How much Cash did you have upon retiring or planning to have -2x-3x yearly expenses?

[Joylush]

I have 20 years of living expenses in cash which is 20% of my portfolio. I often think it’s too much but it’s basically safe and not a large percentage of the overall portfolio so I feel comfortable there.

 

[RobLJ]

I thought I would be in the minority with 4-5 years of cash, but I see there are a bunch of idiots like me. Right now, cash is 22% of the portfolio but I plan to spend it down before SS, so unless the portfolio has a big decline, cash will be a declining percentage.

 

[NW-Bound]

How do you write covered calls on cash? Or are you buying the stock with your cash? Which is a good idea.

No, I wrote "cash-covered puts", and I should have said "cash-secured puts".

The cash is there to back up the puts that I write. If the stocks drop more than I anticipate, the puts get assigned and I have to buy the stocks. This itself is not necessarily bad, because it forces me to buy low.

If the stocks do not drop to the strike price or lower, then I pocket cash from the put option premium, and do it again. And again.

I have been making way more with my cash than the puny interest that CDs and bonds pay. Of course, there's risk, but one can manage it if he's not too greedy.

I also sell covered calls on the shares I hold. This is something else.

 

[Exchme]

Felt it wasn't a good idea to invest the savings in the last 1-2 years of work, only to draw it right back out again, so just chucked it in the bank. Ended up with a little over 2 years worth of cash at retirement and am now spending that down.

Will probably stop at 4-6 months worth and start to spend down bonds I put in taxable a few years ago. While standard advice would tell me not to hold bonds in taxable, I do get an advantage now. Between that and the cash, I have enough to cover expenses until eligible for Medicare, so don't have to worry about selling appreciated stock and accidentally crossing an ACA subsidy threshold to get money to live.

 

[athena53]

Oops. I voted More than 5 because I mis-interpreted your question as "how much invested assets did you have..." Yeah, I know there's a difference.

Probably less than 1.0. DH was getting SS and the total invested assets were high enough that I didn't mind taking a lot of risk.

 

[cyber888]

You can't count on dividends continuing in a severe bear market like the Great Recession.

If the S&P500 or other broad stock market index drops 50% the reality is many companies will simply stop paying dividends altogether.

Right. Many companies will suspend dividends in a downturn. It's not the same as cash.

 

[UnrealizedPotential]

I currently hold maybe about two months expenses in cash, so not a lot . I have thought about bumping up my cash reserve but I dislike that cash earns very little. My portfolio yields more than enough for living expenses every month and I can always use my credit card for emergencies. Still, I completely understand those who hold a lot of cash, and I would never argue with anyone who wants to do that.

However my portfolio is on the conservative side these days, but I am invested.

 

[indiajust]

I have kept roughly a year in cash for expenses my entire life. Too many STEM layoffs to count, so I always contributed the max to retirement and held back my spending.

The last time I was low in cash was waiting for the first paycheck after grad school, 1989. I was back up in less than a year.

 

[2cheap2eat]

Currently 11 years in cash. This is enough to fill the gap until we get social security and pensions.

The weighted average return on this cash is 2.47%. We have no bonds. Portfolio is 75% stocks and 25% cash.

That sounds more like bond holdings than cash, can you give some details on how your getting average of 2.47% ?

 

[brett]

Last month we had 110K.

We gave 85K to our daughter. 18K went for income tax installments.

We will not bring down any cash until mid Dec when we have to make another 18K instalment. Even then we will only bring down 25K.

Just not burning through during covid. Certainly do not want it sitting in an account earning 1.5 percent. We would be loosing buying power given the current inflation rate.

But...we do have pension income. It greatly reduces the need for a great deal of cash on hand.

 

[Dalmore]

We currently have 5 years of cash, assuming my targeted WDR, but since retiring last year, we are only at about 25% of the target WDR. I should reduce it, but as others have said, I can sleep at night.

 

[sroby2020]

Since I was retired unexpectedly, I had less cash that I would have planned if I had retired on my own. But now I have about 1 year stashed in checking/savings accounts (bucket-1) that I pull from during the year. Another 5 years in bond funds/CD's (bucket-2) to feed bucket-1 when depleted. The rest in equities (Dividend Aristocrats/Kings). I get enough dividends throughout the year, to not have to touch bucket-2 for the most part.

 

[Tracer]

I have about 100K in high yield savings accounts and deferred annuities paying from
1-3% per year. More than enough for 2 years expenses. I also have about 40K in a short-term bond fund which I call "almost cash". All the rest at 60/40 stock and bond market. I'm 72, retired at 58. My income (from 2 SPIA's and SS) is pretty much guaranteed so my cash is mainly for emergencies, future large purchases, future travel and yea... some peace of mind.

 

[rayvt]

Holding significant cash is one of those investing choices, like paying off the mortgage early, that has strong emotional appeal but undercuts portfolio returns.

 

[RobbieB]

None? Who has no cash?

Maybe 6 months? But none? How do you live with none? Must be selling weekly eh?

 

[scrabbler1]

None? Who has no cash?

Maybe 6 months? But none? How do you live with none? Must be selling weekly eh?

I have nearly none because I have a steady inflow of cash, every month, from a bond fund dividend. I think of it like a monthly paycheck. The cash I keep is enough to avoid any monthly account fees with about $700 more as a cushion. I don't sell anything to pay my bills.

 

[2177V]

I have nearly zero cash because cash is dead money in a low interest environment. I have multiple properties with HELOC so I can borrow money using my equity at low interest rates if I ever need extra cash. I have about $2K to $3K positive cash flow each month after meeting my expenses but I do save this extra money to a down payment to buy even more properties. I have enough paper assets which is money invested in stocks and bonds….but with inflation on the horizon, I now prefer real estate assets over paper assets.

 

[RobbieB]

I have a dividend and interest stream too, but it's not enough to cover the blow.

So each new year, I sell enough to pay most of last year plus a little. As the year goes by I transfer from "savings" at almost zero interest to checking at less than savings earnings and blow that dough. Towards the end of the year (like now) the savings drops to below a hundred grand and will drop further until I recharge next year.

The recharge is always selling equities, never bonds, and the equities keep growing faster than I can spend them. I keep trying, but...

 

[Joylush]

Right.

I ran a bunch of backtests---with real data, not emotional freakouts---and saw that as long as you stick to the 4% SWR and decent diversity that holding cash is a drag on you.

If you absolutely have to do it for your emotional health, the best thing is to just tap the cash bucket if you feel the need to, and never refill it.

The original poll reads like a push-poll, because there is no option of "None".

What about the argument that comes up in favor of no longer playing if you’ve “won the game”? Wouldn't that be an argument in favor in holding a large amount of cash?

 

[lem1955]

About 6 months before I retired I purchased a 3 year ladder of CD's. The interest rate was better than it is now. Each year, for the next two years, I purchased another CD for the third year out. Then, CD returns went to nearly 0, and I was comfortable enough using my 40% position in bond mutual funds to provide cash. So far the bull market has meant I'm selling stock rather than bonds to fund living expenses and rebalance the portfolio. I might return to CD's if the interest rate goes up to 3%. Otherwise, I'll stick with the asset allocation to provide cash.

 

[Markola]

What about the argument that comes up in favor of no longer playing if you’ve “won the game”? Wouldn't that be an argument in favor in holding a large amount of cash?

Emotionally, sure; Mathematically, no. Same for bucket systems that hold cash. Long-term, a portfolio with inert cash is going to underperform a portfolio with any combo of bonds earning 4% and stocks earning 8%. Opportunity cost.

 

[joejetski]

As several have commented here, it depends on your asset mix. A pension, especially fed gov or something secure like that I would use and line that up against spending requirements. After that, keeping some money in cash for any unaccounted regular expenses, 1 time expenses, travel, etc, equivalent to your comfort level 1-3 years. If no pension, I would keep at least 1 year of expenses in cash, unless your investment pot is large and can withstand some withdrawals during a downturn.

 

[Escapevelocity]

My plan is an unorthodox way. My cash will take me 30 plus years of expenses. From cash stash we have given away 6 figures, bought vehicle, bought land and buy everything that is needed for life. My plan was to have enough cash to live on and to not have to touch investments. The plan was to be a safe and secure for sustaining my portfolio through down times. The ways it looks 5 years into ER my plan of sustainability of investment should work well. My cash is ~11% of portfolio not of NW, and the percentage (cash) keeps going down because investments keep going up.

I will add also, that I have a low WR and take SS.

Ha so basically you have so damn much money it doesn't matter!

 

[Joylush]

My plan is an unorthodox way. My cash will take me 30 plus years of expenses. From cash stash we have given away 6 figures, bought vehicle, bought land and buy everything that is needed for life. My plan was to have enough cash to live on and to not have to touch investments. The plan was to be a safe and secure for sustaining my portfolio through down times. The ways it looks 5 years into ER my plan of sustainability of investment should work well. My cash is ~11% of portfolio not of NW, and the percentage (cash) keeps going down because investments keep going up.

I will add also, that I have a low WR and take SS.

That sounds like a sound plan for someone with high net worth. I was reevaluating due to some of the comments here as to whether that was reasonable or as someone said “stupid” to do. I guess it really depends on the total you actually have.

I hear the arguments which state why risk anything if you’ve “won the game” v if you’ve “won the game” you can afford to take more risks.

I would be more helpful to know what dollar amounts people consider is “winning the game” as well as what their yearly expenses are.

 

[audreyh1]

Right.

I ran a bunch of backtests---with real data, not emotional freakouts---and saw that as long as you stick to the 4% SWR and decent diversity that holding cash is a drag on you.

If you absolutely have to do it for your emotional health, the best thing is to just tap the cash bucket if you feel the need to, and never refill it.

The original poll reads like a push-poll, because there is no option of "None".

If you already have a really large investment portfolio, a few years expenses in cash just doesn’t matter in terms of drag. You can do what you want.