Why 100% stock or 100% bond is the only choice? 60/40 or 70/30 will work out fine under any circumstances.
Clearly, it's not the only choice. But we have to ask ourselves, why are we saving money in these accounts we can't easily get to? Is it our retirement fund? Or is it our unemployment insurance? How should we invest this money to serve our purpose best?
In one's accumulation phase, in my opinion, the greater "cost" is opportunity cost of owning bonds during a period of life where they are unnecessary. If it makes one feel comfortable to own bonds during this time for peace of mind, then absolutely and of course they should hold bonds. But if someone is otherwise comfortable holding 100% to suggest they need to have some bonds to feed a family of 4 for 4 years instead of 3... is a bit exaggerated.
Even in the 100% stock, we have to live off our retirement to make ends meet scenario it gave us 3 years and 4 months (+plus whatever unemployment you can draw and small cash emergency fund) is likely more than enough time find work.
To me, if we're suggesting 3 years may not be enough time to find a job so hold some bonds because 4 years is better... why not 6 years? That must be even better yet. We certainly can't be sure a job will be found after 4 years either. Can we?
I don't think it's an exaggeration at all. I do remember 2008. I also remember early declines, but 2008 was the first time I ever thought the wheels might actually be coming off the economy. It was very scary. Banks that had been around for a hundred years were failing. GM ended up being owned by the Federal Government (isn't that called Communism?) And the groundwork for that was being laid by Republicans! It was literally a situation where nobody knew what shoe was going to drop next.
If you are aggressively saving, you are usually also saving some money in taxable accounts. Although my taxable savings are long-term and intended for retirement (or early retirement), they are also intended as my unemployment reserve.
Although my overall asset allocation is 70/30, my taxable asset allocation has generally been 50/50 (the bull market has actually caused it to creep up to 60/40 and I haven't re-adjusted.) Keeping a different asset allocation in taxable isn't exactly mental accounting. If I didn't keep a good chunk of bonds in taxable, the taxable side would shrink too much in a crash for met to access the reserves. As it is, I have a minimum bond level on the taxable side that I won't drop below unless an emergency occurred. This keeps the bonds in the tax sheltered side accessible. All normal rebalancing occurs on the tax sheltered side to avoid taxable events.
KlangFool has noted that he has about 5 years expenses in bonds. Although I have a similar amount, some of the bond position is on the retirement side. To access it, I'd sell from taxable and rebalance the bonds on the retirement side.
As for how long to have a reserve -- I maintain a backup plan to severely reduce our structural living expenses if it looks like we have an indefinite period of unemployment. So if dual unemployment stretches beyond a certain number of years, we downshift our expenses and then can last indefinitely.
In the middle of the 2008 Financial Crisis, Taylor stressed the importance of having a "Plan B." Some people took his post at the time to mean he was panicking even though he clearly stated it didn't apply to his specific financial situation. I used the opportunity to figure out what exactly I would do if I ever hit my minimal acceptable asset level (and was forced to live on it.) It's better to figure out your Plan B in the middle of a bull market than it is to wait until you're in the depths of a crash, unemployed, and grasping at lifelines.