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Old 09-18-2017, 04:02 PM   #101
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When I was about to retire, I kept about 2 years cash in my retirement account. The idea was if a significant market downturn occurred, it wouldn't need to sell in a down market. It actually lasted for 3 years due to some unexpected cash inflows. Now my plan is to only keep enough cash for the following year expenses, so around 18 months worth.
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Old 09-18-2017, 04:41 PM   #102
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About 5 years worth.
I'd like to reduce it to 3-4 years worth, but am waiting for the next recession or collapse of market before doing that.
If it doesn't happen, I can always just feel super secure not worrying about it happening.
I have more than 6 years of cash in a high yield account. (way too much) This is due to the recent sale of a house.

Like you, waiting for a drop in the market.
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Old 09-19-2017, 01:54 PM   #103
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8 years cash. I'm likely sacrificing a higher return, but hey - I sleep well, no worries about market crashes 'cause we'll be able to ride most downturns out without having to sell low. Note - for living expenses we're relying on our post tax savings for at least the next 15 years. That makes us a bit more conservative than we'd be if we had big pensions or SS checks coming in every month.
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Old 09-19-2017, 04:10 PM   #104
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try to keep 5-10k in checking account. Periodically move excess to vanguard or AXP savings account(up to 25k). Also have up to 15k in Navy Fed Credit union. So we could have up to 50k.
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Old 09-19-2017, 04:34 PM   #105
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+100

By most accounts here, we carry "too much Cash" (this does include CD's and cash value of 2 WL policies). About 5-6 years of normal spending.

The WL policies are on autopilot, so they cost nothing to maintain, and will provide more at death than now.

The balance is to be able to sleep in peace should the markets tank.

FWIW, I don't want to start a side topic on WL insurance. I made a mistake many years ago and this is the best way to create a minor upside.
At least under current tax law if the policies are participating by waiting till death the proceeds are not taxed, whereas if the policy owner cashes them out, then the surplus over what was paid in is taxed.
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Old 09-19-2017, 05:31 PM   #106
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...................... I keep cash/mm sufficient to cover lumpy expenses,................ Current cash/mm total is ~5 years expenses.

NL
lol, 5 years of cash, nice, you can handle big lumps.
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Old 09-19-2017, 05:38 PM   #107
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We do have 2 X SS and modest pension keeping the check book full for expenses. We keep an additional amount which roughly gets us to 1 year's expenses (with the stated sources of income.) So I suppose that comes out to 3 or 4 months we could last without any income - if we thought that could happen, we would keep more - perhaps a whole year's worth, but YMMV.
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Old 09-19-2017, 06:02 PM   #108
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Three to six months worth replenished quarterly from investments.
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Old 09-19-2017, 07:28 PM   #109
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I currently have 4.21 years in cash/short term investments. This is to fund current living expenses, upcoming private equity capital calls and dry powder for a market pull back.
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Old 09-19-2017, 07:29 PM   #110
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lol, 5 years of cash, nice, you can handle big lumps.
How true! Of course, with a small annual spend....5 yrs isn't as impressive as you might think.
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Old 09-19-2017, 09:10 PM   #111
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I have about three years in cash and CD's.
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Old 09-20-2017, 07:56 AM   #112
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16 months.

15 months in a high interest on line bank account. The balance in our savings and chequeing accounts.

Plus some cash from time to time in our investment accounts waiting for re-investment.
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Old 09-20-2017, 08:07 AM   #113
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I have about three years in cash and CD's.


Just to add to my earlier post, some of my USD cash are at Ally (and CD's at Penfed and Discover Bank), but I have exchanged the rest to CAD (I live in Canada now) and am keeping most of it at EQ online Bank since their interest rate is 2.3%, which is not bad at all IMHO, especially compared to the US rate.
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Old 09-20-2017, 03:48 PM   #114
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2.3% is impressive for a savings account.
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Old 09-20-2017, 05:34 PM   #115
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When I retired I sold post tax stock and added those proceeds to my cash position to cover 5 years of projected living expense. I put the cash into VWSUX which is a short term muni bond fund. It throws off some tax free interest and since it's short term it will follow inflation pretty closely if inflation starts to kick up. I live month to month off that VWSUX money.

The rest of my portfolio remains invested in a diversified stock portfolio, further diversified with REIT, GLD, Treasury Bonds, TIPS and Alternatives. The move into VWSUX changed my portfolio to about a 55:45 AA which is in the range recommended in early retirement (55/45 to 45/55, S/B). As the money is spent from VWSUX my portfolio will automatically re-balance itself toward a more aggressive stock position.

When the 5 years are up I will claim SS and be forced to take required minimum disbursements (RMD) on my IRA's, so I'll then re-evaluate how to fund the next 5 year epoch of my retirement. Probably I will slice off another chunk of stocks, recharge VWSUX and balance that against SS and RMD for monthly income.

This portfolio is well positioned against inflation and bear market which are the 2 buzzkills of retirement income, and is very tax efficient, but still has good capital appreciation. My SWR is about 3% and my NW is more than when I retired.

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Old 09-21-2017, 01:43 AM   #116
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I guess there are 4 reasons to hold cash. Regular cash flow management to cover lumpy expenses. Emergency fund. Cash held in portfolio waiting rebalancing or deployment. Cash held in portfolio as an asset class (unusual as it would more likely be in some term instrument). Only the first reason affects me. Maybe have 3-6 months of spending in cash ( unrestricted checking and savings accounts). Since it's so expensive to hold cash I am surprised people hold such large balances?
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Old 09-21-2017, 04:44 AM   #117
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simple rebalancing stocks and bonds accomplishes raising cash very well . in fact it does it better more often than not compared to holding years of cash since unlike cash bonds can go up in bear markets for stocks offsetting a bit more in losses and bonds tend to pay more in interest ..

i am down to just about 1 years cash at this point .
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Old 09-21-2017, 05:05 AM   #118
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I have around 6 years in cash & equivalents. That should be a lot lower in the end (max. 3 years), especially since I also have CD ladders on top of that.
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Old 09-21-2017, 05:18 AM   #119
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I guess there are 4 reasons to hold cash. Regular cash flow management to cover lumpy expenses. Emergency fund. Cash held in portfolio waiting rebalancing or deployment. Cash held in portfolio as an asset class (unusual as it would more likely be in some term instrument). Only the first reason affects me. Maybe have 3-6 months of spending in cash ( unrestricted checking and savings accounts). Since it's so expensive to hold cash I am surprised people hold such large balances?
The "cost" of holding cash should be in perspective to the rest of your portfolio and your personal goals. You can't optimize each individual asset class for long term return (that would drive you to 100% equities), you have to look at the whole and the role of diversification across asset classes.

Holding bonds is "expensive" during rising interest rate periods.

Holding stocks is "expensive" at the start of bear markets.

If you hold cash as an asset class as part of your portfolio allocation, then it needs to be liquid and not credit sensitive or interest rate sensitive. Those are the benefits of the cash asset class - holding a short term bond instead defeats the purpose. You probably won't notice this until you precisely need those characteristics - when it's time to rebalance because bonds and stocks are hit.

Personally, I hold plenty of cash because I can "afford" to. I have plenty invested in other asset classes, more than enough to cover my long-term needs IMO according to careful research (and knocking on wood of course). Most of my cash has been gradually accumulating - the result of years of typically underspending withdrawals. I see no need to reinvest that excess back into equities and bonds as I'm not interested in increasing long-term return at the "cost" of reducing funds I have available to spend on whatever I like in the next few years. Just because I didn't spend the money last year doesn't mean I might not like to spend it next year. I don't want to outlive my assets, but I also have the important goal of not leaving too much on table when I pass.

Minimizing cash is a focus on long-term return. Which is fine. For some folks that is their goal - they have heirs, or prefer to have more $$ available when they are older, perhaps. Or maybe they have so much guaranteed income coming in that they simply don't need any cash reserves at all, so they prefer to pass along the bulk of their investments. But that doesn't mean it's the right goal for everyone.
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Old 09-21-2017, 11:55 PM   #120
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I guess if people exlpained(like you did) why go have such large cash balances we could assess but 8 years of expenses in cash seems pretty high. Gets back to the old question of " should I take more risk because I can afford to, or take less because I don't need to?" Really depends on your personality.

I have an aggressive AA and a solid income cashflow ( pensions and divs) so it's consistent to have cash only for operating needs. I can certainly see your point of view though.
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