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First of all, I plan to retire in 1-2 years, at 57 or 58. I've posted many questions on this forum and I appreciate the responses.
Has anyone felt this nagging feeling of needing to build up cash before retirement?
I've got what I would consider a fair amount of money in the bank (not drawing enough interest to matter). I would say it's enough to live on for @ 18 months. I've also got a fair amount in my 401K and forthcoming pension. So much so that I feel like it's enough for my future lifestyle.
I've got this thought in my head that when I retire, that I might not even draw on the 401K for 18-24 months due to the savings and some money coming from the pension part of my retirement plan. I've already confirmed this is OK. And just so we are clear, this has nothing to do with a penalty on the 401K.
Here's my question: Let's say I work all of 2022, planning to retire 12/31/2022, where I would be 57. I fill like I need to keep building up this cash to get to a mark of about enough to live on four 24 months. So rather than contribute another 25K to the 401K in 2022, add another 25K to my current savings in the bank.
Is this totally crazy? Has anyone else felt this need to build up cash before retirement, rather than keep maxing out the 401K?
I should also say that if at 6/1/2022 I feel like I need to put it in the 401K, I can do that very easily.
It is more a mental thing then necessary….there are other options to cash that can be used as well …
Today we set a side the current years spending every Dec 31 ….then we accumulate dividends , distributions in the taxable account and start to accumulate the second year.
It is easier then trying to fill the spending budget in real time since distributions vary ..
This way we see what we have at the end of the year and see what we need to fill the gap
I've been retired near 10 years now. At first I had 2 years of cash in the bank as a buffer.
Now I just keep 1 year of cash in the bank since I have SS/pension and have been retired this long already.
In Nov/Dec I replenish it if needed and then add more cash if I plan to buy a big ticket item the next year.
As Mathjak noted, it's more of a mental thing knowing you have this buffer of cash "just in case".
I've been retired near 10 years now. At first I had 2 years of cash in the bank as a buffer.
Now I just keep 1 year of cash in the bank since I have SS/pension and have been retired this long already.
In Nov/Dec I replenish it if needed and then add more cash if I plan to buy a big ticket item the next year.
As Mathjak noted, it's more of a mental thing knowing you have this buffer of cash "just in case".
The reality is a down blast in stocks is not going to matter much if it recovers in two years which is the amount of cash many retirees hold. .. an extended bear market does matter and two years cash can be peeing in the ocean in an extended downturn …
2000 took 12 years and retirees in 1965/1966 went through a 20 year bear market
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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We have a different plan, selling the house. We paid $190k for it in 1993, now worth about $1.2 million. Unless there is a big real estate crash in the next year we will sell, buy with cash in a less expensive area, and still have a few hundred k in the bank to supplement out pensions, 401Ks and 457.
We have rental property income that can cover our basic expenses, so we were able to retire comfortably. I was 44 and hubby was almost 57. Our retirement income (401k's, hubby's social security, IRAs, etc...) stays invested or in a bank account. I picked up a job a few years ago when my mom's health deteriorated. I figured that if I had to stay in town that I needed to have something to keep my brain active. Given the past couple of years of COVID and inflation, I am glad that I took the job. It has allowed us to stockpile a little more cash and take advantage of the dips in the marketplace. I like the fact that I will be able to go back to full retirement with greater security and have a little more cash for some additional luxuries.
We have a different plan, selling the house. We paid $190k for it in 1993, now worth about $1.2 million. Unless there is a big real estate crash in the next year we will sell, buy with cash in a less expensive area, and still have a few hundred k in the bank to supplement out pensions, 401Ks and 457.
Well done! Not to derail thread, but I hope you're working on a plan to offset cap gains!
Well done! Not to derail thread, but I hope you're working on a plan to offset cap gains!
Yep, we had a sale of an investment property a few years ago and even though it was a long term capital gain it cost us in total state and local taxes 30% of our entire taxable income that year from dollar one
Capital gains were 23.80% plus we had the amt tax penalty have hit on all other income.
It almost cost us thousands more in Medicare surcharges but i appealed and won being it was our first year retired and on Medicare and they looked back two years to set rates and hit the sale.
We are in nyc so we had federal, state and local taxes that took 30% of the entire years income from dollar one
Had a good year in 2021; need to double that in 2022.
My husband has some goals I'm trying to meet.
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