Generating income off $500k portfolio for non-retiree.

[silvor]

I am trying to help a person generate $1500-2000 a month off their $500k portfolio - mainly to cover rent.

I'm looking at these, mostly because I own them and it's what I'm familiar with.

DVY 4.01%
SCHD 3.70%
SWVXX 5.237% (Schwab cash)

More background...
This is the entire portfolio, about half is non-qualified, the rest is IRA money.
The person is 52.
Income is $20k a year (yes, this has to change).

I thought maybe a bond ladder?
Annuity? But then you're locked in, for better or worse.
Some sort of combination? Because of the persons age, growth is needed.

My thought is buy a condo with cash and get a better job, but at the moment, this person is stuck.

Any ideas?

 

[Car-Guy]

Well to supplement the 20k income and keep it simple, consider SWVXX which should do it "for now" even after taxes "assuming they stay in a very low tax bracket". But of course that rate may not last longer term. It may not even be paying that much in 6mos.

Or consider a 4 or 5 year CD ladder (that pays monthly) should work too. For at least 4 or 5 years.

But first checkout how the 59.5 early withdrawal/exception rules apply in your friends case for money in deferred accounts. That may take a bite but should still work.

 

[freedomatlast]

For now, VMRXX 5.44% totally liquid.

 

[MarieIG]

You might want to look at the high paying money market and perhaps laddering brokered CDs which pay interest monthly.

[-]I haven't looked at MYGAs in a while but there were some which allowed for the peeling off of interest. However, if the person is not disciplined he/she may decide to cash out and incur a substantial penalty with a MYGA so that is a risk.[/-]

I do not know that this person could afford to buy a condo (due to HOA, possible assessments and draining cash accounts) but perhaps, in addition to raising income, seek out lower monthly alternatives, i.e. rent a room in a (decent) house/ share an apartment / rent controlled apartment?

 

[Ncc1701]

Perhaps $50K of the IRA money in JEPI?

 

[COcheesehead]

If income is the goal…

TSLY yields 53%+. An options play on Tesla
WDI yields 12.8% Multi sector leveraged bond fund
LONZ yields 8% Short duration junk

I own all three. Made good money on at least two of the three - LONZ and TSLY. LONZ is remarkably stable.

All are totally liquid.

 

[38Chevy454]

$1500-2000/month = $18-24K/year
$18-24K/$250K = 7.2-9.6% return, and that's before taxes take a bite. Recall this $250K is approx half of the $500K total that is not in tax deferred account. I realize at the income level that the taxes are low, but still need to consider that any income off the after tax investment account is going to be subject to taxes.

I don't think you can get that return in a somewhat safe investment that ensures the income and preservation of principal. You might be able to get approx half of the needed amount at example 5% return in money market type account which is what I would suggest: 5% of $250k = $12.5K before taxes.

The tax deferred accounts I would not tap into. That needs to be invested for growth and long term money. Bottom line, this person needs more work income! Whether by getting a better paying job, or working more hours. $20K/year is less than minimum wage full time, so this person is not working enough. Call it tough love, call me a hardass or whatever, the end result is you can't get what you need out of the after tax investments to provide the needed $18-24K/year income. Need more work income is the answer.

 

[Phroig]

Somebody earning $20k should not be spending $18-24k on rent. You should urge your friend to perhaps rent a room in someone’s house until their financial situation improves.
Assuming the rent is a long-term concern, I wouldn’t rely exclusively on MMs/bills. Some of the money needs to go into intermediate-term fixed income. To balance things out and to grow the portfolio, the IRA should be entirely in equities.

 

[ncbill]

Somebody earning $20k should not be spending $18-24k on rent. You should urge your friend to perhaps rent a room in someone’s house until their financial situation improves.
Assuming the rent is a long-term concern, I wouldn’t rely exclusively on MMs/bills. Some of the money needs to go into intermediate-term fixed income. To balance things out and to grow the portfolio, the IRA should be entirely in equities.

Yep...time for roommates.

 

[Sunset]

Person needs to work more, to build up more SS , and let their savings grow.
Jobs are plentiful right now.

Using the money now will mean a really depressing retirement in 10 years ...

 

[Lawrencewendall]

PM sent

 

[jazz4cash]

Yep...time for roommates.

Great suggestion. Don’t know current living situation, though. Maybe buying a 2br condo for cash and renting out the spare room.

 

[Qs Laptop]

If income is the goal…

TSLY yields 53%+. An options play on Tesla

Tell me more about this. It appears to be a covered call ETF trading only in TSLA that generates a huge monthly dividend. It would appear that if TSLA stock is going to gyrate up and down and not blast off, this might be a nice way to make money on the volatility.

However, if TSLA takes off the investor will not capture the same total return had he owned TSLA stock itself.

Have I got it?

 

[PERSonalTime]

$1500-2000/month = $18-24K/year
$18-24K/$250K = 7.2-9.6% return, and that's before taxes take a bite. Recall this $250K is approx half of the $500K total that is not in tax deferred account. I realize at the income level that the taxes are low, but still need to consider that any income off the after tax investment account is going to be subject to taxes.

I don't think you can get that return in a somewhat safe investment that ensures the income and preservation of principal. You might be able to get approx half of the needed amount at example 5% return in money market type account which is what I would suggest: 5% of $250k = $12.5K before taxes.

The tax deferred accounts I would not tap into. That needs to be invested for growth and long term money. Bottom line, this person needs more work income! Whether by getting a better paying job, or working more hours. $20K/year is less than minimum wage full time, so this person is not working enough. Call it tough love, call me a hardass or whatever, the end result is you can't get what you need out of the after tax investments to provide the needed $18-24K/year income. Need more work income is the answer.

+1

 

[Aerides]

The person is 52.
Income is $20k a year (yes, this has to change).

Unless this person has physical or mental disabilities, those two numbers do not jive. Add the $500k and you have a time bomb, no matter what assistance you provide.

Almost anywhere you can start a job at $15 per hour - that's $30k per year to start. And far more benefit than maximizing an extra .5% out of the right CD ladders. But that's what I do with the stash for now...

 

[COcheesehead]

Tell me more about this. It appears to be a covered call ETF trading only in TSLA that generates a huge monthly dividend. It would appear that if TSLA stock is going to gyrate up and down and not blast off, this might be a nice way to make money on the volatility.

However, if TSLA takes off the investor will not capture the same total return had he owned TSLA stock itself.

Have I got it?

Up 5% yesterday alone. I have made good money off it. I don’t own individual stocks so I wouldn’t buy Tesla anyway. I am an income investor at this point in my life.

 

[ERD50]

Originally Posted by COcheesehead View Post
If income is the goal…

TSLY yields 53%+. An options play on Tesla

Tell me more about this. It appears to be a covered call ETF trading only in TSLA that generates a huge monthly dividend. It would appear that if TSLA stock is going to gyrate up and down and not blast off, this might be a nice way to make money on the volatility.

However, if TSLA takes off the investor will not capture the same total return had he owned TSLA stock itself.

Have I got it?

Except it is more volatile than the Total Market, and under-performs the Total Market.

So there's that.

And if you set w/d to 4.4%/month (52.8% 'yield')- same shape to the graph.

https://tinyurl.com/ylhzukrm

Portfolio	Initial Balance	Final Balance	Return	Stdev
VTI	$1,000,000	$1,058,181	5.82%	15.40%
TSLY	$1,000,000	$1,020,369	2.04%	60.18%

-ERD50

 

[pb4uski]

I am trying to help a person generate $1500-2000 a month off their $500k portfolio - mainly to cover rent.

.... I thought maybe a bond ladder?

...Any ideas?

Yes. You could easily create a bond ladder with target maturity bond ETFs.

https://www.ishares.com/us/resources/tools/ibonds

An all Treasury ladder would yield 4.75%. So start with $24,000 in an online savings account and $476,000 in a 10 year ladder (2024-2033) that yields 4.75%.

Set up the online savings account to transfer $2,000 monthly to your friend's checking account to help with the rent.

When the 2024 ETF matures, transfer $24,000 of the proceeds to replenish the online savings account and invest the remainder in the 2034 issue.

Repeat annually.

Obviously rates will change but at 4.75% it would last for 96 years.

 

[COcheesehead]

Except it is more volatile than the Total Market, and under-performs the Total Market.

So there's that.

And if you set w/d to 4.4%/month (52.8% 'yield')- same shape to the graph.

https://tinyurl.com/ylhzukrm

Portfolio	Initial Balance	Final Balance	Return	Stdev
VTI	$1,000,000	$1,058,181	5.82%	15.40%
TSLY	$1,000,000	$1,020,369	2.04%	60.18%

-ERD50

Using the tool you posted, TSLY has only existed since January of 2023, and has outperformed VTI by 37%

 

[ERD50]

Using the tool you posted, TSLY has only existed since January of 2023, and has outperformed VTI by 37%

I provided a link to my data for transparency. You did not.

I just set the start date of portfolio visualizer to way back, it automatically uses the first available data as the start point.

It sounds like you selected (cherry picked maybe?) a January start date?

yahoo has data for TSLY going back to Nov 23, 2022.

https://finance.yahoo.com/quote/TSLY/history?p=TSLY

as does the NADAQ

https://www.nasdaq.com/market-activity/etf/tsly

Not sure where your Jan 2023 comes from. Links?

-ERD50

 

[COcheesehead]

I provided a link to my data for transparency. You did not.

I just set the start date of portfolio visualizer to way back, it automatically uses the first available data as the start point.

It sounds like you selected (cherry picked maybe?) a January start date?

yahoo has data for TSLY going back to Nov 23, 2022.

https://finance.yahoo.com/quote/TSLY/history?p=TSLY

as does the NADAQ

https://www.nasdaq.com/market-activity/etf/tsly

Not sure where your Jan 2023 comes from. Links?

-ERD50

No, I based it solely on your tool. It said I couldn’t use a November ‘22 start. There is no data that fits the 2009 start date. I posted a screenshot of the results. I am not making it up, just using what you posted. Check my post again. If anyone is cherry picking it’s you.

Frankly you argue a lot on here. I just wanted to point out how your methodology was flawed.
If you don’t like TSLY, don’t buy it. I really don’t care. I’ve made good money using it.

 

[G-Man]

No, I based it solely on your tool. It said I couldn’t use a November ‘22 start. There is no data that fits the 2009 start date. I posted a screenshot of the results. I am not making it up, just using what you posted. Check my post again. If anyone is cherry picking it’s you.

Frankly you argue a lot on here. I just wanted to point out how your methodology was flawed.
If you don’t like TSLY, don’t buy it. I really don’t care. I’ve made good money using it.

Is TSLY still a good but today? How would you know when to exit out of TSLY?

 

[Exchme]

No, I based it solely on your tool. It said I couldn’t use a November ‘22 start. There is no data that fits the 2009 start date. I posted a screenshot of the results. I am not making it up, just using what you posted. Check my post again. If anyone is cherry picking it’s you.

Frankly you argue a lot on here. I just wanted to point out how your methodology was flawed.
If you don’t like TSLY, don’t buy it. I really don’t care. I’ve made good money using it.

Let's recap. A newbie asks for portfolio income ideas for someone who is low income and a relatively small nest egg that is supposed to last a lifetime. Pretty clear that what's needed is conservative ideas. You responded with a list that included a product that is trading options on a volatile stock, which is the opposite of conservative.

OP's friend cannot afford big risks and anything that can go up 2-3 times faster than the stock market can go down that fast too (it went down 18% in May for instance while the markets were flat or up). Experienced folks might know to limit their exposure to "play money", but newbies could easily get sucked in by early great returns and invest more and more and get ruined by a downturn.

As for Portfolio Visualizer, if you only have the free tier, you can't start a data series in the middle of a year, but if you have the paid tier, you can. ERD50's trick of setting an early date allows the program to search for the start date and he clearly has access to the higher tier.

 

[twirler]

move to somewhere that's cheaper...

They need to change nothing if they are willing to move to a lower cost area. Plenty are nice, plenty of parks, and plenty are low crime. Find a small neighborhood with a grocery store in walking distance. I'd focus on frugality not on income. Although, keep your eye out for those opportunities. Use this time to allow the money to grow.

In short sometimes you go to ground, other times you attack, but this situation calls for sitting back and putting your feet up and sadly waiting... waiting for good opportunity. I counsel restraint. Don't try to force something.

 

[ERD50]

No, I based it solely on your tool. It said I couldn’t use a November ‘22 start. There is no data that fits the 2009 start date. ....

Let's recap. A newbie asks for portfolio income ideas for someone who is low income and a relatively small nest egg that is supposed to last a lifetime. Pretty clear that what's needed is conservative ideas. You responded with a list that included a product that is trading options on a volatile stock, which is the opposite of conservative. ....

I 100% agree with Exchme above.

... As for Portfolio Visualizer, if you only have the free tier, you can't start a data series in the middle of a year, but if you have the paid tier, you can. ERD50's trick of setting an early date allows the program to search for the start date and he clearly has access to the higher tier.

No, I only utilize the free access. You can select month-month, and it will go to the start of the first full month of data (or that's what it appears to do).

Try the link I posted earlier, you should see the same:

https://tinyurl.com/ylhzukrm

...Frankly you argue a lot on here. I just wanted to point out how your methodology was flawed. ....

Asking for a link is not "arguing" - it's trying to understand your data, and you still didn't provide a link. Can you do that? I think you'll find you can set it to earlier to get the start date as I described above (or at least include DEC, maybe missing the last few days of Nov).

I think you need to pay for day-to-day , but the month-month is free.

....If you don’t like TSLY, don’t buy it. I really don’t care. I’ve made good money using it.

No problem, I won't. But as Exchme pointed out above, it hardly fits most people's idea of a conservative investment.

-ERD50