:36 pm
Monster99 wrote:
Tue May 26, 2020 5:31 pm
jrbdmb wrote:
Tue May 26, 2020 4:58 pm
JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic ...
I think it is premature to make any conclusions about the lessons from the Covid pandemic. This ain't over yet.
+1
The pandemic is near the end of the begining - and is a long way from over....
Not to get into a debate on the pandemic, however, just to keep the matter in proper perspective, the lockdown will prove to have been infinitely worse than the virus, in my view.
It depends on what metric you are looking at. You don't hear much about it now but the big point of Social Distancing was to "flatten the curve" to slow it down so that hospitals did not overwhelmed. That could have increase the number of deaths when not only people with COVID could not get adequate medical care but people with things like heart attacks and car accidents could also not get adequate medical care. That seems to at least temporarily worked but there are still some states where ICU beds are in very short supply.
As this article points out, Sweden did not implement a lockdown, and while they have experienced Covid-related deaths, not as many as other countries and Swedes didn’t wreck their economy https://www.foreignaffairs.com/articles ... -be-worlds

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Lazareth » Wed May 27, 2020 7:08 am

No emergency fund. My 55/45 asset allocation affords me sufficient months and years of bond funds to draw from for cash needs when stocks tank. In hindsight I am thrilled with my summer 2019 decision, after turning 65, to draw down our taxable-savings and pay off the home mortgage. My Schwab three-fund portfolio is in good shape.

Perhaps we'll someday pretend this lock down idiocy didn't happen, just as we've done with the Y2K fear-scam our government ginned up in the '90's to induce billions in I.T. contracts at every federal, state, and municipal entity in the country.
a/66, retired, married, enjoy p/t employment.

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Ron » Wed May 27, 2020 7:30 am

Back in early 2007 when I retired, my wife/me had 3-4 years in cash in our retirement portfolios (held in MM funds) to cover our forecast expenses. We were both age 59 at that time without any income other than that derived from our respective retirement portfolios.

The cash served us well during the downturn that happened later into late 2007 and into 2008-09.

Today, with all our income sources "on-line" at age 72, we hold very little excess cash - currently around $10k total in our joint retirement portfolios (beyond any cash held within our respective funds, which we don't have access to unless we sell). Additionally, those accumulated cash positions are eliminated each year via withdrawals to satisfy our respective annual RMD's, reducing it to 0% sometime during the year.

It all depends where you are in your retirement journey and under what circumstances you retire only. Those that retire at a "normal" retirement age (whatever that may be) may have enough income sources that cash is little needed from the get-go. It's much different than those that retire before any retirement income sources are available and more akin to those that are still in the accumulation phase.

FWIW,

- Ron

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Sandtrap
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Sandtrap » Wed May 27, 2020 7:35 am

We had set aside some fairly large cash reserves on top of our already ample reserves to fund various home improvement and building additions to the property already scheduled for completion this year.

Beside that, there were more "lumpy expenses" for supplies related to the Covid-19 business and personal impacts on stores to absorb as well. Otherwise, spending was about the same.

We did not have larger cash reserves than had the Covid-19 not happened.

Cash Reserves and/or EF size depends on each persons; income, cash flow, monthly debt, portfolio size, portfolio yield, and stage in the life and investing cycle. Even between senior retirees, there can be huge differences in these variables.

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ByThePond
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by ByThePond » Wed May 27, 2020 7:41 am

OP, we do keep about a year's total expenses in various banking accounts. With liability matching, it's more like 3 years' expenses. The reason is that it keeps DW calm and happy to see the "money in the bank" . That's reason enough, and it has insignificant impact on our financial picture. Our invested portfolio remains untouched by the crisis, and I suspect that might be true for many securely retired Bogleheads. Income streams and scheduled withdrawals likely continued as usual.

Regarding your thought on whether or not being fully invested for the last year protected one's portfolio from the crisis' effects, I find that my portfolio balance is already slightly better than what was predicted for 12/31/20, when I ran RPM in mid-2019. It seems that the big run up in the second half of 2019 allowed a 80/20 portfolio to keep on track with a mid-2019 prediction. Of course, we're not yet back up to the highs of January.

If I was happy with the mid-2019 numbers, then I'm even happier with today's numbers.

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It costs me $25 per month to keep $25K in savings...

Post by hudson » Wed May 27, 2020 7:52 am

Taylor Larimore wrote:
Tue May 26, 2020 3:59 pm
Like others, I haven't had significant cash reserves in decades. If an emergency arrives I know I can get money from my bank, credit card, portfolio, etc..
I think it is usually a mistake to hold a separate low-yielding "emergency fund" that may never be needed.
I agree with Taylor that holding...let's say $25K in quick cash is not an optimal practice. It's expensive...$25 a month
I had to do the math to see what it costs me.
$25K in the intermed. muni VWIUX pays out $564 per year after taxes
$25K in AMEX Bank savings pays out $234 per year after taxes.

Therefore it costs me $300 per year using high yield savings over VWIUX.

My math....
VWIUX 25K at 2.4% = $600....less 6% in state taxes = $564 after tax
AMEX 25K at 1.3% = $325.....less 22% federal...less 6% state =$234 after taxes

Maybe losing $300 per year will keep me from going over the Medicare IRMAA cliff? :)

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by scrabbler1 » Wed May 27, 2020 8:05 am

Because I have a rather steady income from the monthly dividend of a big bond fund, I don't need to keep any unusually large cash reserve. My first-tier emergency fund usually contains between $800 and $2,000, but I have let it grow the last few months for various reasons. I have been watching the daily mil rate for the bond fund in case it takes a significant tumble (it hasn't). In a few weeks, I will re-evaluate my cash inflows and expenses for the rest of the year and resume reinvesting any cash surplus beyond what I have been keeping in my first-tier EF.

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by jbuzolich » Wed May 27, 2020 8:16 am

jrbdmb wrote:
Tue May 26, 2020 4:58 pm
JoelT1 wrote:
Tue May 26, 2020 3:25 pm
As the dust begins to settle on the Covid pandemic ...
I think it is premature to make any conclusions about the lessons from the Covid pandemic. This ain't over yet.
Exactly what I was starting to write. I think we're early still in the impact from all this. The large layoffs are still being announced weekly. I think we're likely to see multiple financial quarters ahead of losses or low earnings from many companies. The financial impacts also won't flow through to hit government jobs for at least a few months. Wife and I are both state and local government employees. Work has shifted to lots of discussion of pay cuts, unpaid furloughs, eliminating vacant position, and other reductions. Anticipating the next 18 months to be rough.

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by treypar » Wed May 27, 2020 8:16 am

As a retired investor, I do not keep much in a money market fund. I do like CDs and have 10 years of expenses in laddered CDs at 3%. Not sure what course I will take as the ladder matures at these very low rates.

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by Michread » Wed May 27, 2020 8:51 am

The question should be answered with whether retirees who keep cash reserves have income from sources like SS, annuities and pensions. Guaranteed income stream every month makes a difference which is not dependent on fluctuations of the market.

Some of us are retired and totally dependent on income from a fluctuating market.
Early retirement 2018

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ruralavalon
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Re: Any retirees get through Covid crisis without large cash reserve?

Post by ruralavalon » Wed May 27, 2020 10:58 am

3504PIR wrote:
Wed May 27, 2020 12:40 am
Spirit Rider wrote:
Tue May 26, 2020 6:23 pm
I find it rather humorous.

When someone who asks the question on here; "where should I invest money I will need in a year?" The near universal response will be to put it in a principal protected matched liquidity investment.

How is that any different when we are talking about money that is already invested, but needed short-term. The cognitive dissonance is dumbfounding.
Amen. Not holding more cash than usual currently is just dumbfounding. Good luck everyone though, honestly.
The most common reason for keeping a large cash buffer is to protect against a prolonged loss of employment income.

A retiree without any employment income does not need to protect against loss of employment income. We have no debt. We have no pension or annuity. Our need for cash is to pay monthly expenses as they are incurred over the next 20 years, so the need is not a current need.

We commonly have enough money to cover a couple of months worth of expenses in our joint checking account. We have fairly high limit credit cards, paid off every month. We are doing just fine with no cash reserve.

I other retirees like a large cash reserve in order to to feel comfortable and sleep well at night, that does not cause me any cognitive dissonance or confound me.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by bertilak » Wed May 27, 2020 1:31 pm

There is nothing about the current (COVID) situation that has required me to have more cash-on-hand than before.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by UpperNwGuy » Wed May 27, 2020 1:57 pm

I am retired and keep very little cash in reserve — just enough to pay for the next vacation (which was recently cancelled) and the next car (which needs to be bought soon). My retirement income stream has been steady, and my living expenses have decreased since the arrival of the virus, so I don't understand why a retiree would need a large cash reserve unless they had an all-equity portfolio with no bonds to stabilize.

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Re: Any retirees get through Covid crisis without large cash reserve?

Post by abuss368 » Wed May 27, 2020 2:33 pm

jebmke wrote:
Tue May 26, 2020 3:35 pm
We haven't had significant cash reserves in decades. Retired in 2007. I think I unwound our EF in the mid-90s.
Agree. We do not have an additional account for an emergency fund. We simplified over the years to one checking and one money market account. Just plain old cash.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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