How Much Cash Should Retirees Have? As Little as Possible

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3 жыл бұрын

How Much Cash Should Retirees Have? As Little as Possible
Article w/ links to studies: robberger.com/how-much-cash-s...
Vanguard article: investornews.vanguard/the-4-b...
Moving from a regular paycheck to living off of your nest egg is not an easy transition. At least it hasn’t been for me. One of the many decisions retirees must make is how much cash should they have in the bank.
For some it’s a question of budgeting. They keep enough to pay the bills over the next several months, but that’s it. For others cash acts as a buffer in the even the stock market drops 10%, 20% or more. For those who see cash as a buffer, several more questions need to be considered:
--How much cash should you keep in the bank?
--How do you decide when to replenish your spending account?
--Do you factor the amount of cash you have into your overall asset allocation?
In this video, we'll explore these questions. We’ll look at some research papers that address these questions. We’ll also talk about how you can get the psychological benefits of holding lots of cash without actually holding lots of cash.
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Пікірлер: 271

@rob_berger 3 жыл бұрын

Article: robberger.com/how-much-cash-should-retirees-keep-on-hand/

@raymonddeflaviis2306 3 жыл бұрын

Unless you are happy with 6000 views, you're going to have to water your content down a smidge. I tuned you out about the time you started bringing out the graphs.

@babs4832 2 жыл бұрын

I like the graphs. Some of us are visual learners.

@Fred2-123 4 ай бұрын

@@raymonddeflaviis2306 Well now it's up to 95,000 views. With graphs.

@raymonddeflaviis2306 4 ай бұрын

@@Fred2-123 If you leave hieroglyphics with a catchy title long enough- on KZfaq you’ll get 100 thousand views too!

@denniskirschbaum9109 3 жыл бұрын

This is definitely food for thought. Thanks for breaking this down.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@BenRook 2 жыл бұрын

Thanks for showing what you do as well as what others may do.

@rayanderson3164 2 жыл бұрын

Excellent content. Thanks for the insights. We're looking at a similar plan starting at 55 in a few years. You got a new subscriber!

@twilde3754 3 жыл бұрын

It's about how one sleeps at night. I don't sleep well under most circumstances. I also have a few more years before retirement. I plan to have about 3-5 years in a savings account as a "sleeping aid". At 68-70 - which I will be -- I'm not too concerned with having too much money in a savings account that doesn't yield much interest. I'm concerned about rest and relaxation.

@Antandthegrasshopper 3 жыл бұрын

"I'm concerned about rest and relaxation" Great response..lol

@missouri6014 2 жыл бұрын

That is why fixed index annuity‘s are great because of principle protection and I can get to 10% of my money at any time all along earning from 4 to 6% interest I never really understood why so many of the gurus say to have up to five years in cash at no interest when you can get a fixed index annuity or a multi year annuity earning over 4% This bucket one thing is way too simple

@twilde3754 2 жыл бұрын

@@missouri6014 My mother had a annuity that gave her 2.5% on one and 3.0% on another. I thought they were a pain: every time she needed more than the RMD she had to call the insurance guy to request the money--then it took a few days to hit her account. But she was OK with them because she felt secure. Again, it's about how one sleeps at night.

@dieworking1391 Жыл бұрын

It would be cheaper to take a sleeping pill...

@ubernard3000 Жыл бұрын

Good response, in a previous video Rob recommended having a 5 year cash buffer..

@mitch-lifestyle1692 3 жыл бұрын

For people who retired early, cash reserves is directly proportional to how much they disliked the job they retired from. If a person really really hated their job, they won’t sleep very well unless they have multiple years+ living expenses set aside in cash 💰 !

@2Rugrats9597 2 ай бұрын

Not in all cases. I love my job but I believe in a balanced portfolio. I have 5yrs of cash living expenses, Roth, 401K and HSA. Also cash is very good especially when markets tanks, it gives you lots of options to buy things very low and take advantage of it.

@edwardperry4419 3 жыл бұрын

Informative, thank you for this.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@mihandsplitters705 3 жыл бұрын

I just found you and started watching your videos. Thank you! I was wondering if you have done a video about attempting to move as much money from pre-tax accounts to Roths before RMD’s kick in to try to avoid them. Thanks again looking forward to going back through your library of helpful information.

@Harry_16710 3 жыл бұрын

Just found your channel, Rob - good presentation/arguments. Subscribed.👍🏼

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@ultramegasuper11 Жыл бұрын

I appreciate this video, it’s making me question some dogma thrown out by radio financial experts for years.

@michaelgreskamp1093 2 жыл бұрын

Rob - new suscriber (69 yr old/retired 60 yr) and enjoyed your video. You nailed it at the end with a "3% withdrawl rate option" vs more than what I believe is a year in cash. You run more of a risk with excess cash due to higher than planned inflation as we are currently experiencing. I am fortunate that my fixed income covers my base expenses between SS and pension. I will review some of your other videos and assume you cover the what I believe is the #1 retirement plan risk - sequence of returns.

@NuclearAlex Жыл бұрын

Why do you not take into account taxes? The cash "buffer" is already after-tax money that is ready to be spent. Both rebalancing and selling stocks or bonds for living expenses is a taxable event.

@BigRed2 4 ай бұрын

If you have no eared income you can sell up to $88k tax free

@2Rugrats9597 2 ай бұрын

When I retire at 61 or 62 Im putting my money into Vanguard Wellington fund, grabbing the dividends and average return in retirement. Plenty of cash on hand and keep a 60/40 Asset allocation. Most importantly is I am completely debt free which is key

@oldcountryman2795 3 жыл бұрын

Don’t risk what you have and need for what you don’t need. If you’re 70 and you lose half your life savings in a market crash, there is no do-over. Looking at market averages over a hundred years is a foolish way to plan your retirement strategy. You don’t have a hundred years. I know people that retired in 1999 and had all their savings in tech stocks. They thought they had a brilliant strategy. They went back to work in 2001 and worked into their late 70s.

@larrytucker222 3 жыл бұрын

Exactly. At age 70, my horizon is shorter term with less time for recovery.

@drewbaughman7129 3 жыл бұрын

They should have invested in an index fund. It’s a no brainer.

@shun2240 2 жыл бұрын

@@drewbaughman7129 most people don't know about that in 1999

@paulthorpe766 2 жыл бұрын

That’s awful for them - it happened to me in 1987 a bit too, but I was young and buying, so fine.....but markets still took 11 years to wipe their face, so to speak. Most tech stock took 13 years to get back from the 1999 crash (Nasdaq analysis used eg 3500 in 99 and 3500 reached again in 2012 some stocks of course hitherto worthless too). If you are retiring and not buying, another big crash is a real bummer and I worry that everyone’s ‘oh just keep 4 or 5 years in cash (or f.n.a’s - fast negotiable assets) and don’t sell/ride it out’ is a tad optimistic (as people tend to suffer recency syndrome) if it hits the market fan big style !

@shun2240 2 жыл бұрын

@@paulthorpe766 yeah my strategy is to invest in s&p 500 and growth stocks while I am still young and switch to more dividend stocks as I get older

@rwa8884 3 жыл бұрын

Thanks for your channel, Rob. You explain things very well. I'd like to offer up a counterargument to your idea that it's best to keep a minimal amount of cash in retirement. I have about 3 years worth of expenses in cash, and my expenses are fairly high since I still have school-age kids at home. While this cash is basically losing value due to inflation, it's enabled me to invest my other assets more aggressively than I would have otherwise. There's no way to know what might have happened if I had kept a smaller amount of cash. But I'm pretty sure the overall value of my portfolio is greater now because I have this cash "buffer." In some ways I think a large buffer is the flip-side of what you mentioned at the end of your video: that in a worst case scenario you would reduce your expenditures to deal with a market downturn. What I'm suggesting, and what I don't think academic studies take into consideration, is that having a financial and psychological buffer makes it possible to do better with your other investments. A pile of cash goes a long way toward making the downs of the stock market, etc., easier to stomach. And I think a strong stomach is 90% of the key to investing success.

@feelnrite 3 жыл бұрын

This way of thinking is working for now. How will it do if crap hits the fan? It will not be about return then but hanging on to what you have.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@zekeboz5533 3 жыл бұрын

Nice piece Rob. So in a pre 59 1/2 scenario where the person has lets say 5-7+ years prior to "retirement" dollars available to cover expenses how would you apply the cash buffer portion given the breakdown of tax vs. tax sheltered dollars? Structure your taxable and tax sheltered with the same ratios, ex. 70/30 so you don't end up to cash heavy?

@mbaker8492 3 жыл бұрын

Just have the "cash" buffer (in something safe, like t-bills, bonds, CDs, whatever) outside of the funds used to calculate your 4%. It won't drag down the performance, and yet it's there for your peace of mind. You could start with 1-2 years, and even add to it over time (in years you don't spend a full 4%, or by using some extra income from whatever source: KZfaq channel, mowing neighbors' yards, selling veggies from a garden, etc.). Best of both worlds.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@auricgoldfinger8478 3 жыл бұрын

I’ve been catching up on your older videos. Good presentations and common sense. We are a bit of mirror-images (background & investing), I’m just an older version

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@SR-ob3wn 3 жыл бұрын

Don’t other sources of income such as pensions, Social Security etc provide the same benefit as bonds (stability in a down market)? In other words, if my living expenses are $100k a year, I have a $30k pension, in 10 yrs my spouse and I will start receiving $45kyr in Social Security, that only leaves a $25k gap to fill. In that case I would suppose bonds become redundant and unnecessary. I guess the counter argument would be why take unnecessary risk on stocks if your needs are already being met by your portfolio.

@ranger2316 3 жыл бұрын

Thanks for doing this video. It seems perfectly reasonable. I have two retirement/pensions, plus social security for myself and my wife. That covers all of our expenses. I have about a year's worth of cash in a saving and checking account for the inevitable unexpected expenses. I watch my 401K and skim some off when it reaches a certain threshold and never go below a certain base threshold. We use that for projects, new cars, and mutually agreed fun things. I'm not particularly interested in growing wealth, but having safe assets I can tap into if I need them. I don't disagree with your thinking.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@SuperYova 5 ай бұрын

Great video, as always. I find it helpful to simply think of cash simply as "insurance" and not focus on it not generating anything beyond peace of mind.

@JWL427 Ай бұрын

If a person has enough there is no need to take significant risks. Peace of mind is invaluable. Money markets, bonds, and dividend stocks to fund expenses is my approach.

@baybay7898 3 жыл бұрын

Your article is very helpful. I am in my 50s and planning to retire in 9 yrs.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@guery9 2 жыл бұрын

Hi Rob, can you tell me what funds in your taxable account are giving you the dividends which you transfer into your checking account?

@Jfhelwig 3 жыл бұрын

3 years cash in these weird times. Every other penny invested. The investments are split between conservative value funds and aggressive growth. I'm under 59.5 and can't touch IRA quite yet. I can always grab some Roth contribution out at any time. Should there be a drop in the market, I can buy a lot towards the bottom if I don't need it all as a buffer.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@dwalker6868 2 жыл бұрын

Thank you

@pblakeney 2 жыл бұрын

Question: If you perform an in kind RMD to a taxable brokerage account, is that RMD calculated in the combined income formula for social security benefits? Since no income was actually realized (but taxes were paid on the RMD), is that RMD no longer calculated in the combined income definition?

@alphamale2363 2 жыл бұрын

Ha! Cash is the top performer of my portfolio this year.

@Nick-xf8pn Жыл бұрын

Easily disproven. In portfolio visualizer compare 70% IEF plus 30% CASHX, against 100% VFITX. They are basically identical. Cash is simply a zero duration bond, add as much as you need to achieve the overall bond duration you want.

@lw9936 3 жыл бұрын

@Rob Berger, really learned a lot from your programs. Would you talk about how to choose funds in your Roth IRA and 401k accounts? thanks

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@luisoncpp 2 жыл бұрын

hmm I have an issue with those studies, they assume that bonds are very different than cash. With current low yields I tend to try bonds and cash like if they were the same.

@PH-dm8ew 2 жыл бұрын

my concept of keeping 12 months cash in an emergency fund (retiring in 3 months at 60 years old) is to have cash to buffer spending in the eventual stock drop that will come. I moved to 46 percent treasuries (and 10 % bonds) with rest in s&p fund. i plan on moving back to 60% stocks after next 20 - 30 stock pull back and then running with that long term. Is that a bad plan?

@43Danc 3 жыл бұрын

Any thoughts on CD Laddering, as short term buffer strategy?

@bobshields908 5 ай бұрын

in the 4 years from 1929 to 1932 the total loss was approx. 90% so if one had 5 years of cash & had to start selling stocks from the portfolio even after the almost 50% increase in the next year the portfolio would still be about 85% in the red so the portfolio could be just about completely depleted the first year once the person sells enough to meet expenses for that one year

@gmshapiro4309 Жыл бұрын

Rob, I have been watching your videos and enjoy them. Good work. On the cash topic, seems like there is no doubt that cash underperforms over a long period compared to market or market and bond returns, as in the Bengen example. But we are in a negative market now with others sure to come randomly in the future. I understand and agree no one can time the market. But suppose I was lucky and converted 50% of my 401(k) to cash in mid-2021. I want to hold some amount in cash as an emergency fund. For us, I want to be very conservative, say 3-5 years, to survive the next bear market. I will still have substantial cash left and am planning to dollar cost average back into index funds over the next year or so. And/or I may do some substantial Roth conversions with the cash--which will then be invested in a S&P 500 index fund, probably VOO, to grow tax free in the Roth. Seems like a sensible strategy, but open to your comments and the comments of your followers. As background, I am 66.5 years old, married to my wife of 36 years who is 63, and 2023 will be my first fully retired year from an income standpoint. Keep the content coming.

@joemc7901 2 жыл бұрын

Rob, watched your video about dividends vs interest. Very informative, especially you're showing actual post dividends payout adjusted value. My Q: thoughts on treating a dividends paying bond/mutual fund as a quasi annuity. As such, balance would not be part of annual portfolio adjustment. If assuming dividends, being used as cash flow, stay fairly constant, what significance does actual value ($/unit) of bond play? Also, assume not concerned with bond value when I die. Do you consider these valid assumptions in this scenario?

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@MrWaterbugdesign 11 ай бұрын

I retired 21 years ago at 45 and only had cash. Checking and savings account. My house is my only other investment. For me there's 2 problems with investing. #1 I hate it. #2 I suck at it. I loved my career as a software engineer, love greater freedom more though. For me I'd rather go back to earning by writing code than have to learn and do investing in financial instruments. Not my idea of retirement.

@rollzolo 3 жыл бұрын

Imagine if we kept our baseball cards collection?

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@DK-et6lm 3 жыл бұрын

I really enjoy your videos sir. My question is I have gotten out of bond funds entirely other than i maxed out on I bonds b/t the wife and I. I currently have 33% of portfolio in stable cash fund and the rest spread out in equity funds.. I currently have been doing DCA into stocks from stable fund. I am soon to be retired with a pension and future wifes SS that if the market takes a huge downturn we could budget to live on. I was thinking of having some % in stable cash fund to buy stocks when market goes bear. any thoughts....Better for me just to have 100% stocks and ride it out? I would assume if all is good I have 20-30 years left in retirement. thanks again for great YT content.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@finned958 3 жыл бұрын

You can move your stocks to cash in your IRA or ROTH accounts. You don’t report distributions until you take the money out.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@clarkhall5940 Жыл бұрын

Follow up time! How does this strategy feel in Oct 2022? Thanks,

@rob_berger Жыл бұрын

Terrible, of course. And if every year were like 2022, we'd all hold nothing but cash. But I haven't changed a thing.

@jasonedwards2571 3 жыл бұрын

This might also depend on if you are doing Roth conversions. You might want to have 3-5 years of cash and live on that while you do Roth conversions to take the greatest advantage of tax efficiency. My struggle is as I get closer to retirement and we get to the tail end of this secular bull market and move into a longer period of a secular bear (not for 5 years I think) when should I take some money off the table, move to bonds, and how much should I have there because I hate bonds, but I know that they can be a good ballast against a down environment.

@DavidEVogel 3 жыл бұрын

Mom and pop investors move to bonds too late. They wait until a bear market, sell equities after the price has fallen, and buy bonds after the price is up. If you feel comfortable with 25% fixed-income securities, you should be there now.

@pauld9653 3 жыл бұрын

I think your buffer isn't cash, its your KZfaq cash flow. Need to know how to turn on a side gig if needed.. Sequence of Return.. is paramount to your portfolio during retirement draw down.. Most of the return of the SP500 over last 50 yrs is Dividends.. Reinvested.. spend the dividends.. and your stock portfolio takes a big hit. Having CASH when you retire means you can design your own TAX bracket.. and do Roth Conversions yet stay in the bracket you want without paying capital gains, or tax on the dividends you are withdrawing.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@jpturner171 3 жыл бұрын

Great information Rob. Thank you, I’m getting ready to retire in a year and never thought about Dividends. Semper Fi,👍🏽

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@craigross341 3 жыл бұрын

The US tax code is a nightmare when it comes to taxing dividends. In the UK we have ISAs (Individual Savings Accounts), and dividends from shares held in them is tax free. Then you've another £2,000 tax free dividends outside the ISAs. Now admittedly the companies are hit before they pay the dividend, so ultimately your investment is being squeezed, but the custom is that dividends get paid. 4-5% is quite easy to achieve. Even during the last year dividends held up.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@JK-rv9tp 3 жыл бұрын

An on-line bank up here in the Great White North is offering federally insured savings accounts and retirement accounts that pay 1.25 points on cash. With T bills paying nothing it's pretty attractive as a place to park cash. I'm looking into moving about 20% of my portfolio into it because I'm convinced of a deflationary crash very soon.

@missouri6014 2 жыл бұрын

Remember you have multi year annuities paying over 4% he also had fixed index annuity‘s paying From 4 to 6% so there are plenty of ways out there and I don’t understand why these you tubers don’t explore all the different ways

@FlyingSolo77 3 жыл бұрын

I suspect the argument against a cash buffer depends on the overall returns of stocks and bonds. Now it's hard to argue against historical data but will we see %8+ CAGR for stocks over the next 20-30 years, ditto for bonds? I am highly doubtful. I would like to see studies which assume far less stock and bond returns and compare them with the buffer approach.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@JosiahK555 2 жыл бұрын

not retired yet, but i'd keep 1 year of minimum expenses in anything that wouldn't lose value in a black swam type event. I wouldn't go under 3 months in the bank account. I don't want to have to pull out any of my money if the market is down 50% also interesting the idea in this video is living off dividends, and other videos talk about how living off the dividends could be a bad idea. I still like the idea of not worrying about selling the principle living off dividends, and reinvesting some portion to continue to grow the principle

@irarosenberg 3 жыл бұрын

Please add the links to the studies mentioned in your video. Thanks very much for an interesting topic I always struggle with to find a comfortable position.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê øn thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@phd_angel4192 Жыл бұрын

When you mention "keeping 10% of cash in bonds", does this include Bond ETFs?

@marshallbutler1137 2 жыл бұрын

Can you please clarify? On one of your older videos you suggest 5 years of cash, and in this video you are suggesting not more than 6 months. Has something specific changed your mind? Thank you!

@traceysweeney6965 3 жыл бұрын

It's interesting to me the idea of retirement. If you work a job that has no 401k or retirement plan, you use your check just to pay rent and food how do you ever thinking of retiring?

@akwolf1434 3 жыл бұрын

There are many other ways to save for retirement if your job does not provide a 401K. You can contribute on your own to a Roth IRA up to $6.000/yr, $7,000 if over 50. Open a brokerage account and start investing on your own into it. Open your own 401 IRA and invest in that. Don't get stuck on my employer doesn't offer anything, therefore, I can't have a retirement plan.

@dopolla1 2 жыл бұрын

Another consideration is that during the Great Depression there was a *lot* of deflation, even if you wanted 5 years of spending money - you'd only need 3 years of spending money at most.

@geneofone 3 жыл бұрын

Rob, what about large emergency expenses such as needing another vehicle or roof needs replaced or some other unplanned large expense. Seems like I would like to have some cash on hand to cover those potential emergencies.

@geneofone 3 жыл бұрын

@@situated4 oh ok. Sinking funds. This would be cash would it not. How much cash should retirees have?

@rob_berger 3 жыл бұрын

It's a good question. I see things like a roof as being something I can plan for, at least to a point. And yes, if I know I'm going to have a big expense in the next 12 months, I hold cash for it. That's the case for me as I'm buying a new car next month. In terms of unexpected emergencies, I generally don't hold more than the case I described in the video, however, some of my bond funds are in money market funds, which is effectively cash. That's temporary, however.

@ariefraiser140 3 жыл бұрын

Depends on your lifestyle. I will be selling my house and moving to different locations around the globe for a while where a car isn't needed and renting throughout most if not all my retirement. Rent in many places around the globe will be less or equal to the expenses I pay for my house after it's paid off (tax, insurance, maintenance, HOA).

@garrett7101 3 жыл бұрын

@@situated4 So, cash

@jamesmorris913 2 жыл бұрын

I actually keep approx 20 yrs worth of basic survival funds, in a combination of laddered standard, and inflation-protected treasuries. In these frothy times in the stock market..it's easy to forget, that bear markets, have lasted for up to 25 yrs!! (1929-1953). The remainder of my money, is in a total market index fund.

@mikeflair6800 3 жыл бұрын

I am not sure set % 're-balancing' makes sense. There is no clear empirical data that says YES or NO. It really depends on the dollars re-balancing into new, and compare that to 'as if no change', and you could be 're-balancing' out of future wealth creation. I have a hybrid approach ($ re-balance = buy when stocks decline, sell on incline, not a set %) that works best for me. Over time, my stocks are now about 80%, and growing. I keep 1 year cash in my MM.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@kleetus88 3 жыл бұрын

this is highly detailed, thanks! We all should be very displeased with our government/Fed in putting seniors in this position in the first place. Why should we be forced to take huge risk at or near retirement anyway? We have a choice between losing purchasing power while in cash versus taking huge risk in equities.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@welshhibby 3 жыл бұрын

My wife left me but I enjoyed this video...

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@whynot2734 3 жыл бұрын

retiring early as soon as south east Asia opens have 120k live off that for 2 or 3 yrs then come home sell my house get around 200 to 300 k live off that for 2 to 4 yrs then draw my Social Security I am 57 now so no debt ready to go. What you think? Also have retirement IRA Roth also use them after 67 to just have some pocket money

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@bruced.370 3 жыл бұрын

4% rule is old and assumed wrong assumptions. He also updated that old paper too. Bond yields are not the same and spending is diminished as time goes by in retirement.

@rob_berger 3 жыл бұрын

It's true that William Bengen has updated his analysis. He now puts it closer to 4.5%, particularly if you add small-cap stocks to your portfolio.

@pc3822 5 ай бұрын

I keep part of my investment in a money market account and then I sell cash-covered puts on SPY or something similar. I use a strike price as low as possible to get 1% a month. If I need cash, I can easily reverse back to cash from the put.

@randychestnut6591 3 жыл бұрын

Rob, I am a recent retiree and need you to clarify a point, please. I understand what you have recommended in this video, to minimize cash holdings. But in another video, you recommend holding 5 years of living expenses in cash or cash-equivalents. The market was down 30% six months after I retired. I stuck to my plan and am glad I did, but it was nerve- wracking. Sequence of return risk is not an abstract theory, it's real! Please advise on the discrepancy. Thank you.

@barbaracash3967 3 жыл бұрын

This is exactly what I was about to comment. In a video right at the start of the pandemic, Rob stated you should have 5 years of cash. Here, it is 6 months. What is it that I am not understanding?????

@paulthorpe766 2 жыл бұрын

Convertible cash equiv' 5 yr holdings like bonds, Nfts and assets like Vintage Wine, Art, Cars, Watches, B.coin, Rugs, Stocks, Gold always trumps cash imho and takes only 30 days to convert at at least 90% mkt value. Only commercial and domestic property and Classic Cars/bikes takes years to shift at appropriate return.

@jmc8076 Жыл бұрын

@@paulthorpe766 Not all alt investments you listed are safe and a few volatile so not appropriate for emergency savings. Also 30 days in some cases can be too long.

@michaeld4090 3 жыл бұрын

Are stocks about 30% over valued? I heard this. If we wait, we may miss more upswing

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@janibeg3247 3 жыл бұрын

we keep more in cash but it is only a small part of our portfolio.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@stephencullum8255 3 жыл бұрын

I subscribe to you but we think too much alike so I have to be wary of informational bias in myself. I have a municipal utility pension and social security which gives me half again over my essential expenses. I have about 8% in bonds in my retirement account for emergencies. And about 5% in cash in my various accounts overall. Been doing IRA to Roth IRA conversions the last few years. That money I could draw down tax free if needed. If my retirement depended on my retirement investment accounts I would pretty much do what you are doing. BTW I am in retirement.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@janethunt4037 Жыл бұрын

I noted that you rebalance once a year. How often do you think retirees should rebalance?

@dday11 Жыл бұрын

Rob, thought you were not fond of dividends. Surprised they’re used in your Budget Dividend Strategy.

@rob_berger Жыл бұрын

Dan, I love dividends. What I don't love is the idea that they are somehow free. As such, you should never reach for dividend yield IMO.

@arnoldbovenzi8806 2 жыл бұрын

How about you make a calculation like this: take the Buffet 90-10 but instead of the 10% representing bonds it will represent your spending money. So on a 700,000$ retirement nest 70,000 is your living income. Re-balance at the beginning of the financial year, if dividends have been paid it will show as a surplus in your living income. Could you do the calculation with the investment in the Vanguard total US market. As you said, and its the same here in Australia, people will actually leave more money than what they started with in order to leave an inheritance, at the risk of not enjoying their retirement. I think this will give the retirees an ever increasing sum to spend, 10%, with a simple system, which only has to be tinkered with once a year.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@chessdad182 3 жыл бұрын

I'm still working at the moment, so other than a short term buffer (3 months), I think I am fine. I get more than enough in dividends that I could survive on that even without SS. Maybe after retirement I might increase the buffer to six months. I think there is less risk of an extended downturn nowadays with the Fed and federal government's willingness to hit the gas pedal. Plus in the worst case I could downsize to an RV! LOL

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆mê øn thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@flowersfrom7311 2 жыл бұрын

I absolutely agree with everything Rob says here, assuming we are going to live in the same capitalistic system that the country had for the last 150 years or so. But it is a bold assumption to make. There is always a small chance of a black swan event, for example a large scale nationalization. I have lived through the fall of the Soviet union and a dizzily fast spin from socialism to capitalism. Even a few years before it happened, nobody , neither those who loved the system nor those who hated it, could imagine this turn of events. The general feeling was, this system was around for 80 years, we were born in it and we'll die in it. In black swan events, depending on their nature, other assets may become profitable, like cash, gold, salt, tobacco and alcohol, clean water and so on... So having a small cash bumper maybe prudent, since it works both for good and bad times.

@toddliveringhouse5808 3 жыл бұрын

I think what each person decides to call cash is important. I will probably hold 5 years cash but that will be in a high quality bond index fund or funds of relatively short maturity. Maybe split between a 3 year average maturity and another fund say 5 years maturity. A little more volatile than money market but not too bad, and significant gain in interest. Sure it’s a drag on returns but not as bad as holding 30 to 40 percent bonds.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê øn thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@hurshrd654 3 жыл бұрын

My parents have about 5k in savings accounts. They just need it in case they need emergency cash. They can withdraw up to 30k from their investments every year so if they need more they can withdraw it from there. They get 3k monthly income from their investments then can withdraw up to 30k a year so they don’t need anymore in savings. They are retired so this is how they do it. Part of their retirements is in two annuities. Those give them guaranteed income every month plus the 30k If they they need it. Then the rest of their retirement is in other things.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@kevinbarrett3706 3 жыл бұрын

Strongly Disagree, especially for those close to retirement (< 3 years). PE Ratios at all time high.

@rob_berger 3 жыл бұрын

Kevin, no question that stocks are expensive. What do you see as the alternative? Bonds are very expensive, too. And with cash, you are guaranteed to earn a rate of return below inflation.

@xyzp8 3 жыл бұрын

@@rob_berger have you looked at annuities?

@thomasd5488 3 жыл бұрын

@@VETERANPREPPER1 Have you looked at a 10 year graph on gold and silver prices? Better to buy short or buy puts rather than go long.

@jakemanchester5139 3 жыл бұрын

If you've "made it" in retirement, what is the point of taking big risks and chasing more growth when your goal should be preserving what you have accumulated?

@SR-ob3wn 3 жыл бұрын

I think the definition of “big risks” is subjective. Is investing in a diversified portfolio of index funds a “big risk”? I suppose that would depend on the individual investor.

@shun2240 2 жыл бұрын

Because inflation will eat away the value of your cash

@frpahe1 3 жыл бұрын

QUESTIONS: The analyses you quote are based on data from periods when price discovery (e.g., for bonds) happened in markets, they were NOT set by the Fed. Now, with a yield curve manipulated down to almost zero, it comes as no surprise that stocks have skyrocketed. This seems to be corroborated by traditional metrics (Shiller P/E, market cap/GDP…). If an investor wants to follow your advice and reduce cash, how should he do it? I see 2 scenarios. Scenario 1: inflation is transitory. Should the investor buy overvalued stocks or overvalued bonds? Or should he wait for a reversion to the mean? Scenario 2: inflation becomes a problem. Then indeed cash is trash and the investor should buy hard assets (stocks but not bonds) asap and at any price to fend off inflation. Where is this thinking flawed?

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..

@MSDOGS1976 3 жыл бұрын

If cash = checking acct/money market I have roughly 1 year's worth. But if cash also includes a CD ladder and deferred annuities(cd like) I have several years in cash. I also have money in bonds and TIPS plus some alternative investments like REITS and gold etfs. Equities only account for 20% of my portfolio. I know this guy is frowning as he reads this but I couldn't care less. I sleep well and my portfolio continues to grow over what I had when I retired 14 years ago. I not married or have kids Fwiw.....

@larryjones9773 2 жыл бұрын

I suggest you maintain an opportunity cost spreadsheet, so you can track how much $ you missed out on. I retired at the same time. A friend of mine retired at the same time and she has 20% equity & 80% bonds. Her opportunity cost since retirement is $1.4 million.

@MSDOGS1976 2 жыл бұрын

@@larryjones9773 Hey.....might as well go 100% equities. Don't want to miss out on those gains! I'm perfectly happy as is. Sleep very well.

@larryjones9773 2 жыл бұрын

@@MSDOGS1976 What about the $1.4 million (estimate) you missed out on? That would pay for a new house, new cars, house cleaner and lawn care.

@MSDOGS1976 2 жыл бұрын

@@larryjones9773 I'm not concerned about running up the number at this point. I have a house on the golf course and a small condo at the beach. No debt whatsoever. I have all the toys I want. I was heavily in the market in my working years but more concerned about capital preservation and a good night sleep at this point. If you want more.....go for it.

@elvdell5582 Жыл бұрын

There is an overwhelming amount of information out here on this topic. I guess at the end of the day you have to pick one and roll with it. What I'm interested in and I'll search your channel for one is SPECIFICS around withdrawal strategy without holding a lot of cash reserve. Specifically, where you are drawing the money from and how, with theoretical numbers. I think a lot of people keep their videos so general, they give you good information, but not good application. So an example is a couple with 500k in a 60/40 split between X investments and need 40k per year to survive. They would pull X from this and X from that X times a year as an example. Be practical. How long does it take to access that money? Is it taxable income? All of that should be known since it is coming from predefined areas. I can't speak for all but the thing is you are talking to people that have NOT done this at all yet but are trying to learn options. Most conversations are had from the standpoint of people already knowing or having some experience with these strategies. That said, I love your videos and am learning some good alternatives. I just don't see how they apply practically.

@billyrayband 3 жыл бұрын

Each year, I pull as much IRA money as I can and still stay in the 12% bracket regardless of what I need. If its a good stock year, that money comes from selling an equity holding. If its down year, it comes from cash or treasury holdings. This way when RMDs start, I will have taken some action to lower my RMDs. With all the electronic accounts, I don't worry that much about how much cash I have where, whether its in the bank, my after tax brokerage, or my IRA (all at the same company). It can be moved quickly, instantly between brokerage and bank.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️…

@Sire638 4 ай бұрын

These number nerds don't never account for stress and your feelings of security in your life and retirement.Example I paid off my home years ago with a 2.75% mortgage and don't regret it a bit even thow math nerds would disagree. They are right on math until you lose a job or have health problems and now have to worry about paying your house payment.Set your total goal you want win stocks and index funds hit it and be happy and then if you have 10 years worth of cash to live on who cares!!!!lol Sounds pretty stress free retirement!

@Bluponi 2 жыл бұрын

Rob, wanted to point something out... You did a 2 hour video pointing out why dividend investing in retirement is a mistake, and in this video you say that you live off your dividends... Am I missing something ?

@davedb3202 10 күн бұрын

Even with CDs at 5%?

@conw_y 2 жыл бұрын

All of this is based on past data. What if the future is different?

@joefalconer9625 2 жыл бұрын

This is not as simple as presented. Holding a substantial cash reserve may work just fine if combined with a 100% allocation to equities (as noted by the Abraham Okusanya article). And it means certainty (ok, inflation impacted certainty) of cash availability. Otherwise typically you'll be drawing against bonds which may also be down when you're equities are down. I prefer to ignore bonds due to the possibility of equity correlation and instead hold a decent reserve of cash equivalents. Also, all the research supporting the fallacy of cash reserves assume a nominal, constant withdrawal rate (which may not be realistic). A front loaded cash profile of short term horizon will impact this discussion significantly (eg a high spending early retirement).

@fitta74 Жыл бұрын

How old are you Rob?

@Paul610goose 2 ай бұрын

What if you want to retire a few years before Medicare kicks in. Isn’t it smart to build a cash reserve large enough to pay for healthcare out of pocket?

@rob_berger 2 ай бұрын

It's certainly one approach, and similar to what some call the Social Security bridge--cash to cover expenses between retiring and when you claim SS.

@RadioRich100 2 жыл бұрын

Anybody that says this is truly not in touch with reality. You would be living your life at the mercy of the market.

@johnd4348 Жыл бұрын

My plan is to have 7 years of cash funded from sell of some property in a high yield savings account , and live off of that. Let my IRA account grow until I start taking SS at 67. I will be poor on paper and qualify for obama care for health care. Possibly not even pay any premiums.

@Agent77X 2 жыл бұрын

100% in cash!

@dieworking1391 Жыл бұрын

You keep saying your cash is in a "checking account." Do you actually write many checks...if so for what?

@michelesimko7541 3 жыл бұрын

Five years cash? What do these people live on. Who can afford that

@jean-marcfiliatrault266 2 жыл бұрын

Rob, I could swear you mentioned in one of your previous videos that you recommended that we don’t invest money we’ll need within the next 5 years. Consequently, that leads me to think that you advocated a 5-year buffer in cash. Now, in this video, you mention something else…

@rob_berger 2 жыл бұрын

I don't want to invest money in stocks or stock funds I'll need in the next 5 years. But that doesn't mean I need 5 years worth of cash. Some of that can be in bonds. And with say a 70/30 portfolio, you'll have more than 5 years in fixed income. Some of that may be in cash (checking, CDs, money market accounts).

@jean-marcfiliatrault266 2 жыл бұрын

@@rob_berger Hi Rob! Luv your show. Fair enough. However, I believe interest rates are about to start rising over the next year or two. Consequently, I’m not planning on buying bonds. Cheers.

@lolz616 3 жыл бұрын

10,000 dollar cash saver still has 10,000 10,000 dollar SPY investor the past 12 months has 14,000+ now.... 40%+ return Factor in inflation... sitting cash in my experience has done nothing but technically lose value.

@akwolf1434 3 жыл бұрын

Factor in the past 16 months and tell me what it was worth? It was 30% down last March, so technically you're only up 10%.

@lolz616 3 жыл бұрын

@@akwolf1434 No the market is up the past 16 months big time + dividends learn how to read a chart... pull up a SPY 2 year and look from March of 2020 to now...... enormous growth

@scottm4894 3 жыл бұрын

I certainly wouldn't keep five years of expenses in a checking account, but a five year ladder of CD's sounds reasonable for someone who is risk averse. A portion of your bond allocation in a CD ladder guarantees your principle when they mature.

@TomHoster 3 жыл бұрын

Excellent thought.

@akwolf1434 3 жыл бұрын

Open a brokerage account and invest it there. TIPS.

@paulthorpe766 2 жыл бұрын

Don't be fearful. Hold only 45-60 days cash tops and the next few months thereafter in (fast) negotiable assets like gold, vintage watches, etc...etc...pure cash is wasteful.

@olfart7902 Жыл бұрын

For retirees Bill Bernstein recommends 25 to 30 yrs safe assets.....he says for decumulators stocks are Three Mile Island, Chernobyl toxic.....for his safes assets he has a 30 yr TIPS ladder

@Jechum 2 жыл бұрын

Cash reserves is a very difficult question…. in this conversation I would hold only 6 months of essential costs in cash. I thought the reason for bonds was to cover a withdrawal during a bear market. Then when the market recovers you rebalance to replenish your bonds. Am I missing something?

@bob8606 5 ай бұрын

Ha! Cash will return 3.5%. Unbelievable! I guess your wish was more than granted. I'm very happy with my 1-2 year buffer. I sleep well at night. Of course, more in other fixed income for longer term downturns.

@jdonalds2001 3 жыл бұрын

We have reached a portfolio level such that we no longer need growth or income. Our net worth is much higher than it was at retirement 13 years ago. We have no debt. We could go 100% cash and live off of it for the rest of our lives. As it is we have 50% in cash and I worry about the other half! The RMA forces us to draw from our IRA which we don't need.

@jackykuk4436 Жыл бұрын

Thañks før wätçhing iñbox👆 mê oñ thê numbêr àbøve i gôt sömēthiñg tø ińtröducë yøu tø❤️❤️..