Retired: Do you withdraw from investments or cash ?

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sixtyforty
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Retired: Do you withdraw from investments or cash ?

Post by sixtyforty » Wed Jul 03, 2019 2:00 pm

For those that are retired, how many of you are withdrawing from investments instead of cash (ie MM, savings, CD's etc) ? Up to this point I've been withdrawing from an allocation of cash (MM/CD's) monthly and then replenish the cash quarterly by selling investments. I'm beginning to wonder if I should just invest the remaining cash, especially with interest rates dropping and withdraw from my investments instead (60/40 allocation).. and it seems simpler. I'm assuming the big drawback with this is if we enter a bear market. Thoughts ?
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci

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Sandtrap
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Re: Retired: Do you withdraw from investments or cash ?

Post by Sandtrap » Wed Jul 03, 2019 2:11 pm

sixtyforty wrote:
Wed Jul 03, 2019 2:00 pm
For those that are retired, how many of you are withdrawing from investments instead of cash (ie MM, savings, CD's etc) ? Up to this point I've been withdrawing from an allocation of cash (MM/CD's) monthly and then replenish the cash quarterly by selling investments. I'm beginning to wonder if I should just invest the remaining cash, especially with interest rates dropping and withdraw from my investments instead (60/40 allocation).. and it seems simpler. I'm assuming the big drawback with this is if we enter a bear market. Thoughts ?
The general "Bogle Concept" is to focus on total returns.
Research past threads on withdrawal rates and so forth. Lot's there.
Research the "Wiki", lot's there. (link below).

What you describe is using your cash accounts as a "buffer" while making withdrawals. That's workable.

It depends on how much cash you're keeping as a "buffer" or working account. Some people have 1 years worth of income, some less, some more. It also depends on whatever other income stream you have besides portfolio returns. IE: SS, Pension, rental income, etc.

As far as reducing your (lets call it) working cash account and investing those excess dollars based on your intuition of whether the market is going to be fruitful or not, is not a good idea.

Suggest, maintain your 60/40 allocation. Invest your excess cash into that. Withdraw into your "cash working accounts" as needed, whether it be to maintain a 1 year income in cash, short term cd's, money market, etc, or whatever amount works for you.

Maybe a good time to post a portfolio review as well for a "tune up"????
Format in the Wiki.

FWIW: I have at least 5X in Cash, High Yield Accounts, CD's, Muni's, etc. (not funds). . I'm able to draw down from that and leave the portfolio on "auto reinvest dividends and interest" and run along by itself. Along the way I'll replenish the "working capital/buffer" funds as needed or otherwise.
In theory, I should only have to tap into dividends and interest earned from the portfolio as needed. Not principal.
j
Last edited by Sandtrap on Thu Jul 04, 2019 9:09 pm, edited 2 times in total.
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jebmke
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Re: Retired: Do you withdraw from investments or cash ?

Post by jebmke » Wed Jul 03, 2019 2:29 pm

Right now, dividends cover what my pension doesn't cover so I guess we are taking from bonds and stocks since we have both in our taxable account.
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Re: Retired: Do you withdraw from investments or cash ?

Post by bertilak » Wed Jul 03, 2019 2:47 pm

If I have the cash and need money I spend the cash. I let dividends replenish my cash. If I really need some I will sell off an investment to get cash. It is an opportunity for re-balancing and/or, sometimes, tax loss harvesting.
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Re: Retired: Do you withdraw from investments or cash ?

Post by Broken Man 1999 » Wed Jul 03, 2019 2:59 pm

I have no cash until I withdraw from investments. My settlement fund has very little in it except for a short period of time.

I am doing two things to generate the cash I need; selling shares of individual stocks, and/or directing index fund's and index ETF's dividends to settlement fund, then transferring to my credit union.

Broken Man 1999
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Dandy
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Re: Retired: Do you withdraw from investments or cash ?

Post by Dandy » Wed Jul 03, 2019 4:03 pm

I'm not typical. Taxable distributions to cash rather than reinvest (don't need higher equity allocation). Our current income almost equals normal expenses. I have extra cash-like assets that avoids having to sell investments.

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Re: Retired: Do you withdraw from investments or cash ?

Post by scrabbler1 » Wed Jul 03, 2019 4:15 pm

I use monthly and quarterly dividends from my main mutual funds, taken as cash, to pay my expenses. The underlying principal remains intact, if not grows (from excess dividends and cap gain distributions). I keep some cash around to cover the lumpier expenses.

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Re: Retired: Do you withdraw from investments or cash ?

Post by jebmke » Wed Jul 03, 2019 4:18 pm

Dandy wrote:
Wed Jul 03, 2019 4:03 pm
I'm not typical. Taxable distributions to cash rather than reinvest (don't need higher equity allocation). Our current income almost equals normal expenses. I have extra cash-like assets that avoids having to sell investments.
That is actually more common than you might think.
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Re: Retired: Do you withdraw from investments or cash ?

Post by David Jay » Wed Jul 03, 2019 4:20 pm

sixtyforty wrote:
Wed Jul 03, 2019 2:00 pm
I'm assuming the big drawback with this is if we enter a bear market. Thoughts ?
If you are 60/40 then 40% of your portfolio is bonds. Unless you are exclusively in a balanced fund (Wellesley, etc.) or fund-of-funds (LifeStrategy, etc.) you can withdraw from your bond funds when the market is down.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

yousha
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Re: Retired: Do you withdraw from investments or cash ?

Post by yousha » Wed Jul 03, 2019 4:23 pm

My RMD, SS and Pension cover all of my expenses. All my distributions outside of my RMD is reinvested. I am 80 years of age.

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Re: Retired: Do you withdraw from investments or cash ?

Post by xxd091 » Wed Jul 03, 2019 4:40 pm

I keep 2 years expenses in cash in an easy access account
I sell Equities or Bonds as required to replenish my Cash fund
Only have a 2 fund Portfolio 30% Equities 65% Bonds and 5% Cash
A Vanguard Global Equities Index Fund plus a Global Bond Index Fund
Usually 1 or 2 trades per year ie sale of Equities or Bonds as required keeping Asset Allocation intact
Simple Cheap
xxd09

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celia
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Re: Retired: Do you withdraw from investments or cash ?

Post by celia » Wed Jul 03, 2019 4:47 pm

yousha wrote:
Wed Jul 03, 2019 4:23 pm
My RMD, SS and Pension cover all of my expenses. All my distributions outside of my RMD is reinvested. I am 80 years of age.
Even your RMD can be reinvested (in Taxable).

livesoft
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Re: Retired: Do you withdraw from investments or cash ?

Post by livesoft » Wed Jul 03, 2019 5:36 pm

We don't have any MM, CD, nor savings accounts. We just don't have cash at all. So when we need money we sell equity shares from our taxable account to get money to spend. We rebalance at the same time in our tax-deferred account. Example: Sell VTI in taxable and buy SPTM in tax-deferred.

You may ask "Where did you get the money to buy SPTM in tax-deferred if you have no cash in tax-deferred?" I leave that as an exercise for the reader.
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livesoft
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Re: Retired: Do you withdraw from investments or cash ?

Post by livesoft » Wed Jul 03, 2019 5:40 pm

Also in a bear market when your total market stock index funds drop, wouldn't you be buying more total market stock index fund shares?
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hirlaw
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Re: Retired: Do you withdraw from investments or cash ?

Post by hirlaw » Wed Jul 03, 2019 6:01 pm

Many appear to use dividends and interest to pay expenses. Do you also use pre-tax dividends and interest to pay expenses? In other words, are you using pre-tax IRA/401k income to pay expenses?

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Leif
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Re: Retired: Do you withdraw from investments or cash ?

Post by Leif » Wed Jul 03, 2019 6:12 pm

Right now I'm withdrawing from CDs. I have a CD ladder to carry me to SS/RMD time. I actually overbuilt my ladder, so the excess funds I'm investing. I keep about 1 year in money markets/checking to handle expenses between rungs in the ladder. Dividends/CG are reinvested.
Last edited by Leif on Wed Jul 03, 2019 6:14 pm, edited 1 time in total.

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Re: Retired: Do you withdraw from investments or cash ?

Post by livesoft » Wed Jul 03, 2019 6:14 pm

hirlaw wrote:
Wed Jul 03, 2019 6:01 pm
Many appear to use dividends and interest to pay expenses. Do you also use pre-tax dividends and interest to pay expenses? In other words, are you using pre-tax IRA/401k income to pay expenses?
Money is money, so yes, I use money to pay expenses. Thus I use pre-tax IRA/401(k) income to pay expenses without ever removing that money from IRA/401(k) accounts.
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hirlaw
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Re: Retired: Do you withdraw from investments or cash ?

Post by hirlaw » Wed Jul 03, 2019 6:15 pm

livesoft wrote:
Wed Jul 03, 2019 6:14 pm
hirlaw wrote:
Wed Jul 03, 2019 6:01 pm
Many appear to use dividends and interest to pay expenses. Do you also use pre-tax dividends and interest to pay expenses? In other words, are you using pre-tax IRA/401k income to pay expenses?
Money is money, so yes, I use money to pay expenses.
Thanks. I am newly retired and wondering about paying taxes on the IRA withdrawals.
Last edited by hirlaw on Wed Jul 03, 2019 11:14 pm, edited 2 times in total.

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sixtyforty
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Re: Retired: Do you withdraw from investments or cash ?

Post by sixtyforty » Wed Jul 03, 2019 6:21 pm

Broken Man 1999 wrote:
Wed Jul 03, 2019 2:59 pm
I have no cash until I withdraw from investments. My settlement fund has very little in it except for a short period of time.

I am doing two things to generate the cash I need; selling shares of individual stocks, and/or directing index fund's and index ETF's dividends to settlement fund, then transferring to my credit union.

Broken Man 1999
This is the approach I am looking at. Can I ask how long you've been doing it this way ?
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci

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sixtyforty
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Re: Retired: Do you withdraw from investments or cash ?

Post by sixtyforty » Wed Jul 03, 2019 6:24 pm

livesoft wrote:
Wed Jul 03, 2019 5:40 pm
Also in a bear market when your total market stock index funds drop, wouldn't you be buying more total market stock index fund shares?
Good point, but the majority of the portfolio is in VBIAX, VWELX and VWINX which is what I prefer. I don't plan on separating stocks and bonds.
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci

Broken Man 1999
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Re: Retired: Do you withdraw from investments or cash ?

Post by Broken Man 1999 » Wed Jul 03, 2019 6:42 pm

sixtyforty wrote:
Wed Jul 03, 2019 6:21 pm
Broken Man 1999 wrote:
Wed Jul 03, 2019 2:59 pm
I have no cash until I withdraw from investments. My settlement fund has very little in it except for a short period of time.

I am doing two things to generate the cash I need; selling shares of individual stocks, and/or directing index fund's and index ETF's dividends to settlement fund, then transferring to my credit union.

Broken Man 1999
This is the approach I am looking at. Can I ask how long you've been doing it this way ?
A few years. I had some cash in my money market fund I used occasionally, but that was invested fairly quick as I worked my lump-sum pension (received 2015) into the portfolio.

I just don't like to hold cash very much. Just a preference, and I certainly respect those who like to have their cash cushions to weather some period of time when the market crashes. With a 50% equity and 50% bond portfolio, I feel our bonds (bond funds only) give us years and years of cushion.

As well, I don't like complexity in my portfolio. Yeah, I know, individual stocks add complexity. Although I have done well with individual stocks (given this bull market it didn't seem that difficult) but there is no way I will buy more individual stocks, even if when the market crashes and buying opportunities could abound. The market has been very good to us, but we are both 66, so the small risks I have taken in previous cycles just don't appeal to me any longer.

Another reason I have dabbled in the past was because we have $3.05 in our taxable brokerage account. So pretty much everything I have done didn't generate capital gains, as all was in our IRAs.

We have a few more years before we have to consider RMDs, and until then I don't expect we will have more than a few dollars in our taxable account. I have yet to decide on our strategy with RMDs, no idea if our first RMD of 3.63% (IIRC) will be too little to live on, or too much to live on.
Plenty of time to figure it out. We might start gifting money if our spend rate leaves much left over after RMDs.

We are a work in progress.

Broken Man 1999
Last edited by Broken Man 1999 on Wed Jul 03, 2019 6:54 pm, edited 3 times in total.
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Re: Retired: Do you withdraw from investments or cash ?

Post by OffGridder » Wed Jul 03, 2019 6:43 pm

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Re: Retired: Do you withdraw from investments or cash ?

Post by Sandtrap » Wed Jul 03, 2019 6:43 pm

sixtyforty wrote:
Wed Jul 03, 2019 6:24 pm
livesoft wrote:
Wed Jul 03, 2019 5:40 pm
Also in a bear market when your total market stock index funds drop, wouldn't you be buying more total market stock index fund shares?
Good point, but the majority of the portfolio is in VBIAX, VWELX and VWINX which is what I prefer. I don't plan on separating stocks and bonds.
VBIAX (Vanguard Balanced Index Fund)
VWELX (Vanguard Wellington Fund)
VWINX (Vanguard Wellesley Income Fund)

Certainly, all good choices of many out there.
j :happy
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Re: Retired: Do you withdraw from investments or cash ?

Post by venkman » Wed Jul 03, 2019 9:34 pm

livesoft wrote:
Wed Jul 03, 2019 5:36 pm
You may ask "Where did you get the money to buy SPTM in tax-deferred if you have no cash in tax-deferred?" I leave that as an exercise for the reader.
You short TSLA? That seems to be what everyone else does. :happy

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Re: Retired: Do you withdraw from investments or cash ?

Post by pascalwager » Thu Jul 04, 2019 12:47 am

livesoft wrote:
Wed Jul 03, 2019 5:36 pm
We don't have any MM, CD, nor savings accounts. We just don't have cash at all. So when we need money we sell equity shares from our taxable account to get money to spend. We rebalance at the same time in our tax-deferred account. Example: Sell VTI in taxable and buy SPTM in tax-deferred.

You may ask "Where did you get the money to buy SPTM in tax-deferred if you have no cash in tax-deferred?" I leave that as an exercise for the reader.
So, you do not have a checking account with a linked debit card either? Do you make 100% of purchases with a credit card?

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Re: Retired: Do you withdraw from investments or cash ?

Post by rossington » Thu Jul 04, 2019 4:29 am

livesoft wrote:
Wed Jul 03, 2019 5:36 pm
We don't have any MM, CD, nor savings accounts. We just don't have cash at all. So when we need money we sell equity shares from our taxable account to get money to spend. We rebalance at the same time in our tax-deferred account. Example: Sell VTI in taxable and buy SPTM in tax-deferred.

You may ask "Where did you get the money to buy SPTM in tax-deferred if you have no cash in tax-deferred?" I leave that as an exercise for the reader.
Bonds in tax-deferred.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

GJ48
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Re: Retired: Do you withdraw from investments or cash ?

Post by GJ48 » Thu Jul 04, 2019 4:50 am

sixtyforty wrote:
Wed Jul 03, 2019 2:00 pm
For those that are retired, how many of you are withdrawing from investments instead of cash (ie MM, savings, CD's etc) ?....
Withdrawals are from investments. In my early 70's with asset allocation of 30% stock and 70% bonds by combining Total Bond Market with Wellington. RMDs come out of Total Bond Market. I figure over time it's not going to have very much volatility.

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Re: Retired: Do you withdraw from investments or cash ?

Post by livesoft » Thu Jul 04, 2019 5:00 am

pascalwager wrote:
Thu Jul 04, 2019 12:47 am
So, you do not have a checking account with a linked debit card either? Do you make 100% of purchases with a credit card?
I make 100% of purchases with a credit card. We do have a checking account with an ATM/debit card.
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livesoft
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Re: Retired: Do you withdraw from investments or cash ?

Post by livesoft » Thu Jul 04, 2019 5:01 am

rossington wrote:
Thu Jul 04, 2019 4:29 am
livesoft wrote:
Wed Jul 03, 2019 5:36 pm
[...]
You may ask "Where did you get the money to buy SPTM in tax-deferred if you have no cash in tax-deferred?" I leave that as an exercise for the reader.
Bonds in tax-deferred.
Winner.
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SGM
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Re: Retired: Do you withdraw from investments or cash ?

Post by SGM » Thu Jul 04, 2019 7:30 am

We withdraw dividends from taxable accounts for expenses beyond our outside income streams. If the cash builds up we reinvest it. There is money coming in every month so we see little need for a large cash holding. Occasionally we will sell some individual stock held for a very long time or look for a capital loss which is rare and usually short term. We have no tax deferred account and don't withdraw from the Roth. Retirement has been good.

Ron
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Re: Retired: Do you withdraw from investments or cash ?

Post by Ron » Thu Jul 04, 2019 7:54 am

We receive 75% of our retirement income from sources other than our investments; e.g. SS, pension, SPIA, etc. The remaining 25% comes via our RMD's, which is currently managed by "cashing out" our accumulated dividends/gains obtained over the year.

We don't have any taxable investments. Each of us have a Roth IRA but we don't foresee ever touching that investment; it's reserved to be passed on to the next generation.

So I guess you can say that we are withdrawing some of our retirement income from our respective retirement tax-deferred portfolios via RMD's, but we don't actually sell any shares to do so, since it comes from our dividends/gains.

- Ron

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Re: Retired: Do you withdraw from investments or cash ?

Post by retiredjg » Thu Jul 04, 2019 8:18 am

I don't have any cash.

When I need money, I click on a button to see my stock to bond ratio and pull money from the side I have "too much" of. For the last few years, that has been the stock side most of the time.

In a stock market downturn, I'll be pulling from the bond side.

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Re: Retired: Do you withdraw from investments or cash ?

Post by retiredjg » Thu Jul 04, 2019 8:23 am

hirlaw wrote:
Wed Jul 03, 2019 6:15 pm
Thanks. I am newly retired and wondering about paying taxes on the IRA withdrawals.
This can be done two ways.

If you don't have a taxable account, when you take money from an IRA, just have some withheld for taxes. To do this accurately, you need to have some idea of your marginal tax rate. The first year, that is something of a guess, but after that it is easy.

If you do have a taxable account, you could elect to have nothing withheld for taxes and pay your taxes quarterly from savings (or increase withholding in a pension or SS or whatever).

Or you could still elect to have taxes withheld from your IRA withdrawal. This has the benefit of reducing the size of your IRA if you are one of the people who have too much in tax-deferral.

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Re: Retired: Do you withdraw from investments or cash ?

Post by yousha » Thu Jul 04, 2019 9:01 am

Die broke!

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Leif
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Re: Retired: Do you withdraw from investments or cash ?

Post by Leif » Thu Jul 04, 2019 11:48 am

yousha wrote:
Thu Jul 04, 2019 9:01 am
Die broke!
OK. When will I die?

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Re: Retired: Do you withdraw from investments or cash ?

Post by garlandwhizzer » Thu Jul 04, 2019 1:23 pm

IMO there is no simple rule that always works best for everyone. Depends on circumstances of the investor and the market. In general I sell equity every year as part of annual rebalancing and produce enough excess equity sales that time to cover at least all anticipated expenses for the upcoming year so I won't be forced to sell into market weakness should a bear market occur in the next 12 months. I keep this money in a MMF and always have at least I year of anticipated living expenses, sometimes 2 - 3 years, depending on circumstances. I've been retired for 22 years and have no other income stream other than modest SS, so I need a significant emergency fund to draw from when the market tanks because most of my portfolio is in equities. I have slowly adjusted my portfolio risk profile in accordance with growing older (I am 72 now) and also in the very rare and very unlikely case when I believe a market disaster is very likely in the near future. I did that adjustment early in 2007 and increased my MM holdings to a level adequate to supply all my living expenses for 3 years, which in retrospect turned out to be a good move, perhaps more luck than skill. When those rare euphoria driven bubbles occur (tech in late 1990s, real estate in 2006) I believe it is time to lower risk. I totally missed out on the first one, tech, but that sensitized me to see warning signs in real estate and finance in 2006.

Garland Whizzer

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Re: Retired: Do you withdraw from investments or cash ?

Post by Robert_007 » Thu Jul 04, 2019 1:43 pm

Garland,
Just curious. What makes you think we are in a euphoric market if there is still much pessimism with many flocking to low yielding bonds? Maybe I misread what you wrote but seems like you are advocating to take some risk off the table at this point.

ginrummy
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Re: Retired: Do you withdraw from investments or cash ?

Post by ginrummy » Thu Jul 04, 2019 2:51 pm

Leif wrote:
Wed Jul 03, 2019 6:12 pm
Right now I'm withdrawing from CDs. I have a CD ladder to carry me to SS/RMD time. I actually overbuilt my ladder, so the excess funds I'm investing. I keep about 1 year in money markets/checking to handle expenses between rungs in the ladder. Dividends/CG are reinvested.
I am doing similar to this. Overbuilt CD ladder. Will take excess and reinvest. Fixed income in CDs and Munis. Should be good for next five years. May rebuild ladder as I go. Unsure at moment. Dividends/interest provide bulk of excess fill in. Also keeping about 1 year in money market.

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Re: Retired: Do you withdraw from investments or cash ?

Post by pascalwager » Thu Jul 04, 2019 4:42 pm

xxd091 wrote:
Wed Jul 03, 2019 4:40 pm
I keep 2 years expenses in cash in an easy access account
I sell Equities or Bonds as required to replenish my Cash fund
Only have a 2 fund Portfolio 30% Equities 65% Bonds and 5% Cash
A Vanguard Global Equities Index Fund plus a Global Bond Index Fund
Usually 1 or 2 trades per year ie sale of Equities or Bonds as required keeping Asset Allocation intact
Simple Cheap
xxd09

Can you provide the tickers for these two index funds? It looks like a simple way to invest.

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Re: Retired: Do you withdraw from investments or cash ?

Post by Artsdoctor » Thu Jul 04, 2019 4:49 pm

Although there are some posters who have been spending their portfolio assets for decades, many of the posters above have been retired only "for a few years." In fact, with this incredible bull market over the past decade, it hasn't really made much difference how people have accessed cash because it was difficult to lose much money no matter what you did. The most interesting feedback might be from those who needed to access cash from their portfolios during the 2008-2009 downturn; that required a bit more skill for many than the last few years.

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Re: Retired: Do you withdraw from investments or cash ?

Post by xxd091 » Thu Jul 04, 2019 5:59 pm

Hi pascalwager
I am a U.K. investor
So these funds are not available to you
I am sure US equivalents are possible-as mutual funds or ETFS
I am 17 years retired so been through 2002 and 2008 crises
xxd091

pascalwager
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Re: Retired: Do you withdraw from investments or cash ?

Post by pascalwager » Fri Jul 05, 2019 9:54 am

Jonathan Clements recommends a minimum 20% or five years of cash for retirees, but I've also seen one, two and three year recommendations. This is to provide living expenses during long bear markets.

Logically, it follows that you should mainly withdraw from investments during normal markets, otherwise you won't have a one, two, three, or five years supply of cash available when a bear market occurs.

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Re: Retired: Do you withdraw from investments or cash ?

Post by jebmke » Fri Jul 05, 2019 9:59 am

Artsdoctor wrote:
Thu Jul 04, 2019 4:49 pm
Although there are some posters who have been spending their portfolio assets for decades, many of the posters above have been retired only "for a few years." In fact, with this incredible bull market over the past decade, it hasn't really made much difference how people have accessed cash because it was difficult to lose much money no matter what you did. The most interesting feedback might be from those who needed to access cash from their portfolios during the 2008-2009 downturn; that required a bit more skill for many than the last few years.
I retired in December, 2007. During 2008-09 I was selling bonds to eat and periodically re-balance to equity. But I was also selling stocks and re-buying stocks at a feverish pace to book tax losses. So, it took a bit of thinking to make sure I didn't make a wrong-footed move. When I could, I tried to combine transactions (e.g. sell enough bonds to fund expenses AND buy equity).
When you discover that you are riding a dead horse, the best strategy is to dismount.

Ron
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Re: Retired: Do you withdraw from investments or cash ?

Post by Ron » Fri Jul 05, 2019 10:51 am

Artsdoctor wrote:
Thu Jul 04, 2019 4:49 pm
Although there are some posters who have been spending their portfolio assets for decades, many of the posters above have been retired only "for a few years." In fact, with this incredible bull market over the past decade, it hasn't really made much difference how people have accessed cash because it was difficult to lose much money no matter what you did. The most interesting feedback might be from those who needed to access cash from their portfolios during the 2008-2009 downturn; that required a bit more skill for many than the last few years.
pascalwager wrote:
Fri Jul 05, 2019 9:54 am
Jonathan Clements recommends a minimum 20% or five years of cash for retirees, but I've also seen one, two and three year recommendations. This is to provide living expenses during long bear markets.

Logically, it follows that you should mainly withdraw from investments during normal markets, otherwise you won't have a one, two, three, or five years supply of cash available when a bear market occurs.
My wife/me planned for our joint retirement in early 2007, both at age 59. Too early for SS and too early for my wife's two small pension payments.
That being the case, we "cashed out" during our mid 50's up to the time of our planned retirement. Each of us had 3-4 years in cash, kept in our respective tax-deferred MM accounts. I also had no pension to count on; however, I did use a portion of the cash I had accumulated to purchase an SPIA which acted as a pension, a few months after I had actually retired.

My wife changed her mind around 2-3 months before her planned date. While she certainly had enough in retirement savings/investments to do so, she found she was not emotionally ready to take the leap. She continued working until her BS bucket got full (actually, it was overflowing when she finally said that she was ready to go, at age 64). However, she kept her retirement cash stash in place in order to just call it quits on any day she chose, at any age.

Today, both age 71, we keep little cash other than what our respective tax-deferred accounts throw off in order to pay next year's RMD. The bulk of that cash comes of course in the month of December. By the first week of January the cash is emptied, being used to satisfy our respective RMD's, paying our calculated FIT for the year on all sources of income, and the remainder going into our bank accounts to pay for "extras" in our budget - primarily travel.

For us, 2008-09 was just a blip that we were well prepared for in our "what if" planning. BTW, we looked at that cash as a non-performing bond holding in our long term 60/40 AA target.

- Ron

TonyDAntonio
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Re: Retired: Do you withdraw from investments or cash ?

Post by TonyDAntonio » Fri Jul 05, 2019 11:15 am

Ron wrote:
Fri Jul 05, 2019 10:51 am
Artsdoctor wrote:
Thu Jul 04, 2019 4:49 pm
Although there are some posters who have been spending their portfolio assets for decades, many of the posters above have been retired only "for a few years." In fact, with this incredible bull market over the past decade, it hasn't really made much difference how people have accessed cash because it was difficult to lose much money no matter what you did. The most interesting feedback might be from those who needed to access cash from their portfolios during the 2008-2009 downturn; that required a bit more skill for many than the last few years.
pascalwager wrote:
Fri Jul 05, 2019 9:54 am
Jonathan Clements recommends a minimum 20% or five years of cash for retirees, but I've also seen one, two and three year recommendations. This is to provide living expenses during long bear markets.

Logically, it follows that you should mainly withdraw from investments during normal markets, otherwise you won't have a one, two, three, or five years supply of cash available when a bear market occurs.
My wife/me planned for our joint retirement in early 2007, both at age 59. Too early for SS and too early for my wife's two small pension payments.
That being the case, we "cashed out" during our mid 50's up to the time of our planned retirement. Each of us had 3-4 years in cash, kept in our respective tax-deferred MM accounts. I also had no pension to count on; however, I did use a portion of the cash I had accumulated to purchase an SPIA which acted as a pension, a few months after I had actually retired.

My wife changed her mind around 2-3 months before her planned date. While she certainly had enough in retirement savings/investments to do so, she found she was not emotionally ready to take the leap. She continued working until her BS bucket got full (actually, it was overflowing when she finally said that she was ready to go, at age 64). However, she kept her retirement cash stash in place in order to just call it quits on any day she chose, at any age.

Today, both age 71, we keep little cash other than what our respective tax-deferred accounts throw off in order to pay next year's RMD. The bulk of that cash comes of course in the month of December. By the first week of January the cash is emptied, being used to satisfy our respective RMD's, paying our calculated FIT for the year on all sources of income, and the remainder going into our bank accounts to pay for "extras" in our budget - primarily travel.

For us, 2008-09 was just a blip that we were well prepared for in our "what if" planning. BTW, we looked at that cash as a non-performing bond holding in our long term 60/40 AA target.

- Ron
If 2008-2009 was just a blip for you then you were well prepared for retirement. I saw my retirement accounts go down 60% and thought I'd never be able to retire. Now in retirement I hold 5 years in MM, I-bonds and savings bonds. And I can still live off of pension, fun part-time retirement job and dividends. With SS on the horizon for my wife and me I'm feeling good about our finances but I'll never forget how 2008-2009 hit my investments.

garlandwhizzer
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Re: Retired: Do you withdraw from investments or cash ?

Post by garlandwhizzer » Fri Jul 05, 2019 12:07 pm

Robert_007 wrote:

Garland,
Just curious. What makes you think we are in a euphoric market if there is still much pessimism with many flocking to low yielding bonds? Maybe I misread what you wrote but seems like you are advocating to take some risk off the table at this point.
I don't think we're in a euphoric market at present, unlike 1999 or 2006 when we were. There is still a lot of pessimism around now after 10+ years of a bull market. The point I was making (sorry if I didn't make it clearly) is that the thing that has kept this bull going for so long is that persistent pessimism and skepticism. This is the most distrusted bull market in history in my opinion and a dose of pessimism every now and then has kept valuations from rising into bubble territory. They are generous, no doubt, at present but not out of whack relative to our very low bond yields and low inflation expectations IMO. The popularity of low yielding bonds, utilities, and consumer staples--all defensive sectors--demonstrate that investors as a whole are not euphoric. Euphoria creates asset bubbles that kill bull markets. We don't have that now and I expect the current bull will keep running for some months. Due to getting older and the fact that, as always, there are potential clouds on the economic horizon over the next year or so, I have reduced risk in my portfolio from 70/30 too 60/40 which is still aggressive for my age, 72. I don't believe this is the time to flee equities completely but only to align portfolio with risk tolerance. My risk tolerance has gradually decreased as the market has gradually increased over the last 10+ years, so I have gradually taken some money out of stocks and into bonds.

Garland Whizzer

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Leif
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Re: Retired: Do you withdraw from investments or cash ?

Post by Leif » Fri Jul 05, 2019 2:02 pm

Ron wrote:
Fri Jul 05, 2019 10:51 am
For us, 2008-09 was just a blip that we were well prepared for in our "what if" planning. BTW, we looked at that cash as a non-performing bond holding in our long term 60/40 AA target.

- Ron
If you retired in 2007, at 60/40, and GFC was a blip, then you have a pair, prepared or not. But your wife still working was surely some comfort.

In 2007 I was at 70/30, working in a secure job, but GFC made me pay attention. But I was wondering at the time "what if" I was retired. I remember going to a Fidelity Investment center at the time, in front of me was a nervous elderly couple telling Fidelity they wanted to sell ALL. I did not want to be them so I glided to 50/50 and retired a few years ago.

Robert_007
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Re: Retired: Do you withdraw from investments or cash ?

Post by Robert_007 » Fri Jul 05, 2019 2:58 pm

Thanks garland for taking the time to reply in depth. Appreciate it.

ginrummy
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Re: Retired: Do you withdraw from investments or cash ?

Post by ginrummy » Tue Jul 09, 2019 4:19 am

Ron wrote:
Fri Jul 05, 2019 10:51 am

BTW, we looked at that cash as a non-performing bond holding in our long term 60/40 AA target.

- Ron
I appreciate this snippet Ron. I do wonder where to place cash in my AA. Is it xx/xx/xx or just xx/xx. Thanks for adding this piece.

Sconie
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Re: Retired: Do you withdraw from investments or cash ?

Post by Sconie » Tue Jul 09, 2019 4:46 am

I look at cash as part of my fixed allocation----it is like a bond, only a very, very short-term bond. My practice is to keep a "bucket" of cash----spend from it----and replenish it periodically using dividends, interest payments, if not proceeds from my other investments.
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

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