@lxnayBob Do you let your equity exposure build up when stocks go up then?
My (two year) EF is my only ācash,ā and cash is in air quotes since it is all in a ST bond fund. And to be fair, its not much of an EF since we are spending the bond fund down to pay expenses awaiting SS filing at 70. (Spending down the bond fund also raises our Asset Allocation %.)
We have about 15% in cash, but it seems like itās more. We thought we might rollover the proceeds from our house sale into a condo, but then covid hit, so that money is still sitting on the sidelines.
I just finished rolling my 403b into a 401k, both at Vanguard. Turns out that when I retired last year the 403b administrators started charging $5/month fee for doing nothing, so I switched. It landed in one of their money market funds instead of the balanced Wellington fund that I had it in. Logged on Monday to switch it back but then I decided that it can just sit in cash for a while. Itās not a huge amount, maybe two years worth of expenses.
We keep a fair amount of cash in our checking account leftover from our working careers and converted our sonās 529 to laddered CDs when he chose a service academy for college in 2015. We have not yet depleted those funds; they should last us another two-three years at which time weāll begin withdrawals from the portfolio and take SS. Unlike many of you, we do not have the stomach for managing our own funds. We check the portfolio twice a year at our bi-annual meetings with our FA and forget about it in between. Our financial plan takes into account a serious pullback every eight years or so, and we invest further during bear markets. Weād never consider converting any of it to cash regardless of how imminent the apocalypse seems but, over the past few years, our FA slowly rebalanced the portfolio to a roughly 60/40 equities/bonds split, though still a bit heavier on the equities side. I guess we just assume a roller coaster and bank on that overall inch upward, like Buffet never betting against America. My thinking is lifeās too short to worry about money after youāve done the work and planned the best you can, but I do enjoy reading here in case someone shares that fool-proof method for acquiring quick and lasting riches. 
ETA: DHās part-time consulting money provides income, and that is his to spend on hookers and bourbon, but we do keep those funds in cash as someday it may be needed for something other than his vices.
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In 20:20 hindsight, having purchased annuities during perhaps the greatest bull market in bond history is win-win.
OTOH, with interest rates now near zero, one has to wonder if the bond bull is now out to pasture. Once the fed stops purchasing, rates have to rise, donāt they? (Canāt fathom the US going negative.)
Read this today from some analyst. āSometimes getting out of a boom too early or not participating could cost you almost as much money in missed profits as getting out too late costs you in losses.ā
It all depends on your time frame. If you are a 30-something with a good job, then riding out the storm may not be costly at all. OTOH, if you just retired, and your nest egg gets cut by 40% (as in the 2009 downturn), then you have a sequence of returns problem if you need that money to live on.
My accounts lost over 30% earlier in the pandemic. Considering that was still a lot more than I had when I retired early a decade ago, it didnāt bother me too much. Easy come, easy go, I guess. A retrenchment on accumulated net worth due to a big upswing in valuation. If the S&P 500 has tripled in 10 years and I lose 30%, Iām still doing pretty well, right?
If youāre out of the market, no skin in the game, sure, you donāt lose anything but you didnāt gain anything either.
@bluebayou
if youāre retired, you need at least 5 years of EF, in cash.
Not sure how anyone can make such a blanket statement, or even if it makes sense for a rule of thumb. Retirement age, annual spend, and asset level are key factors. Is the āretireeā 55 or 65 (with Medicare) or 69 (and perhaps filing for SS in a few months)? Can the retiree cover ānormalā expenses from SS and/or pension? How big is the nest egg?
And, of course, depends on your risk tolerance, what level of AA&EF lets you sleep well at night. Personally, I am more than happy to spend down my bond funds to replenish the EF if needed.
Lol of course if I say EF those that you mentioned should be taken in consideration. Maybe ef is not the right word. Perhaps total expected needed cash for expenditures?
Maybe not a blanket statement. But to minimize your risk during downtime. Maybe 5 years is too conservative. What do I know? Iām not retired yet. Just replying to your response about when youāre retired and maybe lost 1/2 of your nest egg during downtime.
My point is, if you have few years of cash, your portfolio is well balanced based on your age and if youāre retired or not, you should invest your extra cash, and not just sitting there losing value because of inflation.
But again, based on my age and the above qualifications, I have too much cash right now. Peace.
I have a high % in cash. I had been investing in Tbills at 2%, then 1.5%, I would even buy them at 1%, but now at .0013% or whatever they are itās not worth the bother, so me being such a financial genius (<=sarcasm) I wanted my large cash balance to do some work so I sold some putsā¦ on bondsā¦ so now I own some bonds. I am still bullish on interest ratesā¦ (going lower).
With all this interest in annuities I will provide some real numbers as soon as I get confirmation from Equitable what my monthly payment will be. I know what itās supposed to be, but letās verify first. Itās a small one, and I only bought it 21 years ago to help a friend out, but it didnāt hurt!
Percentage in cash? 15% for us. Stocks (in mutual & ETF funds): About 50%. Bonds: About 35%. Getting ready to retire soon. Iām not comfortable with even 50% in equities, but Iām also very concerned about future inflation.
We have an OLD very simple annuity purchased about 25 years ago. It was a small amount. Evidently it has different rules than newer ones. It currently pays 4% interest because at the time of purchase, it was guaranteed to never go below 4%. (Remember interest rates of 10% plus?). Weāve just left it alone. Ultimately it wonāt do as well as stocks, especially once taxed. But better than current savings accounts.
Artificial how much cash we have ā we have sold one property, have an agreement to sell our house, and are putting up a condo in a very desirable neighborhood on the market after Labor Day. So, we have/will have lots of excess cash.
Weāre at about two years of cash. We are about 67/33 stocks/bonds otherwise (joint, 401k and IRA), which is ok with us. DH isnāt planning to retire til 70, and heāll have a pension, which, combined with SocSec (please heaven) will cover our daily expenses and medical premiums/copays.
Similar here. SS, even though we did not count on it in our retirement planning, will comfortably cover our non-discretionary expenses, so weāre comfortable still being more weighted in equities than bonds. We could lose the whole portfolio and not end up on the streets, so I guess thatās why I donāt get too riled by market volatility.
@doschicos, perhaps your portfolio tripled in 10 years, the S&P certainly hasnāt.
Damn close. With dividends reinvested, itās around 285% return over the past 10 years. I was just eyeballing it.
Nice! Thatās about 11.04% annualized ROI.