Retiring in Three Years: Only Enough Cash For Taco Bell

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

Post by TheTimeLord »

Jags4186 wrote: Thu Nov 24, 2022 10:45 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.
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.
Which is why I prefer laddering short term bonds to owning a bond fund. While the bonds on your portfolio would show a paper losses you can pay for things with the maturing bonds which give you exactly what they were supposed to.
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Charles Joseph
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

AnnetteLouisan wrote: Thu Nov 24, 2022 10:56 am
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!!
:sharebeer (and thanks for your other insightful post).
Last edited by Charles Joseph on Thu Nov 24, 2022 11:24 am, edited 1 time in total.
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iamblessed
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by iamblessed »

I would at least be like Buffett a 90/10. I don't think 0 cash is smart.
JohnDoh
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by JohnDoh »

iamblessed wrote: Thu Nov 24, 2022 11:17 am I would at least be like Buffett a 90/10. I don't think 0 cash is smart.
Well, OK. The Taco Bell Buffett, it is! :beer
MathWizard
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by MathWizard »

If you are used to a paycheck, set up your retirement accounts to deposit a check in your checking/savings account.

I plan to do that for normal spending.
Extra expenses will come out of my Roth account
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Charles Joseph
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

RetiredAL wrote: Thu Nov 24, 2022 10:55 am
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.
RetiredAL - Thanks for taking the time to share your thoughts. Big help.
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Charles Joseph
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

livesoft wrote: Wed Nov 23, 2022 9:51 pm Lots of retired folks on this forum do not have any cash. They sell shares "just-in-time" to pay their bills.
Thank you.

Question: is this common among accumulators as well as retirees? I have a decent amount of taxable funds at Vanguard and Fidelity, with good capital gains in VFIAX and FXAIX. I have rarely (but am currently) sold off a bit of shares here and there for expenses. But I always have a hard time wrapping my head around the idea that money is money. What's the different if I spend cash or sell shares?
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by livesoft »

Charles Joseph wrote: Thu Nov 24, 2022 1:45 pmWhat's the different if I spend cash or sell shares?
Your cash did not fluctuate in price in dollars, but your shares fluctuated in price in dollars before you sold them. Your cash earned zero to a small amount of interest that was usually below the level of inflation (you lost value to inflation) while your shares maybe went up a lot or lost a lot.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by canadianbacon »

Charles Joseph wrote: Thu Nov 24, 2022 1:45 pm Question: is this common among accumulators as well as retirees? I have a decent amount of taxable funds at Vanguard and Fidelity, with good capital gains in VFIAX and FXAIX. I have rarely (but am currently) sold off a bit of shares here and there for expenses. But I always have a hard time wrapping my head around the idea that money is money. What's the different if I spend cash or sell shares?
When I was accumulating I'd let up to 10K or so accumulate in my checking and then I'd ship some off to an investment account. I keep it tighter now because of my fixed income maturation dates.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Scott S »

I have trouble letting very much cash sit around uninvested, too. I'm in no rush to change my mind or have my mind changed on that, though. :sharebeer

Sadly, Taco Bell has taken so many of my favorites off their menu, that I don't have much enthusiasm to go there anymore. I used to love them when I was younger...
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by AnnetteLouisan »

Scott S wrote: Thu Nov 24, 2022 2:55 pm I have trouble letting much cash sit around uninvested, too. I'm in no rush to change my mind or have my mind changed on that, though. :sharebeer

Sadly, Taco Bell has taken so many of my favorites off their menu, that I don't have much enthusiasm to go there anymore. I used to love them when I was younger...
Anyone remember Burritoville? That place was awesome. My, catered to Wall Street and other office workers.
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TheTimeLord
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by TheTimeLord »

AnnetteLouisan wrote: Thu Nov 24, 2022 2:57 pm
Scott S wrote: Thu Nov 24, 2022 2:55 pm I have trouble letting much cash sit around uninvested, too. I'm in no rush to change my mind or have my mind changed on that, though. :sharebeer

Sadly, Taco Bell has taken so many of my favorites off their menu, that I don't have much enthusiasm to go there anymore. I used to love them when I was younger...
Anyone remember Burritoville? That place was awesome. My, catered to Wall Street and other office workers.
Given the results of the Franchise Wars Taco Bell is an appropriate choice.

https://www.youtube.com/watch?v=AqGLb4Oxge8
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by tunafish »

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.
Or. charge what you spend on a credit card, pay it off with Social Security as it comes in every month as cash.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by RetiredAL »

Charles Joseph wrote: Thu Nov 24, 2022 1:45 pm
livesoft wrote: Wed Nov 23, 2022 9:51 pm Lots of retired folks on this forum do not have any cash. They sell shares "just-in-time" to pay their bills.
Thank you.

Question: is this common among accumulators as well as retirees? I have a decent amount of taxable funds at Vanguard and Fidelity, with good capital gains in VFIAX and FXAIX. I have rarely (but am currently) sold off a bit of shares here and there for expenses. But I always have a hard time wrapping my head around the idea that money is money. What's the different if I spend cash or sell shares?
I think your VFIAX and FXAIX in taxable would satisfy my expression of "readily available money".

I would not consider money in a 401K or IRA during accumulation to be "readily available money", with the possible inclusion of IRA money after 59.5 as being "readily available", but only at a last resort. I would never consider a 401K loan as readily available, too many risks and gotchas.

Going from working to retired does remove the pressure of worrying about job loss and needing to cover those lost $ for some period of time.

Although not ideal, a working person can tap home equity $ somewhat or a lot easier than a retired person can.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by cjking »

When you retire, start taking the maximum income your investments can support. If that is not enough, then you were right to previously invest everything. If it's more than enough, so you're not spending it all and cash savings are building up, tell yourself there's no point reinvesting it, as you already have more than enough investments. Just let the cash build up until you think of something to spend it on. In a spirit of helpfulness, I'd like to point out that there will always be a boat capable of absorbing any amount of money an individual may wish to relieve themselves of. An article I Googled tells me the most expensive yacht ever built cost 4.8 billion USD.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by HomerJ »

Cash is paying 3%-4%, even 5%.

What's wrong with cash?
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by KlangFool »

HomerJ wrote: Thu Nov 24, 2022 6:21 pm Cash is paying 3%-4%, even 5%.

What's wrong with cash?
There is no fun. There is no possibility of losing the principal nominal value. Some folks enjoy the excitement of losing the principal while selling their investment to pay for their expense. They enjoy doing this month after month in a bear market.

Some folks like to experience this kind of excitement in the coming recession.

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biscuit5
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by biscuit5 »

OP - considering the current cost of some items at Taco Bell these days (compared to even a year back), you must be loaded.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Harry Livermore »

nisiprius wrote: Thu Nov 24, 2022 9:41 am
The big difference is between stocks and not-stocks. Bonds and "cash" are a continuum.
Agree. If I was going to parse out "equities, bonds, and cash" in my AA, and I wished for 60/40, I would break cash out of my bond allocation, so it might be 60/35/5. I'm not going to reduce my equities in order to hold cash. Note that for me, "cash" includes our emergency fund (a hot and contentious topic sometimes here) and our Vanguard MM fund. But I think of it as being on the continuum between "some of my Wellesley", Short Term Treasury, Federal MM Fund, and plain vanilla savings account.
I think, as some have pointed out, the "culture shock" of going from tucking away money for many years to slowly removing money is difficult for many. I suspect it will be difficult for me. And I think this is more the crux of the OP.
Having a few years' expenses in a vanilla savings and/ or money market may help psychologically, at the expense of some small gain 20 years later. Being self-employed, I have always maintained a cash pile, so maybe that will help smooth it for me.
I think of cash the same way that an engineer might think of a damper. Like a shock absorber, or a water hammer arrestor, or a fuel system diaphragm. Smoothing out shocks, in our case, market (or world event) shocks.
So, I don't know what to advise the OP, other than perhaps stop adding new money to "investments" for the next 3 years until retirement, and instead accumulate "cash".
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by tennisplyr »

Been retired 11 years, my AA is ~50/50 and generally keep 4-5% in cash...could I be better off, maybe...could I be worse off maybe. Life goes by quickly, don't sweat the small stiff.
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Harry Livermore
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Harry Livermore »

livesoft wrote: Thu Nov 24, 2022 2:05 pm
Charles Joseph wrote: Thu Nov 24, 2022 1:45 pmWhat's the different if I spend cash or sell shares?
Your cash did not fluctuate in price in dollars, but your shares fluctuated in price in dollars before you sold them. Your cash earned zero to a small amount of interest that was usually below the level of inflation (you lost value to inflation) while your shares maybe went up a lot or lost a lot.
And (pointing out the obvious), if selling taxable as implied by Charles Joseph, you will owe tax on the gains (assuming there are gains)
I've only ever sold "taxable" a few times in my life for consumption (I have sold plenty of course, so take a profit and invest again)
We liquidated several large holdings (McDonald's stock that I had accumulated via a DRIP over many years, a managed fund from Washington Mutual that my wife had started prior to marrying me, and a large stake in Gabelli Asset that I started right after college) in order to buy our vacation cottage for cash.
In the thick of COVID, juggling PPP, EIDL, and savings withdrawals, I sold a small chunk of VTSAX in out taxable account to "fill up" the EF savings account.
Both of those events came with varying degrees of tax burden. Since my income was at or near zero during the COVID event, the tax hit on the VTSAX sale was pretty cheap. The tax hit on the much larger sale of stocks and funds to pay for the cottage was more significant, both because the amounts of gain were larger, but I was earning way more back then.
If both of those events could have been covered with a simple withdrawal of cash from a savings account, no taxes would be owed. The opportunity cost of getting to that big pile of cash may or may not have been larger than the tax obligation. I don't really know how to model that. Not a math guy.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by HMSVictory »

I plan to have about a 5% allocation to cash in my retirement portfolio which will be a component of my fixed income allocation.

Overall I'll be at 80/20 stocks to bonds or maybe even 85/15. I want the cash in the portfolio to pay for lumpy expenses around the time of retirement plus a few years to pay for things like finishing up college without having to sell stocks or bonds at a potentially bad time. I don't think the small allocation will have a huge drag on returns but I'm willing to give up some return for the flexibility.

Prior to retirement my cash allocation will be zero (besides my emergency fund) - and I'll build it up the last few years of working.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by livesoft »

Harry Livermore wrote: Fri Nov 25, 2022 9:31 amAnd (pointing out the obvious), if selling taxable as implied by Charles Joseph, you will owe tax on the gains (assuming there are gains)
[...]
I would like to point out the less obvious: Selling in taxable even at gains does not necessarily result in any tax liability. As has been mentioned many, many times on this forum:

1. Return of capital is not taxed.
2. Judicious tax-loss harvesting can bulk up realized losses that can offset realized capital gains.
3. Net realized long-term capital gains have a favorable capital gains tax rate as low as 0%, so no tax on gains in such situations.
4. There are other ways to offset such income including charitable giving.
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Harry Livermore
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Harry Livermore »

livesoft wrote: Fri Nov 25, 2022 10:42 am
Harry Livermore wrote: Fri Nov 25, 2022 9:31 amAnd (pointing out the obvious), if selling taxable as implied by Charles Joseph, you will owe tax on the gains (assuming there are gains)
[...]
I would like to point out the less obvious: Selling in taxable even at gains does not necessarily result in any tax liability. As has been mentioned many, many times on this forum:

1. Return of capital is not taxed.
2. Judicious tax-loss harvesting can bulk up realized losses that can offset realized capital gains.
3. Net realized long-term capital gains have a favorable capital gains tax rate as low as 0%, so no tax on gains in such situations.
4. There are other ways to offset such income including charitable giving.
Indeed, and for brevity, left out of my response. But of course you are quite correct.
I suppose if I were to plead in my defense, it's just that using cash requires zero planning or thinking compared to selling equities in a taxable account. But then again, I'm a simpleton and therefore less thinking is sometimes pleasureable :)
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Charles Joseph
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

KlangFool wrote: Thu Nov 24, 2022 9:16 pm
HomerJ wrote: Thu Nov 24, 2022 6:21 pm Cash is paying 3%-4%, even 5%.

What's wrong with cash?
There is no fun. There is no possibility of losing the principal nominal value. Some folks enjoy the excitement of losing the principal while selling their investment to pay for their expense. They enjoy doing this month after month in a bear market.

Some folks like to experience this kind of excitement in the coming recession.

KlangFool
Klangfool,

I think you have a point here.

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

Post by KlangFool »

Charles Joseph wrote: Fri Nov 25, 2022 3:48 pm
KlangFool wrote: Thu Nov 24, 2022 9:16 pm
HomerJ wrote: Thu Nov 24, 2022 6:21 pm Cash is paying 3%-4%, even 5%.

What's wrong with cash?
There is no fun. There is no possibility of losing the principal nominal value. Some folks enjoy the excitement of losing the principal while selling their investment to pay for their expense. They enjoy doing this month after month in a bear market.

Some folks like to experience this kind of excitement in the coming recession.

KlangFool
Klangfool,

I think you have a point here.

Charles Joseph
Charles Joseph,

1) I have been unemployed for more than 1 year a few times.

2) In one of those instances (unemployment lasting more than 1 year) , we (me and spouse) had 4 eye surgeries and my son is starting college at the same year. My daughter starting college the following year. I "Sleep Well At Night" (SWAN) because I had 2 years of expense in cash as my emergency fund. I do not have to decide what to sell for at least 1 year.

3) I had been through too many recession / economy crisis over 30+ years.

4) The story repeated itself every recessions. Folks that are overly optimistic underestimate the emotional pain and suffering of having to decide what to sell investment at a loss to pay for the monthly expense. This is on top of the stress having to find a new employment in a recession.

5) Don't put yourself into that situation. It is still not too late for you. It is unnecessary pain and suffering for little to no gain.

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

Post by HomerJ »

Especially now..

I too have always held a large chunk in cash/CDs/Treasuries. Probably too large a chunk.

But it let me sleep at night. So it was the right move for me.

But NOW? Right now I have zero regrets... I'm getting 4%-5% on those investments.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by trek83 »

HomerJ wrote: Fri Nov 25, 2022 7:14 pm Especially now..

I too have always held a large chunk in cash/CDs/Treasuries. Probably too large a chunk.

But it let me sleep at night. So it was the right move for me.

But NOW? Right now I have zero regrets... I'm getting 4%-5% on those investments.
I’m with you Homer J - I’m 63, retired, have quite a bit of cash & ST bonds in both taxable & IRA / Roth’s.

Cash (MMF ) yields 3.6% at Vanguard. VUSB Ultra Short Bond 4.6% VCSH Short Term Corp 5.3% I’m working toward 70+%

stocks in taxable for tax efficiency. Then 25-35% stocks / 65-75% Bonds in IRA / Roth’s ( maybe more stocks in Roth’s for growth ). My

Pension & both our SS will more than pay for all of our expenses when we choose to start those. Have to play the ACA / Obama care

income game for health Insurance these days. Each of us have our own comfort level & get to decide how much is enough and it’s

connection to risk / reward.

We are paying a few bigger ticket items in the next 3-4 months also - Daughter’s wedding & a new car & need to plan some trips. Thus

the need for cash. Great discussion.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Dregob »

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.
If you only eat at Taco Bell you probably won't have to worry about a long retirment!
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Charles Joseph
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

HomerJ wrote: Fri Nov 25, 2022 7:14 pm Especially now..

I too have always held a large chunk in cash/CDs/Treasuries. Probably too large a chunk.

But it let me sleep at night. So it was the right move for me.

But NOW? Right now I have zero regrets... I'm getting 4%-5% on those investments.
Thanks HomerJ. This is making more and more sense.

Question for you or anyone. If I decided I wanted a chunk of cash, is it reasonable to move a portion of fixed income in my tax deferred to a MMF, or in 401k to a stable value fund? I can access those in three months in an emergency. With after-tax paycheck contributions into my taxable brokerage account, it will take quite a while to build up 1-2 years of cash.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

livesoft wrote: Fri Nov 25, 2022 10:42 am
Harry Livermore wrote: Fri Nov 25, 2022 9:31 amAnd (pointing out the obvious), if selling taxable as implied by Charles Joseph, you will owe tax on the gains (assuming there are gains)
[...]
I would like to point out the less obvious: Selling in taxable even at gains does not necessarily result in any tax liability. As has been mentioned many, many times on this forum:

1. Return of capital is not taxed.
2. Judicious tax-loss harvesting can bulk up realized losses that can offset realized capital gains.
3. Net realized long-term capital gains have a favorable capital gains tax rate as low as 0%, so no tax on gains in such situations.
4. There are other ways to offset such income including charitable giving.
These are all great points and I think #1 is the most important message for most people (including me) to remember. If one sells $5,000 of VFIAX, they're only getting taxed on the gains, not the return of capital.

Thank you for the above.

Edit - Which Harry Livermore of course did point out as well.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by KlangFool »

Charles Joseph wrote: Sat Nov 26, 2022 7:31 am
livesoft wrote: Fri Nov 25, 2022 10:42 am
Harry Livermore wrote: Fri Nov 25, 2022 9:31 amAnd (pointing out the obvious), if selling taxable as implied by Charles Joseph, you will owe tax on the gains (assuming there are gains)
[...]
I would like to point out the less obvious: Selling in taxable even at gains does not necessarily result in any tax liability. As has been mentioned many, many times on this forum:

1. Return of capital is not taxed.
2. Judicious tax-loss harvesting can bulk up realized losses that can offset realized capital gains.
3. Net realized long-term capital gains have a favorable capital gains tax rate as low as 0%, so no tax on gains in such situations.
4. There are other ways to offset such income including charitable giving.
These are all great points and I think #1 is the most important message for most people (including me) to remember. If one sells $5,000 of VFIAX, they're only getting taxed on the gains, not the return of capital.

Thank you for the above.

Edit - Which Harry Livermore of course did point out as well.
Have you ever done this while unemployed in a recession? Aka, selling stocks in a bear market while unemployed? Can you stand the emotional pain?

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

Post by KlangFool »

Charles Joseph wrote: Sat Nov 26, 2022 7:26 am
HomerJ wrote: Fri Nov 25, 2022 7:14 pm Especially now..

I too have always held a large chunk in cash/CDs/Treasuries. Probably too large a chunk.

But it let me sleep at night. So it was the right move for me.

But NOW? Right now I have zero regrets... I'm getting 4%-5% on those investments.
Thanks HomerJ. This is making more and more sense.

Question for you or anyone. If I decided I wanted a chunk of cash, is it reasonable to move a portion of fixed income in my tax deferred to a MMF, or in 401k to a stable value fund? I can access those in three months in an emergency. With after-tax paycheck contributions into my taxable brokerage account, it will take quite a while to build up 1-2 years of cash.
How about swapping stock to MMF in your taxable account? If you can't do this now, why do you think you can do it in an emergency?

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

Post by dknightd »

Charles Joseph wrote: Sat Nov 26, 2022 7:26 am If I decided I wanted a chunk of cash, is it reasonable to move a portion of fixed income in my tax deferred to a MMF, or in 401k to a stable value fund?
I think that is reasonable. Others might not agree. I consider "cash like" things an investment category. About 3 years before I retired I started moving some money into "cash like" things in my 403b. I lost out on some returns during that period. But it could have easily gone the other way. I now have enough "cash like" things to allow me to defer SS till 70. With a reasonable expectation that it will work out.

I guess everybody has a different relationship with "cash". I use "cash" in quotes because most of it is not actually cash money. I've always kept some money in the bank, and probably always will. If nothing else, it will give my survivors quick access to money to "bury" me, and figure things out.

I do not know how old you are, but things change when you are 59.5. You suddenly have access to all your tax deferred savings! Or perhaps only some if you are still working. If you are not maxing out your tax deferred savings, start doing it now. On the other hand, when you turn 72 things will change again. Now you have to withdraw from tax deferred accounts. It is complicated, and there is no right answer.

I think I'll always keep at least 6 months in cash like things. Preferable 1-2, or more, years. But I could change my mind ;)

Edit: The perhaps funny, or interesting thing, is that in most years cash is a "drag". But this year is different. This year "cash like" things have perhaps been my best investment! So perhaps cash is King after all ?????
Last edited by dknightd on Sat Nov 26, 2022 8:26 am, edited 1 time in total.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

Harry Livermore wrote: Fri Nov 25, 2022 9:08 am So, I don't know what to advise the OP, other than perhaps stop adding new money to "investments" for the next 3 years until retirement, and instead accumulate "cash".
Cheers
Thanks very much. That, plus turning off reinvestment of dividends/cap gains in taxable could get me there a bit faster. (Wellington, S&P 500 at Vanguard, Puritan, S&P 500 at Fidelity - am am already a low tax bracket and will use the W/P income in retirement). Makes me nervous, not reinvesting, but I'm only three years from retirement.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by winterfan »

My spouse will retire in a 2-3 years and we have cash for the first time in our lives this year (15k in a savings account and 20K in iBonds). We know we have school expenses for our child in the next few years, so it makes me feel better knowing we can cover that if there is a downturn, job loss, etc.

If we didn't have this expense looming, I would keep about 5-10K in cash and invest the rest. We have some fixed assets in our IRAs and my spouse is over 59.5 as well, so we have access to that money if we need it.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by dknightd »

Charles Joseph wrote: Sat Nov 26, 2022 8:19 am
Harry Livermore wrote: Fri Nov 25, 2022 9:08 am So, I don't know what to advise the OP, other than perhaps stop adding new money to "investments" for the next 3 years until retirement, and instead accumulate "cash".
Cheers
Thanks very much. That, plus turning off reinvestment of dividends/cap gains in taxable could get me there a bit faster. (Wellington, S&P 500 at Vanguard, Puritan, S&P 500 at Fidelity - am am already a low tax bracket and will use the W/P income in retirement). Makes me nervous, not reinvesting, but I'm only three years from retirement.
You are in the SORR (Sequence Of Returns Risk) years. It is a scary time!
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

dknightd wrote: Sat Nov 26, 2022 8:45 am
Charles Joseph wrote: Sat Nov 26, 2022 8:19 am
Harry Livermore wrote: Fri Nov 25, 2022 9:08 am So, I don't know what to advise the OP, other than perhaps stop adding new money to "investments" for the next 3 years until retirement, and instead accumulate "cash".
Cheers
Thanks very much. That, plus turning off reinvestment of dividends/cap gains in taxable could get me there a bit faster. (Wellington, S&P 500 at Vanguard, Puritan, S&P 500 at Fidelity - am am already a low tax bracket and will use the W/P income in retirement). Makes me nervous, not reinvesting, but I'm only three years from retirement.
You are in the SORR (Sequence Of Returns Risk) years. It is a scary time!
Yes!! And thanks for your other post above. Appreciate you taking the time. I'm 3 months from 59.5. I could move to stable value in my 401k and/or to Vanguard Federal Money Market Fund in my IRA - both "cash like" stuff. And yes Cash is King these days!

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

Post by HomerJ »

Charles Joseph wrote: Sat Nov 26, 2022 8:19 am That, plus turning off reinvestment of dividends/cap gains in taxable could get me there a bit faster. (Wellington, S&P 500 at Vanguard, Puritan, S&P 500 at Fidelity - am am already a low tax bracket and will use the W/P income in retirement). Makes me nervous, not reinvesting, but I'm only three years from retirement.
I turned off reinvestment of dividends and capital gains recently, and have been tracking how much my settlement account has grown this year.

Gives me an idea of how much "income" my investments generate even without selling a single share.

Of course, next year, it should be even a bigger number.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by delamer »

Just as a counterpoint, remember that William Bernstein has recommended having 20-25 years of net expenses in cash equivalents and the rest of the portfolio in stocks.

This is at the start of retirement.

I’m not suggesting that you do a 180, but reading his thoughts on the subject might give you a new perspective: https://www.whitecoatinvestor.com/berns ... -the-game/
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by trek83 »

delamer wrote: Sat Nov 26, 2022 2:53 pm Just as a counterpoint, remember that William Bernstein has recommended having 20-25 years of net expenses in cash equivalents and the rest of the portfolio in stocks.

This is at the start of retirement.

I’m not suggesting that you do a 180, but reading his thoughts on the subject might give you a new perspective: https://www.whitecoatinvestor.com/berns ... -the-game/
Wow - 20-25 years is a lot ! Seems ultra conservative - But really good advice overall. Thanks delamer.

We have about 12 -15 years of cash equivalents at the moment - am very early in retirement, so like Klang Fool says - SWAN !

We are fortunate to have about 27x in our portfolio.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by JC CPA »

Well he includes SPIAs and short term credit investments including CD’s

Essentially a de-risking strategy to address the under-appreciated risk that retiree investors will blow themselves up with a risk heavy (50-70% equities) portfolio

Some of this gets to a stop playing once you’ve won the game, ie pensionize your portfolio to the extent to cover minimum expenses
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Rudedog »

Funny story, my Mother and Mother-in-law each kept about $ 30k in their checking accounts. Guess how much my wife and I have in our checking account? Yep, its around $ 30k.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by niagara_guy »

I don't hold a lot of cash, I sell a stock fund when I need some. Right now that's not a good idea since the market is down about 18% ytd, but I don't know that ahead of time. Over time this method has served me well since the market has gone up most years.
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by delamer »

trek83 wrote: Sat Nov 26, 2022 9:59 pm
delamer wrote: Sat Nov 26, 2022 2:53 pm Just as a counterpoint, remember that William Bernstein has recommended having 20-25 years of net expenses in cash equivalents and the rest of the portfolio in stocks.

This is at the start of retirement.

I’m not suggesting that you do a 180, but reading his thoughts on the subject might give you a new perspective: https://www.whitecoatinvestor.com/berns ... -the-game/
Wow - 20-25 years is a lot ! Seems ultra conservative - But really good advice overall. Thanks delamer.

We have about 12 -15 years of cash equivalents at the moment - am very early in retirement, so like Klang Fool says - SWAN !

We are fortunate to have about 27x in our portfolio.
As JC CPA says above, it’s based on a stop-playing-once-you’ve-won-the-game philosophy.

The concept is a Liability Matching Portfolio, which has been recommended by other (credible) experts also.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

KlangFool wrote: Sat Nov 26, 2022 7:47 am
Charles Joseph wrote: Sat Nov 26, 2022 7:26 am
HomerJ wrote: Fri Nov 25, 2022 7:14 pm Especially now..

I too have always held a large chunk in cash/CDs/Treasuries. Probably too large a chunk.

But it let me sleep at night. So it was the right move for me.

But NOW? Right now I have zero regrets... I'm getting 4%-5% on those investments.
Thanks HomerJ. This is making more and more sense.

Question for you or anyone. If I decided I wanted a chunk of cash, is it reasonable to move a portion of fixed income in my tax deferred to a MMF, or in 401k to a stable value fund? I can access those in three months in an emergency. With after-tax paycheck contributions into my taxable brokerage account, it will take quite a while to build up 1-2 years of cash.
How about swapping stock to MMF in your taxable account? If you can't do this now, why do you think you can do it in an emergency?

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

Post by whodidntante »

Are we talking about deluxe tacos or just the regular ones?
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by JC CPA »

whodidntante wrote: Sun Nov 27, 2022 1:50 pm Are we talking about deluxe tacos or just the regular ones?

I’m a Mexican pizza type of guy
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by Charles Joseph »

whodidntante wrote: Sun Nov 27, 2022 1:50 pm Are we talking about deluxe tacos or just the regular ones?
Cheesy Bean and Rice Burrito
Spicy Potato Soft Taco

I'm a $1.59 menu guy all the way.
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1moreyr
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Re: Retiring in Three Years: Only Enough Cash For Taco Bell

Post by 1moreyr »

Beensabu wrote: Wed Nov 23, 2022 10:21 pm 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.
Sincerely, that is the best/ most clear argument I have heard for not sitting on a lot of cash in retirement... as I personally sit on a lot of cash in retirement :oops:
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