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$5,000,000 with a rather conservative investment strategy yielding 5%/year would give you 250k annually to play with without impacting the principal.
by lwf 13y ago
$5,000,000 with a rather conservative investment strategy yielding 5%/year would give you 250k annually to play with without impacting the principal.
- aetherson 13y agoGetting 5% (real) return per year isn't really "rather conservative."
- qdog 13y agoAbout 7% is the market average I often hear quoted, but I use the number 4% for guaranteed income. I know you can buy insurance annuities that guarantee about 3% and average 4%. So, I would calculate 200k on 5Million. Planning to actually live off your interest means having to be super conservative, because, if, for instance, your first year is one of the bad years, your calculations will end up way off. Losing 20 or 30% and having to actually eat some principle would hurt a lot. That's why some people end up putting off retirement in bad years and get very conservative with investments near retirement. So, I suppose someone could live off about 1 million at 4%, unless they have a medical emergency, but with minor inflation, I think you'd need to grow your principal to maintain the same level.
- joeframbach 13y agoPlease share some details on this rather conservative 5%/year investment strategy. I'm very interested.
- beagle3 13y agoIt's hard to get even 3% these days for that sum.
- gpjt 13y agoIn addition to what others have said about 5% being hard to achieve conservatively, you have to factor in inflation if you want your principal to remain intact in a meaningful sense. Let's call inflation 3% (it's lower now but there's no obvious reason to assume that'll continue) and you're down to 100k annually in real (inflation-adjusted) terms.