Subject: Re: Have about 2.5 years of cash left for expenses
Assuming a person lives from their portfolio, as I do, I see two quite distinct reasons one might need a cash cushion.

One it to have cash on hand in case of an emergency of some sort--life can be unpredictable. That makes a lot of sense.

Another is to have cash for living expenses because you are afraid of the possibility that your investments might have low market prices when you do your next few small sales to generate money for living.

The latter is very much like the reasoning to buy put options against a market decline: you are spending money, reducing your long run returns, in order to buy your way out of a fear that isn't entirely rational.
If you're selling a little bit of your portfolio every quarter to raise money for living expenses over a period of many many years, the prices will vary.
Some sales will take place at high valuation levels, some at low valuation levels. Almost by definition the average price you realize will be average.
Since we don't expect more than the average over the long run anyway, why should that be a problem?

As an example, I was a little low on cash this spring and sold some Berkshire stock in early April. The valuation level wasn't great: certainly the price is higher now, but you know what? I'm OK with that.
The price I get on average for my sales over time will be just fine.
The key point is that on any given day, the price might be super low. It might last for a while, too. But you're only selling a tiny bit each time.

The upside is that without a big cash allocation all the time, that money can be invested and have a positive real return over the long haul.
That's what you're giving up if you give into fear and have a big cash pile simply because it feels good.

So, my two cents:
By all means, have a solid cash cushion for emergencies. (or even emergency investment opportunities, like Berkshire trading at $200k a share!)
But a multi-year cash cushion for living expenses doesn't make sense to me.

If a short period of low market prices is enough to push you over into the dreaded (but not real) "sequence of return risk" category, you are simply withdrawing too much money.
Plus, to know when to use your cash pile versus when to replenish it you have to be competent at valuing your investments: use the cash when valuations are low, top it up when valuations are high.
Not everybody has that skill.

Health warning: Like my habit of trashing bonds (and most especially bond funds), this view does not match conventional wisdom.

Jim