You could live in retirement while taking whatever you need from your investments each month. Or you could put five years of reserves in cash (assuming you can afford it) and then take from it each month what you need to live on while simultaneously moving the same amount each month from your investments and putting it the cash reserve. But these two things seem like the same thing so maybe there's no difference.
Or you could use the five years cash reserve as a way to time the market because then you don't have to take from your investments when they are down. So you take from your cash reserves for a year when the market is down and then you only have four years left. You can do it again the second year while waiting for the market to go up. Etc. You are up the creek only if the market stays down for five years straight, which is unlikely to happen. But then again, you are timing the market if you do this, which I've heard is a bad idea because nobody can actually do it.
This feels like a standard question but I don't know the answer. Any thoughts are appreciated.
Or you could use the five years cash reserve as a way to time the market because then you don't have to take from your investments when they are down. So you take from your cash reserves for a year when the market is down and then you only have four years left. You can do it again the second year while waiting for the market to go up. Etc. You are up the creek only if the market stays down for five years straight, which is unlikely to happen. But then again, you are timing the market if you do this, which I've heard is a bad idea because nobody can actually do it.
This feels like a standard question but I don't know the answer. Any thoughts are appreciated.
Statistics: Posted by icbmwapg41 — Wed Sep 25, 2024 6:31 pm — Replies 6 — Views 389