Retirement Advisor: Countercultural Cash (Podcast)

Summary

• A novel piece of financial research put out by the Asian Development Bank seeks an explanation for an unexpected growing global demand for cash.
• Retirement is not the paper’s focus, yet its ideas, which I summarize, inspired the thought that increasing cash would be a winning strategy for retirement savers.
• I argue that use of old-fashioned cash could discourage spending, serve as a budgetary monitoring tool and facilitate securities purchases at times like the present when stocks are falling.

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A novel piece of financial research by the Asian Development Bank seeks an explanation for an unexpected growing global demand for cash. The paper does not discuss retirement per se, but inspires thoughts of an advantageous approach for retirement savers.

This podcast (6:41) argues that use of old-fashioned cash could discourage spending, serve as a budgetary monitoring tool and facilitate securities purchases at times like the present when stocks are falling.

Comments

[Seen_It_Before]

@Gil Weinreich - You've ALWAYS stressed the importance of having a substantial cash (or cash equivalent) cushion to deal with financial uncertainty and to be positioned to take advantage of life's opportunities. It's simply common sense, but easy to ignore in the land of capitalism and incessant consumerism. I have two relevant personal experiences to share that illuminate the value of this practice.

-- In mid-2008, at 53 years old (beginning of the Great Recession), for the first time in my life I lost my job. It was unexpected and immediate, but not financially disastrous. My wife was working, we had zero debt and paid off house and cars. At the time, we had 50% of our investable assets allocated to cash with the remainder in equities. More cash than usual, but we were being cautious with all the craziness happening in the financial markets.

It was painful to see our investments drop off a cliff, but there was no impact to our lifestyle or quality of life.

-- Today, 12 years later. The market is on its way down, again, after a remarkable 11 year bull market. We moved cross-country in 2009 to prepare for our eventual retirement in a area where we had always wanted to live. We're now both 65 years old and I have been retired since mid-2008, which was totally unexpected. My wife was the sole bread-winner for the ensuing 6 years, after 2009, while I was renovating our newly purchased (with cash) 30-year old house. Having benefited from this bull market, we started reallocating more to cash over the last 18 months and now have 65% in cash. More cash than usual, but we're being cautious with the run-up in all financial markets.

It is painful to see our investments drop off a cliff, again, but there is no impact to our lifestyle or quality of life.

Our family's life-long learning's:
> ALWAYS live within one's means.
> ALWAYS pay off debt as quickly as possible.
> ALWAYS have a cash cushion to sustain quality of life in bad times and adequate to take advantage of opportunities when they arise.
> NEVER stop learning and adapting because change is constant.

Gil - Thanks for being a constant voice for common sense investing and sustainable living. It works!

[SA For FAs]

@Seen_It_Before You are an example of true prosperity. The wise will take these words to heart and succeed as you have. Many thanks for sharing these impactful experiences.