Holding $600K in cash - feeling like an idiot. Options???

[Gallaher]

We have $700k in cash, way more than I want, (recently sold a house, waiting for a market buying opportunity and keeping AGI low). I’ve been retired for 42 months and at age 61 and 60 we pay less than $100 for ACA insurance.
There are always trade offs but I need this $700 to go most of 6 years before SSI, pension etc.
You probably can’t get what you want on your cash but you can probably get enough. Risk/Reward

[Sojourner]

Another way to generate a higher yield on your cash is to fund a new bank account that's got a nice "new account bonus" promotion going. Check out this list for some ideas:

https://www.doctorofcredit.com/best-...count-bonuses/

Looks like most of the signup bonuses these days are in the $200-400 range, but if you search you might be able to find something a bit higher in your state. This is, IMHO, one of the best ways to boost the pitiful yields on cash these days. An extra $400 on $100k transferred into a new high-yield savings account equates to roughly an extra 0.4% APY. Not much, but something. Better than you can get from a one year CD right now.

[RetireAge50]

If you are an idiot so are we as we are about the same age and also have just under 600k in cash. If the stock market keeps rising the cash amount will increase further as we rebalance to maintain 75% stocks and 25% cash. We have zero in bonds.

I like the feeling of having the cash for all of our spending for probably 10 years and at the same time having the stock portfolio for long-term gains.

[RetireAge50]

If your 401k has a stable value fund this may be a good place for cash. Even if you can’t get to it until 59.5 you can always sell stock outside the 401k while at the same time buying the stock inside the 401k.

[Midpack]

I am another idiot with a pile of cash at Ally...there are no better options with the same low risk and liquidity that I know of. Many here have been faced with the same problem for years, it’s only gotten worse, with no better future on the near horizon...

[LarryMelman]

For the last several years, I have become an income investor. I buy dividend paying stocks which will eventually (I am still working) provide retirement income. Everything I like is overpriced right now, so since I don't immediately need the income I've been letting cash pile up more so than ever. Whenever I get the itch to buy something new, I remind myself that instead of buying a 3% dividend now, I may be able to buy a 4% dividend later.

I also hunt for bank account bonuses, as mentioned above. Chase had a deal for tying up $15K in a savings account for 3 months and DD into a checking account, which paid $500 in bonuses. That's more than I'll make in interest on all my cash in the entire year.

[Bruno]

Quote:

Originally Posted by Midpack I am another idiot with a pile of cash at ...

Me Too but @ Discover Bank. I have 2 CD coming due before long. I visited with a broker the other day and she told me she has bonds paying 4.9%. Didnt really go into details. I dont know much about bonds.

[MRG]

ATT is paying 7% dividend. Century Link at 7.8%. SOS at the money calls and puts are paying 10% two weeks out. QYLD is paying almost 12%.

[chassis]

Read what Dalio has to say about cash as an investment. It’s not pretty. Cash is a terrible investment for the medium to long term.

Try a mix of:
HYSA
dividend stocks
Index funds
Put options to protect capital

A combination of the above is low-medium risk and will so far better than inflation and you always have access to your money.

[ut2sua]

Quote:

Originally Posted by Dash man I don’t think i-Bonds would be a good choice. There is a penalty if you cash them in less than five years after issued. Treasury bills are liquid, but there is risk of losing value if you need to sell before maturity. If you’re willing to hold to maturity they’re very safe. Many folks are using MYGAs. You may want to look into them. Make sure you get it from a solid company because they are not FDIC insured. https://www.annuityexpertadvice.com/...annuity-rates/

I am new to I-Bond, but I believe if one cashes out the bond after 1 year (and before 5 year or something like that), the only "penalty" is to lose 3 months of interest. So 3 month of interest would be taken from the total amount. I read this as: principal + interest will be preserved (minus 3 months of interest) if cashing out before 5 year and hold for 1 year ()

[sengsational]

Quote:

Originally Posted by jim584672 All in VTI.

The OP would really feel like an idiot if the market went against him and had to delay retirement because of it. So, yeah, bad idea.

Quote:

Originally Posted by RetireAge50 If your 401k has a stable value fund this may be a good place for cash. Even if you can’t get to it until 59.5 you can always sell stock outside the 401k while at the same time buying the stock inside the 401k.

Good idea.

[jollystomper]

Quote:

Originally Posted by RetireAge50 If your 401k has a stable value fund this may be a good place for cash. Even if you can’t get to it until 59.5 you can always sell stock outside the 401k while at the same time buying the stock inside the 401k.

I agree with this, most 401K stable value funds are still providing a relatively good return.

I find the threads trend interesting. When the markets are at all time highs, there seem to be a preponderance of "I have too much cash!" themed threads. When the markets go way down into recession/depression territory, there seem to be a preponderance of "I don't have enough in cash!" threads. Human nature, I guess. This is one reason I based my cash holdings on my spending needs for my desired expense interval, regardless of what the market is doing.

[ut2sua]

Thanks everyone for your input. I do feel better after reading all your comments. One option for us is: after I fire, to shift some of our 401K to an IRA and start a 72t to get some $ out (say 20K a year or so). The good thing about that is the 72t will last about 5 years which is just around the time I have access to my IRA at 59.5. The extra cash amount is low enough (once DW and I will have no income) that it won't interfere with ACA, and it is a nice way to resupply our cash account (and perhaps allow me to take some risk with my cash balance, or just to help with the Roth conversion tax payment). The bad thing that I don't like is I have to withdraw that fix amount every year regardless. I have learned somewhere in this forum that Fidelity could help setting such an account up for folks.

[LarryMelman]

Quote:

Originally Posted by ut2sua if one cashes out the bond after 1 year (and before 5 year or something like that), the only "penalty" is to lose 3 months of interest.

That's right. The CPI was just announced today. After May 1, the rate on new I-bonds will be at least 3.54%. That's the highest in 10 years.

Also note, and you may know this, that you MUST hold them for a year.

[ut2sua]

Quote:

Originally Posted by LarryMelman That's right. The CPI was just announced today. After May 1, the rate on new I-bonds will be at least 3.54%. That's the highest in 10 years. Also note, and you may know this, that you MUST hold them for a year.

I will definitely start some I-bonds purchases next month. Thanks for sharing.

[Koolau]

Quote:

Originally Posted by ut2sua So our situation is: I may FIRE anytime between now and the next year or so DW and I are 50 and 54. And we are holding 5x of expense in short term CD earning less than half a percent interest (120K*5=600K). Our plan is, once I fire, to live off of this $ until I turn 59.5 and have access to our 401K and IRA. My work plan 401K does not play with the 55 rule We plan to do some Roth conversion during the 5 years (but that will cost some more cash to pay for conversion taxes). I don't think I have much option, but would like to ask anyway in case there is some better way than holding cash for folks in our situation. I have started reading about I bond, and that may help, but there are limits on how much we can buy. Thanks for sharing your thought.

I think it's okay to look around to see if you can eek out a bit more interest (but keep in mind: If you can get 1/2% more someplace, that's a total of $3K a year.) Better than a stick in the eye, but not as good as you and DW likely did on your 3 stimulus infusions! It's a perspective thing. It's "costing" you a bit (maybe) to have your cash more-or-less sitting there, but you DO have a plan. It's based on your FIRE before 59 1/2. For THAT extra 5+ years, it may be costing you a few grand. WHAT a bargain! Who wouldn't pay a few grand to be able to retire when they want to rather than when they otherwise would be able to. SO, I wouldn't worry too much about your plan - it sounds good to me, anyway.

I would have a bit of concern about inflation reducing the value of your cash stash, but if inflation comes, rates will rise and it won't cost you much to dump CDs paying 1/2 percent to grab the "new" ones at (what?) maybe 3%, 4% - whatever.

What I really like about your plan is your ability to pay the taxes on your Roth exchanges. That is GOLD in my opinion. We retired with "plenty" but had to scrape and scrap for cash to do many of our Roth conversions. You are in the cat-bird's seat to convert up to whatever tax level you desire. We should ALL have set it up this way.

My advice? Relax. Look for some extra interest at a leisurely pace. Relax. Enjoy and just do your plan. It sounds like a good one. As always, YMMV.

[NW-Bound]

Quote:

Originally Posted by jollystomper I find the threads trend interesting. When the markets are at all time highs, there seem to be a preponderance of "I have too much cash!" themed threads. When the markets go way down into recession/depression territory, there seem to be a preponderance of "I don't have enough in cash!" threads. Human nature, I guess...

Consider the opposite.

Suppose at the market top, you have no cash, which means you are all in stock. Bought high?

And at the market bottom, you have loads of cash, which means you have sold all your stocks. Sold low?

I don't think the above is a good position to be in.

[Bruno]

Quote:

Originally Posted by LarryMelman After May 1, the rate on new I-bonds will be at least 3.54%..

Can you buy I-Bond from Fido?

[ivinsfan]

Quote:

Originally Posted by ut2sua I will definitely start some I-bonds purchases next month. Thanks for sharing.

An I bond is a good option for someone on a subsidized ACA plan. The interest is not reported as income until you cash it out.. ( I know the cliff is gone for awhile , but still good info).


Note there are limits on how many I bonds you can buy in a year.

[NYEXPAT]

Stonks for sure, the S&P is about to melt up to 4400 very soon!