Retiring in Three Years: Only Enough Cash For Taco Bell

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Charles Joseph
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Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

I've had this love hate relationship with cash my entire investing life. Now I'm three years from retirement and nothing's changed. Every time I start putting away cash to get ready for retirement in a few years, I just can't deal with it and it ends up invested.

I really can't figure out why I'll need much cash in retirement. I'll have only social security and my investments. Are they any guidelines that I can go by?

The clock is running out.

Thanks.
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Watty
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Watty »

It is not really clear what you are asking. If you have a lot of investments in stocks and bonds but little in cash that is not really a problem.

You might post your information using the suggested format as a guideline then you might get some more useful suggestions.

viewtopic.php?t=6212
livesoft
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by livesoft »

Lots of retired folks on this forum do not have any cash. They sell shares "just-in-time" to pay their bills.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Normchad »

Where I live, Taco Bell has gotten surprisingly expensive. Make sure you’re using up-to-date information for your planning purposes.

Lots of folks say they “have no cash” in retirement, which I take to mean other than a small amount in their wallets or bank accounts, the rest is fully invested someplace. So that situation isn’t unusual. Personally, for some reason I just can not justify, I’ve got about a years worth of expenses just sitting around in cash. It makes no sense to me either…..

I do keep enough in my wallet for 1 or 2 complete meals at Taco Bell.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by BabaWawa »

Charles Joseph wrote: Wed Nov 23, 2022 9:36 pm I've had this love hate relationship with cash my entire investing life. Now I'm three years from retirement and nothing's changed. Every time I start putting away cash to get ready for retirement in a few years, I just can't deal with it and it ends up invested.

I really can't figure out why I'll need much cash in retirement. I'll have only social security and my investments. Are they any guidelines that I can go by?

The clock is running out.

Thanks.
You need to prepare for the culture shock of going from accumulation phase to withdrawal phase. Without a steady paycheck, many of us are comfortable with at least a year or two in cash for expenses.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Florida Orange »

I think it makes sense to keep enough in cash (not literally cash, but cash-like) so that you can ride out a routine downturn and not be forced to liquidate some portion of your investments at an inopportune time. I'd say that means at least a year's worth, maybe two.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by 7eight9 »

If you don't want to hold cash - don't. Charge what you spend on a credit card. Liquidate what you need to make your payment.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by calmaniac »

Need more info from OP to know what they mean by a "no cash" investing strategy. Maybe "all equity, no fixed income"?? Looking for more info.

OP & I do have our "What me worry?" signature blocks in common, but I don't understanding their investing strategy.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Beensabu »

I think people have a cash bucket going into retirement just so they feel like they have something they can spend from if all their investments are down.

But if that cash is sitting in a bucket waiting for retirement vs. invested for a couple years, then there's an opportunity cost to not having it invested (as long as the investments go up). So it's just in case of in case the investments go down.

Over a long enough period (and how long is always different, because stuff is different over different periods), it tends to usually work out better to be invested than be in cash (I think).

So whatever the benefit from not being in cash vs. the detriment from being in cash over a period where being invested was retrospectively the better decision VS. the benefit from being in cashing vs. the detriment from being invested over a period where being in cash was retrospectively the better decision, it kind of washes out to whatever in the end. And that's the total return perspective of just sell what you need to sell to pay for the things you need to pay for, and whatever because there's no way you could have known.

Jack In The Box still has 2 tacos for $1.50 (that's a 50% increase from the previous two decade standard). They don't have meat. I believe the filler is soy based. They are delicious "freshly" hot and dipped in ranch. Not so good for you.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Northern Flicker »

Figure out your target fixed income duration, and implement it, whether or not a cash position is part of the implementation.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by flyingaway »

Honestly speaking, I cannot afford eating Taco Bells often. (Fortunately, I don't like them).
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

Normchad wrote: Wed Nov 23, 2022 9:52 pm Where I live, Taco Bell has gotten surprisingly expensive. Make sure you’re using up-to-date information for your planning purposes.
Yeah but the value menu is still holding strong!
Normchad wrote: Wed Nov 23, 2022 9:52 pm Lots of folks say they “have no cash” in retirement, which I take to mean other than a small amount in their wallets or bank accounts, the rest is fully invested someplace. So that situation isn’t unusual. Personally, for some reason I just can not justify, I’ve got about a years worth of expenses just sitting around in cash. It makes no sense to me either…..

I do keep enough in my wallet for 1 or 2 complete meals at Taco Bell.
Seriously, thanks for the input.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

Watty wrote: Wed Nov 23, 2022 9:47 pm It is not really clear what you are asking. If you have a lot of investments in stocks and bonds but little in cash that is not really a problem.

You might post your information using the suggested format as a guideline then you might get some more useful suggestions.

viewtopic.php?t=6212
Well basically I'm 50/50 AA and I expect to have 30 years of expenses at retirement, net of Social Security.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by KlangFool »

Charles Joseph wrote: Wed Nov 23, 2022 10:31 pm
Watty wrote: Wed Nov 23, 2022 9:47 pm It is not really clear what you are asking. If you have a lot of investments in stocks and bonds but little in cash that is not really a problem.

You might post your information using the suggested format as a guideline then you might get some more useful suggestions.

viewtopic.php?t=6212
Well basically I'm 50/50 AA and I expect to have 30 years of expenses at retirement, net of Social Security.
Good luck to you!

My 60/40 portfolio excluding the emergency fund is at 30X to 33X. I am keeping 2 to 3 years of expense in cash as my emergency fund. I have some physical gold and silver too.

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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Leif »

Guidelines? Sure. But that depends on more information than you are providing.

In my case I'm retired, but not yet on SS or RMDs. Since I'm doing Roth conversions my taxes are high. So, I have a CD ladder and short term T-Bills to tide me over. Along with cash between CD and T-Bill maturity dates. I'm glad to have short term assets to carry me over to SS/RMDs. Particularly this year. As far as having little or no cash that does not work for me. I want to be able to take a long vacation, never checking my account balances, and not worrying if I will run out of cash and bills are not paid.
Last edited by Leif on Thu Nov 24, 2022 1:07 am, edited 2 times in total.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by SafeBonds »

Cash like investments like money market funds or very short term (like 1 month) treasury bills are yielding more than they have in years. And you still feel this way?
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by telemark »

It has more to do with personal preference than anything else. If keeping cash makes you uncomfortable there's no compelling reason to do it. I like to limit the number of times a year that I sell stock, in order to simplify my tax reporting, but that's because FreeTaxUSA doesn't automatically import dividends and capital gains.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by 4nursebee »

Charles Joseph wrote: Wed Nov 23, 2022 9:36 pm I've had this love hate relationship with cash my entire investing life. Now I'm three years from retirement and nothing's changed. Every time I start putting away cash to get ready for retirement in a few years, I just can't deal with it and it ends up invested.

I really can't figure out why I'll need much cash in retirement. I'll have only social security and my investments. Are they any guidelines that I can go by?

The clock is running out.

Thanks.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by BitTooAggressive »

Charles Joseph wrote: Wed Nov 23, 2022 9:36 pm I've had this love hate relationship with cash my entire investing life. Now I'm three years from retirement and nothing's changed. Every time I start putting away cash to get ready for retirement in a few years, I just can't deal with it and it ends up invested.

I really can't figure out why I'll need much cash in retirement. I'll have only social security and my investments. Are they any guidelines that I can go by?

The clock is running out.

Thanks.
What about a high quality short term bond fund or short term tips fund? A little volatility but it is worth it IMO.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by thedaybeforetoday »

I think, as you mentioned in your post (love/hate), having a stash of cash, or not, has an emotional component.

We have a rationale as to why we have a couple years of expenses in cash (not to sell funds when the market is down to pay expenses), but it also feels better knowing we can have a bit more say in our financial lives vs the whims of the market.

This approach, as others have noted, has it's own steady, potential opportunity cost.
It's paid off this year in terms of loss reduction (down 10% or so vs a fully invested portfolio) other years it's cost us in portfolio growth.

In the end, IMHO, this is a personal decision with little to point to as to how much cash is right for you other than what you can justify for yourself.
I don't believe there is a hard right or wrong way to deal with this issue.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by eric321 »

Some of the reply are reading too close into the definition of cash. The OP is saying they have little to no savings for retirement.

Unfortunately, that's the case for many Americans. And with inflation, it's makes fixed budgets harder.

I'd suggest delaying retirement if possible. Delaying to take social security could increase your check during retirement.

Continue to spend carefully and try to increase your income if possible (more hours, side hussle).

It's hard to hear but every bit you do now helps later on.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by dcabler »

eric321 wrote: Thu Nov 24, 2022 7:35 am Some of the reply are reading too close into the definition of cash. The OP is saying they have little to no savings for retirement.

Unfortunately, that's the case for many Americans. And with inflation, it's makes fixed budgets harder.

I'd suggest delaying retirement if possible. Delaying to take social security could increase your check during retirement.

Continue to spend carefully and try to increase your income if possible (more hours, side hussle).

It's hard to hear but every bit you do now helps later on.
I don't think that's what the OP is saying at all. He mentioned that every time he has cash, he ends up investing it. Presumably he's investing it for retirement.

Cheers.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Jack FFR1846 »

I'm retiring next year. Not only do DW and I have $250k in cash, we have over $400k in savings bonds. This is protection against an event such as the day after the election in 2016. Say that the fast recovery didn't happen. The Dow goes down 1000 points. Say is stays there for 4 years. Sure, you can sell at the new low price but if, as you say, your investments are barely enough for you to retire, the new investment values mean that you clearly don't have enough. Back to work you go.

I'm a fan of Glen Bell's scrumptious restaurant. I do the drive through in my Wrangler, usually. Number 7 with a Diet Pepsi, no ice. (because if you get ice, you get about 1 ounce of soda)
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by galawdawg »

eric321 wrote: Thu Nov 24, 2022 7:35 am Some of the reply are reading too close into the definition of cash. The OP is saying they have little to no savings for retirement.

Unfortunately, that's the case for many Americans. And with inflation, it's makes fixed budgets harder.

I'd suggest delaying retirement if possible. Delaying to take social security could increase your check during retirement.

Continue to spend carefully and try to increase your income if possible (more hours, side hussle).

It's hard to hear but every bit you do now helps later on.
I don't believe you have read his posts correctly...
Charles Joseph wrote: Wed Nov 23, 2022 9:36 pm I really can't figure out why I'll need much cash in retirement. I'll have only social security and my investments. Are they any guidelines that I can go by?
Charles Joseph wrote: Wed Nov 23, 2022 10:31 pm Well basically I'm 50/50 AA and I expect to have 30 years of expenses at retirement, net of Social Security.
OP has also posted in other threads that he has run the numbers for his retirement spending in an online simulator and that over thirty years, inflation adjusted, his plan only failed in two (2) of one-hundred twenty (120) cycles. He also ran his numbers in Fidelity's Retirement Planning tool and had a Retirement Success Score of 114 for success under "significantly below average" market conditions using conservative inputs. That means that based upon his current investments and his planned retirement spending, he can cover one-hundred fourteen (114%) percent of his retirement spending in an under-performing market. https://www.fidelity.com/calculators-to ... score-tool

So I believe this thread is literally about how much cash OP holds as a part of his overall asset allocation.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by livesoft »

Jack FFR1846 wrote: Thu Nov 24, 2022 7:51 am[...] Say that the fast recovery didn't happen. The Dow goes down 1000 points. Say is stays there for 4 years. Sure, you can sell at the new low price but if, as you say, your investments are barely enough for you to retire, the new investment values mean that you clearly don't have enough. Back to work you go.
I suppose the moral of that scenario is: Don't retire with investments barely enough for you to retire. :)

Otherwise, a 1000 point drop in the Dow is kind of a nothingburger nowadays.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Florida Orange »

Beensabu wrote: Wed Nov 23, 2022 10:21 pm And that's the total return perspective of just sell what you need to sell to pay for the things you need to pay for, and whatever because there's no way you could have known.
And that's the reason for having cash. Because there's no way you could have known. Without any cash you're taking a risk. As you correctly point out, it comes with an opportunity cost, but all forms of safety do.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by jebmke »

Jack FFR1846 wrote: Thu Nov 24, 2022 7:51 am I'm retiring next year. Not only do DW and I have $250k in cash, we have over $400k in savings bonds. This is protection against an event such as the day after the election in 2016. Say that the fast recovery didn't happen. The Dow goes down 1000 points. Say is stays there for 4 years. Sure, you can sell at the new low price but if, as you say, your investments are barely enough for you to retire, the new investment values mean that you clearly don't have enough. Back to work you go.

I'm a fan of Glen Bell's scrumptious restaurant. I do the drive through in my Wrangler, usually. Number 7 with a Diet Pepsi, no ice. (because if you get ice, you get about 1 ounce of soda)
Bonds work as well. I retired in December, 2007 with essentially no cash, no problem.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by FellsGuy »

One thought is that in these cash discussions it is often treated as a binary e.g. fully invested or 5 years of cash in the checking account at .00002% interest but under FDIC limits of course. I've treated it as a flexibility account so I have 50% of three years of planned withdrawals in a CD or treasury ladder. Thus each monthly withdrawal can come from either bucket, current investments or cash like funds. A second thought is if you have enough to generate what you need each month whats wrong with risk free investments (Treasuries, CD's, High interest MM's) you've already won the game why risk losing the game? Accounting for inflation etc of course, other than compulsion? I suspect you have been a very successful person at your profession and have probably way over saved at this point time to start benefiting from your prudence. :D
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by cjcerny »

I don’t get the worry about lack of cash. You get it as you need it (monthly, yearly, etc) from your portfolio.

Sounds like the real worry is de-accumulation, which is a different beast altogether. That requires a big mindset change, as others have mentioned above. Lots of folks struggle with this transition. Some suggestions would be to consider working part time or buying a SPIA with some of your portfolio. Lots of written help out there for tackling the transition.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by TheTimeLord »

I have never understood the obsession many BH have with attempting to separate what they refer to as "cash" from their Fixed Income investments. Of course this is further complicated by the lack of a universal BH definition for what constitutes "cash". I have in the past and will continue in the future to just look at it as part of my fixed income allocation that has a short investment duration. And it seems to me once retired people might need some assets invested in short duration instruments to meet their monthly obligations not covered by income streams such as SS, pensions or annuities.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Ed 2 »

Charles Joseph wrote: Wed Nov 23, 2022 9:36 pm I've had this love hate relationship with cash my entire investing life. Now I'm three years from retirement and nothing's changed. Every time I start putting away cash to get ready for retirement in a few years, I just can't deal with it and it ends up invested.

I really can't figure out why I'll need much cash in retirement. I'll have only social security and my investments. Are they any guidelines that I can go by?

The clock is running out.

Thanks.
I don’t understand your question. Look, I don’t have much cash too and always had, just cash for investing opportunities and to pay bills. I put all available cash into stock index funds and index ETFs . To me it’s not a problem . I am going to retire when I am 55 , very soon in 3 years. I will start living off my dividends and some selling of my equity if I needed. So, re articulate your question .
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Kenkat »

I just set up a monthly draw from a 30/70 bucket to fund pre-social security retirement needs. I have some cash but I’m not using it for retirement.

if you use the Taco Bell app or order through the website, the $5 pick your combo box is a fantastic deal. You can even upsize your drink for 10 cents: :D

https://www.tacobell.com/food/combos/my-cravings-box
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by JackoC »

dcabler wrote: Thu Nov 24, 2022 7:44 am
eric321 wrote: Thu Nov 24, 2022 7:35 am Some of the reply are reading too close into the definition of cash. The OP is saying they have little to no savings for retirement.

Unfortunately, that's the case for many Americans. And with inflation, it's makes fixed budgets harder.
I don't think that's what the OP is saying at all. He mentioned that every time he has cash, he ends up investing it. Presumably he's investing it for retirement.
Yeah and later specifically said "basically I'm 50/50 AA and I expect to have 30 years of expenses at retirement, net of Social Security", not sure what 'net of SS' means but that gives a much better idea than misleading title and vague first post. But unless the issue is that the 'investments' are all IRA, I don't see much significance to the question. The expected return of 15x stock/15x 'bond' or 15x stock/14x 'bond'/1x 'cash' would be very similar, especially with yield curve models estimating the term premium near zero (IOW the expected return of cash held for X yrs is the same as the X yr bond yield, historically the return on cash over X yrs was significantly lower than the starting X yr bond yield averaging over periods where rates went up and down, positive realized term premium). If somebody wants to set aside cash instead of investing in risk assets, there's a significant issue of opportunity cost, 'cash' v 'bonds' (with different people defining the dividing line differently), for a 1-2 /30's, not significant. The only issue would be again if all the 'investments' are IRA/401k, tax consequence of shifting a chunk to taxable 'cash' account, or whatever cap gains effect there'll be in taxable. But without a serious tax issue it takes one day not 3 yrs to make that change.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by sailaway »

eric321 wrote: Thu Nov 24, 2022 7:35 am Some of the reply are reading too close into the definition of cash. The OP is saying they have little to no savings for retirement.

Unfortunately, that's the case for many Americans. And with inflation, it's makes fixed budgets harder.

I'd suggest delaying retirement if possible. Delaying to take social security could increase your check during retirement.

Continue to spend carefully and try to increase your income if possible (more hours, side hussle).

It's hard to hear but every bit you do now helps later on.
OP says their cash ends up invested. How do you get from there to no savings for retirement?
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

JackoC wrote: Thu Nov 24, 2022 9:16 am Yeah and later specifically said "basically I'm 50/50 AA and I expect to have 30 years of expenses at retirement, net of Social Security", not sure what 'net of SS' means but that gives a much better idea than misleading title and vague first post.
I'm not an accountant, but "net of" is an accounting term which represents the exclusion of something from a particular sum. In other words the amount I have after deducting Social Security is the "net of" amount. So after accounting for SS I'll have (very likely more than) 30 years of expenses.

I didn't intend to be misleading in any part of my post or subject heading.

Thanks for the insights in your response.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by nisiprius »

TheTimeLord wrote: Thu Nov 24, 2022 9:08 am I have never understood the obsession many BH have with attempting to separate what they refer to as "cash" from their fixed Income investments. Of course this is further complicated by the lack of a universal BH definition for what constitutes "cash". I have in the past and will continue in the future to just look at it as part of my fixed income allocation that has a short investment duration. And it seems to me once retired people might need some assets invested in short duration instruments to meet their monthly obligations not covered by income streams such as SS, pensions or annuities.
Exactly.

The big difference is between stocks and not-stocks. Bonds and "cash" are a continuum.

By just about any measure you care to define, the difference between Vanguard Total Stock and Vanguard Total Bond is far more than the difference between Total Bond and any kind of "cash" or "cashlike" investment.

The scorn for "cash" is just marketing and institutional rivalry. Banks, "investment" firms, and insurance companies are all competing to hold your money. Investment firms have obvious self-interested motives for trashing "cash." If you want minimal risk, they are going to suggest a money market mutual fund, not a high-yield bank savings account. If you want higher return than that, they are going to suggest a bond fund, not bank CDs.

And they are going to propagandize (especially now!) by pretending that there is no such thing as an interest-paying bank account, and that "cash" only means physical currency, and describing how inflation decimates any non-interest-paying cash holding.

With the usual issues of time periods and endpoints, a reasonable mental model for interest-paying "cash" is a 0% long-term real return, i.e. it has, roughly, kept up with inflation. Treasury bills have averaged something like 1% per year, annualized, including a period of time when their interest rate was capped (during which they suffered badly from inflation).

An awful lot of the books and articles you read on "investing" are written from the point of view of investment firms, see the world only through securities-colored glasses, and are unlikely even to mention, much less recommend, bank CDs or savings bonds or competitive savings accounts.

In deciding how much in bonds and how much in cash, it is overenthusiastic to try too hard to avoid having even pennies in cash. Other characteristics that should be taken into account include all the characteristics implied by words like "liquidity," "accessibility," and "technological fragility" in all of their forms. If there is a reason to pay someone in cash, you can get a form of cash, acceptable to them, much more quickly if it is in your bank account than if it is at Vanguard.
Last edited by nisiprius on Thu Nov 24, 2022 9:56 am, edited 1 time in total.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

nisiprius wrote: Thu Nov 24, 2022 9:41 am In deciding how much in bonds and how much in cash, it is overenthusiastic to try too hard to avoid having even pennies in cash. Other characteristics that should be taken into account include all the characteristics implied by words like "liquidity" and "accessibility" in all of its forms. If there is a reason to pay someone in cash, you can get a form of cash, acceptable to them, much more quickly if it is in your bank account than if it is at Vanguard.
This is simple and clear. Thank you nisiprius. It's simply good to have the cash you need on hand to pay what needs to be paid. Maybe a reasonable buffer.

If I did this, I wouldn't be shaving off a few shares of VFIAX to buy Christmas presents for the wife and kids (translation: My wife and I have our bill-pay account for regular expenses but lumpy expenses aren't held either individually or collectively in cash).

The other side of the coin is that money is money so selling shares from taxable before retirement isn't so terrible I suppose.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by nisiprius »

Thinking about accessibility, liquidity, and technological fragility...

As a result of moving, we have been hiring miscellaneous contractors to do things, both to the house we're buying and the house we're selling.

I hate the idea of having anything on my cell phone that is capable and designed to move money out of my account and to a third party, but I set up a Venmo account on my smartphone, thinking I would "need" it.

To my surprise, not one of them has mentioned Venmo or any other similar system as a preference. Most of them did not mention it at all. One or two mentioned only as an aside ("we even take Venmo.")

So far, most have accepted credit cards. All have accepted personal checks, which surprised me. Only one, out of perhaps twenty, has offered a discount for (physical) cash.

The "invention" of those tiny plastic credit card readers that plug into smartphones must have been a revolution, although I haven't read anything about it.

I don't believe it's possible (yet?) to pay off a credit card balance directly from a Vanguard investment portfolio. I don't know about brokerages with integral "bank accounts" but I assume that if the money isn't already in that account, you still need to issue a "sell" order and wait X days for settlement.

Credit cards drawing directly from securities accounts used to be a feature of the original cash management accounts; are they still? If you are using ETFs, how do you tell them which ETF to draw from, and how do you deal with the need to keep that ETF adequately funded?

If you have credit cards as an intermediate buffer, and if you can have them on autopay from an investment account, and if virtually all merchants accept credit cards, that does change the equation. I don't think we're there yet.

Of course, you still have the issue of technological fragility, which is very hard to assess.

What's left? Club fundraisers, girl scout cookies, lawn sales, small transactions between individuals ("Can I pay you with Venmo?" "No, can you pay me with Zelle?" "No, can I pay you with Paypal?")
Last edited by nisiprius on Thu Nov 24, 2022 10:01 am, edited 1 time in total.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by JohnDoh »

nisiprius wrote: Thu Nov 24, 2022 9:41 am
TheTimeLord wrote: Thu Nov 24, 2022 9:08 am I have never understood the obsession many BH have with attempting to separate what they refer to as "cash" from their fixed Income investments. Of course this is further complicated by the lack of a universal BH definition for what constitutes "cash". I have in the past and will continue in the future to just look at it as part of my fixed income allocation that has a short investment duration. And it seems to me once retired people might need some assets invested in short duration instruments to meet their monthly obligations not covered by income streams such as SS, pensions or annuities.
Exactly.

The big difference is between stocks and not-stocks. Bonds and "cash" are a continuum.

By just about any measure you care to define, the difference between Vanguard Total Stock and Vanguard Total Bond is far more than the difference between Total Bond and any kind of "cash" or "cashlike" investment.

The scorn for "cash" is just marketing and institutional rivalry. Banks, "investment" firms, and insurance companies are all competing to hold your money. Investment firms have obvious self-interested motives for trashing "cash." If you want minimal risk, they are going to suggest a money market mutual fund, not a high-yield bank savings account. If you want higher return than that, they are going to suggest a bond fund, not bank CDs.

And they are going to propagandize (especially now!) by pretending that there is no such thing as an interest-paying bank account, and that "cash" only means physical currency, and describing how inflation decimates any non-interest-paying cash holding.

With the usual issues of time periods and endpoints, a reasonable mental model for interest-paying "cash" is a 0% long-term real return, i.e. it has, roughly, kept up with inflation. Treasury bills have averaged something like 1% per year, annualized, including a period of time when their interest rate was capped (during which they suffered badly from inflation).

An awful lot of the books and articles you read on "investing" are written from the point of view of investment firms, see the world only through securities-colored glasses, and are unlikely even to mention, much less recommend, bank CDs or savings bonds or competitive savings accounts.

In deciding how much in bonds and how much in cash, it is overenthusiastic to try too hard to avoid having even pennies in cash. Other characteristics that should be taken into account include all the characteristics implied by words like "liquidity" and "accessibility" in all of its forms. If there is a reason to pay someone in cash, you can get a form of cash, acceptable to them, much more quickly if it is in your bank account than if it is at Vanguard.
It seems to be that this is the PERFECT use case for I Bonds because they sit right in the middle of that continuum. They're both bonds and cash. (Sort of like Shimmer from the old SNL: it's both a floor wax and a dessert topping! https://www.nbc.com/saturday-night-live ... -wax/n8625 8-) )

Personally, I'd build this up to some reasonable level and then try to keep funding it even as taking withdrawals. Of course, for some folks I suppose the amounts involved don't really move the needle.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by nisiprius »

I bonds are interesting. I'm a huge enthusiast and if you count them as "fixed income, we have a meaningful fraction of our "fixed income" in them.

A big strike against them is "technological fragility." From my own experience and from complaints in the forum," the chances of encountering a glitch, with the need to contact a human representative to resolve it, are uncomfortably high. I've been locked out of the account several times, fortunately at times when they were answering the phone promptly.

This is just a personal observation but when I've redeemed ("withdrawn") from the Treasury Direct account, every single time the money has been in my checking account on the next business day, not just as a balance, but as "available funds." That's faster than with other online financial. I don't know if you can count on it.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by TheTimeLord »

JohnDoh wrote: Thu Nov 24, 2022 9:57 am
nisiprius wrote: Thu Nov 24, 2022 9:41 am
TheTimeLord wrote: Thu Nov 24, 2022 9:08 am I have never understood the obsession many BH have with attempting to separate what they refer to as "cash" from their fixed Income investments. Of course this is further complicated by the lack of a universal BH definition for what constitutes "cash". I have in the past and will continue in the future to just look at it as part of my fixed income allocation that has a short investment duration. And it seems to me once retired people might need some assets invested in short duration instruments to meet their monthly obligations not covered by income streams such as SS, pensions or annuities.
Exactly.

The big difference is between stocks and not-stocks. Bonds and "cash" are a continuum.

By just about any measure you care to define, the difference between Vanguard Total Stock and Vanguard Total Bond is far more than the difference between Total Bond and any kind of "cash" or "cashlike" investment.

The scorn for "cash" is just marketing and institutional rivalry. Banks, "investment" firms, and insurance companies are all competing to hold your money. Investment firms have obvious self-interested motives for trashing "cash." If you want minimal risk, they are going to suggest a money market mutual fund, not a high-yield bank savings account. If you want higher return than that, they are going to suggest a bond fund, not bank CDs.

And they are going to propagandize (especially now!) by pretending that there is no such thing as an interest-paying bank account, and that "cash" only means physical currency, and describing how inflation decimates any non-interest-paying cash holding.

With the usual issues of time periods and endpoints, a reasonable mental model for interest-paying "cash" is a 0% long-term real return, i.e. it has, roughly, kept up with inflation. Treasury bills have averaged something like 1% per year, annualized, including a period of time when their interest rate was capped (during which they suffered badly from inflation).

An awful lot of the books and articles you read on "investing" are written from the point of view of investment firms, see the world only through securities-colored glasses, and are unlikely even to mention, much less recommend, bank CDs or savings bonds or competitive savings accounts.

In deciding how much in bonds and how much in cash, it is overenthusiastic to try too hard to avoid having even pennies in cash. Other characteristics that should be taken into account include all the characteristics implied by words like "liquidity" and "accessibility" in all of its forms. If there is a reason to pay someone in cash, you can get a form of cash, acceptable to them, much more quickly if it is in your bank account than if it is at Vanguard.
It seems to be that this is the PERFECT use case for I Bonds because they sit right in the middle of that continuum. They're both bonds and cash. (Sort of like Shimmer from the old SNL: it's both a floor wax and a dessert topping! https://www.nbc.com/saturday-night-live ... -wax/n8625 8-) )

Personally, I'd build this up to some reasonable level and then try to keep funding it even as taking withdrawals. Of course, for some folks I suppose the amounts involved don't really move the needle.
Because you can choose the duration of your I-Bonds (1-30 years) I think they make a good tool for emergency funds and cash needs. But they do require a little planning ahead since you have to wait a year before you can withdraw the money and 5 years until it is penalty free. Shorter duration bond and CD ladders would be another possibility. Or you could consider auto rolled T-Bills if your brokerage provides this option. As you look to set up these investments you need consider how urgent your liquidity need might be, some investments that work great if you need to money in 2-4 weeks don't work as well if you need the money tomorrow so you would likely need to mix in an investment to meet very short term needs (within days) with investments that work when the need is in weeks or months.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by behhp »

7eight9 wrote: Wed Nov 23, 2022 10:03 pm If you don't want to hold cash - don't. Charge what you spend on a credit card. Liquidate what you need to make your payment.

I like this idea. Kind of like dollar cost averaging but in reverse.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by LadyGeek »

This thread is now in the Personal Investments forum (help with personal investments).
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

nisiprius wrote: Thu Nov 24, 2022 9:56 am The "invention" of those tiny plastic credit card readers that plug into smartphones must have been a revolution, although I haven't read anything about it.
The guy who sold us our hot dogs and knishes from his cart in Washington Square Park when we visited our son in Manhattan last weekend had one of those! I was going to run to an ATM to get cash when I realized I didn't have any (ha ha) but then my wife saw someone ahead of us in line paying via the smartphone reader. Pretty amazing.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Jags4186 »

nisiprius wrote: Thu Nov 24, 2022 9:41 am
TheTimeLord wrote: Thu Nov 24, 2022 9:08 am I have never understood the obsession many BH have with attempting to separate what they refer to as "cash" from their fixed Income investments. Of course this is further complicated by the lack of a universal BH definition for what constitutes "cash". I have in the past and will continue in the future to just look at it as part of my fixed income allocation that has a short investment duration. And it seems to me once retired people might need some assets invested in short duration instruments to meet their monthly obligations not covered by income streams such as SS, pensions or annuities.
Exactly.

The big difference is between stocks and not-stocks. Bonds and "cash" are a continuum.
Even the most conservative short term treasury funds are down over 5% this year. Cash never goes down in value. It loses purchasing power. There is a huge psychological difference between losing money and losing purchasing power.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by AnnetteLouisan »

I don’t know how much this will resonate with all of you but I thought of it due to the above discussion.

I was sitting in a garden with my then-boyfriend and mentioned that I had to leave at 1 for an interview at 3. I said I didn’t really want to attend but it was a friend of a friend and I didn’t want to be discourteous and cancel.

He said something like, “but you don’t need them, you’ve got money. That’s the whole point of having money, right, that you don’t have to do things you don’t want to do?” I looked up at a nearby statue of a famous poet and thought, “hey yeah! That right!” I canceled the interview and had a nice day free of stress.

OP, do what you want to do. Don’t do what you don’t want to do.
Last edited by AnnetteLouisan on Thu Nov 24, 2022 10:57 am, edited 1 time in total.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by RetiredAL »

Charles Joseph wrote: Wed Nov 23, 2022 9:36 pm I've had this love hate relationship with cash my entire investing life. Now I'm three years from retirement and nothing's changed. .....

Thanks.
Charles --

I had similar thoughts about cash as I retired at age 66. Knowing roof replacement was coming, I had $22K in a saving account for this. Outside of our retirement accounts, this was our total cash. During my working years, this had been our emergency fund. Our retirement income is our SS and monthly IRA withdrawals. The withdrawals were less than 2%.

2-1/2 years into retirement, the roof was replaced. I had planned it to be $16k, quotes came to $19K. Significant damage was found so the cost blossomed to $26K. So the expected remaining reserve after the project went poof and I had to dip into my IRA funds.

I was not comfortable being at zero savings, but in another year RMD's would start which would return an extra $25K over our expenses and I could replenish my savings account then. Until RMD, anything lumpy would just come from the IRA, just as the extra roof money had. The roof had gotten me past the previous brain-lock to handling lump expenses via IRA withdrawals. I weathered that year with no lumpy surprises.

We are now into early 2020 and I was getting ready to start my RMD in quarterly transfers. Covid hit. Congress cancelled RMD's for that year. RMD age got changed from 70 to 72. I was initially in disarray about finance plans. With the Covid lockdown, and CA was truly locked down, my checking account balance started growing without any RMD influx

I soon came to the conclusion that having real cash was not needed at all. All that I needed was to have access to "readily available money" and my IRA accomplished this. I could get whatever amount I needed in 3-4 days by selling something, be it an ETF, Mutual Fund, Bond Fund.

Now 72 this year, I've taken my RMD, but it did not go to savings cash. I went into a brokerage account and has been invested. I am happy with my new mindset.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

Kenkat wrote: Thu Nov 24, 2022 9:15 am I just set up a monthly draw from a 30/70 bucket to fund pre-social security retirement needs. I have some cash but I’m not using it for retirement.

if you use the Taco Bell app or order through the website, the $5 pick your combo box is a fantastic deal. You can even upsize your drink for 10 cents: :D

https://www.tacobell.com/food/combos/my-cravings-box
That's a great deal! Thanks for the link! (seriously!)

We were having dinner with my brother-in-law and sister-in-law and she was bemoaning how she can't retire. Referring to me, my wife said, "he'll be fine, all he does is buy Taco Bell!"
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by AnnetteLouisan »

Charles Joseph wrote: Thu Nov 24, 2022 10:55 am
Kenkat wrote: Thu Nov 24, 2022 9:15 am I just set up a monthly draw from a 30/70 bucket to fund pre-social security retirement needs. I have some cash but I’m not using it for retirement.

if you use the Taco Bell app or order through the website, the $5 pick your combo box is a fantastic deal. You can even upsize your drink for 10 cents: :D

https://www.tacobell.com/food/combos/my-cravings-box
That's a great deal! Thanks for the link! (seriously!)

We were having dinner with my brother-in-law and sister-in-law and she was bemoaning how she can't retire. Referring to me, my wife said, "he'll be fine, all he does is buy Taco Bell!"
That would be a GREAT ad!!
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