If your objective was to leave an inheritance greater than your current net worth to a child in need, what approach would you take to minimize the possibillity of loss of principal and still grow the portfolio.
In working with a $1,700,000 in assets, I have entertained the idea of dividing the money in two buckets as they say, thus trying to live with fixed income from bonds and CD's for the next 20 years off $700,000, and leaving the $1,000,000 untouched for growth for my son to live on for his remaining 40 years after I die. Taking 4% of that amount would only give me $28,000 a year, and with paying taxes on the whole non tax sheltered estate, that would not be enough income. 6% from $700,000 would generate $42,000 which is the minimum I feel I would need. ($24,000 a year for me, and $18,000 a year for Uncle Sam) I would still want to have at least 40% of the $1,000,000 for my son in fixed income and 60% in stocks, so that means I must pay taxes on $66,000 (assuming 6% interest) plus another $20,000 from social security, plus any dividend income coming from stocks. Thus my $90,000 total fixed income and $18,000 tax bite.
So if I am 65 now, I will have 20 years to grow that $1,000,000 for him. .
However, in 20 years the present $42,000 income generated from the $700,000 for me to live on will be worth less than 1/2 because of inflation, and I would have a difficult time as years pass trying to live on it. So that plan seems flawed. I know part of the difficulty lies in my fear of the stock market and fear of loss on account of my son, thus my desire for a more conservative approach.
I know looking at it as a whole (undivided) $1,700,000, taking a little less than 3% would give me the needed current and supposed future income I need. However, most charts such as FireC are geared to looking at will your money last YOUR lifetime, as opposed to will your money last yours and someone elses lifetime.
As $1,700,000 would be sufficient net worth for someone to retire today, that amount may very well not be adequate for someone 20 years from now, especially if it had to last another 40 years, thus my desire to make it grow.
I guess the real question here is, what strategy should I take here to best
protect and grow my assets to last a long time. There don't appear to be charts geared to this scenerio, and of course I am very aware that "safety" and inflation protected type investment don't go hand and hand.
So, I guess my questgion here is what would be the safest strategy to achieve my goals (besides continuing to work till I drop) Do you think that my fear of the stock market and possible loss is just something I need to get over in order to make best use of this money?
I don't want an annuity, and I don't want to be a landlord any longer. So, stocks and bonds seem to be all that is left.
In working with a $1,700,000 in assets, I have entertained the idea of dividing the money in two buckets as they say, thus trying to live with fixed income from bonds and CD's for the next 20 years off $700,000, and leaving the $1,000,000 untouched for growth for my son to live on for his remaining 40 years after I die. Taking 4% of that amount would only give me $28,000 a year, and with paying taxes on the whole non tax sheltered estate, that would not be enough income. 6% from $700,000 would generate $42,000 which is the minimum I feel I would need. ($24,000 a year for me, and $18,000 a year for Uncle Sam) I would still want to have at least 40% of the $1,000,000 for my son in fixed income and 60% in stocks, so that means I must pay taxes on $66,000 (assuming 6% interest) plus another $20,000 from social security, plus any dividend income coming from stocks. Thus my $90,000 total fixed income and $18,000 tax bite.
So if I am 65 now, I will have 20 years to grow that $1,000,000 for him. .
However, in 20 years the present $42,000 income generated from the $700,000 for me to live on will be worth less than 1/2 because of inflation, and I would have a difficult time as years pass trying to live on it. So that plan seems flawed. I know part of the difficulty lies in my fear of the stock market and fear of loss on account of my son, thus my desire for a more conservative approach.
I know looking at it as a whole (undivided) $1,700,000, taking a little less than 3% would give me the needed current and supposed future income I need. However, most charts such as FireC are geared to looking at will your money last YOUR lifetime, as opposed to will your money last yours and someone elses lifetime.
As $1,700,000 would be sufficient net worth for someone to retire today, that amount may very well not be adequate for someone 20 years from now, especially if it had to last another 40 years, thus my desire to make it grow.
I guess the real question here is, what strategy should I take here to best
protect and grow my assets to last a long time. There don't appear to be charts geared to this scenerio, and of course I am very aware that "safety" and inflation protected type investment don't go hand and hand.
So, I guess my questgion here is what would be the safest strategy to achieve my goals (besides continuing to work till I drop) Do you think that my fear of the stock market and possible loss is just something I need to get over in order to make best use of this money?
I don't want an annuity, and I don't want to be a landlord any longer. So, stocks and bonds seem to be all that is left.
