the cash is a declining balance since by the end of year 1 it is gone and you are no longer holding 2 years .

So you aren't saying always have 2 years in cash (i.e. a 92%/8% equities/cash)? You're saying start with 2 years, spend it all regardless of market conditions, allow the equities (the other 23x/92% of your portfolio) to grow over those two years, then go 100% stocks?

Okay, I went ahead and tested this scenario.

I ran a cFIREsim scenario of having saved 23x expenses in 100% equities, and 2x expenses in cash, by putting in that 23x expenses as the portfolio (920k on 40k spending in equities, 80k, or two years spending, in cash). To model this I put in a portfolio of 920k, 100% equities, then I added a single income of 40k in years 1 and 2. So that offsets the 40k spending those years, as that 80k cash is spent down, and the portfolio is left to grow the first two years. All other stuff (fees, etc.) left default.

I also ran a default cFIREsim of 75/25 stocks/bonds, entire 1MM portfolio invested, no cash infusion, as well as a 100% stocks scenario.

I then downloaded the spreadsheets and found the median and average of the year two end portfolio for each scenario.

Cash scenario:

Average: 1,109,048.311

Median: 1,098,287.19

75/25 stocks/bonds scenario:

Average: 1,084,244.348

Median: 1,081,889.04

100% equities scenario:

Average: 1,113,412.208

Median: 1,099,959.26

Looks like straight equities > equities + cash > 75/25.

The interesting thing though is that 75/25 has a lower failure rate (i.e. higher success rate, as I posted earlier in the thread), so it's not just about the most money.

Either way though, if you want a lower failure rate, it doesn't seem like cash is the way to go, and if you want more money two years after ERing, ditto.

I'm not seeing a scenario where investing 23x your income and keeping 2x in cash to start out your ER, then spending down that two years in cash is beneficial. Nor am I seeing one where keeping two years in cash forever is beneficial.

Other than, as we said, psychologically.

If it helps you sleep at night, great, more power to you. But I don't see the math where it helps your success rate, or leaves you with more money.

in firecalc

75/25 had a slightly better success rate going out to 30 years

100% equity s had a higher success rate and bigger balance going out to 40 years .

i would think you guys are more interested in the 40 year results retiring so young

30 years 4% at 75/25

FIRECalc looked at the 116 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 116 cycles. The lowest and highest portfolio balance at the end of your retirement was $-400,986 to $5,679,475, with an average at the end of $1,845,488. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 94.8%.

30 year 100% equity

FIRECalc looked at the 116 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 116 cycles. The lowest and highest portfolio balance at the end of your retirement was $-931,017 to $8,509,297, with an average at the end of $2,686,348. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 8 cycles failed, for a success rate of 93.1%

40 years 75/25

FIRECalc looked at the 106 possible 40 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 106 cycles. The lowest and highest portfolio balance at the end of your retirement was $-1,120,937 to $12,410,499, with an average at the end of $2,365,051. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 40 years. FIRECalc found that 16 cycles failed, for a success rate of 84.9%.

40 years 100% equity

FIRECalc looked at the 106 possible 40 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 106 cycles. The lowest and highest portfolio balance at the end of your retirement was $-1,624,576 to $23,195,431, with an average at the end of $4,088,042. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 40 years. FIRECalc found that 13 cycles failed, for a success rate of 87.7%.