How much cash?

enthusiasticsaver

It would be interesting to know what others thoughts are on this and how people work out how much cash to keep accessible when retired and drawing pensions.

We are in the early years of our retirement and may well do a few big holidays, change cars or do home improvements. We are 59 and 60 and our state pensions don't pay out for another 5 and 7 years. Our DB pensions comfortably cover our outgoings with a bit spare but we need to draw on savings for expensive holidays, home improvements or replacing cars.

We have £10k in our emergency fund but need to decide how much extra cash to keep accessible and how much to invest. At the moment about 70% of our total assets are invested and 30% is in cash. I am thinking about £10k a year for the next 5 years on the grounds an expensive holiday would be around £5k and we have already replaced our kitchen so only bathrooms to do which could possibly be around the same. We don't do expensive cars and tend to buy ones 1 or 2 years old.

How do others decide what to keep accessible and what to invest? Do you make plans for the next 5 years and cost them out or just take a ballpark figure? I am not sure I want to be that rigid. We are just moving to an IFA after being self managed for the last 5 years and one suggestion was us keeping 5 years of unusual expenditure in fairly liquid terms and investing our stocks and shares isas and sipps in different risk profiles so we have options for withdrawal and maximum potential for growth but we will be discussing that in further at our next meeting.

232607

I’m planning on holding 3 years of cash.

crv1963

I'm planning on keeping money for big ticket items in Premium Bonds, most of EF in cash- as high interest as possible but still easily got at as Credit Cards can be used for the immediate payment and then pay off before due date.

atush

2-3 years spending for me.

Sea_Shell

We've got 8 years worth!!! Over cautious maybe, but enough (hopefully) to weather an investment "storm" before DB's and SP kick in.

Linton

2 years cover for dividend and drawdown income in cash: PBs and current accounts. 5 further years in Wealth Preservation funds. More than half of our income consists of annuities and SP which are not covered by cash.

Prism

It depends what you mean by cash. Current accounts, instant access saving accounts, fixed term savings accounts, p2p accounts? How about gilts and index linked gilts?

If its just current and savings accounts I only plan to keep 1 year. The rest of the list is fluid enough to cover maybe another 7-8 years if needed.

Marine_life

enthusiasticsaver wrote: »

on the grounds an expensive holiday would be around £5k

You're not trying hard enough

enthusiasticsaver

Thanks for feedback and a variety of responses there but majority seem to be going for 2-3 years with Sea Shell keeping more. I am relatively cautious too and was going for 5 years but don't want to skimp just in case my not so expensive holiday at £5k ends up costing £15k.


Of course none of us know how long we will live so that is a fairly critical number as our savings/investments have to last out our lifetimes. A balancing act I suppose which will probably be reviewed several times.

Sea_Shell

We have "instant access" cash of about 3.5 years worth, in mainly CA's and RS's, then the other 4.5 years worth is locked away in fixed term accounts of between 2-3 years to go.

To be fair, we might look at topping up our ISA's in April-June with some of this cash, into our cautious fund, and leave ourselves with say 5 years worth of readies, as the Interest rates aren't what they were (i.e. Tesco & Virgin RS maturities)

DT2001

In the time running up to SPA I am aiming to hold cash (in 90 day or less accessible accounts) to cover 1 years total expenditure less DB pension(s). I know this is lower than most however I am working on the premise that any investment ‘storm’ will be cushioned considerably by my lower risk portfolio (as I approach retirement), the ability to defer a car change or home improvement project and setting my safe withdrawal rate cautiously.
The level of cash held presumably depends on how much you need to supplement income with capital? Also, as the OP suggested, a flexible short term plan helps.
As my OH is not ready to retire I’ll continue to read this thread and see if I should adjust my plans.