kyounge1956
Thinks s/he gets paid by the post
- Joined
- Sep 11, 2008
- Messages
- 2,171
At retirement, I plan to sell my current residence and move to a less-expensive part of the state. Until recently, I've always supposed my house here would sell for quite a lot more than it would cost to replace there, and I planned to add a cash allocation to my portfolio out of the excess proceeds.
Recently, I've had a real-estate reality check. I knew prices were down, but I didn't know how much until my recent refi, when my house appraised for only about 3/4 of what it appraised for on the previous refi in 2006. Shortly after that, an identical unit kitty-corner from mine went on the market with an asking price of only 65% of the 2006 appraisal . I called the listing agent to investigate, and she said it had sold but wouldn't disclose the price, since the sale hadn't closed yet. But in this market, I'm sure it wouldn't have sold for more than the asking price. By the time I pay for expenses of sale and a few repairs to the house that will probably be required before it's fit to put on the market, it looks like the "excess proceeds" that I was counting on to fill up a cash bucket at retirement will have completely evaporated. (Silver lining: I can probably still hit my retirement target date of May 2013)
That leaves me wondering if I should change the allocation in my portfolio. I could put some of my Roth contributions into a money market fund or short term Treasuries, or I could add a "Cash Accumulator" (basically a CD inside the retirement plan) or the mysterious Stable Value fund to my 457 account at w@rk. The Stable Value fund has higher returns than the other cash or cash-like options in the plan, but I've never been able to find out exactly what it is. I asked the deferred-comp custodian's on-site rep about it, and he couldn't either. There is no prospectus available. It's a black box, you put money in and get it back later with, currently, about 3% return.
The immediate purpose of the cash bucket is to make up any shortfall between my pension and living expenses between retirement and starting to draw SS, probably at full retirement age, about 9 years into retirement. (FIRECalc said $45K would meet this need in all time periods, and in most time periods I'd have more than $35K of it left when I start to draw SS)
How do you decide how much of your portfolio to keep in cash? Or do you consider cash reserves a separate category from your portfolio?
Recently, I've had a real-estate reality check. I knew prices were down, but I didn't know how much until my recent refi, when my house appraised for only about 3/4 of what it appraised for on the previous refi in 2006. Shortly after that, an identical unit kitty-corner from mine went on the market with an asking price of only 65% of the 2006 appraisal . I called the listing agent to investigate, and she said it had sold but wouldn't disclose the price, since the sale hadn't closed yet. But in this market, I'm sure it wouldn't have sold for more than the asking price. By the time I pay for expenses of sale and a few repairs to the house that will probably be required before it's fit to put on the market, it looks like the "excess proceeds" that I was counting on to fill up a cash bucket at retirement will have completely evaporated. (Silver lining: I can probably still hit my retirement target date of May 2013)
That leaves me wondering if I should change the allocation in my portfolio. I could put some of my Roth contributions into a money market fund or short term Treasuries, or I could add a "Cash Accumulator" (basically a CD inside the retirement plan) or the mysterious Stable Value fund to my 457 account at w@rk. The Stable Value fund has higher returns than the other cash or cash-like options in the plan, but I've never been able to find out exactly what it is. I asked the deferred-comp custodian's on-site rep about it, and he couldn't either. There is no prospectus available. It's a black box, you put money in and get it back later with, currently, about 3% return.
The immediate purpose of the cash bucket is to make up any shortfall between my pension and living expenses between retirement and starting to draw SS, probably at full retirement age, about 9 years into retirement. (FIRECalc said $45K would meet this need in all time periods, and in most time periods I'd have more than $35K of it left when I start to draw SS)
How do you decide how much of your portfolio to keep in cash? Or do you consider cash reserves a separate category from your portfolio?