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The Dangers of Cash
Old 06-14-2021, 02:22 PM   #1
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The Dangers of Cash

I'm wondering if my strategy for cash will get me in trouble.

When I RE'd five years ago, I wasn't all that confident that it would work. I waited until I had about one year's worth of expenses in the bank, not counting my 401k, or my regular checking account for routine expenses.

Fast forward five years, and it's all still there. I had it in CDs for a while when those were productive, but now it's in a high-yield savings account which gives me about the same (low) return as CDs these days.

I'm comfortable with this strategy. I have a non-COLA pension which, so far, has covered my expenses without dipping into the 401k, which is allocated about how I want it.

I'm also considering selling the house and not buying another one for a year or so while I scout for a new place. That would be an even bigger pile of cash to manage.

BUT...

Lately I wonder about the safety of keeping cash. What if I lose my health insurance just before a big medical expense? What if someone slips on my front steps and sues me? Would the cash be an easier target than, say, my house or 401k? Would having cash hurt my eligibility for some program I'm not even aware I might need?

I haven't thought this through completely. Assuming I want this money to remain in cash (as opposed to investments) then what other dangers am I exposing myself to that I might not even realize?
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Old 06-14-2021, 02:28 PM   #2
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What if someone slips on my front steps and sues me? Would the cash be an easier target than, say, my house or 401k?...
Perhaps it's safer to convert it to Krugerrands, and bury them in a jar in your back yard?

That would be safer than Bitcoins, given the recent news that the FBI was able to track down the Colonial pipeline hackers and reclaim the ransom loot in Bitcoins.
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Old 06-14-2021, 03:19 PM   #3
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Your 401K and house are probably more protected than cash in a lawsuit, but I don't think any other investments (stocks, bonds, etc) you would be doing with that cash are any safer. Maybe an annuity would be better, but I don't see this as a reason to get one.

Do you have an umbrella (PELP) insurance policy? That would be better protection.

I don't know of any program where cash is different from other taxable investments, so I wouldn't worry about that either.
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Old 06-14-2021, 03:20 PM   #4
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Asteroids cross the Earth's orbit. One might strike the Earth. Cash won't matter much at that point.

Keep going as you are and forget about "what could happen".

You or I might not wake up tomorrow morning. It's not up to you, or to me.
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Old 06-14-2021, 03:33 PM   #5
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Perhaps it's safer to convert it to Krugerrands, and bury them in a jar in your back yard?

That would be safer than Bitcoins, given the recent news that the FBI was able to track down the Colonial pipeline hackers and reclaim the ransom loot in Bitcoins.

I prefer America Gold Eagles and Canadian Maple Leafs... (Note Maple Leafs are beautiful but scratch pretty easy) Also prefer to keep mine in a safe or SDB rather than the backyard.

CD's rates just aren't worth the effort anymore and gold is pretty anonymous too. Maybe as much or more than Bitcoins.
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Old 06-14-2021, 03:41 PM   #6
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The last part is why I buy umbrella insurance. My umbrella insurance carrier has millions of good reasons to provide me with a vigorus defense should I be sued (never have been but you never know).

The main risk with cash is that its spending power decays because inflation exceeds its growth.

I don't see your strategy getting you in trouble but you may well lose some spending power but that would be offset by returns/growth that exceed inflation in other parts of your portfolio.

Cash is a really hard space these days. I have an online savings account that pays ~0.4% and some in GM RightNotes (1.5%), Toyota IncomeDriver Notes and Dominion Energy Reliability Investment Notes (both 1.35%) but they do theoretically involve some credit risk.
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Old 06-14-2021, 03:41 PM   #7
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Maybe rare coins?
11 Rarest and Most Valuable Coins in the World

From the 1913 Liberty Head Nickel, last sold in 2010 for $3,737,500 all the way up to the 1794 Flowing Hair Silver Dollar, last sold in 2013 for $10,016,875.
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Old 06-14-2021, 03:52 PM   #8
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I don’t consider my cash any more vulnerable that my other taxable investment assets.

I do carry an umbrella policy.
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Old 06-14-2021, 04:04 PM   #9
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Maybe rare coins?
11 Rarest and Most Valuable Coins in the World

From the 1913 Liberty Head Nickel, last sold in 2010 for $3,737,500 all the way up to the 1794 Flowing Hair Silver Dollar, last sold in 2013 for $10,016,875.
In my experaince, if you are buying most collectables, (ex. coins, cars, guns) you better be doing it more for enjoyment or as a hobby rather than an investment, unless you have the lifespan of Methuselah.

I've found "quality" guns and raw bullion to be the most profitable.... Most cars, common guns and collectable/certifed coins, not so much. YMMV
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Old 06-14-2021, 04:16 PM   #10
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1 years expenses in cash is probably lower than most here (or average?) certainly not the high end.

I don't see it as any riskier than money in my taxable accounts - ie, not really.
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Old 06-14-2021, 04:22 PM   #11
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Maybe rare coins?
11 Rarest and Most Valuable Coins in the World

From the 1913 Liberty Head Nickel, last sold in 2010 for $3,737,500 all the way up to the 1794 Flowing Hair Silver Dollar, last sold in 2013 for $10,016,875.
If I recall correctly, I saw one of the five 1913 Liberty Nickels ~20 years ago on display at a major coin show in Houston. I remember it being displayed in a roped off area in a huge plastic case with armed guards on site 24 hours a day... At the time, I think it was presented as a million dollar coin. So it looks like someone may have made some money...
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Old 06-14-2021, 04:23 PM   #12
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I wouldn't know. I have a RV, boat and Waverunner that take my cash.

But we really enjoy'em.

I do keep enough on hand to last me until RMD's kick in next year.
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Old 06-14-2021, 04:56 PM   #13
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I never thought about cash being unsafe/danger. If that is the case, then I'm doomed. I have enough cash in CD's and savings that should last me my life time. My plan is to live from cash and SS and never have to touch investments, if I didn't want to. Not saying my plan will work but so far after 5 years the amount is just about the same as I started with 5 years ago. If hadn't done charity and gifting it would be more then what I started with in cash.

I can't see why cash would be in danger thou.
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Old 06-14-2021, 05:25 PM   #14
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It sounds like the OP needs a good insurance agent who can help him protect his assets in the event of an insurable loss. He should pick the highest deductible he can afford without suffering a significant alternation to his preferred lifestyle. Then avoid risky situations. IOW, do the basics right.
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Old 06-14-2021, 06:43 PM   #15
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I
Lately I wonder about the safety of keeping cash. What if I lose my health insurance just before a big medical expense? What if someone slips on my front steps and sues me? Would the cash be an easier target than, say, my house or 401k? Would having cash hurt my eligibility for some program I'm not even aware I might need?

I haven't thought this through completely. Assuming I want this money to remain in cash (as opposed to investments) then what other dangers am I exposing myself to that I might not even realize?
One of the things I have learned in my life is that one can live an entire alternate existence based on "What ifs?", and miss the joy of experiencing one's actual life .

I started retirement with 3-5 years (based on conservative/aggressive spending) of cash to supplement my non-COLA pension. three years later, based on our spending so far (which has been extravagant for use), it is turning out to at least 5 years worth. And I have not even started SS yet. Beyond ensuring I have a big enough liability policy, I am not staying up at night worrying about what ifs. We do not qualify for ACA (though our Megacorp retiree insurance is better), we will be hit with IRMAA at SS time, and our RMDs, even with Roth conversions before then, are going to be large. None of those are going to impact our desired retirement lifestyle. They *might* impact what we leave to our heirs, but that is a secondary consideration.

I do not see my cash as dangerous, I see it as allowing us to be flexible.
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Old 06-14-2021, 07:05 PM   #16
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To your original question, I don’t think how you hold an asset, either cash, equities, bonds, or gold will affect your liability if a court orders a payment. Of course a complaining person or the lawyer will look at the assets available and I’m sure if you have $20 million they would seek more than it you have $100K. But the asset class wouldn’t affect that I don’t think.
I would suggest considering an umbrella policy.
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Old 06-14-2021, 09:36 PM   #17
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As others said, I don't see how cash is protected from a legal claim, unless you hide it as I mentioned.

But in terms of not having an investment gain, I see no problem with holding cash right now, and I have a lot of it. Just read that JP Morgan is sitting on $500 billion in cash, waiting for the interest rate to go up. And they are not the only one.
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Old 06-14-2021, 10:08 PM   #18
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Yup, only if they don't know it's buried in a hole next to the big tree in the backyard.
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Old 06-14-2021, 10:39 PM   #19
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I think cash is safer than a house or 401K. Say a Devious person is sued for liable by some politician.
Chance of a judgement is very high and it will be for a lot.

A Devious person could withdraw all their cash and bury it, this Devious person cannot sell their house in a day (well maybe in this market ) and if they cash out their 401K the tax rate will be highest possible.

Cash is great because if the politician doesn't sue.
Devious person can dig up the money and put it back into CDs, at a low cost.
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Old 06-14-2021, 10:45 PM   #20
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I think cash is safer than a house or 401K. Say a Devious person is sued for liable by some politician.
Chance of a judgement is very high and it will be for a lot.

A Devious person could withdraw all their cash and bury it, this Devious person cannot sell their house in a day (well maybe in this market ) and if they cash out their 401K the tax rate will be highest possible.

Cash is great because if the politician doesn't sue.
Devious person can dig up the money and put it back into CDs, at a low cost.

Just be sure to dig up the cash from the backyard, before they evict you from your home that they seize.
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