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I've never been one to have lots of cash on hand. By cash, I mean checking, savings and money market accounts. Cash in the wallets counts as does a vault loaded with cash, or cash in a safe deposit box.
Just learned that my FIL has $20,000 stashed in a safe deposit box. Haven't personally verified it but this is what I've learned. Had a client one time who learned his deceased brother had $80,000 in a safe deposit box.
Did have some six-figure cash recently from sale of residence and it felt awkward. Then we got rid of it buying a second home.
My approach to excess cash has been using it to pay down real estate loans and have a home equity line of credit to draw it out when needed. This approach worked exceedingly well and thanks to a little intensity and compulsiveness, we're now debt free on all real estate debt.
To me more than $10,000 seems like excess cash but we do have a $300,000 home equity line of credit if quick cash is needed. And, I'm still in the "rat race" earning an income.
I make a distinction between two types of cash - physical cash as in bills of various denominations and cash of the type one can have in various bank accounts. Having huge amounts of the former, as in your example of someone having $80,000 in a safe deposit box, borders on the pathological in my opinion.
Having huge amounts of the latter is also hard to justify, but at least the various types of bank accounts will be paying interest (as absurdly small as the prevailing rates of interest are), whereas the cash in a safe deposit box is not even earning that.
As you point out, emergencies can be handled without having large amounts of either kind of cash, through existing lines of credit or by withdrawing from a mutual fund or similar. If you need a new water heater, or a new furnace, or have a major car repair, those sorts of amounts can be put on a credit card while one waits the couple of days it would take to get a check or transfer from an existing line of credit. Even withdrawing from a mutual fund should not take more than two weeks, should it?
Don't most people have at least a $10,000 limit on their credit card? Provided people pay the credit card in full every month (which is the only rational way to go), then most of that limit would be available for emergencies.
Why is it almost nothing on this forum is actually about retirement or even written by a retiree? This seems to belong in the personal finance forum.
Let me be generous and assume that you want to discuss why or if people who are retired handle cash differently. I do suspect there are at least some minor adjustments. When I was working and money is coming in and going out, I kept relatively little in cash. By cash I mean primarily money in my checking or savings accounts. I rarely buy anything with paper money or coins and before or after retirement that has not changed. The reason I have more cash is partly due to the way my retirement is funded. Some of my income is from social security. Some is from the sale of mutual funds in my retirement account. I tend to do that on an infrequent basis. I also like to accrue some cash so I do not need to cash out funds when the markets are low. That is mostly just a psychological ploy. It would be better just to leave the money invested and keep only a minimal amount in actual cash.
Since you are including cash as money markets, I will assume that also includes CDs since the interest rates are about the same for a 1 year CD. I've saved a good chunk of cash over the last 3-4 years to prepare for retirement - to buy a new vehicle, fix my house up to put it on the market and pay closing costs and moving costs. Since I am retiring to an area with higher home prices, the last thing I want to do is to dip into my home equity to pay for these expenses.
But as jrkliny pointed out, it is also recommended that you keep some money available in cash of a market correction or bear market. Usually about 2-3 years of the amount that you would normally be withdrawing from your investments for retirement. I don't have that amount of cash saved and it makes me a little nervous. As you are nearing retirement, many people are putting as much of their money into investments as possible. Strategies to increase cash immediately before retirement are seldom discussed.
I've always large amount of cash in my checking account. I don't have any balance in any credit or HELOC account. So what? I don't have to worry about spending. It's been that way for years. It's earning a big fat ZERO interest rate. To me it seems like a lot of work to get a big of money from create a savings account and then you have to pay tax on it. Too much pain for very little gain.
Do you find it wise to be commenting on your finances on a public forum? MYOB is the best answer to this type thread. I have noticed many threads lately asking financial questions of seniors. Could this be hackers looking for a victim?
I don't answer questions on the telephone and I don't reveal finances on a public forum. I decided this after answering a question telling about using extra money to buy a car stating that my 2012 car is showing mechanical problems. The next day we got a call asking if we had a particular type of 2012 car. There are people who can find out almost anything on the internet.
I've always large amount of cash in my checking account. I don't have any balance in any credit or HELOC account. So what? I don't have to worry about spending. It's been that way for years. It's earning a big fat ZERO interest rate. To me it seems like a lot of work to get a big of money from create a savings account and then you have to pay tax on it. Too much pain for very little gain.
Does anyone have any idea what the poster is trying to say? I think a few words are missing or something.
Yes, I have enough for over 6 months expenses, I get anxiety if I do not have a large chunk of readily available cash on hand.
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Why is it almost nothing on this forum is actually about retirement or even written by a retiree? This seems to belong in the personal finance forum.
Let me be generous and assume that you want to discuss why or if people who are retired handle cash differently. I do suspect there are at least some minor adjustments. When I was working and money is coming in and going out, I kept relatively little in cash. By cash I mean primarily money in my checking or savings accounts. I rarely buy anything with paper money or coins and before or after retirement that has not changed. The reason I have more cash is partly due to the way my retirement is funded. Some of my income is from social security. Some is from the sale of mutual funds in my retirement account. I tend to do that on an infrequent basis. I also like to accrue some cash so I do not need to cash out funds when the markets are low. That is mostly just a psychological ploy. It would be better just to leave the money invested and keep only a minimal amount in actual cash.
Your point is well taken and I'll be more mindful of this. Thanks for keeping this forum "safe."
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