What is your trigger point to start spending from cash buffer?? + QE, Does it change the game?

Sea_Shell

MK62 said:

Sea_Shell said:

Sea_Shell said:

GazzaBloom said:

Whereas someone needing to drawdown say 4% or more from their investments without a cash buffer, could be in trouble if there was a poor sequence of returns early on. I certainly wouldn't feel comfortable if I needed to drawdown 4% each year without having a cash buffer.

That's really my point.  If you are withdrawing at above a sustainable withdrawal rate, there is no evidence that a cash buffer will increase your chances of success, in fact, it is likely to reduce the chances of success.

Exactly, having a cash buffer is like saying "I don't believe that the Safe Withdrawal Rate I have set is actually Safe!

The concept of the SWR, if set correctly should negate the need for a cash buffer. Cash buffers are really a soother to calm the nerves during market downturns, but in the cold light of day they only serve to detract from portfolio performance and longevity.

I shall crunch some numbers excluding our cash altogether and see where we're at, at month end.

As promised, I've looked at our "when is a cash buffer not a cash buffer" figures, and if you exclude all our cash, we have a pot invested of £518,500.   3% of which would give us £15,500.   Tight, but within target.

This is mostly on a 60% equities split.  

Our "cash" is then a "nice to have" cushion, for whatever we want/need it to be.   Capital expenditure, top-up spends etc etc.

Make of that what you will. 

If the numbers work for you, then does it really matter that much what anyone else makes of it?....everyone's different anyway.

That said, 3% looks like a reasonably safe starting point to me, and then you always have your cash to use as you see fit (how about that for a "trigger point".... )

Ha. Yes.  There is a fine line between asking "what would you do" and just "doing it my way".

I'm not asking "permission"...just sanity checking really.

So I shall carry on "winging it" with a sort of hybrid SWR, finger in the air, gut feeling, spreadsheet driven "plan". 😉

DT2001

Sea_Shell said:

MK62 said:

Sea_Shell said:

Sea_Shell said:

GazzaBloom said:

Whereas someone needing to drawdown say 4% or more from their investments without a cash buffer, could be in trouble if there was a poor sequence of returns early on. I certainly wouldn't feel comfortable if I needed to drawdown 4% each year without having a cash buffer.

That's really my point.  If you are withdrawing at above a sustainable withdrawal rate, there is no evidence that a cash buffer will increase your chances of success, in fact, it is likely to reduce the chances of success.

Exactly, having a cash buffer is like saying "I don't believe that the Safe Withdrawal Rate I have set is actually Safe!

The concept of the SWR, if set correctly should negate the need for a cash buffer. Cash buffers are really a soother to calm the nerves during market downturns, but in the cold light of day they only serve to detract from portfolio performance and longevity.

I shall crunch some numbers excluding our cash altogether and see where we're at, at month end.

As promised, I've looked at our "when is a cash buffer not a cash buffer" figures, and if you exclude all our cash, we have a pot invested of £518,500.   3% of which would give us £15,500.   Tight, but within target.

This is mostly on a 60% equities split.  

Our "cash" is then a "nice to have" cushion, for whatever we want/need it to be.   Capital expenditure, top-up spends etc etc.

Make of that what you will. 

If the numbers work for you, then does it really matter that much what anyone else makes of it?....everyone's different anyway.

That said, 3% looks like a reasonably safe starting point to me, and then you always have your cash to use as you see fit (how about that for a "trigger point".... )

Ha. Yes.  There is a fine line between asking "what would you do" and just "doing it my way".

I'm not asking "permission"...just sanity checking really.

So I shall carry on "winging it" with a sort of hybrid SWR, finger in the air, gut feeling, spreadsheet driven "plan". 😉

You have 9 years to DB pensions kicking in and 11 to first SP when in theory your pot is redundant on present spending levels?

I think with your cash buffer of 3 to 4 years you have nothing to worry about. If your plan does not work, as you say, we’ll all be in dire straits.

You need to implement CFW’s target of 22 in 22! 

You keep a close eye on your plan so any clouds on the horizon will be taken into account.

Excellent threads