Comfort level for pre-retirees
How long out do you have cash set aside to make you feel comfortable for people close to retiring?
For instance, for my clients retiring in a year or two, I have about 2 years of cash, not including another year in cash in their bank accounts.
So realistically, that gives me 3 to 4, maybe 5 years before anything needs to be sold. Hopefully things can come back by then, but who knows.
Also, do any of you think this will change how you look at Social Security for those close to 62? Instead of waiting until 66, why not just take the money at 62 with reduced benefits to take pressure off the accounts?
Snags ...here in Canada the debate has always been about early withdrawals from CPP ( your Social Security ) , the number escapes me right now but with early withdrawal I think they are in fact up if they are still living by age 72.
I always have 5 years of withdrawals protected - CD's, MMKT, fixed annuity, whatever. I do not include checking or small savings accounts, because most people want their cash cushion for the unexpected things.
The next 5 years may be in bonds (varied types - govy's, corp, muni, int'l, whatever) that are kicking off good income (4-7%) and have relatively stable values over time.
After that, good quality equities can be used.
SS withdrawals are based on client needs. Some need it early, some can wait, and some WON'T wait no matter what ("bird in the hand" theory). But yes, if you plan to take WD at 66, and the market tanks with your retirement kitty, this would be a viable solution. This is a logical reason to try holding off on SS - it can serve as a backstop.
One other thing that I do for some clients - I will give them an annuity with a 10 year certain and annuitize it. This covers all of their living expenses for 10 years. This way we can invest the other portion of their money in equities.
I am simplifying this, but you get the idea.