CASH

[Roadsidetreasurehunter]

I feel the need to hoard cash in preparation for the time when I expect to be layed off from my job and when I can draw full retirement benefits.  I'm 56, I currently max out my 401k and my Roth IRA, including catch up contributions in both, I have no debt and home is paid for.  I have $36,000 emergency fund in place, $300,000 in roth and 401 combined and $50,000 in after tax investments.   I guesstimate that I have 6 more years of employment at my current long term job, putting me at  62ish when I leave.

Does it make sense to hoard and save cash for living expenses for the 3 years between layoff and full retirement benefits?  I'm single and annual living expenses are $22,000.

[Metric Mouse]

You don't need to hoard cash.  You can max out your retirement accounts because if you get laid off at any point from now on you can draw on those funds penalty free because you will have been over age 55 at the date you separated from service.

I would continue to put the money into the tax deferred accounts at this point.  That way you get the tax deduction when your income is relatively higher.  After you stop working you can take the 22k/year you need for your expenses out of the 401k and still be in a very low tax bracket, or you could withdraw some from the Roth to keep your tax burden as low as possible.

Technically you would be at a 5.5% withdrawal rate, which is a little higher than ideal, but that would only be until you start drawing SS.  Plus you are still working, so you will pad that 400k quite a bit in the next 6 years.

Max out with catch-up contributions puts it much closer to 4% in 6 years, even before market gains.

No need to horde cash - you have plenty. Good luck Roadside!