7 year fund

[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.

 

[Nords]

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.

 

[jdw_fire]

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.

 

[brewer12345]

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.

 

[jdw_fire]

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. )

 

[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.

 

[BigMoneyJim]

(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.)

 

[Nords]

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.

 

[ferco]

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.

 

[Nords]

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/index.php?topic=6565.0

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.

 

[ferco]

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.

 

[brewer12345]

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.