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"So you had a cash cushion of about a year, and what if the market had not recovered but had slumped for say another 5 years? 10 years? This is what concerns him."

Not exactly ...

In June 2007, I made a sale and topped-off our 3 year cash cushion. In October 2010, we had about 1 year of cash left and I made the first sale since 2007 to start replenishing the cushion back to 3 years of planned expenses.

I did take the dividends from our joint account. That was about 10% of our dividends with the bulk being in our IRA's. Did not want to take money from the IRA's because of the 10% penalties and did not want to mess with 72t schedules or other things.

A number of sources recommend a 3 to 5 year cash cushion of actual cash or part cash and near cash. Near cash can be bonds. Bond funds can be used for the last year or 2 of a five year cushion but they are susceptible to capital loss during a down-turn.

I agree with AJ that this seems to be a plan on a shoestring. When we retired, I made a bullet-proof plan and ran it across every planning guide I could. I did want to have my wife and I out trying to pickup jobs for grocery money.

Does that help you?

All holdings and some stats on my profile page
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