Cash flow in retirement

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leftcoaster
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Cash flow in retirement

Post by leftcoaster »

For someone about to be new to retirement… how much cash should one keep on hand for expenses? A year? More? Less?

Do folks here sell assets frequently (monthly) or top up a cash account less often (annually)?

My priorities are simplicity and peace of mind.
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RickBoglehead
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Re: Cash flow in retirement

Post by RickBoglehead »

Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
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chipperd
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Re: Cash flow in retirement

Post by chipperd »

Our priority is also peace of mind and simplicity, along with liquidity. Once we became FI, we moved to keeping 5 years expenses in cash, about 20% of total holdings. We won the game and didn't want to risk losing so much and needing to find full time work.
That, of course, presents the idea that in this environment, your cash will probably loose value relative to inflation, so you will need to weigh that out and determine if you can sleep knowing that fact.
We are fortunate in that we have access to a stable value fund in a 457 account, currently just south of 3%. If we didn't have access to that, we would probably drop that to keeping maybe 2 years expenses in cash.
If inflation keeps doing what it has been over the very recent time period, we may be moving some of that cash to I bonds.
What brings one peace of mind may not for others. YMMV.
As I mentioned, wife and I are FI and working part time, so our goal is to reduce sequence of withdraw risk and ride out an extended dip or drop by keeping a higher number of years worth of expenses in cash than when we were both working full time.
When working full time, we had about 6 months expenses in cash. So again, YMMV.
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Dude2
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Re: Cash flow in retirement

Post by Dude2 »

The answer is wide-open as presented. What are your avenues of income that could be considered as cash flow? The greater those are, then clearly the smaller cash pot buffer you'd need to have -- even in the most extreme case: zero cash pot. Most retirees I know are highly risk averse. Their comfort level is greatly enhanced by sitting on a lot of cash -- a very unreasonable amount. (They need to consider FDIC limits.) Also, it is very easy to set up Pay On Death in your bank account to facilitate heirs getting your money, or setting up joint accounts with relatives who can help you to spend your money as needed -- far simpler with a cash account. As you ramp up in age, it's natural to ramp up in cash accounts.

A very clever-minded person who is financially adroit could figure out how to set up a bond or CD ladder so that they could protect themselves from whatever negatives there could be to holding beaucoup cash (from a fixed income perspective: inflation, interest rate risk). They could also figure out how to place that into tax-advantaged accounts to prevent interest income contributing to their AGI (not too much of a factor currently with rates so low).

On the other hand, many people would feel that every dollar in cash is not a dollar in stock and a terrible sin. Perhaps that is the OP's concern. The answer probably has to be tailored to whether the individual has enough to avoid taking risk or not.
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dcabler
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Re: Cash flow in retirement

Post by dcabler »

Nearing retirement now. I don't keep an explicit Emergency Fund anymore, though I do keep enough cash in my checking account to buffer the month-to-month expenditures. Once retired, I'll make my withdrawals once, maybe 2X per year.

Why no Emergency Fund anymore?
- I'm no longer worried about the effects of unemployment. If it happens before my planned retirement date, it doesn't really matter now, as we're already good to go. So that's no longer part of my reasoning.
- Small emergencies can be handled directly from the buffer in my Checking Account if it's an absolute necessity that cash is needed
- I have several credit cards with very high limits which should allow me to handle just about any emergency that comes along, giving plenty of time to liquidate something if needed and pay off the current month's credit card balance.
- If the emergency is so big that the only way to pay for it and I need to sell something, then so be it. Most everything can wait a day or two for the money to show up in my checking account.

Long thread regarding the need (or not) of an EF here: viewtopic.php?f=10&t=339966
There have been others over the years as well.

cheers.
jebmke
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Re: Cash flow in retirement

Post by jebmke »

I eliminated cash from our holdings decades before we retired. I only have cash on hand to pay the bills for the next mont. if I need more, I withdraw from our investments.
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vineviz
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Re: Cash flow in retirement

Post by vineviz »

leftcoaster wrote: Mon May 17, 2021 4:35 am For someone about to be new to retirement… how much cash should one keep on hand for expenses? A year? More? Less?

Do folks here sell assets frequently (monthly) or top up a cash account less often (annually)?

My priorities are simplicity and peace of mind.
The only “right” answer go how much cash to keep on hand is “as little as possible”.

What’s possible for you, though, will depend entirely on what you mean by simplicity and peace of mind. How frequently would you feel comfortable logging in to your account and selling some shares of your funds?

Most people are used to budgeting monthly, so setting up your accounts to automatically transfer money from your brokerage account to your checking account every month typically works well.

Using some of the money you’ve allocated to bonds to purchase an income annuity also ticks the “simplicity “ and “peace of mind” boxes.
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Colorado Guy
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Re: Cash flow in retirement

Post by Colorado Guy »

leftcoaster wrote: Mon May 17, 2021 4:35 am For someone about to be new to retirement… how much cash should one keep on hand for expenses? A year? More? Less?

Do folks here sell assets frequently (monthly) or top up a cash account less often (annually)?

My priorities are simplicity and peace of mind.
Lots of different options, do the one for you that provides the least amount of stress. I chose an initial cash heavy approach, as I was uncertain how much money I would need in retirement. Plus, I wasn't mentally ready for performing monthly withdrawals, as I was dealing with all of the life changes that came with retirement.

I ended up transferring a decent sum of cash to my credit union, in a money market account (current low interest rate, but better than Vanguard money market). This was to be used for a couple of anticipated major projects and to get a handle on what I actually needed on a monthly basis. In practice, this amount of cash has proved to be a bit much, but I have left it there. One of the major projects is underway, the second one is probably delayed until fall. One thing I didn't realize is that I could write checks against my money market account, making it convenient for large purchases.

While I still have quite a bit of the original cash left, my plans are to transition to a quarterly withdrawal at some point. There is some comfort in
being able to make an immediate withdrawal when necessary. I am not saying this was the absolute smartest way to do it, but it worked for me.
livesoft
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Re: Cash flow in retirement

Post by livesoft »

jebmke wrote: Mon May 17, 2021 6:06 am I eliminated cash from our holdings decades before we retired. I only have cash on hand to pay the bills for the next mont. if I need more, I withdraw from our investments.
This is the way.

If we need money for an upcoming major expense like a car, then we just sell some shares a few days beforehand. If we need money for an unexpected expense, then it is going on the credit card like all our other expenses.

In other words cash doesn't flow anywhere near us.
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Padlin
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Re: Cash flow in retirement

Post by Padlin »

If "cash" to you means sitting in the local or ebank, not including Ibonds or a money market, then here's what works for me.

I have monthly withdrawals from the 401k sent to the checking which covers all my spending.
It takes a week or so to get $ if I were to do a manual withdrawal from my 401k, and a few weeks from the Roths, at least it did the last time I tried such, so I wouldn't need to keep any cash on reserve. That said I have about 50k in savings although it's just what has piled up over the last 8 years of retirement. For me, with spending of about 70k a year, 10k or so would be fine sitting in cash for simplicity's sake. It's nice to have to pay off larger bills that come in.
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scrabbler1
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Re: Cash flow in retirement

Post by scrabbler1 »

To me it would depend on the type of income you have. I have a monthly dividend coming from a big bond fund I own, and that generally covers my monthly expenses. A few of my expenses are lumpier ones, such as car insurance, so I have to make sure I carry over enough of the previous month's surplus into the car insurance month.

I also keep a small cushion (~$700) in my local bank's checking account to cover any smaller, unforeseen expenses. It is pretty common to dip into that cushion until I can replenish it the following month. That's my Tier 1 "emergency fund," while a national muni bond fund with about $40k in it is a second-tier EF for larger (and much rarer) unforeseen expenses. That fund earns about 2%-2.5% annually so it builds up itself.
fortunefavored
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Re: Cash flow in retirement

Post by fortunefavored »

livesoft wrote: Mon May 17, 2021 6:26 am
jebmke wrote: Mon May 17, 2021 6:06 am I eliminated cash from our holdings decades before we retired. I only have cash on hand to pay the bills for the next mont. if I need more, I withdraw from our investments.
This is the way.

If we need money for an upcoming major expense like a car, then we just sell some shares a few days beforehand. If we need money for an unexpected expense, then it is going on the credit card like all our other expenses.

In other words cash doesn't flow anywhere near us.
Since fixed instrument interest rates are garbage on everything, I've gone the reverse.. I don't even really pay attention to what is in money market, cash or bonds. It's all losing money. The net result is it's all available to spend as long as I'm sticking with my 70/30 AA.
jebmke
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Re: Cash flow in retirement

Post by jebmke »

livesoft wrote: Mon May 17, 2021 6:26 am
jebmke wrote: Mon May 17, 2021 6:06 am I eliminated cash from our holdings decades before we retired. I only have cash on hand to pay the bills for the next mont. if I need more, I withdraw from our investments.
This is the way.

If we need money for an upcoming major expense like a car, then we just sell some shares a few days beforehand. If we need money for an unexpected expense, then it is going on the credit card like all our other expenses.

In other words cash doesn't flow anywhere near us.
Just to put this into perspective. My credit card closes on or about the 25th of the month. So, if an unexpected expense hit me randomly during a credit card cycle, the average date it hit would be ~ the 10th of the month. The card closes on the 25th, the CC bill isn't typically due until around the 20th of the next month. So, on average, I have ~40 days to convert assets to cash to cover that unexpected item assuming I want to pay my bill on time (which I do). I have found that by sequencing all direct debits around the same time of the month, I can very accurately forecast my cash needs for the next ~6 weeks without doing much work.
When you discover that you are riding a dead horse, the best strategy is to dismount.
KlangFool
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Re: Cash flow in retirement

Post by KlangFool »

OP,

1) Do you care about tax management or you won't mind paying a lot of taxes?

2) Do you need to use the ACA insurance and qualifying for the ACA subsidy? It is worth up to 10K to 20K per year.

I keep 3 years of expense in CASH for the reasons listed in (1) and (2).

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dbr
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Re: Cash flow in retirement

Post by dbr »

Since cash is a low returning and low risk asset one answer is how much makes sense in the asset allocation. For most retirees cash returns too little to be a good asset to hold. So from the portfolio perspective, none.

Cash flow is a question of liquidity and convenience. Investment assets are generally highly liquid. Most investors could liquidate and have in cash just about their entire wealth within a few days, barring little bits in certain kinds of investments. Most people also have a month or so of cash liquidity in credit cards that is a buffer against expenses. It is also the case that inevitably cash from or to various transactions ends up sloshing around in checking accounts or settlement funds or wherever. We usually have about 1% of portfolio value here, there, or somewhere. Of course, if one were to count accrued balances on credit cards not yet monthly due and paid, the cash balance could even be negative.

After that it really is a question of how steady your spending outflows are and how you want to most conveniently arrange for cash inflow. It is common for people to have cash deposits from Social Security or sometimes from pensions and annuities. In that case cash flow has a good monthly rhythm. Sometimes it is convenient to set up monthly disbursements from brokerage accounts, especially taxable ones. In any case distributions from taxable holdings can just go to cash as they occur.

If cash outflows are lumpy or one anticipates a large expenditure then one might hold more in a checking account of some kind than otherwise.

I would say that once you are there the issue is resolved by obvious common sense and experience.
scrabbler1
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Re: Cash flow in retirement

Post by scrabbler1 »

jebmke wrote: Mon May 17, 2021 8:02 am
livesoft wrote: Mon May 17, 2021 6:26 am
jebmke wrote: Mon May 17, 2021 6:06 am I eliminated cash from our holdings decades before we retired. I only have cash on hand to pay the bills for the next mont. if I need more, I withdraw from our investments.
This is the way.

If we need money for an upcoming major expense like a car, then we just sell some shares a few days beforehand. If we need money for an unexpected expense, then it is going on the credit card like all our other expenses.

In other words cash doesn't flow anywhere near us.
Just to put this into perspective. My credit card closes on or about the 25th of the month. So, if an unexpected expense hit me randomly during a credit card cycle, the average date it hit would be ~ the 10th of the month. The card closes on the 25th, the CC bill isn't typically due until around the 20th of the next month. So, on average, I have ~40 days to convert assets to cash to cover that unexpected item assuming I want to pay my bill on time (which I do). I have found that by sequencing all direct debits around the same time of the month, I can very accurately forecast my cash needs for the next ~6 weeks without doing much work.
I began doing this for my car insurance payments a few years ago. That lumpy expense, although not unforeseen, happened to coincide with some other lumpy expenses. That made budgeting my cash flow a little awkward. However, when I was able to switch the car insurance to a credit card, I was able to delay the actual cash outlay by about 2 months simply by timing the CI payment on the CC and the actual CC payment ideally, in the manner like you described. This greatly smoothed out the lumpier expenses into separate months.
delamer
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Re: Cash flow in retirement

Post by delamer »

As with many financial issues, this has a big psychological component.

Is the thought of having to sell equities or bonds whose value has dropped (like in the Great Recession) to pay your bills is upsetting? If so, then put several years of expenses into cash, TIPS, short-term bonds.

Also, do you have a taxable account that throws off interest and dividends? Because those can be used to replenish your cash as they get paud out.
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seajay
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Re: Cash flow in retirement

Post by seajay »

jebmke wrote: Mon May 17, 2021 6:06 am I eliminated cash from our holdings decades before we retired. I only have cash on hand to pay the bills for the next month. if I need more, I withdraw from our investments.
+1

Current/spending account, when that's running low I access my brokerage account and sell 'enough' to top the current account up with the sale proceeds a few days later.

Nor do I rebalance the portfolio anymore, I just direct towards desired target weightings by selling whatever is the 'over weighted' at the time.

My brokerage charges a $15/month fee and as part of that you get a 'free' trade each month, so regular (monthly) 'withdrawals' are in effect free.

Emergency funding is the same. Not that I've endured any such situations. T+3 could mean having to use a credit card to cover a immediate emergency.
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Garco
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Re: Cash flow in retirement

Post by Garco »

I've been retired since 2014. My cash comes mainly from (a) the RMD in my 403b plan and (b) Social Security. If a cash emergency arose I also have a $70K line of credit at my credit union. I've never had to draw on it.

In addition to my 403b plan I have a brokerage account that holds about 5X my annual budget in equities if I needed it. That brokerage account (plus an IRA) adds about 25% to my invested estate -- beyond the 403b.

So I'm secure, and never short of cash or access to it. I would emphasize that "security" isn't just in cash flow. It's also potentially in hard assets, such as property. And for sure security depends on having excellent medical and health services and plans.
Last edited by Garco on Mon May 17, 2021 10:04 am, edited 1 time in total.
dbr
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Re: Cash flow in retirement

Post by dbr »

seajay wrote: Mon May 17, 2021 9:33 am
Nor do I rebalance the portfolio anymore, I just direct towards desired target weightings by selling whatever is the 'over weighted' at the time.
Exactly so. With a balanced portfolio there is no "withdrawing from stocks when stocks are down" or something like that. If the whole portfolio including all stocks, bonds, and cash is down, then there is no helping that. It is built into the plan.

In the event one is withdrawing from taxable accounts and those are all stocks and one would want to withdraw from bonds, then one just counterbalances the transaction in some tax deferred account by selling bonds and buying stock there.
EnjoyIt
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Re: Cash flow in retirement

Post by EnjoyIt »

RickBoglehead wrote: Mon May 17, 2021 5:04 am Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
jebmke wrote: Mon May 17, 2021 6:06 am I eliminated cash from our holdings decades before we retired. I only have cash on hand to pay the bills for the next mont. if I need more, I withdraw from our investments.
This is a perfect example that one should do what makes them comfortable. If one was to ask me for advice, I would say keep just enough cash so that you don’t worry. Anything more than that is a waste.

For us, we hold about 2 months of expenses. Whenever the account gets below 1 month, we replenish.
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Re: Cash flow in retirement

Post by jebmke »

^^ exactly. I understand some people's desire to hold cash in amounts that look reasonable but would be more than I'd hold. Everyone has different circumstances that affect this decision.

This is true with asset allocation. Mine has been significantly more conservative than most would call for given the facts but I had valid personal reasons for doing this and don't regret any of my prior decisions in that regard.
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Re: Cash flow in retirement

Post by NiceUnparticularMan »

chipperd wrote: Mon May 17, 2021 5:04 amWe are fortunate in that we have access to a stable value fund in a 457 account, currently just south of 3%. If we didn't have access to that, we would probably drop that to keeping maybe 2 years expenses in cash.
Yeah, I think the answer to this question logically depends on what sorts of "cash" (if you want to call them that) instruments you have available.

With things like a stable value fund, TSP G fund, some cash-balance pensions, and so forth, there can be less of a return penalty to holding "cash".

I think it also depends a bit on how you plan to handle bad luck in terms of the liquidation value of your risky assets early in withdrawal. Like, if you have planned for a 4% SWR, and put 20% in "cash", and then you immediately get hit with a bad market event such that this becomes like 40% of your portfolio--do you plan to spend down the 20% in "cash" over the next five years and leave the other 60% (used to be 80%) alone? Or immediately use half to buy more risky assets so as to get back down to 20%, which would mean only having 2.5 years left? Or actually keep it at 5 years, meaning you would have to gradually sell risky assets to keep it stocked up? These different plans have different implications.
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Re: Cash flow in retirement

Post by chipperd »

NiceUnparticularMan wrote: Mon May 17, 2021 10:36 am
chipperd wrote: Mon May 17, 2021 5:04 amWe are fortunate in that we have access to a stable value fund in a 457 account, currently just south of 3%. If we didn't have access to that, we would probably drop that to keeping maybe 2 years expenses in cash.
Yeah, I think the answer to this question logically depends on what sorts of "cash" (if you want to call them that) instruments you have available.

With things like a stable value fund, TSP G fund, some cash-balance pensions, and so forth, there can be less of a return penalty to holding "cash".

I think it also depends a bit on how you plan to handle bad luck in terms of the liquidation value of your risky assets early in withdrawal. Like, if you have planned for a 4% SWR, and put 20% in "cash", and then you immediately get hit with a bad market event such that this becomes like 40% of your portfolio--do you plan to spend down the 20% in "cash" over the next five years and leave the other 60% (used to be 80%) alone? Or immediately use half to buy more risky assets so as to get back down to 20%, which would mean only having 2.5 years left? Or actually keep it at 5 years, meaning you would have to gradually sell risky assets to keep it stocked up? These different plans have different implications.
I used some of our cash to increase stock fund allocation last spring, so I do time the market a wee bit. I don't have a problem going down to about 4 years spending cash reserve to take advantage of a down market over a brief period of time. As we get closer to social security age (we will be taking early for numerous reasons) that reserve number will dwindle down to probably about 6 months once social security kicks in. At our ages with a long FI/retirement, ( we like knowing we have FU money and have the green light to leave our p.t. jobs at a moments notice), I like having that sequence of return risk whittled down. :sharebeer
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Re: Cash flow in retirement

Post by GeraniumLover »

livesoft wrote: Mon May 17, 2021 6:26 am
jebmke wrote: Mon May 17, 2021 6:06 am I eliminated cash from our holdings decades before we retired. I only have cash on hand to pay the bills for the next mont. if I need more, I withdraw from our investments.
This is the way.

If we need money for an upcoming major expense like a car, then we just sell some shares a few days beforehand. If we need money for an unexpected expense, then it is going on the credit card like all our other expenses.

In other words cash doesn't flow anywhere near us.
I am just getting started in this game, having retired last week. What is your method for accomplishing this while also (a) preserving your AA, (b) minimizing taxes, particularly STCG, and (c) keeping your taxable income away from various cliffs, particularly near the end of the year?
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Re: Cash flow in retirement

Post by NiceUnparticularMan »

chipperd wrote: Mon May 17, 2021 10:44 am
NiceUnparticularMan wrote: Mon May 17, 2021 10:36 am
chipperd wrote: Mon May 17, 2021 5:04 amWe are fortunate in that we have access to a stable value fund in a 457 account, currently just south of 3%. If we didn't have access to that, we would probably drop that to keeping maybe 2 years expenses in cash.
Yeah, I think the answer to this question logically depends on what sorts of "cash" (if you want to call them that) instruments you have available.

With things like a stable value fund, TSP G fund, some cash-balance pensions, and so forth, there can be less of a return penalty to holding "cash".

I think it also depends a bit on how you plan to handle bad luck in terms of the liquidation value of your risky assets early in withdrawal. Like, if you have planned for a 4% SWR, and put 20% in "cash", and then you immediately get hit with a bad market event such that this becomes like 40% of your portfolio--do you plan to spend down the 20% in "cash" over the next five years and leave the other 60% (used to be 80%) alone? Or immediately use half to buy more risky assets so as to get back down to 20%, which would mean only having 2.5 years left? Or actually keep it at 5 years, meaning you would have to gradually sell risky assets to keep it stocked up? These different plans have different implications.
I used some of our cash to increase stock fund allocation last spring, so I do time the market a wee bit. I don't have a problem going down to about 4 years spending cash reserve to take advantage of a down market over a brief period of time. As we get closer to social security age (we will be taking early for numerous reasons) that reserve number will dwindle down to probably about 6 months once social security kicks in. At our ages with a long FI/retirement, ( we like knowing we have FU money and have the green light to leave our p.t. jobs at a moments notice), I like having that sequence of return risk whittled down. :sharebeer
Yeah, I remain philosophically opposed to market timing per se, but I think there are principled ways you can plan this out.

As in, in my hypothetical, you could plan to blend approaches--between keeping it at 5 years, and reallocating it down to 2.5 years, you could plan to split the difference at 3.75 years. But you could also institute a floor, which is one interpretation of what you suggested.

I would just want to make sure I have this more or less mapped out in advance, within ranges at least, so as not to do anything dramatically off plan in the pressure of a difficult period.
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leftcoaster
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Re: Cash flow in retirement

Post by leftcoaster »

Lots of wisdom here. To attempt a summary of sorts…

If not yet sure of true expenditures, keep a larger cash buffer.

Use a cash bucket of a certain duration and replenish with some combination of periodic sales, tax loss harvesting sales, RMDs, interest/dividends.

Keep a pretty short cash bucket (1-2 months) and adjust billing cycles so that one can get near 2 months from charge to end of CC grace period. Schedule sales in alignment, with allowances for lumpy expenses.

Ladder safe instruments like CDs, I bonds, TIPs such that rungs mature to match liabilities.

Annuitize part of portfolio.

One might adjust approaches according to rebalancing needs (big market moves) and interest/inflation rates with low yield on cash arguing for a shorter bucket.

Use a higher yield stable value fund to get the stability of cash without sacrificing quite as much yield and reducing the pain of taxable asset sales during a dip. (Total portfolio return mindset)

Pay attention to tax implications of sales and wash rules.
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Re: Cash flow in retirement

Post by sixtyforty »

leftcoaster wrote: Mon May 17, 2021 10:55 am Lots of wisdom here. To attempt a summary of sorts…

If not yet sure of true expenditures, keep a larger cash buffer.

Use a cash bucket of a certain duration and replenish with some combination of periodic sales, tax loss harvesting sales, RMDs, interest/dividends.

Keep a pretty short cash bucket (1-2 months) and adjust billing cycles so that one can get near 2 months from charge to end of CC grace period. Schedule sales in alignment, with allowances for lumpy expenses.

Ladder safe instruments like CDs, I bonds, TIPs such that rungs mature to match liabilities.

Annuitize part of portfolio.

One might adjust approaches according to rebalancing needs (big market moves) and interest/inflation rates with low yield on cash arguing for a shorter bucket.

Use a higher yield stable value fund to get the stability of cash without sacrificing quite as much yield and reducing the pain of taxable asset sales during a dip. (Total portfolio return mindset)

Pay attention to tax implications of sales and wash rules.
The other thing I would add to all this is stay flexible, because what you start out at retirement you most likely may change over time. We started out having a cash buffer and now have very little cash, withdrawing mainly from investments.
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Re: Cash flow in retirement

Post by Broken Man 1999 »

The only cash we need is to pay bills.

Near to the end of each month, I know how much cash is needed to pay about half my allotted expenses for the next month. So I distribute money from my TIRA to my credit union. Almost always my distribution is from my Short-term Treasury Index mutual fund. That particular fund has a pretty stable NAV, and if I squint hard enough it is close enough to cash for my purposes.

The cash distribution from my TIRA is used up quickly to pay bills that are due earlier in the month. My SS deposit finishes up the bills coming due later in the month, and I start the process all over again.

DW also has allotted expenses to pay. However, I have automated her distributions from her TIRA as there isn't much variance month to month, unlike my allotted lumpy expenses. Her distributions are taken from her TIRA, using Short-term Treasury Index mutual fund, and her SS deposit finishes up her bills.

The life of cash in my accounts is at most three weeks, sometimes less. For all I know DW might be holding thousands of dollars in her credit union account. Not my money, not my business to worry about.

Never really been a fan of cash, and even less a fan in retirement.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
TN_Boy
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Re: Cash flow in retirement

Post by TN_Boy »

RickBoglehead wrote: Mon May 17, 2021 5:04 am Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
I think a lot of retirees feel a separate earmarked emergency fund is unnecessary if they have an investment portfolio of any size. Ie., they call the emergency fund "my bond allocation ..."

Obviously you do need to have resources that are easily available and liquid. As an example, a person living off SS and rental income from properties with no significant stock/bond investments would need to have some cash on hand.
dbr
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Re: Cash flow in retirement

Post by dbr »

TN_Boy wrote: Mon May 17, 2021 12:16 pm
RickBoglehead wrote: Mon May 17, 2021 5:04 am Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
I think a lot of retirees feel a separate earmarked emergency fund is unnecessary if they have an investment portfolio of any size. Ie., they call the emergency fund "my bond allocation ..."

Obviously you do need to have resources that are easily available and liquid. As an example, a person living off SS and rental income from properties with no significant stock/bond investments would need to have some cash on hand.
Right. Although for me my emergency fund is my portfolio. Whether an emergency would provoke selling of stocks, of bonds, or of some of each would depend.

Also, I would advocate not thinking the E fund is not part of one's assets. If one keeps six months in cash then one has that as a cash allocation, or for me just part of fixed income. Whether or not that would be the item spent in an emergency could be, but there is no reason it has to be.

If the investor is also generally keeping the portfolio rebalanced while taking some withdrawal or another I am not even sure the question of what one withdrew from is sensible. Sometimes people get confused that selling from a balanced fund might mean selling stocks when stocks are down, but they forget the fund would be selling bonds and buying stocks all along even while they are withdrawing.
NiceUnparticularMan
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Re: Cash flow in retirement

Post by NiceUnparticularMan »

sixtyforty wrote: Mon May 17, 2021 11:04 am
leftcoaster wrote: Mon May 17, 2021 10:55 am Lots of wisdom here. To attempt a summary of sorts…

If not yet sure of true expenditures, keep a larger cash buffer.

Use a cash bucket of a certain duration and replenish with some combination of periodic sales, tax loss harvesting sales, RMDs, interest/dividends.

Keep a pretty short cash bucket (1-2 months) and adjust billing cycles so that one can get near 2 months from charge to end of CC grace period. Schedule sales in alignment, with allowances for lumpy expenses.

Ladder safe instruments like CDs, I bonds, TIPs such that rungs mature to match liabilities.

Annuitize part of portfolio.

One might adjust approaches according to rebalancing needs (big market moves) and interest/inflation rates with low yield on cash arguing for a shorter bucket.

Use a higher yield stable value fund to get the stability of cash without sacrificing quite as much yield and reducing the pain of taxable asset sales during a dip. (Total portfolio return mindset)

Pay attention to tax implications of sales and wash rules.
The other thing I would add to all this is stay flexible, because what you start out at retirement you most likely may change over time. We started out having a cash buffer and now have very little cash, withdrawing mainly from investments.
And just to elaborate on one common scenario:

You start out with a SWR calculated to survive a poor initial sequence of returns. You do not experience a poor initial sequence of returns. Your SWR is now much smaller relative to portfolio size than it used to be.

At this point, you can do many things. But if you feel like it, you can stick to your withdrawal rate. And now, you are much less exposed to a run of poor returns, and you might well decide to back off measures designed to deal with such a scenario.
balbrec2
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Re: Cash flow in retirement

Post by balbrec2 »

RickBoglehead wrote: Mon May 17, 2021 5:04 am Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
Why does someone in retirement need 6 months emergency funds? Seems high to me.
Your not preparing for a possible job loss. You should be ready for things like car repairs,
fixing a roof or replacing major appliances. 3 months ought to do it, IMO. Some might even think that is high for a retiree.
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Re: Cash flow in retirement

Post by Broken Man 1999 »

balbrec2 wrote: Mon May 17, 2021 3:28 pm
RickBoglehead wrote: Mon May 17, 2021 5:04 am Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
Why does someone in retirement need 6 months emergency funds? Seems high to me.
Your not preparing for a possible job loss. You should be ready for things like car repairs,
fixing a roof or replacing major appliances. 3 months ought to do it, IMO. Some might even think that is high for a retiree.
In truth many things some consider as emergencies aren’t really emergencies, such as a roof needing replacement without a natural disaster, or a normal purchase of a newer car.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
goblue100
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Re: Cash flow in retirement

Post by goblue100 »

KlangFool wrote: Mon May 17, 2021 8:04 am OP,

1) Do you care about tax management or you won't mind paying a lot of taxes?

2) Do you need to use the ACA insurance and qualifying for the ACA subsidy? It is worth up to 10K to 20K per year.

I keep 3 years of expense in CASH for the reasons listed in (1) and (2).

KlangFool
I have no doubt that the correct answer in theory is Livesoft's and vineviz and others in the thread that say as little as possible. In reality I'm closer to klangs answer. Only been retired 6 months. I'm also relying on the ACA subsidy for healthcare. I won't replenish to keep this much, but will be spending down as needed. Also going to do Roth conversions as I can over the next 8 years. I would also say I'm engaging in some forecasting and market timing and keeping more cash on hand because it sort of feels like some sort of downturn should be coming. I know that is folly, but I have to admit I'm in engaging in it anyway. I haven't cashed out to build the cash, just been reluctant to get it all invested as I should have. (some of the cash was an inheritance from my brothers estate).
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns
delamer
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Re: Cash flow in retirement

Post by delamer »

balbrec2 wrote: Mon May 17, 2021 3:28 pm
RickBoglehead wrote: Mon May 17, 2021 5:04 am Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
Why does someone in retirement need 6 months emergency funds? Seems high to me.
Your not preparing for a possible job loss. You should be ready for things like car repairs,
fixing a roof or replacing major appliances. 3 months ought to do it, IMO. Some might even think that is high for a retiree.
And what relationship would those irregular costs have to your monthly budget for normal expenses?

Very little.

Earmark funds for expenses that are likely to occur within the next 5 years, and add to them or withdraw from them as needs develop.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
TN_Boy
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Re: Cash flow in retirement

Post by TN_Boy »

delamer wrote: Mon May 17, 2021 4:49 pm
balbrec2 wrote: Mon May 17, 2021 3:28 pm
RickBoglehead wrote: Mon May 17, 2021 5:04 am Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
Why does someone in retirement need 6 months emergency funds? Seems high to me.
Your not preparing for a possible job loss. You should be ready for things like car repairs,
fixing a roof or replacing major appliances. 3 months ought to do it, IMO. Some might even think that is high for a retiree.
And what relationship would those irregular costs have to your monthly budget for normal expenses?

Very little.

Earmark funds for expenses that are likely to occur within the next 5 years, and add to them or withdraw from them as needs develop.
Why earmark?

You have, for example, a 60/40 portfolio. Why wouldn't you pull money for those "irregular" expenses from the same place you pull money for "regular" expenses? The "irregular" expenses should have been accounted for during retirement planning .. i.e. I usually spend 50k a year on housing, vacations, etc but every other year or so I spend an extra 10k on house repairs and so forth. But it's not clear to me how to earmark such expenses, or why that would be a good thing.

Obviously I tend to have the same take on this as livesoft and vineviz.
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22twain
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Re: Cash flow in retirement

Post by 22twain »

I've been retired for four years, and covering my expenses from my taxable account until I start Social Security at 70 in three years.

I don't continually "live on the edge" with a bare minimum checking account. Nor do I keep three or more years of cash or CASH around to tide me through a downturn; that's what my entire fixed-income allocation is for.

To get money out of the ETFs in my taxable account means (a) selling some shares, (b) waiting a couple of days for the trade to settle, (c) initiating a transfer from the settlement fund to my checking account, (d) waiting a couple more days. I prefer not to do this every month.

Therefore, I sell ETF shares about once per year, and transfer a "paycheck" once a month from the settlement fund to my checking account. That way, my checking account behaves much as it did when I was still working. It also keeps my taxes simple: only one transaction in my 1099-B, or maybe two if it spans two tax lots.

I don't lose sleep over the foregone gains by keeping all that "extra" cash in my settlement fund. I currently spend less than 2% of my total portfolio per year. On average, I have about 1% uninvested, which translates to a "drag" of maybe 0.1%. It's not a big deal to me. :|
It's "Roth", not "ROTH". Senator William Roth was a person, not an acronym.
retire57
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Re: Cash flow in retirement

Post by retire57 »

OP, are you talking about about an emergency fund? If so, consider your entire portfolio an emergency fund, as you no longer have to worry about losing your job.

You can't get simpler than that.
delamer
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Re: Cash flow in retirement

Post by delamer »

TN_Boy wrote: Mon May 17, 2021 5:18 pm
delamer wrote: Mon May 17, 2021 4:49 pm
balbrec2 wrote: Mon May 17, 2021 3:28 pm
RickBoglehead wrote: Mon May 17, 2021 5:04 am Whether in retirement or not, you should have an emergency fund with 6 months expenses.

I keep 2 -3 months in Ally Savings and put the rest in Ally No Penalty CDs.
Why does someone in retirement need 6 months emergency funds? Seems high to me.
Your not preparing for a possible job loss. You should be ready for things like car repairs,
fixing a roof or replacing major appliances. 3 months ought to do it, IMO. Some might even think that is high for a retiree.
And what relationship would those irregular costs have to your monthly budget for normal expenses?

Very little.

Earmark funds for expenses that are likely to occur within the next 5 years, and add to them or withdraw from them as needs develop.
Why earmark?

You have, for example, a 60/40 portfolio. Why wouldn't you pull money for those "irregular" expenses from the same place you pull money for "regular" expenses? The "irregular" expenses should have been accounted for during retirement planning .. i.e. I usually spend 50k a year on housing, vacations, etc but every other year or so I spend an extra 10k on house repairs and so forth. But it's not clear to me how to earmark such expenses, or why that would be a good thing.

Obviously I tend to have the same take on this as livesoft and vineviz.
IF someone feels the need for a SEPARATE emergency fund in retirement, then it should be based on anticipated irregular expenses as opposed to some multiple of regular expenses (which are irrelevant).

That was my main point.

I too tend to agree that it is unnecessary to have such a separate fund in retirement.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. | | Alexandre Dumas, fils
wolf359
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Re: Cash flow in retirement

Post by wolf359 »

Caveat: I am not retired. However, I have been thinking about cash flow in retirement.

Definitions:
Cash: Physical currency, such as coins or notes, or in forms that are easily convertible to physical currency. I consider bank accounts, money market accounts, checks, CDs, and similar to be cash or cash equivalents. The key difference between a cash account and an investment account is that a cash account does not have risk of principal, and no liquidity risk.

Cash flow: The cash that is being generated by a business or other asset.

An annuity or pension generates cash (payment). Social Security generates cash (payment). A rental property generates cash (rent). A bond generates cash (interest). An index fund generates cash (dividend).

You can generate cash flow from stocks by selling them. However, index funds generally yield about 2% in dividends without touching the principal.

Cash flow in retirement matters because it represents new cash that can be used for expenses without tapping your cash reserves. If you have high cash flow, you have a lower sequence of returns risk. For example, if you happen to have a really big pension and maximum social security, and all your expenses are covered by those two sources, then you have NO sequence of returns risk. It's prudent to maintain an emergency fund in case you have a sudden cash need to cover a large unexpected expense, but you don't have the same risk as someone who is completely dependent upon investments to generate cash.

Bogleheads are used to buying multiple types of assets, in order to diversify their returns. Some assets may be going down when others are going up, evening out your overall portfolio return.

I believe it is also prudent to have multiple sources of cash flow, especially in retirement. These can be diversified in time as well as in the nature of their cash flow. For example:

1) the bulk of my assets are in traditional investments (stocks and bonds). This will generate interest and dividends of about 2%. However, this source of income is subject to market risk (the bonds less so, but the risk is still there.)

2) I intend to maximize social security, delaying claiming it until the last possible date. This provides a significant income stream after a certain date. I am also seriously considering a QLAC annuity, for the same reason (longevity insurance.)

3) I have a rental property, which generates rent. It is not enough to cover all my expenses, but it is enough to cover all property taxes and maintenance for itself and my primary residence. It would effectively eliminates my housing expense in retirement. Should I go between renters, I have to cover those expenses from my retirement budget. This is acceptable, because it effectively turns a core expense into a discretionary expense. When the property is vacant, it is a core expense again. When in retirement, the property will have no mortgage. Its equity value should grow at the rate of inflation. However, if a critical enough emergency arises, I have the option of doing a cash-out refinance and assuming a mortgage again. (I'd have to go through an asset-based lender, but that is possible.) This provides a source of tax-free income that could be tapped if necessary.

4) If I were ambitious, I'd have multiple rental properties, and use them to cover all living expenses. I have friends who have done this, and live on the income of 5-10 rental properties. I don't want to deal with that many properties, but it works for them.

5) I know someone else who moved a section of their assets into dividend-producing stocks, including specific high-yielding REITs (like O). This violates all sorts of Boglehead philosophies, including buying individual stocks, and doing dividend yield investment strategies. However, this is done on a percentage of their overall portfolio, the way that we would wall off a portion as a "fun" account. It seems to work, and I'm considering it.

6) I know of several retirees who are writing options (covered calls and cash-secured puts) to generate synthetic dividends, and using long-held assets to generate additional cash flow. This scares me, but I'm interested in learning more about this prior to retirement. It is the very definition of active trading. They may or may not beat the market, but they definitely generate much more cash flow than a bank account, for not that much more risk.

7) I know of retirees who are running what are essentially lifestyle businesses to generate cash while in retirement. I know that a lot of people will then claim that they are not retired, but according to the AARP, approximately 19% of retired people over the age of 65 had earned income. This includes a gentleman who sold his auto repair shop, but retained a small portion that was adjacent to a neighborhood, and turned it into a seasonal ice cream shop during the summers. It let him keep in touch with the neighbors. Another gentleman I'm aware of lives on a bass lake and will be a fishing guide from time to time.

I realize that you were essentially defining cash flow as cash, and that this answer wasn't at all what you were looking for. However, if you have sufficient cash flow in retirement, you may not need to keep large amounts of cash around in an emergency fund, reducing the cash drag. Sufficient cash flow from non-market-based sources can also eliminate sequence of returns risk.

I also realize that some of these approaches are decidedly NOT Boglehead, and may not be acceptable options to many Bogleheads. If so, don't use them. But people are doing them anyways. There's a reason it's called "personal" finance.
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leftcoaster
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Re: Cash flow in retirement

Post by leftcoaster »

wolf359 wrote: Mon May 17, 2021 9:47 pm Caveat: I am not retired. However, I have been thinking about cash flow in retirement.

Definitions:
Cash: Physical currency, such as coins or notes, or in forms that are easily convertible to physical currency. I consider bank accounts, money market accounts, checks, CDs, and similar to be cash or cash equivalents. The key difference between a cash account and an investment account is that a cash account does not have risk of principal, and no liquidity risk.

Cash flow: The cash that is being generated by a business or other asset.

An annuity or pension generates cash (payment). Social Security generates cash (payment). A rental property generates cash (rent). A bond generates cash (interest). An index fund generates cash (dividend).

You can generate cash flow from stocks by selling them. However, index funds generally yield about 2% in dividends without touching the principal.

Cash flow in retirement matters because it represents new cash that can be used for expenses without tapping your cash reserves. If you have high cash flow, you have a lower sequence of returns risk. For example, if you happen to have a really big pension and maximum social security, and all your expenses are covered by those two sources, then you have NO sequence of returns risk. It's prudent to maintain an emergency fund in case you have a sudden cash need to cover a large unexpected expense, but you don't have the same risk as someone who is completely dependent upon investments to generate cash.

Bogleheads are used to buying multiple types of assets, in order to diversify their returns. Some assets may be going down when others are going up, evening out your overall portfolio return.

I believe it is also prudent to have multiple sources of cash flow, especially in retirement. These can be diversified in time as well as in the nature of their cash flow. For example:

1) the bulk of my assets are in traditional investments (stocks and bonds). This will generate interest and dividends of about 2%. However, this source of income is subject to market risk (the bonds less so, but the risk is still there.)

2) I intend to maximize social security, delaying claiming it until the last possible date. This provides a significant income stream after a certain date. I am also seriously considering a QLAC annuity, for the same reason (longevity insurance.)

3) I have a rental property, which generates rent. It is not enough to cover all my expenses, but it is enough to cover all property taxes and maintenance for itself and my primary residence. It would effectively eliminates my housing expense in retirement. Should I go between renters, I have to cover those expenses from my retirement budget. This is acceptable, because it effectively turns a core expense into a discretionary expense. When the property is vacant, it is a core expense again. When in retirement, the property will have no mortgage. Its equity value should grow at the rate of inflation. However, if a critical enough emergency arises, I have the option of doing a cash-out refinance and assuming a mortgage again. (I'd have to go through an asset-based lender, but that is possible.) This provides a source of tax-free income that could be tapped if necessary.

4) If I were ambitious, I'd have multiple rental properties, and use them to cover all living expenses. I have friends who have done this, and live on the income of 5-10 rental properties. I don't want to deal with that many properties, but it works for them.

5) I know someone else who moved a section of their assets into dividend-producing stocks, including specific high-yielding REITs (like O). This violates all sorts of Boglehead philosophies, including buying individual stocks, and doing dividend yield investment strategies. However, this is done on a percentage of their overall portfolio, the way that we would wall off a portion as a "fun" account. It seems to work, and I'm considering it.

6) I know of several retirees who are writing options (covered calls and cash-secured puts) to generate synthetic dividends, and using long-held assets to generate additional cash flow. This scares me, but I'm interested in learning more about this prior to retirement. It is the very definition of active trading. They may or may not beat the market, but they definitely generate much more cash flow than a bank account, for not that much more risk.

7) I know of retirees who are running what are essentially lifestyle businesses to generate cash while in retirement. I know that a lot of people will then claim that they are not retired, but according to the AARP, approximately 19% of retired people over the age of 65 had earned income. This includes a gentleman who sold his auto repair shop, but retained a small portion that was adjacent to a neighborhood, and turned it into a seasonal ice cream shop during the summers. It let him keep in touch with the neighbors. Another gentleman I'm aware of lives on a bass lake and will be a fishing guide from time to time.

I realize that you were essentially defining cash flow as cash, and that this answer wasn't at all what you were looking for. However, if you have sufficient cash flow in retirement, you may not need to keep large amounts of cash around in an emergency fund, reducing the cash drag. Sufficient cash flow from non-market-based sources can also eliminate sequence of returns risk.

I also realize that some of these approaches are decidedly NOT Boglehead, and may not be acceptable options to many Bogleheads. If so, don't use them. But people are doing them anyways. There's a reason it's called "personal" finance.
Great post!!
RAchip
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Re: Cash flow in retirement

Post by RAchip »

“The only ‘right’ answer go how much cash to keep on hand is ‘as little as possible’”

Not in my book. If you have a lot of money (well above inheritance tax threshold), is the goal to keep growing it so you have more the govt can take when you die? I dont think so. I generally keep several million in cash because I want to. I dont care whether other people (who mostly have a tiny fraction of the money I have made over my life) think this is stupid. I want to do it because I can, I think it is the smart thing to do and it gives me optionality.
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vineviz
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Re: Cash flow in retirement

Post by vineviz »

RAchip wrote: Fri May 21, 2021 9:32 pm I generally keep several million in cash because I want to.
Some people have so much money relative to their spending needs that it will never matter how badly they manage it, which is a pretty freeing position to be in.

Most Americans don't have so much wealth that they can afford to be careless with it.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Tattarrattat
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Re: Cash flow in retirement

Post by Tattarrattat »

Not sure having ample cash is "badly managing" it. Bonds barely pay more than cash. If lots of riskless cash let's you sleep well at night, I don't see a problem, if your overall plan is otherwise set up to meet your goals. It's not always about milking every possible ounce of return.
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vineviz
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Re: Cash flow in retirement

Post by vineviz »

Tattarrattat wrote: Sat May 22, 2021 2:38 pm Not sure having ample cash is "badly managing" it. Bonds barely pay more than cash. If lots of riskless cash let's you sleep well at night, I don't see a problem, if your overall plan is otherwise set up to meet your goals. It's not always about milking every possible ounce of return.
Keeping “ample” cash isn’t irrational. Keeping excess cash is.

And although none of us is completely rational, it’s important to understand the ways we are acting irrationally.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
goblue100
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Re: Cash flow in retirement

Post by goblue100 »

vineviz wrote: Sat May 22, 2021 2:51 pm
And although none of us is completely rational, it’s important to understand the ways we are acting irrationally.
I agree with this. If I paraphrase it to "None of us is a perfect Boglehead, but it's important to understand the things I do differently and why". Maybe I believe some managed fund is worth the extra risk and expense, maybe I believe International isn't. Maybe I think small cap value is worth over weighting, maybe I don't. As long as I know the tradeoffs of what I'm doing, no one else should think I'm "wrong". But having said that, I shouldn't try to convince someone my way is the one true way. Because its not.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns
NiceUnparticularMan
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Re: Cash flow in retirement

Post by NiceUnparticularMan »

vineviz wrote: Sat May 22, 2021 2:51 pm
Tattarrattat wrote: Sat May 22, 2021 2:38 pm Not sure having ample cash is "badly managing" it. Bonds barely pay more than cash. If lots of riskless cash let's you sleep well at night, I don't see a problem, if your overall plan is otherwise set up to meet your goals. It's not always about milking every possible ounce of return.
Keeping “ample” cash isn’t irrational. Keeping excess cash is.

And although none of us is completely rational, it’s important to understand the ways we are acting irrationally.
Rationality is about choosing actions reasonably related to achieving one's goals.

So you seem to be making some implicit assumptions about this other person's goals such that holding millions in cash would be careless or irrational.

But, the other poster actually explained their reasoning--they have so much money that they are already well above the inheritance tax line and do not see additional growth of that portfolio as an important goal. Further, holding lots of cash gives them options.

Which is plausibly quite rational.

Just hypothetically, suppose you had $50 million, did not care about growth, and were planning to give away several million per year to charities, as you saw fit, until you got down close to the individual estate tax exemption (currently $11.7M). It would be rational for such a person to hold millions in cash at any given time.

My question for this poster would be more along the lines of whether they did have some such plans. There is indeed not all that much point in holding cash versus bonds if there is no chance you will want to do something with it within a few years (although given the current yield curve, that could be a decent-sized few years these days). I don't think you have to be certain at this point what you intend to do with it, but having some sort of plan in mind would seem to be warranted.
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Re: Cash flow in retirement

Post by Dude2 »

Let's not talk rational or irrational; instead, it is either at risk or not at risk. Cash is still at risk. Loss of purchasing power is a slow creep but a real one. Think back 20 years on how much things cost versus now. On the other hand, we can attempt to devise a very low risk portfolio that could possibly achieve 0% real.
Then ’tis like the breath of an unfee’d lawyer.
NiceUnparticularMan
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Re: Cash flow in retirement

Post by NiceUnparticularMan »

Dude2 wrote: Sun May 23, 2021 7:52 am Let's not talk rational or irrational; instead, it is either at risk or not at risk. Cash is still at risk. Loss of purchasing power is a slow creep but a real one. Think back 20 years on how much things cost versus now. On the other hand, we can attempt to devise a very low risk portfolio that could possibly achieve 0% real.
So it is true the long term real expected return on marketed cash accounts is very low and can easily end up negative.

But if you use it in the short term, then that long term issue isn't necessarily a relevant issue.

Conversely, portfolios with a reasonable expected return of 0% real or more, particularly now, are typically going to have a lot of short term risk. Meaning if you actually spent those funds in the next few years, you could end up with less than if you kept it in something with a lower long term expected return.
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