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Old 04-04-2013, 09:10 AM   #21
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I guess it's possible to have all of your cash in i-bonds or tips. Or does that not count as cash?
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Old 04-04-2013, 09:11 AM   #22
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I guess it's possible to have all of your cash in i-bonds or tips. Or does that not count as cash?
How would you move all your cash to iBonds with the $10K (plus tax refund) annual limit per Soc Sec #? I often see iBonds mentioned as a great alternative, but the limits are so severe they're not much help. We bought $20K last year (me & DW) and will probably continue while this investing environment exists, but $20K/year is relatively small for most people's retirement personal assets...
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Old 04-04-2013, 09:14 AM   #23
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Well not just i-bonds. Presumably he/she could buy TIPS too.

The 20k per year limit for a couple in i-bonds is lower than I would like too. But If I had started buying them earlier I think the limit wouldn't be problem..
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Old 04-04-2013, 09:17 AM   #24
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Well not just i-bonds. Presumably he/she could buy TIPS too.
I understand, but the OP asked about what to do with a portfolio that was large enough for cash only (@ zero real return) to support an inflation adjusted, long (30 years +/-) retirement, most likely a 7 figure nest egg. $10-20K/yr would be trivial in that circumstance.
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Old 04-04-2013, 09:56 AM   #25
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If I ever find myself going 100% to cash (or equivalents), I think it would be a fine time to have myself tested for dementia.

I recently received a pretty large heap of cash that I've decided to dollar-cost average monthly over a period of 2 years into a target-date retirement fund that currently has assets allocated 60/40 stocks/bonds.
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Old 04-04-2013, 10:08 AM   #26
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I guess if you don't mind inflation killing your purchasing power, do it. I personalyl would enver do it, I have very little in FDIC covered deposits and will have very little upon retirement.........YMMV...........
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Old 04-04-2013, 10:51 AM   #27
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This is almost exactly what my mother (now over 80) has done since retiring on mostly SS income. (She still puts in a few hours every week for a small additional paycheck.)

Almost everything (which is quite a very small amount by the standards here but significant to her) has been in FDIC backed products (passbook accounts, CD's, etc.) as long as I can remember. She does not understand or trust the markets and would not be able to sleep at night if her money was at risk.

Since she can easily subsist on her SS income, the savings are just for peace of mind (an emergency fund of sorts) in any case.
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Old 04-04-2013, 11:17 AM   #28
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That's the problem here. We can't "know" future inflation any more than we can "know" future equity returns. We can no more assume inflation will remain (mostly) below 3% (officially, don't get me started) than we can assume equities will continue to return 10-11% over the long run.

Exactly. If the conditions were met in the OP, that we had enough to last our lifetime, taking to account inflation, then cash would be no-brainer.
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Old 04-04-2013, 12:10 PM   #29
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I guess I will add a caveat to this hypothetical: Are you interested in building a greater estate for your beneficiaries or charities or not? FDIC insured investments have never been known to build wealth. And a diversified investment over time will smoke FDIC returns. So, again, it goes back to the OP's intent........because its THEIR money..........
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Old 04-04-2013, 03:00 PM   #30
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I diversify, not so much because I don't feel I have enough to survive, but because I fear inflation more than I fear losses (and it's a close fear!) So, if reasonable inflation could be "guaranteed", I would consider all cash. Since it can not be guaranteed, I diversify. Though as someone pointed out, precious metals also lose value, they have never lost all value as all past currencies have eventually done. Yeah, I know, there are some (currently) surviving currencies, but they too will fail - even the dollar. Just hope it's not in my lifetime, though that looks more possible than 5 years ago. So one point of diversity, even if no other, would be PM if it were me (and for me, it is.) YMMV
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Old 04-04-2013, 03:20 PM   #31
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As for me, I agree with others who have said that the inability to predict inflation over time is reason enough to maintain a balanced portfolio, which grows more-conservative as one ages. When I hit 80, depending upon my portfolio's worth, I will certainly re-think the "all cash" (or SPIA) option.
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Old 04-04-2013, 03:28 PM   #32
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The more I think about it, I could never go 100% cash (or cash equivalents) even if if I had an obscene nestegg and a very low withdrawal rate as I have spent a life-time trying to optimize my nestegg and to do an about face and IMO suboptimize my nestegg would be very uncomfortable for me.

Besides, I have heirs and charities who will benefit from whatever is left so in such a situation I would view myself as managing the investments for their benefit (just like I currently manage my mother's investments for my and my siblings benefit since between SS and a commercial real property she owns it provides more than what she needs).
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Old 04-04-2013, 03:35 PM   #33
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Well depending upon how long I have to live I may be able to go 100% cash now however, I would never drop below 25% equities.

As Henny Youngman said; "I have all the money I'll ever need if I die before 4:30."
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Old 04-04-2013, 04:16 PM   #34
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Well depending upon how long I have to live I may be able to go 100% cash now however, I would never drop below 25% equities.

As Henny Youngman said; "I have all the money I'll ever need if I die before 4:30."
I think Benjamin Graham said regarding asset allocation something like never go below 25% equities or conversely never go below 25% bonds. Sounds like good advice to me.
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Old 04-04-2013, 05:08 PM   #35
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I think Benjamin Graham said regarding asset allocation something like never go below 25% equities or conversely never go below 25% bonds. Sounds like good advice to me.
Yes that and I believe Bernstein's risk/return chart in his asset allocation book.
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Old 04-04-2013, 07:37 PM   #36
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I understand, but the OP asked about what to do with a portfolio that was large enough for cash only (@ zero real return) to support an inflation adjusted, long (30 years +/-) retirement, most likely a 7 figure nest egg. $10-20K/yr would be trivial in that circumstance.
There's no limit on TIPS so anything that doesn't fit in the i-bonds portion could go there.
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Old 04-04-2013, 09:35 PM   #37
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Hypothetical question. If you were certain that you had enough in your portfolio to cover all of your expenses for the rest of your life (after factoring inflation) without making any more money from your investments, would you ever consider taking all of your money out of the market and bonds and just put it in federally insured investments?
Yes - but only if I were certain I could live comfortably for the rest of my life. (what I consider comfortable)
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Old 04-05-2013, 03:55 PM   #38
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Not me. I'm a dirty asset allocator, and have been known to *shudder* rebalance every once in a while!
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Old 04-05-2013, 04:02 PM   #39
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FDIC covers to $100000 per account when the temporary increase to $250000 expires. You earn next to nothing for interest for the last 5 or 6 years and for at least a couple of more years to come. You pay tax at ordinary income level on whatever small amount of interest generated and the cash will lose value just as fast if there is significant inflation. Do not really see cash as any better hiding place.
Apparently the temporary increase was made permanent in Dodd-Frank North American State Bank Online

If one did go all in for 100% FDIC coverage, I would have several different institutions, so if one goes belly-up, you still would have some immediate assets available.
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Old 04-05-2013, 04:12 PM   #40
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Hypothetical question. If you were certain that you had enough in your portfolio to cover all of your expenses for the rest of your life (after factoring inflation) without making any more money from your investments, would you ever consider taking all of your money out of the market and bonds and just put it in federally insured investments?
Personally, I don't think I would unless I were in my 90s.
What would bother me about having all that cash laying around is a fear that my financial intelligence will diminish with age, leading me to squander my remaining funds or be swindled. Annuities can protect against that, but some of them have such high fees.
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