Cash and Near Cash...composite

[YellowSubmarine]

Cash and near-cash demonstrates one's safety and comfort level. It's interesting to learn what others perceive as low risk. In fact, it can be inspirational and informative.

 

[Original Wally]

REALITY CHECK, PLEASE!

Your response just made me wonder: Equities held either in taxable or tIRAs/401(k) or similar have this issue of HUGE unrealized gains attached. You won't even know how "bad" an issue that might be until you cash out. Even then, there may be LIFO vs FIFO issues or other issues that mean you don't know how much tax you will owe.

BUT what about Roth IRAs? Even though most of my Roths have equities in them, and they certainly have lots of gains (right now) if I took proceeds from them, there are no tax consequences and I end up with either a check or an electronic transfer to my checking account. In "essence" they are "like" cash to me.

I discovered this, sort of accidentally recently. I had a very small bond fund that was superfluous in my AA. It was a Roth account. I cashed it out and directed the funds to my checking account. For all intents and purposes, that Roth I decided to get rid of was (wait for it) a "cash" account - even though it was a bond fund - and it COULD have been an equity fund. In every respect OTHER than that the account balance varied daily, to ME it was just like a cash account.

This is all a revelation to me. Am I thinking wrong?

I think for ME the diff is volatility. Bond FMV movement is WAAYYY less and slower than potential Equity movement.
my tIRA is largely earmarked for some QCD payments, so the deferred tax issue is much reduced.

OR - I could be completely wrong. As per usual.

 

[TheWizard]

I am surprised no one mentions annuity payments or SS. I consider my SS near cash, specialized annuity. But, I didn't include it in the thread.

Well, that's because it doesn't become "cash" until it arrives.
I have something like $13,000 per month in that category and it's usually more than I need for the month so I toss the excess into stock ETFs...

 

[TheWizard]

Cash and near-cash demonstrates one's safety and comfort level. It's interesting to learn what others perceive as low risk. In fact, it can be inspirational and informative.

I keep approximately $10,000 in my checking account after all bills are paid each month.
I have no savings account; the excess goes into things like VOO, QQQ, VGT and the like.

Most of the time, that $10k, along with the coming month's income, is adequate to cover expenses. But not always...

 

[jazz4cash]

Laddering has a positive impact on my AA. I don't need as much allocated to near cash and the steps mature periodically so I don't have to sell anything.

 

[CalBird]

Bank accounts
BOXX
BIL

 

[Koolau]

Why is this important? Whatever you want to consider to be cash, consider it to be cash. I will do the same and if my decision is different than yours, so what?

I suppose some of us might learn to think of things differently when we hear how others consider them. I hadn't thought of some of the possibilities I've seen here. Not sure I'll adopt them, but I'll mull for a while. YMMV

 

[Koolau]

Well, that's because it doesn't become "cash" until it arrives.
I have something like $13,000 per month in that category and it's usually more than I need for the month so I toss the excess into stock ETFs...

That's a pretty nice income! I've had to take a fair amount from my stash to get to those levels of cash per month. Congrats!

 

[YellowSubmarine]

Well, that's because it doesn't become "cash" until it arrives.
I have something like $13,000 per month in that category and it's usually more than I need for the month so I toss the excess into stock ETFs...

In that line of thinking, only money in-hand is cash. Your paper check is just paper until you take the cash and the money in your account is not cash until you withdraw and have possession. That's too limited for me.

 

[Semi-Retyrd]

I am adjusting my allocations and I am determining what constitutes "near cash". After long consideration, I decided the following items will make up my Cash/near cash allocation. Feedback and comments are welcomed. What do you consider cash and near cash for your asset allocation? Here's mine; and when I include this group, my cash/near cash allocation rises to 24% of my investment designated fund potentials or emergency funding: (note I do not include dividends payable in 2026; if I did it would raise my "cash" allocation another 3.5%; further, they are in DRIP mode currently)
Bank accounts (checking, savings)
Bond interest payable in 2026
Bond maturities in 2026
Money Market accounts
Special funds held for future equity/bond purchases including: NEA, NMVO, NZF, JBBB (historically these funds trade in a narrow range)

In my taxable Fidelity account I keep a 2 month daily expense buffer of cash in a MM fund that is replenished each month by SS and a small pension. This account is also my checking account. I have no CDs, bonds or other bank accounts. This cash is about 3.5% of my taxable account. 90% of my taxable account is in QLENX. The other 6.5% is experimental and will be split between QLFNX and ORR to test tax efficiency and volatility over this year.
My ROTH IRA is 100% in EGRIX which behaves like near cash but with triple the return of typical bonds or bond funds (total return of 20.35% in 2025).
My tIRA is about 85% EGRIX as near cash and will be 100% EGRIX after I dispose of a 15% position in PDI in this or the next quarter. Current allocation is around 52/48 but with the overall volatility of a bond fund.
Over the next four years (assuming I am still around) I intend to roll the tIRA to the ROTH to avoid the widow penalty as my wife is 11 years younger than me. The new senior deduction has made this possible while keeping us in the 12% bracket.

 

[TheWizard]

In that line of thinking, only money in-hand is cash. Your paper check is just paper until you take the cash and the money in your account is not cash until you withdraw and have possession. That's too limited for me.

Not exactly. My only cash account is my checking account, aside from the $50 in my wallet.
And all my regular deposits are EFTs, no paper checks.

Often I'll have a few hundred or thousand in one of my settlement funds but that money usually has a limit order pending to buy more of an ETF so I don't count that as immediate cash...

 

[imjustawarrior]

I'm not trying to be the definition police, but I think of things like this. There is cash/cash like products ("cash") and then there are income streams. SS, pensions, annuities, interest payments, and such are income streams. They are not in the "cash" category. MMA, MMF, short duration high quality bonds, checking account, savings account, paper money, and such are "cash". "Cash" needs to have a stable value.

One should look at expenses and subtract income streams from expenses. The remaining expenses need to be covered by "cash".

Personally, I hold 1-2 months expenses in MMF. It gets replenished with dividends from taxable account. When I need more money, I sell something from taxable. We are retired and 58/51.

 

[Al18]

I consider cash anything in a checking or savings account, Money market funds, iBonds more than a year old. If I wanted to buy a new car in 3 days - this money is available.

SS, Pension, SPIA is considered income, not cash.

CD, MYGA, iBonds less than a year old are fixed income investments, because I can't access them easily and without paying a penalty.

 

[zinger1457]

I just make sure my checking account has enough cash to cover my expenses, monthly income streams (SS, pension, etc.) deposited into my checking account more than cover that. Move any excess to investment accounts, it's not very complicated.

 

[TheWizard]

I just make sure my checking account has enough cash to cover my expenses, monthly income streams (SS, pension, etc.) deposited into my checking account more than cover that. Move any excess to investment accounts, it's not very complicated.

Exactly what I do.
13 years of retirement has given me enough experience to know how much cash on hand works for me 95% of the time...

 

[Original Wally]

Rather than "cash" I prefer to think of things as either Debt Instruments vs Equities <- I ignore the "CASH Position" of my several ETFs.

Since I am a debt instrument "Hold to Maturity" guy, that minimizes volatility.

 

[TheWizard]

Rather than "cash" I prefer to think of things as either Debt Instruments vs Equities <- I ignore the "CASH Position" of my several ETFs.

Since I am a debt instrument "Hold to Maturity" guy, that minimizes volatility.

Ok, but real cash in my checking account is free and clear; I can spend that at 100% of face value.

Debt instruments in your tIRA (a common place for them) aren't the same. There can be a significant tax liability when taking those out for spending...

 

[joejetski]

IMHO, cash and near cash are defined based on price stability, not a certain duration or other metric. Maybe I am a purist. So MM, ST Treasuries and products (SGOV), CDs, cash equivalence (CSHI, ICSH, JAAA). These all have a 100% or near probability that the funds you invest (plus interest) will be there when needed.

 

[old medic]

I am surprised no one mentions annuity payments or SS. I consider my SS near cash,

It and pension becomes cash every month for us... I would says for us cash is what we have on hand, in the safe, or easily accessed quickly without cost. Roth/ HSA/ savings account.

 

[TickTock]

While I agree with OldShooter that ultimately "if my decision is different than yours, so what?" I do think the topic and discussion have merit.

I'm in the camp that SS, annuity payments, pensions, bond/CD interest and (to a lesser extent) equity dividends are what I term 'reliable income streams'. They turn into cash when they arrive.

Checking/savings/MMF and short-term USTs (for me, 3 months) are 'cash and cash-equivalents'. Perhaps a stable value fund, provided that the $ is readily available (you don't have to wait 30/60/90 days from making a withdrawal request to receiving the funds).

I don't have enough knowledge of the specialized funds to offer an informed opinion.

ETA: I agree that price stability is a necessary part of the cash-equivalent definition. So for me, it's the type of asset and the account wrapper (Roth, for example) is irrelevant. Although I do acknowledge that a Roth, with the ability to withdraw funds without tax consequences, deserves a special category. Just not cash-equivalent.

 

[TheWizard]

... the account wrapper (Roth, for example) is irrelevant. Although I do acknowledge that a Roth, with the ability to withdraw funds without tax consequences, deserves a special category. Just not cash-equivalent.

Many folks keep only growth equity funds in their Roth IRA.
I would not refer to those ETFs as "cash"...

 

[Steelpony]

I am adjusting my allocations and I am determining what constitutes "near cash". After long consideration, I decided the following items will make up my Cash/near cash allocation. Feedback and comments are welcomed. What do you consider cash and near cash for your asset allocation? Here's mine; and when I include this group, my cash/near cash allocation rises to 24% of my investment designated fund potentials or emergency funding: (note I do not include dividends payable in 2026; if I did it would raise my "cash" allocation another 3.5%; further, they are in DRIP mode currently)
Bank accounts (checking, savings)
Bond interest payable in 2026
Bond maturities in 2026
Money Market accounts
Special funds held for future equity/bond purchases including: NEA, NMVO, NZF, JBBB (historically these funds trade in a narrow range)

Highly liquid, low risk to principle, short CD’s and treasuries, MM accounts etc.

Our cash or near cash is held in a MM fund and SGOV, short treasuries that pay variable taxable income monthly. Vanguard has just entered this area with VBIL

We hold 5-10% of our portfolio value as cash or near cash, readily available at any time quickly. A click away with a debit card.

We do hold a large amount of income OEF’s and Munis which have risk to principle value. So for the income not for safety.

So I believe unknown future values is the cutoff and most widely accepted agreed upon definition of “cash like or near cash”.