How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

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DebiT
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How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by DebiT »

I've become interested in perhaps using T Bills to wring a little more return out of my 2 years of expenses "bucket", which is currently in about half literal cash and 1/2 SWVXX at Schwab (Schwab Value Advantage Money Fund, yield about 0.07%). Note that this isn't a sweep fund anymore, so I do need some money in cash to write checks and transfer to my Wells Fargo bill paying account.

If I change nothing, my basic plan is yearly in January sell enough BND to add about $50K, which is what I need in addition to dividends if I do everything in my budget including discretionary. That way I start every year with 2 years of expenses, and spend it down over the year to about 1 year expenses. Simple, meets my SWAN requirements, etc.

I seem to have a mental block about how to incorporate using T Bills into this, and what duration(s) to use. All the posts I read seem to be more for people who have a cash emergency fund that they do not spend. So they get started with some sort of T Bill ladder, and then renew them into maybe 6 mo or 1 year T Bills. The post many other posts @refer to is viewtopic.php?t=377042 with great responses from KevinM.

Assuming I would still want to start with about 6 months expenses remaining in cash , how would I go about this on an ongoing basis? I would so appreciate a table or checklist of what to do now, and how to renew it or keep it up indefinitely. Like I said, I seem to have an amazing mental block about it. EDIT: I would never want to have less than 6 months in cash. I'm on my own, and have things running pretty much on automatic. 6 months of cash means my sons would have time to take over if I'm in a coma or otherwise incapacitated.

Always something new to learn, it seems. This is the place I've learned so much, so thank you in advance.
Last edited by DebiT on Sat May 21, 2022 3:18 pm, edited 1 time in total.
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
mega317
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by mega317 »

A much easier way to accomplish what I think you're trying to do is buy a short-term treasury mutual fund or ETF.

If you're selling BND to refill the cash, why don't you just skip the cash step and sell BND for your expenses?
Topic Author
DebiT
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by DebiT »

mega317 wrote: Sat May 21, 2022 3:16 pm A much easier way to accomplish what I think you're trying to do is buy a short-term treasury mutual fund or ETF.

If you're selling BND to refill the cash, why don't you just skip the cash step and sell BND for your expenses?
Thank you, I just now edited my post to say I need to have 6 months of cash to keep things running if I were incapacitated.

I think but am not sure that I've been reading that 6 month or 1 year T Bills would pay somewhat more. I guess I need someone to also help my understand what is to be gained from $150K in those lengths of T Bills vs just cash. I guess a rough number for 1 year T Bill is 2%. If I were able to (eventually) invest the entire $75K in 1 yr T Bills at 2%, I'd net about $1500 a year.

Are there short term treasury ETF's that would yield 2%? Or should I just be selling BND every 6 months, and keep another 6 months in cash so I never have less than 6 months of cash?
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
dbr
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by dbr »

I don't think you need a cash bucket beyond whatever common sense practice you need to manage uneven cash flow. As the poster above suggested, as you need money to spend you just take withdrawals from your allocation to stocks and bonds, keeping rebalanced along the way, and not doing something inefficient tax wise. As long as your withdrawals from your portfolio are small and steady there is no point to holding a bucket for spending. If you anticipate a large expenditure at a known point in time cash flow management might dictate taking some steps to set that aside.
mega317
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by mega317 »

Sure. Last I checked about a week ago: VGSH 2.55%, SPTS 2.53%, SHY 2.4%. But those aren't cash. If you need to have cash around then why are you trying to buy things that aren't cash?
dbr
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by dbr »

DebiT wrote: Sat May 21, 2022 3:24 pm
mega317 wrote: Sat May 21, 2022 3:16 pm A much easier way to accomplish what I think you're trying to do is buy a short-term treasury mutual fund or ETF.

If you're selling BND to refill the cash, why don't you just skip the cash step and sell BND for your expenses?
Thank you, I just now edited my post to say I need to have 6 months of cash to keep things running if I were incapacitated.

I think but am not sure that I've been reading that 6 month or 1 year T Bills would pay somewhat more. I guess I need someone to also help my understand what is to be gained from $150K in those lengths of T Bills vs just cash. I guess a rough number for 1 year T Bill is 2%. If I were able to (eventually) invest the entire $75K in 1 yr T Bills at 2%, I'd net about $1500 a year.

Are there short term treasury ETF's that would yield 2%? Or should I just be selling BND every 6 months, and keep another 6 months in cash so I never have less than 6 months of cash?
A way to keep things running if you are incapacitated is to already arrange with your brokers to make monthly fixed payments from either/or your taxable assets or your IRA. The issue might be trickier getting a 401k plan to do that.

A better alternative if incapacitation is a serious concern it to have someone with a durable power of attorney to manage things. Being actually unable to carry out financial transactions for as long as six months is a serious issue.
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DebiT
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by DebiT »

mega317 wrote: Sat May 21, 2022 3:29 pm Sure. Last I checked about a week ago: VGSH 2.55%, SPTS 2.53%, SHY 2.4%. But those aren't cash. If you need to have cash around then why are you trying to buy things that aren't cash?
Trying to decide how much my "SWAN" peace of mind is costing me in actual dollars.
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
Topic Author
DebiT
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by DebiT »

dbr wrote: Sat May 21, 2022 3:32 pm
A way to keep things running if you are incapacitated is to already arrange with your brokers to make monthly fixed payments from either/or your taxable assets or your IRA. The issue might be trickier getting a 401k plan to do that.

A better alternative if incapacitation is a serious concern it to have someone with a durable power of attorney to manage things. Being actually unable to carry out financial transactions for as long as six months is a serious issue.
No more 401K as of this year, yay! Just today filed Final 5500EZ. Such a relief. Rolled over into 2nd IRA at Schwab.

I have a trust with POA with my sons, although this post is reminding me to write out how to keep things flowing if they need to be in charge. For me, just trying to figure out how to do this retirement stuff, keeping balance between peace of mind and (relative) wisdom with money. Also getting used to being solo as opposed to part of a couple with 2 brains. Truly, it is exhausting still. (Although I think I fixed the BBQ on my own, so there's that.)

Right now I have a nice system of monthly transfers from Schwab cash to my WF bill pay account (I like having a brick and mortar bank account). I wonder if there is a way to automate a sell from an ETF like BND? If not, if there is a way to do so from the equivalent mutual fund? If this were only available from a mutual fund, is there any downside to using the mutual fund vs BND? I may be overthinking, but if it's easy to set up, I may do it just for that bit more of peace of mind.

Then I would just keep things in BND or equivalent, and not worry about a long runway of cash. (My IPS calls for only selling from bonds, not from stock, for as long as possible, without rebalancing. McClung Prime Harvesting). Although this triggers a memory of reading that DCA'ing in reverse during decumulation is bad, not good. See, another thing to look up and learn. Exhausting.
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
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Artsdoctor
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by Artsdoctor »

Depending on how much "cash" you're talking about, you can set up two sets of T-bills now: one 3-month and the second 6-month. In 3 months, the first will mature and then you can set aside or augment money to buy 6-month T-bills. You'll then have two 6-month T-bill sets maturing every 3 months. If you're comfortable with buying T-bills, it's pretty easy to do this and you'll be earning more than in a money market (especially if it's just a sweep account).

If you're interested in keeping things on autopilot if you're incapacitated, you can always arrange to have a certain amount of dividends automatically flowing into your brokerage sweep account each month.
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Artsdoctor
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by Artsdoctor »

^ Regarding automatically selling from a mutual fund, you can set it up at Vanguard although I've not done it at Schwab. At Vanguard, you can arrange to have $X sent directly each month from a cash settlement account or any mutual fund account. I don't think they'll do it with ETFs.
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AnnetteLouisan
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by AnnetteLouisan »

Artsdoctor wrote: Sat May 21, 2022 4:10 pm Depending on how much "cash" you're talking about, you can set up two sets of T-bills now: one 3-month and the second 6-month. In 3 months, the first will mature and then you can set aside or augment money to buy 6-month T-bills. You'll then have two 6-month T-bill sets maturing every 3 months. If you're comfortable with buying T-bills, it's pretty easy to do this and you'll be earning more than in a money market (especially if it's just a sweep account).

If you're interested in keeping things on autopilot if you're incapacitated, you can always arrange to have a certain amount of dividends automatically flowing into your brokerage sweep account each month.
If you have a Treasury Direct account, you can put some funds in a 4-8 week t bill on auto roll and a few 6 month t bills. It’s not difficult and it earns more than some bank checking and savings accounts. Buying at auction isn’t that difficult.
Last edited by AnnetteLouisan on Sun May 22, 2022 9:51 am, edited 2 times in total.
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jeffyscott
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by jeffyscott »

mega317 wrote: Sat May 21, 2022 3:16 pm A much easier way to accomplish what I think you're trying to do is buy a short-term treasury mutual fund or ETF.

If you're selling BND to refill the cash, why don't you just skip the cash step and sell BND for your expenses?
This is the aspect that I can't see a way around? It seems like you either have to go fully to the ladder route, completely replacing the bond fund with a series of individual securities that you roll or spend as they mature. Otherwise it just comes down to when you sell the bond fund and are you going to be any better off by, say, selling enough to cover 6 months every 6 months vs. selling it as needed or monthly?

Most of our normal expenses are covered by monthly pension income. But to cover anything extra that may come up, I have just recently moved to this set-up:
A few <1yr treasuries for things coming up in the next year (dental implant, property taxes, HSA contribution, planned large purchases)
CD maturing about every 6 months from about 18 months to ~4 years
some 7-10 year TIPS
short term bond index fund (SWSBX)

I am taking intermediate bond fund dividends in cash and sending a portion to SWSBX along with some of the CD and treasury interest payments. When SWSBX balance is $20K, I will consider buying another CD (or treasury).

[Not related to managing short term cash, but I will also reinvest some bond fund dividends and other interest payments in the TIPS index (SWRSX) and when that balance is large enough, I will consider buying another individual TIPS.]

But I doubt that the results of all this will differ significantly from just using the funds and selling some as needed.
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by RetiredAL »

DebiT wrote: Sat May 21, 2022 3:12 pm
If I change nothing, my basic plan is yearly in January sell enough BND to add about $50K, which is what I need in addition to dividends if I do everything in my budget including discretionary. That way I start every year with 2 years of expenses, and spend it down over the year to about 1 year expenses. Simple, meets my SWAN requirements, etc.
I do a similar 'withdrawal for spending bucket' in my IRA, holding 18 months using 6 month replenishment cycle, with automatic monthly transfers out to my checking. My account is at Fidelity and I use their Short Term Treasury Fund FUMBX. Fidelity will auto-withdraw from any Fidelity Fund in an IRA, but not from an EFT's. I do not use T-bills or T-notes with this spending bucket, accepting whatever the FUMBX return is. Since it is short term, it does not have a lot of NAV change.

In event I don't replenish the FUMBX balance and it goes to zero, the auto-withdraw will start using any Fidelity Fund.

I do have a ladder of T-bills, but I do not use them for this spending bucket. I want it to still maintain auto-withdrawals (for DW) if I don't get around to handling the details that using T-bills for this function would necessitate. I choose to not rollover the T-bills, so they dump back to my core account when their term expires, thus the auto-withdraw would eventually use them.

Edit to add-----

Although Fidelity has a very nice IRA withdrawal tool-set for scheduling automatic withdrawals from any Fidelity fund within an IRA, they do not extend those tools to taxable accounts. In taxable, transfers (either scheduled or ad-hoc) only happen against the core holding and it is up to you to manage the core's $ level to make sure their is enough $ there to accomplish the transfers.
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DebiT
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by DebiT »

I think that what I will do eventually, since I want to begin each year with 2 years expenses in cash or near cash, is to have a 1 year T Bill, perhaps that will rollover annually, and likely buy a 6 month T Bill at the beginning of every year. That way my account will always have cash for the year. I may decide not to have an automatic rollover, so that if something happened to me at the end of a year, there would still end up being a year's worth of cash when the T Bill matured.

I'll think about it some more, but this may best accomplish my goal of squeezing a little more return out of my 2 years of expenses, and keeping cash available to keep my "machine" working if I were incapacitated for a while. I think I'm answering my own question, that the T Bill doesn't need to auto-renew. That piece I can do myself at the first of every year.

These responses are helping me. It's interesting; if my husband were still alive this wouldn't be a concern at all, but since I'm on my own I want to make sure it's very easy for my sons if I weren't dead but simply ill. As someone coming off of COBRA then ACA into Medicare (thank goodness), my prime directive has been "if I'm in a coma do not let my COBRA lapse!". It was a giant concern, for obvious reasons.

Hoping that Medicare will auto withdraw from survivor SS. Supplement and Plan D will likely be pretty simple to autopay. Can't tell for a few more weeks until I can get into my various portals.
Age 66, life turned upside down 3/2/19, thanking God for what I've learned from this group. AA 40/60 for now, possibly changing at age 70.
dbr
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by dbr »

My experience is that if you want to make it easy for someone else to make sure your expenses are paid then the way to do that is to put the money in a checking account and maybe a savings account also at a bank and set up that person with POA on those accounts. Make sure that person has access to your mail to see all bills and notices that might come in.* Asking someone to handle assets in holdings like T Bills gets more complex and needs access to more accounts. Practical problems like this are not best addressed by proliferating different kinds of assets to hold money. Two years expenses accessible seems excessive. If you are so severely afflicted that it comes to two years of spending your sons are going to need full Durable POA over everything and also Health Care POA.

I have been there and done that for two parents and another family member and have shared the same process with parents on the other side of the family including one relative who had to get court ordered custody to care for an elderly family member.

*The worst episodes were when a person I had to help with finances trashed, hid, or misfiled mail. The situation came to a head when their house was being foreclosed and the water was shut off.
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Re: How to use T Bills for my 2 years of expenses money in retirement (meaning I spend it)

Post by evelynmanley »

dbr wrote: Sun May 22, 2022 12:28 pm My experience is that if you want to make it easy for someone else to make sure your expenses are paid then the way to do that is to put the money in a checking account and maybe a savings account also at a bank and set up that person with POA on those accounts. Make sure that person has access to your mail to see all bills and notices that might come in.* Asking someone to handle assets in holdings like T Bills gets more complex and needs access to more accounts. Practical problems like this are not best addressed by proliferating different kinds of assets to hold money. Two years expenses accessible seems excessive. If you are so severely afflicted that it comes to two years of spending your sons are going to need full Durable POA over everything and also Health Care POA.

I have been there and done that for two parents and another family member and have shared the same process with parents on the other side of the family including one relative who had to get court ordered custody to care for an elderly family member.

*The worst episodes were when a person I had to help with finances trashed, hid, or misfiled mail. The situation came to a head when their house was being foreclosed and the water was shut off.
I am in my late sixties and single. I have two adult children. One lives far from me and the other is soon going to live far from me. This is the solution I came up with in order to make it very easy for them to take care of anything and everything if I'm incapacitated: I have enough funds in my checking account to cover two years of all my expenses (yes, that might seem excessive, but since my kids live far from me, I want as little hassle as possible for them), and all my bills are set up on autopay from my bank (with the exception of the odd bill in the mail, like car registration.) My son was set up years ago as my Durable POA for all my banking accounts. (I took him to my bank to set up that POA and he has met my longtime banking guy.) Both of my kids are POA for my healthcare (Kaiser) and both are cosigners on my HSA account and have their own HSA debit card in their own names linked to my account. We all share account info in our password manager Bitwarden (family sharing plan), where I also have copies of my will, Durable Healthcare POA, Financial POA, and copies of everything you can imagine. I also have detailed instructions for everything they could possibly need (viewtopic.php?f=11&t=365992) and viewtopic.php?f=2&t=350862).

All of my financial accounts (checking, savings, HYSA, Treasury Direct, Vanguard) are set up as POD to both of my kids after my death. No hassles. I own my own business and wanted to buy additional I-bonds as a sole proprietorship (in addition to the ones I bought as individual), but there is no beneficiary option with I-bonds as sole proprietor. The executor (one of my kids) would have to deal with sending a form, etc. So I didn't buy them. I don't want my kids to have to deal with any hassles.
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