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  • FIRST POST
    • Sea Shell
    • By Sea Shell 9th Mar 18, 7:37 AM
    • 785Posts
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    Sea Shell
    Depleting cash first....to what level?
    • #1
    • 9th Mar 18, 7:37 AM
    Depleting cash first....to what level? 9th Mar 18 at 7:37 AM
    Good Morning everyone.

    A debate me and the OH are having at the moment. If you have diversified retirement savings (pensions & investments), but which do currently include a fairly large proportion of cash, at what level would you set your "Emergency" cash floor, that you won't (try not to) go below?

    Would you spend it all first and leave say 1,2 or 3 years of expeniture available as cash before you start drawing from other investments. Or would you keep a bit more in cash, and draw-down profit from investments (say by converting to INC from ACC) to suppliment your outgoings.

    Some market slumps can take 10-15 years to recover from...so would you try and cover that whole period with cash??, so you can give your investments time to recover?

    Thoughts??
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
Page 1
    • Linton
    • By Linton 9th Mar 18, 8:09 AM
    • 9,395 Posts
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    Linton
    • #2
    • 9th Mar 18, 8:09 AM
    • #2
    • 9th Mar 18, 8:09 AM
    I think something like 3 years cash and 5 years in cautious investments as a minimum would be reasonable. If you currently have a larger cash pot than 3 years income perhaps you should put some of the excess into investments now.

    Maximising diversification is vital. Having some of your income in interest and dividends and some from selling investments would be one way of helping achieving it.

    I dont know of any global slump that has lasted 10-15 years, certainly none in my lifetime. Individual countries may have suffered such a slump, Japan comes to mind, but not the whole world. That is why diversification is essential.
    • OldMusicGuy
    • By OldMusicGuy 9th Mar 18, 9:57 AM
    • 400 Posts
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    OldMusicGuy
    • #3
    • 9th Mar 18, 9:57 AM
    • #3
    • 9th Mar 18, 9:57 AM
    I retired last week, so here's my situation. I am very cautious and hold a large proportion of cash and near cash. Our total net worth is about 60% invested, 40% cash. The 60% invested will stay untouched and invested for probably 15 years, the 40% cash will be used to live off over the next 10 to 15 years so that we minimize tax. I'll be using a bond ladder to get some return on the cash.

    That is far more than most people on here would hold as cash, but it suits my wife and I. I realized the best investment strategy is one that allows you to sleep at night and this suits us.
    • IanSt
    • By IanSt 9th Mar 18, 10:53 AM
    • 260 Posts
    • 194 Thanks
    IanSt
    • #4
    • 9th Mar 18, 10:53 AM
    • #4
    • 9th Mar 18, 10:53 AM
    Would you spend it all first and leave say 1,2 or 3 years of expeniture available as cash before you start drawing from other investments. Or would you keep a bit more in cash, and draw-down profit from investments (say by converting to INC from ACC) to suppliment your outgoings.
    Originally posted by Sea Shell
    I'm not a fan of bonds at the moment, so currently I'm planning to take income from my equity funds to help cover my outgoings and hence keep my cash at fullish levels.

    I'm hoping that when the markets do eventually have a prolonged dive that their dividends won't crash quite as much, so we'll be able to sail through the troubles without too much effect on our retirement.

    We'll only start drawing heavily on cash if the dividends from the diversified range of companies that our funds invest in have a significant drop AND we need to cut back more than we'd like to.
    • bostonerimus
    • By bostonerimus 9th Mar 18, 12:57 PM
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    bostonerimus
    • #5
    • 9th Mar 18, 12:57 PM
    • #5
    • 9th Mar 18, 12:57 PM
    Keep at least 3 years in cash and in the good times replenish it from investment gains; I've seen people use 3,6, or 12 month schedules. In bad times you might spend it down to a year or 6 months of spending and then replenish from the part of your portfolio that has seen the smallest losses....rinse and repeat.
    Last edited by bostonerimus; 09-03-2018 at 1:00 PM.
    Misanthrope in search of similar for mutual loathing
    • Sea Shell
    • By Sea Shell 10th Mar 18, 7:31 AM
    • 785 Posts
    • 1,065 Thanks
    Sea Shell
    • #6
    • 10th Mar 18, 7:31 AM
    • #6
    • 10th Mar 18, 7:31 AM
    thank you all

    I think we'll probably go with a 5 yr cash cushion, and move a bit more into our ISA's, pensions for a few more years (not fully retired just yet)

    We're currently approx. 30% cash, and 70% Pensions/Investments
    that'd move us towards a more 15% / 85% split.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
    • Sea Shell
    • By Sea Shell 10th Mar 18, 7:35 AM
    • 785 Posts
    • 1,065 Thanks
    Sea Shell
    • #7
    • 10th Mar 18, 7:35 AM
    • #7
    • 10th Mar 18, 7:35 AM
    I dont know of any global slump that has lasted 10-15 years, certainly none in my lifetime. Individual countries may have suffered such a slump, Japan comes to mind, but not the whole world. That is why diversification is essential.
    Originally posted by Linton
    I thought that after 9/11, the markets took almost that many years to recover back to the levels beforehand. It took about 8 years to recover fully from the banking crisis too didn't it.? Or is that my pessimistic memory failing me.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
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