catastrophy theory

[kz]

I'm guilty of keeping $xx,xxx in money market/savings accounts. I think it comes from a mindset of NEVER touching investments but it's ok to take from savings. (thanks, dad <g>) I realize that it may not make sense to most people here but it works for me.

Everything is pretty much budgeted at this house 'cause I'm pretty anal about that. We had a few unexpected expenses after hubby retired this yr but, in total, less than $7000. (mostly for the boys)

 

[TromboneAl]

Retirement: You'll end up in Uranus if you don't planet.

 

[maddythebeagle]

Interesting idea. If you are FIRE, I would think that an emergency fund in a mm account, etc. isnt as nec. My impression is more nec. for the working slave with little net worth, kids, mortgage. If they lost a job, they would have a harder time paying the debt payments and bills during a period of no income.

 

[ERD50]

Interesting idea. If you are FIRE, I would think that an emergency fund in a mm account, etc. isnt as nec. My impression is more nec. for the working slave with little net worth, kids, mortgage. If they lost a job, they would have a harder time paying the debt payments and bills during a period of no income.

Yes, good perspective, maddy. In retirement with a diversified portfolio, there is usually someplace you could pull money from without a lot of hurt. But for those in the accumulation phase of life - well, they probably do need to keep some liquid cash. They don't have as many options available.

One source of quick cash is a margin account at your broker. If you just have a one or two month cash flow issue, the rates aren't so bad, no paperwork, and tax deductible against gains.

-ERD50

 

[Martha]

I'm not understanding this thread.

Many of us on this forum have between $200,000 and $400,000 in taxable accounts (that is, non-retirement accounts). For someone like that, talk of an emergency fund is totally irrelevant right?

Things can be organized so that in an emergency, you wouldn't have to sell stock when the market is down, and even if you had to -- it's an emergency, and in an emergency you might have to take a bit of a loss.

I guess this would be relevant if the taxable money were gone, and you were under 59.5 years old, or if your money were coming from a pension, and you didn't have savings.

Let me know what I've overlooked here.

I think the issue is in part how much fluff do you have in your budget to cover the unexpected. A two million dollar well balanced portfolio historically yielded a SWR of $80,000. But do you spend $80,000? Or do you spend a lot less, figuring that (1) you have a long live ahead, a lot can happen in 40 years, (2) you are not so sure about a SWR anyway, (3) you worry about unexpected costs, like increases in medical costs and (4) who knows what I will want to spend my money on in 20 years.

Then there also is figuring out how much fluff to have in the budget just for the irregular things, like the day after you take collision insurance off your car you have an accident and total it.

 

[Sheryl]

In addition to Martha's explanation, I think we were also asking about actual accounting logistics. Some posters have referred to having $xk for emergencies and then "rolling it over" in years that it's not used.

So it's really all a mindset - do you budget for emergencies every year, which I guess semantically would make them not emergencies, if they were planned for. Or do you just know in general that, for example, you spent $8,000 on unexpected plumbing repairs in October, so you better scale back the spending in Mexico that you might otherwise have done in February until your "average" spending reverts back to average.

Some of us like the physical simplicity of putting each budget pot in separate accounts or envelopes - others are content to just keep the big picture in mind.

 

[greg]

Yeah, but if you're looking for retirement real estate there is a Great Spot on Jupiter...

REW: If you're looking for a RE venture, I know of heard about
a G-spot on Venus.

We're back from vacation! Yeeaaah!

TromboneAl: What I was looking for in this thread was sort a common budgetary amount that people set aside for the unexpected. We are currently attempting to 'tighten up' our expected retirement budget. I was attempting to find out what these common unexpected events cost other people on a yearly basis so that I can adjust my amount up or down. '10% fluff' is a about right to my mind at this point--a good rule of thumb. As usual though, I'm still searching for the unexpected unexpected that always eludes me. Good comments from everyone. Thanks to all.

We visited the insane ayslum museum in St. Joe. MO last week. Both DW and I enjoy industrial wasteland visits on our RV forays, so we thought a psychological wasteland visit was appropriate. They had a huge hamster cage-like apparatus there that people who couldn't stop moving were put in to tire them out. Talk about a tautology rat race! Nothing unexpected going on in there.

I wanted to visit UncleMick and go on a jelly donut run with him while the SOs visited and gossiped about us (maybe, but probably not), but DW threatened to put me in a storage compartment for the duration of the trip. The more things are different, the more they stay the same.

--Greg

 

[KB]

Before I retired, I kept my Emergency fund (8 months expenses or so) in a Money market account, my irregular bills money in another MM account and my monthly money in my checking account.

Since retiring, I deposit my monthly money in my checking around the first of the month and all the rest is in 1 Money market account. I'm keeping 1 years expenses in that MM and a second years expenses in CDs (I got this idea from either Nords or Cut-throat....forget which).

I invest all the extra. It's pretty clean and simple this way.

 

[frayne]

Our annual living expenses are approx. $35K and we keep an extra $10K for emergencies. We also have approx. $50K for extra ordinary expenses in easy to access funds. So far haven't had the need to dip into either of our emergency contingency funds, but it is good to know they are there if needed.

 

[SteveR]

Not retired yet, but laying the foundation. We have several accounts that will be used for retirement:

Checking for short term month to month bills.

MM for longer than 1-2 months of expenses. This is sort of the transfer account where stuff sits after it comes from differnet sources but prior to moving to checking or out to a CD or other investment. It is also the overall slush fund for the "unexpected" expenses we know will show up (and has) from time to time. Ours is pretty big right now due to the two properties that seem to always need something that just can't wait.

CDs for longer term stuff like less than a year. I have two: one three month and one 6-month; waiting for rates to go up a bit more before I lock in for a longer term.

Longer that 6 months out is sitting in mutual funds and bond funds. Once we do bail from the work world, we will activate our income streams from the various sources and see what happens year to year. Our SWR in the first 10 years will be about 5% with reductions at intervals along the way. The ending period SWR will be more like 1-2%.

Now we just need to stay alive long enough to spend it all. 8)

 

[REWahoo]

REW: If you're looking for a RE venture, I know of heard about
a G-spot on Venus.

Greg, looks like others have heard about it too...

Scientists Probe Venus Mysteries

http://www.msnbc.msn.com/id/9807779/

 

[greg]

REW: Dang, that spot really moves around when it wants to. :

--Greg