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Retirement Discussions / Retirement-Soon or Done
|Subject: Re: Where to start||Date: 8/24/1999 7:11 PM|
|Author: GrayWulff||Number: 96 of 175|
I know nothing about Canadian tax laws, but here is a general approach.
1) Estimate your cash requirements as you've already done.
2) Subtract any annuities from your cash needs (Social Security in the USA).
3) Is the remainder more than 4% of your liquid capital? If so either find another source of income or re-budget.
4) Set up a 5 year bond ladder with about 13% or your capital. That is, with $1,000,000 in liquid investments, put $130,000 into bonds.
Annual dividend on this ladder would be $7,693 (at 6%)
5) Invest the remaining 87% or 870,000 in stocks. That will yield a dividend of about 1.0% (S&P500 index fund like VFINX) or $8,700.
6) Add up $24,000 $7,693 and $8,700 and you get relatively certain cashflow of $40,393 in the first year.
7) As your bonds mature, replace them with new 5 year ones, selling stock as required. Add on 3% each year.
(next year buy $28,655 worth of bonds.)
8) If the market is low for a year or three, don't replace the bonds until it recovers.
Unless we suffer a 5+ year depression, that should do it for you. The numbers of course are overprecise, round off to the nearest thousand when you buy your bonds and don't sweat it.
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