while mentally we think cash buffers add some mythical benefit , they really don't . they are only a mental thing .
in fact looking at the 119 30 year retirement cycles we had to date 50/50 and 100% equities had almost the same success rate .
the reason is without the weight of cash and bonds the up years are so much higher that even with the drops you still tend to have a higher balance .
mentally most of us don't want high equity positions in retirement , but financially there is no real down side ..
cash buffers are a mirage .
as famed researcher michael kitces points out
Executive Summary
As baby boomers continue into their retirement transition, two portfolio-based strategies are increasingly popular to generate retirement income: the systematic withdrawal strategy, and the bucket strategy. While the former is still the most common approach, the latter has become increasingly popular lately, viewed in part as a strategy to help work around difficult and volatile market environments. Yet while the two strategies approach portfolio construction very differently, the reality is that bucket strategies actually produce asset allocations almost exactly the same as systematic withdrawal strategies; their often-purported differences amount to little more than a mirage! Nonetheless, bucket strategies might actually still be a superior strategy, not because of the differences in portfolio construction, but due to the ways that the client psychologically connects with and understands the strategy!
https://www.kitces.com/blog/are-retirement-bucket-strategies-an-asset-allocation-mirage/
Executive Summary
Cash reserve strategies that hold aside several years of spending to avoid liquidations during bear markets are a popular way to manage withdrawals for retirees. In theory, the strategy is presumed to enhance risk-adjusted returns by allowing retirees to spend down their cash during market declines and then replenish it after the recovery. Yet recent research in the Journal of Financial Planning reveals that the strategy actually results in more harm than good; while in some scenarios the cash reserves effectively allow the retiree to “time” the market by avoiding an untimely liquidation, more often the retiree simply ends out with less money due to the ongoing return drag of a significant portfolio position in cash. As a result, the superior strategy for those who want to alter their asset allocation through market volatility (the effective result of spending down cash in declines and replenishing it later) appears to be simply tactically altering asset allocation directly, without the adverse impact of a cash return drag. Nonetheless, this still fails to account for the psychological benefits the client enjoys by having a clearly identifiable cash reserve to manage spending through volatility – even though the reality is that it results in less retirement income, not more. Does that mean cash reserve strategies are still superior for their psychological benefits alone, even if they’re not an effective way to time the market? Or do total return strategies simply need to find a better way to communicate their benefits and value?
https://www.kitces.com/blog/researc...s-dont-work-unless-youre-a-good-market-timer/
FOR THE RECORD I DO USE A CASH BUFFER , it just feels more comfortable to me even though financially there is no real benefit
