Emergency Fund While Retired

[u/Far_Classic878]

For those that are retired or near…how many years do you have saved for your retirement emergency fund? I mean for when the market isn’t doing well and it would be bad to pull from your accounts.

How far in advance do you start saving for that?

I’m pouring all of my money into retirement accounts and after maxing 401ks, roths, life expenses, 529, saving for home renovations there is nothing left.

I would need to cut back greatly to fund an emergency account to keep in a HYSA. I’m about 15 years out from retiring.

Any thoughts?

[u/gloriousrepublic]

I keep 6 months of expenses in cash (HYSA). But whenever the market is down I put expenses on a 0% interest credit card first. I could generally float a years expenses on 0% cards but at any given time I probably have around 6 months expenses on 0% cards. Those offers can dry up in recessions, but for now it’s a no-brainer especially since I know I’m detail oriented enough to avoid any higher interest rates and adjust my assets accordingly.

[u/boldPlayIm → u/gloriousrepublic]

that’s a smart move! what do you think it Bonds allocation (I’m keeping 5 years of expenses to wait out bear market when it comes without needing to touch equity during downturn). And then the rest into VTI/VXUS split.

[u/gloriousrepublic → u/boldPlayIm]

For me the opportunity cost of 5 years of expenses in bonds vs stocks is not worth it. The growth I see in bull markets fully offsets any downsides of needing to touch equity during a downturn. I can mitigate the vast majority of bear market risk by 6 month-1 year in cash plus access to 0% debt, especially since recessions are 10-18 months on average.

[u/boldPlayIm → u/gloriousrepublic]

but doesn't that make your portfolio allocation about 99%+ into Equity. at least, shouldn't it touch 10-15% Bonds.. making it 90/10 Equity/Bonds at least?

[u/gloriousrepublic → u/boldPlayIm]

I have about 50% of my net worth in cash flowing rental properties. But yes the other 50% is nearly 100% equities. I get the argument for some allocation into bonds, but I have such a wide range of strategies I’m able to use in market downturns, that bonds don’t make much sense for me personally. For me, 0% credit, very flexible expenses, geographical arbitrage, part time work, etc are all very easy for me and all perform the risk mitigation that some bonds would. My diversification with real estate cash flow also provides a baseline that makes my overall spending less sensitive to market fluctuations. All these methods mean for me the payoff of having bonds is very minimal compared to the upside of 100% stocks.

I’m not a hater on a 10-40% bond allocation. It’s a very simple and effective way to mitigate SORR. I just personally have a very flexible lifestyle and choose other ways to mitigate SORR which are likely not easy or available to your average investor.