Understanding Cash in Retirement Planning

For retirement savings, cash refers to liquid, safe, non-volatile assets like high-yield savings or money market accounts, not riskier investment products.

### The Importance of Cash in Retirement Planning
* 💸 " "Cash" in retirement planning refers to **liquid, accessible assets** such as high-yield savings accounts, money market mutual funds, and money market accounts.
* 💰  Retirees are advised to maintain **12 to 18 months** (or up to **24 months for more conservative retirees**) of living expenses in cash.
* 📊  In addition to cash reserves, retirees should have a mix of **risk-on and risk-off assets** in their portfolio.
* 💰  Cash is defined as assets that can be accessed immediately **without any loss in principle**.
* 🧐  Be cautious of products marketed as alternatives to cash that offer **higher yields** but come with **increased risks**.
* 💡 " We want you to be able to get access and actually have **liquid capital at your need**, and that's **cash in a bank, a high-yield savings account, or a liquid money market account**.
* 💰  Cash not only serves as a **safety net for emergencies** but also presents **wealth-building opportunities when others are in panic**.

[Music] Eric's question is up next. He says when working out calculations for retirement, they always ask about cash. What do they mean by that? Like my emergency fund or is Cash something else or other types of accounts in this context. So specifically when thinking about net worth and retirement savings, could you clarify this for him? So yeah, this is a great question. Let you fill in B but Eric's probably like so do I go pull $110,000 out and keep that under my mattress or do I keep it access and it's not even access to cash cuz access to cash man there is a whole broad spectrum here because there is when you people say Cash. There's a group of people that're probably saying oh my gosh these guys are saying put this under your mattress and then there's other groups these Financial mutants that or they they think they're Financial mutants but it's the people that think well access to cash works and I falling into this cuz I was a good Financial mutant where

I had a home equity line or I see people who think they have a good Investment Portfolio that that's going to be their cash. There is a broad spectrum so kind of answer that question what do we mean when we say cash yeah. I'm curious uh when working out calculations they always ask about cash. I guess I don't know who the they is I guess he's talking about when we say emergency reserves 3 to six months he's probably trying to figure out what is what shape form accounts can that be yeah. So we one of the things that we espouse is that not only in accumulation but even more so in decumulation you do need to have true emergency re reserves true cash that you can get to and we say cash like high yield savings accounts this is not like folders can in the backyard this is like liquid cash and a savings account that you can get to and we think that for a retiree someone living off of their assets it should probably be 12 to 18 months of living expenses so when you

look at your total portfolio. You're going to have 12 to 18 months and some liquid, principally safe, non-volatile asset called cash. It could be in high-yield savings, a money market mutual fund, money market account, any of those types of suggestions. But in addition to that, then when you look at your whole portfolio structure, you are going to have a mix of risk on and risk off or risk-reduced assets. Now, even though assets might be risk-reduced like fixed income investments, bonds, alternative type investments, I would not classify those specifically as cash. Cash are things that you know you can get to tomorrow without any loss in principle. You're not going to risk a bad day causing you to go get that money and it being worth less than it was when you originally put the dollars in there. So for retirees, we want you to be somewhere between 12 to 18 or maybe for even more conservative retirees all the way up to 24 months of available liquidity. And then in addition to that, we also want you to have some conservative type asset.

base inside of your uh retirement portfol liquidity is a big thing cuz. I find and I think through through time. Like there's products that can get confusing. Like you hear cash value. That's not yes you could get to it but that's not that's that's got a different liquidity format than than having money in a high yield savings account or in a brokerage account. I also think about remember there there was this whole season where State you know crypto accounts where supposedly that was an alternative for cash or 10% Y and then don't forget even back before the Great Recession you had mortgage backed cash type options that got into a lot of liquidity problems. There's always going to be somebody who's really smart that's going to be out there marketing an alternative to cash equivalent type of investments. Just be careful if it sounds too good to be true it probably is. We want you to be able to get access and actually the ability to have liquid Capital um at your need and that's cash it's in a bank a high yield savings.

account a liquid money market account. Don't fall into some of these fancy things that are trying to market a higher yield riskier version because they say, What could go wrong? You'll always have access. This, I haven't tell you, through the Great Recession, I saw all those mortgage-backed ones. All of a sudden, they started freezing assets. Um, the Stak accounts with the cryptos, they started locking those down. You know those. You won't to be able to have money when everybody else is panicked because that's where the contrarian wealth-building opportunity is going to show itself. It's not just to get you through emergencies. There's potential that down the road, your cash actually has wealth-building opportunities as well.

What Is Included Under the Category of "Cash" in Retirement Planning?

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Understanding the Role of Cash in Retirement Savings

Cash in retirement calculations refers to liquid assets, like high-yield savings accounts, not actual physical cash.

It's important to have a significant amount of cash reserves, around 12 to 18 months of living expenses, especially during retirement for easy access and financial security.

The concept of cash in this context varies from keeping money under the mattress to having a well-diversified investment portfolio, but it typically means having readily available funds in a liquid form.

Structuring Your Retirement Portfolio for Safety and Liquidity

Retirees are advised to keep 12 to 24 months of liquidity in safe, non-volatile assets like cash.

This could be in high-yield savings, money market funds, or accounts that allow quick access to funds without risking principle.

The rest of the portfolio should consist of a mix of risk-on and risk-off assets, including risk-reduced investments like bonds, but the emphasis on liquidity and safety remains crucial.

Managing Liquidity in Your Retirement Portfolio

Different investment products have varying levels of liquidity, with cash, high-yield savings accounts, and brokerage accounts offering easier access to money.

Alternative investment options, such as crypto accounts and mortgage-backed securities, have presented liquidity challenges in the past.

It's important to be cautious of "too good to be true" alternatives and prioritize having access to liquid capital when needed, such as through a bank or high-yield savings account.

The Importance of a Liquid Money Market Account

A liquid money market account provides access to funds, even during financial crises, avoiding the risk of frozen assets.

It offers not only emergency support but also wealth-building opportunities in the long run.

Avoiding high-yield, riskier investments is crucial, as the stability of a money market account is key during panic situations.