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Old 03-25-2011, 11:52 AM
 
36 posts, read 29,509 times
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Default Cash in Hand After Retiring?

If you're already retired, how much cash, or cash equivalent, do you keep immediately available for living expenses, and how did you decide on the amount? I've read that retirees "should" have from one to two years' worth of living expenses in a cash fund. My husband and I retired about 8 months ago and don't really have a handle yet on what our average annual expenses in retirement will be, but does that amount sound about right to you? (I hate doing that given the feeble returns that cash, CDs, and money market accounts are getting, but if it's money we need to live on right away I guess it needs to be ultra-safe.)
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Old 03-25-2011, 12:01 PM
 
Location: Planet Eaarth
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Originally Posted by ocdokie View Post
If you're already retired, how much cash, or cash equivalent, do you keep immediately available for living expenses, and how did you decide on the amount? I've read that retirees "should" have from one to two years' worth of living expenses in a cash fund. My husband and I retired about 8 months ago and don't really have a handle yet on what our average annual expenses in retirement will be, but does that amount sound about right to you? (I hate doing that given the feeble returns that cash, CDs, and money market accounts are getting, but if it's money we need to live on right away I guess it needs to be ultra-safe.)
There is no "ultra safe" place to store your money. We just live month to month on a small reserve in my Credit Union savings account that is our slush fund.

Having lot's of money saved away is a great way to watch it devalue to nothing.

And yes, the older you are the harder it is for you to grasp todays real economy.

Last edited by Grandpa Pipes; 03-25-2011 at 12:10 PM..
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Old 03-25-2011, 12:25 PM
 
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my system i use has 7 years not of living expenses but of withdrawls in cash instruments

another 7 years in various types of income generating stuff like bond funds,un-traded reits, rental real estate partnerships

all the rest in equities of various sorts
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Old 03-25-2011, 12:49 PM
 
Location: Bar Harbor, ME
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I just wonder how many people actually had(have) a budget while working. Some of these questions would have obvious answers if you had years of understanding your cash flow: where you know how much your expenses have been over the years. If that is the case, I see no reason for have 2 years worth of cash sitting somewhere. We expect to have 3/4 of ONE year in savings for emergencies. But we've also budgeted for having quite a bit more in disposable income that will probably just get saved per month. But the emergencies are pretty hard to fathom, since we do have health care, and we're not planning on helping our kids anymore.
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Old 03-25-2011, 12:50 PM
 
Location: Hills & Hollers of SW MO
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We didn't really have much of a system nor a great deal of wherewithal. But what we did have and continue to enjoy is two state pensions from our former state and Social Security. Most of our liquidity went to buying our home, making a 2,000 mile move and furnishing and equipping a rural home after having rented in a central city most of our not-so-old marriage. Now we save to build back a nest egg/emergency fund but we feel quite secure about our future.
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Old 03-25-2011, 02:06 PM
 
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Originally Posted by Zarathu View Post
I just wonder how many people actually had(have) a budget while working. Some of these questions would have obvious answers if you had years of understanding your cash flow: where you know how much your expenses have been over the years. If that is the case, I see no reason for have 2 years worth of cash sitting somewhere. We expect to have 3/4 of ONE year in savings for emergencies. But we've also budgeted for having quite a bit more in disposable income that will probably just get saved per month. But the emergencies are pretty hard to fathom, since we do have health care, and we're not planning on helping our kids anymore.
I do the reverse ,i construct the portfolio first to meet my risk level i want to take and then see what it can produce in income.
its all about the risk vs reward and what we want to tolerate in swings or potential drops that will determine our final income.
when we retire our expenses and where we live and what we do will have to conform to our income level .

doing the reverse for us wouldnt make much sense since i dont know our expenses yet. even if i did i still have to work it from what can the portfolio and other income generate and thats based on my risk level.

i suggest reading ray lucias ready set retire for more thoughts on structuring your income screen
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Old 03-25-2011, 03:20 PM
 
Location: Bar Harbor, ME
1,922 posts, read 2,115,745 times
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Originally Posted by mathjak107 View Post
when we retire our expenses and where we live and what we do will have to conform to our income level .

doing the reverse for us wouldnt make much sense since i dont know our expenses yet. even if i did i still have to work it from what can the portfolio and other income generate and thats based on my risk level.

i suggest reading ray lucias ready set retire for more thoughts on structuring your income screen
I'm sorry. I don't understand what you are talking about. I hope that it has nothing to do with the lack of punctuation and capitals.

I fail to understand why your expenses in retirement are going to be much different than those while working. With a budget you can easily determine which ones you will have to keep, which ones will be different(such as less driving to work so less gas bill), and which deductions from your paycheck you won't have anymore because they are only taken from earned income rather that annuity or investment income.

A budget is a budget. If you have one now, then you will have one in the future. I fail to see why this is so hard.
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Old 03-25-2011, 03:44 PM
 
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I have had no success in developing a retirement budget. I have sold the house and will be traveling in a RV. I decided that it makes more sense to determine how much money I can afford to spend and then live within that amount. Even that approch is not easy. This is only the second week in the RV and I have been enjoying my retirement with lots of restaurant expenses.
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Old 03-25-2011, 05:00 PM
 
27,213 posts, read 22,654,172 times
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Quote:
Originally Posted by Zarathu View Post
I'm sorry. I don't understand what you are talking about. I hope that it has nothing to do with the lack of punctuation and capitals.

I fail to understand why your expenses in retirement are going to be much different than those while working. With a budget you can easily determine which ones you will have to keep, which ones will be different(such as less driving to work so less gas bill), and which deductions from your paycheck you won't have anymore because they are only taken from earned income rather that annuity or investment income.

A budget is a budget. If you have one now, then you will have one in the future. I fail to see why this is so hard.
our expenses will be totaly different. we are leaving new york city, we will have lots of free time. with us time cost money. we enjoy doing things ,going places and feeding our hobbies ,especially our photography.
we expect to spend way more in our early years of retirement then we did working.

we will have a different lifestyle and we will have different income levels with no paychecks to live our lifestyle.

im interested in designing a portfolio that first off is at a risk level im comfortable with. next ill see what that comfort level can generate conservatively in income. next we will mold our retirement lives around that income.
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Old 03-25-2011, 06:43 PM
 
Location: Florida
482 posts, read 424,673 times
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Subtract from your annual expenses pension, annuity and social security payments. The difference is the annual cash you need. Keeping two years of cash is a good idea. I would also consider the next 3 years money in bonds (not bond funds) that will mature in the year you need them. The object is to have enough cash coming in so you do not have to sell equity securities in a down market. Thus if the stock market declines you live off your cash reserves for several years. This means that you are using up the cash and not replacing it until the market recovers. What this strategy is saying is that you do not expect the market to be down more than 5 years in a row. I think two years is too short of a period. If you do not have equity securities to protect then you should keep an emergency cash fund but you would not need two years of cash.
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