Investing in Retirement

Have been doing something similar. Two points to note that will affect the amount you should put aside for living expenses and as a hedge against a bear market:

o The biggest drop in dividend from one year to the next that I have experienced in my portfolio thus far is roughly a 33% cut in 2008/09. So if your expenses is less than 67% of your yearly dividend year you may be able to make do with less of a cash cushion for living expenses.

o At the depth of a recession, some of your counters may do a cash call. You may end up being severely diluted if you have no cash cushion for that and other investment purposes especially if there is a "sale" on.

Just for sharing, I only keep about 50% of my yearly living expenses as a cash cushion (mainly for emergencies) as I aim to control my living expenses to below my yearly dividend income. Last year it came in at about 75% so the cash cushion is worth about a great recession event lasting more than three times as long.

I separately hold 10% of my portfolio in cash as an investment opportunity fund and deploy it only if I can buy a portfolio of stocks for P/E 6 and below.

Finally, you may want to think through the possibility of a systemic black swan event that can throw you completely off course. A personal example for me is CLOB in 1997 which set me back a couple of years.

Source: http://www.valuebuddies.com/thread-2810.html

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