How Much Cash Should You Hold in Retirement?

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Many things change when we retire. There’s the obvious change-we stop working. And there’s a less obvious change-how we approach cash.
Before retirement, we might have an emergency fund of three to six months’ worth of living expenses. After retirement, we need cash for so much more. The ideal cash reserve depends on individual circumstances, including income stability, potential emergencies, and comfort level during market volatility.
In this video, I’ll walk through the seven main reasons retirees hold cash. For each, we’ll look at how much cash one should have for each reason and the type of account best suited to hold the cash.
Resources
Savings Accounts: www.allcards.com/savings-acco...
No-penalty CDs: www.allcards.com/no-penalty-c...
T-Bills: fixedincome.fidelity.com/ftgw...
Timestamps
0:00 - How Much Cash Should You Hold In Retirement
1:33 - Cash Investments
2:20 - Monthly spending
3:30 - Emergency fund
5:11 - Short term savings
6:19 - Taxes
7:18 - Income gaps
9:08 - Peace of mind
11:17 - Stock market crash
15:39 - Episode recap
16:15 - Financial Freedom
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ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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Опубликовано:

28 июн 2024

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Комментарии : 223

@pensacola321 4 дня назад

I am retired and hold a lot of cash. At 5% plus, I am happy to do so.

@SR-ob3wn 4 дня назад

I used to be almost 100% in stocks, now have some long term bonds, yielding in the range of 4-6% and a lot of cash in my money market account earning 5.29%. I’m gradually increasing by exposure to equities, but I’m happy to take my time as long as I’m getting paid. If there is a correction I’ll go shopping.

@Antandthegrasshopper 4 дня назад

@@SR-ob3wn What you're doing is reverse glide path... look it up.

@user-oh8jj8ht1s 4 дня назад

Maybe off topic a bit, but I've read that some analysts believe the stock market is heavily over valued, for example the S&P CAPE ratio is 32% as one example. We all assume that past history says that the market will always go up over the long term but as the ads say "past performance is no guarantee of future performance." I'm actually worried about the markets longterm.

@SR-ob3wn 4 дня назад

@@user-oh8jj8ht1s I’ve been hearing these exact same statistics for ten years. Supposedly, the market was only supposed to gain 2% a year between 2018 and 2030. Best to not worry about what the experts think and just dollar cost average in and rebalance when appropriate.

@tomf9292 3 дня назад

@@user-oh8jj8ht1sthis means your not confident in the US economy. More people coming into the first world means they will want to live like Americans. The market may correct but it will always go up

@Fred2-123 4 дня назад

When you are retired, your entire portfolio is your emergency fund. There is no emergency that requires you to need 3-6 months of expenses in cash. You only need enough to cover immediate need. An immediate need can usually be covered by credit card then you have a month or two to liquidate some of your portfolio to raise the needed cash.

@BadPhD777 4 дня назад

Being retired requires a whole different way to think about your money. I no longer have an emergency fund since I don't need 3-6 months worth of expenses in case I become unemployed.

@coreyburke3493 4 дня назад

I'm not retired but from what I gather your "emergency" in retirement is a down market. I plan on returning with two years of cash in a high yield savings account. If the market is way down the last thing I want to do is have to keep selling my stocks. If I have a large portion of cash saved before retirement AND a portfolio large enough to support me in a 4-5% withdrawal rate I'll be very secure. If the market takes a huge dip I could literally live off that large cash fund for a year or two to hopefully get at least some of those losses back before I need to continue selling my assets to live on.

@thomasbruner854 2 дня назад

Given the actuary tables, being in my 70s, everything is now in CDs and money mkt. funds. It just makes sense at this point.

@educatedwanderer9293 4 дня назад

I'm 55, and not retired yet. So far, I have a 6 month emergency fund in a high yield savings, one paycheck ahead in checking, plus our current budget checking. I have sinking funds for 6 common recurring expenses including taxes, insurance, car repair / replace, etc... I have a another 6 months invested in a CD ladder. I have 6 years worth of expenses invested in index funds in a taxable brokerage. Another 20 plus years worth of expenses are in Roth and Traditional IRA's. I have a small pension and SS which I plan on taking at age 67 or 70.

@davidrogers0717 4 дня назад

Rob has a video on his thoughts about the bucket strategy. I encourage anyone wanting more analysis on this to go find it. He just touched on this towards the end of this video.

@kenm8162 4 дня назад

One additional place I keep cash is in the safe, the goal is to keep about 4-5k in a mix of bills. The reasoning is the bank has a 1k ATM withdrawal limit and I do not have a local bank. This cash has come into play a few times when a deal pops up on the local 4-sale boards. And most recently when having the house window trim repainted. Cash is still king when bartering over items for sale and in dealing with some small independent contractors.

@alextjb 3 дня назад

Keeping a little bit of silver or gold in the safe would be a good idea as well

@MusicalXena 2 дня назад

@@alextjb Just curious, how would you actually use that silver or gold in real world situations? I see how cash is useful for last minute purchases with individuals, etc., but I imagine that the percentage of individuals who would barter in gold or silver is significantly lower.

@suzanneemerson2625 2 дня назад

Pawn shops may buy some amount of physical gold or silver coins, but they won’t give you full value for it. It’s one thing to say, “I have $10,000 worth of gold coins.” It’s something else to actually get that amount for it when you sell.

@alextjb День назад

@@MusicalXena it can be used for a number of situations. Primarily related to storing value that is not directly tied to any one economy so you aren’t fully dependent on that currency valuation. Keep in mind though, I’m not advocating for putting your entire life savings in gold and silver. the name of the game is all about diversification. So something like 2-4%… sure! just like having 1-2% exposure to crypto currencies. One practical use for silver that I have actually used is that I keep a one once silver coin in my wallet. Back in the day my debit card had stopped working and my credit card was maxed out because I had been traveling for work on two long projects back to back… the reimbursement hadn’t come through yet. I didn’t have cash and this was before payment apps were even a thing. I bartered my one ounce silver coin for a ride back home. You would be surprised how much people admire gold or silver. In barters they are typically are worth more than their current value because of the novelty of the item in that moment. That is extremely specific… but there are plenty of practical reasons one may want to hold a small amount of precious metals. Also, I’m not a fan of owning precious metal stock… that defeats the purpose. If you are going to own gold and silver then you want physical gold or silver and you need to be in possession of it. I hope that answers your question.

@oceansunsetak 4 дня назад

I've always kept 1 to 5 years of living expenses in cash $80k in 1990. 500k in 2024. It was a mistake when interest rates tanked after 2008. Now that I'm old, I'm getting 5% . It makes more sense. Some people do not have enough cash to last year

@BSimons-u6g 3 дня назад

Great advice Rob, especially about not keeping a large hoard of cash to weather a market downturn. It makes perfect sense to just rebalance at least yearly when you’re retired just like you did while working. Your videos have been a TREMENDOUS help and I am sincerely thankful for your common sense insights.

@paulhorvat6 4 дня назад

1st class content as usual - thanks for sharing!

@MeasureTwiceMoney 4 дня назад

Your example about the 2-3 years of "cash" cushion during the market crash assumes they don't rebalance the rest of their portfolio (sell bonds, buy stock). 1. The "cash position" is still considered part of the total fixed income allocation (within the 30 of the 70/30, etc.). 2. The portfolio would still be rebalanced during that period, meaning stocks would still be purchased during the downturn. For example: $2,000,000 Total Portfolio 70% Equity = $1,400,000 30% Fixed Income = $600,000 $80,000 per year * 3 years = $240,000 out of the $600,000 invested for short-term stability, the rest in intermediate Treasury and investment-grade corporate bonds (for example) If the stock market crashes -30% within the first year: $1,500,000 Total Portfolio 65% Equity = $980,000 Equity 35% Fixed Income = $520,000 (assuming no total return for bonds for simplicity) Although they may continue living off their remaining $160,000 cash cushion, they would still rebalance the remaining portfolio, moving $70,000 from fixed income to the equity allocation. That's a similar rebalancing that would have occurred using the basic 70/30 allocation approach.

@gg80108 3 дня назад

I never sell winners, they are hard to find and you luck into them mostly. I sell my losers and invest in the winners.

@Idahomie День назад

His talk Sounds like my scenario....great overview. Thx RB...yur a most groovey guy...the mostest

@wilma6235 4 дня назад

Great video. Thank you

@BiggMo 4 дня назад

I’m in a volatile industry that has long periods of lows. I keep the equivalent of a years salary in cash. My credit union is paying 5.25% yield

@Ferdinand208 4 дня назад

Sounds smart. How do you keep yourself and family from touching it?

@alexg4185 4 дня назад

For now

@BiggMo 4 дня назад

@@Ferdinand208 firm boundaries and simple lifestyle. You are either a consumer or an investor

@BiggMo 4 дня назад

@@alexg4185 … for now!!! And I’ll pivot when needed.

@sharedsailing4787 3 дня назад

@@Ferdinand208you can create a CD ladder if you don't trust yourself

@stephenjenkins117 День назад

Thanks, I hope that's helpful to others as well.

@scott1441 4 дня назад

Totally agree on the re-balance strategy

@pcash4088 4 дня назад

We keep about 1 1/2 months expenses in checking too. Then keep a significant amount in high yield money market to cover estimated taxes, travel etc. Doing Roth Conversions for 2 more years so need it for extra taxes. We have about 5% of total portfolio in cash. As rates lower I may reduce it.

@bulrack66 4 дня назад

Thanks Rob

@davidfolts5893 4 дня назад

Thanks, Rob! Your content is the best in the RU-vid financial space. I have been binge-watching your live shows and much prefer them to Netflix. Too bad RU-vid can't show a trending score because you would be #1 in my book.

@mapmanlxii1715 3 дня назад

I work in the oil and gas industry which is very cyclical many folks who have been up and down with price crashes have 4 to 5 years living expenses in cash CDs or MYGAs…just in case 🤞

@SiempreFlor 4 дня назад

Great advice thank you 😊

@MariaLarsen09 3 дня назад

Thanks so much for sharing that! That is huge in this higher interest rate environment

@MariaLarsen09 3 дня назад

i believe A massive benefit with Fidelity is when you deposit money to be invested. Your money earns 4.99% interest until you buy shares. So if you're doing cash secured puts your still earning interest on your money.

@BadPhD777 4 дня назад

I have all but two monthly bills charging to my credit card. It makes it really easy to see how much to move once a month from my retirement account to checking to pay the bills. I have money for the next few years in money market accounts or CD's (some at 5.4%!).

@rightwingprofessor1356 3 дня назад

Excellent video Bob, and I am on board with your recommendations. The only other thing I have is $5K-$10K in cash, in my Gun Safe. I bank with Capital One, and they have no brick & mortar in my area, so I keep cash handy, in case I need to deposit it in our local bank (where I maintain $500-$1,000 balance) to get a Bank Check or something similar. Some purchases I make (like my local Gun Store and my dentist) give cash discounts for not using credit cards.

@dl777 4 дня назад

I always appreciate the videos. I think that we have a much higher potential to have both stocks and bonds going down together with our national debt and inability to slow the increase down. It feels like we are going to have an L as opposed to a V when stocks correct. I bought international stocks a few years ago and I think I am only breakeven right now. I am about to retire in a few months so sequence of returns is weighing heavily on my mind. thanks again.

@whatsup3270 4 дня назад

When investment markets were smaller people transferred between stocks and bonds. Now the markets are overgrown and thus people buy or sell, thus selling will occur on both sides, drops on either side will bring the other side down. Simply they will either put money into the market(stocks and bonds) or remove it from the market(stocks and bonds).

@BillySantiago-us7zn 4 дня назад

Hey Rob, thanks for sharing the knowledge about how much cash you should have on hand…Question, what is your opinion on Yieldmax Funds…Thanks👍😎👌

@PaulaHannan 3 дня назад

I think you have to do the math. I am early in my retirement, and I am using a cash buffer to mitigate sequence of returns risk. IOW, holding cash to buffer a stock crash. I run my portfolio through portfolio analyzer with the cash as cash and with the cash distributed according to my asset allocation and I am losing .2 percentage point on the sample portfolio. (my Annualized Return (CAGR) for the with cash portfolio is 5.96 and my CAGR is 6.2 for the distributed portfolio). I am totally fine with this cost for my peace of mind.

@brianh6680 4 дня назад

many have a multi-year cash cushion (or short-term stuff like CDs, SGOV, BILS, etc) so they don't need bonds, rather than having bonds so they don't need a cash cushion. try a portfolio visualizer to see which wins out.

@dancurran8977 4 дня назад

Thanks for the video. I am retired with a 55/45 split. Your perspective on rebalancing vs. socking away cash for down markets is different from other advice that I have heard. I think I will stick with 3-4 years of cash for living expenses, Roth conversion taxes, and home projects.

@CaptainBenjamins 4 дня назад

If you don’t mind me asking, why not stick to a typical 70/30 split? Why is your allocation at 55/45 when you already have a 3-4 year emergency fund

@whatsup3270 4 дня назад

@@CaptainBenjamins Just and fyi - many consider an investment account of 50%/50% split with a different non-investment emergency account of cash (often 1- 6 months) as a steady state for non-financial people. IE set it and leave it: it is a long run strategy

@dancurran8977 4 дня назад

@@CaptainBenjamins That's a good question! I had financial advisors when I was near the end of my career recommend it given my income requirements and net worth. My son, who is in the financial industry (but not a financial advisor) is ok with it. New Retirement software's Monte Carlo simulations also look good. So basically the answer is that I am projected to have enough money in retirement so being conservative adds a little peace of mind.

@CaptainBenjamins 4 дня назад

@@dancurran8977 I guess if your professional son says it is okay, then you should be good. I feel that you would be leaving money on the table, right? I mean, sure your portfolio would have enough for a 30 year retirement, but what about leaving a legacy for generational wealth?

@dancurran8977 4 дня назад

@@CaptainBenjamins Leaving a legacy is not one of our goals. My take is that parents and children should be able to handle their own finances.

@Bob-yh7ir 4 дня назад

We have 2 years projected spend in cash ( savings and checking ), then 2 years in high yield savings. So 4 years total to ride out market crashes while taking minimum or nothing off the downed portfolios, etc. Planning shows that even if we only replace half of what we spend we never run out of money when we factor in just 1 of our SS income which I will turn on at 64 or 65. Our projections assume 4% inflation AVG through the rest of our lives. It looks like in our late 60s our cash and investments will grow beyond what we have now and instead we will be adding to after tax investments, etc. Good problem to have. Better than being on the other side of the numbers and worry about money.

@SR-ob3wn 4 дня назад

Why not put your 2 years in a Money Market account? They are FDIC insured and mine yields 5.29%.

@PH-dm8ew 4 дня назад

keep two types of cash, emergency fund 3 months of spending (or for big ticket items), treasuries 1 to 2 years. Other "bond funds" are in the few balanced portion of my ira/roth.

@strenfoo7396 3 дня назад

Great video. I like your take on not having a cash cushion to weather a market downturn. I haven't heard that approach before. That said, I'd love to see data that explores both strategies. Are you aware of any papers that dive into this? Does something like New Retirement go into this kind of thing? Keep in mind that even if you did use a large cash cushion to ride out a market downturn, you'd still be buying stocks because you'd still have to rebalance along the way to take into account the stock market volatility. I think the question really is: Is the drag that having a large cash position puts on your portfolio worse than otherwise having to sell stocks during a market downturn? Again, in both scenarios, you'd still be rebalancing.

@patrickmack7 4 дня назад

thanks for the video as always. one thing I can't wrap my head around is in a market crash, rebalancing makes sense, but doesn't it trigger taxable events when selling? (on the flip side, in a bull market, selling stocks to rebalance into bonds also creates taxable events). do the taxes offset the positives of rebalancing?

@alphamale2363 4 дня назад

Try to do the rebalancing in your 401K/IRA.

@KB_Art 2 дня назад

Subscribed…partially for the good advice…mostly because you have a ROM #1 on your shelf. Good taste makes for good choices. 😉

@dmoon9037 4 дня назад

@Rob Berger I may have missed it over the many episodes I’ve watched: when do you and your spouse intend to claim Social Security?

@Jl-620 3 дня назад

Since you mentioned early in the video that cash-like equivalents could be treasury bonds as in a bond ladder, I think is important to clarify that, when you say that you don’t hold cash for a potential long market downturn, you mean that what you ave in that case is the safe bonds in your asset allocation, but not just pure cash. So, if say you hold 5 years of expenses in safe bonds, that is just part of your bond allocation and not separate cash.

@nancyrichardi1746 3 дня назад

Hi ! I have watched so many of your podcasts and have learned a lot. So thanx ! But I have a wuestion about the example you gave for the cash cushion to use if the stock market tanks. If you took $50000 from your taxable s+p fund and then rebalanced your IRA thereby essentially moving money out of fixed income to buy more stocks, how is that a net gain? You have already sold stock and you are just going to buy it back again. What am I missing?

@usmcramin 4 дня назад

Great video as usual, Rob. I think this depends entirely on your goals and tolerance for volatility. For example, if you are risk averse, and you're 5 years out from a planned early retirement, and a 4% return will get your portfolio to beyond where you need it, then why keep your money in an 80/20 portfolio for the next 5 years and risk a massive decline (a la 2000-2003)? Yes, the probability is that you'll handily outperform the 4%. But when the 5-year risk-free (Treasury) rate is 4.25%...you're pretty much there with a very conservative allocation. Why risk your early retirement in the pursuit of "even more," if you already have more than enough? On the other hand, if you have reached your goal and you'll easily weather the emotions of a steep market decline and yawn your way into retirement, then by all means ... stick to your 80/20 allocation, rebalance, and enjoy your life!

@georgemaniere7919 4 дня назад

Rob, I really like your videos. I am 74yrs old and my wife is 77yrs old. Two years ago I swithched to fixed income. Getting 5+% on the short end TBills has been great. I watched your video on Vanguard Life strategy funds and you said I could ask questions so here goes. At our age, do we need to be in the stock market? Thanks for your posts. I'm also a big fan of Geoff Schmidt.

@Fred2-123 4 дня назад

@georgemaniere7919 What if you live another 20 or 30 years? Bonds & Tbills are very little return after inflation. So, yes, you really need to be in the stock market.

@stephenjenkins117 3 дня назад

Thanks as always Rob. I would like to see you address the issue of high returns for cash. Is it still a mistake to hold more in cash when returns are 5.4%?

@likethesky День назад

When interest rates go down, bonds will go up. Do you want to buy bonds then, once they’ve gone up in value (and are earning lower interest rates)? Probably not. Pick an asset allocation, and just keep rebalancing to it regularly. Not so important what allocation ratio you pick, just that you stick to it and rebalance regularly. 60/40 (equities/bonds) is fine.

@bryonsview 4 дня назад

Are you buying the actual tbill or the money market fund spaax?

@mikeflair6800 3 дня назад

To each their own. Even in retirement, my planning model is 97% USA ETF Stock and 3% cash. I manage (take advantage?) volatility by a 'sell one year of expense at each 10% gain' in bull markets, hopefully that is enough to cover through bear markets. If it is not, I 'sell one month of expense at current market price' to mitigate the asset damage. It becomes a game of managing forward time through the bull / bear market cycle.

@gg80108 3 дня назад

do you really need all that market risk is always the question.

@thetjt 2 дня назад

@@gg80108 That's a very good question. I don't think one should listen to millionaire investors who tell you to invest everything... 60% down is not same for them as it is for most people.

@dmoon9037 4 дня назад

<a href="#" class="seekto" data-time="961">16:01</a> well, rebalancing one’s portfolio is a form of market timing (programmatically, I would hope)

@rgarri6396 3 дня назад

Ron have you talked about RMD lately? Should you do it at start of year or wait to end? The money will be reinvested in personal account.

@restoreamerica1558 4 дня назад

Rob, explain why it would be smart in todays Market after 2022 to invest in bonds vs. cash or money market when the cash return is basically equal or even better than bonds. Although maybe not a sure thing, it is certainly possible the with a run away inflation bonds could actually still have a big swing. Interest rates went as high as 18 percent in the 80s. If you can get +5% return in a fidelity cash account, why would it be better to buy bonds at the same returns?

@whatsup3270 4 дня назад

Cash accounts only hold that 5% for 90 days to one year, after that they have a new number, which today many expect those accounts to pay less in the next 2, 3 years. The Bond accounts usually range from 2 years to 30 years (10 years is the most common)

@xporkrind 4 дня назад

Also what are the pluses and minus regarding say TFDXX blackrock fund vs. T bills in terms of interest rate and other factors?

@gg80108 3 дня назад

you lose the protection of maturity with a fund. You may never see your principal back.

@venchenzo4493 4 дня назад

Most bear markets last 18 months, so 1.5 years cash is all you need for most scenarios.

@Lukionest 4 дня назад

You mean 1.5 years cash for the average bear market, not MOST scenarios. Half of the bear markets will last longer than 1.5 years, so you may need to consider that.

@Jl-620 3 дня назад

I think 1.5 years of safe assets is not enough. Remember the lost decade of 2000-2009 when it was just starting to recover in 2007 when it went down again.

@tombkk1322 День назад

Hi Rob, another informative video. Do you think Vanguard’s new Cash Plus Account would be an ok place to keep a large savings position? Thanks.

@walterovercash2371 4 дня назад

If you already have a 3-6 month of expenses emergency fund, what is the additional year's expenses in the peace of mind fund for?

@dforrest4503 4 дня назад

I think a lot of this depends on how much money you have. For example, having $80k in cash may seem like a horrible decision, but if that’s only 3% of your portfolio and it gives you the peace of mind to invest more aggressively with the rest of your money, that’s very different than someone with the same amount of cash but it’s 40% of their portfolio.

@gg80108 3 дня назад

Bingo all advice is not for everyone. I suspect BOB has about a 2 million dollar nest egg, excluding RE, and needing about 100k income. If his starting point matches yours, it might be a good plan.

@thetjt 2 дня назад

Good point. However, if you total 2.7 million money you really don't *have to* invest anything now do you...

@gg80108 День назад

@@thetjt bingo that is the starting point, do I really have to do anything, except not lose a big chunk of money or figure out how much you can lose and then it's play money.

@tracythompson1692 3 дня назад

Rob, you mentioned estimated taxes. I pay mine with bac 2.62 preferred rewards card and payusatax. you get a float and make a spread on rewards vs the payusatax fee…whatcha think?

@Fred2-123 3 дня назад

That's just what I have been doing for several years. As you say, you make about 1/2% on the spread and you have 1-2 months float.

@hanwagu9967 4 дня назад

Mostly agree, although I don't consider the 2-3yr cash as a cushion, but as a reserve. My view is: 1yr operating cash, 2-3yrs cash reserve, 3-5yrs bonds, rest equities. I'll take the 3.1%yoy inflation risk on 2-3yrs cash/cash equivalent reserve to benefit from a 10%+ market decline.

@Handlethecurvessmoothly 4 дня назад

I may be a little higher as I am about to retire so 4 years cash , 5 years worth in annuities that feature a basement and ceiling ( I like because the host is incentivized) and the rest in equities. When I say cash at least half of this is in CDs . Still earning so may invest in a business or go TBills will have to look into what Rob is saying.

@rayzerot 4 дня назад

The 3-5 years in bonds is supposed to act as your reserve in case of market downturns though right? If you aren't using them to diversify like that wouldn't it make more sense to just keep them as equities? I'm not sure I see why to have operational cash and reserve cash and bonds other than for emotional comfort (not in a derogatory way, we all need to feel comfortable with our allocations)

@hanwagu9967 4 дня назад

@@rayzerot no, 3-5yrs in bonds is supposed to act as mitigation against equity downturn, not act as a reserve. A reserve isn't a cushion, because I'm actively going to deploy it when an opportunity exists.

@likethesky День назад

@@hanwagu9967”when an opportunity exists” is thinking you can time the market. You cannot. Do what Rob recommends, just keep rebalancing, on a regular basis.

@richardthorne2804 3 дня назад

I put $400K in SWVXX and made approximately $40K ish last year b/c i sold puts on long term dividend stocks i wanted to own using that cash . It’s a great way to double dip and get invested.

@maxmaxed2887 4 дня назад

I'm just buying TBIL etf with emergency cash

@todddunn945 3 дня назад

How much you hold in cash changes as you age. We currently are looking at about 15 years to plan for (that takes us into our mid 90s). We no longer need much or any return since we do not have children to leave anything to. So we are about 99% cash with only about 1% in dividend stocks. As far as that stock goes, it is so little money that we could have it go to zero with no significant impact. The result is that we can ignore the market.

@Moochie79 4 дня назад

But having about 2 years worth of cash does make sense for a 100% Stock portfolio though. Essentially we want to avoid selling stocks (to produce the cash needed to pay our bills) in a down market. And having extra cash available also allows us to buy stocks when they are on sale (during the same down market). Now, having too much cash can represent an opportunity cost for sure.

@wilma6235 2 дня назад

@ROB BERGER. unrelated questions 1) should we have beneficiaries listed at brokerage firms on after tax investments? I don’t knew them to lose the step up basis feature. 2) where to go if you are supposed to be receiving pension from a defined benefit plan years ago. The company was acquired by another. I contacted them and the pension guarantee company, no one can find my records. They told me to contact social security. I have all my tax returns. Worked there from 1981-1989. I was fully vested when I left.

@likethesky День назад

You should contact a fee-only (paid hourly) financial advisor or tax professional. For a fixed fee they can answer your questions about beneficiaries and about a lost defined benefit pension plan. Short answers: 1) naming beneficiaries does not lose step-up in basis as far as I know, but a joint account with rights of survivorship **would** lose step-up…, an attorney, tax pro, or financial advisor would know more. You DO lose step-up in basis on real estate if you name heir as joint owner (with rights of survivorship), that’s different than a beneficiary or heir. 2) There may be an office in your state capital that deals with pensions and regulations-or call your local state or federal representative-your congress person-and ask. They can help you find the lost pension plan benefits you may be entitled to.

@BB-cs3kk 3 дня назад

If you place one years worth of cash to cover current year expenses, do you include this amount in total assets allocation. Thanks

@tomgradel4999 4 дня назад

I think another category could be increased cash allocation based on a statistic such as the Buffett Indicator. If I remember correctly, Berkshire Hathaway is carrying about 40% cash which goes against the prevailing recommendations -- including yours.

@likethesky День назад

Berkshire carries about 20% cash which is typical for them. Nowhere close to 40%. They have about $180B cash and a $880B mkt cap.

@tomgradel4999 День назад

@@likethesky Thanks for the correction. I should have verified my data before posting instead of "remembering".

@FraserRyan-oz2bj 3 дня назад

As a soon retiree, keeping my $401k on course after a rocky 2022 is top priority. I have been reading of lnvestors making up to $25Ok R0I in this current crashing market, any recommendations to scale up my R0I before retirement will be highly appreciated

@RodHardin 4 дня назад

Is it better to do regular tax withholding from your pensions such as social security or make quarterly tax payments? I do both but keep wondering if I should just do quarterly IRS tax payments.

@Fred2-123 4 дня назад

@RodHardin If you are over 70 1/2, just take a withdrawal of your estimated tax from your IRA in December and have 100% withholding.

@RodHardin 4 дня назад

@@Fred2-123 I do that too but it's still not enough. Thanks

@benpatana7664 4 дня назад

I think in addition to holding cash, it is good practice to have a strategy for how you would best convert your investments to cash if for some reason a major unexpected expense came up.

@Fred2-123 4 дня назад

@benpatana7664 That's easy. Log on to your brokerage account and sell the investments that have the least gain. Next day it has settled and the cash is in your account. Then transfer or wire the money and write a check.

@kurtelia2212 2 дня назад

The idea of diversifying into bonds vs holding cash seems like a distinction without a difference at least at today’s interest rates. Both bonds and cash are “fixed income,” and with the inverted yield curve these days, cash is actually paying more than long term bonds, with much less risk. If stocks go down, you can use this excess cash to buy more shares.

@likethesky День назад

And if interest rates go down, so bonds go up in value, do you **then** buy bonds when they’re now higher in price? Or if interest rates go up, then you buy more bonds, when they’re lower in value? (In the case where bonds have gone down in value, interest rates have risen… If the yield curve is still inverted your short term cash will be earning even higher rates. Even harder to buy bonds then.) There is risk in holding cash, and long term it doesn’t pay off. Rob mentions that in the video. If you’re betting on the yield curve changing (or betting on it staying the same: inverted), then you’re still market timing…

@kurtelia2212 День назад

@@liketheskyI guess I have never really seen the point of bonds. When interest rates were near zero for years, they paid nearly nothing while carrying the risk they would drop in price when rates finally rose. Now that rates are high, one could argue they make more sense, but for long term investments stocks as a class have generally outperformed bonds, so not all that compelling to me for capital appreciation. For safety, cash is king. True you do run the risk of missing out on potential upside, but if that cash cushion keeps you from needing to sell low, it may save you downside too. Main thing is, don’t put money in the market that you need in the next 5 years, since anything can happen short term. But long term, stocks are the place to be.

@artstein9428 2 дня назад

Rob do you include your various cash buckets as part of your bond allocation in your overall portfolio, or is it separate? For instance, if you use 70/30 and have a $1m portfolio, does the $300k implied bond allocation include all your cash buckets?

@kennethwers 4 дня назад

With today's interest rates on savings. Why have bonds that goes up and down. Why not have a large part of your money in 5.25% savings?

@alessandrosavino1431 4 дня назад

To add to your analysis of 2022, the perfect storm for the stock/bond markets also came with particularly spicy inflation. If you are concerned about low real returns in your bond/stock portfolio, imagine what all that inflation is going to do to your cash cushion...

@Fred2-123 4 дня назад

The people who are saying that 4.25% is enough so you should put all your money there instead of stocks are wrong. Recent inflation has been 4.7%, 8.0%, 4.1%. You are losing purchasing power. You think you are safe but in fact you are in financial danger.

@alphamale2363 4 дня назад

I'm 60/40 with the 40 about half bond fund, half cash.

@joycewright5386 3 дня назад

So that’s about 20% cash which is what I have. I was always worried I had too much in cash but at the same time I feel very safe.

@susanharkema2888 4 дня назад

If retiring at age 53/55, what about holding cash to ensure you can get the ACA subsidy for 12 years? Would you do that? Also, if my portfolio goes down 30-40%, I don't know how comfortable I am touching it. I would be more apt to spend the peace of mind money.

@WKre123x4 4 дня назад

I am in that spot. Using cash for day to day, also have emergency fund, but selectively selling positions to keep below the ACA limits. Just retired in April, so this year’s tax picture is murky. I feel 2025 might be a little more clearer for us.

@BadPhD777 4 дня назад

I also retired in April, and am looking forward to ending the year and seeing how good I did on estimating for ACA.

@MikeMitterer 4 дня назад

You say you don't like the crash-cushion strategy. I think the problem occurs only if you combine e.g. a 6<a href="#" class="seekto" data-time="40">0:40</a> and the crash-cushion but imagine an emergency position, crash-cushion and the rest in stocks! Depends on how much you have to invest but this strategy can bring your stock allocation to 80, 90 percent and still let's you sleep like a baby 😀

@merrymerkin 4 дня назад

I have a 19-bucket system just for cash.

@BadPhD777 4 дня назад

ROFL! That sounds simple 🙂

@billycryer 4 дня назад

Rob, during a down turn, should I pull proportionately from my funds? If I have a 80/20 portfolio, for example, I still pull 80% from stocks and 20% from bonds? Or do I pull mostly from bonds? (BTW, my short-term treasury ETFs didn’t go way down in 2022 like most other bonds.)

@rhondaandmartyyoungkins7034 4 дня назад

Doesn't matter you would rebalance to 80/20 anyway ... need to take tax implications into account of course

@billycryer 4 дня назад

Do I rebalance immediately after making a withdrawal?

@likethesky День назад

⁠⁠@@billycryerif your 20% was all in short term ETF bond funds that generally what is meant by “cash.” So you’re 80% equities and 20% cash. Generally bonds are ~ 6-10 year duration. So 20% in intermediate term bonds. That’s what you should be rebalancing to. You “pull from” whatever you need to, to keep it at 80/20. If your stocks have gone down by 25%, then they’re only worth 60%, so you have a 60/40 which means any time you need cash, you withdraw from bonds until it’s back down to 20%. A couple times a year, if you still aren’t back to 80/20, then rebalance too, meaning sell additional bonds that you don’t withdraw in cash, but instead use that to buy for equities (index funds like VT).

@scoobedoo5243 4 дня назад

We honestly don't know if 2022 is an anomaly since we have very little experience with that kind of an event. You're also thinking that the cash is separate from the 70/30, 60/40, 50/50 portfolio when it should be treated as part of the fixed income portion. So regardless of the market activities, there would still be the opportunity to rebalance by buying stocks when they're down.

@godblessyou7376 4 дня назад

I respectfully disagree. Your allocation (e.g., 70/30, 60/40, etc.) should be in investable assets. Cash should be separate from that.

@scoobedoo5243 3 дня назад

@@godblessyou7376 I'll point you a bit farther down the comments to MeasureTwiceMoney's response. He does this for a living and trust his stuff, too. Obviously there are no hard and fast rules for bucket strategies, but I'm choosing this way because of some things Rob has said in the past as well as in this video.

@robertwalker5521 3 дня назад

"cash in a checking account" is RISKY CASH.

@AmithKaury 2 дня назад

As a soon-to-be retiree, keeping my 401k on track after a bumpy 2022 is a high goal. I've read about investors generating up to $250k ROI in this present sinking market; any suggestions for increasing my ROI before retirement would be greatly appreciated.

@kurtKking 2 дня назад

A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.

@xporkrind 4 дня назад

Can you please explain how to buy T bills on something like Merrill ? I have never bought any. I have always used stocks, options, and CD's only.

@whatsup3270 4 дня назад

It is called money market accounts in most of those system.

@jimrobinson9979 4 дня назад

If Rob doesn't have a video covering buying individual T-Bills (vs. buying a Money Market Fund) I know another YT channel called Diamond Nestegg covers it. I think she covers step by step tutorials for buying fixed income across all the big platforms. Not sure if there are multiple Merrill platforms, but I see she has one video titled "How To Buy T-Bills On Merrill Edge".

@xporkrind 4 дня назад

@@jimrobinson9979 Thank you. I will check out those videos and others about T bill purchases.

@gg80108 3 дня назад

Money market are paying equal to tbills, why bother?

@whatsup3270 3 дня назад

@@gg80108 Because money markets are typically 1 year or less, while the bonds can be locked in up to 30 years.

@alanalbin1988 2 дня назад

I bonds

@jimmarka3983 4 дня назад

At 69 years old, I prefer to keep 300k in CDs for LTC risk Thoughts?

@BadPhD777 4 дня назад

I'd say if that helps you sleep better, then it's the way to go! Currently with CD's around 5%, it's a great way to go.

@dominikk1978 4 дня назад

Can you give us an honest opinion on Yieldmax ETF?

@gg80108 3 дня назад

I think they are great for reducing risk in portfolio, if you are not greedy. say you were making 8% div you take 1/2 the principal out of harms way and invest 1/2 the money making 16%.

@MicahsJourney... 4 дня назад

Rob, I think you made a mistake. At <a href="#" class="seekto" data-time="788">13:08</a>, you mentioned selling S&P 500 index fund in the taxable account, then re-buying the same (by selling bonds) in the IRA. You then mentioned that the net effect was that you bought more stocks--which you go on to mention a few more times in the video--although truly, the net effect was simply holding the same amount of stocks, while decreasing bonds by the value withdrawn. In your example, you sold stocks in taxable, then re-bought (presumably at same cost on same day) in the IRA. The actual net effect is that you'd own the same amount of S&P 500 index fund, as opposed to buying more of it when the market is down, as I think you erroneously mentioned a few times. To achieve what you're referring to (i.e., buy stocks when they're down), I think you'd have to sell stocks in taxable, then not only re-purchase in the IRA by selling bonds, but also sell even more bonds in the IRA to purchase even more S&P 500 than what you originally sold in taxable.

@hoss6981 3 дня назад

I was thinking the exact same thing. It’s a wash. You are holding bonds to be able to buy more stock you just sold or you use cash so you don’t have to sell your stock. The latter is less work.

@pauleasthope3931 3 дня назад

Here’s a thought Long term stocks outperform bonds which outperforms cash So maybe keep 3 years cash to mitigate a stock market crash , put the rest in stocks?

@gg80108 3 дня назад

Except the cash is dry powder to use in a downturn and you can get some quick doubles or so with blue chips. You buy low and be sure to sell when you got a good profit. Rinse and repeat every few years.

@BiggMo 4 дня назад

Has Bob done a deep dive on Bond investing? I’m a newbie… I don’t really get the bond market

@Constitution1789 4 дня назад

I avoid the bond market. It's, in my opinion, a scam. The government takes your money, and when payday finally arrives, you're actually receiving less than you started with because of inflation, which the government created. Reduced purchasing power means you lose, and the government wins. Oh, to add insult to injury, I think you also have to pay federal income taxes on bonds, which makes it worse. 😂

@whatsup3270 4 дня назад

It is far trickier than it appears. Bond yields are more important than interest rates. Bonds and bond funds can go opposite directions.

@wirehairs 4 дня назад

Yes, he did. I recommend it too because bonds are harder to understand than equities.

@user-qp5to9ct7g 4 дня назад

Yes.

@BiggMo 4 дня назад

@@wirehairs I’m not finding it… would you happen to know how far back it was? Maybe it’s title?

@maguilla 2 дня назад

I keep nothing, I enjoy life I survived 4 crashes all ready

@NewGuy2024 4 дня назад

In my 20's I always felt $25k was good.....now it's at least $50k....mainly for emergency funds since I drive used cars. Now if the market dips like March 2020 and it's time to buy, $10k is actually my dead set minimum I'd feel comfortable in cash.

@koufax174 4 дня назад

50% of total

@peter-hr1gl 4 дня назад

liquidity is important, but actual dollars on hand? Not much IMO. I am not a doomsday person. If the major monetary systems fail such that electronic funds transfer capabilities are greatly impaired or outright prevented, underlying gov't coin/currency and systems will also be impacted these days such that I doubt having access to that would make much difference. Perhaps in the short run if there is a temp glitch in getting funds moved from A to B and you have XX dollars sitting around allowing you to go to grocery store, gas station, etc. and use coin/currency, but if we are talking about large dollar amounts (thousands or more), I don't see it being useful/necessary. If we are talking about what portion of your portfolio to keep useable and accessible outside of stock/bond market conditions, then that to me is predicated on your risk tolerance, need for funds to use/live on, and the timeframe. I keep 100k available in HSYA's on an annual basis (rolling basis) to be used for regular bill paying. Annual spend rate is about 80k. Your mileage will vary based on your needs.

@fortyofforty5257 4 дня назад

Number two. But we try harder.

@pauldenali6367 4 дня назад

With your rebalancing strategy it seems like you'd end up a net seller, not a net buyer of stocks. Let's say there's a bear market and you've got a 60/40 stock/bond portfolio. Say you sell 1% of your bonds for living expenses. To rebalance that portfolio you are now going to have to sell stocks in order to buy more bonds to rebalance the portfolio. So you still end up selling stocks in a bear market.

@josh9231 3 дня назад

Are T- bills cash or are they bonds? It’s debatable, I can see both sides of the argument. Ultra-short term bonds?

@robertwalker5521 3 дня назад

Regardless, this thieving "government" can seize all those bonds, T,-bills, etc

@valleyofiron125 4 дня назад

My job feels less secure right now and im applying to other jobs. Eliminated my extra payment on the low rate mortgage and stopped deferred comp contribution for now. Buying very little and saving into savings account like a skinflint until i feel less in danger.

@chuckmurray1825 4 дня назад

Rob, aren't you concerned about the lack of buyers for U.S. Gov. debt? China, Japan and others have stopped buying our bonds and we could be looking at a real problem coming up soon which would hammer both bonds and stocks. If we look at history, you theory about selling bonds and rebalancing instead of keeping cash would be right but that history is based on the U.S. dollar as the global currency. The dollar is losing it's status as the global currently and will soon be replaced by a basket of currencies. With fewer customers looking to buy U.S. debt, we could see our bonds and our currency lose value for the foreseeable future.

@joycewright5386 3 дня назад

Is 21% of my life savings in cash too much?

@borisgurevich3237 4 дня назад

I was under the impression long term CDs have a better return than Bonds excluding tax considerations. Am I wrong? As long you shop around for the best rates you get a better return than bonds?

@whatsup3270 4 дня назад

Bonds come in all shapes and sizes, the video isn't taking about that. CD's are a bond however they are Bond issued from one company. Many CDs are not cash because they have 1 year minimum time frames.

@clsanchez77 4 дня назад

Ben Stein recommended everyone should hold 20% cash, regardless of age, income or working/retirement status. The other difference with Ben was this 20% included your emergency savings. Certainly not a recommendation that falls in mainstream or without debate.

@TonyCox1351 4 дня назад

20% is crazy. What was his reasoning?

@cheesecrackers3928 4 дня назад

Ben gets way to exciting giving advice! It makes me cautious.

@tamib64 2 дня назад

I disagree with Rob's not having cash on hand. With the world's political climate, cash and assets are very helpful should there be a sudden downturn. At the moment, we are keeping 25% of our assets in cash (in a HYSA). It not only gives me peace of mind but positions us to be able to buy a property or extend a loan to family.

@Georgggg 4 дня назад

If you beleieve cash has stable value, try to save up to buy house. You'll learn the hard way, as many clueless financially illiterate people.

@gg80108 3 дня назад

Money is made in RE cuz of the mortgage, even at high interest rates, say you pay 8% and RE goes up 15% your a winner.

@Constitution1789 4 дня назад

Free checking accounts are the best. No minimums. No fees. Simple and perfect for everyday expenses, in my opinion.

@WKre123x4 4 дня назад

I moved from traditional bank to using a brokerage account at Fidelity as my checking. No investments in that account (I have another for that). It has money market fund as core (5%), and do checks/bill pay from that. No fees and better interest rates for me.

@Constitution1789 4 дня назад

@@WKre123x4 Isn't the expense ratio on that 0.42 percent? If you had a million in it, it'd cost $4200 a year? The annual average return over ten years is 1.22 percent, so minus the expense ratio, like .8 percent. The expense ratio is constant, but the return is variable. Seems risky to me for a checking account that's supposed to pay the bills.

@noreenn6976 4 дня назад

I prefer to use a bank for my checking and savings. I use Fidelity for investing only.

@Fred2-123 4 дня назад

@@Constitution1789 SPAXX yield - currently 4.96% - already accounts for the expense ratio. You get 4.96%. Or you could use FCASH as your core position and get 2.69% FDIC insured. Either is a lot better than the 0.01% that bank checking accounts pay.

@vevenaneathna 4 дня назад

just copy burkshire's cash holdings.

@mmactc 3 дня назад

Warren Buffett sure seems to be holding a bunch of cash.

@rob_berger 3 дня назад

Well, Berkshire holds a bunch of cash. No idea how much Buffett holds. And Berkshire holds a bunch of cash because of its potential exposure to insurance claims, capital requirements of its operating businesses, and Buffett hasn't found very large investments that are attractive to him. And even with all of that cash, Berkshire holds far more in equities.

@alk672 3 дня назад

I keep hearing this idea that people should rebalance to a percentage based mix. That’s ridiculous. You must rebalance to the amount of safe investment that you need to last through a downturn of a certain length. Everything else should be in stock. Your percentage will vary.

@Jl-620 3 дня назад

What you say is very similar to a 2-bucket strategy, which many times can be equivalent to a fixed asset allocation, depending on the size of your portfolio. What I think is usually missed in the whole rebalancing concept of selling stocks in taxable and re-buying them in Trad IRA, is the effect of taxes. You can’t just do the same amounts in both since the LTCGs in your stocks in taxable may be taxed at 0%, while selling them later in your IRA will incur regular income tax.

@ib23579 4 дня назад

A quick and dirty computation shows that rebalancing in the down market very quickly causes you sell stocks to buy bonds. Say start from 1M with 60/40 portfolio an withdraw 4%. Assume zero inflation and say in year 1 the stocks drop from 600K to 400K and bonds stay put at 400K. That year we sell/withdraw 40K of bonds and rebanance to 60/40 leaving 456K of stock and 304 of bonds. Assume zero growth in year 2 and sell 40K of bonds leaving 456K of stock and 264 of bonds. Now bonds are 37% of the total, so to rebalance to 60/40 we are forced to sell stocks and buy bonds. For the following year the bonds drop to 33%, and we again are forced to sell stocks and buy bonds.

@ib23579 4 дня назад

The point I am trying is make is that one should not justify the rebalancing strategy with "we sell bonds to buy cheaper stocks in down market". This is not exactly what happens. It is more complicated. Personally, I would probably sell bonds to buy stocks and cover living expenses, and postpone rebalancing until stocks come back.

@momhouser 4 дня назад

I think that "assume zero growth" is a big leap, especially over 3 years.

@ib23579 4 дня назад

@@momhouser Examples of US bear markets with zero growth after inflation: 2000-2003, 1972-1982.

@AP-ex6yd 4 дня назад

@@ib23579 Interesting point. Seems like portfolio size and spending rate make a big difference here.

@user-pr8ft5wg4l 4 дня назад

I don’t think that’s how you should rebalance during the downturn. You don’t sell fixed amount (living expense) of bond then rebalance. You rebalance as you sell both stocks and bond (mostly bond during downturn) for living expenses. This way you will pretty much never sell stock to buy bonds during downturn

@Ferdinand208 4 дня назад

In the long term, a 100% stocks portfolio goes higher. Why would you take a 80/20 portfolio if you rebalance each year? 100% stocks of $100.000 goes to 176000 in 10 years 80/20 of $100.000 goes to $159000 in 10 years That is a $17000 difference in 10 years. Wouldn't that form a buffer against the bigger drops that stocks get? $176000 100% stocks drop 40% to $105600 $159000 80/20 drop 32% to $108120 It seems to me that stocks after 10 years would yield so much extra that they begin to become safer than bonds.

@momhouser 4 дня назад

Holding a portfolio is totally different than pulling money every year from a portfolio. Look up "sequence of returns" risk.

@whatsup3270 4 дня назад

That is the pre ten years from retirement plan. Even then it is questionable on risk. If the year one retires the market drops 30% and the withdraw rate is 5% of the original balance 35% of the account is wiped out and it is unlikely to ever recover. From roughly years 2000 to 2013 there were practically no new highs.

@Ferdinand208 3 дня назад

@@whatsup3270 Anything to say about my calculations? If you have a crash of 30% with 100% stocks you would have a 24% crash with 80/20. So in that case you have a 6% bigger crash. How many years of stock returns would you need to make that 6% with 100% stocks compared to 80/20? If stocks do 8% then 80/20 would do about 7%. So you might need 6 years of 100% stocks to gain the buffer. In this case 100% stocks and 80/20 after 6 years would be at the same amount when the market crashes.

@whatsup3270 3 дня назад

@@Ferdinand208 On January 1, 2000 a new retiree with 100% S&P 500 account if drawing 4% would be out of money in 23 years, at 5% he would be out of money in 19 years, at 6% he would be out of money in 16 years.

@whatsup3270 3 дня назад

@@Ferdinand208 The same guy with his accounts 100% in 10 year treasuries in 2010 would have after 4% withdraws 136.2% account balance, 5% withdraws 122.6% account balance, and with 6% withdraws 109%. The guy with Bonds was miles ahead.