No. of Recommendations: 0
soui says:
I was thinking about the presence of a cash buffer (MMF and laddered CDs) in an early retirement portfolio. Naively, it would seem to me that if one separates out this cash buffer of N years of living experience, one can withdraw more aggressively from the non-cash portion of one's portfolio. The point is: how much does a buffer increase a safe rate of withdrawal?

intercst says:
I varied the %stock allocation from 100% to 64% for a 50 year pay out period. An 82% stock/18% fixed income gives the highest 100% safe withdrawal rate, 3.37%.

I'm not sure this answers what soui is asking. I'm pretty sure it doesn't answer the question I have.

I assume your study takes distributions evenly from the two asset classes. But what I'm more interested in is the strategy that you have N years of money in cash (MMF, CD, etc), and when the stock market return is low, you withdraw only from the fixed income portion and leave the stock stuff alone. Later, when stock market returns increase, you can withdraw more than you need to replentish the cash portion.

Has anyone done a study which takes this kind of strategy into account? It seems to me that the "safe withdrawl rate" would be higher...

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