Poll:How much cash at beginning of ER?

[David1961]

As a recent retiree, I'm curious at the how much cash (in terms of annual living expenses) did you have when you ER'd. Or for those planning ER, how much cash do you plan on having when you ER? By cash, I mean savings, checking, or money market accounts. But if you count anything else as cash, include that, too.

 

[Midpack]

I had about 3 years, but that's partly because I wanted money on the sidelines for investing, totally apart from retirement timing. I plan to hold 1-2 years worth, probably what you're looking for BUT that will flucuate somewhat with markets.

 

[panhead]

I'm currently working, but I am planning on a bit over 1 year of expenses in cash for when I retire. Now, this is what I plan to spend down during the year, and then replenish at the beginning of the following year (with a bit of a buffer, thus the "over" 1 year of expenses).

 

[Moemg]

As a 2008 retiree I voted two years . I only had one-year in cash when I retired and we all know how that year played out .

 

[W2R]

I had a little over 5 years of expenses, in cash, at the time. Now that the market has recovered I have less.

 

[scrabbler1]

Because my ER plan included a steady income stream via monthly dividends from a big bond fund, I did not have a lot of actual cash on hand sitting around, maybe 1 month of expenses.

 

[GrayHare]

With a buckets approach I have more then 5 years worth. Based on the results, it looks like the poll has too many short-duration choices.

 

[Trawler]

Have 4 years but looking to make it 5 max as market recovers. Reason for 5 years as I hope to never have to sell in down market to pay expenses also when and if another large plunge i may want to buy the plunge . I use two bucket system and WDs based on invested assets performance not to exceed 5% after inflation adjustment .

 

[67walkon]

We have another 6 years of payments coming in on a very well secured deal where we sold something. It is almost enough to live on. Despite that, and realizing stuff happens, we're going to have a couple of years worth of living expenses in cash when I hang it up next March. I've come up with a different kind of plan from reading things here and my wife agrees. We're going to put $50,000 in two different bank accounts on April 1, 2013. She will use one and I will use the other. The payments coming in will cover most of our basic living expenses. The $50,000 will be a cushion so we don't have to worry about it. Both of us are pretty thrifty, but I don't want either of us worrying about going out to dinner or buying something we want. On April 1, 2014, I expect we will still have $25-30,000 each in those accounts, unless we go kind of crazy in the first year of full time retirement. We'll meet with the financial guy in April, re-balance accounts and get the balances in the two accounts back up to $50,000. If we're too optimistic about cost of living in retirement, maybe we'll put a little more in there. If we're doing good, maybe a little less or maybe we'll take a nice trip.

Our cash balances will continue to grow for the 6 years until I'm just about at the maximum SS age. SS will replace about 75% of the payments we're getting and our retirement accounts should be substantially larger than they are now. And, when you're 70, it's probably ok to dip into principal a little bit if you need to, but I don't think we'll need to.

 

[Alan]

Based on the results, it looks like the poll has too many short-duration choices.

Depends on your income streams in retirement.

I had less than 2 years in living expenses, but I had private pensions that covered 70% of living expenses so the chances of needing that cash was, I hoped, quite small.

 

[GrayHare]

Depends on your income streams in retirement.

Sounds like you are thinking votes rather than poll choices. I'd expect the vote results to form a bell curve, but at the moment the top voted is a choice at one end of the range.

 

[rescueme]

Depends on your income streams in retirement.

I had less than 2 years in living expenses, but I had private pensions that covered 70% of living expenses so the chances of needing that cash was, I hoped, quite small.

In reality, one could have an extended timeframe to cover, yet still have little in cash.

For instance, in preperation for expected retirement in early 2007 for both DW/me, each had "sold off profits" from many prior years and had five years worth of cash (including taxes due on withdrawls).

However, since that time we have reduced the target by one year, becoming more comfortable in retirement without any income sources (such as pensions or SS) over the last five years. Of course, in our case we did convert part of our investments to an SPIA, which acts as a non-Cola life pension.

In reality, we are still living primarily on our investments, with two small DB pensions (DW) starting in June, and her FRA SS starting a year after that. In addition, I'll claim 50% of her SS as soon as she starts it, along with my SS at age 70.

Over the next five years, our cash accounts will be greatly reduced "in volume", but we still will maintain the current four year target in cash, regardless of other income sources...

I'll agree that it seems that most don't plan on keeping that many years in reserve, regardless of income sources. For me/DW, that's too little. But than again, we are getting more conserative as we age.

 

[MBAustin]

I had more than 3 years at ER, but only because I received a large lump-sum taxable distribution from my former employer (no other option because I was under 62).

 

[donheff]

I had and have kept a small amount of actual MMF cash -- less than 1 year. But I have about 5 years in the TSP G Fund which is a principle protected bond fund that is as safe as cash.

 

[Meadbh]

As a 2008 retiree I voted two years . I only had one-year in cash when I retired and we all know how that year played out .

Which is why I voted for 3-4 years. Wouldn't want to be cut short in a meltdown!

 

[Moemg]

Which is why I voted for 3-4 years. Wouldn't want to be cut short in a meltdown!

Rethinking it I would definitely go for three years .When I retired I had a survivor pension & survivor SS that accounted for my needs budget. The withdrawals from my stash accounted for my wants and I really cut back my wants for two years. .

 

[obgyn65]

I guess by this definition, if I include munis and CDs, I am 100% cash (except tiny annuities bought this year). So I am planning for $85k-100k withdrawals each year for about 50 years.

Or for those planning ER, how much cash do you plan on having when you ER? By cash, I mean savings, checking, or money market accounts. But if you count anything else as cash, include that, too.

 

[BTravlin]

I will have over 4 years worth of spending on hand as that is what it will take to get me to 59 1/2 and have access to tax deferred accounts. Once I hit that milestone I'll pare it back to about 2 years worth.

 

[Lsbcal]

As a recent retiree, I'm curious at the how much cash (in terms of annual living expenses) did you have when you ER'd. Or for those planning ER, how much cash do you plan on having when you ER? By cash, I mean savings, checking, or money market accounts. But if you count anything else as cash, include that, too.

I think the poll as stated will not really help you. The amount of cash to hold should depend on the shape of the yield curve IMO. When I retired the real rate of return on cash was perhaps 2% (4% in Vanguard MM and maybe 2% inflation).

Right now the real yield on cash is negative.

Assuming you are trying to set up a safe stash, why not allocate some to these "buckets":
1) a money market fund or similar
2) a 1yr CD or similar
3) a short term bond fund of 2 years duration or similar duration safe security
4) maybe longer duration assets

The idea is to have the maturities coincide somewhat with your need to spend. Over the longish term this should work out fine I think. In our case because cash rates are so low, the #1 above gets only a few months funding and I skip #2, just fund #3 and #4. As bond market conditions change I'll adjust these.

 

[traineeinvestor]

I plan to have at least two years worth of living expenses in cash or near cash in various currencies at all times. Unless I make a lot of new investments, I could have over seven years worth when I pull the plug in the middle of 2013.

 

[truenorth418]

2 years expenses, which I replenish with 1 years expenses annually with dividends and gains.

I also have several years expenses worth of iBonds which serves as an additional emergency cash cushion.

 

[mathjak107]

with 1 year 9 months to go before i pull the plug at 62 i just finished restructuring our plan.

as it stands right now we have about 3-4 years withdrawals in cash.

thats not total living expenses since we have a small pension ,real estate income , and my wifes ss check but not mine coming in as i may hold off..


our allocations are 100% various bond funds right now with some bond funds actually acting as slightly less aggressive equity funds. up 10% this year and generating about 3- 3-1/2% income.

that will stay as our model until rates p/u at which time different allocations will be made with more going back to equities.

since projections say we only need about 2%-2-1/2% or so from our nest egg we have the luxury of being a little less aggressive in our model

 

[MichaelB]

We currently keep in cash & short term fixed income our current year budget, one additional year budget and enough additional cash to fund all commitments we have made (weddings, etc) and significant home repair.

When I retired our portfolio was >50% cash. Some was invested during '00, and the result was so encouraging I plowed the rest in '01, just in time to catch the very top and watch it lose 1/4 in no time flat. The good old days...

 

[mathjak107]

you sound like as good a market timer as me.

i closed on my first rental property 10 days before the 1987 stock market crash . of course the co-op was in nyc . when the smoke cleared i was down 30% right out of the box as real estate plunged here for years to come.

of course today things bounced back beyond our wildest expectations and if i wasnt telling this story from time to time i wouldnt even have rembered it happened.

 

[braumeister]

I had less than 2 years in living expenses, but I had private pensions that covered 70% of living expenses so the chances of needing that cash was, I hoped, quite small.

This is my case, too. "Living expenses" is one thing, and "cash needed for living expenses" is another.