How cash rich should we aim to be at retirement?

scdandem

I can find a lot of advice about how to work out how much you're going to need as an income in retirement (which I think we've got sorted) but can anyone give, or point me to, any advice on how to work out what cash pot to aim for? I appreciate some things are very specific, like perhaps saving an amount for maybe a holiday home etc, but I'm wondering if there have been any studies that give an idea of what cash-in-the-bank figure to aim for? 
We're at a point where one of us is semi-retired and has maximum 3.5 years to state retirement age and the other 14 years but with a good flexible business income that can easily carry on. We are lucky (but have worked really hard) to now have regular surplus income but are unsure whether to keep adding that into pension funds (and get the tax relief and hopeful decent return but will then have tied it up except for 25% TFLS) or stick it in the (fairly cautious) investment ISA and risk a loss but ultimately have access to all the cash).
Just as a figure, we're on target for retirement income of between £30k and £40k net pa (depending on the stage), but have not accounted for taking any TFLS. We currently have £80k in cash and investment ISAs. An IFA friend says we're cash poor. So, other than the big personalised costs, I'm looking to figure out what is a comfortable figure to have in the bank to see us out!
Thanks in advance.

AlanP_2

By the sounds of it all your retirment income, apart from SPs, will come from your investments so I would suggest you need a higher proportion of cash type assets than someone who also has Defined Benefit pension income.

What you are trying to protect against is having to sell investment assets at a low price because you need to buy some food this month, the cash buffer will allow you to smooth the asset sales.

How much is trickier - most comments on here seem to be in the 2 - 3 year range whilst some are 5 - 10 years and others think it is a pointless exercise and prefer to have everything invested. 

Long term returns from being 100% invested will probably be better but how would you sleep at night when markets are going through Covid25 or whatever hits them down the line? 

You might need less cash whilst one of you still working / business still going? Depends how "safe" the business income is I guess.

BritishInvestor

AlanP_2 said:

By the sounds of it all your retirment income, apart from SPs, will come from your investments so I would suggest you need a higher proportion of cash type assets than someone who also has Defined Benefit pension income.

What you are trying to protect against is having to sell investment assets at a low price because you need to buy some food this month, the cash buffer will allow you to smooth the asset sales.

How much is trickier - most comments on here seem to be in the 2 - 3 year range whilst some are 5 - 10 years and others think it is a pointless exercise and prefer to have everything invested. 

Long term returns from being 100% invested will probably be better but how would you sleep at night when markets are going through Covid25 or whatever hits them down the line? 

You might need less cash whilst one of you still working / business still going? Depends how "safe" the business income is I guess.

Sell what investment assets at a low price? Equities? 

robrit61

I've got a DB pension and a small DC pension which i was going to start taking earlier this year just as things started to go a bit pear shaped. My wife has only got a DC pension and we have about 3 years of that in cash plus about £20k for emergencies. We get not much interest on this money but it will hopefully help when the next downturn comes. 

scdandem

AlanP_2 said:

By the sounds of it all your retirment income, apart from SPs, will come from your investments so I would suggest you need a higher proportion of cash type assets than someone who also has Defined Benefit pension income.

What you are trying to protect against is having to sell investment assets at a low price because you need to buy some food this month, the cash buffer will allow you to smooth the asset sales.

How much is trickier - most comments on here seem to be in the 2 - 3 year range whilst some are 5 - 10 years and others think it is a pointless exercise and prefer to have everything invested. 

Long term returns from being 100% invested will probably be better but how would you sleep at night when markets are going through Covid25 or whatever hits them down the line? 

You might need less cash whilst one of you still working / business still going? Depends how "safe" the business income is I guess.

Thanks. Majority is DB then we'll have SP (10 yrs apart) and current DC pot of £250k with £1200 per month going in from company. Business is well established but you never know!

AlanP_2

BritishInvestor said:

AlanP_2 said:

By the sounds of it all your retirment income, apart from SPs, will come from your investments so I would suggest you need a higher proportion of cash type assets than someone who also has Defined Benefit pension income.

What you are trying to protect against is having to sell investment assets at a low price because you need to buy some food this month, the cash buffer will allow you to smooth the asset sales.

How much is trickier - most comments on here seem to be in the 2 - 3 year range whilst some are 5 - 10 years and others think it is a pointless exercise and prefer to have everything invested. 

Long term returns from being 100% invested will probably be better but how would you sleep at night when markets are going through Covid25 or whatever hits them down the line? 

You might need less cash whilst one of you still working / business still going? Depends how "safe" the business income is I guess.

Sell what investment assets at a low price? Equities? 

If that is what you have then yes. The point of the cash buffer isn't affected by what your investments are is it? If the investments were in fine wine and post-modern art you still wouldn't want to be a forced seller in poor market conditions.

Albermarle

If the majority of income is guaranteed ( DB + state pensions) the need for a cash buffer is reduced so maybe you have enough.
However cash is cash and  apparently low risk investments are not the same as cash. Unless they are very low risk like Gilts but then you get a better return in a savings account/premium bonds anyway 

BritishInvestor

robrit61 said:

I've got a DB pension and a small DC pension which i was going to start taking earlier this year just as things started to go a bit pear shaped. My wife has only got a DC pension and we have about 3 years of that in cash plus about £20k for emergencies. We get not much interest on this money but it will hopefully help when the next downturn comes. 

I think it's important to be clear on what you mean by "help". A diversified portfolio will contain more than just equities and if the equity market falls it may well be that you are buying equities (as well as taking withdrawals from the non-equity part of the portfolio) to ensure you remain aligned to your desired asset allocation.

molerat

I look at it as having enough for a new car + new boiler + new roof in easily accessible, not necessarily instantly accessible, liquid funds that are not subject to the whims of the market tanking on the day you need them which covers you for all those emergencies that could happen.

BritishInvestor

molerat said:

I look at it as having enough for a new car + new boiler + new roof in easily accessible, not necessarily instantly accessible, liquid funds that are not subject to the whims of the market tanking on the day you need them which covers you for all those emergencies that could happen.

What market? Equities? High quality bonds?

scdandem

molerat said:

I look at it as having enough for a new car + new boiler + new roof in easily accessible, not necessarily instantly accessible, liquid funds that are not subject to the whims of the market tanking on the day you need them which covers you for all those emergencies that could happen.

Thanks! That's the sort of thing I was looking for. I found the Which? survey really helpful to show what a basic, moderate and comfortable retirement would look like in terms of changing the car every X years, holidays abroad (or not), clothing, replacing white goods, leisure, food etc. I know it's very broad but it does give a sense of direction and whether you're on track or not. I just wondered if anyone had seen any articles/advice along those lines relating to what cash savings pot to aim for.