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05-12-2016, 12:33 PM
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#41
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Thinks s/he gets paid by the post
Join Date: Jul 2015
Location: Beaverton
Posts: 1,382
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So I pay myself a salary every two weeks. Of that I put $600 into a fund of Taxes, Car/Home Insurance, Christmas & Copays. Fund number two is $500 per paycheck for Home & Auto Repairs. Third is $500 for Entertainment/Clothing/Travel. The rest is for everyday bills. Hopefully these all cover yearly and surprise bills. If these are not spent then I'll deposit back to earn interest.
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05-12-2016, 12:40 PM
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#42
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Recycles dryer sheets
Join Date: Apr 2012
Location: Long Island
Posts: 141
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Someone told me that Ally offers a 5 year CD @ 2% with a six month interest forfeiture if broken early. If I wanted to stash a bunch of cash ultra conservatively, that’s what I would do. This way you still remain liquid.
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05-12-2016, 12:46 PM
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#43
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Recycles dryer sheets
Join Date: Jul 2012
Posts: 287
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I think the OP does not trust any retirement calculators, formulas and such and is asking how much they should adulterate the formula by to feel safe. Call it a fear factor. As others have indicated, the $700K amount may or may not be reasonable depending on the OP's total assets and how fearful they are.
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05-12-2016, 01:15 PM
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#44
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Posts: 17,241
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Quote:
Originally Posted by jkern
I live in earthquake country and earthquake insurance is far too expensive. I can see needing to rebuild (about $600k) after a major quake if you are self insured.
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I cannot see taking a risk of $600K... what kind of premium are you talking about
IIRC, the chance of something major happening to a house is less than 1%... I do not know the chance of a major earthquake.... but I think that if it happened then almost all houses would have damage so I can see why it is so high.... kinda like flood insurance if you live in a flood zone... when it happens, most houses are affected....
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05-12-2016, 01:37 PM
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#45
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Thinks s/he gets paid by the post
Join Date: Aug 2010
Posts: 1,089
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We are not retired yet. We keep a mental 10% amount of our portfolio as our reserve. This is for large purchases; 2-3 more cars; new roof; DD's wedding; graduate schools, etc.
The remaining account will give us 25X retirement estimated expenses. We are ready but our jobs are without much pressure, so we keep going for now.
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05-12-2016, 01:39 PM
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#46
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Thinks s/he gets paid by the post
Join Date: Aug 2013
Location: North
Posts: 4,043
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Had family lose their livelyhood and home in Hurricane Katrina. They only had about 100k in retirement and all other accounts. It was enough to get them back on their feet. Sure life might not be the same after one of these "events" but it won't take 700k to recover.
__________________
Time > $$$ ~ 100% equities ~ FIRE @2031
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05-12-2016, 02:46 PM
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#47
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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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I have to admit not reading the entire thread but think I have the gist. I am with the 'nothing in reserve', 'all invested', 'I can always sell something from somewhere' crowd. And I guess if I couldn't sell something - as in the world was ending... then I break into the coin collection.
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05-12-2016, 02:49 PM
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#48
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Recycles dryer sheets
Join Date: Feb 2006
Posts: 223
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To Major Tom, I have no major expenses now that would require that amount. Investments (stocks, bonds, cds, cash) north of $3M. House, cars paid for but not included in assets.
I guess I just have a hard time not worrying (my parent's curse, my brother has it too). DW thinks it is excessive based on last 3 years of retirement expenses and I thought I would see what others thought.
__________________
I don't mind coming to w**k,
but that eight hour wait to go home is just bulls**t!
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05-12-2016, 03:03 PM
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#49
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Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,884
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Quote:
Originally Posted by COHgirl
It earns .001% in the cash account.
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You are your bank's favorite customer.
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05-12-2016, 03:26 PM
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#50
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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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Quote:
Originally Posted by F-One
To Major Tom, I have no major expenses now that would require that amount. Investments (stocks, bonds, cds, cash) north of $3M. House, cars paid for but not included in assets.
I guess I just have a hard time not worrying (my parent's curse, my brother has it too). DW thinks it is excessive based on last 3 years of retirement expenses and I thought I would see what others thought.
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Thanks for the response, F-One. If you can afford to keep that much in an account that gives a low return, and it's necessary to do this for you to feel comfortable, then that is all the justification you need, I think.
For me, the key decider is whether your portfolio overall will return enough income for you to live. If it does, your approach sounds fine to me. There's no point in maximizing your long-term return if the result is that your retirement feels like a white-knuckle ride. We all have different tolerances for risk and volatility.
__________________
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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05-12-2016, 03:29 PM
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#51
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
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Quote:
Originally Posted by F-One
The reserve is money I don't count on when running FireCalc, i-orp, retirement calculations. I should have worded it and question better.
The question might be better asked, when you run retirement calculations do you add all your resources into retirement calculations or keep some reserve and if you keep some reserve, how much?
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The alternate (and IMO better) way to handle this "reserve" in FIRECalc is to select the $xxx remaining option, instead of excluding it from the calculation altogether.
+1
You can pretend all you want that the $xxx is not there but, it really is (it's part of your AA), and Mr. Market knows it is & acts accordingly with your portfolio.
Now, having said all that, we DO keep a substantial amount in cash (laddered CDs) but, not as high a % as 7/30ths. We do it as a back-up for several bad years of market returns (search on this forum for "galeno" and related threads for more on this approach). The counter argument is that this approach is a drag on portfolio performance; you have to choose what approach is best for you. In any case though, we DO include the CD ladder in our AA and any runs of FIRECalc, FIDO or, other retirement calculators. That way, it's...oamcie[ap,. Ewe I.,e. Cm304..c,eye and the omoewoulrlamc. Woirmlojj ....
Sorry, sorry, I went temporarily blind there for a moment.
Anyway, I think you get the point.
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
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05-12-2016, 03:30 PM
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#52
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Quote:
Originally Posted by Major Tom
There's no point in maximizing your long-term return if the result is that your retirement feels like a white-knuckle ride.
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+1
However, she's right:
Quote:
Originally Posted by F-One
DW thinks it is excessive based on last 3 years of retirement expenses...
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__________________
Numbers is hard
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05-12-2016, 04:37 PM
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#53
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: Independence
Posts: 7,298
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Thanks for this thread: we have way too much earning a massive 1% at Discover. Have requested a payoff amount on our 3% PenFed 5/5 loan that is to reset a year from now. That isn't a big move, but it sure is a safe one to gain 2% over the next year on our payoff amount.
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05-13-2016, 09:10 AM
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#54
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Full time employment: Posting here.
Join Date: Apr 2011
Location: Castro Valley
Posts: 788
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Quote:
Originally Posted by Texas Proud
I cannot see taking a risk of $600K... what kind of premium are you talking about
IIRC, the chance of something major happening to a house is less than 1%... I do not know the chance of a major earthquake.... but I think that if it happened then almost all houses would have damage so I can see why it is so high.... kinda like flood insurance if you live in a flood zone... when it happens, most houses are affected....
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I haven't checked in several years, but I think the premium is about 4 or 5 times your regular insurance plus it comes with a huge deductible (maybe $50k). It's expensive enough that I don't know anyone with earthquake insurance.
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05-13-2016, 10:36 AM
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#55
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Recycles dryer sheets
Join Date: Jan 2016
Posts: 235
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Great thread. Got me thinking. Just opened up a few CDs I had been dragging my feet on. Rates looked good at the credit union. Need to think harder about how any reserve (cash in bank) plays into asset allocation.
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05-13-2016, 10:59 AM
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#56
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2013
Location: Texas
Posts: 10,932
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For me, I don't keep a reserve. I started with X dollars (or net worth) when I retired and projected my spend rate out for 35+ years. I keep track of X, and as long I'm within ~5% of that "original" projection on an annualized basis, I just don't worry about it. If I need (or more likely, want) to buy a new car or have other major expenses, that is just an expense that comes out of X. I decide where to take the money when the expense is incurred. (checking accounts, sell stock, withdraw from an IRA or 401k, etc). I'm amazed that after starting my 5th year of retirement that my projections are as close as they are. I've never (so far) been out of my projected 5% range (positive or negative), but then again, it's only been 5 years.
Works for me....
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05-13-2016, 07:45 PM
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#57
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,941
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Quote:
Originally Posted by pb4uski
If you keep a couple year's of spending less a couple years of dividends in cash that should be plenty.
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That makes a lot of sense. If you put the cash part in a CD ladder, you could earn a little interest, too.
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05-13-2016, 09:09 PM
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#58
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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: 17,094
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Quote:
Originally Posted by jkern
I live in earthquake country and earthquake insurance is far too expensive. I can see needing to rebuild (about $600k) after a major quake if you are self insured.
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If I lived in that place, and the earthquake destroyed the home, I'd leave, or live in a tent.
Because if you spend your 600K to build another, it could easily be destroyed at any time.
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05-13-2016, 09:16 PM
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#59
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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: 17,094
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Quote:
Originally Posted by F-One
To Major Tom, I have no major expenses now that would require that amount. Investments (stocks, bonds, cds, cash) north of $3M. House, cars paid for but not included in assets.
I guess I just have a hard time not worrying (my parent's curse, my brother has it too). DW thinks it is excessive based on last 3 years of retirement expenses and I thought I would see what others thought.
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You know what your retirement expenses are per year.
My cautious thinking is:
Calculate 1/2 of the dividends you currently get per year, figure out how much cash is needed to add up to 1 year retirement expenses.
Multiply that cash amount by 5, and you have the amount of cash to keep handy (in 2% cds) in case of another giant recession.
Any more than that, and you are losing money value over the years by not being in a very broad based etf (example VTI).
I say calculate 1/2 of dividends as some companies will reduce/cut divs during extreme recessionary times, others won't so an off the cuff feeling is it is safe to count on 1/2 of them.
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05-13-2016, 09:39 PM
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#60
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2013
Posts: 9,358
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Quote:
Originally Posted by Sunset
If I lived in that place, and the earthquake destroyed the home, I'd leave, or live in a tent.
Because if you spend your 600K to build another, it could easily be destroyed at any time.
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I think I'd like a tiny house if that happened to us, or at least as small as the building codes would let us. We sit outside a lot anyway.
__________________
Even clouds seem bright and breezy, 'Cause the livin' is free and easy, See the rat race in a new way, Like you're wakin' up to a new day (Dr. Tarr and Professor Fether lyrics, Alan Parsons Project, based on an EA Poe story)
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