I am retired fourteen years from the Postal Service. I have eight months liquid cash in bank for emergencies. I have my Postal pension and also get full SS benefits under the FERS retirement system. I have no debt on credit cards. I have paid my car off five years ago. My TSP plan continues to grow as I keep 25% invested in stocks.. In fact , I earned back all my RMD’s and then some this year. I am single now (divorced eight years ago) Health coverage is still funded primarily by the Postal retirement system and been in Medicare for a while. I still have a mortgage but it’s small , did a re-fi at 3% . I will never be rich but I am in a good place and want for nothing. I aches and pains like most of us in our 70’s but overall health is good. What can I say? I am blessed , truly.
2 months living expenses in a Federally Chartered BANK 2-4 months living expenses in a Treasury ST Bond or Money Market fund. Alternatively, very short CDs.
Pay off cards Pay off car, unless it is a special low rate from manufacturer.
Emergency fund: After our savings passed a certain amount (for us $50K+) we no longer have a lot of cash or emergency fund for over several decades and are now in retirement. Do I need an emergency fund? not really, first I use credit cards, if I can’t, I have several thousand in the bank. Beyond that, I can sell my mutual funds and get the money within 2 days. I have been reading now for many years you must have a lot of cash (beyond several thousand) but never saw a case where you need it unless you buy illegal drugs or need it for a ransom.
CASH: Do you need years of cash, even as a retiree? IMO, a retiree needs maybe 3-6 months at most. Most/all retirees have a cash flow from SS + distributions + pension + can sell something, which isn’t difficult to sell 3-4 times per year. When stocks do better, you can sell stocks, when stocks lose, you can use bonds. Some of these bonds should be a ballast for stocks, which means in a market meltdown they will go up or have minimal losses. Bonds have different categories, risks, duration, and behavior such as treasuries, Munis, HY, bank loan, MBS, TIPS, emerging markets, and corp. Usually, over the longer-term hold, they will do better than money markets and CDs. You can sell your bond funds and see the money the next day in your account. The only time I was in cash=money market was in 2022 for months because it was obvious that bonds+stocks will not work when the Fed promised to raise rates rapidly at the beginning of 2022.
CASH for trading: I never understood this concept, and I’m a trader and not a typical investor. A typical investor has stocks+bonds. If stocks go down, and you want to buy more stocks, it’s pretty easy to sell some bonds and buy stocks, so why be in cash for months-years making a lot less?
The only exception for me happened after our portfolio was big enough, and I was several years before retirement. I added the max loss allowed rule to protect my portfolio. Since then, I’ve been in the market most time and invested at 99+%(less than 1% in cash, in the bank). Only at extreme risk, I’m out.
How can a retiree create monthly cash flow? Pretty easy. She can use 1 (or more) funds and create a repeatable monthly sell order for the amount she needs for years to come. It takes about 2 minutes and there is nothing to do after that. A more sophisticated retiree can sell 3-4 times annually the fund that made more money or from the account (taxable, IRAs) she likes to use. She has full control of what and how to do it.
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The above has been tested several times in 2022-3. We totaled our used car (over 10 years old) and bought a new one. Just sold thousands in our joint account for the purchase. We had to replace our very old vehicle of 17 years. We were just looking and to our surprise, we found what we wanted, we paid (wired the money to the dealer) it in just one day after selling a mutual fund. We also had to replace the roof + deck, we used the same approach. The above has been 4 times your typical emergencies and the total amount was over $100K.
So, I’m still looking, after several decades, for an emergency I can’t handle with this approach.
We have always tried to maintain 3-6 months of “living expenses” in readily available cash. Taught the kids the same.
Now in retirement, we have 1 year of living expenses in checking, a second year in a short-term T-Bill ladder, and I treat our ROTHs as a tertiary safety net (tax-free withdrawals). I have also added a HECM as the mother of all emergency band-aids. (Reverse Mortgages, Dr. Wade Pfau)
I am retired fourteen years from the Postal Service. I have eight months liquid cash in bank for emergencies. I have my Postal pension and also get full SS benefits under the FERS retirement system. I have no debt on credit cards. I have paid my car off five years ago. My TSP plan continues to grow as I keep 25% invested in stocks.. In fact , I earned back all my RMD’s and then some this year. I am single now (divorced eight years ago) Health coverage is still funded primarily by the Postal retirement system and been in Medicare for a while. I still have a mortgage but it’s small , did a re-fi at 3% . I will never be rich but I am in a good place and want for nothing. I aches and pains like most of us in our 70’s but overall health is good. What can I say? I am blessed , truly.
2 months living expenses in a Federally Chartered BANK
2-4 months living expenses in a Treasury ST Bond or Money Market fund. Alternatively, very short CDs.
Pay off cards
Pay off car, unless it is a special low rate from manufacturer.
After that, it is investing decision…
Emergency fund: After our savings passed a certain amount (for us $50K+) we no longer have a lot of cash or emergency fund for over several decades and are now in retirement.
Do I need an emergency fund? not really, first I use credit cards, if I can’t, I have several thousand in the bank. Beyond that, I can sell my mutual funds and get the money within 2 days. I have been reading now for many years you must have a lot of cash (beyond several thousand) but never saw a case where you need it unless you buy illegal drugs or need it for a ransom.
CASH: Do you need years of cash, even as a retiree? IMO, a retiree needs maybe 3-6 months at most. Most/all retirees have a cash flow from SS + distributions + pension + can sell something, which isn’t difficult to sell 3-4 times per year. When stocks do better, you can sell stocks, when stocks lose, you can use bonds. Some of these bonds should be a ballast for stocks, which means in a market meltdown they will go up or have minimal losses. Bonds have different categories, risks, duration, and behavior such as treasuries, Munis, HY, bank loan, MBS, TIPS, emerging markets, and corp. Usually, over the longer-term hold, they will do better than money markets and CDs. You can sell your bond funds and see the money the next day in your account. The only time I was in cash=money market was in 2022 for months because it was obvious that bonds+stocks will not work when the Fed promised to raise rates rapidly at the beginning of 2022.
CASH for trading: I never understood this concept, and I’m a trader and not a typical investor. A typical investor has stocks+bonds. If stocks go down, and you want to buy more stocks, it’s pretty easy to sell some bonds and buy stocks, so why be in cash for months-years making a lot less?
The only exception for me happened after our portfolio was big enough, and I was several years before retirement. I added the max loss allowed rule to protect my portfolio. Since then, I’ve been in the market most time and invested at 99+%(less than 1% in cash, in the bank). Only at extreme risk, I’m out.
How can a retiree create monthly cash flow? Pretty easy. She can use 1 (or more) funds and create a repeatable monthly sell order for the amount she needs for years to come. It takes about 2 minutes and there is nothing to do after that.
A more sophisticated retiree can sell 3-4 times annually the fund that made more money or from the account (taxable, IRAs) she likes to use. She has full control of what and how to do it.
============
The above has been tested several times in 2022-3.
We totaled our used car (over 10 years old) and bought a new one. Just sold thousands in our joint account for the purchase. We had to replace our very old vehicle of 17 years. We were just looking and to our surprise, we found what we wanted, we paid (wired the money to the dealer) it in just one day after selling a mutual fund. We also had to replace the roof + deck, we used the same approach. The above has been 4 times your typical emergencies and the total amount was over $100K.
So, I’m still looking, after several decades, for an emergency I can’t handle with this approach.
We have always tried to maintain 3-6 months of “living expenses” in readily available cash. Taught the kids the same.
Now in retirement, we have 1 year of living expenses in checking, a second year in a short-term T-Bill ladder, and I treat our ROTHs as a tertiary safety net (tax-free withdrawals). I have also added a HECM as the mother of all emergency band-aids. (Reverse Mortgages, Dr. Wade Pfau)