Is this too much cash, or is it appropriate?

[Anonymous]

the market is doing well right now, you should invest some of the $200K+ you have sitting around

[Anonymous]

Too much in cash

First, the poster who said to put into a Roth is right. After 5 years you can withdraw the original contribution any time without penalty or tax. That said putting it in a Roth only works if you then invest the Roth funds.

You have so much in cash it is inflation considered going down in value. Mixed of stocks and bonds should enable you to almost always be able to withdraw cash without loss. I’d keep no more than $100K absolute max on liquid assets. Personally I’d keep less.

And open a HELOC in your house. Don’t ever plan on drawing on it but you should have one for emergency access (literally everyone without copious liquidity and marketable securities should have one)

[Anonymous]

Anonymous wrote:Curious if you would be eligible for social security when you hit full retirement age. If not, you should definitely consider a Roth IRA to save more deliberately for retirement. It is easier to access Roth funds (especially the principal) in a pinch.

Yes, I am eligible for Social Security – my business pays me a salary from which Social Security and Medicare taxes are taken out.

I did look into a Roth IRA, but the problem — as I understand it — is that while I am still eligible to contribute based on my income, I can only contribute a tiny amount because the contribution limits decrease once your income is above something like $120,000. At my current income of $140,000, I believe I was only eligible to contribute something like $2,000 for the year, so not a meaningful amount.

The alternative is the backdoor Roth IRA, but if I understand correctly, there is still a five-year period where you cannot access even the contributions without paying a penalty.

I have looked into all of this stuff. I’m not financially illiterate, but it’s just that the thought of not having enough cash — or previously, the thought of having a mortgage — frankly terrifies me.

[Anonymous]

I honestly don’t think that’s too much, based on the fact that the vast majority of your net worth is in an illiquid asset (your house) and you run your own business.

I personally might invest a portion of it in the stock market, but with interest rates where they are now, it’s not an irrational decision to leave it where it is for now.

[Anonymous]

You really should have a good chunk of savings in stocks - like an S&P 500 ETF. Otherwise you’re giving up a lot of potential returns.

[Anonymous]

Anonymous wrote:Too much in cash

First, the poster who said to put into a Roth is right. After 5 years you can withdraw the original contribution any time without penalty or tax. That said putting it in a Roth only works if you then invest the Roth funds.

You have so much in cash it is inflation considered going down in value. Mixed of stocks and bonds should enable you to almost always be able to withdraw cash without loss. I’d keep no more than $100K absolute max on liquid assets. Personally I’d keep less.

And open a HELOC in your house. Don’t ever plan on drawing on it but you should have one for emergency access (literally everyone without copious liquidity and marketable securities should have one)

Thank you — yes, the HELOC is a good idea that I really should implement. To date, I’ve been hesitant to do this for two reasons:

1). I believe the interest rate currently would be something like 9.5% (yikes) if I ever needed to access it, so definitely not cheap.

2). It harkens back to the pre-2008 era when people were using their houses as ATMs to do renovations and buy SUVs, and of course we know how that story ended.

[Anonymous]

Anonymous wrote:I honestly don’t think that’s too much, based on the fact that the vast majority of your net worth is in an illiquid asset (your house) and you run your own business.

I personally might invest a portion of it in the stock market, but with interest rates where they are now, it’s not an irrational decision to leave it where it is for now.

Thank you — it’s good to know there are at least some people who share a similar point of view or at least can understand where I’m coming from.

Whenever I see the traditional advice of keeping 3-6 months in cash, it just seems so extremely low to me that I feel like I’m from another planet.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Curious if you would be eligible for social security when you hit full retirement age. If not, you should definitely consider a Roth IRA to save more deliberately for retirement. It is easier to access Roth funds (especially the principal) in a pinch.

Yes, I am eligible for Social Security – my business pays me a salary from which Social Security and Medicare taxes are taken out.

I did look into a Roth IRA, but the problem — as I understand it — is that while I am still eligible to contribute based on my income, I can only contribute a tiny amount because the contribution limits decrease once your income is above something like $120,000. At my current income of $140,000, I believe I was only eligible to contribute something like $2,000 for the year, so not a meaningful amount.

The alternative is the backdoor Roth IRA, but if I understand correctly, there is still a five-year period where you cannot access even the contributions without paying a penalty.

I have looked into all of this stuff. I’m not financially illiterate, but it’s just that the thought of not having enough cash — or previously, the thought of having a mortgage — frankly terrifies me.

So then put in $2000 per year from your cash hoard. Future you will be grateful!
If you need it for an emergency, the only part you won’t be able to access is 5 years of principal which is just $10000.
Also very happy to hear that you will get social security benefits in retirement.

[Anonymous]

Great example of why paying off your mortgage early makes very little sense. You have over 70% of your net worth tied up in your house, which you can’t liquidate without losing your current place to live (and still needing to find a roof). Meanwhile, you have no retirement accounts.

Yes, you should be investing the 270k. Spend less on your car. And get a home equity line of credit lined up if you have a true massive, costly, emergency and can’t access your investments (significant unrealized losses).

[Anonymous]

You would be far better off with $500k invested, $20k cash, and a mortgage.

[Anonymous]

You own a condo, which probably won’t appreciate that much and has HOA fees, and have lots of cash, which will only depreciate. Not good. You need something that has a good chance of appreciating a lot and outpacing inflation.

[Anonymous]

OP, don’t listen to all the morons. The stock market is wildly overvalued right now and anyone holding cash is going to be king within the next 1-2 years. We’ve been in a highly volatile sideways market since late 2020. Hold onto your cash, rake in a comfortable 5% in high yield savings and money market funds, wait until the S&P drops to 4000, and then go all in.

I’ve done this dozens of times since 1990 and I’m sitting on a $918M portfolio of mostly cash with a cost basis of $2M. When the S&P 500 hits 4000, I buy; and then when it jumps back to 5000, I’ll be $250M richer than the dumb ones that decided to buy high too early.

[Anonymous]

Anonymous wrote:Great example of why paying off your mortgage early makes very little sense. You have over 70% of your net worth tied up in your house, which you can’t liquidate without losing your current place to live (and still needing to find a roof). Meanwhile, you have no retirement accounts.

Yes, you should be investing the 270k. Spend less on your car. And get a home equity line of credit lined up if you have a true massive, costly, emergency and can’t access your investments (significant unrealized losses).

Yes, that is one way to look at it. But I guess I perceive the lack of liquidity as a benefit actually. I’m always going to need a place to live, and it’s such a fundamental need that I actually *want* it to be hard to access the money. I don’t want to be tempted to access the money any time a friend tells me that they think Nvidia stock or Bitcoin is cheap.

I know this is a controversial point, but I felt a huge sense of relief when I finally paid off the mortgage and have never regretted it.

[Anonymous]

Anonymous wrote:OP, don’t listen to all the morons. The stock market is wildly overvalued right now and anyone holding cash is going to be king within the next 1-2 years. We’ve been in a highly volatile sideways market since late 2020. Hold onto your cash, rake in a comfortable 5% in high yield savings and money market funds, wait until the S&P drops to 4000, and then go all in.

I’ve done this dozens of times since 1990 and I’m sitting on a $918M portfolio of mostly cash with a cost basis of $2M. When the S&P 500 hits 4000, I buy; and then when it jumps back to 5000, I’ll be $250M richer than the dumb ones that decided to buy high too early.

Lol, is this real??

[Anonymous]

Anonymous wrote:You own a condo, which probably won’t appreciate that much and has HOA fees, and have lots of cash, which will only depreciate. Not good. You need something that has a good chance of appreciating a lot and outpacing inflation.

You are correct about this, and it is something that I do worry about. The condo has appreciated at something like 2% per year since I bought it – it hasn’t even kept up with inflation.