No. of Recommendations: 0
Ok--heres the problen experts. I am 65 y/o and need 120,00 after taxes to live the kind of lif I want . My wife doesn't want to dip into the principal of about 3 mil investable assests. How can I earn a reliable 120,000 from 3 mil. I have about 1,400,000 in short munis which earn prob 3% over all. I have 1 mil in equities but this is iffy if there is a bubble and things crash. All I want to do is relax and live like a king.. I deserve it. I also have a very rich daughter but refuse to ever ask for help. I,
I'm 66 but feel 70 so who know how long I'll need the money. With my luck I'll probably live to 90 in a rest hme--ugh.Safty is the byword.

hope you can help
Print the post Back To Top
No. of Recommendations: 0
Seems to me you need a return of 4% on your $3,000,000 in order to generate $120,000 a year. I assume that is what you want as an annual income in retirement off of your retirement investment. Even depleting your $3m principal of $120k/yr, you will still last 25 years which starting at 65 will get you to 90. But if you are looking to leave a sizeable inheritance you have a couple of options.

You could open an ING Direct Orange Savings account to earn 2.35%, but that insures only the first $100k. You could invest in a bond fund, but even those can lose value, although with less fluctuation risk and do you really want DW killing you before you reach 90? A set of CDs would guarantee a set return over a period of time.

But frankly, if you are dealing with $3m in retirement assets, your best bet is to talk to a fee-based advisor (not a commissioned advisor) and get some professional advice.

Fuskie
Who may be Foolish but by no means can talk about $3,000,000 without tearing up...
Print the post Back To Top
No. of Recommendations: 0
Fuskie
Who may be Foolish but by no means can talk about $3,000,000 without tearing up...



+++
+++

You're allowed a few tears ( of Joy or Regret, your choice ) on your Fooliversary.


;-)
sunray
Print the post Back To Top
No. of Recommendations: 9
Fuskie,

I suppose I'm being a bit skeptical, and I can dream up alternate explanations for this case, but I wonder about someone who has amassed $3 million in investible assets posing such a question on a web. Note also, the question is about an after tax $120 K annually. Are we the dupes of a put on?

db
Print the post Back To Top
No. of Recommendations: 0
I suppose I'm being a bit skeptical, and I can dream up alternate explanations for this case, but I wonder about someone who has amassed $3 million in investible assets posing such a question on a web. Note also, the question is about an after tax $120 K annually. Are we the dupes of a put on?

It's rather hard for me to be sympathetic with someone who has supposedly amassed $3 million and doesn't have a clue as to how to invest it. It implies that the making of the money is totally separate from the investing of the money. I just don't see that happening.

Hedge
Print the post Back To Top
No. of Recommendations: 1
Au contraire, it happens all the time. Different skills, you know. I've made more, and am just now really learning how to invest, so I can quit working and let the money work for me.
Metal 27
Print the post Back To Top
No. of Recommendations: 1
Au contraire, it happens all the time. Different skills, you know.

It happens all the time? Amassing $3 million? I don't argue that it's possible that a doctor or lawyer has the income to get that kind of money together over the years. But, hanging on to it and never having done anything with it other than put it in a bank account? It just stretches my imagination. The person in that situation is just so prone to being fleeced by any and every con that comes along that I'd be surprised they could actually hang onto it, even at an effective 0% interest at a bank.

I will have to admit that I have read about dentists and doctors making naive investments and being fleeced. So, yes, I suppose that it is possible to come up with that kind of cash. So, maybe I was a little hasty in just assuming the original poster was a troll. But, I do remain skeptical.

Actually, it's not a difficult position, if true. Put all the money in 10 year US treasuries, close your eyes to any possibility of making more than 4.28% or so, and get on with your life with an annual income of $128,400(current 10 year bond). That figure isn't inflation protected, of course, so that may be a problem. But, considering he is 65 years old, his needs will most likely decrease pretty rapidly, so I'm not sure that's a big problem.

I know nothing about annuities, and distrust them in principle. But, there might be something in it for him. If he does consider an annuity, he should also have a for-fee financial advisor go over it with him. Hell, before he does anything, he should hire a for-fee financial advisor. (NOTE: anyone having anything to do with the insurance industry is not a financial advisor!)

Hedge - who's not sure he would change his allocations even if he did have $3 million instead of, well, what he has. :o)
Print the post Back To Top
No. of Recommendations: 4
Why doesn't your wife want to dip into the $3 million? I'm hesitant to touch this, but if you are in poor health, could be that she is thinking ahead to her life without you. That, or she's thinking ahead to divorce!

If she just has issues about spending money, then you need to sit down and have a frank conversation about the problem. The problem of being Scrooge doesn't go away unless you confront it. I know a man over 100 who does not spend any of his millions. What is he waiting for?

I don't know what kind of life takes $120K a year but you should also look at your expenditures and see if you are being fair to your wife. If you're spending on strippers and whores, I wouldn't let you get your hands on the principle either.

From this side of the keyboard, I have no way of knowing if your wife is an extremely fearful woman or just an extremely shrewd one. Make sure that you are BOTH willing to be fair to each other. The financial issues are secondary, because once you are on the same page, it shouldn't be hard to live a great life with $3 million to draw from.
Print the post Back To Top
No. of Recommendations: 0
It's rather hard for me to be sympathetic with someone who has supposedly amassed $3 million and doesn't have a clue as to how to invest it.

Based on some of his other posts, I don't think this is the case.

3MM
Print the post Back To Top
No. of Recommendations: 0
It implies that the making of the money is totally separate from the investing of the money. I just don't see that happening.

Look at most professional atheletes/rock stars/movie stars. How many reach middle to late age and are bankrupt?

For a more "realistic" view, look at physicians and lawyers. I know several that have made millions and are retirement poor.

The ability to earn money doesn't mean you'll be good an investing/saving your money.

JLC
Print the post Back To Top
No. of Recommendations: 2
I just finished Gary Smith's book, "Trading for a Living". Read it and you may have some idea about how to make money from your investments. He trades on a rather different basis from what I do, but we agree on the basics.

Other books:

Mandelbrot: "The (Mis)Behavior of the Markets"
Achelis: "Technical Analysis from A to Z"
O'Neil: "How to Make Money in Stocks" (Description of CANSLIM)

Message Boards:

http://www.ft-talk.com/forums/

TimingCube:

http://www.timingcube.com/app/html?page=home

My own site:

http://www.actwin.com/kalostrader/

There are a lot of different methods for making money in the market, but all of them require discipline. In addition, there is risk involved in any activity - or any inactivity - if you have money in the market. The important thing is to learn how to control the risk, and how to take risks that are acceptable.
Print the post Back To Top
No. of Recommendations: 0
It happens all the time? Amassing $3 million? I don't argue that it's possible that a doctor or lawyer has the income to get that kind of money together over the years. But, hanging on to it and never having done anything with it other than put it in a bank account? It just stretches my imagination. The person in that situation is just so prone to being fleeced by any and every con that comes along that I'd be surprised they could actually hang onto it, even at an effective 0% interest at a bank.

It's feasible to me. I took over an elder's finances. Once I sorted through the literal piles of paper stacked on his tables and the entire middle of his living room as well as a forgotten safe deposit box, his net worth was well over $1M.
I think he avoided getting fleeced by bank investors because he had this spread out over 30 banks, with an avg yield barely over 1%. If not for the banking mergers, this would've been over 40 banks. Once I started consolidating his accounts, the bank's investment counselors were all over him - trying to sell B funds, annuities, long-term healthcare policies, etc..

No flashy job to have raked in the money. Just hard diligent work as a steam plan mechanic. And a very, very simple lifestyle.
So someone with a much more heady career and a stubborn streak to shun the bankers could have amassed the $3M.

I'll grant you that the story makes us turn down our BS radar's attenuation setting, but it's not out of the realm of possibility.

Print the post Back To Top
No. of Recommendations: 0
There are a lot of different methods for making money in the market, but all of them require discipline. In addition, there is risk involved in any activity - or any inactivity - if you have money in the market. The important thing is to learn how to control the risk, and how to take risks that are acceptable.

Joel,
I just had to toss you a rec for presenting your alternative opinion and style in a much more even handed way than of late.

My core investments are pretty bland allocations, but there is a portion that I still play around with some timing concepts. So I read with interest on much of the info you post, but wouldn't push it so hard, especially with newbies.

I find momentum investing intriguing, but now leave it as something to flirt with, not as the core for my family's future.


Keith
~ still looks back regretting jumping into the deep end before heading to the shallow end and learning how to swim first
~~ often needs to learn the hard way
Print the post Back To Top
No. of Recommendations: 0
Radman get yourself to http://www.retireearlyhomepage.com/ and pay $5.00 to download Vol#1 "How Much Can You Withdraw From Your Portfolio?"

It says essentially you can withdraw 4% and increase the amount every year for inflation (here you have to read the fine print about inflation measures) and have essentially zero chance of runing out of money.

Now that 4% number sort of depends on how long you plan to live. If you are talking over 40 years you may have to cut back to 3.5 or 3.6% --but you say you have $4 million ( your and hers) -- 3.5% of that is $140,000 a year - and you get an inflation adjustment.

Gordon
Atlanta
Print the post Back To Top
No. of Recommendations: 1
The ability to earn money doesn't mean you'll be good an investing/saving your money.

True, but he's managed to hold onto $3million. That's a pretty good start.

Unless, of course, this is just his last paycheck. :)

3MM
Print the post Back To Top
No. of Recommendations: 0
Wow, this thread fell off the tracks very early.

I think that the standard recommendation to put 5 years of income into money market funds and invest the rest in a combination of 25% treasuries (bond funds or individual bonds depending on the OP's motivation level) and 75% stock funds (total market index for example). This is the simple portfolio that should provide 30 years of 4% withdrawals pre-tax. Not quite what the OP is looking for, but it's probably a reasonably safe alternative.

Now trying to work this into the pre-existing portfolio is trickier. Perhaps keep some of the municipal bonds to make up the 25% in fixed income and turn the rest over into a few stock index funds (total stock, international index, REIT). Still, keeping 5 years worth of withdrawals in a money market fund (+/- a CD ladder).

Of course this is easy for me to say, it's not my $3 million. If it was my money I would call Vanguard, put aside $600,000 (5 yrs x $120,000) in MMF's at several banks to get FDIC protection. Then I would invest 3/4 of the rest in VTSMX, 1/4 of the rest in VMBFX, and go enjoy my retirement. Each year I would pull an inflation adjusted $120K from accumulated dividends and sale of shares as needed to replenish the MMF.

For you, I would recommend considering a fee-based financial planner to help with this. The above portfolio is not truly a "relax and live like a king" kind of arrangement.

Adenovir
Print the post Back To Top
No. of Recommendations: 0
Sure, I could blow $3 million easily, and have the taste to do it. Let's see, that would buy a median price house in my town, or a couple of pretty nice Ferraris (maybe a 250 TdF and 250 SWB, but not enough to buy a 250 GTO or TR -- don't really want a GTO anyway, but sure would like a TR).

As I wrote in my earlier post, I can imagine cases where this amount of money is amassed without knowlege of how to manage it, it just seems unlikely. Even rock stars and sports figures usually have someone to advise them, though that advice may be self-serving. I think it's the rare physician, dentist, or attorney who would amass such funds, especially without a concerted effort to invest wisely.

So glibly saying there are many such cases as some of the posters did, doesn't cut it for me. I think a put-on is more likely. Now, let's talk about this bridge I have for sale . . .

db
Print the post Back To Top
No. of Recommendations: 3
Not deliberately trying to take the thread off the tracks. I just think until we know why the poster's wife won't allow him to draw down out of the $3 million, we really don't know what is going on here.

It might not be his money at all. It might be hers. In which case while his best interest would be to blow the money while he could, then her best interest would be to keep it out of his grubby little hands. We just honestly do not know.
Print the post Back To Top
No. of Recommendations: 0
Of course this is easy for me to say, it's not my $3 million. If it was my money I would call Vanguard, put aside $600,000 (5 yrs x $120,000) in MMF's at several banks to get FDIC protection. Then I would invest 3/4 of the rest in VTSMX, 1/4 of the rest in VMBFX, and go enjoy my retirement. Each year I would pull an inflation adjusted $120K from accumulated dividends and sale of shares as needed to replenish the MMF.

The FDIC protection is cummulative. It is not $100,000 per bank. It's $100,000 per person. Spreading the money around doesn't do anything but lead to more paperwork and more to keep track of.

Keep 1 year of money liquid at ING for instance. Keep 5 years laddered in cds or Tbills. Invest the rest. You may want to talk to a professional.

billyturtle
Print the post Back To Top
No. of Recommendations: 3
The FDIC protection is cummulative. It is not $100,000 per bank. It's $100,000 per person. Spreading the money around doesn't do anything but lead to more paperwork and more to keep track of.

Not sure where you get your info, but here's what FDIC notes:
http://www.fdic.gov/deposit/deposits/insured/faq.html

Can I increase my insurance coverage by depositing funds with different insured banks?

Your deposits with each FDIC-insured bank are insured separately from any deposits you have at another insured bank. If an insured bank has branch offices, the main office and all branch offices are considered one insured bank – you cannot increase insurance coverage by placing deposits at different branches of the same insured bank. Similarly, deposits held with the Internet division of an insured bank are considered the same as funds deposited with the “brick and mortar” part of the bank, even if the Internet division uses a different name.
Print the post Back To Top
No. of Recommendations: 0
Wow was I off base on that one. I'm sorry. I assumed that because multiple accounts at the same institution don't increase your insurance that having multiple accounts at multiple instutions wouldn't help either.

Thanks for pointing that out SisypheanFool.

billyturtle
Print the post Back To Top
No. of Recommendations: 0
Wow was I off base on that one. I'm sorry. I assumed that because multiple accounts at the same institution don't increase your insurance that having multiple accounts at multiple instutions wouldn't help either.

Getting myself corrected or clarified is one of the benefits of Fooldom. Sooo many twists and turns to finances that I love having a collective to tap.

Example in RE: FDIC
There's a quirk to FDIC that I've seen argued 3 ways - A couple can either hold up to $200K, $300K or $400K insured at a bank.
I've seen it debated that a joint account can be viewed a separate entity with it's own insurance. So then it extracts that this joint account is insured for either $100K, or $200K ($100K for each joint owner).

FWIW, my reading says it's $200K, $100K for each owner (with their retirement accts separately insured).
I can see a view where if each of their individual accts name the other person POD, than the individual accts would be a Totten Trust. This would then allow $400K held, $100K per Totten Trust and $200K for a jointly held acct. But it's a murky view for me, so I just stick to thinking in terms of "$100K per SSN".

Now that I've managed to hijack this thread...
...Here's wishing that everyone enjoyed a Happy New Year celebration!


Keith
Print the post Back To Top
No. of Recommendations: 0
billyturtle:

<<<<Of course this is easy for me to say, it's not my $3 million. If it was my money I would call Vanguard, put aside $600,000 (5 yrs x $120,000) in MMF's at several banks to get FDIC protection. Then I would invest 3/4 of the rest in VTSMX, 1/4 of the rest in VMBFX, and go enjoy my retirement. Each year I would pull an inflation adjusted $120K from accumulated dividends and sale of shares as needed to replenish the MMF.>>>>

"The FDIC protection is cummulative. It is not $100,000 per bank. It's $100,000 per person."

This is not entirely correct. It is possible to have more than $100k coverage by using multiple banks (not branches of the same bank).

Regards, JAFO
(posted before reading entire thread)
Print the post Back To Top
No. of Recommendations: 1
Author: radman93003 | Date: 12/29/04 8:34 PM | Number: 43770
How can I earn a reliable 120,000 from 3 mil.I have about 1,400,000 in short munis which earn prob 3% over all. I have 1 mil in equities but this is iffy if there is a bubble and things crash. All I want to do is relax and live like a king.

With 3.0 mil, you should be able to generate $120,000 a year (with increases for inflation) for 30 years. I realize that you said 'safety is the byword', but be careful not to equate bonds with safety. They give the 'illusion' of safety while exposing you to the full ravages of inflation. You need sufficient equities to provide growth to offset inflation if you want to withdraw safely from your portfolio for 30 years. Typically, you need about 60% equities and 40% bonds to support a 4% long term withdrawal rate with increases for inflation with a 96% success rate. Right now, you have 66% bonds and 33% equities which has a lower probability of success.

One way to simplify your life would be to invest all your funds in one or more of the many low cost mutual funds that maintain a 60%/40% equity/bond ratio. Then, you don't even have to worry about rebalancing - they do it for you with no commission charges. There are also funds that maintain lower equity and higher bond ratios, but your long term chance of success with a 4% withdrawal rate will be less.

The Vanguard Balanced Index Fund (Admiral Shares), VBIAX, maintains 60% S&P 500 and 40% Total Bond Market, and has an expense ratio of only 0.15%. With this fund (and most of the other funds at Vanguard), you can arrange for full dividend reinvestment and then have a monthly check sent to you for any amount you choose. You would choose 4% divided by 12 or 0.333% per month. Then, once a year, look at the value. If it is higher than last year, increase your check by the rate of inflation. If it is lower, keep your check the same (or lower it if you want to).

Since 4% is about the maximum you can expect to 'safely' withdraw, you should not expect much growth from your portfolio during your 30 years of withdrawals.

Russ
Print the post Back To Top
Advertisement