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Originally Posted by willravel
The $4m would be in a savings account with a reasonable interest rate (not cash). I'd have more invested, but I've found in the past that having too much of my worth tied up in investments can make for trouble if there's an emergency and I need it. I had to take a rather alarming loss on some of my investments a year and a half ago. It left an impression.
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This shouldn't prevent you from having much of that in fixed-income investments such as long-term and short-term bonds. $4m out of $5.5m in assets is rather high. That's nearly three quarters (75%) of your "portfolio" sitting in cash. What will you do if inflation runs amok? Your $4m could be decimated in one or two years. As a retired senior, it makes sense to have a low proportion of stocks, since there are few short-term benefits to holding them, but one benefit is that they protect your money from inflation.
Having that much cash sitting in a savings account will only earn you around $100,000/year (assuming 2.5%, though even a more generous 3.5+% would only earn around $150,000). Your portfolio of $1.5m would reasonably earn you around $90,000 to $100,000/year (assuming around 6%). This is quite a bit shy of your desired $330,000/year. How did you do your math?
If I were your advisor, I'd tell you to do this with your assets:
10% cash, 25% stocks, 65% bonds
This is rather conservative. And depending on the bond market, you might want to shift some of that into stocks. An alternative shift in a poorly performing bond market (due to inflation) could be:
10% cash, 35% stocks, 55% bonds
Still rather conservative. The bonds would be guaranteed income, and the stocks would protect you from inflation. I would suggest some foreign ownership too if you haven't considered that.
I would divy up your cash holdings with a savings account, CDs, and treasury bills. This 10% would still be $550,000, which would be far more than one year's income if you consider your $330,000/year. Isn't that more than enough for emergencies? When you have bonds that are continually becoming due, you will always have cash to move around. EDIT: There are those who would argue that 10% in cash is too high, that 6% to 8% would be more ideal.
What say you?