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Old 03-09-2009, 03:01 PM   #61
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Originally Posted by REWahoo View Post
Estimated annual expenses (includes taxes)
- estimated annual income from SS
- estimated annual income from dividends
= estimated annual shortfall

Are others using similar logic when reporting how many years living expenses they have in cash?
That's what I used. + a pension.
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Old 03-09-2009, 03:22 PM   #62
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Originally Posted by ziggy29 View Post
One wonders if the market can recover at all given that almost everyone says they aren't selling now but plan to reduce their AA in stocks when we recover some...

I tend to agree that the market recovery will be difficult due to people selling rallies. I started this downturn at 50/50 and am currently 30/70. If a recovery comes I would think the professionals will jump in the market hard sending it up 20 or 30 % quickly. As my allocation nears the 50% point I will consider trimming but a balanced approach has served me well so far. Now those who were 80 or 90% equities may have a much different allocation in mind as I'm sure some have seen losses they did not expect.
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cash reserve
Old 03-09-2009, 05:13 PM   #63
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cash reserve

we have 5 yrs. of living expenses if calpers stopped paying me. but then we would not be the only one in a pickle.
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Old 03-09-2009, 05:41 PM   #64
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Thanks Audrey and YouBet. I guess my #1 objective in having cash is to avoid selling an asset that has dropped in value, thus losing an opportunity for it to rebound.

If I were to move $100,000 from GNMA to Prime MM, I'd be giving up about $3,000 per year in returns (currently 5.6% vs. 2.3%) but avoiding the possibility of having to sell GNMA shares at a time when it's value has gone down. It's all trade-offs.

I think I'll probably split the difference, and move about half of the amount I would if GNMA were a more volatile investment.
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Old 03-09-2009, 06:54 PM   #65
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I feel that a simple calculation of years cash based on current price levels (or very moderate inflation) can lead to a false sense of security particularly when you get to 10-20 year levels. There are plenty of examples of countries (Argentina, Brazil, Germany) where inflation quickly got VERY out of hand and I don't think there are any guarantees that we will be able to avoid some exposure to significant inflation. If that happens, cash and near cash are the worst offenders.

For what is worth, cash is currently about 10% of my allocation and I really don't want to go any higher than this. I am retired, don't have a pension and am still four years away from SS...
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Old 03-09-2009, 10:32 PM   #66
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Thanks Audrey and YouBet. I guess my #1 objective in having cash is to avoid selling an asset that has dropped in value, thus losing an opportunity for it to rebound.

If I were to move $100,000 from GNMA to Prime MM, I'd be giving up about $3,000 per year in returns (currently 5.6% vs. 2.3%) but avoiding the possibility of having to sell GNMA shares at a time when it's value has gone down. It's all trade-offs.

I think I'll probably split the difference, and move about half of the amount I would if GNMA were a more volatile investment.
Sounds like as good a plan as any T AL.

I have DW's IRA 100% in a GNMA fund and it sure has done well though all this. 5%+ interest plus some NAV gain is hard to knock when equities are falling like a rock. But, like you, I've been thinking the time to move some of that to another fixed investment may be here. It won't be a MM since her IRA isn't on our list of possible sources of cash. Maybe some shares of the TIP ETF if the share price drops to the $95 range.

I feel inflation coming down the road.....
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Old 03-09-2009, 10:45 PM   #67
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Our AA is 41/41/12/6, or will be shortly when I top off my munis with a bonus due within the next couple weeks (equities, bonds - mostly munis, real estate held for sale at some future date, cash). My earlier post said we had three years worth of barebones expenses, which is true, and assumes no other income. With the bond interest, and current levels of dividends, we have non-work related income approximately equal to our moderate expense scenario, and would not need to dip into the cash. So why am I not FIREd? I'm not sure DW's and my tastes and hobbies can be satisfied with the moderate expense budget, I am fearful of the market becoming much worse than it is now, and I am fearful of health insurance being much higher than anticipated in any of our current budgets (about $13,200 budgeted). So, I keep pouring money into the bottomless pit/market.

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Old 03-10-2009, 02:11 PM   #68
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It won't be a MM since her IRA isn't on our list of possible sources of cash.
Our GNMA is in an IRA, but if I need cash I use patented TromboneAl Switcheroo® .

That is, I transfer, say $20,000 of shares from our taxable-account 500 Index fund to our taxable MM account, and on the same day transfer $20,000 shares from IRA MM to IRA 500 Index fund.
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Old 03-10-2009, 02:39 PM   #69
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Our GNMA is in an IRA, but if I need cash I use patented TromboneAl Switcheroo® .

That is, I transfer, say $20,000 of shares from our taxable-account 500 Index fund to our taxable MM account, and on the same day transfer $20,000 shares from IRA MM to IRA 500 Index fund.
I remember you mentioning that propriatary procedure before, and it does make some sense. I'll have to give that some thought.
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Old 03-10-2009, 02:57 PM   #70
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I guess my #1 objective in having cash is to avoid selling an asset that has dropped in value, thus losing an opportunity for it to rebound.
Al, et. Al (sorry!)

Guess I'm the opposite in that I only keep equities as an inflation hedge. Based on CURRENT inflation and CURRENT WDR I don't need equities. However, I'm trying to increase my equities (which is tough to do right now as we all know) to combat the inflation I assume is coming. Ironic that the "cure" for our current equity mess may well be inflation. I guess it just shows you can't fool mother nature. You push something in here and it pops out over there. Or, there is no free lunch, or...

To someone else's point about the actual AA I use. I'll be honest. I'm not sure. Even though I've added to equities lately, I haven't had the nerve to calculate everything out. If I did that, I'd probably abandon my plan to increase equities. I'm trying to work up to about 25/65/10 or there about. For the purposes of this thread, I lumped the 65 and 10 together and called them cash, even though I know that's incorrect. The bulk of my "bond" equivalent investments are through a Stable Value fund. Not sure how stable "Stable" is, but in 35 years the NAV has never gone down. The returns vary, but the NAV holds steady. For that reason, I felt OK about calling them "cash" - at least for now. Heretical? Probably.
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Old 03-10-2009, 04:32 PM   #71
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Are you saying you're going for a 30% or so allocation to cash/cash equivalents? Sounds pretty high as a long term position.

Would you let that diminish as you go through retirement? Or replenish it and keep it at 10 years?
I will keep 10 years of cash and TIPS for living expenses.

The remaining amount can be invested in non cash equilivents.
My allocation would be heavy on the cash side but I do not see
that much risk in this.

I would not replenish it since I do not have any income to do so
unless I choose to work.
No pension or full SS for 10 years
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