Thursday, January 15, 2015

Keep A Bank Cash Stash in Retirement

If you are retired or semi-retired and pay attention to the stock market, I recommend that you keep a stash of cash in the bank, maybe 6 to 12 months of living expenses.

You should theoretically keep all of your assets in a well diversified portfolio, and bank accounts pay very little interest today.  However, if your anxiety level goes up whenever the news is filled with stories of the stock market tanking or the bond market doing something strange, you need to resist the temptation to do something silly.  If you start thinking irrational thoughts like "if I don't get the money out of the market, I could end up as a greeter at Walmart..", you need a bank cash cushion.

If you have cash in the bank for your needs over the next 6 to 12 months, and the rest of your assets in your well diversified portfolio, you will be less anxious.  So you may be able to withstand the temptation to buy gold coins, bury silver in the backyard, or move your money to that guaranteed investment fund run by your neighbor, Charlie D. Cheat, who drives a Ferrari and wears sleeveless muscle shirts.

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