Nest Egg Management

[Markola]

I'm a bit uneasy about the possibility of a market crash while FIRE and taking money out of the market in that time. Perhaps its not as bad as I think it will be because my bond/fixed income assets won't be as affected and will sustain us during those times?.

These graphs of the last two major recession periods ought to help you answer that. They do for me, anyway, and illustrate why I’ll happily remain fully invested at 50/50 stocks/bonds with $0 cash(drag) beyond the modest checking account.

 

[TheWizard]

The problem I have is this sentence: “What I assume here is that the cash bucket doesn’t reduce the stock/bond investment but it’s in addition to the $1m portfolio.”

It’s a logical fallacy, because one can’t just have a meaningful pile of cash sitting around and pretend that it is not part of one’s portfolio. That cash could have been compounding in the good years were it invested like the rest of the portfolio. People think they are getting a free lunch and avoiding SORR with a pile of cash. Rather than a free lunch, they are guaranteeing less portfolio growth through the large opportunity cost of cash-drag.

I’ll stay fully invested, thanks.

I tend to agree.
Maybe it depends on how close to the "edge" some retirees are.
If you have way more than "enough" and can tolerate a market crash every so often then maybe buckets and lots of cash aren't needed so much...