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Old 09-07-2007, 01:49 PM   #21
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Originally Posted by ChrisC View Post
I'm trying to understand the math of keeping cash. If living expenses in retirement are $60K a year, when people say they are keeping 10 years in cash equivalents, does that mean they are keeping $600K in cash equivalents?
Close, but not exactly. Since cash generates interest, you'll need less than $600K. You'll need to figure out the exact amount by guessing your rate of return and using a net-present-value function in a spreadsheet.
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Old 09-07-2007, 05:06 PM   #22
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After selling some investment property -- I am way cash heavy. Most is in Prime MM w/ Vanguard and w/ Citi E savings(5%APY) that I have send me monthly E checks.
As the smoke clears concerning our market, more will go from prime into equities - I have made a couple smaller equity purchases, but right now .... having cash feels real good. But, I don't want to be to conservative.
For now - I am going to "sit on my hands" (not be impulsive) and take my time.
Let me know when to jump in w/ both feet ;-) !
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Old 09-07-2007, 05:34 PM   #23
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Retired (sort of; in a grad program for fun, not livelihood though it is huge work). Wife with a modest cola'd teacher retirement, ss in the future for me(70 yrs old?). Right now about 60% in money funds paying a little over 5% tax deferrred. I have an 11 year horizon on withdrawing from sheltered accounts (ira) but don't have the stomach right now for big risk. I think the market (domestic and world) is right there with Las Vegas right now. Note, I am 40% into the crap shoot. I love the advice and takes available on this forum. I appreciate the folks who do homework and put it out there for the rest of us proletariat dweebs. I don't trust the fed bs with the tweeks to market. That ain't a free market; it's a stacked deck. If anyone is in touch with the dealer, please let the rest of us know.
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Old 09-07-2007, 06:05 PM   #24
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Why are some people so worried about cashing out of an intermediate bond fund if it is really necessary. Seems a bad year for a bond fund might be around -5% (less if short term bond fund). If you are cashing out 4% of your assets from this bond fund then the "permanent loss" amounts to only 0.2% of total assets. Not an ideal situation but hardly something to loose sleep over.

Most likely in a bad equities market you will be experience good to modest bond gains with the exception of recessions that have sudden upswings in inflation and/or rises in real interest rates. In the case where equities are on the upswing you will probably have to rebalance out of them thus providing the cash you need for living expenses.

Seems that some people are letting emotions overrule rational investing. Or am I missing something?
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Old 09-07-2007, 06:44 PM   #25
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Why are some people so worried about cashing out of an intermediate bond fund if it is really necessary. Seems a bad year for a bond fund might be around -5% (less if short term bond fund). If you are cashing out 4% of your assets from this bond fund then the "permanent loss" amounts to only 0.2% of total assets. Not an ideal situation but hardly something to loose sleep over.
There may be some reason. I am sure everyone's situation is a little different.

I believe there are a number of ways to handle the draw-down in a bad market.

Our basic options are as follows:

DB pension - covers 17% of yearly expenses
Stock Mutual Fund dividends covers 20% of yearly expenses
Bond dividends covers 36% of yearly expenses

This represents 73% of our planned yearly expenses. We could get by on that fine.

The money market account will hold 8% of the total portfolio. 60/32/8

The other 27% of planned yearly expenses will be taken from the Money Market. It can cover almost 7 years of withdrawals (i.e., 27% of expenses).

Alternately that 8% represents 2 full years of expenses in cash.

We have a number of options to ride out a bad market for several years.

Even if the market dives, as long as the companies are still around, they will pay their dividends.

I am not too concerned about the market going to zero and staying there. If that happens, my dollars will not worth the paper they are printed on. Better be hold gold bullion instead of cash.
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How much cash?
Old 09-11-2007, 07:28 PM   #26
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How much cash?

I retired 4 years ago at 55. We have 3-4 years in cash which I have acculmulated by taking profits from my 60/40 portfolio. We use a portion of that to supplement our pensions each year. I will periodically take some profit off the table and stiill keep our portfolio at a certain level. By doing this we avoid withdrawing when the market might be down.
Downsizing our expenses has proven to be very hard. We live in SC, I have an ill dad in a nursing home in Fl, my first grandchild in Oregon, and my son who is about to get married in NYC. We do a lot of traveling to them and to far off places (that was our primary retirement wish as we couldn't when we were working our butts off to retire early). If push comes to shove we would do cut expenses but thankfully that has not happened yet.
Larry
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Old 09-12-2007, 05:41 AM   #27
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I maintain a relatively small amount of cash and inflation indexed bonds to top up my dividend income. It works as follows:

Pension + dividend income = good standard of living (pension is inflation linked)

If dividend income does not rise in line with average earnings or inflation (whichever is the higher) I sell some of the bonds or cash to make up the shortfall. In 7 years i've had to dip into the cash in 3 years (but it hasn't required much to make up the shortfall).
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Old 09-12-2007, 10:34 AM   #28
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Why are some people so worried about cashing out of an intermediate bond fund if it is really necessary. Seems a bad year for a bond fund might be around -5% (less if short term bond fund). If you are cashing out 4% of your assets from this bond fund then the "permanent loss" amounts to only 0.2% of total assets. Not an ideal situation but hardly something to loose sleep over.
Very good point. Earlier this year Vanguard did an investment plan for us. I had seen earlier plans where they sliced and diced fixed income portion with long term, short term and even high yield bonds. In mine they put it all in their Total Bond Market which is effectively an intermediate term fund!
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