How much in cash at the time of retirement?

I just retired 1-Feb-21

We have 2 years of Cash sat in the Bank and Gun Safe for FAT FIRE expenses and can easy go to 3 years if need be.

The "Sleep Good At Night Factor" is real.

gamboolman...
 
I didn't have any excess cash. What I had was over $150k worth of stock in a brokerage account that I would sell as needed. I also had over $70k in a 401k retirement account that I could access early using the "rule of 55". I prefer to keep my money working for me as much as possible so I don't keep much cash. I did recently set up monthly withdrawals from my 401k so I don't have to sell the individual stock because I'm getting a better rate of return on it. I was comfortable with that. I could live over 15 years on those 2 accounts alone. The rest of my accounts will pretty much grow untouched for many years, barring any unforeseen circumstances of course.
 
I'm not retired yet, and I wrestle with how much cash to have when I walk away in 2 yrs.
When people say they have x # of years of cash, do you calculate that as necessary living expenses, not including planned discretionary spending or total planned spending? To me cash would be cash and not part of my AA nor invested win anything other than money market , otherwise it's part of your AA. I have a large cash value life insurance amount that I can always tap for needed expenses , but is that cash? I personally don't love the lack of growth concept and since I am an income investor it bothers me to not have that money working and creating income. Argghhh ...driving myself crazy again.
 
Looking back over the last 5 years it looks like we keep about 100k in cash outside of retirement accounts. I keep 2 sets of books. One for total assets and one for core retirement. The core retirement includes tIRA's, Roth's and one of our HSA's for long term growth. DW manages (spends) out of the first category and I manage (cling to) the core retirement accounts.
 
I don’t understand why people do not consider cash as part of their asset allocation.
 
We had 5 or 6 years of expenses in short term bonds and cash. I believe SORR should be considered and mitigated where possible.
 
The whole nine yards... (less physical assets) No equities, no bonds... To be fair, several million was tied up in IRA's and 401'ks but that too was in cash or fixed income.

From my POV, I probably would not have retired when I did if I had to keep money in the market to meet my retirement numbers.... These days I do play the market but not with any money I need to maintain my retirement lifestyle.
 
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We have enough in stable value and CD’s to last until SS and pensions arrive in our mid sixties. Our invested portfolio is 100% stocks and is purely discretionary/blow the dough money.
 
Have about 5 years worth of annual expenses in cash to make up for an otherwise stock heavy portfolio.
 
HI Bill said:
Without this year's spending equivalent in cash, I'd be hesitant to pull the plug, given the relatively high valuations, and recent volatility.
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I feel like 12 months of spending in cash is the bare minimum I'd be comfortable with entering retirement. Those first few months adjusting to no paycheck for the first time ever I'd want a nice pile of cash to draw from just in case other pieces of the plan don't play out exactly as anticipated.
 
We originally had about $200K in cash (2 years worth of expected expenses in retirement (~$100K per year)) when we initially retired in 2017.
As time has worn on however I have reduced that to a floating value between $50K to $100K, depending upon what we have going on etc. and haven't had any issues occur.
 
corn18 said:
I don’t understand why people do not consider cash as part of their asset allocation.
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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.
 
I have always maintained a lot of cash equivalents as part of my AA, because I own very little bonds. These include stable value funds, I bonds, and very short-term T bills.

At the start of my retirement, the 25% cash AA could last me 10 years. With the portfolio growth, my current 30% cash AA can sustain my current WR for 30 years (ignoring inflation). And I still have SS to claim at the age of 70.

PS. Much of the cash above is in before-tax accounts, so I cannot withdraw to buy another home on a whim without serious tax liabilities. However, I have enough after-tax cash to last quite a few years.
 
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NW-Bound said:
At the start of my retirement, the 25% cash AA could last me 10 years. With the portfolio growth, my current 30% cash AA can sustain my current WR for 30 years (ignoring inflation). And I still have SS to claim at the age of 70.
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What a very sweet position to be in. Well done!
 
The day I retired, I had enough cash to cover spending for a little over 4 years. That was back in 2009, and the market looked dismal so I probably had more in cash than I otherwise would have had.

By now (2021), I have a little more than 6 years' cash. This is because I am pushing 73 years old. While I am reasonably healthy, I am also thinking that my projected lifespan is lessening (due to being older). So my cash will not be subject to being decreased in value by inflation for as many years as previously.
 
We don't hold much cash. Typically, between 1-3% of the portfolio. That's equivalent to 6-18 months of expenses, not covered by pensions and dividends.

I started ER holding more like 5-6% and then replenished it by selling stock almost immediately after drawing some cash. After thinking about that, I started questioning the conventional wisdom of holding that much cash, since it didn't seem to serve any real purpose.

What I do now is: wait for cash to get down to 1%, then replenish to 3%. That happens roughly every 18 months or so. I try to be somewhat opportunistic about timing, in terms of both taxes and market considerations.

All that said, we sold our last rental house late last year and we're still sitting on the cash. We plan to use most of it to buy a Class B camper van. The rest will either get consumed over time or put into the market if I sense a good opportunity.
 
We don’t have pensions or other income, so I retired end of 2017 with about 4 years of cash. The dramatic stock market correction in Feb/Mar 2020 made me glad I had such a large cash cushion, although I had no idea the market would recover so fast. Having the large cash reserve helped me to stay the course, I think.
 
swakyaby said:
We don’t have pensions or other income, so I retired end of 2017 with about 4 years of cash. The dramatic stock market correction in Feb/Mar 2020 made me glad I had such a large cash cushion, although I had no idea the market would recover so fast. Having the large cash reserve helped me to stay the course, I think.
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Did you have any bonds? They did ok during the corona crash.
 
swakyaby said:
Having the large cash reserve helped me to stay the course, I think.
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That's a great point. If it kept you from making a knee-jerk reaction that you would have regretted later, it was well worth it. I can totally see how having that cash on hand would have that effect.
 
swakyaby said:
We don’t have pensions or other income, so I retired end of 2017 with about 4 years of cash. The dramatic stock market correction in Feb/Mar 2020 made me glad I had such a large cash cushion, although I had no idea the market would recover so fast. Having the large cash reserve helped me to stay the course, I think.
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disneysteve said:
That's a great point. If it kept you from making a knee-jerk reaction that you would have regretted later, it was well worth it. I can totally see how having that cash on hand would have that effect.
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Having enough cash on hand to ride out several down years is what saved my bacon during the 08/09 crash and allowed me to stay the course. Now I never leave home without it. :)
 
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Having a target AA and rebalancing to it routinely is different from saying this is my current AA.
 
audreyh1 said:
Having a target AA and rebalancing to it routinely is different from saying this is my current AA.
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Agree. But why not include cash in the estimation of your current AA?
 
corn18 said:
Agree. But why not include cash in the estimation of your current AA?
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Current AA at any instant in time is not important to me. Only the AA of the retirement portfolio that I withdraw from for retirement income and rebalance annually.
 
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