If you are retired, do you keep an emergency fund? (moving, spouse)

[aslowdodge]

Originally Posted by mathjak107

a typical decent run up where you develop a few years worth of withdrawal money up front .

on the other hand a hit day 1 in retirement while spending down is like a trader having a string of loosing trades out of the gate . the money you need to generate future income is gone .

but once you have a cushion in place you can deal with occasional down years and losses. spending down systematically will work fine with no cash buffers once you are a head of the curve .

So if you had plans to withdraw $100K a year, but your investments in that year actually yield $200K you are over your need with a $100K cushion?

[Blondy]

Originally Posted by mathjak107

well let me tell you about counting on atm's .

we already had three times in new york city atm's were down . 9-11 , the tornado we had and sandy . some were down for quite a few days and many of the banks were closed as well

Yep, learned that lesson after 9/11 in NY.

My kids no longer even carry cash lol, but I am never without it.

[Blondy]

Originally Posted by Robyn55

We keep about 2 years worth of living expenses in "cash". A "high yield" savings account yielding about 1%. We don't call it an "emergency fund" - but it can be used for emergencies/"rainy days". One of the main reasons we have it is so if either of us died - the other would have some breathing room to figure out what to do next. Another possibility might be if one of us had a catastrophic health event - like a stroke. And needed to go into an ALF or a SNF. Another possibility is we get a note from our insurance company saying it will cancel our homeowners' policy unless we put on a new roof in X months. Yet another is our car dies and we need a new car. There's always the possibility of dental expenses too . I suppose you could call our fund the "unexpected big ticket items" fund. Robyn

That's pretty much how I view our "emergency" fund. In truth, we have pensions and can fund most unusual events out of current income.

If there's a hurricane/tornado that rips my roof off, I will be waving cash at the roaming price gougers to protect my property and find temp quarters if necessary while my neighbors are haggling with their insurance companies and waiting for legitimate companies to come get the tree off their roof or out of their driveway, tarp the roof and schedule roofers. No hotel rooms or apts? I have cash to buy a small house condo I can sell later if necessary!

Better doctor or medical procedure my insurance company wont cover or only covers partially? I have cash to buy treatment I want. Been there even pre-retirement. I don't want to be fighting with them while I don't feel 100%. Can do that later.

I used to have a new car fund. But, I decided that's not an emergency and I no longer want a new car as we have family/friends who live on rural properties with dirt roads, so I keep my old car as a "farm" car. My husband has a new car and if I want, I drive it. Its not an emergency if one car goes.

In reality, my emergency fund is big ticket shopping fund and/or other peoples emergencies. So, I used it for the downpayment on our retirement home before we sold our old home. Then I replenished it and used it to furnish our retirement home with new furniture. I used it to reassure my sister when her husband died and she was totally ignorant of their finances and how to access them that I had X amount in the bank and not to worry, we could just go withdraw whatever she needed until she figured it out. Used it to give my parents a swing loan so they didn't have to withdraw and pay taxes on IRA funds to pay for their new digs before they sold their house. Used it for loans or gifts to kids related to house downpayments.

I keep about a hundred grand in cash, sometimes more sometimes less. I've never really used more than 50 grand at a time other than the house downpayment, but I sleep better at night knowing its there.

[mathjak107]

Originally Posted by aslowdodge

So if you had plans to withdraw $100K a year, but your investments in that year actually yield $200K you are over your need with a $100K cushion?

it is not about just 1 year . what if next year you are down 40% ?

a cycle is a complete cycle which is usually a few years of up markets .

[twins4lynn]

I’m retired and have a pension, social security and income property (6-unit building). No debt. I have a reserve fund of twice my annual rental income exclusively set aside for miscellaneous expenses for the building. This doesn't include the normal piddly stuff each month (i.e. janitorial, electric, water, etc. for the building or taxes and insurance). That is paid directly from the monthly income). The fund is used for large expenses, such as renovating units when long term tenants move out. Next year I’ll be doing an mandatory earthquake retrofit. Within the next few years I’ll probably do the roof. I’m glad I have that reserve fund and will replenish it as it’s used.

Setting aside $$ in separate accounts works for me. I have another reserve fund set aside to cover taxes, home & car insurance, etc. just miscellaneous expenses that are ongoing each year or just once in a while for my primary residence; another fund that’s been used for my kids college expenses; and a 4th separate fund where my social security checks are deposited (which I haven’t needed).

[loves2read]

We have cash we are drawing down before my husband needs to take RMDs from his IRA. Cash--not investments w/dividend flow or bond drips...
He kept good chunk of available cash out of the market after 08--in CDs--more than 3 yrs of income....so maybe a mistake considering last 6 mo of run-up but before then market was pretty volatile. He has large IRA invested in market (index/low-cost funds and short/med bonds)--didn't want that much risk across the board.
I only have a Roth so no RMDs. I also have limited pension (less than 20k after insurance premiums) and spousal SS. He isn't drawing SS now.

[txfriend]

Our emergency fund in retirement is our checking and money market accounts. The accounts have grown so much that I just opened up another account with etrade, independent from our IRA accounts. This starter $100K account will be used primarily for capital preservation with a return of 3% to 4%. I will transfer additional funds semi-annually and still maintain very healthy checking & MM accounts.

[lieqiang]

Originally Posted by Larry Caldwell

You apparently don't understand bonds. If interest rates rise, you are going to have to hold the bonds to maturity to get the face value out of them. If you have to sell them to meet an emergency, you will have to sell at a discounted price. At the same time, rising interest rates will also cut the legs out from under the stock boom, so you won't have a good option either place. A forced sale will cut into the principal of your portfolio.

You apparently don't understand bond funds, risk, and volatility.

I invite you to outline a scenario where needing to sell shares of a total bond index fund to generate $50k would be a devastating loss event like you've outlined. Again, worst annual loss since inception of VBMFX was under 3%, do you really think me needing to sell shares in that scenario is a risk element requiring me to hold cash to hedge against.

The overwhelming number of positive returns for the bond portion of the portfolio easily outpaces cash enough to where needing to sell in a down year is still a win.

[lieqiang]

A great option for an emergency fund if you also have taxable investments is the stable value fund found in many 401ks. They usually have a much better return than savings or money market account, and you could get to it without penalty by doing a wash sale with taxable investments.

[leastprime]

OP: Sort of.
We have deferred GLWB annuities that we have not taken a draw.
We have Discretionary trading accounts that I keep a fluctuating cash hoard depending on my feelings of the Market and our cash needs for the near future 3-12months.
So if our needs are very large, I can turn on the annuities (which will happen beginning late 2017 and thru 2023+) or liquidate some of the Discretionary holdings, depending on Market.
We also have an Only son with a large cash hoard (building to 1 year income, I think) that we can tap for an emergency. He's eventually going to get what we don't use anyway.