Strategy: Having enough low risk savings to cover spending needs for most statistically likely market downturns...

[street]

This is true. I view my cash bucket instead as a "won the game" bucket. There's no longer a need for me to risk everything. It's now insurance against my selling assets at depressed prices and, like all insurance, it has a cost, at least until you need it.

Exactly!!
Cash is golden for me and would have it at any cost, to have it at my fingertips. Cash is worth every red ¢ I give up in that account for more growth and gains. This is just me I know most here disagree but again I have gotten where I am, doing things the unorthodox way what all the experts say isn't the way to do things.

I have no intentions to sell any investments at any time. Do I give up some interest/growth in that (cash) money of course you do. On the other side of the coin, I'm not selling when I need large amount of money now.

Markets can keep doing their thing and I still have all investments intact working for me in all kinds of markets up and downs.

Cash is opportunity to more growth while not disturbing the investment to keeping on and growing.

 

[audreyh1]

Opportunity cost for holding extra cash has to do long term growth, and I no longer care if I have that extra bit larger portfolio at the end.

 

[TheWizard]

What do you do when you have a large purchase you want to make? Do you sell investments then? Just wondering what path people do in a case like that.
I'm talking 100K or more or a 60K vehicle.

Good question.
I did a factory order of my new Mustang back in July of '23.
I normally keep just $10k in checking and invest the excess into stock funds in my taxable account.

But I paused doing that in June or July and let the excess pile up in checking. Then when the vehicle arrived in October, I sold around $30k of stock funds to raise the remaining cash needed.

It turned out that I had a few lots in my taxable account with small losses, so I sold those to raise the $30k.

Had all my taxable lots been showing gains, it might have been trickier. Too much CG income could push me into the next higher IRMAA tier and I don't want that. So I could take most or all of that $30k from my Roth IRA and avoid that issue.

I'll likely be replacing my 2016 F-150 in 4-5 years and will likely take a similar approach to raising funds...

 

[Montecfo]

An HELOC is another tool to make a major purchase while you let funds accumulate or find things to sell.

 

[Koolau]

Exactly!!
Cash is golden for me and would have it at any cost, to have it at my fingertips. Cash is worth every red ¢ I give up in that account for more growth and gains. This is just me I know most here disagree but again I have gotten where I am, doing things the unorthodox way what all the experts say isn't the way to do things.

I have no intentions to sell any investments at any time. Do I give up some interest/growth in that (cash) money of course you do. On the other side of the coin, I'm not selling when I need large amount of money now.

Markets can keep doing their thing and I still have all investments intact working for me in all kinds of markets up and downs.

Cash is opportunity to more growth while not disturbing the investment to keeping on and growing.

I'm with you. Cash is King. I no longer need to swing for the fences, so having cash available for any reason suits me just fine. I have plenty of equities and bonds as well - "doing their thing" as you say. What growth I lose to cash, I make up for in sound sleep and ease of writing a check whenever I feel like it.

I understand that I'm in the minority.

 

[rembrandt]

Exactly!!
Cash is golden for me and would have it at any cost, to have it at my fingertips. Cash is worth every red ¢ I give up in that account for more growth and gains. This is just me I know most here disagree but again I have gotten where I am, doing things the unorthodox way what all the experts say isn't the way to do things.

I have no intentions to sell any investments at any time. Do I give up some interest/growth in that (cash) money of course you do. On the other side of the coin, I'm not selling when I need large amount of money now.

Markets can keep doing their thing and I still have all investments intact working for me in all kinds of markets up and downs.

Cash is opportunity to more growth while not disturbing the investment to keeping on and growing.

Unfortunately, the days of red cents are numbered!

 

[boilerman]

I have about 3 years expenses in cash. At the end of the year, if the market is up, I move what I need to get back to 3 years worth. If the market is down I don’t do anything.

I give up some return on that cash in exchange for sleeping better at night. Works for me.

 

[street]

I'm with you. Cash is King. I no longer need to swing for the fences, so having cash available for any reason suits me just fine. I have plenty of equities and bonds as well - "doing their thing" as you say. What growth I lose to cash, I make up for in sound sleep and ease of writing a check whenever I feel like it.

I understand that I'm in the minority.

Koolau, it works for me and you saying sleeping at night is a real thing.

I have plenty invested in the markets with equities above 80%. If the market drops 60% or 70% and stayed there, I would still be able to go buy large purchases and live life no different than when the markets were high. Those are the time of opportunity owning cash, when your stocks aren't worth anything, and you need them to live.

I wouldn't not have to be dependent on those investments in the market. Some have suggested loans home credit lines etc... but they cost to use those tools and still have to find a way to pay them off.

Cash is an opportunity tool I would never be without. I'm not trying to convince or sell my way for others to do it the way I do business. I just want to add my way and view on doing business. Most would never have a life worth of cash to live from on hand.

 

[jazz4cash]

Thanks.
Bonds have never seemed all that tasteful to me, but I've always had a bad impression.
I have been considering a CD ladder for my liquid savings. Rembrandt's suggestion of a high yield saving account also seemed interesting, but I have little idea how they work.


~~~~~

i don’t see much difference between individual bonds and CDs (except FDIC). I “think” member A18’s comment was specific to bond funds. Individual bonds act very differently than bond funds. I avoid bond funds for that reason but it can be tough to get the level of diversification I want with individual bonds. Timing income distributions is another concern so I use a ladder using a variety if fixed income products: treasuries, bonds, CDs, MYGAs.

 

[Koolau]

Unfortunately, the days of red cents are numbered!

I refuse to give them up - red or otherwise but YMMV.

 

[Al18]

jazz4cash,
My dislike is bond funds, not individual bonds.

In addition to your list of fixed income products, I would add I Bonds and Savings Bonds. I like both - the only big drawback is you can only purchase $10,000 per year per person.

 

[TickTock]

OP,

I've been reading Jane Bryant Quinn's How to Make Your Money Last. She recommends a 2-year cash cushion, considered separate from the investment portfolio, plus two years in a short-term bond fund that is part of the bond allocation of the portfolio.

The major US stock market recovery time from bottom to previous top (assuming dividends were reinvested) averages 29 months; longest just over 5 years (August 2000 to October 2006); shortest five months (started in June 1998). That data comes from Towneley Capital Management of Laguna Hills, CA. (p. 259).

 

[Koolau]

Seems reasonable but I wonder how she defines "cash" and how rigid she is on "bonds."

I always have a fair amount in the checking account - but nothing like 2 years. My bond funds are integral to my AA.

SO my cash cushion is primarily my Guaranteed Income fund within my 401(k). I also consider that GIF as my equivalent of her "short term bond fund."

It's true that every time I take from the GIF it's a fully taxable event, but I do it strategically - with the back-up ability to use it as my cash cushion and short term bond fund equivalent.

I DO count my GIF in my AA and not as separate from my AA of my Port.

I don't know how my treatment of my GIF compares to her recommendations but it seems to w*rk for me. YMMV.

 

[Montecfo]

I have about 4 years in a bond stepladder maturing quarterly.

I view it as part of my allocation.

 

[youbet]

1. Are folks differentiating between "dry powder" cash and spending cash?

2. If Pension + SS + interest + dividends > spending, does that imply you have infinite spending cash?

 

[TheWizard]

1. Are folks differentiating between "dry powder" cash and spending cash?

2. If Pension + SS + interest + dividends > spending, does that imply you have infinite spending cash?

Good question.
My interest + dividends stay in my investment portfolio.
My pension (annuity) + SS does indeed exceed my expenses/spending most months, so I move the excess, beyond $10k checking into my taxable investment account.

My AA for that account is presently 95% stock funds and 5% settlement fund cash. So that 5% cash is something like dry powder, yes.

I generally have a few low-ball limit orders pending on certain ETFs with that 5% cash. It works for me...

 

[Gumby]

Our pension + SS exceeds our normal spending, so I just keep a basic 60/40 allocation in our portfolio. That's what got us here in the first place, so I figure I'll stick with it. We have no children, so I'm not really trying to build a legacy.

 

[Koolau]

Our pension + SS exceeds our normal spending, so I just keep a basic 60/40 allocation in our portfolio. That's what got us here in the first place, so I figure I'll stick with it. We have no children, so I'm not really trying to build a legacy.

Sounds like you WILL end up with quite a legacy if you don't need to take from your stash.

I'm taking from the stash and am STILL getting ahead. Great problem to have. Still trying to figure out how to distribute when I'm gone.

 

[Closet_Gamer]

I’m all about the “once you’ve won, stop fighting” view.

That was exactly the approach we took with our kids college. The point of that money wasn’t max growth forever. It was to meet a specific liability. Worked great.

Had the same view when we paid off the house early. Was it the theoretically optimal path? No. Did I sleep better having retired a major obligation? Yes. I viewed it as a life win.

I have the same view about a major chunk of the portfolio as we went retirement. We won … so we’re building a very safe, 10 year rolling runway for our essential expenses + part of our discretionary expenses. We sleep great.