The Money Mustache Community
General Discussion => Post-FIRE => Topic started by: Much Fishing to Do on February 24, 2018, 12:23:32 PM
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So I realize this is more of a technical question than substantive one but curious as to standard use as I am approaching FI. Obviously there is some amount of one's stache upon/in retirement that is cash as it is there to pay upcoming expenses. For me this may be about 1x annual expenses, haven't completely figured it out yet. I have about 20x in total in stache including that right now. So would I generally say my current allocation is 5% cash/15% Bond/80% equity, and include that cash amount in calculating my what would be current 5% SWR, etc, or does everyone generally separate that money out from their stach when figuring those numbers? (which would make me about SWR 5.2% if I retired at this moment and at more like 85/15 equity to bond ratio). Or maybe my 1 year cash is just high and this isn't usually a significant factor at all?? Just curious as to the norm.
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I'm not sure what the norm is, but I'll tell you what I do. I'm 48 and have been FIREd just about 2 years.
I commonly say my AA is 90/10 because my rebalancing is between stocks and bonds and that is my AA target. I do have about 6 months cash on hand so to be more precise my AA is 2.32%/9.93%/87.75% cash/bonds/stock.
When I run cFIREsim or FIREcalc I do put in my actual AA to the nearest percentages, so 2/10/88.
I do include my cash on hand when calculating my WR from my FIRE stash. I also adjust my FIRE stash for the NPV of my remaining child support payments and the NPV of my expected SS income waay in the future.
I have been spending down my cash over the past two years. I intend to replenish my cash quarterly and keep a 2-month buffer on hand, so I should oscillate between about 2 to 5 months on hand going forward. So in the long run it should really be a rounding error.