Early-retirement wannabe

Lungboy

atush wrote: »

You should always have a cash buffer of at least one years income, just for that reason. So that you dont have to draw income during a downturn.

If you havent got that much yet, work and save until you do.

I'm up to 7 months' income as cash at the moment. Is a year's worth not a bit high? most places seem to recommend 3-6 months' worth. Does the recommendation change with respect to retirement?

MallyGirl

yes - you should have a 3-6 month buffer while working in case you lose your job and take a whjile to find a new one. Once you hit retirement it is more like 1 or 2 years cash so that you can whether a downturn in your investments and not have to sell when market is low.

Anonymous101

MallyGirl wrote: »

yes - you should have a 3-6 month buffer while working in case you lose your job and take a whjile to find a new one. Once you hit retirement it is more like 1 or 2 years cash so that you can whether a downturn in your investments and not have to sell when market is low.

I'm not so sure about that.

There could certainly be a case for leaving as much as possible invested and just altering your draw down rate in times of economic downturn. The theory being that by keeping large amounts in cash you'll miss the benefit of the growth had you left it invested during the good times.

MallyGirl

possibly but Lungboy is looking for £16k pa which is fairly frugal and so does not leave a huge amount of scope for altering drawdown rate

MK62

Downside protection will always come at the price of giving up upside gains....its just the nature of the beast.

Its a judgement call as to how much cash you need to keep available....personally it would always be more than 12 months for me...

As I read once a long time ago...sometimes 0% is a very good return.....

Anonymous101

MallyGirl wrote: »

possibly but Lungboy is looking for £16k pa which is fairly frugal and so does not leave a huge amount of scope for altering drawdown rate

True, in his position surety of income is possibly priority rather than optimised investing.

kidmugsy

Anonymous101 wrote: »

True, in his position surety of income is possibly priority rather than optimised investing.

For many people certainty of income is optimised investment.

Anonymous101

kidmugsy wrote: »

For many people certainty of income is optimised investment.

Maybe if their income is close to their lower threshold. I'd think anyone with some scope to reduce temporarily would accept a slightly lower short term income for an overall higher total income.

Lungboy

Yes, due to my wife being in employment for several years longer than I will (she's 6 years my junior), there should be plenty of scope for me to temporarily reduce my drawdown to ride a rough market for a bit.

bluenose1

MallyGirl wrote: »

possibly but Lungboy is looking for £16k pa which is fairly frugal and so does not leave a huge amount of scope for altering drawdown rate

That doesn't include his wife's earnings though, so it may not be that frugal.

I am considering going at 55 with £12k per year drawdown, though we do have my oh private pension of £20k per year and rental income of £10k per year.
I am hoping household income of £42k per year will fund us in the holidays I intend to become accustomed to.