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Old 10-25-2020, 07:28 AM   #61
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I’m in the “give every dollar a job” camp. If I want to accumulate cash for a specific purpose, such as a car, renovation, trip or emergency fund, I do. Otherwise, I want them all out there fully invested and making more dollars.
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Old 10-25-2020, 08:20 AM   #62
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I’m in the “give every dollar a job” camp. If I want to accumulate cash for a specific purpose, such as a car, renovation, trip or emergency fund, I do. Otherwise, I want them all out there fully invested and making more dollarspennies.
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Old 10-25-2020, 08:34 AM   #63
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+1 mental accounting. A number of years ago I considered buckets based on a Christine Benz article on the subject. After calculations, it broadly came back to the 60/40 AA that I was using at the time.

I figure it this way, if your WR is 4% and you keep 10 years of withdrawals in "safe" money that is 40% bonds and the other 60% ends up in equities... so six of one or a half-dozen of the other IMO.

Now within the bond allocation I can see a subset being a ladder of CDs or target maturity bond funds for liquidity sake if it make one sleep better at night.
While I won't disagree with the mental accounting POV, buckets adds the dimension of time to your asset allocation. I don't know why anyone would expect a bucket strategy to dramatically alter their AA ("it broadly came back to the 60/40 AA"), it's a tweek at best. With no bucket strategy my 60/40 allocation might include the highest yielding longest term CDs I could find. With a bucket strategy I would certainly have more shorter term CDs and/or money markets accessible within 12-24 months. If you are laddering, the lower rungs function in a similar fashion to bucket #1.

I have some issues with managing bucket #2 and the refiling process but I just make sure bucket #1 is adequately funded and my overall AA is within my target range. Using a CD ladder bucket #1 pretty much replenishes itself
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Old 10-25-2020, 09:11 AM   #64
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While I won't disagree with the mental accounting POV, buckets adds the dimension of time to your asset allocation. I don't know why anyone would expect a bucket strategy to dramatically alter their AA ("it broadly came back to the 60/40 AA"), it's a tweek at best. With no bucket strategy my 60/40 allocation might include the highest yielding longest term CDs I could find. With a bucket strategy I would certainly have more shorter term CDs and/or money markets accessible within 12-24 months. If you are laddering, the lower rungs function in a similar fashion to bucket #1.

I have some issues with managing bucket #2 and the refiling process but I just make sure bucket #1 is adequately funded and my overall AA is within my target range. Using a CD ladder bucket #1 pretty much replenishes itself
+1 That bucket view/bucket #1 is key to reducing or eliminating SORR. When the market tanks I think pretty much all of us will be diving into bucket #1 for living expenses, even if we didn't know we had a bucket #1.
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Old 10-25-2020, 10:55 AM   #65
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While I won't disagree with the mental accounting POV, buckets adds the dimension of time to your asset allocation. I don't know why anyone would expect a bucket strategy to dramatically alter their AA ("it broadly came back to the 60/40 AA"), it's a tweek at best. With no bucket strategy my 60/40 allocation might include the highest yielding longest term CDs I could find. With a bucket strategy I would certainly have more shorter term CDs and/or money markets accessible within 12-24 months. If you are laddering, the lower rungs function in a similar fashion to bucket #1.

I have some issues with managing bucket #2 and the refiling process but I just make sure bucket #1 is adequately funded and my overall AA is within my target range. Using a CD ladder bucket #1 pretty much replenishes itself
But isn’t this mostly the same as having say 3 years living expenses in cash? Wouldn’t that be the same as bucket #1?
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Old 10-25-2020, 11:30 AM   #66
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But isn’t this mostly the same as having say 3 years living expenses in cash? Wouldn’t that be the same as bucket #1?


Yeah. Pretty much the same. It’s not at all inconsistent with many other tools to manage a portfolio and pay your bills.
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Old 10-25-2020, 12:26 PM   #67
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I’m in the “give every dollar a job” camp. If I want to accumulate cash for a specific purpose, such as a car, renovation, trip or emergency fund, I do. Otherwise, I want them all out there fully invested and making more dollars.
If the exercise of keeping every dollar invested is fulfilling, then by all means go for it. I find it a grind to be too involved in the process. I think it was Scott Burns who came up with the "Couch Potato" portfolio. Just 2 or 3 indexes and some cash IIRC. Probably beats over half the ports. that folks sweat bullets over. I just never wanted to w*rk that hard but it is your money and YMMV.
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Old 10-25-2020, 03:32 PM   #68
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This is a great thread! My DH is going to retire next month and I am going to work a few more months because I enjoy my job and uncertainty in general. I will retire if I stop looking forward to work though. I alternate between thinking we have too much cash and not enough cash 🤦*♀️. We have a very healthy amount in cash and we can live off my salary. I like the idea that the "cash reserve" does not need to be immediately accessible because 5 years is a long time to figure things out. I may consult a bit for extra income (and health insurance) as well. We are 59.
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Old 10-25-2020, 08:43 PM   #69
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....With no bucket strategy my 60/40 allocation might include the highest yielding longest term CDs I could find. With a bucket strategy I would certainly have more shorter term CDs and/or money markets accessible within 12-24 months. ...
Keep in mind that sometimes depending on the CD yield curve at the time, it is better to buy the longer term CDs and pay the EWP if you need the money earlier... IOW, in some circumstances if you're investing 3 year money the 5 year CD yield for 3 years less the EWP exceed the yield on a 3 year CD.

Not so today, but I have seen it often in the past.
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Old 10-25-2020, 09:20 PM   #70
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Keep in mind that sometimes depending on the CD yield curve at the time, it is better to buy the longer term CDs and pay the EWP if you need the money earlier... IOW, in some circumstances if you're investing 3 year money the 5 year CD yield for 3 years less the EWP exceed the yield on a 3 year CD.



Not so today, but I have seen it often in the past.


Good point. Depositaccounts.com has a handy EWP calculator. I never would have thought to do this in anything other than an emergency situation but it doesn’t really matter if the rate is good and the penalty is modest.
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