Help me simulate an immediate annuity
Later on this year, I will pull the trigger and Iíve been thinking of various ways I can bridge the gap between 55 and 62 when my DW will start collecting social security. I am looking for a little more money Ė say $1,000 per month that I can use to finance the non-essential luxuries that I want to include in my retirement.
One alternative I am considering is laddering CDís over the next 8 years. At an average CD rate of 5.35%, I figure I could withdraw $15K per year over this time period before I exhaust the $$$.
Another alternative I am considering is dumping a full $100K into a fund which has worked well for me. Nuveen Preferred & Convertible Income Fund (JPC) is currently paying a cash return of 8%. This would give me only about half the $$ to work with but I would be preserving my principle. I know I would be subjecting myself to interest rate risk if I do this, but I figure that if I simply hold for the income and donít sell, losses in priciple won't matter.
Regarding JPC, I donít understand why this exchange traded fund sells for such a discount to its NAV. Even with principle fluctuations, if you hold long enough for the dividends, it seems hard to go wrong with. It certainly has worked for me! I bought in last year at a price of 12.50/sh when the yield was over 9%. Over the past year, Iíve enjoyed the 9% yield plus an additional 10% in capital appreciation.
A $100K investment would represent less than 6% of my nest egg.
Any advice would be greatly appreciated.