Author Topic: Live off the Cash or Invest it already Fire'd  (Read 1158 times)

soccerluvof4

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Live off the Cash or Invest it already Fire'd
« on: November 30, 2022, 06:45:51 AM »

So I know alot of peeps here since I have been around awhile but I guess I am looking for support , Ideas, maybe a mixture of both.

So anyhow here is the Stats.

Been Fire'd for 8 Years currently 58 and my Wife is 54. My DW after being retired 2 years wanted to go back to work and negotiated a pretty good deal to do the minimum to get Health Insurance, and after contributing to HSA max and right now 500$ a month into her 401k she nets 2600$ a month.

Are current portfolio with Vanguard and Cash is 2.2M, we have a paid for home worth on a low end 1M and no debt or upcoming debt barring medical emergency or?  that we dont have funds put aside that we dont keep in our NW for example college.

Of the 2.2M which is 400k down from its high a bit ago about 300k is in cash or cash short term CD's etc..

All our dividends etc,,, are automatically rolled over and we have a 60/40 portfolio that I do work with a Vanguard advisor with at times.

We live on 9k a month which gives us a very comfortable life and depending on inflation with only one kids left at home I could see that coming down unless we increase our traveling which we have some already.

So for the first 7 of my 8 years fired I for the most part to get to the 9k a month took 6400$ out a month and my DW's 2600$ makes the 9k.

This last year I took nothing out of Vanguard and lived of our cash my DW's income but I still have 300k left which would get me 3-4 years depending on what I do to the house etc..if anything.

I know we cant ever predict the bottom or the top and I understand Cash drag but the Cash came from a real estate transaction and the way the market was climbing dumb or not I just wanted to hold for a big pull back. Anyhow that is water on the bridge so no need to go there.

My question is though for the New year coming should keep doing what I am doing or use the cash for the full 9k and have my wife max out her 401k since there is a match or put half into to Vanguard etc....

Again looking for ideas and I have face punched myself but if it makes you feel good i can take it.

Thanks

Omy

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Re: Live off the Cash or Invest it already Fire'd
« Reply #1 on: November 30, 2022, 07:53:04 AM »
Approximately 15% of our net worth is in high yield savings, I bonds, EE bonds, and CDs. I love having lots of "cash" available, but I'm definitely the minority around here.

This would probably be a good time to put some of it back into the market, but I much prefer the sense of security I have from knowing that I won't have to sell stocks when they're low.

If one or both of us were still working, we would definitely be maxing out the 401K (especially if there's a match) and putting the rest in the market. And we would draw completely from cash accounts right now.

I'm assuming you have social security coming in the next 10 years, so that will also reduce the amount you need to draw.
And with such a large monthly draw, there's likely a lot of fluff you could eliminate if you ever need to.

At this point, I think you can do whatever you want.
 

RWD

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Re: Live off the Cash or Invest it already Fire'd
« Reply #2 on: November 30, 2022, 11:07:26 AM »
[...] and the way the market was climbing dumb or not I just wanted to hold for a big pull back.

It's been a while since I've had an excuse to bring out the list... Wasn't there a nice big pull back in October? The market is definitely a steal compared to December last year.

1/2013  [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
5/2013  [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013  [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014  [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014  [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014  [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014  [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015  [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015  [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015  [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016  [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017  [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017  [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017  [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017  [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018  [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018  [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018  [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018  [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018  [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019  [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019  [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019  [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019  [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/
https://forum.mrmoneymustache.com/investor-alley/the-old-excuses-for-down-swings-and-a-reality-yet-we-are-at-all-time-highs!/
1/2020 [3296]
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-a-large-sum-of-money-bad-time-to-buy-index-funds/
2/2020 [3345]
https://forum.mrmoneymustache.com/real-estate-and-landlording/in-a-pickle/
6/2020 [3125]
https://forum.mrmoneymustache.com/investor-alley/august-is-when-it-all-implodes/
https://forum.mrmoneymustache.com/investor-alley/should-i-move-my-bond-etf-to-money-market-fund-or-cd/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-struggling-to-not-sell/
8/2020 [3360]
https://forum.mrmoneymustache.com/investor-alley/invest-lump-sum-or-wait/
11/2020 [3585]
https://forum.mrmoneymustache.com/investor-alley/little-reminder-just-how-gross-the-valuation-of-equities-is/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-terrified-of-stock-market-right-now/
12/2020 [3703]
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-pulled-my-index-funds-because-fear-of-market-crash/
2/2021 [3935]
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/
3/2021 [3939]
https://forum.mrmoneymustache.com/investor-alley/sky-high-sp-500-pe-ratio/
4/2021 [4129]
https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/
https://forum.mrmoneymustache.com/investor-alley/advice-121943/
6/2021 [4281]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-a-windfall-122870/
8/2021 [4437]
https://forum.mrmoneymustache.com/investor-alley/the-great-marital-dispute-who-is-'right'-about-how-to-invest!/
9/2021 [4535]
https://forum.mrmoneymustache.com/investor-alley/thoughtshelp-took-crypto-profits-cash-heavy/
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-large-bonus-123900/
11/2021 [4595]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-an-inheritance-(international)/
12/2021 [4701]
https://forum.mrmoneymustache.com/investor-alley/is-a-7-return-unlikely-without-a-complex-approach/
https://forum.mrmoneymustache.com/welcome-to-the-forum/upcoming-recession/
3/2022 [4201]
https://forum.mrmoneymustache.com/welcome-to-the-forum/what-to-do-with-$100k-126670/
5/2022 [3991]
https://forum.mrmoneymustache.com/investor-alley/where-to-stuff-this-extra-income/
6/2022 [4177]
https://forum.mrmoneymustache.com/investor-alley/safer-investment-ideas-for-8-years/
11/2022 [3945]
https://forum.mrmoneymustache.com/ask-a-mustachian/live-off-the-cash-or-invest-it-already-fire'd/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/so-we're-basically-on-track-for-a-bear-market-by-tomorrow/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/
https://forum.mrmoneymustache.com/welcome-to-the-forum/new-saver-worried-about-future-stockmarket/
https://forum.mrmoneymustache.com/investor-alley/i-tried-to-time-the-market-roast-me-and-tell-me-what-to-do-now/
https://forum.mrmoneymustache.com/investor-alley/help-i-screwed-up/
https://forum.mrmoneymustache.com/ask-a-mustachian/lost-all-my-money-in-the-stock-market-made-it-all-back-and-some-need-advice/
https://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/lessons-from-riding-the-hot-stock-train/
« Last Edit: January 17, 2023, 08:23:46 AM by RWD »

soccerluvof4

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Re: Live off the Cash or Invest it already Fire'd
« Reply #3 on: November 30, 2022, 02:54:43 PM »
Approximately 15% of our net worth is in high yield savings, I bonds, EE bonds, and CDs. I love having lots of "cash" available, but I'm definitely the minority around here.

This would probably be a good time to put some of it back into the market, but I much prefer the sense of security I have from knowing that I won't have to sell stocks when they're low.

If one or both of us were still working, we would definitely be maxing out the 401K (especially if there's a match) and putting the rest in the market. And we would draw completely from cash accounts right now.

I'm assuming you have social security coming in the next 10 years, so that will also reduce the amount you need to draw.
And with such a large monthly draw, there's likely a lot of fluff you could eliminate if you ever need to.

At this point, I think you can do whatever you want.



I agree with the scenario maxing out the 401k to at least the match amount which I need to investigate and its 6% so thats better than alot of things right now.

soccerluvof4

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  • Posts: 7169
  • Location: Artic Midwest
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    • My Journal
Re: Live off the Cash or Invest it already Fire'd
« Reply #4 on: November 30, 2022, 02:55:44 PM »
[...] and the way the market was climbing dumb or not I just wanted to hold for a big pull back.

It's been a while since I've had an excuse to bring out the list... Wasn't there a nice big pull back in October? The market is definitely a steal compared to December last year.

1/2013  [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
5/2013  [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013  [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014  [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014  [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014  [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014  [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015  [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015  [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015  [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016  [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017  [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017  [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017  [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017  [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018  [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018  [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018  [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018  [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018  [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019  [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019  [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019  [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019  [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/
https://forum.mrmoneymustache.com/investor-alley/the-old-excuses-for-down-swings-and-a-reality-yet-we-are-at-all-time-highs!/
1/2020 [3296]
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-a-large-sum-of-money-bad-time-to-buy-index-funds/
2/2020 [3345]
https://forum.mrmoneymustache.com/real-estate-and-landlording/in-a-pickle/
6/2020 [3125]
https://forum.mrmoneymustache.com/investor-alley/august-is-when-it-all-implodes/
https://forum.mrmoneymustache.com/investor-alley/should-i-move-my-bond-etf-to-money-market-fund-or-cd/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-struggling-to-not-sell/
8/2020 [3360]
https://forum.mrmoneymustache.com/investor-alley/invest-lump-sum-or-wait/
11/2020 [3585]
https://forum.mrmoneymustache.com/investor-alley/little-reminder-just-how-gross-the-valuation-of-equities-is/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-terrified-of-stock-market-right-now/
12/2020 [3703]
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-pulled-my-index-funds-because-fear-of-market-crash/
2/2021 [3935]
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/
3/2021 [3939]
https://forum.mrmoneymustache.com/investor-alley/sky-high-sp-500-pe-ratio/
4/2021 [4129]
https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/
https://forum.mrmoneymustache.com/investor-alley/advice-121943/
6/2021 [4281]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-a-windfall-122870/
8/2021 [4437]
https://forum.mrmoneymustache.com/investor-alley/the-great-marital-dispute-who-is-'right'-about-how-to-invest!/
9/2021 [4535]
https://forum.mrmoneymustache.com/investor-alley/thoughtshelp-took-crypto-profits-cash-heavy/
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-large-bonus-123900/
11/2021 [4595]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-an-inheritance-(international)/
12/2021 [4701]
https://forum.mrmoneymustache.com/investor-alley/is-a-7-return-unlikely-without-a-complex-approach/
https://forum.mrmoneymustache.com/welcome-to-the-forum/upcoming-recession/
3/2022 [4201]
https://forum.mrmoneymustache.com/welcome-to-the-forum/what-to-do-with-$100k-126670/
5/2022 [3991]
https://forum.mrmoneymustache.com/investor-alley/where-to-stuff-this-extra-income/
6/2022 [4177]
https://forum.mrmoneymustache.com/investor-alley/safer-investment-ideas-for-8-years/
11/2022 [3945]
https://forum.mrmoneymustache.com/ask-a-mustachian/live-off-the-cash-or-invest-it-already-fire'd/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/so-we're-basically-on-track-for-a-bear-market-by-tomorrow/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/
https://forum.mrmoneymustache.com/welcome-to-the-forum/new-saver-worried-about-future-stockmarket/
https://forum.mrmoneymustache.com/investor-alley/i-tried-to-time-the-market-roast-me-and-tell-me-what-to-do-now/
https://forum.mrmoneymustache.com/investor-alley/help-i-screwed-up/
https://forum.mrmoneymustache.com/ask-a-mustachian/lost-all-my-money-in-the-stock-market-made-it-all-back-and-some-need-advice/


Thanks for all that! I will scour over it the next day or so!

Laura33

  • Magnum Stache
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  • Posts: 3553
  • Location: Mid-Atlantic
Re: Live off the Cash or Invest it already Fire'd
« Reply #5 on: December 01, 2022, 09:26:34 AM »
I think you need to look at this in the bigger picture.  First, though, congratulations -- you are in a fantastic position, and so what you do with $300K won't make or break your plans.  So don't drive yourself nuts trying to optimize.

I think the bigger picture is what do you want your overall asset allocation to be, and where does this cash fit in there?  Part of transitioning to retirement is the shift from maximizing your upside to minimizing your downside.  For me, that means 3-5 years of expenses in a CD or bond ladder, which then allows me to keep the rest of the money in VTSAX. Every year, I can live on the money from the CDs/bonds that mature, and then transfer the equivalent from VTSAX to a new CD/bond coming due in 3-5 years to keep the ladder rolling. That way I always have cash available to meet my needs, plus the flexibility of waiting a year or two to sell out of VTSAX to replenish my cash stash if the market craters. 

Other people do it differently, of course; some folks will have a set asset allocation and then sell out of stocks/bonds proportionately every year to cover expenses and re-set the investments to the target allocation.  The point is that there's nothing whatsoever wrong with keeping $300K in cash if that's part of your strategy -- for you, that's about 3 years expenses (more as long as your DW continues to work), so that's really the equivalent of my CD ladder.  So it's perfectly fine not just to keep that money there, but to replenish it every year as you spend it.  Or if that's not your particular plan, then invest it right away so you keep your overall asset allocation within its target range.

I do agree, however, that it would be smart for your DW to max her 401(k) options (and presumably a spousal IRA for you).  If everything goes to plan, you two have another 30-40 years in front of you, so the tax-deferred growth will be meaningful.  Note also that at your current income level, you could likely do a Roth with minimal tax consequences, which could start the 5-year Roth ladder for you and provide additional tax flexibility in future years. 

leevs11

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Re: Live off the Cash or Invest it already Fire'd
« Reply #6 on: December 01, 2022, 11:27:41 AM »
Is the $300k cash part of the 40 in your 60/40 portfolio? Or is it in addition?

I think that including some cash in money market or short term treasuries can definitely be a part of your bond allocation. The interest rate difference is negligible.

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Re: Live off the Cash or Invest it already Fire'd
« Reply #7 on: December 01, 2022, 04:58:52 PM »
A small suggestion on your bigger issue:  have the dividends and cap gains generated by your non-tax sheltered mutual funds paid out rather than automatically reinvested.  You're paying tax on them regardless.  By having them paid out you can decide to keep the cash to fund your life or reinvest however you want to maintain your target asset allocation. 


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Re: Live off the Cash or Invest it already Fire'd
« Reply #8 on: December 02, 2022, 06:45:39 AM »
Is the $300k cash part of the 40 in your 60/40 portfolio? Or is it in addition?

I think that including some cash in money market or short term treasuries can definitely be a part of your bond allocation. The interest rate difference is negligible.

Separate but in the total NW

soccerluvof4

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Re: Live off the Cash or Invest it already Fire'd
« Reply #9 on: December 02, 2022, 06:46:50 AM »
A small suggestion on your bigger issue:  have the dividends and cap gains generated by your non-tax sheltered mutual funds paid out rather than automatically reinvested.  You're paying tax on them regardless.  By having them paid out you can decide to keep the cash to fund your life or reinvest however you want to maintain your target asset allocation.

I will pose that to my Vanguard guy and see what hes says but makes sense to me

soccerluvof4

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Re: Live off the Cash or Invest it already Fire'd
« Reply #10 on: December 02, 2022, 06:49:35 AM »
I think you need to look at this in the bigger picture.  First, though, congratulations -- you are in a fantastic position, and so what you do with $300K won't make or break your plans.  So don't drive yourself nuts trying to optimize.

I think the bigger picture is what do you want your overall asset allocation to be, and where does this cash fit in there?  Part of transitioning to retirement is the shift from maximizing your upside to minimizing your downside.  For me, that means 3-5 years of expenses in a CD or bond ladder, which then allows me to keep the rest of the money in VTSAX. Every year, I can live on the money from the CDs/bonds that mature, and then transfer the equivalent from VTSAX to a new CD/bond coming due in 3-5 years to keep the ladder rolling. That way I always have cash available to meet my needs, plus the flexibility of waiting a year or two to sell out of VTSAX to replenish my cash stash if the market craters. 

Other people do it differently, of course; some folks will have a set asset allocation and then sell out of stocks/bonds proportionately every year to cover expenses and re-set the investments to the target allocation.  The point is that there's nothing whatsoever wrong with keeping $300K in cash if that's part of your strategy -- for you, that's about 3 years expenses (more as long as your DW continues to work), so that's really the equivalent of my CD ladder.  So it's perfectly fine not just to keep that money there, but to replenish it every year as you spend it.  Or if that's not your particular plan, then invest it right away so you keep your overall asset allocation within its target range.

I do agree, however, that it would be smart for your DW to max her 401(k) options (and presumably a spousal IRA for you).  If everything goes to plan, you two have another 30-40 years in front of you, so the tax-deferred growth will be meaningful.  Note also that at your current income level, you could likely do a Roth with minimal tax consequences, which could start the 5-year Roth ladder for you and provide additional tax flexibility in future years.

A lot of good points and i like the Roth Ladder to start. Thanks

Sandi_k

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Re: Live off the Cash or Invest it already Fire'd
« Reply #11 on: December 02, 2022, 11:32:42 AM »
We are three years away from retirement, and this is how we think of it.

1) Invest up to the match, 100%. If your wife has a Roth option that gets her the match, even better.

2) You should open a Roth, and get the clock started. Since you have kids, these will be POWERFUL accounts to pass along as part of your estate. Invest 100% in growth stocks; no bonds or cash.

3) We have 3-5 years in TIP funds and GNMAE funds. We really want to spend some funds once we're past 59.5 and can do some home renovations, without worrying about tax penalties for early distribution.

4) Since your wife is bringing in extra money, I would be using some of that cash to pay taxes on converting your tax-deferred accounts into a Roth account. I am using extra withholding from my paycheck to make that tax payment easy and darned near unnoticeable.

Have you *looked* at the RMD chart for your accounts? You say you have $2.2M and $300k is cash. In 14 years, when you hit age 72, it is likely that your accounts will be doubled. So let's say $4M. Your RMD will be **$146k** that year, using the current table. This will have an effect on your Medicare premiums, so it's doubly advantageous to get the money into a Roth before IRMAA is calculated for you.

Also - the tax rates are set to go higher again in 2026. You could certainly do conversions for 2022, 2023, 2024 and 2025. Make a dent in the tax-deferred accounts, and get them into a Roth. I'd convert up to the top of the 22% bracket (which will be 25% in 2026).

5) Anything "extra" at this point would go into a brokerage account.

leevs11

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Re: Live off the Cash or Invest it already Fire'd
« Reply #12 on: December 02, 2022, 11:52:28 AM »
Is the $300k cash part of the 40 in your 60/40 portfolio? Or is it in addition?

I think that including some cash in money market or short term treasuries can definitely be a part of your bond allocation. The interest rate difference is negligible.

Separate but in the total NW

So you're really closer to 55/35/10 stock/bonds/cash or something like that? If that's not how you'd like your AA to look, you can move some from one bucket to another. Keep in mind, whether cash or bonds or stock it's all part of the allocation.

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Re: Live off the Cash or Invest it already Fire'd
« Reply #13 on: December 03, 2022, 04:00:11 AM »
We are three years away from retirement, and this is how we think of it.

1) Invest up to the match, 100%. If your wife has a Roth option that gets her the match, even better.

2) You should open a Roth, and get the clock started. Since you have kids, these will be POWERFUL accounts to pass along as part of your estate. Invest 100% in growth stocks; no bonds or cash.

3) We have 3-5 years in TIP funds and GNMAE funds. We really want to spend some funds once we're past 59.5 and can do some home renovations, without worrying about tax penalties for early distribution.

4) Since your wife is bringing in extra money, I would be using some of that cash to pay taxes on converting your tax-deferred accounts into a Roth account. I am using extra withholding from my paycheck to make that tax payment easy and darned near unnoticeable.

Have you *looked* at the RMD chart for your accounts? You say you have $2.2M and $300k is cash. In 14 years, when you hit age 72, it is likely that your accounts will be doubled. So let's say $4M. Your RMD will be **$146k** that year, using the current table. This will have an effect on your Medicare premiums, so it's doubly advantageous to get the money into a Roth before IRMAA is calculated for you.

Also - the tax rates are set to go higher again in 2026. You could certainly do conversions for 2022, 2023, 2024 and 2025. Make a dent in the tax-deferred accounts, and get them into a Roth. I'd convert up to the top of the 22% bracket (which will be 25% in 2026).

5) Anything "extra" at this point would go into a brokerage account.


Makes sense. What are GNMAE funds? I am 59 so closing in on 591/2 pretty quick so that part makes sense too. Thanks

soccerluvof4

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Re: Live off the Cash or Invest it already Fire'd
« Reply #14 on: December 03, 2022, 04:04:19 AM »
Is the $300k cash part of the 40 in your 60/40 portfolio? Or is it in addition?

I think that including some cash in money market or short term treasuries can definitely be a part of your bond allocation. The interest rate difference is negligible.

Separate but in the total NW



So you're really closer to 55/35/10 stock/bonds/cash or something like that? If that's not how you'd like your AA to look, you can move some from one bucket to another. Keep in mind, whether cash or bonds or stock it's all part of the allocation.



Correct- I sent a message to my Vanguard guy that I want to move to more 70/30 and with what I have invested and might be adding more to my investments but just figuring out what I want to do. I might need someone to talk to just once to overview my whole situation and tell me what I need to do because Vanguard will only tell what to do with what I have invested with them not a couple other things I have and or analyze the whole picture.

 

Wow, a phone plan for fifteen bucks!