Suggestions please: If I wanted $550 income per month, how much would I need?

[mrpaseo]

How much would I need and how much would I have to earn on that money, to be able to draw 550 dollars per month?

Thanks,
Ray

[KTP]

you are leaving out a ton of info that is needed.

do you want the principal untouched forever? What risk level?

$550 invested at 1200% would give you $550 a month if you can hold off taking a payment for one month and depending how it is compounded.

Maybe more reasonable would be $200,000 invested in a municipal bond fund at 3.5% annual rate of return which would give you a bit over $550 tax free each month without touching the principal.

[kork13]

An easy and reliable method: long-term CDs. With $165k in CDs earning 4% (achievable even now, though mostly in 5-10 year CDs), you would get your $550/mo of interest, and you could consistently count on it.

If you can find 6% interest (possibly in corporate bonds), you would only need $110k. At only 3% interest (shorter-term CDs, federal bonds/notes), you would need $220k.

Whatever way you slice it, if you're looking for a specific level of income, you want something reliable that won't vary so that you can rely on it. Other options for sources of income might include buying tax liens, prosper.com loans (or similar), or..... something else that others come up with.

[jIM_Ohio]

How much would I need and how much would I have to earn on that money, to be able to draw 550 dollars per month?

Thanks,
Ray

Ray-

$550/month is $6600 per year
I am assuming the $6600 needs to increase 3% per year for inflation (meaning $6600 this year is really $6800 next year and $7000 the 2nd year and each year gets a 3% raise from the year before...


If you wanted the $6600 per year for 20 years, a 5% return is what you are looking for

$6600/.05=$132,000

If you wanted the $6600 per year for 30 years, a 4% return is what you are after.

$6600/04=$165,000.

If you want the $6600 per year for 40 years, a 3% return is what you are after.

$6600/.03=$220,000.


If you want the $6600 to be available FOREVER use a 2.5% return. (More on this below).

$6600/.025=$264,000


How you get those returns depends on the percentage. The longer the money is needed, the lower the percentage of withdraw to account for market deviations. I use retirement calculators and monte carlo simulations to know those numbers above...

5% return is probably all bonds and cash. Very little chance of failure over a short time frame (like 20 years), but at end of 20 years, those bonds would not be worth very much at all.

4% return for 30 years should have a 60-40 allocation (60% equites; 40% bonds and cash). There is a chance (about 5 times out of 100) the 60-40 will run out of money within 30 years. Depending on what this money is used for, and the amount of planning, this can be dealt with by controlling what the $6600 is spent on (easier to control spending than the market). For example, if 60-40 had a negative return, do not increase 3% for inflation that year.


3% return for 40 years is probably same 60-40 allocation, the lower return is used because over 40 years the market will have a negative return more times than over 30 years.

2.5% return is lowest real return IMO because the dividends of the S&P 500 very rarely has its yields go below 2.5%. So I would do about 80-20 (80% equities, 20% bonds) in this case, putting all 80% of equities into dividend payers, and more than likely this portfolio will grow even while you withdraw, and can supply the income in a down year just from dividends and interest alone.


All percentages account for both inflation (increasing withdraw each year for same spending power) and taxes.

[mrpaseo]

you are leaving out a ton of info that is needed.

do you want the principal untouched forever? What risk level?

$550 invested at 1200% would give you $550 a month if you can hold off taking a payment for one month and depending how it is compounded.

Maybe more reasonable would be $200,000 invested in a municipal bond fund at 3.5% annual rate of return which would give you a bit over $550 tax free each month without touching the principal.

Okay, I have the 550 dollars, how can I earn 1200% per month? I think compounded daily would be best. Also, is there a way I can do this tax free....lol

Thanks,
Ray

[KTP]

Okay, I have the 550 dollars, how can I earn 1200% per month? I think compounded daily would be best. Also, is there a way I can do this tax free....lol

Thanks,
Ray

Don't be ridiculous. It is obvious I meant 1200% per year not per month.

Sheez, 1200% per month, now that would be insane.

[mrpaseo]

Don't be ridiculous. It is obvious I meant 1200% per year not per month.

Sheez, 1200% per month, now that would be insane.

I figure I could "invest" for a few months then retire at that rate... Not sure I could do it at 1200% per year

Oh well, thanks anyway.
Ray