Retirement War Chest | How Much Should You Have In Cash Reserves?

Emergency funds are not a sexy topic. But if we call it a war chest, well… game on.

Links:

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Intro (0:00)
Emergency Fund Basics (0:48)
How Much Should You Have? (2:44)
Scenario 1 (4:26)
Scenario 2 (8:20)
Scenario 3 (9:20)
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DISCLAIMER: All videos on this channel (including this one) are for educational or entertainment purposes only. They are not (and are not intended to be) financial, investment or legal advice. It is our firm position that everyone has a unique situation and should seek professional advice on how best to navigate it. Rhys Martell is a Chartered Investment Manager (CIM), a Fellow of the Canadian Securities Industry (FCSI), a Qualified Associate Financial Planner (QAFP) and more. However, he is not registered to provide investment advice and, therefore, does not provide specific investment recommendations. Those looking for specific investment advice should seek out a registered professional.

[billyrock]

Excellent advice ✅

Stress is the #1 enemy in retirement. (And pre-retirement). 😉

Work, relationship and financial stress greatly reduce life expectancy. Best to eliminate ALL stress. 👍

[vm]

Fantastic video. When I first decided to retire early I was dejected because saving DURING retirement never even occurred to me. I thought I would have to work until 65 (shoot me!). Now I have slush funds built into my plan (safe, fluid and boring), and I am all set! For the first time in my life I am not depressed/stressed about money!

[andysterdam]

Amazing how many people don’t understand the importance of having a war chest. Even Garth Turner has a blind spot on this point, which is no surprise considering that he’s a financial advisor who wants to see every dollar invested. The ability of not having to dip into your investments at a loss during bear markets is like a superpower. Good job raising awareness!

[investmentinrentalproperti]

Divide your assets into buckets for the short, medium, and long term. Each bucket has a risk/reward profile to match the time horizon. Periodically weigh the contents of your buckets versus your upcoming needs and “pour” your money from bucket to bucket.

[TheReids-lr]

Omg I’m so Antoine!! Did you make this video just for me Rhys? 🤣. I’m hearing you. Will be in touch next week. 👍
All you videos rock!!

[Helix]

Amazing advice. I love the idea of calling it a war chest. The idea applies to non-retired people too 💪

[laed]

Now to the IMPORTANT stuff...I really enjoy your content Rhys. They're interesting to watch and they're packed with great information and ideas. Keep them coming.
I watch every one of your videos to the end, though I use incognito mode to keep the YT algorithm from controlling my viewing content. Keep up the great work.
DM me if you're coming back to the Island to visit. Cheers LE.

[cantireman]

Ryhs, I love your simple explanations for some of the most important decisions all of us will have to make in retirement! You make it easy to understand and argue reasons for and against different strategies! Keep them coming!

[annw]

Great video. I rewatched this after watching your latest on what to do with a windfall, in my case a large cash infusion into my RRSP and LIRA direct investment accounts due to the financial institution my former employer used forcing me to sell all my investments in order to move them. (I want everything in one place). We already had a war chest, but not as large as you suggest. Now we have a plan!

[daveb]

Split the war chest into 4 bags. Stagger them in 1yr GICs to get the higher rate compared to shorter duration GICs, 3 months apart. Every 3 months one will mature, and can be allocated different if the need arises. Can stagger more bags if 3 months is too long. Can also do cashable GICs but they will have lower rate.

But honestly, it would barely keep up with inflation. And interest rates for HISA are even worse. Melting ice cubes. The purchasing power would melt to nothing given enough time.

[dh]

I’d love to see a video for people with goals to retire extra early ( 45-50yrs old ) how would you calculate how much you need and would the withdrawal rate still be 4%?

[ronmaunder]

A subject i haven’t totally thought about. Now I am ! Always appreciate the Solid Advice. Thanks

[sandeeptanjore]

Once again excellent video and good advise by Rhys.

[scubeedu]

Great video. Do you have any suggestions on how to fund a war chest if you're already retired and living off of RIF payments?

[dougk]

I call mine the "All Hell Breaks Loose Plan, " but I really like the "War Chest, " so I will change it in my spreadsheet to that. Once I started building my (now called war chest), the thing that became apparent is that after taking into account CPP, OAS and defined pension payments, the amount of my own money required to meet planned annual expenses in the future was not that big of an amount. I currently have 6 years saved, and I aim to get 10 years. I know it's overkill, but I'm not concerned I'll have too many "near" cash-type investments. Like another comment on this page, parts of my war chest are in my TFSA, RRSP, LIRA, Spouse's RRSP and taxable investment accounts. I have been simply plowing dividends into high-interest savings instead of back into ETFs.

Easy Peasy (as some guy I watch likes to say.)
D

[freedomlife]

Since biggest sequence of return risk is first 5 years of your retirement, I have 5 years of stacked GIC. Afterward will maintain 3 years of required income in stacked GIC, specially our rate is still decent. Peace of mind is the king when retire. Thanks Ryhs, believe you will approve my approach.

[neilbertram]

As you were talking, I was wondering about how one's high-interest war chest is going to be ravaged by taxes, since interest income is so tax-inefficient. But, arguably, the war chest can be in the TFSA or RRIF/LIF. You need to plan for cash-flow anyway, just keep the buffer in the investment account, continuously being drawn from and replenished.

What a difference a couple of years makes. Two years ago, GICs and HISAs paid essentially 0%. Keeping liquidity had a huge opportunity cost. With GICs at 5-6% now, the conversation is very different.

One last thought.... if your liquid war chest is really big, make sure you spread it about in such a way that it is all covered by the CDIC deposit protection.

[AlexOnFinance]

Great video Rhys! I almost feel like having a high dividend portfolio in Scenario 1 would have negated much of the trouble Ferdinand had with having to sell his investments during a downturn provided his dividend payments were substantial enough. There are more and more covered call option ETFs out there that have some very interesting monthly returns if one can handle the volatility and doesn't mind the additional risk and higher MERs involved with these types of ETFs. But of course, eevryone's situation is different; just saying, Ferdinand might have benefitted having some high dividend payers (whether they involve covered call ETFs or not).

[NorthernTrapper]

Hi, just subscribed and really enjoy the way you explain your information. I will be booking a call to see if we are a fit.

[James_]

My plan is to turn of my dividend reinvestment plan 6-12 months before retiring and get those funds into a HISA.