What type of income fund

[modhatter]

As I am hopefully only a few years away from retirement ( I'm 63) I am trying to decide on a split of assets. As I want to preserve and grow as much of my principal as possible to pass on, I am thinking along these lines:

Total $1,600,000 assets split in the folowing manner:

$600,000 in rentals producing Net $22,000 income a year. (Growth potential)

$500,000 in a very balanced equity fund (As per Bernstein asset classes) for growth. Will not touch this account other than needed rebalacing. (for my son)

$500,000 in some sort of income producing account for any short fall I may have with rental income and social security $20,000 yr. Soc. Sec plus $22,000 rental income - or any rental repairs, vacancies etc. and also money to pay my taxes on all of the above. (Really trying to make this fund streatch)

Knowing the purpose and of the "income $500,000" what are my best bets?
CD's will probobly through off the most income, but I will be taxed at federal rate. Is there a better tax efficient way of obtaiining income. I bonds won't work cause they are less than CD rates and they are taxed at fed rate when taken out. TIPS, can you cash these in along the way, or do they have to stay in the duration. (Less income)

I was thinking of maybe a split between ladering CD's and a little riskier investments "Canadian Trusts" or some "Junk Grade Bonds" strickly for income-held to maturity. What do you think? Any suggestions?

 

[wildcat]

I don't think junk bonds are a wise place to be right now. You are not getting compensated for the risk. Sounds crazy but I would rather be in international bonds right now. Don't know if that fits your definition risky.

 

[JPatrick]

You can get a pretty interesting mix with Fidelity's Strategic Income Fund. (FSICX)
Well rated- -good record.--I got some

 

[cute fuzzy bunny]

I think the mantra that "high dividend stocks are the new bonds" isnt a bad plan. A lot of moderate dividend paying funds can net you 3-5% at the 5/15% capital gains rate (goes to zero in 2007). Probably beats cash or most non-junk bonds unless you're in a very low tax bracket and will remain there indefinitely.

 

[Sam]

$600,000 in rentals producing Net $22,000 income a year. (Growth potential)

I know I'm very late to this thread.

You said in several earlier posts that you were conservative, and don't want to lose money (important for son).  I think you also said that you were afraid of stock because of volatility.

In reality, you are a lot more of a gambler than you think.  In my view, the only reason you hang on to the above $600,000 rental property is the speculation that its value will go up significantly.  Otherwise, it just does not make sense.  22K is 3.7% of 600K.  You can get better return on CD.

 

[mathjak107]

I think the mantra that "high dividend stocks are the new bonds" isnt a bad plan.  A lot of moderate dividend paying funds can net you 3-5% at the 5/15% capital gains rate (goes to zero in 2007).  Probably beats cash or most non-junk bonds unless you're in a very low tax bracket and will remain there indefinitely.

read our discussion below "large stable dividend stocks vs diversified funds
i think you may have a new perspective on this