Where do I put my cash?

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Shauninusa
Posts: 4
Joined: Thu Feb 18, 2021 7:59 am

Where do I put my cash?

Post by Shauninusa »

Long time reader first time poster.
This may be a silly question but here goes.
I’m close to being able to retire, I’m 53 and 356/365ths, I’d like to retire in the next 1-5 years, my dream is to retire by 55.
I have my money in different places mainly in low cost index funds through Vanguard and Fidelity as well as some shares and saving with Edward Jones, and a 401k with Fidelity. My question is concerning my “cash” reserves, I have $270,000 as my 3 year cash reserve. I have this money currently invested in Vanguard VTSAX and have had for about a year now where its making good money for me. But what am I supposed to do with it? I know that it’s supposed to be cash and put somewhere safe to avoid market fluctuations but where would that be? I know its not under my mattress..... Thanks Shaun
Dude2
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Re: Where do I put my cash?

Post by Dude2 »

A $270,000 investment in VTSAX does not equal cash. Cash is super low risk, super low reward. It is meant to be consumed directly; otherwise, a person would be better off matching the duration of their fixed income to their need date. In that case it is at least some little risk, some little reward.

Back up a step and tell us what you feel is the purpose of holding cash. Sounds like possibly you want a 3 year spending buffer (pot). Why? Also, please tell us how this is held. Are you talking about a taxable account?
Then ’tis like the breath of an unfee’d lawyer.
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retired@50
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Re: Where do I put my cash?

Post by retired@50 »

Shauninusa wrote: Sun Jun 13, 2021 7:35 am Long time reader first time poster.
... as well as some shares and saving with Edward Jones ...
Thanks Shaun
Welcome to the forum. :happy

Something doesn't compute. :shock:

Long time readers of this forum don't use Edward Jones for anything, other than a sad story about what they once did before seeing the light.

I'd suggest a portfolio review if you're interested in tapping into the wisdom offered in the forum.

See link: viewtopic.php?f=1&t=6212

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
dbr
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Re: Where do I put my cash?

Post by dbr »

Reading in a couple of good books such as Rick Ferri's book about asset allocation and Swedroe's investing book and retirement book might make the nature and use of investment assets more clear.
MichDad
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Re: Where do I put my cash?

Post by MichDad »

Grasshopper,

Don't stand outside our Shaolin Monastery in the inclement weather. Come inside, read the Wiki, learn, and pass on your newfound knowledge to others in need. There's much wisdom here.

Welcome, you've come to the right place.

MichDad
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ruralavalon
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Location: Illinois

Re: Where do I put my cash?

Post by ruralavalon »

Welcome to the forum :).

It's great to see that you have most of your investments in low expense Vanguard or Fidelity index funds.

Shauninusa wrote: Sun Jun 13, 2021 7:35 am Long time reader first time poster.
This may be a silly question but here goes.
I’m close to being able to retire, I’m 53 and 356/365ths, I’d like to retire in the next 1-5 years, my dream is to retire by 55.
I have my money in different places mainly in low cost index funds through Vanguard and Fidelity as well as some shares and saving with Edward Jones, and a 401k with Fidelity. My question is concerning my “cash” reserves, I have $270,000 as my 3 year cash reserve. I have this money currently invested in Vanguard VTSAX and have had for about a year now where its making good money for me. But what am I supposed to do with it? I know that it’s supposed to be cash and put somewhere safe to avoid market fluctuations but where would that be? I know its not under my mattress..... Thanks Shaun
Vanguard Total Stock Market Index Fund (VTSAX) is not cash. Still it may be good to have that $270k in that fund. It depends on what other investments you have, and whether you have a pension.

I don't know why you feel that 3 years in a cash reserve is necessary or desirable or recommended. Why is that?

For what it's worth we are age 75, I retired 10 years ago, and we have no cash allocation. We have just a couple of months the worth of living expenses (net of Social Security) in our joint checking account, no other "cash reserve". 50% of our portfolio is fixed income, in a good credit quality bond index fund. That's enough to cover about 17 years of our living expenses (net of Social Security), which is longer than our life expectancy.

What type(s) of account(s) do you have at Edward Jones, and what investments do you have in each of those account(s)? It's probably a good idea to move any Edward Jones account to a low cost fund provider like Vanguard or Fidelity.

For advice about your "cash" reserve or any other part of your plan you need to provide more information in this format: Asking Portfolio Questions.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
Shauninusa
Posts: 4
Joined: Thu Feb 18, 2021 7:59 am

Re: Where do I put my cash?

Post by Shauninusa »

ruralavalon wrote: Sun Jun 13, 2021 9:37 am Welcome to the forum :).

It's great to see that you have most of your investments in low expense Vanguard or Fidelity index funds.

Shauninusa wrote: Sun Jun 13, 2021 7:35 am Long time reader first time poster.
This may be a silly question but here goes.
I’m close to being able to retire, I’m 53 and 356/365ths, I’d like to retire in the next 1-5 years, my dream is to retire by 55.
I have my money in different places mainly in low cost index funds through Vanguard and Fidelity as well as some shares and saving with Edward Jones, and a 401k with Fidelity. My question is concerning my “cash” reserves, I have $270,000 as my 3 year cash reserve. I have this money currently invested in Vanguard VTSAX and have had for about a year now where its making good money for me. But what am I supposed to do with it? I know that it’s supposed to be cash and put somewhere safe to avoid market fluctuations but where would that be? I know its not under my mattress..... Thanks Shaun
Vanguard Total Stock Market Index Fund (VTSAX) is not cash. Still it may be good to have that $270k in that fund. It depends on what other investments you have, and whether you have a pension.

I don't know why you feel that 3 years in a cash reserve is necessary or desirable or recommended. Why is that?

For what it's worth we are age 75, I retired 10 years ago, and we have no cash allocation. We have just a couple of months the worth of living expenses (net of Social Security) in our joint checking account, no other "cash reserve". 50% of our portfolio is fixed income, in a good credit quality bond index fund. That's enough to cover about 17 years of our living expenses (net of Social Security), which is longer than our life expectancy.

What type(s) of account(s) do you have at Edward Jones, and what investments do you have in each of those account(s)? It's probably a good idea to move any Edward Jones account to a low cost fund provider like Vanguard or Fidelity.

For advice about your "cash" reserve or any other part of your plan you need to provide more information in this format: Asking Portfolio Questions.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
I was told by a financial person linked to my work 401K that you should have 3 years worth of living expenses in case of a market crash. Ive had three different opinions from financial advisors related to either my 401K (fidelity), EJ where I have money in a small IRA”s (200K) shares in a shares account worth 250k (not diversified) and another 150K in a money market account. Plus the local Fidelity guy, all had the 3 year cash suggestion.
I originally started putting this $270K away to pay off my mortgage (240k left to pay 12 years left at 3%) but since I spoke to the financial people Ive been steered towards the 3 years of savings in case of crash. I saw in another post that I could get an Ally savings account and make .5%.
I have no debt other than the mortgage and I put around 4K each month living expenses on my credit card which i pay off each month. I would like to get this down though.
Ill fill in the account form at the link you posted.
Thanks
Topic Author
Shauninusa
Posts: 4
Joined: Thu Feb 18, 2021 7:59 am

Re: Where do I put my cash?

Post by Shauninusa »

Dude2 wrote: Sun Jun 13, 2021 7:54 am A $270,000 investment in VTSAX does not equal cash. Cash is super low risk, super low reward. It is meant to be consumed directly; otherwise, a person would be better off matching the duration of their fixed income to their need date. In that case it is at least some little risk, some little reward.

Back up a step and tell us what you feel is the purpose of holding cash. Sounds like possibly you want a 3 year spending buffer (pot). Why? Also, please tell us how this is held. Are you talking about a taxable account?
The cash is to cover me for 3 years (the guesstimate of a stock market crash and recovery) while my other investments would not be touched. It was advice given to me by a couple of different financial advisory related to the accounts I have. I’m a beginner, this wounded like a good idea to me, but I dont really know so figured I’d ask you guys on your thoughts. I means it sounds good to me, if the general average stock market crash is 3 years long then I would not need to touch any of my investments and wait for their recovery allowing me to stay in the market for along time and ride it out.
I could also pay off my mortgage, I owe 240K, I have 12 years left at 3%.
The 3 years idea sounds lime a very sound idea to me, and sure I get that it could be 5 years or more but looking at the history thats a good guess. But like I said I’m a beginner at this.
mortfree
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Re: Where do I put my cash?

Post by mortfree »

The 150k in money market should be your cash position.

Assuming it is not part of a retirement account
Mid-40’s
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ruralavalon
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Location: Illinois

Re: Where do I put my cash?

Post by ruralavalon »

Shauninusa wrote: Sun Jun 13, 2021 1:53 pm
ruralavalon wrote: Sun Jun 13, 2021 9:37 am Welcome to the forum :).

It's great to see that you have most of your investments in low expense Vanguard or Fidelity index funds.

Shauninusa wrote: Sun Jun 13, 2021 7:35 am Long time reader first time poster.
This may be a silly question but here goes.
I’m close to being able to retire, I’m 53 and 356/365ths, I’d like to retire in the next 1-5 years, my dream is to retire by 55.
I have my money in different places mainly in low cost index funds through Vanguard and Fidelity as well as some shares and saving with Edward Jones, and a 401k with Fidelity. My question is concerning my “cash” reserves, I have $270,000 as my 3 year cash reserve. I have this money currently invested in Vanguard VTSAX and have had for about a year now where its making good money for me. But what am I supposed to do with it? I know that it’s supposed to be cash and put somewhere safe to avoid market fluctuations but where would that be? I know its not under my mattress..... Thanks Shaun
Vanguard Total Stock Market Index Fund (VTSAX) is not cash. Still it may be good to have that $270k in that fund. It depends on what other investments you have, and whether you have a pension.

I don't know why you feel that 3 years in a cash reserve is necessary or desirable or recommended. Why is that?

For what it's worth we are age 75, I retired 10 years ago, and we have no cash allocation. We have just a couple of months the worth of living expenses (net of Social Security) in our joint checking account, no other "cash reserve". 50% of our portfolio is fixed income, in a good credit quality bond index fund. That's enough to cover about 17 years of our living expenses (net of Social Security), which is longer than our life expectancy.

What type(s) of account(s) do you have at Edward Jones, and what investments do you have in each of those account(s)? It's probably a good idea to move any Edward Jones account to a low cost fund provider like Vanguard or Fidelity.

For advice about your "cash" reserve or any other part of your plan you need to provide more information in this format: Asking Portfolio Questions.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
I was told by a financial person linked to my work 401K that you should have 3 years worth of living expenses in case of a market crash. Ive had three different opinions from financial advisors related to either my 401K (fidelity), EJ where I have money in a small IRA”s (200K) shares in a shares account worth 250k (not diversified) and another 150K in a money market account. Plus the local Fidelity guy, all had the 3 year cash suggestion.
I originally started putting this $270K away to pay off my mortgage (240k left to pay 12 years left at 3%) but since I spoke to the financial people Ive been steered towards the 3 years of savings in case of crash. I saw in another post that I could get an Ally savings account and make .5%.
I have no debt other than the mortgage and I put around 4K each month living expenses on my credit card which i pay off each month. I would like to get this down though.
Ill fill in the account form at the link you posted.
Thanks
Is that $270k "cash" reserve held in a taxable brokerage account? If so then what is the current UNrealized capital gain status and amount for your $270k reserve held in Vanguard Total Stock Market Index Fund (VTSAX).

If you really are going to retire in three years at age 55, then I suggest using $240k of that $270 reserve to the pay off your mortgage note (even though only 3%). I am a strong believer in being debt free during retirement.

For the other $30k, there is currently no cash-like savings vehicle that is very good. You might consider:
1) a short-term bond fund like Vanguard Short-Term Federal Fund Investor Shares (VSGBX); or
2) Vanguard Ultra-Short-Term Bond Fund Investor Shares (VUBFX), or BlackRock Ultra Short-Term Bond ETF (ICSH); or
3) I savings bonds; or
4) a combination of all of the above.

What is your overall equity/fixed income allocation over all of your accounts?

I suggest rollover of your Edward Jones IRAs to IRAs at a low cost provider like Vanguard or Fidelity. Also move your Edward Jones money market account to either Vanguard or Fidelity. What is the Edward Jones "shares account"?
Last edited by ruralavalon on Sun Jun 13, 2021 3:19 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
babystep
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Re: Where do I put my cash?

Post by babystep »

Shaun,

After reading all three of your comments, I strongly feel that you will greatly benefit if you can add all the details in your original post. Please include all the accounts, balances and what they are invested in: taxable, 401k, iras, mortgage balance, money market account etc.

There is a template for asking portfolio questions.
viewtopic.php?f=1&t=6212
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ruralavalon
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Location: Illinois

Re: Where do I put my cash?

Post by ruralavalon »

babystep wrote: Sun Jun 13, 2021 3:15 pm Shaun,

After reading all three of your comments, I strongly feel that you will greatly benefit if you can add all the details in your original post. Please include all the accounts, balances and what they are invested in: taxable, 401k, iras, mortgage balance, money market account etc.

There is a template for asking portfolio questions.
viewtopic.php?f=1&t=6212
I agree.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Dude2
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Location: FL

Re: Where do I put my cash?

Post by Dude2 »

If we were speaking only about a taxable account, this may not be bad advice, i.e. hold 100% stocks with x number of years cash to help you to avoid selling low in a downturn. In other words, I can see why it might be given identically by 3 separate brokerage places. Is your overall AA 100% stock?

Alternatively you can approach it from the "portfolio as a whole" angle. Decide on an asset allocation that not only has to do with avoiding panic selling in a downturn but also takes risk into account. Stocks may not deliver on your expectations. In that case, you'd better have some fixed income assets, and the older you get, the more you want certainty, not risk.

Remember that what matters is your personal situation, not the fear of missing out on market upturns. You need established income in retirement. If that is meant to come from a 100% stock portfolio, there could be times that 3 years isn't long enough of a buffer. I have no idea.
Then ’tis like the breath of an unfee’d lawyer.
drummer
Posts: 68
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Re: Where do I put my cash?

Post by drummer »

It sounds like you want to take the $270,000.00 you have invested and move it to something safer...is that correct? Something you can access quickly?

If so, one option is an online high-yield savings account. Just google them and pick one. One other option for a higher interest rate than a high-yield savings account is to put some cash with Toyota Income Driver Notes, although they are not FDIC insured...but safe nonetheless.
TheDDC
Posts: 1612
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Re: Where do I put my cash?

Post by TheDDC »

If you're unsure when you will ever spend "cash", best to put 6 months - 1 year of expenses in a money market, then put the rest in VTSAX/VTIAX. Don't get over involved in cash. Use the mutual funds like a savings account and keep contributing to them. We call that dollar cost averaging into the funds.

Get rid of the high fee "investment guys" at Edward Jones and Fidelity. Fidelity is a fine brokerage, but you don't need the financial advisor. Find a good tax advisor and post the request of your advisory questions here.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
Topic Author
Shauninusa
Posts: 4
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Re: Where do I put my cash?

Post by Shauninusa »

ruralavalon wrote: Sun Jun 13, 2021 3:20 pm
babystep wrote: Sun Jun 13, 2021 3:15 pm Shaun,

After reading all three of your comments, I strongly feel that you will greatly benefit if you can add all the details in your original post. Please include all the accounts, balances and what they are invested in: taxable, 401k, iras, mortgage balance, money market account etc.

There is a template for asking portfolio questions.
viewtopic.php?f=1&t=6212
I agree.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
I work in cybersecurity so I'm just not that comfortable posting this type of information on the web. I understand that may not help but just wanted to get peoples thoughts on a portfolio that has 3 years of living expenses as cash ($240,000) in a high interest saving's account lets say Ally at .5%, $1,400,000 in VTSAX and $300,000 in VBTLX. Would that be a good asset allocation mix with the theory that the 3 years of cash would cover a Bear market and could then be replenished once the Bear turned Bull?
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ruralavalon
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Re: Where do I put my cash?

Post by ruralavalon »

Shauninusa wrote: Wed Jun 16, 2021 8:09 am
ruralavalon wrote: Sun Jun 13, 2021 3:20 pm
babystep wrote: Sun Jun 13, 2021 3:15 pm Shaun,

After reading all three of your comments, I strongly feel that you will greatly benefit if you can add all the details in your original post. Please include all the accounts, balances and what they are invested in: taxable, 401k, iras, mortgage balance, money market account etc.

There is a template for asking portfolio questions.
viewtopic.php?f=1&t=6212
I agree.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
I work in cybersecurity so I'm just not that comfortable posting this type of information on the web. I understand that may not help but just wanted to get peoples thoughts on a portfolio that has 3 years of living expenses as cash ($240,000) in a high interest saving's account lets say Ally at .5%, $1,400,000 in VTSAX and $300,000 in VBTLX. Would that be a good asset allocation mix with the theory that the 3 years of cash would cover a Bear market and could then be replenished once the Bear turned Bull?
Age 54, expecting to retire in 1-5 years, total portfolio = $1,940k. The asset allocation is 72% equity/28% fixed income.

Are you eligible for a substantial pension?

In my opinion the asset allocation seems aggressive, with just 28% fixed income just 1-5 years from retirement. As mentioned before, I am not a proponent of a large cash allocation.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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