100% in cash?

[David1961]

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.

 

[pb4uski]

Only if I didn't have an heirs or charities that I cared about, but that is a frequent debate around here. Do you play it safe because you can or do you take risk because you can?

 

[kmt1972]

Seems more like an issue of your inflation expectations. If you expect them to be low for your time horizon then I see nothing wrong with doing this.

 

[heeyy_joe]

No, it would go mostly into gold and silver in case of government collapse. (And you did say hypothetical).

 

[W2R]

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.

I don't like that idea. It goes against the grain. "Don't put all your eggs in one basket", and so on, and in this case, I suppose FDIC insured bank accounts would be the one basket.

I might put 40%-50% in bank accounts, but no more. The rest would go in real estate and other investments.

 

[Katsmeow]

Agree with W2R.

 

[jon-nyc]

I wouldn't do that but I would put together a liability-matching portion of the portfolio using TIPs and keep the 'extra' monies in equities. In fact that's more or less what I've done.

 

[bondi688]

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.

 

[jollystomper]

I don't think I would ever stop diversifying my savings/investments. I might go to a larger percentage of cash, but would never be totally out of other investments. One cannot predict the future so the best way to plan for it is to stay diversified.

 

[obgyn65]

If cash includes money market, CDs, muni bonds or equivalent, then I am close to 100% cash. I only bought some deferred annuities last year and Wellesley a few weeks ago (discussed in other threads). Now trying to assess whether I should buy more Wellesley in the coming weeks. I am turning 48 this year. To answer your question, I have enough to cover all my expenses for the rest of my life.

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.

 

[audreyh1]

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.

The $250,000 limit was made permanent in 2010.

 

[Dawg52]

Basically what my parents did. Worked out for them. Of course they had SS and a pension to go along with it.

 

[bondi688]

The $250,000 limit was made permanent in 2010.

In the original bill, the limit was to revert back to $100000 after Dec 31, 2013, but you are right, the Dodd-Frank Bill made that increase permanent.

 

[jerome len]

No, it would go mostly into gold and silver in case of government collapse. (And you did say hypothetical).

I would diversify. If you bought gold and silver a few months ago you would have lost big. So...some index mutual funds, some bonds, some gold and some REITs......pay off the house, keep a year's expenses in cash and go enjoy yourself!

 

[MichaelB]

Agree with W2R.

Me too

 

[Milton]

Not a hypothetical question for many people on this board; and very few are 100% cash, for the reasons mentioned above.

Also, once you have established the habit of ensuring that your capital works reasonably hard (nothing too aggressive, natch!), it becomes somewhat of an end unto itself and it would seem strange to adopt a completely passive, no-risk no-growth strategy ... even though that might make some sense.

 

[clifp]

Nope I would not be 100% cash/CDs ever.
Two reasons:
Weimar Republic
Cyprus

 

[Midpack]

While I agree with reducing/limiting risk for retirees, since all cash has actually been less safe for providing retirement income since 1871 to present than an AA with 20-30% equity, I can't imagine going below 20-30% equity regardless. And while "Federally insured" has been one of the safest investments historically, and that's likely to continue (I hope), it's still not without risk.

I also agree with not having all your eggs in any one basket no matter what.

My parents are completely in CD's and cash now, but he was still in the market at least with bonds until his late 80's. And they have COLAd pensions and healthcare (retired military).

I wonder if anyone from Cyprus is on this forum? They might have a different take on the OP question...

 

[MichaelB]

This sounds a bit like the view put forward by the annuity side. Is there such a thing as 100% safe into the future? Maybe individual TIPS that mature in sync with budget needs together with a lump sum in the local FDIC protected bank account to cover all sorts of unique cash needs. That would imply a very low withdrawal rate. I think Wellesley would probably be just as safe, potentially better managed, and also have some upside.

 

[ziggy29]

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)

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.

 

[photoguy]

I guess it's possible to have all of your cash in i-bonds or tips. Or does that not count as cash?

 

[Midpack]

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...

 

[photoguy]

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..

 

[Midpack]

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.

 

[steelyman]

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.