Join Early Retirement Today
View Poll Results: How many years of living expenses do you keep in cash and near-cash?
1 year's worth or less 31 33.33%
2 years 16 17.20%
3-5 years 25 26.88%
6-8 years 8 8.60%
9-11 years 4 4.30%
12-14 years 3 3.23%
15+ 6 6.45%
Voters: 93. You may not vote on this poll

Reply
 
Thread Tools Search this Thread Display Modes
How many years of expenses in cash
Old 07-11-2006, 06:35 PM   #1
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
How many years of expenses in cash

For those in or near FIRE (say, within 3 years).

By near-cash I mean MMF, CD's, short-term treasuries, immediate annuities -- stuff you virtually KNOW won't decrease in value.
__________________

__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: How many years of expenses in cash
Old 07-11-2006, 06:46 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,382
Re: How many years of expenses in cash

My cash allocation varies dynamically with my appraisal of risk in more speculative investments. Right now I have > 40 years worth!

Since I have been retired I have varied from the above 40 years on the high side, to a negative cash position on the low side. However, I was younger, and keeping the pedal to the metal- I wouldn't go back there. I think my floor now, regardless of how attractive non-cash investments might be, would be about 3 years. It is just more comfortable.

Still, you never know. I might become uncomfortable with being comfortable.*

Ha
__________________

__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is online now   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 07:06 PM   #3
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: How many years of expenses in cash

Quote:
Originally Posted by HaHa
My cash allocation varies dynamically with my appraisal of risk in more speculative investments. Right now I have > 40 years worth!
Wow. Nice going (unless of course, you only need $5K per year to live off ).
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 07:11 PM   #4
 
Posts: n/a
Re: How many years of expenses in cash

Quote:
Originally Posted by HaHa
My cash allocation varies dynamically with my appraisal of risk in more speculative investments. Right now I have > 40 years worth!

Since I have been retired I have varied from the above 40 years on the high side, to a negative cash position on the low side. However, I was younger, and keeping the pedal to the metal- I wouldn't go back there. I think my floor now, regardless of how attractive non-cash investments might be, would be about 3 years. It is just more comfortable.

Still, you never know. I might become uncomfortable with being comfortable.

Ha
So Mikey, with 40 years of Cash, why would you bother investing in anything other than Treasuries? - I think you know that you have less than a 1% Chance of living more than 40 years. Why even sweat the investing.
__________________
  Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 07:23 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,382
Re: How many years of expenses in cash

Quote:
Originally Posted by Cut-Throat
So Mikey, with 40 years of Cash, why would you bother investing in anything other than Treasuries?* - I think you know that you have less than a 1% Chance of living more than 40 years. Why even sweat the investing.
A few reasons really, Cut-throat-

!) Habit
2) I didn't adjust for inflation in the 40 years figure- I just took my last years expenses and divided into my current cash allocation.
3) I might like to upgrade my standard of living if I feel comfortable with doing so.
4) I am not comfortable with a liquidating scenario. Even if I only planned to live for 5 years, I don't like run-off.
5) I enjoy speculating.

I might be able to think of more, but you get the picture I am sure.* *

Ha

__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is online now   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 08:25 PM   #6
Full time employment: Posting here.
 
Join Date: Jun 2006
Posts: 718
Re: How many years of expenses in cash

1 to 2 years cash. Frankly if the market bombs so bad that I lose everything I got bigger things to worry about than that. IE start stacking water/food and ammo up in the mountains.
__________________
Mwsinron is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 08:32 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,433
Re: How many years of expenses in cash

I will be almost 53 when I retire so I plan to keep 9 years worth. Enough to get me to 62 and social security. I will evaluate my cash needs again at that time.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 08:44 PM   #8
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: How many years of expenses in cash

Quote:
Originally Posted by DOG51
I will be almost 53 when I retire so I plan to keep 9 years worth. Enough to get me to 62 and social security. I will evaluate my cash needs again at that time.
Does the loss of investment growth opportunity on that much cash concern you? Or maybe you have enough that the opportunity cost is not important.

For me, that's the tradeoff - xx years sitting around at 4% when the market is doing its 10% thing.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 08:56 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,433
Re: How many years of expenses in cash

Quote:
Originally Posted by Rich_in_Tampa
Does the loss of investment growth opportunity on that much cash concern you?
Nah, will sleep better knowing I have those years secured. It makes up about 20% of my portfolio. The rest will be invested in a balanced mix of funds.
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 08:58 PM   #10
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: How many years of expenses in cash

Quote:
Originally Posted by DOG51
Nah, will sleep better knowing I have those years secured. It makes up about 20% of my portfolio.
Nice. Well done.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 09:06 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 7,433
Re: How many years of expenses in cash

Quote:
Originally Posted by Rich_in_Tampa
Nice. Well done.
Well I'm single, so I don't have the budget requirements as most on here. Not sure how much I would have in cash if I had a wife and traveled all over the world. Of course I wouldn't be able to retire early either.*
__________________
Retired 3/31/2007@52
Full time wuss.......
Dawg52 is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 09:41 PM   #12
Full time employment: Posting here.
 
Join Date: Jun 2006
Posts: 718
Re: How many years of expenses in cash

Quote:
Originally Posted by DOG51
Well I'm single, so I don't have the budget requirements as most on here. Not sure how much I would have in cash if I had a wife and traveled all over the world. Of course I wouldn't be able to retire early either.*
Golf is your mistress!
__________________
Mwsinron is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 09:42 PM   #13
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: How many years of expenses in cash

Quote:
Originally Posted by Mwsinron
1 to 2 years cash. Frankly if the market bombs so bad that I lose everything I got bigger things to worry about than that. IE start stacking water/food and ammo up in the mountains.
I can see off-the-grid, ammo, mountain gear in the case of, say, a 10 year slide. But 2-3 years seems a bit too "not unlikely" over 35 years to switch into survival mode for me.

Is that what you mean? Or do your after-cash reserves buy you enough additional time to sit out almost any reasonable prolonged, negative market scenario?
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 09:45 PM   #14
Full time employment: Posting here.
 
Join Date: Jun 2006
Posts: 718
Re: How many years of expenses in cash

Im just not counting on more than a 1 to 2 year heavy slide. IE I dont have enough saved Was a slight joke...Ill be more clear next time. My DW and I have a good amount saved plus a place to lived paid for. However we have 7yr to ER . I suppose if things were bad enough we could do it now but would not be the ideal circumstance for us at the moment.
__________________
Mwsinron is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 10:19 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,382
Re: How many years of expenses in cash

Quote:
Originally Posted by Rich_in_Tampa
For me, that's the tradeoff - xx years sitting around at 4% when the market is doing its 10% thing.
With 13 and 26 week T bills now at or above 5%. and TIPS of various maturities* around 2.5% real,* the competing fixed return assets look better than they did even a few months ago. So right away that trims opportunity cost. Also, I think calling the hoped for total return of an equity portfolio an opportunity cost is not quite kosher. An opportunity cost is forgone interest on risk free assets. I think it can be confusing to call total return a yield, except in retrospect.

Treasury yields are definite, while the 10% from equities is a projection from the past. Maybe a good guess, but not in the same class as the pledge of the US government to pay timely interest and principle on its obligations.

And, there can be zero investment costs associated with a program of investing in treasury obligations. Thsi is one the brokers will really hate!

TIPS could easily get cheaper, so I wouldn’t want to tie up money in them that I didn't have a strong expectation of being able to leave until maturity. But if you can live on $50,000 today, and you have $2,000,000 to invest, therein lies a plan, no matter how long you might live. Obviously there would be re-investment risk along the way. The only way I know of to avoid that is an annuity. But I don't know of any annuities being offered that don't cap the inflation adjustment, whereas TIPS just key off CPI. This could be a very favorable feature to the TIPS.

Ha

__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is online now   Reply With Quote
Re: How many years of expenses in cash
Old 07-11-2006, 10:47 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Re: How many years of expenses in cash

Just started RE about a week ago. Have about 3 years of total expenses in cash or near-cash.* That's about 5 years of net expenses after DBP pension and SS.* Who knows if the pension and SS would still be there, so let's say somewhere between 3 and 5 years.

After the near-cash, there's a tax free mid-term bond fund that shows a lot of stability (+- 15%) historically.* That would do us another few years even if it's NAV dropped significantly.* I think its portfolio of AAA municipals would hold up somewhat during a crash, although no doubt there would be some defaults.* Could we call it a crash if NYC didn't threaten to go belly-up unless bailed out?

After that?* Hey, I could always burn the worthless equity certificates, that make up 60% of my total portfolio, in my wood stove!



__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-12-2006, 07:35 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,638
Re: How many years of expenses in cash

Quote:
Originally Posted by DOG51
Nah, will sleep better knowing I have those years secured. It makes up about 20% of my portfolio. The rest will be invested in a balanced mix of funds.
Good grief Ha Ha, you must be as rich as Croessus (sp?). 40 years cash = 20% - wow! That cash equivalent isn't by any chance a pension, is it?
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-12-2006, 07:40 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,638
Re: How many years of expenses in cash

Quote:
Originally Posted by donheff
Good grief Ha Ha, you must be as rich as Croessus (sp?). 40 years cash = 20% - wow! That cash equivalent isn't by any chance a pension, is it?
Sorry, I didn't read that one correctly. I thought the quote was from Ha Ha but it was from Dog51.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-12-2006, 01:09 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,714
Send a message via Skype™ to kcowan
Re: How many years of expenses in cash

Pure equity is 33% of total net worth. Most of the rest is in bonds (laddered). Siiting on about 10 months worth of cash primarily because of profit-taking and positioning for buying opportunities. Been retired four years. So far so good...
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Re: How many years of expenses in cash
Old 07-12-2006, 01:16 PM   #20
Thinks s/he gets paid by the post
SteveR's Avatar
 
Join Date: Jul 2005
Posts: 2,803
Re: How many years of expenses in cash

On market days like this one (down >100 pts. so far) I do think about having a lot more in cash.
__________________

__________________
Work? I don't have time to work....I'm retired.
SteveR is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Where to put cash if you don't trust the market.... HBH FIRE and Money 46 12-19-2006 06:07 PM
Will you stay 5 more years for $1,000,000? honobob Other topics 18 12-17-2006 10:31 AM
Would you tie up some cash for 7 years at 6%? ShokWaveRider FIRE and Money 7 01-02-2006 03:52 PM
Four more years!!! cute fuzzy bunny Other topics 7 07-07-2005 03:16 PM
$50 a day? No way! patnbj FIRE and Money 112 01-30-2004 09:21 PM

 

 
All times are GMT -6. The time now is 02:03 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.