How Much Cash Should You Hold in Retirement?

Recently bonds and stocks are moving together, so there is no safe place to store capital. Any advice on "safer" funds would be appreciated. Bonds still seem to be moving with equities in the latest bull market; any change predicted? Thx for all your advice.

How about using the cash to rebalance by buying stocks with cash. I hold 20 percent cash 5 percent bonds and 75 percent stocks

Didn't think I could learn anything from a Ohio State Buckeye! Surprise, surprise - appreciate your insights! Go Blue!! :)

T Bills as an equivalent to a money market, interesting.

Rob and others: in your asset allocation (for example (60/40 stocks/fixed income) do you include your emergency fund in your fixed income asset allocation?

Personally I include my emergency fund, but not those funds targeted for a large expense due within 6months, for an expensive trip, for example.
Thank you Rob for your videos - very informative and “boglehead” compliant, which I like and do my best to practice.

Let's say you have a large portfolio of 6 million or more and you have adopted the Warren Buffett approach of 90% S & P 500 Index and 10% Treasuries to build wealth for your heirs. Doesn't that accomplish the goal of keeping plenty of money in cash for emergencies and enough to weather a stock market downturn that lasts 3 years. (ie 10% = $600,000)? Any thoughts on that?

I hold enough cash to survive 5 years
Nothing will ever convince me to reduce this amount

Regarding Bonds going down with stocks only once in a 100 years....
In 2008 and 2009, Bond returns were mixed and down a little at the same time as stocks. Not as much as 2022, but still, it happened less than 20 years ago...

It feels like "once in a blue moon" events are happening more frequently as of late...

That all being said, I agree that timing never works and the best thing you can do is set up your portfolio using the metrics you described and hang on tight. Its gonna be what it is...

I finally moved my savings to a Prime Money Market account. I'm already up about $600...more than I ever made from my all my savings accounts I've ever had, combined!

What about that rebalancing thing when bonds are low, but stocks are up, like now? Do we sell stocks and buy bonds? How do you calculate how much to sell and buy going, either direction?

Isn’t this mostly market timing of various kinds. Any cash you hold is the same as selling your portfolio to that cash value.

Rob, what do you think about Alpha Architect's BOXX ETF as a means of holding a cash position. It seems extremely safe and should result in lower taxes for most people.

I think the people that should be worried are those of us who are retiring with less than a million. I have only 650k in my Roth and I don't know how to grow it.

Whoever says "cash is trash" can give me all his cash.

Cash is a depreciating asset.

Can you dedicate a show to just a discussion about how to invest during a market crash. taking into mind cash holding in a retirement account.

I would love for you to do a video sharing your thoughts about fidelity’s personal retirement annuity (FPRA). They have around 67 VIP funds available for investing, including the type that would create a boglehead’s type 3 fund strategy as you often discuss. The main selling points of the FPRA as I see it is the ability to trade within this group of funds without having to report earnings for taxes purposes until they are withdrawn. Secondly, it would be interesting to find an approach to tracking these VIP funds, as their ticker symbols do not appear to chart when entered into any of the charting platforms. Love your advice and thought it was past time to let you know!

Is it time for Federal bank deposit and credit union deposit insurance "FDIC" "NCUA" to increase? I think so,especially after the recent spate of inflation that has in my experience at least cut the purchasing value of a dollar in half or to even less than half in the years since the last Presidential administration change.
Perhaps $1,000,000. would be appropriate,it takes almost that much to purchase an entry level residence in a lot of localities.
I believe that at one time the FDIC amount was $10,000. but then ten thousand might have been what an entry level house cost !

I am 10% cash, 10% foreign equities/ a mutual fund, and 80% U.S. mutual funds. I am 70 and social security covers over 1/2 of my expenses. My cash is earning 4.5%.

Dream scenario during a crash would be a roth conversion, selling bonds in the IRA, moving that to the ROTH and buying stocks and paying the taxes with cash. Trifecta!

We have 70% of our funds in short term T-Bills. The T-Bills are laddered where funds mature every month. Most of our stocks have performed poorly relative to the overall market. We are up about 15% ytd. However, most of that is in NVIDIA. We've held stocks like PayPal, Disney, Carnivale, CVS, BA, and Pfizer hoping they would return. We had these and others for several years and they have only lost more money.

We do not want to invest any more money into the stock market and have been happy with 5% on T-Bills. If the market crashes, we'll look for undervalued stocks to buy. Probably none of those listed above.

The problem now is the market is over bought. We did make the mistake of selling about 60 shares of NVIDIA. Thirty at $500 and 30 at $750. We bought it several years back at $35.

Maintain accounts at more than one bank or credit union. My credit union is currently temporarily shut down due to ransomware. Fortunately, I have accounts at multiple credit unions, so I'm not concerned with not having access to my money at the affected credit union.

Retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My parents both spent same number of years in the civil service, but my mom was investing through a wealth manager, and my dad through the 401k.

@RobBerger I noticed My Banking Direct in the video is not on all cards anymore. Is there a reason why?

To me, the bond-stock uncorrelation is a myth. Currently, the interest rate has the tendency to fall, meaning the bond price has the tendency to rise. Does it mean the stock price will fall? If both bond and stock prices going down in 2022 was a 1% event, falling stock price will be a 99% event when the Fed cuts the interest rate. Comment, please.

How are you measuring the return of the charities you are distributing God’s money that he has entrusted you to manage?

Bravo! How did you learn to do this and what is your secret to sticking with the plan?

Bond mutual finds underfprform momey market funds, css. tbills for years last 5-10 years total return.

I'm Retiring at the end of August 2024, at little over 62. I'm holding a Months expenses now, Severance will add another Month. My CalPers will be 70% with Coordinated Social Security. Social Security will be delayed until after I my deplete my 403b. I'll take Social Security no later than 65 [with Medicare], unless I've gone back to work from boredom & have Healthcare.

Another potential reason: If retiring before 65, and you do not have post retirement employer paid healthcare, it is likely you will need to sign up for ACA (Obamacare) coverage. Having a cash pool that can be drawn for expenses until Medicare kicks in helps to minimize the income (MAGI) that is used to calculate premiums. And note that if you choose to start SS at 62, your entire SS withdrawal is considered income for MAGI purposes. So relying on cash as much as possible until Medicare may result in considerable healthcare premium savings.

I bought me some TSLA, PYPL and SOFI last month. Investors are preaching buy the dip, some are selling without a concern should I too? I am asking because after a pretty good run Q1. I am up to 251k from 180k at the beginning of Q1 thanks to the likes of AMD and TSMC.

Random question, is T.Rowe a good brokerage? I read good thing about them.

Rob, thinking about the Fed TSP and a “60/40 Portfolio” I’m currently a few months from retirement and am allocated 65% C & 35% G. I believe with the current return on the G that is better for the “bond” portion than the F fund. Am thinking about changing equities to some combo of C, S & I. Maybe 35% C, 15% S & 15% I.

In any case your thoughts on a good retiree 60/40 portfolio keeping funds in the TSP?

Why not just use your cash cushion to buy stocks when market is down.

I have an aggressive portfolio with only 10% in bonds and only 2% in cash. If I had kept 6 months in cash cushion I would have missed over 30% I've gained since last year's market boom. I might sell off if the market turns bear, but for the time being I'm winning big, knock on the wood.

uSMART balance interest, make savings more than just numbers, 4.6% annualized income, ready to invest, keep your money alive.

Timing is still luck & those who get it right should not attribute it solely to their “brilliance”. Initial conditions matter a lot even as one attempts to do the “best” planning possible. It is all about the future & surprises both positive & negative are going to be the norm, far more than people have been used even considering the past few years. Even Gramps Warren Buffet pays homage to the luck-factor as a significant element of his successes 😊

I see your buckeye football. Go Bucks!

Overdraft protection works too!

New subscriber and love the content until I saw the Nut football on your shelf. GO BLUE!!!!!!!

Thanks Rob great video! This is exactly what we need to hear because it's so much simpler. The bucket approach is way too complicated and requires market timing just like you said not to mention all the cash drag.

When you sell stock from your taxable, sell bonds in your tax-advantaged accounts and buy stocks in your tax advantaged accounts (rebalance), you aren't a net buyer of stocks, though. You are simply taking out your spending money from bonds and re-bucketing your stock allocation from your taxable to your tax advantages accounts.

A BIG need for cash can be emergencies for children and adult aged grandchildren!

My local credit union has a 3.5% interest checking account. Similar to a HYSA, but they add stipulations like you need to use your debit card 15 times per month. Thats not hard to meet if you have your bills setup to autodraft from the account.

Morningstar did a video on the BOXX ETF as an alternative to holding cash. The claim is the it mimics the short term bond but when you sell the stock it is recorded as a capital gain and not earned income thus a tax advantage.

Have you looked at this and if so do you have any thought?

We've been retired for 8 years, we keep 3 years of RMD's, equivalent to 5 years of actual budget, in MM accounts. 100% of the balance stays fully invested.

I believe investors should prioritize putting their cash to work instead of letting it sit in banks. This quarter, we'll likely see greater market diversification. I plan to invest approximately $350K of my retirement savings in stocks for the coming year, with the aim of generating significant returns and potentially millions.

100% stocks is right for me 🤷‍♂
I don't see the point in bonds when you have a secure pension. I would argue anyone under 40 should be 100% stocks, maybe even anyone under 50. Just my opinion.

Is cash trash if you are retired with a pension?

If you want to buy more stocks during the down turn, don't you want to have the cash cushion vs selling bonds to buy stocks, which will require more rebalancing for X:Y ratio of stock and bond?