How many months of cash in your portfolio do you keep?

[traineeinvestor]

I currently have about 28 months of outgoings in cash/near cash in my local currency and a bit more to other currencies. DW has almost as much.

Given projected cash flows, this is multiples of anything we are likely to need - and it's earning close to zilch.

 

[Midpack]

I have 7% in cash, and 36% in bond funds, the rest equity funds. If bonds were more compelling, I wouldn't hold that much cash. My target is 2 years in cash plus/minus, I'm over that for the moment.

 

[mrfeh]

I think the answer depends on many factors.

For us, we have no pensions and don't plan on taking SS for 15 years, which means we are living exclusively off our taxable accounts. In this situation, we have 3 years of cash.

 

[mathjak107]

total return on bond funds have been decent . especially if besides a total bond fund you diversified in to other areas because total bond funds are not total .

they lack many areas that have done quite well .

 

[Independent]

I guess we're weird. Our only cash is in a checking account. The balance is in the low thousands - just enough that we don't have to do IRA withdrawals too frequently.

I make no attempt to keep enough cash to avoid selling bonds or stocks. I figure I can't time the market, so I wouldn't know when to sell and when to draw down cash.

 

[mathjak107]

it really would not to much anyway . conventional rebalancing to raise cash is more efficient than trying to time things with cash . .

 

[kcowan]

Good for you!
I just turned 60 but have done the math and it makes sense for me to wait till 65 before starting CPP. I expect to have OAS fully clawed back, so I'm not counting on anything from that source.

You should do the math. There are only 8 drop out years and 60-65 are five of them. So the government reports assume you work until 65 at the last years earnings. IOW useless. I chose 62 because of that I had managed my income tax in the last 10 years. So I had a few years to drop out. DW started at 60 for similar reasons.

 

[bclover]

not alot maybe 3 months living expenses. I am working P/t so that does give me a couple hundred bucks play money

 

[Meadbh]

You should do the math. There are only 8 drop out years and 60-65 are five of them. So the government reports assume you work until 65 at the last years earnings. IOW useless. I chose 62 because of that I had managed my income tax in the last 10 years. So I had a few years to drop out. DW started at 60 for similar reasons.

I did not use the Government calculations, which are misleading unless you continue to earn till age 65. I moved to Canada in my early 30s so I would never be entitled to full CPP. If I wait till 65, I will have 23 working years and 10 years with no earnings, which further reduces my baseline. However, the discount rate for taking CPP at 60 is now 36% (I believe it was 30% when you were making your decision). The effect of the increased discount exceeds the effect of the non working years in my case. Waiting till 65 will give me a monthly cash flow that is 40% higher than what I could get at 60. (Simplistically, that could be considered an annual increase of 8%). My breakeven point (between 60 and 65) is at age 78. Hopefully I will still be around then! One could argue over the minutiae, and there is no "wrong" answer. I can choose to take CPP anytime if I need the cash flow, but my current plan is to wait till 65 and treat it as an inflation-adjusted annuity. In the meantime I continue to draw down on my tax sheltered investments such as RRSPs, the purpose of which is to minimize RMDs at age 71.

 

[Bir48die]

About 16 months at the beginning of the year. By the end I have 4 months. Pay myself once a year and live off that plus DW's SS and her pension.

 

[audreyh1]

+1 even though I know carring 5% in cash is suboptimal, for some reason it is comforting.... and the cost to total portfolio return is fairly minimal... in my case ~9-15 bps. I reduced my cash allocation from 6% to 5% about a year ago and may reduce it further in the future as I become more comfortable living off our investments. I think I'll definitely reduce it once we start SS as at that point our pension-type income sources will comprise about 70% of our spending (from ~18% now).

When people mention that having x% or more cash is "suboptimal", I always wonder what, exactly, they are optimizing for. Not everybody is trying to maximize long term returns = big portfolio when you are almost dead. There are other considerations.

 

[Blue Collar Guy]

If you count CD ladders and Series I bonds as cash then it's about 15 years.

Thats a ton of dough. You have passed the finish line, congrats.

 

[Livefree]

Thank you the bride just found this, 1.31 % Money market guaranteed for 12 months. She will transfer 2 years worth of living expenses to this. After taxes thats $850 to spend. Thats a good chunk of change for a few mouse clicks.

Ally Bank currently has a 1.5% eleven month no withdrawal penalty CD available

 

[scrabbler1]

I think the answer depends on many factors.

For us, we have no pensions and don't plan on taking SS for 15 years, which means we are living exclusively off our taxable accounts. In this situation, we have 3 years of cash.

Another factor I think is if you have a steady cash inflow (i.e. monthly dividend) as opposed to a big blob of cash sitting somewhere to use. I have the former but I see many of you have the latter.

 

[Car-Guy]

Some of us (well me anyway) need a lot of available cash in our checking accounts to support our habits. Sorry, I mean hobbies.

 

[Lawrencewendall]

0 - I have a monthly pension which pays the bills and 50k available credit on CC for emergencies.

 

[Sunset]

Thank you the bride just found this, 1.31 % Money market guaranteed for 12 months. She will transfer 2 years worth of living expenses to this. After taxes thats $850 to spend. Thats a good chunk of change for a few mouse clicks.

You can easily get 1.5% cashable anytime after 6 days with no penalty:
https://www.ally.com/bank/no-penalty-cd/

 

[kgtest]

Some of us (well me anyway) need a lot of available cash in our checking accounts to support our habits. Sorry, I mean hobbies.

When can I visit, you are in cali right

 

[CardsFan]

When people mention that having x% or more cash is "suboptimal", I always wonder what, exactly, they are optimizing for. Not everybody is trying to maximize long term returns = big portfolio when you are almost dead. There are other considerations.

+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.

 

[gerntz]

What is cash? Currency in hand? Which currencies? Checking account? Savings account? CD's? Short-term bonds? How short? Gold? Silver? Other?

 

[Meadbh]

What is cash? Currency in hand? Which currencies? Checking account? Savings account? CD's? Short-term bonds? How short? Gold? Silver? Other?

See the link in post #26.
It would be too easy if we could all agree on a definition!

 

[kcowan]

Waiting till 65 will give me a monthly cash flow that is 40% higher than what I could get at 60. (Simplistically, that could be considered an annual increase of 8%). My breakeven point (between 60 and 65) is at age 78. Hopefully I will still be around then!

Yes it sounds pretty good as a choice. When I took it at 62, the breakeven was 78. My thinking was that I would have lots of other sources by then and fewer things to do with it. Now I am not so sure. But I know I will be OK.

With the exception of 2008-9, it has been a great run.

 

[kimcdougc]

Have about 6 years worth of cash in a high yield mm account. Two years in my credit union which is what we live off of now. Not going to touch our IRA until we burn up 5 years of after tax $ to live on. DH and I will start ss at 62.

 

[Winemaker]

About 10 years worth, or 14% of portfolio. I'm either not spending enough, or have been blessed with enough income sources or both. SS is at least 4+ years out for FRA, and I have reduced my equity % recently.

 

[Nature Lover]

Pensions cover my ongoing regular expenses including taxes. I keep cash/mm sufficient to cover lumpy expenses, upcoming asset replacements (anything near the end of its useful life), and for unexpected items/opportunities/additional safety net. Current cash/mm total is ~5 years expenses.

NL