Too much cash in hand?

[GoodbyeYellow]

For reasons you can find, if interested, in another thread of mine, we are holding about 5 years of base* needs as cash. We also have a HELOC in place for unforeseen overages.

Holding $0.5M in cash to start with feels... sub-optimal. Not only is there inflation to worry about (but at least 1/3 of forecast is fixed expense), there is also the niggling thought that one should be putting the money to work in general, inflation or no.

BTW the rest of the portfolio (for the post-5 year period) is pretty much 100% equities. I know this is the subject of much debate, but not going there for now except to indicate a less-than-low interest in bonds and such. We are not tapping or even including SS in the above so that is a form of fixed-return investment I suppose.

What strategies might one employ to alleviate/improve this situation?

*base here means middle-ground; we may spend 15% less, or may spend 15% more in any given year.

 

[RobbieB]

I keep my (market down, don't sell) fund in muni bonds. Don't pay much, a couple percent, but the value doesn't change much and the income is double tax free.

 

[njhowie]

What is the total? $500k in cash might be "sub-optimal" if the entire portfolio is worth $1M. However, if the entire portfolio is $10M, then there might not be anything wrong with $500k cash.

 

[pb4uski]

For reasons you can find, if interested, in another thread of mine, we are holding about 5 years of base* needs as cash. We also have a HELOC in place for unforeseen overages.

Holding $0.5M in cash to start with feels... sub-optimal. Not only is there inflation to worry about (but at least 1/3 of forecast is fixed expense), there is also the niggling thought that one should be putting the money to work in general, inflation or no.

BTW the rest of the portfolio (for the post-5 year period) is pretty much 100% equities. I know this is the subject of much debate, but not going there for now except to indicate a less-than-low interest in bonds and such. We are not tapping or even including SS in the above so that is a form of fixed-return investment I suppose.

What strategies might one employ to alleviate/improve this situation?

*base here means middle-ground; we may spend 15% less, or may spend 15% more in any given year.

We only have a little over a year of withdrawals in cash.... and then right now I have about an equal amount in "dry powder" that I plan to use to buy some June 2024 SPY calls when they become available in a couple months.

 

[OldShooter]

Too much cash in hand?

The only way to know the answer to this question is by looking in the rear view mirror. Going forward, all any of us can do is to make our best guess of future circumstances and future needs, then set our AA accordingly. You seem to have done that. So I wouldn't worry too much about being wrong by a lot and wouldn't worry at all about being wrong by a little. The latter is virtually guaranteed.

 

[TheWizard]

The solution to the OP's problem is slowly to move that excess cash into stock index funds in your taxable account, assuming retired with no earned income.

Only cash I keep is about $10k in checking plus a certain amount in my taxable settlement account where my target AA is 95% stocks and 5% MM fund.
Excess retirement income from annuities + SS goes from checking to that settlement account twice a month...

 

[Dtail]

We keep 5% in cash, which assists the yearly funding for spending.

 

[Midpack]

I have way more in cash than I want, but there aren’t any good alternatives. So it sits at 0.5% interest until the next serious meltdown…

 

[NW-Bound]

My stock AA is currently 65%. I don't like bonds at this point, so it means most of the rest is in cash, in the 7 figures.

Yes, having that much idle money would not be good, but as I often posted here, I used the cash as collateral to sell OTM (out-of-the-money) cash-covered put options on stocks that I like.

I have been collecting more money on option premium than I would have earned with bonds, even though I never commit all of my cash. Usually, about 1/4 to 1/3 of my cash is committed to put options, yet when averaged over all cash, I beat bonds soundly.

 

[street]

Holding cash, is and should be part of a plan you have. I personally hold a lot of cash, is it good or bad, it depends. My plan is to live from cash, so I never have to ever sell an investment if I don't want too (life can change). I just checked and I have 45X living expenses in cash and it is about 10.5% of my portfolio.

Not sure if my plan is good or bad but for me it is safe, and I don't have to worry about the markets. I don't like when markets go down, but I know I have money to live without having to sell.

I have thought about reinvesting some of it, but I don't believe I ever will. Am I losing money each day because of holding cash, yes, I am?

 

[audreyh1]

I have way more in cash than I want, but there aren’t any good alternatives. So it sits at 0.5% interest until the next serious meltdown…

I really don’t sweat it. I already have way more invested in riskier assets, plus a bunch of higher yielding CDs that haven’t matured yet.

 

[RobbieB]

My cash (cash-cash), bank stuff, checking and savings is low right now about a hundred grand. But end of year and all by plan.

January I'll sell some equities (if all goes well) and the cash will be back to quarter mill. My comfort level for the New Year.

 

[audreyh1]

Sounds good to me!

 

[txtig]

I’ve got about 10% of my investable assets in cash. Amounts to about three years of spending. I’m comfortable with that.

 

[harllee]

I got caught in 2008 with too many equities and not enough cash. I didn't want to sell while the market was down big time so I tightened my belt and did without many things for a while. I learned my lesson. Now I have too much cash and I am glad of it, I sleep better at night.

 

[FANOFJESUS]

For reasons you can find, if interested, in another thread of mine, we are holding about 5 years of base* needs as cash. We also have a HELOC in place for unforeseen overages.

Holding $0.5M in cash to start with feels... sub-optimal. Not only is there inflation to worry about (but at least 1/3 of forecast is fixed expense), there is also the niggling thought that one should be putting the money to work in general, inflation or no.

BTW the rest of the portfolio (for the post-5 year period) is pretty much 100% equities. I know this is the subject of much debate, but not going there for now except to indicate a less-than-low interest in bonds and such. We are not tapping or even including SS in the above so that is a form of fixed-return investment I suppose.

What strategies might one employ to alleviate/improve this situation?

*base here means middle-ground; we may spend 15% less, or may spend 15% more in any given year.

5 years cash sounds good to me. You need that much 2008 took about five years to recover from.

 

[ShokWaveRider]

We keep ~$500k in cash right now, as we are looking to downsize our home. If a home comes up, we would like to buy it cash without selling ours first, and without having to pull too much from other places.