Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
7 year fund
Old 05-12-2006, 01:43 PM   #1
Recycles dryer sheets
 
Join Date: Sep 2004
Posts: 330
7 year fund

Where would you put 250k, to pay out (draw)$3,500 per month over 7 years; Basically, I want to self annuitize over 7 years ...with relatively low risk.
__________________

__________________
ferco is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: 7 year fund
Old 05-12-2006, 01:51 PM   #2
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: 7 year fund

Quote:
Originally Posted by ferco
Where would you put 250k, to pay out (draw)$3,500 per month over 7 years; Basically, I want to self annuitize over 7 years ...with relatively low risk.
I keep looking for the punchline.

Let me make sure we're using the same mathematical coordinates. You want $3500*12/$250,000 = 16.8% interest for seven years?!? Heck, I'd be thrilled to get that for six months!!

Maybe you could use that $250K to collateralize a loan for $726,650. That'd buy you a Pentagon Federal Credit Union seven-year CD at a 5.78% dividend. Unfortunately your $3500/mo payout would be reduced by the amount of the loan repayment and its interest rate.

Outside of Vegas I'm not aware of any other institution offering the potential of 16.8% APY with "relatively low risk". High risk with high volatility, no problem. But what you're looking for does not appear to exist.
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: 7 year fund
Old 05-12-2006, 01:58 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Re: 7 year fund

Quote:
Originally Posted by Nords
I keep looking for the punchline.

Let me make sure we're using the same mathematical coordinates.* You want $3500*12/$250,000 = 16.8% interest for seven years?!?* Heck, I'd be thrilled to get that for six months!!

Maybe you could use that $250K to collateralize a loan for $726,650.* That'd buy you a Pentagon Federal Credit Union seven-year CD at a 5.78% dividend.* Unfortunately your $3500/mo payout would be reduced by the amount of the loan repayment and its interest rate.

Outside of Vegas I'm not aware of any other institution offering the potential of 16.8% APY with "relatively low risk".* High risk with high volatility, no problem.* But what you're looking for does not appear to exist.
Nords when ferco says "self annuitize" I think it means to use up the principle also, which would only require an interest rate of 4.71% to provide the $3500/mo for 7 years.
__________________
jdw_fire is offline   Reply With Quote
Re: 7 year fund
Old 05-12-2006, 02:04 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: 7 year fund

A ladder of CDs or treasuries would probably do the job nicely. Keep the front year's worth in a low cost MM fund and set up the rest of the ladder with bonds or CDs. Should be easy to beat your hurdle rate.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Re: 7 year fund
Old 05-12-2006, 02:11 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Re: 7 year fund

Quote:
Originally Posted by ferco
Where would you put 250k, to pay out (draw)$3,500 per month over 7 years; Basically, I want to self annuitize over 7 years ...with relatively low risk.
I went over to the Vanguard website to see if your numbers would buy you such an annuity and found that they will sell you a 7 year certain annuity paying $3500/mo for $254,126.65.* (I know annuity is a bad word around this forum and that I might receive some disagreement for this but it is for educational purposes. )
__________________
jdw_fire is offline   Reply With Quote
Re: 7 year fund
Old 05-12-2006, 02:15 PM   #6
Recycles dryer sheets
 
Join Date: Sep 2004
Posts: 330
Re: 7 year fund

Thanks brewer and jdw ! Nords I didn't mean to confuse you. The 4.71 rate is VERY safely achievable by using the MM and the laddered CD's and drawing down the principle over 7 years leading to my "final" ER date.
__________________
ferco is offline   Reply With Quote
Re: 7 year fund
Old 05-12-2006, 03:45 PM   #7
Thinks s/he gets paid by the post
BigMoneyJim's Avatar
 
Join Date: Feb 2003
Location: DFW
Posts: 2,627
Re: 7 year fund

Quote:
Originally Posted by jdw_fire
(I know annuity is a bad word around this forum and that I might receive some disagreement for this but it is for educational purposes. )
I think deferred annuities and indexed annuities deserve a lot of the derision. Immediate regular (I keep forgetting the term) annuities are in great danger of being eaten by the inflation monster when talking about retirement planning. Annutiy isn't a bad word, it's just not a magical solution to the worry of outliving your money.

In ferco's case I don't see a problem with an annuity, and unless I'm misunderstanding something it should be academic to compare the return on it to other investments drawn down over that time frame.

(Okay, I am predisposed to dislike annuities, but as I see it an annuity is a bet between you and an insurer, and the insurer has done an enormous amount of due diligence and expects to win the bet.)
__________________
BigMoneyJim is offline   Reply With Quote
Re: 7 year fund
Old 05-12-2006, 04:56 PM   #8
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: 7 year fund

Quote:
Originally Posted by ferco
Thanks brewer and jdw ! Nords I didn't mean to confuse you. The 4.71 rate is VERY safely achievable by using the MM and the laddered CD's and drawing down the principle over 7 years leading to my "final" ER date.
Well, thank goodness, in this case I'm happy to be confused.

No offense intended, but I was afraid that the Kiyosaki tax liens were going to rear their ugly head again.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: 7 year fund
Old 05-12-2006, 10:26 PM   #9
Recycles dryer sheets
 
Join Date: Sep 2004
Posts: 330
Re: 7 year fund

Nords, what are the Kiyosaki tax liens?I was at the recent Learning Annex Show in LA, featuring Kiyosaki and "The Donald"...it was very interesting even from the back row. The vendors probably made a few hundred thousand each in just 2 days; with those sales who needs to buy another piece of property. The most(and only)impressive speaker was Suzie Orman who implored folks to forget the get rich schemes and the main thing was to get out of debt and start saving some money for retirement....oh, by the way she was the only one besides "The Donald"who didn't have anything to sell to rip you off.
__________________
ferco is offline   Reply With Quote
Re: 7 year fund
Old 05-12-2006, 11:59 PM   #10
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: 7 year fund

Quote:
Originally Posted by ferco
Nords, what are the Kiyosaki tax liens?
George Burns used to pay people big money to feed him lines like this.

Here's the thread: http://early-retirement.org/forums/i...p?topic=6565.0

Quote:
Originally Posted by ferco
The most(and only)impressive speaker was Suzie Orman who implored folks to forget the get rich schemes and the main thing was to get out of debt and start saving some money for retirement....oh, by the way she was the only one besides "The Donald"who didn't have anything to sell to rip you off.
What an interesting "coincidence"-- Dave Barry's Money Book manages to simultaneously insult both Suze Orman and The Donald. Dave'd be very frightened to learn that they were appearing together, probably coordinating their libel lawsuits backstage.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: 7 year fund
Old 05-13-2006, 09:33 AM   #11
Recycles dryer sheets
 
Join Date: Sep 2004
Posts: 330
Re: 7 year fund

Would an asset allocation of the 250k over 7 years of 1/3Vanguard Target 2045, 1/3 Vanguard Wellington, and 1/3 Fixed Income 5%, safely achieve the 3,500/ month spend down over 7 years, with rebalancing every 2 years.
__________________
ferco is offline   Reply With Quote
Re: 7 year fund
Old 05-13-2006, 03:58 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Re: 7 year fund

Maybe, maybe not. With equities in the mix and a 7 year horizon it is definately a gamble. If you need certainty, Iwould probably stick with the FI portfolio.
__________________

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Vanguard Asset Allocation fund now 10% cash... Lancelot FIRE and Money 18 03-02-2008 11:02 AM
The Balance Mutual Fund per Mr Bogle Hillbilly FIRE and Money 26 04-08-2007 12:02 PM
Thinking of a high MER fund accountingsucks FIRE and Money 4 02-26-2007 09:25 PM
Mid Year starting Point al4trade FIRECalc support 3 08-22-2006 11:21 AM
How should I invest my savings? dante60093 FIRE and Money 69 07-12-2004 03:46 PM

 

 
All times are GMT -6. The time now is 11:55 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.