How much in cash at the time of retirement?

[corn18]

Current AA at any instant in time is not important to me. Only the AA of the retirement investments that I withdraw from for retirement income and rebalance annually.

You said earlier you do not include your cash in your AA. Why not?

The reason I am trying to get an answer is important to me. If I include my cash, I will be 50/50. If I do not, I am 60/40. I don't think I should rebalance my non cash assets back to 50/50 as that will put me at 43/57.

 

[Car-Guy]

why not include cash in the estimation of your current AA?

Personally I do... If I didn't include cash in my AA, I wouldn't have an AA most of the time

 

[audreyh1]

You said earlier you do not include your cash in your AA. Why not?

I manage my long term investments retirement portfolio as a stand alone piece. I withdraw from it annually for income and rebalance it auto a target AA after withdrawing. I actually do have cash in my retirement portfolio as part of the retirement AA. We also have HSAs and short-term accounts including checking that are not part of our retirement portfolio.

I only pay attention to the AA of my retirement portfolio because that’s only piece that I rebalance or withdraw from according to the withdrawal rules I use.

This is simply a personal choice, and works well for us.

 

[swakyaby]

Did you have any bonds? They did ok during the corona crash.

I did have about 7 years worth of bonds, and it did help buoy my portfolio decline during the market correction.

 

[corn18]

If I didn't include cash in my AA, I wouldn't have an AA most of the time

Why are you all cash?

 

[corn18]

I manage my long term investments retirement portfolio as a stand alone piece. I withdraw from it annually for income and rebalance it auto a target AA after withdrawing. I actually do have cash in my retirement portfolio as part of the retirement AA. We also have HSAs and short-term accounts including checking that are not part of our retirement portfolio.

I only pay attention to the AA of my retirement portfolio because that’s only piece that I rebalance or withdraw from according to the withdrawal rules I use.

This is simply a personal choice, and works well for us.

That makes sense. I like this approach and I may end up targeting 60/40 instead of 50/50 for the retirement portfolio.

 

[Car-Guy]

Why are you all cash?

Personal choice..... Why risk it since I've got more than enough for my lifetime....


A.K.A. "won the game".

 

[disneysteve]

At this point in life, I essentially count all of our money as retirement money regardless of which account it is in or what type of assets it comprises, so cash is part of my AA. And in retirement, I would definitely rebalance to keep the cash accounts at a certain level. I think most retirees probably do that, aiming perhaps to keep one-year of expenses in cash, and as that cash gets spent, drawing from the investments to replenish it.


I've always looked at our entire portfolio as one big bucket and structured it accordingly to maintain the AA that I wanted.

 

[corn18]

Personal choice..... Why risk it since I've got more than enough for my lifetime....


A.K.A. "won the game".

Makes sense. I have won the game @ 2% real return, but my model kindof explodes if I put in -2% real return.

 

[audreyh1]

At this point in life, I essentially count all of our money as retirement money regardless of which account it is in or what type of assets it comprises, so cash is part of my AA. And in retirement, I would definitely rebalance to keep the cash accounts at a certain level. I think most retirees probably do that, aiming perhaps to keep one-year of expenses in cash, and as that cash gets spent, drawing from the investments to replenish it.


I've always looked at our entire portfolio as one big bucket and structured it accordingly to maintain the AA that I wanted.

You will eventually notice here that there are a wide variety of approaches to cash flow management and not really one particular approach that “most retirees” use.

 

[disneysteve]

You will eventually notice here that there are a wide variety of approaches to cash flow management and not really one particular approach that “most retirees” use.

For sure. My "most retirees" wording probably wasn't the best. Heck, that's why I started the thread, to see how everyone is handling their cash heading into retirement.

 

[Finance Dave]

Depends on what you call "cash". If you count CDs, we have quite a bit. That's because our AA is heavy on cash anyway. We had about $1.4M at time of FIRE. The CDs are a 5 year ladder. If you don't count the CDs, we had about $600k, which represents about 6-7 years of spending for us.

 

[disneysteve]

Depends on what you call "cash". If you count CDs

I count any cash accounts: savings, checking, money markets, CDs, a wad of bills stuffed under the mattress or stashed in a home safe, whatever.

 

[CardsFan]

At this point in life, I essentially count all of our money as retirement money regardless of which account it is in or what type of assets it comprises, so cash is part of my AA. And in retirement, I would definitely rebalance to keep the cash accounts at a certain level. I think most retirees probably do that, aiming perhaps to keep one-year of expenses in cash, and as that cash gets spent, drawing from the investments to replenish it.


I've always looked at our entire portfolio as one big bucket and structured it accordingly to maintain the AA that I wanted.

Fully agree with the bold above.

Cash is just a very low return investment. I used to separate them and considered CD's as cash, but I now have CD's paying more than my bond funds. So, in the end, when I look at our AA, everything is in the pool, down to the B&M bank accounts.

Currently 55/45 (+/-), depending on what the market did today

 

[Badger]

I have way too much in cash by most traditional standards but it is just right for me. The actual amount is not really helpful for anyone else since the rest of their retirement plans will be different than that of others. I still have plenty invested in the stock market to keep the nest egg growing. I tend to march to my own drummer as it should be although there are a few people here that I listen to very carefully and apply their wisdom to my financial situation.


Cheers!

 

[jazz4cash]

I count any cash accounts: savings, checking, money markets, CDs, a wad of bills stuffed under the mattress or stashed in a home safe, whatever.

I count CDs with 2yrs or less to maturity as “cash”. CDs with more than 2 yrs to maturity are counted as “bonds”. Both are part of my 35% fixed income allocation along with actual bonds and one bond fund.

 

[CardsFan]

I count CDs with 2yrs or less to maturity as “cash”. CDs with more than 2 yrs to maturity are counted as “bonds”. Both are part of my 35% fixed income allocation along with actual bonds and one bond fund.

I am confused about the need to separate "cash" from fixed income.

I guess there is the ability to access it. But that is just an issue with availability.

If you had $100k under the mattress it would still take some time to turn it into something you could use for a large purchase.

 

[disneysteve]

I am confused about the need to separate "cash" from fixed income.

I guess there is the ability to access it. But that is just an issue with availability.

If you had $100k under the mattress it would still take some time to turn it into something you could use for a large purchase.

Cash and fixed income/bonds aren't the same thing, though some bonds are essentially as good as cash like US savings bonds, for example. Their value is guaranteed so you won't ever lose principal. But most bonds fluctuate in value as do bond funds. Cash instruments do not.


As for the 100K under your mattress, why would it take time to be able to spend it? Cash is accepted pretty much everywhere. Maybe not to buy a house but I'm not sure about that. Anything else cash should work just fine.

 

[W2R]

As for the 100K under your mattress, why would it take time to be able to spend it? Cash is accepted pretty much everywhere. Maybe not to buy a house but I'm not sure about that. Anything else cash should work just fine.

My realtor used to love telling the story about some clients who were gentlemen of foreign extraction, and who brought suitcases containing half a million dollars in cash to a real estate closing here in New Orleans years ago! I just can't even imagine, but according to him it happened and the closing went smoothly.

This was years ago and I suppose it might not even be legal to do this now-a-days; perhaps there are restrictions on big cash transactions because of drug dealing.

 

[Exchme]

Just retired and the answer depends on what you count I suppose. In checking, savings and the Vanguard settlement accounts, 2-2.5 years worth, depending on how big we go on the Roth conversions.

 

[Mountain skier]

Our AA is 30/70 (cash)...enough cash probably for the rest of our lives

 

[audreyh1]

Cash in savings isn’t bonds, but it is definitely considered part of fixed income as it pays a fixed (i.e. pre-determined) interest rate.

 

[Joylush]

Me neither. If you have a substantial amount in cash (not just a little emergency stash), it is part of your AA. You can't really say you're 80/20 or 60/40 when 5 or 10% of your money is actually in cash.


Right now, we're about 67/23/10.

Thanks. I needed that. What are notes receivable classified as? I’m talking secured mortgage notes?

I have a lot of cash. But it’s 20% of my overall assets. I do worry that it’s too much but also realize I don’t need any more so why risk it.

 

[corn18]

Thanks. I needed that. What are notes receivable classified as? I’m talking secured mortgage notes?

I have a lot of cash. But it’s 20% of my overall assets. I do worry that it’s too much but also realize I don’t need any more so why risk it.

That's perfectly ok. This isn't a competition and you don't have to be right, just don't be wrong. I have learned a lot from this thread.

I would classify secured mortgage notes as income. It's not very liquid, but does provide what I assume is monthly cash flow.

 

[retire48in2018]

We'll have 4 years of cash - $400k, and our AA is 100% equities. If I consider the cash as part of AA then were 90% equities, 10% cash - no bonds.

I'm thinking that I'd rather be consistent with our AA, and have the sequence of risk and downturn covered by the 4 years of cash.

We can easily make that 8 years (or more) vs 4. But, that's a different topic.