How many years expenses in cash/bonds if the rest is 100% stock?

After retiring 11 years ago I went from literally 100% stocks to around 95%. The cash allows me to not worry about cash flow - the timing of the dividends coming in that I live on or the occasional car replacement / bathroom remodel going out.
 
^ Right. If your portfolio is large enough relative to spending, (say 40-50 times) then just the dividends from the stocks is enough to cover it, and you can safely hold mostly (or all) stocks, with the cash bucket acting as a buffer. But even with a lesser amount, you can let the dividends flow into the cash bucket, and may not need to actually sell stocks for a long time.
 
Also people should remember that for a 30 year horizon
1/30=3.33%
so plain old return of capital already gives you 3.33% you can withdraw. Just a little bit of (real) returns gets that to 4%.

Huh? Is that cash? Inflation cuts into that - potentially quite seriously after 30 years.
 
^
(Just do everything in inflation adjusted terms.)
0% real return supports 3.33% initial withdrawal inflation adjusted for 30 years.

For 4% SWR for 30 years, it is sufficient to get a steady 1.33% real return.
 
We aim for about 7 years in cash + bonds, with cash being about 1-2 yrs. We range 55-60% stocks.

The overall AA is based on what appears optimal in our situation when simulated in Firecalc. Also, I like at least 7 years in cash & bonds in case of a slow recovery, as in the case of the last 2 recessions. So our AA as well as "years in bonds & cash" w*rk together to help us sleep better, especially since we've only been FIRE'd 3 years and feel vulnerable to an unfavorable early sequence of returns.
 
It fluctuates but at present we have enough cash/deposits/short term bonds/FX to cover about three years cash outflows without cutting back at all.

On paper this is completely unnecessary as cash in from DW's salary/dividends/rents/interest exceeds cash out, a position that will improve dramatically between now and mid 2021 when our home mortgage is finally paid off.
 
one years cash and a 40/60 overall mix down from 50/50 in december ..
 
^
(Just do everything in inflation adjusted terms.)
0% real return supports 3.33% initial withdrawal inflation adjusted for 30 years.

For 4% SWR for 30 years, it is sufficient to get a steady 1.33% real return.

If it’s in cash I don’t think you are going to achieve a 0% real return.
 
35 years in Cash, CDs. That should cover it. No SS...... Yet, maybe next year. No Stocks as none are needed. No Heirs to worry about.

As mentioned that does not include any SS or Interest income from the CDs.
 
If it’s in cash I don’t think you are going to achieve a 0% real return.
That comment didn't refer to cash. It simply points out that 1/30=3.33%
(in the general context of SWRs, not this specific thread).
 
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That comment didn't refer to cash. It simply points out that 1/30=3.33%
(in the general context of SWRs, not this specific thread).

Well it really does depend what you invest in. Capital can be cut in half or much worse when inflation is taken into account.
 
^ Certainly. That's why I said "(Just do everything in inflation adjusted terms.)" (i.e. real not nominal).

This thread is about a specific kind of decumulation strategy, so all the considerations that apply to decumulation strategies in general, also apply to this specific case.
 
Well it really does depend what you invest in. Capital can be cut in half or much worse when inflation is taken into account.

as moishe milevsky demonstrated , the difference between the best and worst outcome in how long the money lasts just based on the sequence of the same returns ,rates and inflation can vary as much as 15 years with a 30 year time frame . that is mind blowing .

especially because when you just use a simple reverse amortization calculator where you throw in some average return and rate of inflation the results are so skewed and off from what could be using those same numbers
 
I think inflation is different for most Retirees as they become less of a consumer once they retire. Yes Food etc. But in general I have been retired for 5 years and DW 3 (FiRED), and really have not seen any significant inflation in that period (for US). OK tuna Cans are now 4oz instead of 6oz for the same cost but eggs are still ~$1.50 a doz. House Taxes have actually decreased a little. Utilities are up a little but not that we notice that much.
 
that premise , that retirees spend in a smile shape and spending falls off a cliff as we age makes two wrong assumptions for starters .

the first is it depends on discretionary income levels . when everything is a need and you have few wants there is nothing to get cut back .

the other is that if we do have discretionary income and our own spending falls off we may just do more for our kids or grand kids like helping with school or day care .

so this premise stills is highly individual situation dependent
 
Currently, I have 22.5% in cash or cash equivalent. At 2017 WR rate of 2.66%, that cash is good for more than 8 years, if that money can keep up with inflation. And just coincidentally, in 8 years we will be able to draw SS of $74K (in today's dollars).
 
We are about 93% stocks.
It's been a great ride, but as I learn more, I'm becoming more worried about sequence of risk, and so have been slowly converting to cash-like to have about 4-5 years of expenses covered.
 
having so many negative real returns historically , after inflation and taxes with cash instruments , has actually added to sequence risk . those in 1965/1966 were crushed by inflation , not their returns or rates over their 30 years.

there is a mistake made thinking cash instruments lessen sequence risk . they really don't because it is real returns governed by inflation and taxes that count .

fixed income has terrible results in firecalc .
 
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35 years in Cash, CDs. That should cover it. No SS...... Yet, maybe next year. No Stocks as none are needed. No Heirs to worry about.

As mentioned that does not include any SS or Interest income from the CDs.

Similar here. But I do have a small amount in stocks for an inflation hedge. But could go w/o stocks. Don't see any point in paying taxes on capital gains so will just let it ride and collect the dividends.
 
Who has see the inflation monster for the past 5 years :confused:
For the 5 years of 2012 -> 2016 inclusive it totals 6.54 % (not compounded).

That is barely a nudge.

https://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp

When compounded, the cumulative inflation from 11/2012 to 11/2017 (past 5 years) is 7.14%. It's still significant, even for a tame period, and works out to 1.39% average for each of the 5 years.

It could be up to 2.5% each year, and still be considered normal. The cumulative 5-year number would be 13%.
 
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it is the sequence risk in inflation that acts like sequence risk in our returns . cumulative means little .
 
Similar here. But I do have a small amount in stocks for an inflation hedge. But could go w/o stocks. Don't see any point in paying taxes on capital gains so will just let it ride and collect the dividends.

I just checked our budget spreadsheets back to 2008 (We both were working till 2012) which is when we purchased our current home in Florida, and other than the Items I mentioned in my previous post our mandatory expenses have been quite static. Real Estate taxes have gone down. Our Groceries have been pretty consistent too. That is 10 years.
 
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