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Author: EaseeEd Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19027  
Subject: Distribution of Pension Monies Date: 6/25/2000 10:37 AM
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June 25, 2000

I'm retired. My Company is shutting down the Pension Fund and will distribute our accural (In my case $260,000 to $300,000) in a lump sum or a Company selected Annuity which would continue to pay the same monthly amount. I am 72 years of age.

I have opted to receive the lump sum and roll over into my IRA or Keough account. Question: Can you recommend how to invest this money to allow me to receive about $2000 per month without sacrificing my principal? Maybe this is not achievable

Thanks much

EaseeEd@Juno.com
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Author: galeno Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4284 of 19027
Subject: Re: Distribution of Pension Monies Date: 6/25/2000 11:43 AM
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EaseeEd wrote:
I'm retired. My Company is shutting down the Pension Fund and will distribute our accural (In my case $260,000 to $300,000) in a lump sum or a Company selected Annuity which would continue to pay the same monthly amount. I am 72 years of age.

I have opted to receive the lump sum and roll over into my IRA or Keough account. Question: Can you recommend how to invest this money to allow me to receive about $2000 per month without sacrificing my principal? Maybe this is not achievable


A $2000 per month income ($24K annual) would mean an 8% annual withdrawal rate from a nest-egg of $300K. It goes to 9.23% using a nest-egg of $260K. If you are a healthy 72 year-old, these withdrawal rates are way too high for a 20 year withdrawal period.

If I were you, I'd allocate the lump sum like this:
40% laddered cash portfolio (MMFs, CDs)
60% S&P500 index fund.

You could ladder the cash like this:
10% (2 years of living expenses) in MMF
10% (2 years of living expenses) in 1y CD
10% (2 years of living expenses) in 2y CD
10% (2 years of living expenses) in 3y CD

I'd use the following link to pick my FDIC insured CDs:
http://www.bankrate.com/brm/rate/high_home.asp?hAboutType=H

I'd then use a 5 to 6% annual withdrawal rate from the entire portfolio (cash plus stock fund) to generate my monthly income. Your monthly income should range from a low of $1080 to a high of $1500 depending on the size of your initial nest-egg ($260K vs $300K) and your inflation-adjusted annual withdrawal rate (5 vs 6%).

See the following link: http://www.geocities.com/WallStreet/8257/restud1.html
to see how I derived the above. Good luck.



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