How much of a cash cushion?

[nun]

When I get my pension and SS I can see myself reducing the amount of cash I hold to pay daily bills and as a buffer against market down turns. But until that happens I want to have enough cash to live for 2 or 3 years so that I'm not forced to sell and at a bad time.

[Danmar]

Quote:

Originally Posted by nun When I get my pension and SS I can see myself reducing the amount of cash I hold to pay daily bills and as a buffer against market down turns. But until that happens I want to have enough cash to live for 2 or 3 years so that I'm not forced to sell and at a bad time.

Makes sense. Would you reduce your cash holdings once you get within 2/3 years of pension/SS receipt?

[nun]

Quote:

Originally Posted by Danmar Makes sense. Would you reduce your cash holdings once you get within 2/3 years of pension/SS receipt?

I suppose so. I'm still working and I have 2 months living expenses in the bank and another 2 months in a MM and I'm happy with that as I know there's a pay check coming in. If I ER I'll want that 2 to 3 year cash cushion, but once SS and the pension start and I have a regular check coming in I can see myself reducing the amount of cash I hold.

[cardude]

I have about 14 year's worth of living expenses in cash/cd/bonds.

I have a large equity allocation (50%) to one stock, and I use the cash as security if the market stays depressed for that stock for a long period of time, keeping me from selling some to fund expenses/replenish cash.

Rental real estate provides about 35% of my living expenses.

SWR is 2% if rentals are at 90% occupancy.

Not the typical portfolio, obviously.

[nun]

Quote:

Originally Posted by cardude I have about 14 year's worth of living expenses in cash/cd/bonds. I have a large equity allocation (50%) to one stock, and I use the cash as security if the market stays depressed for that stock for a long period of time, keeping me from selling some to fund expenses/replenish cash. Rental real estate provides about 35% of my living expenses. SWR is 2% if rentals are at 90% occupancy. Not the typical portfolio, obviously.

I have rental property that will cover half my expenses after the mortgage is paid off, so that reduces the actual amount of cash I need to cover 2 or 3 years of expenses. I'm 50/50 allocated and the bond terms are around 5 to 7 years. Once I ER I'll probably do 1 year of cash in a bank account, one year in a MM and one year in a short duration bond and top up the bank account with rent, distributions, interest and capital gains from after tax accounts. Right now I have no plans to use CDs and the returns aren't worth locking up money for 5 years....but if interest rates go up they might become an option.