How much cash?

enthusiasticsaver wrote: »

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.

ES, I think you need to differentiate between posters whos primary retirement income is based on underlying investments and those where the income is more guranteed (DBs, annuity, etc etc).

It makes absolute sense for an invetment driven retirement to hold a larger proportion of cash or cash equivalent.

Based on the info you provided you do not appear to be primarily an investment based retirement and therefore your question is very much about the levels of cash for ongoing expenses rather than to safeguard against possible investment fluctuations.

cloud_dog wrote: »

ES, I think you need to differentiate between posters whos primary retirement income is based on underlying investments and those where the income is more guranteed (DBs, annuity, etc etc).

It makes absolute sense for an invetment driven retirement to hold a larger proportion of cash or cash equivalent.

Based on the info you provided you do not appear to be primarily an investment based retirement and therefore your question is very much about the levels of cash for ongoing expenses rather than to safeguard against possible investment fluctuations.

That's an excellent point and one which I think many people miss.

I think in the OP's case where there is only 5-7 years away from the start of the DB paying out a much lower number of years of cash would be required. Holding 5+ years of expenses as cash in that position is extremely risk averse, far too much so for me. I think i'd be looking at 2-3 at most.

Spreadsheetman wrote: »

It's a balancing act for both I think. With investments it is (relatively) easy to get hold of substantial lump sums (especially if held outside the pension wrapper), with DB, lump sums are harder (apart from the initial PLCS).

I don't have a DB pension so I will be holding 3 years cash plus a new car's worth so I don't need to draw on investments for anything if they are substantially down.

I don't believe ES will not be holding at least some investments, which could be accessed if absolutely required but the point remains, as you comment on, your cash holding has a very high weighting towards safeguarding your investments during a period of downturn for obvious short-term income and longer term sustainability reasons.