How Many Month/Years of Living Expenses do You Keep in Cash?

[David1961]

When I ER'd about a year ago, I had between 2-3 years of annual expenses in cash. However, since I'm also getting a pension and have some dividends and other distributions coming in as cash, I have barely had to tap into this yet. (no major unexpected expenses, fortunately).

[bizlady]

I think "how much" not only is subjective, but it depends on your "guaranteed" income. If SS and pensions cover 90% of expenses, you do not need much cash. If you are not yet on SS or have little or no pensions, you may want more.

We are 2+ years into retirement, 56/57 years old, and do not want to tap our retirement funds before 59.5, as they are all taxable, and we have no Roth. At this stage, we keep 2 years expenses in cash. At the start of retirement, it was still 2 years expenses in cash plus taxable investments, which we have now mostly cashed out to keep that bucket in cash.

[MDJO]

Currently about 4 years expenses in cash or stable value investments. One year in money market, one in savings at just under 1%, and last two years at 2.8 %. Rest is in equities. Waiting to purchase bonds when interest rates turn up.

[calmloki]

Closing in on 64 and we sit on about 3 1/2 years of cash in bank accounts earning about 0.85%. We don't have a budget, but that is at the amount I use as an annual expense for planning/score keeping. Knowing myself. we more likely have 4 1/2 years of cash. That amount gets tapped and replenished if good short term investments come up, but we get uncomfortable with less than 1 1/2 years worth ready to grab. Another chunk in PenFed CDs equal to what we owe on the PenFed 5/5 home loans plus about 3/4 of a year.

[vttlarry]

I have about a year of expenses at my ready. Pension covers bills and SS in another year allows me to be more aggressive with my investments.

[KB]

I retired just over 8 years ago. I keep 4 years of annual expenses in CDs at 1 year intervals. Over time I have accumulated another 2 years worth, sort of by accident. I either will add 2 more CDs or invest it in Vanguard. It's been sitting in my Ally savings for awhile until I figured out what to do with it.

[psweath]

5 years of living expenses in cash is what keeps me from checking on the market every day.

[Meadbh]

Quote:

Originally Posted by bizlady I think "how much" not only is subjective, but it depends on your "guaranteed" income. If SS and pensions cover 90% of expenses, you do not need much cash. If you are not yet on SS or have little or no pensions, you may want more.

Exactly.

[Independent]

I've got a DB pension that covers about half our current expenses. I make withdrawals from investments when the checking account gets down to about a month's expenses, and then withdraw a few months at a time.

I make no attempt to "time" withdrawals based on market conditions, because I don't think I have any special insights into market prices.

[Ronnieboy]

I'm not close to FIRE yet either, but the plan is:

Have two years of budgeted monies in cash equivalents while having dividends paid into that account to keep it topped off. No real maintenance/emergency fund set up per se, but part of the budgeted plan is to have $xxx/month for house repairs, $xxx for auto, etc. that would just build up until needed.
I would take the money out for the new washer, dryer, roof whatever, car out of said funds, just have to hope the money is there at the time and not have to go into a debit

[jebmke]

typically about 1/2 of months worth. I sell something at the beginning of the month to fund the upcoming month and by the end of the month it is gone.

[Badger]

If I would only be able to draw from the available cash in taxable MM accounts fed by dividends I would probably have about 4 years. If it was to suppliment pensions and SS then it would probably cover 10 years without changing our lifestyle.

Cheers!

[mickeyd]

I have about 2 years expenses stashed in "cash reserves" which is partially cash and the rest STB fund and a few other similar assets.

[martyb]

I'm retiring in 3 1/2 months. Initially, my federal employee DB pension will cover 75% of our expenses, with some cushion, including health insurance & a $1200 mortgage. Wife will continue working for a year or two, continuing to fund her 401k & making up the 25% difference in our budget. This will allow us to avoid withdrawals from my TSP.

In 4 years, I'll begin receiving my military reserves retirement, which will replace wife's working income. If she works until my mil retirement starts, we won't have to touch the TSP or her 401k. If she retires before the mil retirement begins (her choice) we'll have to withdraw at a 4% rate until the mil retirement does begin, then cease withdrawals at that point.

Wife is 3 yrs younger than I. She'll begin SS at age 62, when I'm 65. Her SS will only be maybe $600 or so. Mine is affected by the WEP, and will be $250 or less. Our biggest financial decision in the next 3 or 4 years will probably be whether to use portfolio funds to pay off the mortgage or continue making payments. Terms are 4.25% fixed, VA loan for 30 yrs. Paying off the mortgage will leave us with a much nicer monthly/yearly cushion, but at the cost of the loss of investment opportunity.

We won't have a large total portfolio, so paying off the mortgage would put a big dent in it (by about 50%). Still, since by age 60 (me, 4 yrs from now), my pensions will cover 100% of our finances, maybe that wouldn't be such a big concern. All that said, we will probably only keep 6 months basic expenses in cash, plus maybe $25,000 or so, in Roth IRA's for emergencies.

[48Fire]

I just keep a month or two of expenses in cash, and no separate emergency fund. If I need something, I can sell something.

[foxfirev5]

Currently at age 57 1/2 I have 5+ years expenses in cash. Ready to ER at anytime financially. If I don't retire before 59 1/2 I plan to reduce the cash portion as I get closer to age 62.

[Meadbh]

Clearly we are all over the map, from 1 month to 10 years!

[Bikerdude]

I guess it depends on what the meaning of cash is. If it includes CD ladders then I have about 8 years. If it is MM then I have about 18 months.

[Alan]

Quote:

Originally Posted by Bikerdude I guess it depends on what the meaning of cash is. If it includes CD ladders then I have about 8 years. If it is MM then I have about 18 months.

+1

I have a couple of months in a savings account, plus I do have ~2 years of annual spend in I-Bonds which is as good as cash IMO

[JonnyM]

None, "they" pay us. We spend it. If you want to get technical then call it max of:

One Month, lol.