Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Amount of money needed in savings prior to RE
Old 07-05-2020, 08:10 PM   #1
Recycles dryer sheets
 
Join Date: Mar 2018
Location: Baltimore
Posts: 52
Amount of money needed in savings prior to RE

I wanted to find out what the consensus was on how many years of reserves one should have available when you retire. Five years? I tried searching on this topic and did not find anything that covered this. Thanks,
__________________

AreWeThereYet0 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-05-2020, 08:16 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 26,591
Not sure what you mean by reserves.

It varies greatly. On one extreme are people whose pensions and SS exceed their spending and they don't need any retirement savings at all. On the other extreme are people with no pension and not much SS and they should have as much as 25x their spending.
__________________

__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 07-05-2020, 08:16 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 9,514
I doubt there's any consensus. What feels right to you?

I used to not worry too much about cash until the ACA subsidy came about. Now I try to have enough cash to supplement dividends to get me thru to 65.

Just an example of varying views on the topic, and this is just from one person.
RunningBum is offline   Reply With Quote
Old 07-05-2020, 08:38 PM   #4
Recycles dryer sheets
 
Join Date: Dec 2017
Posts: 460
@arewethereyet0, use Firecalc or similar tool to see how much you will need, with a given lifestyle.
__________________
New Math: 1918 + 1968 = 2020

FIREd at 59.5 on 2019-01-18
camfused is offline   Reply With Quote
Old 07-05-2020, 09:08 PM   #5
Recycles dryer sheets
 
Join Date: Mar 2018
Location: Baltimore
Posts: 52
Okay. For example, I will be fifty when I retire and will have to wait for SS and pension. How many years of living expenses should I have prepared at fifty so I won’t be forced to sell my non tax advantaged funds during possibly bad market conditions? What kind of padding is recommenced at the start in that situation? Thanks
AreWeThereYet0 is offline   Reply With Quote
Old 07-05-2020, 09:26 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 3,979
Can’t be answered without planned expense number. A lot of folks have this backwards. It’s not how much you have, its how much you plan to spend.
COcheesehead is offline   Reply With Quote
Old 07-05-2020, 09:37 PM   #7
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 4,163
If this is just about cash in a savings account I'd personally go with one year. However, in 2007 when I retired and fearing a recession I went to 30% cash/bonds/bear market funds and 70% equities. I was planning to stay at 100% equities.

As far as I'm concerned, bonds (I use FXNAX, so mostly treasuries) are the same as cash. I'm now at 75/25. I'm perfectly fine selling only bonds to fund our expenses if stocks are way down, or only stocks if they're running high. Or raising cash month to month if I don't want to sell anything. I normally have zero to one year of expenses in cash and try to refill only when the portfolio as a whole is doing well.
Animorph is offline   Reply With Quote
Old 07-06-2020, 12:46 AM   #8
Recycles dryer sheets
 
Join Date: Sep 2016
Location: Way up North
Posts: 261
Quote:
Originally Posted by AreWeThereYet0 View Post
Okay. For example, I will be fifty when I retire and will have to wait for SS and pension. How many years of living expenses should I have prepared at fifty so I wonít be forced to sell my non tax advantaged funds during possibly bad market conditions? What kind of padding is recommenced at the start in that situation? Thanks
If you're asking about a cash buffer to smooth access to more volatile investments, that is a matter of personal opinion. Could be as short as 1 year or less of spending and you'll see some plan on 10 years or more. Depends. My personal plan is 3-4 years at first, reducing to 1 year or less when I'm on SS and pension at age 70 and beyond.

If I was 50 and retired, I'd want at least 3 years spending as a cash buffer as part of a portfolio that totals at least 30 times expected spending. You can calculate an appropriate adjustment on that based on realistic guesses for eventual SS & pension, but best guess is that SS at least is going to get a haircut within 15 years. At age 50, I'd plan on a 40 year planning horizon, so 3.3% SWR is the maximum I'd use. Lot's of guess work at age 50.
__________________
Retiring in mid 2020 at age 61 from Evil Mega Big Oil Corp (EMBO corp)
Planning on living on:
Social Security +
Modest private pension +
Modest nest egg, 60/40 indexed +
My good looks and sparkling conversation
bada bing is offline   Reply With Quote
Old 07-06-2020, 07:20 AM   #9
Thinks s/he gets paid by the post
Badger's Avatar
 
Join Date: Nov 2008
Posts: 1,637
It looks like you have been here for a little over 2 years. Maybe you haven't been following the posts but you need to be more specific with your question and with your circumstances if you want any meaningful answers.
In our case we have all medical covered through medicare and tricare, we have SS and small pensions that cover our expenses, no mortgage, etc. We are very frugal people and what we have saved/invested for retirement is more than enough to take care of us for a couple of lifetimes, donate to charities, and still have a good chunk left for inheritance.

How that information or information from anyone else with their different circumstances would help you is beyond me.
What is it that you really want to know?


Cheers!
Badger is offline   Reply With Quote
Old 07-06-2020, 07:33 AM   #10
Recycles dryer sheets
 
Join Date: Jun 2014
Posts: 329
I'm not yet 50, but I have a years worth of expenses in savings. I also have about 3 years worth of cash in our AA. With that said, I also generate approximately 1x passive income and receive 1.75x in deferred compensation of our target extended expenses. It's very conservative.
Toocold is offline   Reply With Quote
Old 07-06-2020, 07:43 AM   #11
Thinks s/he gets paid by the post
Red Badger's Avatar
 
Join Date: Jan 2017
Location: Hog Mountian
Posts: 2,077
Quote:
Originally Posted by COcheesehead View Post
Canít be answered without planned expense number. A lot of folks have this backwards. Itís not how much you have, its how much you plan to spend.
+1.

Some recent and historic figures provide examples.

https://www.forbes.com/sites/jrose/2.../#135a904d41cf
__________________
Never let yesterday use up too much of today.
W. Rogers
Red Badger is offline   Reply With Quote
Old 07-06-2020, 07:51 AM   #12
Thinks s/he gets paid by the post
RetireAge50's Avatar
 
Join Date: Aug 2013
Posts: 1,455
Iím currently 53 and have enough cash to last until SS and pensions kick in. Our overall AA including this cash is 63/9/28.
RetireAge50 is offline   Reply With Quote
Old 07-06-2020, 08:07 AM   #13
Thinks s/he gets paid by the post
 
Join Date: Sep 2012
Location: Seattle
Posts: 4,026
Quote:
Originally Posted by RetireAge50 View Post
Iím currently 53 and have enough cash to last until SS and pensions kick in. Our overall AA including this cash is 63/9/28.
That is just because bonds are complete crap right now, right?
Fermion is offline   Reply With Quote
Old 07-06-2020, 08:13 AM   #14
Full time employment: Posting here.
 
Join Date: Mar 2008
Posts: 839
For us, it was enough after tax cash to get us to 59.5 so we could draw from retirement without penalty. Now, it is one year expenses in money market in retirement fund plus cash for planned vehicle purchase in same account. In addition we keep about 15k after tax for unplanned emergencies.
bizlady is offline   Reply With Quote
Old 07-06-2020, 08:20 AM   #15
Full time employment: Posting here.
 
Join Date: Jan 2014
Location: Everett
Posts: 699
I retired at 57 with 3+ years of expenses in cash to last at least until 59-1/2 when I can dip into a Roth IRA if necessary. Dividends pay for about 1/2 of my expenses, so I can drop some cash into the market when it dips. Part of our plan involves keeping our taxable income down to qualify for ACA subsidies. I haven't decided yet if I'll start taking SS at 62. After 65 I might still keep ~3 years of cash on hand to ride out market lows.
O2Bfree is offline   Reply With Quote
Old 07-06-2020, 08:45 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2009
Posts: 5,561
Quote:
Originally Posted by AreWeThereYet0 View Post
I wanted to find out what the consensus was on how many years of reserves one should have available when you retire. Five years? I tried searching on this topic and did not find anything that covered this. Thanks,
When I retired 12 years ago at age 45, I set up my portfolio so that the non-retirement (taxable) part to generate enough income to cover my expenses until age ~59.5 when I would begin having unfettered access to my rollover IRA. My whole ER plan was split into two parts, the more important part being between ages 45-59.5 because I would have to live on only ~2/3 of my total portfolio. Once I reach age 59.5 (which is only about 2 years from now, wow!), the rollover IRA would become the first of my "reinforcements" I would have access to, the others being my frozen company pension and SS.

Because of this reasonably reliable income from my portfolio's taxable subset, I keep nearly no cash in it, reserves or otherwise. I realize the income is not inflation-adjusted, so if I have to tap into principal it's okay. I don't use the entire portion to generate the income used to pay the bills.

In short, OP, worry about getting from age 50 to whatever age (~59.5?) you need in order to gain access to more of your portfolio.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 07-06-2020, 08:52 AM   #17
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 248
Quote:
Originally Posted by bada bing View Post
If you're asking about a cash buffer to smooth access to more volatile investments, that is a matter of personal opinion. Could be as short as 1 year or less of spending and you'll see some plan on 10 years or more. Depends. My personal plan is 3-4 years at first, reducing to 1 year or less when I'm on SS and pension at age 70 and beyond.

If I was 50 and retired, I'd want at least 3 years spending as a cash buffer as part of a portfolio that totals at least 30 times expected spending. You can calculate an appropriate adjustment on that based on realistic guesses for eventual SS & pension, but best guess is that SS at least is going to get a haircut within 15 years. At age 50, I'd plan on a 40 year planning horizon, so 3.3% SWR is the maximum I'd use. Lot's of guess work at age 50.
+ 10

I find this approach to make the most sense & I follow in similar ways
rkser is offline   Reply With Quote
Old 07-06-2020, 09:11 AM   #18
Thinks s/he gets paid by the post
RetireAge50's Avatar
 
Join Date: Aug 2013
Posts: 1,455
Quote:
Originally Posted by Fermion View Post
That is just because bonds are complete crap right now, right?

Right. Moved from bonds to cash (for now). Mostly to take advantage of the 3 plus percentage CDís offered a bit ago by NFCU. Once they expire will need to figure out what to do.
RetireAge50 is offline   Reply With Quote
Old 07-06-2020, 09:27 AM   #19
Thinks s/he gets paid by the post
SumDay's Avatar
 
Join Date: Aug 2012
Posts: 1,777
I'll share this blog post with you. It helped me get ready for our retirement two years ago, and continues to give me guidance for asset allocation. He stresses that you need to know how much you plan to spend to maintain your lifestyle.

https://www.theretirementmanifesto.c...ment-paycheck/

This post helps me with rebalancing: https://www.theretirementmanifesto.c...cket-strategy/

It's pretty straightforward, no fancy financial speak, so I hope it helps.
__________________
FIRE Class of 2018 @ 61

Old men and women sit in the shade of trees they planted long ago
SumDay is offline   Reply With Quote
Old 07-06-2020, 09:36 AM   #20
Thinks s/he gets paid by the post
street's Avatar
 
Join Date: Nov 2016
Posts: 3,312
I would say what ever your expenses are, plus the years you want to pull from your reserves. Now, saying that you also have choices and or options to what you would feel save with.

I for one have enough reserves, as you call it, to never have to touch my investments. I have no pension and my reserves as of today have grown more then when I retired, so I have a negative WR, so to speak.
Everyone has a different view and path to get where they want to be in the end.
__________________

street is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Where to park large amount of money? Bond Strategy? PaloAlto FIRE and Money 67 06-01-2017 07:00 PM
Put What Money Where, for ER prior to 59.5 ShortInSeattle FIRE and Money 20 01-27-2014 03:13 PM
Do you spend a significant amount of money on your appearance/grooming Tracker FIRE and Money 46 03-26-2007 09:01 PM
Investing just prior to Retirement minimalist FIRE and Money 6 03-04-2006 04:05 PM
Advice prior to retirement kenepp1 FIRE and Money 8 03-14-2005 11:14 AM

» Quick Links

 
All times are GMT -6. The time now is 01:45 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×