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While most retirement portfolios include allocations to stocks and bonds in the years leading up to retirement, most retirement savers don’t hold much more than an emergency cushion in cash.Thus, an important job in the years before retirement is building up that cash cushion.The good news is that cash yields are up, meaning cash holdings aren’t the “dead money” they were a few years ago. And equity investments have performed well, tooat least until very recently. That means that most investors can build their cash stakes, at least in part, by pruning appreciated holdings.Here’s some guidance on the amount, source, and location of those liquid reserves, according to the Bucket approach to retirement portfolio planning. Rightsizing Bucket 1 Your cash bucket should consist of one to two years’ worth of portfolio withdrawals, not living expenses.In order to set up Bucket 1 initially, think through your cash flow sources for the first few years of retirement.For example, let’s say a 66-year-old wants to retire in two years and expects that he’ll need to spend $80,000 per year, in total, from his $1.5 million portfolio, at that time. He wants to delay filing for Social Security until age 70, so all of his spending will come from his portfolio in those first few years of retirement. After that, roughly half his spending needs will come from Social Security.If he wanted to be conservative, he could build a cash cushion consisting of $160,000his years 1 and 2 portfolio withdrawals.His Bucket 2high-quality bondswould consist of eight years’ worth of portfolio withdrawals, which at that point will be $40,000 per year. The remaining $1 million and change could go into a globally diversified equity portfolio. Where to put the money? It’s also worth considering the “where” of your liquid reserves. To do so, consider your sequence of withdrawals in retirement.Taxable accounts are often first in the queue for retirement withdrawals because their ongoing tax costs are higher than tax-sheltered accounts.But some retirees may benefit from spending from their tax-deferred accounts early in retirement, with an eye toward reducing future required minimum distributions and tax bills. This is a good spot to get some advice from a financial or tax advisor.Armed with the knowledge of where you’ll turn for your spending in the first part of your retirement, you can then figure out where best to hold your liquid reserves. Where to get the money? The next step is figuring out how to build up this reserve. Ideally, you’d give yourself a couple of years to enlarge your cash position rather than having to find the money just before retirement.For preretirees who are still saving for retirement, start by directing new contributions into cash. Say, for example, the aforementioned retiree is directing a couple years’ worth of IRA and 401(k)contributions to cash. He could arrive at nearly half his target cash allocation by the time he reaches his retirement.There’s also potential bonuses and inheritances. If you’ve recently received a surprise cash injection, the assets are a logical source for bulking up cash reserves.Another solid option is to build up cash by peeling back on highly appreciated asset classes, especially US stocks. Trimming equities and adding those assets to cash and bonds reduces risk and helps cover cash flows for the first few years of retirement.Finally, you can reduce risky positions. Consider the employer stock you know you should scale back on or the individual-stock portfolio that’s duplicative of what’s in your mutual funds. Such holdings can be ideal sources when building up your cash reserves, but mind the tax consequences if you’re selling them from a taxable account. This article was provided to The Associated Press by Morningstar. For more personal finance content, go to https://www.morningstar.com/personal-financeChristine Benz is director of personal finance for Morningstar. Christine Benz of Morningstar
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E-Commerce
U.S. President Donald Trump is pushing China and India to stop buying oil from Russia and helping fund the Kremlin’s war against Ukraine.Trump is raising the issue as he seeks to press Russian President Vladimir Putin to agree to a ceasefire.But cheap Russian oil benefits refiners in those countries as well as meeting their needs for energy, and they’re not showing any inclination to halt the practice. Three countries are big buyers of Russian oil China, India and Turkey are the biggest recipients of oil that used to go to the European Union. The EU’s decision to boycott most Russian seaborne oil from January 2023 led to a massive shift in crude flows from Europe to Asia.Since then, China has been the No. 1 overall purchaser of Russian energy since the EU boycott, with some $219.5 billion worth of Russian oil, gas and coal, followed by India with $133.4 billion and Turkey with $90.3 billion. Before the invasion, India imported relatively little Russian oil.Hungary imports some Russian oil through a pipeline. Hungary is an EU member, but President Viktor Orban has been critical of sanctions against Russia. The lure of cheaper oil One big reason: It’s cheap. Since Russian oil trades at a lower price than international benchmark Brent, refineries can fatten their profit margins when they turn crude into usable products such as diesel fuel. Russia’s oil earnings are substantial despite sanctions The Kyiv School of Economics says Russia took in $12.6 billion from oil sales in June. Russia continues to earn substantial sums even as the Group of Seven leading industrialized nations has tried to limit Russia’s take by imposing an oil price cap. The cap is to be enforced by requiring shipping and insurance companies to refuse to handle oil shipments above the cap. Russia has, to a great extent, been able to evade the cap by shipping oil on a “shadow fleet” of old vessels using insurers and trading companies located in countries that are not enforcing sanctions.Russian oil exporters are predicted to take in $153 billion this year, according to the Kyiv institute. Fossil fuels are the single largest source of budget revenue. The imports support Russia’s ruble currency and help Russia to buy goods from other countries, including weapons and parts for them. David McHugh, AP Business Writer
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E-Commerce
Wall Street is holding steadier following its see-saw ride that bracketed the weekend. The S&P 500 was up 0.1% in early trading Tuesday. The index is coming off its best day since May, which followed its worst day since May. The Dow Jones Industrial Average was edging up 27 points, and the Nasdaq composite was flat. Worries are still high that President Donald Trump’s tariffs may be hurting the economy. But increased hopes for cuts to interest rates by the Federal Reserve, along with a stream of stronger-than-expected profit reports from U.S. companies, are helping to support the market.Wall Street headed higher in early trading Tuesday as markets’ anxiety over last week’s poor jobs data appears to have dissipated as investors turn their attention to another batch of corporate earnings.Futures for the S&P 500 gained 0.3% before the bell, while Nasdaq futures climbed 0.4%. Futures for the Dow Jones Industrial Average were effectively unchanged.Palantir Technologies is heading toward another record high after booking its first $1 billion in quarterly sales and raising its outlook for the year. Shares surged more than 6% to $170 before markets opened, which would be tops for the company that has already notched record highs four times this year. One year ago, Palantir shares were going for about $24 each.Shares of Caterpillar fell 3.5% in premarket after the farming and industrial equipment maker’s second-quarter profit fell short of Wall Street targets. The Texas company’s operating profit in the period fell 18% from last year, which company executives blamed on “unfavorable manufacturing costs” related to higher tariffs.Coming later this week are earnings reports from The Walt Disney Co., McDonald’s and DoorDash, along with updates on U.S. business activity.Investors appeared to have recovered some confidence after worries over how President Donald Trump’s tariffs may be punishing the economy sent a shudder through Wall Street last week.Reports from big U.S. companies have largely come in better than expected and could help steady a U.S. stock market that may have been due for some turbulence. A jump in stock prices from a low point in April had raised criticism that the broad market had become too expensive.At the same time, signs of weakness in hiring by U.S. businesses have raised expectations that the Federal Reserve will cut interest rates at its next meeting in September, potentially a plus for markets.Elsewhere, at midday in Europe, Germany’s DAX gained 0.8%, while the CAC 40 in Paris edged 0.2% higher. Britain’s FTSE 100 was up 0.5%.In Asian trading, Tokyo’s Nikkei 225 index gained 0.6% to 40,549.54 while the Kospi in South Korea jumped 1.6% to 3,198.00.In Hong Kong, the Hang Seng rose 0.7% to 24,902.53. The Shanghai Composite index surged 1% to 3,617.60.Australia’s S&P/ASX 200 jumped 1.2% to 8,770.40, while the SET in Thailand climbed 1.3%.India’s Sensex was the sole outlier, losing 0.5% on concerns over trade tensions with the United States as the Trump administration pushes for cutbacks in oil purchases from Russia.India has indicated that it will continue buying oil from Russia, saying its stance on securing its energy needs is guided by the availability of oil in the markets and prevailing global circumstances.“Trump’s threats of ‘substantial’ tariff hikes on account of imports of Russian crude pose a quagmire for India,” Mizuho Bank said in a commentary. “Between exacerbated U.S.-imposed geoeconomic headwinds and financial/macro setbacks from Russian oil advantages lost, pain will be hard to avert.”The Indian rupee hit another all-time low, dipping to 87.7 against the U.S. dollar.In energy trading, U.S. benchmark crude oil shed 73 cents to $65.56 per barrel, while Brent crude, the international standard, gave up 64 cents to $68.12 per barrel.The U.S. dollar rose to 147.60 Japanese yen from 147.09 yen. The euro slipped to $1.1541 from $1.1573. Associated Press
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