Lets just assume that in addition to social security, you need another $30,000 in todays dollars to supplement your retirement. Now lets also say that you are interested in "growing" your retirement money with the intent to pass this money onto your heirs. And the last assumption is that your current nest egg is $1,500,000.
In bucket #1
$500,000
Time 5 yrs.
CD Ladder
6%
Income $30,000
In bucket #2
$500,000
(average 6%)
Some med term bonds, maybe reits, preferreds, and some Div stock funds like DVY.
In bucket # 3
$500,000
A balanced mix of stocks both domestic and international along with some commodities.
You do not increase your draw of $30,000 for five years, but at the end of 5 years, you increase Bucket#1 to $600,000 (taking $100,000) from bucket #2 that has now grown to $650,000+, thus increasing your yearly income to $36,000 from bucket #1.
At the end of the next five years, bucket #2 has grown from $550,000 to $725,000, so you take once again $100,000 from bucket #2, leaving a new balance of 625,000 in it and add it to bucket #1 to total $700,000, which will now generate a yearly income of $42,000.
Repeat the above for another 10 year period, and my quick calculations come out something like this at the end of 20 years.
Bucket #1 Balance
$1,100,000
Bucket #2 (averaging 6%)
$925,600
Bucket #3 (averaging 7.5%)
2,123,925
End of 20 Years
Total Balance $4,149,525
Yearly Income: $66,000.
As a final note. The big flaw in this analogy is income taxes. With so much money in CD's and income producing vehicles, the tax bite would eat up too much of that needed $30,000 income in fed. income taxes-so a greater draw than $30,000 would be needed.
In bucket #1
$500,000
Time 5 yrs.
CD Ladder
6%
Income $30,000
In bucket #2
$500,000
(average 6%)
Some med term bonds, maybe reits, preferreds, and some Div stock funds like DVY.
In bucket # 3
$500,000
A balanced mix of stocks both domestic and international along with some commodities.
You do not increase your draw of $30,000 for five years, but at the end of 5 years, you increase Bucket#1 to $600,000 (taking $100,000) from bucket #2 that has now grown to $650,000+, thus increasing your yearly income to $36,000 from bucket #1.
At the end of the next five years, bucket #2 has grown from $550,000 to $725,000, so you take once again $100,000 from bucket #2, leaving a new balance of 625,000 in it and add it to bucket #1 to total $700,000, which will now generate a yearly income of $42,000.
Repeat the above for another 10 year period, and my quick calculations come out something like this at the end of 20 years.
Bucket #1 Balance
$1,100,000
Bucket #2 (averaging 6%)
$925,600
Bucket #3 (averaging 7.5%)
2,123,925
End of 20 Years
Total Balance $4,149,525
Yearly Income: $66,000.
As a final note. The big flaw in this analogy is income taxes. With so much money in CD's and income producing vehicles, the tax bite would eat up too much of that needed $30,000 income in fed. income taxes-so a greater draw than $30,000 would be needed.