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FYI: Should I hold a cash reserve in retirement? If so, how much? And, if you’re willing to share, do you have a cash reserve as part of your retirement savings?
We’ve currently got about 10% of our total savings in cash right now, the highest in many years. This is due to the relatively high yields of CDs and money markets right now, as well as the low yields for high quality bonds. That, plus we need to make periodic withdrawals in retirement and want to avoid having to sell stocks during potential market downturns.
I’m unable to access the article. But the elephant in the room here would appear to be: What’s the rest of the money invested in? For someone heavily allocated to aggressive growth funds, a higher cash level might be appropriate. But, if you’re holding a lot of balanced, diversified income or asset allocation funds, than those already hold some cash (or short term bonds) and so your own cash allocation might not need to be as high. Like so many other questions postulated here, the answer can only be answered in context.
Personally, I target 15% in my static allocation (possibly appropriate for the 70+ crowd). That’s not strictly cash, however. Also includes some short-term bond funds. I’ve considered taking it down to 10% and putting the 5% into something a bit more aggressive like TMSRX at T. Rowe. That fund should pull a couple percent higher than cash over intermediate term (3-5 years) without a whole lot of additional risk from what I can see. But there’s more liquidity with cash. So I’ll let it rest.
While cash isn’t trash, If one can afford even a modicum of fluctuation in value (and dispense with FDIC backing), there are better alternatives.
Comments
Personally, I target 15% in my static allocation (possibly appropriate for the 70+ crowd). That’s not strictly cash, however. Also includes some short-term bond funds. I’ve considered taking it down to 10% and putting the 5% into something a bit more aggressive like TMSRX at T. Rowe. That fund should pull a couple percent higher than cash over intermediate term (3-5 years) without a whole lot of additional risk from what I can see. But there’s more liquidity with cash. So I’ll let it rest.
While cash isn’t trash, If one can afford even a modicum of fluctuation in value (and dispense with FDIC backing), there are better alternatives.