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Old 09-22-2017, 04:29 AM   #121
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Some of us with large sums of cash are also keeping it for specific purposes. DW has two parents in assisted living, one of which is in memory care. She is also searching for a home on the Jersey shore, which would be a large expense that we'd need relatively quickly to get a good deal on what she wants. We also have plenty in equities to provide for future growth, but keeping powder dry for a market downturn is also nice.
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Old 09-22-2017, 06:39 AM   #122
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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.
Exactly - for a high net worth individual, how aggressive they are in their investments is a matter of personal goals and preferences. It's not just personal preferences either - it's also goals. Whether or not you have sources of guaranteed income to cover expenses and/or heirs to pass money to will strongly influence those preferences.

I mean if you have say 8 years of expenses in cash, yet in addition say well over 50 years of expenses in long term investments/retirement assets, from a financial planning perspective it just doesn't matter if you let excess cash accumulate. There is no right or wrong approach. It depends on your goals.
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Old 09-22-2017, 06:53 AM   #123
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I 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.
Very well said. Personally, I think there are too many folks that retire with an expectation that certain higher risks investments will "get them by in retirement". I can understand that and wish them the best.

As I've said before, I have two buckets of money. Bucket one is in very safe investments but have a very low rates of return, but I can live like "I want" on those funds for the rest of my life. (Why risk it) Bucket two (about the same size as bucket one) is in higher risk investments. I'll admit, those they have done very well in the past 6 to 8 years but I don't depend on them.
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Old 09-22-2017, 07:03 AM   #124
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Exactly - for a high net worth individual, how aggressive they are in their investments is a matter of personal goals and preferences. It's not just personal preferences either - it's also goals. Whether or not you have sources of guaranteed income to cover expenses and/or heirs to pass money to will strongly influence those preferences.

I mean if you have say 8 years of expenses in cash, yet in addition say well over 50 years of expenses in long term investments/retirement assets, from a financial planning perspective it just doesn't matter if you let excess cash accumulate. There is no right or wrong approach. It depends on your goals.
I agree, but it's all tied together. In your example I would wonder why they waited so long to retire or spend so little in retirement. In any event, one of the things I have learned here is that there are many valid approaches to financial matters, The other thing is how high my risk tolerance is compared to many others.
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Old 09-22-2017, 07:46 AM   #125
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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.
Agree here. The cash builds up faster than we can spend it and its not something we need to have invested. For us, about 3 years worth of spending in cash is not that much, but provides a completely liquid source for emergencies, bigger expenditures, and market uncertainty.
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Old 09-22-2017, 08:45 AM   #126
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I agree, but it's all tied together. In your example I would wonder why they waited so long to retire or spend so little in retirement. In any event, one of the things I have learned here is that there are many valid approaches to financial matters, The other thing is how high my risk tolerance is compared to many others.
What if "they" retired at age 39?

Spend so little? Maybe they don't spend little. Maybe they spend quite a bit - far more than they ever did while working.

I suppose you could wonder why they don't spend more if their net worth is "so high" relative to their expenses. Maybe they will eventually spend more. They certainly know they have that option when something desired comes along. They have lots of flexibility which is a nice thing.

As more cash builds they are likely to spend or gift more of it.
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Old 09-22-2017, 08:48 AM   #127
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Agree here. The cash builds up faster than we can spend it and its not something we need to have invested. For us, about 3 years worth of spending in cash is not that much, but provides a completely liquid source for emergencies, bigger expenditures, and market uncertainty.
Yep, we might be underspending withdrawals while the markets zoom higher, but if our retirement assets take a 30% hit, so will our income, and suddenly you're not underspending anymore but might need to tap into your cash reserves to make up the shortfall in income.
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