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11-01-2020, 11:10 AM
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#21
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Thinks s/he gets paid by the post
Join Date: Nov 2009
Location: SF East Bay
Posts: 4,342
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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.
__________________
Contentedly ER, with 3 furry friends (now, sadly, 1).
Planning my escape to the wide open spaces in my campervan (with my remaining kitty, of course!)
On a mission to become the world's second most boring man.
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11-01-2020, 11:24 AM
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#22
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Dryer sheet aficionado
Join Date: Jun 2019
Posts: 28
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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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11-01-2020, 11:32 AM
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#23
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2016
Posts: 9,525
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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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11-01-2020, 11:38 AM
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#24
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,722
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Quote:
Originally Posted by Flyfish1
Right - just to clarify - I should have asked how many years of living expenses do people hold in cash reserve?
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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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11-01-2020, 11:47 AM
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#25
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,099
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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.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
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11-01-2020, 11:54 AM
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#26
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Thinks s/he gets paid by the post
Join Date: Feb 2013
Location: Toronto
Posts: 3,321
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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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11-01-2020, 12:14 PM
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#27
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Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,985
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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.
__________________
Took SS at 62 and hope I live long enough to regret the decision.
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11-01-2020, 12:51 PM
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#28
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2016
Location: Northern Virginia
Posts: 7,591
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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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11-01-2020, 01:13 PM
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#29
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2013
Location: Limerick
Posts: 5,655
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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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11-01-2020, 02:40 PM
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#30
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Recycles dryer sheets
Join Date: Aug 2020
Location: Houston
Posts: 108
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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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11-01-2020, 06:04 PM
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#31
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Full time employment: Posting here.
Join Date: May 2014
Location: Lakewood
Posts: 920
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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.
__________________
Why be normal when you can be yourself?
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11-01-2020, 06:55 PM
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#32
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,077
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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.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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11-01-2020, 09:09 PM
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#33
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2016
Location: Northern Virginia
Posts: 7,591
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Quote:
Originally Posted by Souschef
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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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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11-01-2020, 11:02 PM
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#34
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Location: Santa Paula
Posts: 4,077
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Quote:
Originally Posted by Montecfo
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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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.
__________________
Retired Jan 2009 Have not looked back.
AA 60/35/5 considering SS and pensions a SP annuity
WR 2% with 2SS & 2 Pensions
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11-02-2020, 04:10 AM
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#35
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2015
Location: Michigan
Posts: 5,003
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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.
__________________
"The mountains are calling, and I must go." John Muir
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11-02-2020, 08:28 AM
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#36
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Recycles dryer sheets
Join Date: Jan 2019
Location: Fort Worth
Posts: 99
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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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11-02-2020, 08:46 AM
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#37
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Recycles dryer sheets
Join Date: Jun 2011
Posts: 297
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I try to keep about 9 months worth expenses in CD/Cash accounts.
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11-02-2020, 08:59 AM
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#38
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,351
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Quote:
Originally Posted by Cotton1929
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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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.
__________________
Ignoramus et ignorabimus
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11-02-2020, 09:41 AM
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#39
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Full time employment: Posting here.
Join Date: Jul 2019
Posts: 679
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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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11-02-2020, 10:05 AM
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#40
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2010
Posts: 5,914
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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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