Retirement War Chest | How Much Should You Have In Cash Reserves?
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- เผยแพร่เมื่อ 27 มิ.ย. 2024
- Emergency funds are not a sexy topic. But if we call it a war chest, well… game on.
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Intro (0:00)
Emergency Fund Basics (0:48)
How Much Should You Have? (2:44)
Scenario 1 (4:26)
Scenario 2 (8:20)
Scenario 3 (9:20)
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DISCLAIMER: All videos on this channel (including this one) are for educational or entertainment purposes only. They are not (and are not intended to be) financial, investment or legal advice. It is our firm position that everyone has a unique situation and should seek professional advice on how best to navigate it. Rhys Martell is a Chartered Investment Manager (CIM), a Fellow of the Canadian Securities Industry (FCSI), a Qualified Associate Financial Planner (QAFP) and more. However, he is not registered to provide investment advice and, therefore, does not provide specific investment recommendations. Those looking for specific investment advice should seek out a registered professional.
Excellent advice ✅
Stress is the #1 enemy in retirement. (And pre-retirement). 😉
Work, relationship and financial stress greatly reduce life expectancy. Best to eliminate ALL stress. 👍
Amazing how many people don’t understand the importance of having a war chest. Even Garth Turner has a blind spot on this point, which is no surprise considering that he’s a financial advisor who wants to see every dollar invested. The ability of not having to dip into your investments at a loss during bear markets is like a superpower. Good job raising awareness!
Fantastic video. When I first decided to retire early I was dejected because saving DURING retirement never even occurred to me. I thought I would have to work until 65 (shoot me!). Now I have slush funds built into my plan (safe, fluid and boring), and I am all set! For the first time in my life I am not depressed/stressed about money!
Awesome!!
so, how did you do it?
@@nataschas9552 GICs, TFSA, and high interest savings acct. Make it part of your plan and you'd be amazed what you can build over your retirement. Check out online banks like EQ. Get your money out of the big banks. Today!
Smart advice as usual 👍
A subject i haven’t totally thought about. Now I am ! Always appreciate the Solid Advice. Thanks
You’re welcome ☺️
Great video Rhys!
Thanks! 🤓
Ryhs, I love your simple explanations for some of the most important decisions all of us will have to make in retirement! You make it easy to understand and argue reasons for and against different strategies! Keep them coming!
Thanks so much! 🤓
Once again excellent video and good advise by Rhys.
Thank you!
Omg I’m so Antoine!! Did you make this video just for me Rhys? 🤣. I’m hearing you. Will be in touch next week. 👍
All you videos rock!!
😂🤓
Divide your assets into buckets for the short, medium, and long term. Each bucket has a risk/reward profile to match the time horizon. Periodically weigh the contents of your buckets versus your upcoming needs and “pour” your money from bucket to bucket.
Since biggest sequence of return risk is first 5 years of your retirement, I have 5 years of stacked GIC. Afterward will maintain 3 years of required income in stacked GIC, specially our rate is still decent. Peace of mind is the king when retire. Thanks Ryhs, believe you will approve my approach.
Love it :)
I’d love to see a video for people with goals to retire extra early ( 45-50yrs old ) how would you calculate how much you need and would the withdrawal rate still be 4%?
Amazing advice. I love the idea of calling it a war chest. The idea applies to non-retired people too 💪
For sure :)
Great video. What do you think about the flexible GICs?
Good question! They’re totally fine. Usually have a bit lower of a rate but then you get the flexibility :)
I call mine the "All Hell Breaks Loose Plan," but I really like the "War Chest," so I will change it in my spreadsheet to that. Once I started building my (now called war chest), the thing that became apparent is that after taking into account CPP, OAS and defined pension payments, the amount of my own money required to meet planned annual expenses in the future was not that big of an amount. I currently have 6 years saved, and I aim to get 10 years. I know it's overkill, but I'm not concerned I'll have too many "near" cash-type investments. Like another comment on this page, parts of my war chest are in my TFSA, RRSP, LIRA, Spouse's RRSP and taxable investment accounts. I have been simply plowing dividends into high-interest savings instead of back into ETFs.
Easy Peasy (as some guy I watch likes to say.)
D
🤓
As you were talking, I was wondering about how one's high-interest war chest is going to be ravaged by taxes, since interest income is so tax-inefficient. But, arguably, the war chest can be in the TFSA or RRIF/LIF. You need to plan for cash-flow anyway, just keep the buffer in the investment account, continuously being drawn from and replenished.
What a difference a couple of years makes. Two years ago, GICs and HISAs paid essentially 0%. Keeping liquidity had a huge opportunity cost. With GICs at 5-6% now, the conversation is very different.
One last thought.... if your liquid war chest is really big, make sure you spread it about in such a way that it is all covered by the CDIC deposit protection.
Well said.
Hi, just subscribed and really enjoy the way you explain your information. I will be booking a call to see if we are a fit.
Welcome aboard! :)
I can't wait to hear your thoughts about Alberta and pulling their $$ out of CPP.
Still lots to unfold on this one…
None of the main banks offer a high interest savings account that I’m aware of? Unless you consider .25% high interest
My plan is to turn of my dividend reinvestment plan 6-12 months before retiring and get those funds into a HISA.
Beauty
New subscriber here and I really enjoy your videos. Aside from a HISA or GIC why didn't you also mention the cash ETFs... Horizon's hsav or cash etf etc as an alternative?...pays better than an HISA and is more liquid than a GIC.
You are 100% correct! That’s kind of a next level product though and wanted to keep this pretty simple. But you are bang on!
@@wellbuiltwealth thanks... I was at EQ bank but it offers a piddly 2.5% and that's below inflation. So even CWB or Motive they offer better HSIA rates, yet I still wanted an even better rate and that's why I explored cash ETFs.
How would you integrate dividends and interest into the calculation?
That’s a great way to beef up your emergency fund if you don’t need all the interest and dividends you are making.
What are your thoughts on having a war chest in high interest ETFs or money markets? They’re liquidable and offer much higher rate of return than high interest saving accounts.
I’m for it. At least for a good chunk :)
I understand your council.
My feeling is my zero balance Line of Credit is my emergency fund. My zero balance credit card offering zero interest for 12 months for a 2% upfront fee is my emergency fund.
I’m 52, a widower due to cancer, and I still have never been in the situation that I need to access my cash.
I have life insurance, work insurance, and normally do very well in terms of income.
I just would rather continue to invest in higher risk investments. I currently have most of my investments in private mortgages and my returns are double digits every year. This is not for everyone and I’m not recommending it. It just what works for me.
I understand what you’re saying I’m just good with the risk.
Then carry on :)
@@wellbuiltwealth 👍
A fantastic overview, but I have a question: When are the markets "down", -10%, -25%, -40%? Okay, I can for sure agree that at -40%, the markets are well and truly down, but what is the point at which we turn to the war chest vs selling bonds or equity (I mention bonds because it's been a pretty bad two years for an aggregate bond ETF - ZAG is down 24.2% from its high of $17.10)? Your thoughts would be appreciated.
Thanks for the comment. That’s actually a case by case situation. That said, I wouldn’t rush to the war chest.
Market crash happens fast so it doesn’t take long to see the bottom.
I’d say the market is down when the book value of your investments is greater than their current value.
@@murraytown4That’s an interesting thought. Our portfolio today is close to 50% what we invested and 50% gains.
Looking forward to working with you soon... Inflation is a killer. While we hear about 5-7% inflation the last few years, it seems that basket to determine CPI and true inflation rates is not realistic.
I assume you would advise putting the war chest into a TFSA if you had room? Then its small gains would be tax free??? I would like to one day hear your thoughts on bullion as part of your war chest. It seems modern day FAs don't seem to like bullion but in the long term its done well against inflation and is very liquid.
You bet, if you have the room, start the war chest off in the TFSA. As for gold as part of the war chest, well…it definitely doesn’t fit the definition of “boring”’given how volatile it is. So I don’t think it makes for a great fit for a war chest. But I definitely don’t have a problem with owning it. No reason why it can’t or shouldn’t be part of an overall diversification strategy. But too volatile to be considered “liquid and boring.”
well its definitely not boring but its better than cash which has a guaranteed loss over time. It's losing value every day now. @@wellbuiltwealth
Oh I hear you. For sure. But the main focus for an emergency fund is to make sure the money is there and not exposed to volatility. But ultimately, you can do whatever you feel comfortable with.
Get out of my head! I've just been debating this...recently retired, but no CPP / OAS for 15 years. In the meantime, dividends wil be my main source of income. Should I be concerned that perhaps dividends may not be paid in some years and still keep a complete 2 years on hand?
Ha! I’ll try :)
Can’t comment on your situation specifically because I don’t have all the details. But 2 years is just a rule of thumb.
Cheers
if you have a 60/40 or 80/20 portfolio, does the warchest count in the 40 or 20 fixed income?
Depends how it’s set up. That could potentially work but certainly not ideal for the full amount.
Unfortunately, sometimes it will take more than 2 years for the market to fully recover.
Yup! But we adjust accordingly :)
Then make it 3 or 5 years. Nothing is set in stone, but the concept is very logical.
What about cash hidden in a mattress. Isnt that a war chest. Liquidy and Boring.😜
About as liquid as it gets! Anything but boring though. Very cool party trick :)
Lol nobody I know has that much in liquid assets. Too unrealistic. 😮
Think it depends on your stage in life, we are a year from retirement, have 5 years of required income in stacked GIC starting next year, so we can actually enjoy our retirement without worry about the market. To each of your own, it really depends on your goal & risk tolerance.
Too many commercials, are you broke man?