Cash in investment portfolio

[thepalmersinking]

Any suggestions on maintaining cash in Roth and Traditional IRA's. I sell covered calls and usually reinvest the $ into different stocks. I am currently 100% invested and 5 years away from retirement so I am thinking about taking the option premium and putting it in a money market etf and letting it accumulate.

Thoughts?

 

[VanWinkle]

Any suggestions on maintaining cash in Roth and Traditional IRA's. I sell covered calls and usually reinvest the $ into different stocks. I am currently 100% invested and 5 years away from retirement so I am thinking about taking the option premium and putting it in a money market etf and letting it accumulate.

Thoughts?

I would build cash in a taxable account ahead of retirement to give you a cushion for at least 2 years of expenses. This can be actual cash, or very short term investment grade bond funds. I don't see an advantage to having cash in an IRA/Roth unless your plan is to market time into stocks during a downturn. I am not recommending that action as you never get the timing right twice as it requires getting out and back in at the correct time.

 

[street]

I like the safety and security in cash type accounts. For me it was always in my plan to have enough to live just from cash accounts and not have to sell investments. It also was a way for me to know that I will continue to save because that is my nature and that is how I got to where I am today.

As far as how much that is something you will want to find your way with in your safety level. Having cash accounts is one part of your portfolio NO ONE can take from you no matter what the markets do.

 

[Red Badger]

The amount in cash and "cash like" varies from one person to the next. We keep 30 days cash in hand, and a year of cash in a safe deposit box. This is truly SHTF $$. 6 Months worth would likely be sufficient, and we're weighing buy a few more CD's.

Our "cash like" is a 2 year CD ladder with quarterly "rungs."

We have several years in govie bonds.

We think this keeps us from having to sell equities in a down market, and that allows us to sleep well no matter what the pundits are screaming about.

Like street implied, have a strategy behind your overall AA. Some folks with pensions have a higher equity position, as they are comfy that the pension(s) helps mitigate some volatility. Even with a couple of modest pensions we stay about 60/30/10 for our AA.

YMMV

 

[Nightcap]

We retired early almost three years ago. My greatest fear was sequence-of-returns risk, so I've maintained two to three years-worth of cash on hand. Given that short-term CDs have been yielding so poorly, I've been happy just to leave that money in preferred savings accounts.

 

[Dave J]

We retired early almost three years ago. My greatest fear was sequence-of-returns risk, so I've maintained two to three years-worth of cash on hand. Given that short-term CDs have been yielding so poorly, I've been happy just to leave that money in preferred savings accounts.

Check out the 11 month 1.75% no penalty CDs Ally bank has. Works well for me. Take them out in 25k per CD and you can cash with no penalty after 6 days.

 

[RobbieB]

I have instructed my broker to transfer all the cash my equities generate into my checking account and then I just blow it.

 

[kimcdougc]

We tend to keep 2 to 3 years in cash in a couple of high interest mm accounts. Just in case.

 

[gayl]

sell covered calls and usually reinvest the $ into different stocks ... Thoughts?

Thoughts:

• have you considered using proceeds to buy dividend payers then moving dividends into cash?
• leaps to increase cash flow?
• what % is options?

 

[JonB]

Check out the 11 month 1.75% no penalty CDs Ally bank has. Works well for me. Take them out in 25k per CD and you can cash with no penalty after 6 days.

Thanks for the tip. I am just starting retirement and was looking for some decent option to keep a couple years of cash/equivalents. The Ally no-penalty CD’s look like the best deal around. The next best I’ve seen which maintains flexibility, without penalty, is the Amex High Yield Savings account currently paying 1.35%. The Money Market account at my bank maxes out at only 0.7% with deposits over $50K. Will definitely check out the Ally CD’s.

JonB

 

[Dave J]

Thanks for the tip. I am just starting retirement and was looking for some decent option to keep a couple years of cash/equivalents. The Ally no-penalty CD’s look like the best deal around. The next best I’ve seen which maintains flexibility, without penalty, is the Amex High Yield Savings account currently paying 1.35%. The Money Market account at my bank maxes out at only 0.7% with deposits over $50K. Will definitely check out the Ally CD’s.

JonB

Since I posted the rate dropped to 1.6%. It will go up in the future,IMHO.It is easy to break online and open a new one same day if rate goes up. I would advise also opening the free checking account if for nothing else to have a account to move CD into. At first I only had the MM checking account, but it has a 6 per month limit on transfers out, and you could use that up if you have a bunch of 25K CD's you want to roll-over to a new higher rate.HTH

 

[Cobra9777]

Check out the 11 month 1.75% no penalty CDs Ally bank has. Works well for me. Take them out in 25k per CD and you can cash with no penalty after 6 days.

I just checked the Ally website. Looks to me like the 11-month no penalty is 1.60%. The 1.75% is 2-year with early withdrawal penalty.

Edit to add: Ahh, I see you just posted the 1.6%

 

[JonB]

Since I posted the rate dropped to 1.6%. It will go up in the future,IMHO.It is easy to break online and open a new one same day if rate goes up. I would advise also opening the free checking account if for nothing else to have a account to move CD into. At first I only had the MM checking account, but it has a 6 per month limit on transfers out, and you could use that up if you have a bunch of 25K CD's you want to roll-over to a new higher rate.HTH

Thanks again for the rate update. Saw that on the Ally site too. I tried to call them about getting set up, but the wait was estimated to be 15 min so I thought I should try again later. I had a couple questions including the need to have a free checking account, but you read my mind and answered that already! Thanks. Also I was thinking about potentially trading up to higher rates when they are available. Sounds like no problem after 6 days, which is great.

FYI, my financial advisor doesn’t have any better suggestions for the cash; I think you are on to a very good option here. Now, just need to get the separation package paid out from my company so I have something to put into the CD’s!

JonB

 

[Dave J]

Thanks again for the rate update. Saw that on the Ally site too. I tried to call them about getting set up, but the wait was estimated to be 15 min so I thought I should try again later. I had a couple questions including the need to have a free checking account, but you read my mind and answered that already! Thanks. Also I was thinking about potentially trading up to higher rates when they are available. Sounds like no problem after 6 days, which is great.

FYI, my financial advisor doesn’t have any better suggestions for the cash; I think you are on to a very good option here. Now, just need to get the separation package paid out from my company so I have something to put into the CD’s!

JonB

You might just try setting up your free checking account and maybe a savings account online, get your bank info in and fund it for 10 bucks each so they are set up and ready when you are ready to fund. It is actually easy and straightforward. I was able to do it. I do quite a bit of ACH back and forth and it works well for me. If interested, it is also easy after setting up account to set your beneficiarys. I love the fact after setting up first account it saves your info and prefills most if not all for you. Adding a joint owner after the first time they give you that name to choose and if you do prefills everything for joint owner. Easiest bank I've ever worked with so far.

 

[bmcgonig]

Vanguard money market is now up to 1.4%


https://personal.vanguard.com/us/funds/snapshot?FundId=0030&FundIntExt=INT&ps_disable_redirect=true

 

[brokrken]

Having cash accounts is one part of your portfolio NO ONE can take from you no matter what the markets do.

Mr Inflation can and will take your cash from you.