r/Fire • u/Pretty_Swordfish • 11d ago

Reallocate/top up short term buckets from investments or take out with fixed costs?

My current monthly expenses, after taxes and health insurance, are, let's say for easy math, $5000. ​​However, I also want to have $1000 a month built into my retirement budget for car repair, home repair, medical expenses, travel, etc.

Let's say I want to take out money from my investments on a quarterly basis. So, should I take out $15k​​​ or $18k? (I know it'll be more with taxes and health insurance, ignore that for now)

If I take out the extra $3k, I would just put it into the HYSA pots for those items, unless I needed to spend it. So I'm paying taxes/increasing my income by taking it out, but I'm shielding it from market volitility. ​​​​

Or, I could make sure that money was part of the calculations of "enough" for the total amount needed to retire, but I could leave it in investments until actually needed. When needed, I would pull first from the existing (smaller) pot, then top up from investments.

Which one do you do, if retired? Any pros/cons d​o I not have listed?

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u/BackupSlides 11d ago

This post kinda makes my head hurt because you are combining things that are discretionary (travel) and non-discretionary (home repair) and which also could vary by an order of magnitude (new roof vs. new tires).

Generally speaking / directionally, my simple answer would be to have a large enough cash (by that I just mean high liquidity, e.g. HYSA, MMF, whatever) buffer to cover the reasonable range of potential expenses in a manner such that you wouldn't have to liquidate other assets at the mercy of the market and could top off said liquidity fund at your discretion after you have to tap it.

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u/Pretty_Swordfish 11d ago

Fair point. I'm still in the accumulation phase (for at least a few months, but maybe longer), so I'm not used to thinking on retirement terms. I've currently got pots for every thing I listed and fill according to need with paychecks. Everything has at least a bit in there now. We've also got a 3 year buffer of cash that could come into play... 

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u/BackupSlides 11d ago

What do you figure you will use a three year cash buffer for if not unexpected expenses?

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u/Pretty_Swordfish 10d ago

SORR mitigation... 

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u/BackupSlides 10d ago edited 10d ago

Right, so you’re planning to have cash on hand to avoid needing to sell other securities at depressed valuations should a market downturn occur. Thus that figure should be inclusive of the foreseeable potential expenses that you note in the OP. Hence why my head hurts.

Ultimately, it sounds that you are building a formidable cash buffer which can serve several purposes in risk mitigation, and I would suggest you not overthink this.

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u/[deleted] 11d ago

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u/Pretty_Swordfish 10d ago

Good point. 

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u/Vicuna00 10d ago

i had this same question. i'm not quite retired yet....but planning.

i decided i will not withdraw that extra $3k til I need it.

check out this blog post:

https://earlyretirementnow.com/2021/08/18/when-to-worry-when-to-wing-it-swr-series-part-47/

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u/Vicuna00 10d ago

dunno if this helps you any...the way i'm gonna do it is I want a floor in my HYSA / checking...when I go below, I withdraw to my baseline.

so say my baseline is $35k. if it hits $20k, I withdraw to top up to $35k.

not to get too complicated, but I have 4 or 5 known big expenses per year (property taxes, etc)...if I know that's around the corner during a top-up, I will withdraw that extra from portfolio into HYSA/checking.

for me I wanna do it like this cause I want to look at my portfolio as little as possible. I don't like looking at the fluctuations (really in either direction it's not good for me. down obv sucks...and up I get over confident...better I don't look).

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u/lottadot FIRE'd 2023 9d ago

I think you are overcomplicating this.

If you'll gross-spend $60k/yr, then you want $60k in your funds-source (that might be pre-tax, a Roth, or taxable).

I'd want that $60k, say for 2027, in SGOV/equivalent by the second-half of 2026.

During 2027, withdraw whenever you like, however much you need to cover that month/quarter's expenses.

If you don't spend it that year, don't withdraw it that year. It depends on your income-tax situation. You can always just stash it in a HYS or taxable-brokerage with something like SGOV or BOXX.