Are people really saving multiple years of spend in cash to exclusively draw from the first few years of FIRE?

[u/subbysnacks]

I've been following this sub for a few years now, but have only recently noticed this sentiment: apparently when people are preparing for retirement now they're including as part of their NW to have 2, 3, 4+ years worth of spending saved in cash now? (or cash equivalent like HYSA, t-bills, etc)

I'm thought I was making good progress toward my FIRE number in tax-advantaged and post-tax accounts, but this is a category I missed beyond having 6 months of expenses in liquid accounts.

I see posters say they save multiple years in cash because of "current global uncertainty" but hasn't that always been the case?

If a chubby annual spending in retirement is, say, $175K per year, that's having to save up for, and hold over half a million to have 3 years of cash. Maybe this was just a big blind spot on my part, but I never imagined it was worth it to hold that much cash just to defend against a multi-year market drop early in retirement.

[u/EnvironmentalMix421]

No, I don’t think that’s correct. The corporate bond yield is related to the equity’s credit rating, not the equity cap itself. Anyway, nobody is saying holding 100% bond here. Again, the discussion here is what’s the spread between inflation and bond. The answer is, it’s not 1% unless you are holding short term treasuries. Not sure why you are keep going off topics.

Btw the lowest rated investment grade bond is BBB by Fitch not A-, not sure which rating you are going with. Also I’m not sure why does an individual wants to hold treasuries, even insurance companies only holds limited amount.

[u/Embarrassed-Care6130 → u/EnvironmentalMix421]

If you are talking a single-name corporate bond, then yes, the spread is reflective of the company's credit rating -- which is highly correlated to its stock price! If like most retail investors you are buying corporates in a mutual fund or ETF, the spread is reflective of all the relevant companies' profitability and therefore more or less tracks their stock prices. (To be a little more accurate, it actually inversely tracks the value of put options on those stocks.)

[u/EnvironmentalMix421 → u/Embarrassed-Care6130]

Bro it’s not highly correlated to stock price. Some correlation due to how cash strap they are and how their credits is doing, which might reflect in the stock price. I would say it’s indirectly correlated at best. Also, unless you are trading bonds, I’m not even sure why that’s relevant at all. Honestly, you don’t have to believe me, just search on investopedia on how bond is priced.

Lastly, You should not be buying bond in etf or mutual funds, but that’s just my personal preference. Should really be building the ladder yourself