How Much Investment Needed to Earn $1000 a Month?

[Cheetahwoman7]

I don't know enough to figure out the amount of interest paid against an amount invested to get a monthly return. I'm sure there's some sort of calculator somewhere that does this.

What I'm looking for is to find out how much money needs to be invested at the most common current rate (seems to be a bit over 5% right now) to earn $1000 a month. I'm sure it's an astronomical figure, but I'm curious.

Thanks in advance,

CJ

[safari]

$1000 a month would give you $12,000 a year, so considering E-Loan's 5.5% rate, you'd need to deposit $218,182 to give you that income. Of course, if you have that kind of money, it wouldn't make sense to keep it all in a savings account.

[Cheetahwoman7]

Thanks Safari,

No, I don't have that much money, but I'm working on it. *wink* Where would you safely invest that amount of money if you had it? Would it bring a higher return and therefore you'd need less $$ to invest to make that $1000 a month in interest?

[Bluezy]

Many investments with higher yields carry significant risk to your principle. You might consider keeping $1,000.00 per month distribution as a goal to work towards. Save as much as you can and re-invest all dividends until you reach your goal.

I am in a similar situation, only building my IRA for the highest possible distribution upon my elder years. I chose a targeted retirement mutual fund from T. Rowe Price (Retirement 2040) now bringing in around 12%, even during the bear. Therefore, you might want to consider certain mutual funds with companies like T. Rowe Price, Vanguard or Fidelity, that offer experience and solid fund management.

Good luck to you! Cheers!

[Cheetahwoman7]

Thank you, Bluezy. That brings up another point that I need to look into, retirement investments! In the way-back-when time, I started a regular IRA. It doesn't have much in it because I moved to a job (teaching) where they had a retirement account and I was never sure if I could still contribute to an IRA. Then along came the Roth IRA, and I was even MORE confused. I'm getting to that age where I really need to get off my patooty and start investing something into an account that will help me with organizing my retirement funds.

If I have a retirement account at work, what other types of retirement accounts am I allowed to have? Which type of account would allow me to put the MOST $$ away until retirement? Would a Roth be better than a regular IRA? Should I still contribute to my "old" IRA, leave it alone, or roll it over into something else?

Thanks in advance,
CJ

[meaghanchan]

Originally Posted by Cheetahwoman7

If I have a retirement account at work, what other types of retirement accounts am I allowed to have?

You are allowed to have, in addition to your retirement account at work, an IRA and a Roth IRA, though I don't think (double-check on this) you can contribute to both in the same year. You can contribute up to $4,000 per year ($5,000 if you're over 50) to either a Roth IRA or a traditional IRA.

Which type of account would allow me to put the MOST $$ away until retirement?

Since the limit's the same, either one. However, in a Roth IRA, your contributions grow tax-free. (the downside is, unlike in a traditional IRA, your contributions are not tax-deductible). So if you put $4000 a year in a Roth IRA, and in 10 years (with growth) your total is $50,000, you own the whole $50,000... If it was a traditional IRA, you'd have to pay taxes on the money as you withdraw it.

Would a Roth be better than a regular IRA?

Depends on your age. If you have a long time to retirement, the benefits of the Roth (tax-free growth) outweight the downside (contributions not tax-deductible). If you are retiring in just a few years, the inverse is probably true- the downsides outweigh the advantage of tax-free growth, since it won't have a chance to grow much in 5 years or so.

Should I still contribute to my "old" IRA, leave it alone, or roll it over into something else?

I'll leave that up to someone who knows more than me about all that stuff! I only have 1 IRA, (a Roth) and haven't had to deal with any rollover stuff. I don't know all the particulars.

[Ima saver]

It depends what your old IRA is in? A bank, a mutual fund, cd??

[Cheetahwoman7]

Thank you, Meaghanchan,

I'd love to retire today, if I could...hehehehe Doubtful that is possible. For me to get my full retirement, I need to teach another 8 years. I don't know if I'll be able to hang on that long with all the micro-managing that seems to be taking place in education now. It's a bit too restrictive for me, as I'm a believer that all children learn in different ways and there's no ONE right way to teach them. I'm the total opposite of what's been coming down the pike in regards to, "Here's the book/system/program. Teach ONLY this!" It just all rubs me the wrong way!

Another thing that I need to consider is that my district has changed its policy in regards to seniority. They now base it on "time in grade", which means how many years you've been teaching a particular grade CONSECUTIVELY!!!! I have nine years with this school district (11 with another) and have been at the same school this whole time, but only have one year of time in grade (well, not even that) as I've been in four different grades in four years!!! It's not because I'm a bad teacher, it's because I'm so good they can plug me into any hole and know that I can teach there. Honest!

Amazingly, all of this lead to me being "expendable" last year. They had five upper grade teachers who had less overall seniority than I did, but guaranteed them jobs because of their time in grade. I taught a combination class (5th-6th) and, again, only had that one year in that weirdly mixed up grade. There wasn't going to be enough kids to have another combination class so I thought I wasn't going to have a job! Infact, I even posted on here trying to figure out what my tightest budget could be so that I could survive until I found something else to do. I wasn't notified untill the middle of July that one other teachers was leaving and I could have their position!

Still, they're managing to leave me hanging in the seniority department because this is ANOTHER new grade (although I taught it for two years when I first started at that school). And get this, it will be a looping class, which means I'll teach 4th grade this year and move with my kids to 5th grade next year...thereby not gaining any seniority AGAIN! Politics just kill me!

Sorry, I went off on a rant. I need to get off my soapbox. It just suffices to say that I feel I'm on such shakey ground and nothing is a sure thing. The hypothetical $1000 a month is the LOWEST (at this time) amount of $$ I need to survive each month. That's why I proposed the question. I'd like to know that there is the possibility that I have the option of leaving my job or me not having a job, but still being able to survive.

Thanks for the help,

CJ

[Cheetahwoman7]

Hi Ima,

The "old" IRA is in a bank and is worth about $4,000. I know, not much, but I was really young when I started it and at that time the amount you could put in wasn't anywhere near the $4000 you can put in per year today. I think I'll have to track it down again as the bank's been sold. That's happened at least three times in the last 20 years. It's like playing hide and seek with my own money!!!

[Ima saver]

You probably should get it transferred to a good mutual fund company, I suggest Vanguard. If you can track down the account, Vanguard will even transfer it and do all the paper work for you.
I sure wish i could afford to live on $1000 a month. Then we could retire, cause I have enough cash to earn that much interest!

[Cheetahwoman7]

Hi again, Ima,

That $1000 is the BARE MINIMUM that I'd be able to live on. It doesn't include health, dental, or long term care insurance, sorry to say. I've always been single, so it's only my income that I have to work with when it comes to retirement savings.

Luckily, my house is paid off, so I only have to worry about the monthly bills and taxes on it. My car's paid off too. Might need a newER one in a few years. Mine's a '95 Mitsubishi Expo with about 100,000 miles on it. Been acting a bit strange lately, so we'll have to see what needs to be fixed.

As far as the IRA goes, I wonder if I can combine it with another $2,000 that I have in a small retirement account I had when I wasn't working as a teacher. It's been sold off a number of times as well. Anyone know how that works? If you can combine a employee retirement account that's not active with an IRA?

Thanks,

CJ

[creditcardfree]

Originally Posted by meaghanchan

You are allowed to have, in addition to your retirement account at work, an IRA and a Roth IRA, though I don't think (double-check on this) you can contribute to both in the same year. You can contribute up to $4,000 per year ($5,000 if you're over 50) to either a Roth IRA or a traditional IRA.

You can contribute up to $4000 per year. It could divided between a traditional and roth ira accounts. I personally would put it all in the Roth...tax free in retirement!!

[creditcardfree]

Originally Posted by Cheetahwoman7

As far as the IRA goes, I wonder if I can combine it with another $2,000 that I have in a small retirement account I had when I wasn't working as a teacher. It's been sold off a number of times as well. Anyone know how that works? If you can combine a employee retirement account that's not active with an IRA?

Thanks,

CJ

Yes, you could roll over the employee retirement account into a traditonal ira at another company. This a tax free rollover. You fill out paperwork with the company you want to move the money to. They will contact the employer account and request the money sent to them for your account.

Some people advise against combining 401k money into a traditional ira, because it keeps you from moving the 401k money into another company 401k. If you want to roll it into another 401k at some point. Just set up a separate rollover ira account. Call the mutual fund company for more information specific to your situation for clarification.

[Cheetahwoman7]

Thank you, Creditcardfree,

I don't know if I'll ever work for another private company again where I can roll those initial retirement funds into their retirement account, or are you talking about just placing it with another "holding" company where it will be invested? It would be wonderful if I could just stick it into my teacher's retirement, but I'm VERY sure they won't let me do that. The account it's in now I think only pays about 2% a year. *heavy sigh*

I need to start to get ALL of my financial ducks in a row. The older you get, the faster time flys. Eight years doesn't really seem that long to get things together and prepare for retirement when you're busy doing other things.

Thanks for all the help so far,
CJ

[disneysteve]

I just skimmed through, so forgive me if this has already been said.

If you are in your employer plan, you can contribute to a traditional IRA BUT you can't take a deduction for it, so it makes no sense to do so. However, you CAN contribute to a ROTH, so that's the way to go. The only advantage to a traditional IRA is the tax deduction. Lose that and the account offers no benefit.

We just went through this with my wife. We have funded a spousal IRA for her each year, including this year. Well, she went back to work and now has a 403b plan. So I had to recharacterize her 2006 IRA contribution into a ROTH account since leaving it in the IRA made no sense.

[creditcardfree]

Originally Posted by Cheetahwoman7

Thank you, Creditcardfree,

I don't know if I'll ever work for another private company again where I can roll those initial retirement funds into their retirement account, or are you talking about just placing it with another "holding" company where it will be invested? It would be wonderful if I could just stick it into my teacher's retirement, but I'm VERY sure they won't let me do that. The account it's in now I think only pays about 2% a year. *heavy sigh*

I need to start to get ALL of my financial ducks in a row. The older you get, the faster time flys. Eight years doesn't really seem that long to get things together and prepare for retirement when you're busy doing other things.

Thanks for all the help so far,
CJ

If you have been told it can't be rolled into your current teachers retirement fund than I would just find one mutual fund company (ex Vanguard or Fidelity) to set up a rollover IRA. This gets the money out of the old employers retirement account.

Yes the money would then just sit in that account growing until you need the funds in retirement. You should be able to get more than 2% on average in a mutual fund...more like 8-10% average!!

By picking one mutual fund company that has a large number of investments to choose from it simplifies where all your accounts are. Then you could also set up a Roth IRA account at the same company.

Good luck.You'll get those ducks in a row, I'm sure of it.