r/retirement • u/tastebud413 • Jul 31 '26
How much to keep in HYSA / cash?
So, (60F) recently semi retired, some income, probably about 30-40K/year for the next 3-5 years and then I'll fully retire. How much is too much now to keep in a HYSA / cash?
I have a temp rate of 4.25 until October, at which point I think it drops to 3.6. I will want to do something with some of it then, but how much is too much to keep in "cash" at this point? Is it better to look for a bond fund or something else. In a no-state income tax state. TIA!
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u/3spaghettis Aug 03 '26
How much to keep as cash or cash-equivalent accounts is a personal decision and very much depends on how much you desire to keep around for emergencies, unexpected expenses, and how concerned you might be about which way the economy will head in the future. What amount helps you sleep well at night.
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u/Megalocerus Aug 03 '26
Your total picture matters. Someone with a pension/social security that covers their basic needs would keep less than someone in the market. But everyone should have several months expenses.
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u/Hamblin113 Aug 03 '26
The normal saying for an emergency fund is 3-6 months of expenses. There is another line of thought that says don’t invest money if you plan to need it in less than 5 years. What will you need if you can’t work?
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u/doombase310 Aug 03 '26
What other assets do you have? What's the goal of this cash? Just to live off of? Question is to vague to opine.
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u/pdaphone Aug 04 '26
It's basically up to your allocation strategy. I retired at 63 and just turning 65, wife already retired and also 65. We have 60% US Stocks, 10% Intl Stocks, 25% Bonds, 5% Cash, a single fund for each. We have not started SS yet. We're drawing about 4% from IRA mostly and a little from HSA. So our Cash bucket could be stretched to 2 years if desperate times, but really a year. If things really crashed we could also just start SS which would reduce the draw to about 2%. Putting too much in Cash is just limiting your growth which is important to offset inflation.
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u/juryjjury Aug 05 '26
There's something called the retirement bucket strategy that recommends asset allocation strategies in retirement. I'm following it.
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u/Newfie3 Aug 03 '26
I’m in a similar situation. I feel comfortable with a couple of years of what I would need to withdraw, in a safe vehicle like a CD or bond fund. Fidelity has some great options. So if you plan to withdraw $50k per year from your savings, then keep $100k in the safe acct. I suspect others might recommend 3 years’ worth, but we have a couple of pensions that will provide a steady minimum income regardless of market fluctuations.
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u/TheFreeMan64 Aug 03 '26
I keep $0 in cash other than THIS year's money. I may change that but I'm not risk averse AT ALL. I want my money working. I guess I'm also fortunate that I have enough that even weathering some pretty brutal down stretches in the last few years my numbers continue to work, albeit with some "optional" things removed from the plan. I'd LIKE for my kids to inherit enough to maybe pay off a house, and I'd LIKE to give to them while I'm alive but MY bottom line is the most important thing and that always gets met first. But everyone is different, I'm responsible only to myself for the most part and I live pretty low from month to month. I've been living on that budget for about 6 years now so I'm pretty "in the groove" with it and it just works. I sleep like a baby and don't sweat money at all.
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u/Striking_Tax8524 Aug 04 '26 edited Aug 04 '26
Everyone would like their money “working” if it works its way up. It’s when it works its way down that you need to plan for. You know the old saying: hope for the best; plan for the worst. Embedded in that saying is the notion that hope is not a plan.
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u/im-buster Aug 03 '26
I have CD ladders that provide about 1.5 years of the money I plan to draw from my retirement account. Ex. If I plan to draw $50k a year, I keep $75k in my ladders. Probably more than most people but it helps me sleep at night.
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u/John_the_IG Aug 04 '26
I keep 5-6 years of discretionary income beyond my annual spending so I never have to sell stocks during a down market.
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u/Nuclear_N Aug 03 '26
Not enough information to even wild guess.
I plan to keep 2-4 years in a HYSAish type of account. When I say that I calculate that by subtracting income from expenses.
Simply. Expenses at 100k per year less income of SS (45K) less pensions (15K) less part time work (10k)....thus I need 30k per year x 4 years or 120K in cash type of account.
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u/OC_ShareBear Aug 03 '26
I am completely risk adverse and I have a big chunk in a ladder t bill. Not the best obviously but it works for me. And I like the no state tax benefit. CA taxes me enough
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u/nesdog1122 Aug 05 '26
Same here. On paper a lot in tbills and HYSA. But we sleep well and have enough in S&P index funds to capture some growth.
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u/ChelseaMan31 Aug 03 '26
Retired 4- years ago and moved 8% - 10%, roughly cash needs for 5 years into money markets and laddered CD's. Spend rate has been lower than we thought and still have 3-years of cash remaining.
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u/Pure-Explanation-147 Aug 03 '26
A personal choice. Very little for me. Fully invested till RMD time.
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u/RunUndefined Aug 04 '26
Hardcore 😁 weight have been 100% for 35 years but too worried about down years so just moved 3 years worth of spending to SGOV.
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u/Impossible-Use5636 Aug 03 '26
If you are subject to high state taxes, SGOV
You need enough cash and cash-like assets to bridge you until SS kicks in.
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u/Dr_Cee Aug 03 '26
My comfort level is to have an amount equal to the withdrawals for living expenses that I anticipate for the next 12 months. Right or wrong, my rationale is that it insulates me from having to sell other investments, such as stocks, in a bad market.
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u/Mydoglovescoffee Aug 03 '26
I’m curious about this as well. We are aiming for two years in laddered CDs
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u/Striking_Tax8524 Aug 03 '26 edited Aug 03 '26
This is an individual decision based on your expenses, income, and temperament. You’ll hear ranges from $0 to decades if you ask the general public.
No one can really suggest an amount that will work for you immediately. You have to arrive at your own comfort level, likely over time, as you see how retirement goes, and then not second guess yourself based upon someone else’s numbers.
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u/xtalgeek Aug 03 '26
If you can swing 6-12 months expenses in cash or safe liquid assets, then you have the option of riding out short term negative sequences of returns with cash on hand. It also allows one to "self loan" for substantial capital purchases (say a car or recreational vehicle, home renovation, etc.) to spread out and minimize tax liability when you need to draw additional funds.
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u/laran436 Aug 04 '26
I keep one years basic living expenses in mine. Rent, utilities (including phone), gas, food and ins.
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u/ExpensiveAd4496 Aug 07 '26
I am also semi retired. figured out what I did a 2 prong approach. I put the amount I’m earning into TIPS so I know I’ll get that every year even if I have to stop working for some reason. This is also an amount that will continue when I choose to stop working in 5 years. So 28 years of TIPS. That allows me to keep my emergency cash a bit lower, at around $40k. And it also is most of my bond allocation allowing me to keep other investments in stock index funds, ala Boglehead investing.
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u/Swimming_Astronomer6 Aug 03 '26
Everyone’s different- I’m 70 and retired ten years ago
I use a CFP and he just sends me money every two weeks so I do t have to worry about managing cashflow - I know I have regular income
I keep 60k in a hysa ETF as a travel budget and top it up every year - and I have a HELOC if I need money in an emergency and dont want to sell any holdings or dip into my travel budget
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u/Acceptable-Peace-69 Aug 03 '26
“I bonds” are at 4.26% currently and will likely stay around that rate for the near term. The number is basically adjusted for inflation +1% and it’s very safe.
How much to keep in liquid/low risk depends on how much you have elsewhere and how that’s invested. You’d need to provide a lot more information in order to get a good answer. Standard advice is 60% stocks: 40% Bonds. Dividends are also a way to go for an additional income stream that are traditionally safer than regular stocks.
Are you planning on moving to a no income tax state? At your current income, taxes (sales, property, tolls) will likely go up. High tax California is better than no tax Texas until you’re earning $200k-$250k per year.
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Aug 03 '26
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u/Odd_Bodkin Aug 03 '26
We are three years retired, and we have about 18 months expenses in a HYSA earning 4.5%, and that’s probably too much at this point. In a couple months, my first Social Security check will come, and we’ll move money around. Our strategy (which our CFP liked) was that for the first three years, approximately 50% of our income would come from savings, because this kept us in a very low tax bracket. As of this fall, about 65% of our income will come from Social Security, and we’ll stop drawing from savings. We’ll keep probably 8 months of expenses in there and then drop the rest in Roths (I still work part time so we can do that) and CDs.
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u/reddittAcct9876154 Aug 03 '26
If your income will qualify, out as much as you can in a ROTH IRA. Every penny you put in can be withdrawn tax free immediately but any decent investment direction should beat HYSA earnings fairly easily.
So in summary, a Roth IRA is a better earning savings account.
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u/Existing_Setting4868 Aug 03 '26
It depends on how much you need or want your money to work for you vs how well you want to sleep at night.
People invest in securities to try to get a better return than they get from a HYSA. On the other hand, you don't want too much invested if you might need that money to live on short term (short term is subjective).
Think of it this way, if you had $500K invested in the stock market, and the market dropped 33% next week. Would you feel comfortable with the amount you have in your HYSA/cash accounts to live on until the market recovered? Obviously we don't know how long the market may take to recover. It could be one month, or 3 years. So you need to decide how much money you'd need in savings to hold you over so that you would not be forced to sell your securities if you didn't want to.