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03-26-2014, 01:22 PM
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#1
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Recycles dryer sheets
Join Date: Feb 2014
Location: SF Bay Area
Posts: 289
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Really, what IS cash
Hi, a real newbie here. I’ve been lurking around this sight for some time and have finally pulled the trigger on signing up and getting involved (albeit with some very basic questions.)
First off, old timers on this board should know how grateful folks like me are, in that I’m sure there is no question that hasn't already been asked over the years, and yet the forthcoming advice is always fresh and helpful. The information thus far received is priceless.
Secondly, kudo’s to all the moderators. I’m no stranger to forums in general and the discourse on this one is helpful, friendly, Non-judgmental, and enjoyable to read. So, to those in charge and to long time contributors….Great Job!
About me….think of George Clooney; add 75 lbs., less hair, 3” shorter and not as good looking.
Going forward, anything I say with respect to AA or $ in general should be taken “as for two” (i.e. My wife and myself). Mine is hers and hers is mine. Been that way for 35 yrs and counting. We are both in professional careers (Megacorp/Healthcare), but certainly not “big fish”. We live in the SF bay area. I mention that because I think there is so much of difference with respect to “net worth”, given where a person resides.
Technically, I’m not ‘early’ with respect to retirement. I’m 60, DW 57. Simply put, I’m burnt out on w**k and its focus on “process” (another story for another day). Want to pull the plug this year with DW working another 2 or 3 (kept man). Then tap retirement. While there is much more to add, I just wanted to get this brief introduction out there, and say ‘Hi’.
But before leaving, I do have a question…and, it may be more philosophical rather than technical. With respect to AA xx%/xx%/Cash. What really is cash?
I think cash is..
• Anything in the bank
• Anything in my wallet
With respect to retirement, it’s the above, plus
• Anything in a MM or stable fund. But with that said, if it’s in an IRA, Uncle Sam still takes a bite.
• So, is cash anything in MM or stable fund Investment account (not IRA). Uncle Sam still gets something minor…. But like interest in a savings account it’s just on growth.
• Can I look at a ROTH account as cash? Yes if it’s in a mm/Stable fund or No if a high risk International fund?
Is the answer All of the above? Just food for thought I guess. I would like a 10% or 15% cash reserve when retired.
Anyway, glad to be here. And finally, the biggest thing I’ve learned from my lurking…. I mean, THE Biggest thing, is given the right knowledge base and skillset, anyone should be able to manage their own funds in retirement.
__________________
"The only function of economic forecasting is to make astrology look respectable"
- J.K. Galbraith
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03-26-2014, 01:36 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,370
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The type of account doesn't matter. IOW, a money market fund is cash if its in a taxable account or a tax-deferred account (like a 401k or a tIRA) or a tax-free account (like a Roth or a HSA). Look at AA across all your taxable, tax-deferred and tax-free accounts.
While there is a technical definition of cash and cash equivalents, in short it is an fixed income investment that is highly liquid and has minimal interest rate risk so everything you mention above would arguably qualify - though I think of the stable value fund as being more a bond than cash even though it is liquid and has minimal interest rate risk.
While there are posters who have a 10-15% cash reserve, IMO that is pretty high and I have seen some studies suggesting it is suboptimal, but some folks find it easier to sleep at night. I personally target 6% cash - about 18-24 months of living expenses - when I rebalance - and in my case it is in an online FDIC insured savings account that earns about 0.8%.
Note that the context that we tend to use the term cash - in AA - there are no particular rules and it can be whatever makes sense to you. For example, I sold some bond funds in December and the proceeds are sitting in a MM fund until I find the right deals on some target date bond funds to redeploy it so it is in the MM only temporarily. For my AA I consider that money to be bonds because I know the MM is just a temporary holding spot and those funds will ultimately end up in bonds.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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03-26-2014, 01:38 PM
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#3
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Recycles dryer sheets
Join Date: Feb 2014
Location: SF Bay Area
Posts: 289
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...and already, the solid advice comes pouring in
__________________
"The only function of economic forecasting is to make astrology look respectable"
- J.K. Galbraith
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03-26-2014, 01:42 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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__________________
Numbers is hard
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03-26-2014, 01:46 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,370
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In case anyone cares for the technical definition (last post in the thread REWahoo cited).
Quote:
Cash
Consistent with common usage, cash includes not only currency on hand but demand deposits with banks or other financial institutions. Cash also includes other kinds of accounts that have the general characteristics of demand deposits in that the customer may deposit additional funds at any time and also effectively may withdraw funds at any time without prior notice or penalty. All charges and credits to those accounts are cash receipts or payments to both the entity owning the account and the bank holding it. For example, a bank’s granting of a loan by crediting the proceeds to a customer’s demand deposit account is a cash payment by the bank and a cash receipt of the customer when the entry is made
Cash Equivalents
Cash equivalents are short-term, highly liquid investments that have both of the following characteristics:
a. Readily convertible to known amounts of cash
b. So near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments with original maturities of three months or less qualify under that definition. Original maturity means original maturity to the entity holding the investment. For example, both a three-month US Treasury bill and a three-year US Treasury note purchased three months from maturity qualify as cash equivalents. However, a Treasury note purchased three years ago does not become a cash equivalent when its remaining maturity is three months. Examples of items commonly considered to be cash equivalents are Treasury bills, commercial paper, money market funds, and federal funds sold (for an entity with banking operations)
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__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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03-26-2014, 01:57 PM
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#6
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Moderator Emeritus
Join Date: May 2007
Posts: 12,901
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Quote:
Originally Posted by pb4uski
The type of account doesn't matter. IOW, a money market fund is cash if its in a taxable account or a tax-deferred account (like a 401k or a tIRA) or a tax-free account (like a Roth or a HSA). Look at AA across all your taxable, tax-deferred and tax-free accounts.
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+1
For me, cash is anything in checking/savings accounts and in money market funds. Some people also consider short term bonds, CDs, and savings bonds to be cash, but personally I don't.
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03-26-2014, 02:09 PM
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#7
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Gone but not forgotten
Join Date: Jul 2012
Location: Peru
Posts: 6,335
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Not much into the technical definition, but from a practical standpoint, I look at the Treasury as my guarantor for what I consider cash equivalency. Thus my reliance on I Bonds. In addition, Banks deposits/CD's etc, covered by the FDIC. Insurance companies... policies and instruments like annuities, not necessarily covered by the Federal Government, but reliant on State Government oversight and (hopefully) management.
Our small annuity has changed hands twice, and NursingHome policy three times since beginning ownership. The latter held in trust by the state of Pennsylvania.
Some info here:
Are You Protected If Your Insurance Company Goes Belly-Up?
Also a coffee can of Seated Liberty Quarters, buried in the back yard.
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03-26-2014, 02:36 PM
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#8
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,356
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Cash is obsolete.
Bitcoin is the future, baby!
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03-26-2014, 02:43 PM
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#9
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Recycles dryer sheets
Join Date: Nov 2011
Location: Beaver island, MI and St. Augustine, FL
Posts: 90
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I count I-bonds and a stable value fund (both pay nice interest) as cash, but make sure I also have some that I'm certain I can spend immediately, such as checking acct and money market fund.
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03-26-2014, 03:57 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Location: Seattle
Posts: 6,023
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Quote:
Originally Posted by braumeister
Cash is obsolete.
Bitcoin is the future, baby!
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IRS says bitcoin is a commodity, like pork bellies.
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03-26-2014, 04:32 PM
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#11
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,356
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Quote:
Originally Posted by Fermion
IRS says bitcoin is a commodity, like pork bellies.
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Around here, bacon is worshipped to the point where pork bellies are as good as gold, so that kind of makes sense to me.
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03-26-2014, 04:40 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Location: Seattle
Posts: 6,023
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Quote:
Originally Posted by braumeister
Around here, bacon is worshipped to the point where pork bellies are as good as gold, so that kind of makes sense to me.
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A bacon backed currency! Now that is a concept I could stomach!
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03-26-2014, 05:09 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Sep 2013
Location: Cincinnati, OH
Posts: 4,373
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I'll throw my discussion into the mix. My personal view is cash can be defined as anything that can be converted to cash with easy liquidity and without significant tax consequences. So besides obvious cash itself in your wallet and checking/savings account at local bank; it is also Money Market, CD's, Roth IRA (assuming age meets minimum), after-tax investments, Gov't savings bonds, and similar type assets.
What is not would be 401k/403b, 457, or other pre-tax investments; due to the tax consequences of withdrawl. I would not count anything that is not liquid, examples would be your house, vehicles, art or other collections with value, or similar things that would take time to sell and get the value out of; due to low liquidity.
There's my $.02 of cash added to the pot!
__________________
The problem isn't artificial intelligence, it's natural stupidity.
You can't spend yourself to prosperity.
Semi-Retired 7/1/16: working part-time (60%) for now [4/24/17 changed to 80%]
Retired Aug 2, 2017; age 53
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03-26-2014, 05:41 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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Quote:
Originally Posted by FIREd
+1
For me, cash is anything in checking/savings accounts and in money market funds. Some people also consider short term bonds, CDs, and savings bonds to be cash, but personally I don't.
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+1
A lovely characteristic of cash is liquidity.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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03-26-2014, 05:57 PM
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#15
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Recycles dryer sheets
Join Date: Feb 2014
Location: SF Bay Area
Posts: 289
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Thanks for all the insight...it's why i joined. I noticed that some of you touched on the topic of Risk. I left my wallet on DW's nightstand. I'll have to evaluate the acceptable risk level of that.
__________________
"The only function of economic forecasting is to make astrology look respectable"
- J.K. Galbraith
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03-26-2014, 06:11 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,370
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Quote:
Originally Posted by FireBug
Thanks for all the insight...it's why i joined. I noticed that some of you touched on the topic of Risk. I left my wallet on DW's nightstand. I'll have to evaluate the acceptable risk level of that.
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A 90/10 AA is nothing compared to leaving my wallet on DW's nightstand.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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03-26-2014, 06:16 PM
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#17
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Full time employment: Posting here.
Join Date: Sep 2011
Location: Bushnell
Posts: 607
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Quote:
Originally Posted by FIREd
+1
For me, cash is anything in checking/savings accounts and in money market funds. Some people also consider short term bonds, CDs, and savings bonds to be cash, but personally I don't.
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+1 though I would consider CDs cash.
To the OP. Great first post. Welcome aboard.
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03-26-2014, 07:32 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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One definition of cash, and I think a good one, is money zero maturity.
But like most of these definition threads, it really depends entirely on for what purpose you want to know. Clearly cash in an IRA is cash for AA, but not for making bail should have that kind of need.
H
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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03-26-2014, 11:18 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Jun 2007
Posts: 2,657
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I consider as cash, all those cash-like investments, bank accounts, money market, CD (breakable) and so on. I would still consider them as cash if they are locked up in some kind of tax deferred vehicle assuming I have enough funds (of any kind) in taxable. Even if my taxable equity investment is way way down, I can liquidate it and buy a near equivalent in tax deferred with CASH there, so I have in effect accessed the cash from inside the tax deferred vehicle without taking a withdrawal. Maybe even took a tax loss on the equity as a bonus if things are that bad. Cash is cash whereever it is; accessing it might be tricky but it's still cash.
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03-26-2014, 11:41 PM
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#20
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Full time employment: Posting here.
Join Date: May 2011
Posts: 873
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I consider cash (that green stuff I have under my mattress). No really, any money that is liquid. MM, savings accounts etc. Maybe gold/silver investments that you can sell immediately. Just my 2 cents.
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