Would you still invest if you didnt have to?

S

Seattle

Dryer sheet aficionado
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May 10, 2012
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FIRE'd a few months ago. Ran a lot of numbers...

I believe I have enough cash today to live very comfortably for the rest of my life without ever having to invest a dime in the market or bonds. Simply do a CD ladder and forget about the market and all the headaches/risk it brings especially today with possible negative interest rates, massive debt, high PEs, etc.

I don't have any heirs or a need to leave anything when I am gone so I am free of that...

So the fundamental question is "why invest if you don't have to?" I just love the idea of pulling out cash every year to live comfortably and never having to look at the market again - plus paying very little to no taxes for the rest of my life is pretty appealing after how much I have paid in the past...

I know it's radical, but I'm very curious to see if any of you have done the same thing and just lived off your cash without investing in the market....

I very much realize I am leaving a ton of cash on the table by not investing, and I could be using that extra investment cash for even a better retirement (more travel, things I want to do in retirement, new cars etc.,) but honestly, the peace of mind of not having to worry about the market more then makes up for what I could have...or am I looking at this wrong? Friends of mine who I talked to about this always bring up the unseen risk (medical costs skyrocket, I live to 100 and run out of money and have to eat dog food, inflation runs rampant etc.) but I honestly feel the market(s) are even more risky then that...

Would you still invest if you didn't have to? If so, why?

Thoughts?
 
Yes, I think I would but I have invested in equities for over 30 years and am quite comfortable with them. I could do more if I wish to, I could contribute more to causes that are dear to me and my kids would inherit more and could hopefully do the same (live better, give more to charity and leave more to my grandchildren.

I guess another part is that to not invest would be a wasted opportunity and I dislike waste.
 
First of all, congratulations on being in the position you are in. Well done.

If I were in your situation, it would still bother me to see my money earning so little interest with interest rates being so low that I would feel the need to have some exposure to the markets. But I might reduce the exposure to a very modest amount - maybe 30 - 40%. Even if the market crashes, I wouldn't lose any sleep with that low of an exposure.

Because you say that you could have a nicer retirement if you did earn some, that tells me that you would possibly enjoy having a bit more to spend. And perhaps if interest rates rise, and bond yields follow, you may have the option to go 100% fixed income and do just fine.

In any case, it doesn't sound like you are going to be hurting by avoiding the stock markets. I assume you've factored inflation into the mix and still feel very comfortable. And if so, I would go with whatever you are comfortable with.
 
I would because over a long run cash is by far a riskiest asset one can own :)

I do not have 8 digits of cash that might allow to take such a huge risk.
 
My choice would be to hedge my portfolio with a decent chunk of equities that would not be part of my planned spending.

I think you are in a good and enviable position to choose not to invest if it makes you more comfortable. Not sure how the tax issue factors in as market returns are generally taxed favorably although it may involve more hassle. It's not just a choice of stocks, bonds and CDs. There are other things like insurance products and annuities (including delaying SS) to provide some protection against running out of money. You have to really understand how inflation will impact your expenses (although I personally feel it is a bit overblown).
 
Being "in the market" was how I stacked enough dough to retire. I've been in for 40 years. I have to work hard to blow all the dividends and interest these investments generate. As interest rates rise there might be more incentive to go with more cash, but I don't see that happening anytime soon.

No, not planning on killing the goose that laid the golden egg.
 
Congratulations on having reached FI to the extent that your portfolio is sustainable without taking on any investment risk.

For myself, I would not be comfortable with an all-cash portfolio. I would worry too much about inflation risk. (Remember the 1970s?). I prefer to balance investment risk with growth. Hence, I have a diverse portfolio that includes equities, fixed income and real estate. I believe I would feel this way even if my portfolio were ten times its present value.
 
Seattle said:
plus paying very little to no taxes for the rest of my life is pretty appealing after how much I have paid in the past...
Click to expand...

By the way you will pay shitload of taxes on CD interest versus Long term dividends. :LOL:
 
Wow, there's no way I could sleep at night with all cash. Inflation would scare me to pieces. If I had so much I wanted to stop taking any stock market risk, I'd probably look for some kind of annuities (multiple companies) to cover my core expenses and then just diversify including some equities and try to never look at statements.
 
If I were faced with that dilemma I might stagger some life only annuities with different companies. Basically a homemade pension plan. I know annuities get a bad wrap but when the sole goal is simple cash for the course of life with no remainder I think the annuity works perfectly. Then you make sure you don't run out of money. Sometimes people live longer than they anticipated.
 
growing_older said:
Wow, there's no way I could sleep at night with all cash. Inflation would scare me to pieces. If I had so much I wanted to stop taking any stock market risk, I'd probably look for some kind of annuities (multiple companies) to cover my core expenses and then just diversify including some equities and try to never look at statements.
Click to expand...


Inflation is the killer. If you can find a way to hedge inflation such as purchasing cost of living adjusted annuities, your plan will definitely work.
 
I am also in the invest camp.... but I have too...


Now, my mom and two sisters have enough income with their SS and/or pension to not touch their stash... and all have investments... stocks are an inflation hedge...



BTW, there can be something that happens that might have you going through your stash a lot faster than you think... what if you had an injury or got sick and had to go to a long term care facility that cost $6K a month... plus whatever other costs that might come up for that.... do you still have enough?
 
The only thing to consider in your case is hyper inflation (low possibilities but it is still there). Equities may go up or down but Real Estate, land or PMs would shoot up, protecting your wealth.
 
I would probably still keep at least 30% in equities and ignore it.

You're talking about a pretty large ratio of funds to expenses/needs if you can live off a CD only scenario and still beat inflation. And you can probably live quite well on 80% of it. So putting 30% in stocks to combat long-term inflation far more efficiently than CDs ever will, seems prudent. You have so much that ignoring the volatility in 30% of it should be relatively easy to do. So that chunk goes up and down by 50% now and then - so what.

Another way to put it: to live off CDs and adjust for inflation requires that you take some of the CD income you are paid each year and reinvest it to let the CDs grow with inflation.

Alternatively, you could just take all the CD interest as income, and leave the 30% invested in stocks grow over time to make up for inflation. You could probably even take dividend income from this portion (but be sure to reinvest all capital gains) and it would probably take care of inflation for you over the long term. You can rebalance occasionally and buy more CDs, if you decide the % invested in equities has crept up too high.

Important issue: if CDs are paying say 2.5%, and inflation is running 1%, you only have 1.5% left after inflation as income. AND you have to pay income taxes on that total 2.5% interest paid, so you have even less available to live off of after taxes.
 
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I would still invest, because i am wired to seek optimization of my resources without waste.


Sent from my iPhone using Early Retirement Forum
 
Interesting

All of your feedback has been greatly appreciated. I think there are some very valid points that have been made and something I will consider.

If I was to boil it all down - I truthfully just don't trust the stock market in any way right now and I think everything is being manipulated. I don't buy into the "historic returns of the stock market" rhetoric because all things are not created equal. They didn't have the manipulation, the high speed trading, hedge funds, the debt, the Fed, negative interest rates, historic political instability and infighting, private equity limiting IPOs etc. in the 1920s that we are dealing with today. I agree with Bill Gross that the times have changed and in this case, history should be taken out of the mix.

I have worked very hard to accumulate a large amount of cash and I do not want to subject it to manipulation and significant loss which I think is a significant possibility...why do it when you don't have to?

So, that is the reason for my post - just came from utter frustration. I even think the conservative 50/50 portfolio is going to be in for a significant surprise by the combination of rising interest rates and stock market manipulation...but that's just me...maybe I just need a really good correction so I can have a better buy in price lol...

Keeping the powder dry for the time being and sleeping pretty good at night...:)

But thanks to all for the insight. I really need to digest and think about the comments because a lot of very good advice. Really appreciate it.
 
Would keep investing for sure. For one it's enjoyable, very much like any other hobby (yes have other hobbies too haha)- yes I'm weird that way.

Secondly, if I was in a situation where I had more than enough and didn't "need" the money, I would invest to create further excess that would allow for contributing more to causes I think are important. Would give me a better opportunity to make more of a difference for others.

Ultimately though, regardless of what any of us say, you need to do what you feel comfortable with, what gives you satisfaction in life and what lets you sleep at night.
 
First of all investing in a CD ladder is investing, and if we have negative interest rates for 20 years, your CD ladder is going to lose you a lot of money.

Inflation will kill your pile of cash, inflation can easily go to 12%, and there is nothing except belief to stop inflation going to 100% (where your pile of cash is worth 1/2 in a year). Other countries have had worse inflation.

As others have said, if you are shy of stocks (which are taxed very low or not taxed at all), then do 30% stock (broad based etf like VTI) and 70 interest and pay more in taxes.

Finally, I'm not sure you really are doing the math correctly, either you live like a pauper, or you miscalculated as you would need many millions to get by the next 30 years with your plan.

If you do have many millions then invest in VTI and you can live off the dividends and pay no FED income tax, and does not matter if stocks go up or down.
Example: 4 million * 2.08 Div yield = $83,200 tax free per year (actually will increase each year on avg.)
 
Seattle said:
All of your feedback has been greatly appreciated. I think there are some very valid points that have been made and something I will consider.

If I was to boil it all down - I truthfully just don't trust the stock market in any way right now and I think everything is being manipulated. I don't buy into the "historic returns of the stock market" rhetoric because all things are not created equal. They didn't have the manipulation, the high speed trading, hedge funds, the debt, the Fed, negative interest rates, historic political instability and infighting, private equity limiting IPOs etc. in the 1920s that we are dealing with today. I agree with Bill Gross that the times have changed and in this case, history should be taken out of the mix.

I have worked very hard to accumulate a large amount of cash and I do not want to subject it to manipulation and significant loss which I think is a significant possibility...why do it when you don't have to?

So, that is the reason for my post - just came from utter frustration. I even think the conservative 50/50 portfolio is going to be in for a significant surprise by the combination of rising interest rates and stock market manipulation...but that's just me...maybe I just need a really good correction so I can have a better buy in price lol...

Keeping the powder dry for the time being and sleeping pretty good at night...:)

But thanks to all for the insight. I really need to digest and think about the comments because a lot of very good advice. Really appreciate it.
Click to expand...


If you are really this paranoid about the market, then you can just stay out... it has worked for you so far...

For me, about 50% of the money I have is due to gains from the market (maybe more... actually, probably more)... I would not be 'retired' if not for my stock investments...

So far my horse has been winning for me.... I plan to keep riding it...


BTW, I do not think with the way you describe the market that you need to keep powder dry... there is little chance of you getting in no matter what level it is at... heck, in 2009 the market was really cheap... and it seems you did not buy at that time... you could have doubled your money... but, you got maybe a 20% gain (or less)....
 
IMO, if you want to see a truly manipulated market, look to China, or to a lesser extent, Japan. For the US market, i see more good years than bad ahead, and so will remain anywhere from 40% to 60% in the market throughout my retirement. As others have said, tho, do what you are comfortable with. Because of inflation mainly, as I have only seven digits, not eight, i really have little choice, anyway, other than to remain in, to a degree.
 
Seattle said:
Would you still invest if you didn't have to? If so, why?

Thoughts?
Click to expand...

We invest using more or less a liability matching strategy and do not have much in stocks:

https://www.bogleheads.org/wiki/Matching_strategy

For us actually in hindsight I would not have invested in stocks much if at all. I don't like the ups and downs. Well, the ups are okay. :) We made enough from our human capital and our run rate is low enough that I don't think we ever really needed to invest in stocks in order to be FI.

Bill Bernstein calls it the if you've won the game stop playing approach:
http://whitecoatinvestor.com/bernstein-says-stop-when-you-win-the-game/
 
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My husband is in the same boat. His account is 25% stock and 75% G fund. I'll wait until I come back to the states before I make any change. But we do not depend on the stock market for living.
However I invest in stocks just in case. I'm still experimenting with ways to earn more than CDs with less risk.
 
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