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Old 03-08-2009, 11:57 AM   #21
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Wow, this thread is very instructive. You guys have a lot of cash. Right now I have about two years of bare bones expenses in cash and cash equivalents, not counting bonds. I am currently putting 75% of my monthy savings into cash and planning to increase that to 100% as soon as a recovery takes hold in equities. My goal is to have at least 5 years expenses in cash before retiring. Maybe I need to be more conservative!

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Old 03-08-2009, 12:24 PM   #22
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Wow, this thread is very instructive. You guys have a lot of cash. Right now I have about two years of bare bones expenses in cash and cash equivalents, not counting bonds. I am currently putting 75% of my monthy savings into cash and planning to increase that to 100% as soon as a recovery takes hold in equities. My goal is to have at least 5 years expenses in cash before retiring. Maybe I need to be more conservative!

Yeah, but are you retired? Big difference (for this question) between someone still saving and someone living in retirement.
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Old 03-08-2009, 12:38 PM   #23
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I compute this in the following way. From my estimated expenses. I subtract dividends and interest (and SS and pension, if applicable). Then I look to my cash pool to make up the difference, and figure the number of years my cash will last without replenishment before I would have to sell long-term holdings (stocks or bonds). Obviously, this requires re-computation if dividend (or interest) income gets cut. This method, although perhaps more risky in the eyes of some, allows a for a higher equity allocation.
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Old 03-08-2009, 12:47 PM   #24
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How many years of cash/cash equilivents do you have now

I can't address this until someone explains to me what an equillivent is. It sounds like chemistry lab.
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Old 03-08-2009, 12:49 PM   #25
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Yeah, but are you retired? Big difference (for this question) between someone still saving and someone living in retirement.
I'm w*rking (original planned ER date 2013, now subject to change!). But some of the posters are still w*rking too.
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Old 03-08-2009, 12:55 PM   #26
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Wow, this thread is very instructive. You guys have a lot of cash. Right now I have about two years of bare bones expenses in cash and cash equivalents, not counting bonds.
I think these discussions could be misleading to folks who haven't been following along. I don't think many of the posters are actually advocating carry high percentages of cash.

As some have indicated, there is a big difference between "years of expenses" held in "cash or cash equivalents" and having enough cash, interest income, dividend income and other income such as SS and pensions to avoid selling equities.

For someone with SS and a bit of a pension, a generic 60/35/5 portfolio might well supply decades of "no selling of equities" performance to support a barebones retirement budget. No particular emphasis on cash or liquidity required. Collect dividends generated by the 60% equities. Collect interest generated by the 35% fixed. Collect SS and pension. Use the 5% to smooth the periods between div and int payments. Live a modest life.

I follow the method FIREd@51 describes in post #23 above. It makes it possible to mangage investments with an eye on potential future inflation which, IMO, will eventually turn out to be more of a threat to ER types than the current downturn in equity prices.
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Old 03-08-2009, 01:03 PM   #27
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I have almost 2 years in cash accounts separate from my retirement fund.

I have just under 12 years in cash+bonds in my retirement fund (~45% or so of my portfolio). Unfortunately some of my bond funds got hit really hard too last year, but I'm hoping they will recover first!

So - almost 14 years.

I am retired.

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Old 03-08-2009, 01:07 PM   #28
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Everything is in cash or short term bonds at the moment. I'm waiting until stocks look like an attractive buy, then will diversify more.
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Old 03-08-2009, 01:11 PM   #29
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Income will be = non-cola pension + dividends + cash

Both dividends & cash come from retirement savings.

Enough cash for 10 years.

Cash for me is a combination of MMFs, CD's and I-Bonds.

In 8 years SS will kick in.

savings currently is made up of 15% cash. (rest is 35% equities, 50% bonds)
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Old 03-08-2009, 01:19 PM   #30
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I'm two-to-three years from retirement.

I have about 10-12 years of cash/bonds/Wellesley. Assuming the market continues its current path, and I include my equities, I figure in total I will have 10-12 years + 6-8 days before my financial resources are depleted.
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Old 03-08-2009, 01:25 PM   #31
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I think these discussions could be misleading to folks who haven't been following along. I don't think many of the posters are actually advocating carry high percentages of cash.

As some have indicated, there is a big difference between "years of expenses" held in "cash or cash equivalents" and having enough cash, interest income, dividend income and other income such as SS and pensions to avoid selling equities.
So....are we really talking about CASH FLOW?
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Old 03-08-2009, 01:37 PM   #32
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So....are we really talking about CASH FLOW?
I thought we were talking about holding the amount you need to withdraw each year from savings to live on.

I have 10 years of cash for that and would keep that amount even without a pension. If I did not have a pension the % of my savings held in cash would be much higher and I would only be in equities at 15-20%.
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Old 03-08-2009, 02:04 PM   #33
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So....are we really talking about CASH FLOW?
Yes, "years in cash" is very comforting, but it's really "years in cash enough to supplement cash flow" that counts. Pension plus dividends plus interest plus S.S., etc., with enough cash to make up the difference. For many people, a little cash goes a long way.
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Old 03-08-2009, 02:14 PM   #34
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Yes, "years in cash" is very comforting, but it's really "years in cash enough to supplement cash flow" that counts. Pension plus dividends plus interest plus S.S., etc., with enough cash to make up the difference. For many people, a little cash goes a long way.
Agreed.

If my pension disappeared before I start drawing it next year then the cash I have in savings would last only 3 years, not 10. (In reality, if that happened I would drastically change the planned retirement to reduce spending)
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Old 03-08-2009, 02:15 PM   #35
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It's hard to calculate, but if things stayed the same as today I have enough for at least 20 years...

If we have inflation Id think interest rates would rise and I might be able to live off of interest without drawing down principal
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Old 03-08-2009, 02:17 PM   #36
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How many years of cash/cash equilivents do you have now

I can't address this until someone explains to me what an equillivent is. It sounds like chemistry lab.
Good point - - seems like a wide variety of definitions going on in the same thread, with no particular standard definition.

For me, cash is money in a MM fund. A cash equivalent is something else that will not lose any value whatsoever - - in my case, the G Fund of the TSP.

I didn't include other bonds, Wellesley, dividends, my bank accounts (which are earmarked for my move and transitional expenses when I retire), or my house. As I mentioned in my post, I also didn't include pension or SS. If I include all of these things and don't include inflation then I have infinite years in cash, which is pretty meaningless. I think you can define it as you wish.
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Old 03-08-2009, 02:20 PM   #37
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So....are we really talking about CASH FLOW?
Sure. And, IMO, that's a better way to look at withdrawals as part of overall retiree portfolio management than a "keep a separate stash of cash" view. But, to each his/her own.

Just scanning back over the posts in this thread, it's clear the definition of "cash" or "near-cash" or "cash equivalents" or "constant value investments" varies all over the place. Not surprising I guess.

I still believe in asset allocation as the key contributor to portfolio success. In retirement, I'm finding that withdrawal needs are influencing my AA decisions (and appropriately so!), but I don't find it beneficial to leave AA strategies behind and go to separate "cash" (whatever that is) stashes. I've just adjusted my AA so that cash flows + pension and SS = spending budget with some true liquid cash (5%) to handle emergencies and smooth over any periods with few int or div distributions.
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Old 03-08-2009, 02:34 PM   #38
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I've just adjusted my AA so that cash flows + pension and SS = spending budget with some true liquid cash (5%) to handle emergencies and smooth over any periods with few int or div distributions.
Good point.

Currently all my income to live on comes from a salary, and I keep 6 months expenses worth of cash in a MMF for emergencies. My retirement fund is managed separately.

Next year my income to live on will come from pension + withdrawals from retirement fund. Fund will have 10 years cash ie CD's, I-Bonds etc to ride out markets.

I still intend to keep 6 months expenses in cash in a MMF outside of the retirement fund which will ebb and flow as it does now. oops - major unplanned for major expense, then use emergency fund to cover and cut back on living expenses until it is replenished.

Just my way of keeping things segregated and "logical".
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Old 03-08-2009, 02:39 PM   #39
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If SS and COLA'd "pension" income is counted as cash, or cash equivalent, I just have to keep breathing.
Now you got me quoting myself. So if it is only CASH in MMA (not fund) and CD's, both earning interest, but disregarding the interest component, which can go up and down, and only assuming PRINCIPAL (could be under the mattress) we may have enough to pay expenses for the next 20 years. That should be enough (ages would be 88/91 at that point).
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Old 03-08-2009, 02:41 PM   #40
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It's hard to calculate, but if things stayed the same as today I have enough for at least 20 years...

If we have inflation Id think interest rates would rise and I might be able to live off of interest without drawing down principal
Steve.... based on my experience with the double digit inflation we experienced in the past, most investments are hard pressed to keep up. Interest rates on CD's, for example, are typically a point or two above inflation. That's the "real" interest rate you're receiving. However, when high and rising inflation kicks in, you typically see negative real interest rates with CD's and similar paying less interest than the inflation rate.

I think the "final blow" to the current economic mess we're in will be an eventual dramatic rise in aggregate prices without corresponding increases in the value of most investments leaving retirees in a bind. I'm trying to plan for that. There are a number of threads here on TIPS and related ETF's and MF's. Do a search and read them.
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