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Intercst writes:

I agree that in retirement one should keep a minimum of 5 year's worth of needed investment income out of the market. However, a 30-year-old planning to retire at age 50 won't need any investment income for another 20 years. Does such a 30-year-old still need to keep 5-year's worth of living expenses out of the market, or would a 6-month "emergency fund" be sufficient.

Certainly you're not suggesting that a 30-year-old spending $50,000 per year wait until he had accumulated $250,000 in a money market fund before he invests his first dollar in the stock market.

I'm surprised at you. What I'm saying is what we have preached in Fooldom from Day One. Money you know you will need from savings in the next five years or so should NEVER be invested in the stock market. IMHO if you're silly enough at ANY age to invest money in stocks that you KNOW you will or must come from your savings in the next five years, and then you see the market plunge just as you have to take that money out of your savings to cover that expense, then you deserve the hardship you have created for yourself. I know for a fact you don't plan that way.

As you well know, it's utterly ludicrous to think one must wait until a $250K pot is amassed prior to investing. Will that person have to take that $250K from savings within the next five years? Not likely, because that person will have wages from which the vast majority of needed income comes. OTOH, if that person intends to buy a home and will need $20K for a downpayment, then that $20K must be amassed outside of the stock market to ensure it's there when needed.

Or maybe that person is an early retiree, like you, who must live exclusively on income from savings (i.e., no Social Security, no pension, no job wages). If that's the case, and they need $50K per year to live on, then absolutely that person must have $250K NOT invested in stocks to cover the 5-year period of withdrawals from savings.

Why is it I suspicion you knew what my response would be before you even asked the question? Are you testing me or simply enjoying a slight bit of harassment to enliven an otherwise boring day? :-)

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