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Old 03-06-2021, 02:08 PM   #101
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Cash drag is not a good thing.
I am now starting year 8 of retirement and continue to keep around $10k in my checking account, that's pretty much it.

Since I've not been able to travel for the past year, I could easily cut back to $5k average in checking but I'm optimistic that things will revert to normal soon.

Excess retirement income, lately a few thousand$ per month, gets transferred to my taxable settlement account and eventually invested in stock index funds.

I hold no cash/MM funds in my investments aside from settlement accounts...
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Old 03-06-2021, 02:41 PM   #102
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Originally Posted by disneysteve View Post
When I asked the question, I was thinking strictly of cash in liquid accounts, but you raise an interesting point. Folks may also have cash in their retirement accounts. I do. I mainly keep that to be able to take advantage of investment opportunities that arise from time to time. For example, last March when the market dropped sharply I bought 700 shares of JETS, the airline ETF. I sold it last week for an 81% ($8,500) gain. Since it was in my Roth, there was no tax impact at all to worry about.
Yes, I keep a modest amount of cash in the settlement funds of both my taxable and Roth IRA accounts for buying opportunities.
I hold zero bond funds, so this is all I have for rebalancing...
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Old 03-06-2021, 03:47 PM   #103
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Originally Posted by TheWizard View Post
Cash drag is not a good thing.
I am now starting year 8 of retirement and continue to keep around $10k in my checking account, that's pretty much it.
In my case cash drag is immaterial. It just doesn’t matter.
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How much in cash at the time of retirement?
Old 03-06-2021, 07:51 PM   #104
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How much in cash at the time of retirement?

When I hear the term “cash drag” I think in terms of rates that are 1% or less, but what if you’ve been able to use CDs and stable value funds paying 2-5%? In that case I think the drag is modest and worth the trade off.

Edit: it pains me to keep a few thousand in online savings that pays <1% but this year I am going to bite the bullet and bump up these convenience reserves to ~$5k.
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Old 03-07-2021, 05:58 AM   #105
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When I hear the term “cash drag” I think in terms of rates that are 1% or less, but what if you’ve been able to use CDs and stable value funds paying 2-5%? In that case I think the drag is modest and worth the trade off.

Edit: it pains me to keep a few thousand in online savings that pays <1% but this year I am going to bite the bullet and bump up these convenience reserves to ~$5k.
It depends on inflation, really. Earning 0% when inflation is 1% is the same as earning 4% when inflation is 5%. Your money is losing the same amount of buying power in both cases.
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Old 03-07-2021, 05:52 PM   #106
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I have been retired for a little over 6 years. Up until a couple years ago I was 100% in stocks plus about 3 months of necessary income in cash since I am adverse to making next to nothing on the cash. Since I am a dividend growth investor in my retirement accounts, I am able to live completely on my stock dividends. A little over two years ago, interest rates started to rise and I started to buy CDs. Now I have roughly 3 years estimated income in cash, CDs, ultra short term fixed income mutual funds, and short term fixed income mutual funds. Not exactly cash, but at least most of those funds are earning more than money market rates.

In six years I have never had to sell any investments to get cash to live off of. That will probably change when I start having to pay RMDs in the next year or so. The brokerage firm, where I have my IRA accounts, sends me a fixed amount of money automatically twice a month. I guess you could say that I have annuitized my retirement accounts.

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