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Old 11-01-2020, 12:10 PM   #21
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It depends how comfortable you are with the volatility of your portfolio, and how happy you'd be withdrawing from it in down years. Some folk here have little to no cash reserve. My cash reserve, kept in a savings account represents, on average, about a year's worth of income. However, the dividends from the taxable portion of my portfolio are paid directly into my savings account every quarter. This means that I could, if I really wanted, go somewhere between 18 months - 2 years without withdrawals. However, my cash pot would be completely empty at the end of a stint like that.

I withdraw from the main portfolio every year, to bump up the cash pot, regardless of whether it's an up or a down year. I'm comfortable with that.
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Old 11-01-2020, 12:24 PM   #22
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We keep 3 years, and like others we consider that to be part of our “fixed income” allocation. Currently (mostly because of COVID) averaging a bit under a 1% WR.

I know we don’t really need that much, but we sleep better knowing it’s there.
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Old 11-01-2020, 12:32 PM   #23
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My method/plan has been ~16% of my portfolio in CD's and savings account. Pretty much unorthodox way to everyone here but that is what I have done. As far as how many years in cash will it last. Those CD's and savings should be efficient for my life time here on earth plus SS.
My plan was to have enough cash to never have to touch investments till I have to do RMD. Then my plan is to just reinvest back in to the markets from RMD funds.
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Old 11-01-2020, 12:38 PM   #24
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Originally Posted by Flyfish1 View Post
Right - just to clarify - I should have asked how many years of living expenses do people hold in cash reserve?
There may not be a right or wrong answer, just ranges of opinion. It's like the question, "What is the best Asset Allocation."

18 months cash sounds like a really good idea. 2-3 years would work too.

We have 7.3% cash which would should get us through 30 months.
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Old 11-01-2020, 12:47 PM   #25
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We have 3 yrs worth (approx) add in the divs and interest and that probably stretchs to 4 yrs.
Of course if things are that bad (1928 bad) we would probably cut back to rice and beans and the money could last 5+ yrs.
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Old 11-01-2020, 12:54 PM   #26
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Still have a bit of income now and then but never felt the need for any significant cash holding once we got established. Withdraw as needed in the direction that rebalances toward our predetermined AA.
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Old 11-01-2020, 01:14 PM   #27
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With a 40/60 AA we have 30x annual expenses in CD ladders / Cash / Series I Bonds within the 60 % portion.
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Old 11-01-2020, 01:51 PM   #28
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A couple of thoughts.

First , we keep 2-3 years in cash including MM accounts, savings and CDs. That is our near term spending money, emergency cash and everything else. I craft a "paycheck" from these funds, which I replenish from asset sales in the ordinary course of investing. As an active investor, I seldom need to sell assets to rebalance as I do so dynamically.

Second, it helps to know people's pension situation. If someone is drawing a pension, obviously they need less cash. I do not have a pension, DW a very small one of say 1000 a month ( none presently). No plans to tap SS anytime soon.

Third, folks planning to keep high gain stocks in taxable accounts till death should look at current tax platforms, one of which calls for an end to basis step up at death.

Cheers!
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Old 11-01-2020, 02:13 PM   #29
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We have enough in CDs, Savings and a Flexible Retirement Annuity (which is basically a tax deferred savings account with no fees). CDs range from 1.5% - 3.5% with all but one maturing in 2021. The FRA pays ~2.6% and only new money is lower at 1%.
It would last us 8-10 years depending on if stock dividends were cut in a market crash . We’re 64, so we could always take SS if needed. We sleep well at night.
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Old 11-01-2020, 03:40 PM   #30
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I retired last year with 2 years cash (including lumpy expenses such as cars and travels) and 5 years bonds. Now we are down to 1 Yr cash and 4 Yrs bonds after some reshuffling, but I am still Ok with that. We plan to build up some more cash for a new house down payment next year. Bottom line is I am comfortable with from 5 to 7 years total cash and bonds.
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Old 11-01-2020, 07:04 PM   #31
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I plan to retire with 3 years cash (savings account). CD rates are so low right now, I doubt I'll bother with a ladder for the foreseeable future.
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Old 11-01-2020, 07:55 PM   #32
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I want my money working for me. I have a credit card with over a $40 K limit that will cover any emergency.
I can cover any expense as part of my RMD. Right now my projected RMD for next year is about $70 K.
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Old 11-01-2020, 10:09 PM   #33
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I want my money working for me. I have a credit card with over a $40 K limit that will cover any emergency.
I can cover any expense as part of my RMD. Right now my projected RMD for next year is about $70 K.
Yes but this begs the question: are you funding the RMD by selling equities? RMD is not a funding source per se.
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Old 11-02-2020, 12:02 AM   #34
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Yes but this begs the question: are you funding the RMD by selling equities? RMD is not a funding source per se.
All I have in my IRA's are equities. I can either sell them or transfer them into a taxable account.
Since we are blessed with more than we will ever need, I distribute part of my RMD to our sons, plus some QCD's to various organizations.
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Old 11-02-2020, 05:10 AM   #35
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For the first 3 years, I had a minimum of 3 mo, and pulled the next year's cash in Nov/Dec. This year, I am going to raise the minimum to 6 mo, and perhaps repeat that the next year or two until the min is up to 1 yr.
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Old 11-02-2020, 09:28 AM   #36
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We keep about 4-6 months of expenses (including any known upcoming lump payments) in our checking. We pull funds from our after tax bond fund or dividends as needed. We have been retired almost 2 years and still working on this process.
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Old 11-02-2020, 09:46 AM   #37
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I try to keep about 9 months worth expenses in CD/Cash accounts.
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Old 11-02-2020, 09:59 AM   #38
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Originally Posted by Cotton1929 View Post
We keep about 4-6 months of expenses (including any known upcoming lump payments) in our checking. We pull funds from our after tax bond fund or dividends as needed. We have been retired almost 2 years and still working on this process.
Everyone is different. We carry checking account balances sufficient for the month's expenses plus maybe a $1K cushion, plus any extraordinary expenses like cars or vacations. We pull as needed from our tIRAs, usually just a few $K at a time.

I don't think either of us have ever used it, but Schwab will go to our taxable accounts for available cash if we somehow end up with an overdraft. Belts & suspenders, I also have a $10K overdraft credit line on my checking account.
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Old 11-02-2020, 10:41 AM   #39
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I have low living expenses and have 10-15k in the bank which is enough emergency fund for the next 2-3 yrs. I am still working so if I need more cash (e.g. if my car gets totalled or I need a new water heater), I will stop the auto investment to build up cash.
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Old 11-02-2020, 11:05 AM   #40
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Anywhere from nine to eighteen months. BUT.......our withdrawal rate is very low. Less than one percent and that is primarily due to extended travel.

This number is really a function of both risk tolerance and the percentage of your income that is covered by pensions, etc.
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