How would you turn a $500K lump sum into $20K/yr income?

[Wilko]

Exactly what it says on the box.

 

[wifehunter]

Exactly what it says on the box.

I would invest in a market the has a proven record of good returns, that is uninflatable, and has minimal manipulation.

AKA 'not dollars'.

 

[speed dawg]

Exactly what it says on the box.

That's like 6% interest, with tax. You sound like a troll.

 

[Wilko]

Yeah, I don't think there's anyway I could avoid dipping into the original capital.

Been giving some thought to pulling the pin at 45 when my current obligation to the military runs out.

I have a pretty generous pension that starts paying out at 55, so I've been thinking about my options from 45 - 55. And honestly, if I don't have to take another job, I probably won't.

Apartment will be paid for leaving around 500K in savings. I can get 3% where I am which gives me 15K/yr - well under the tax-free threshold here. It's a bit tight, even for a minimalist like myself. I'd probably draw another 5K/yr from the original capital - maybe less, maybe more.

So perhaps 50-100K to buy myself out of the rat race ten years earlier than I originally planned - I think I'm ok with that!

 

[sazc]

I've been seeing a 6% taxable return on my savings, and a 7% return on my roth IRA at www.betterment.com

If anyone signs up, DM me to put my name down as a reference so I get credit.

Otherwise i would go into rental property.

 

[BeTheChange]

That's like 6% interest, with tax. You sound like a troll.

6% annual ROI is not a lot if you're actively managing your investments....

 

[BeTheChange]

Yeah, I don't think there's anyway I could avoid dipping into the original capital.

Been giving some thought to pulling the pin at 45 when my current obligation to the military runs out.

I have a pretty generous pension that starts paying out at 55, so I've been thinking about my options from 45 - 55. And honestly, if I don't have to take another job, I probably won't.

Apartment will be paid for leaving around 500K in savings. I can get 3% where I am which gives me 15K/yr - well under the tax-free threshold here. It's a bit tight, even for a minimalist like myself. I'd probably draw another 5K/yr from the original capital - maybe less, maybe more.

So perhaps 50-100K to buy myself out of the rat race ten years earlier than I originally planned - I think I'm ok with that!

How did you save $500k in hard cash?

 

[Wilko]

How did you save $500k in hard cash?

Just so I'm not misleading anyone, as of now I'm 39 with $300k, should be around $700k by 45 (when I can get out). Studio apartment in my preferred city runs anywhere between $120k and $200k, leaving around $500k to invest and life off (in one scenario).

Most of it comes down to the fact that for the last few years (should have started a LOT sooner) I've been taking advantage of (nearly) free accommodation on base, and been reasonably frugal. Ordinarily that lets me save about $50k/yr but some years I can save as much as $100k with bonuses and/or overseas allowances.

Do note that we're talking aussie dollars here, so it's not quite as impressive as it might sound. Kind of hard to make a straight comparison with the US - higher wages, weaker currency, some things are cheaper, some things are more expensive.

 

[speed dawg]

6% annual ROI is not a lot if you're actively managing your investments....

That's my point, it should be very easy to do. With 500K invested, you could be earning upwards of 40K per year.

 

[Wilko]

Otherwise i would go into rental property.

That's on option I'm looking at. I could buy a cluster of studio apartments (5 x $125k) that caters to rich overseas students. Live in one, rent the other four, that would net me about $24k/yr after expenses. Have the option to easily rent the fifth if I want to bum around SE Asia every now and again. Capital growth would be negligible. Of course, eggs in one basket, illiquid (kind of).

 

[sazc]

That's on option I'm looking at. I could buy a cluster of studio apartments (5 x $125k) that caters to rich overseas students. Live in one, rent the other four, that would net me about $24k/yr after expenses. Have the option to easily rent the fifth if I want to bum around SE Asia every now and again. Capital growth would be negligible. Of course, eggs in one basket, illiquid (kind of).

I would love to sell my properties and get a single multi unit building. I'm looking to do that, waiting for the right deal.

 

[Von]

Depends also on your saving patterns... average returns have been around 7-8% in the past 10 years.... on a 15-20 years basis its 5%..... average investors/customer did 2%

Why your saving patterns? 500 000k can give you the 20 000$ annual income.... but you have to invest it to have it... invest in investments which will ''move''.... so your 500 000 might go up like it go down..... yes the market goes down and it crashes every 10 years or so. so your 500 000$ could become 200 000$ for a while and you lose that 20 000$ annually for awhile

If you know you'll be able to triple the 500 000$ in the years to come before touching it.... go ahead... why triple? To ensure your capital is always big enough to ensure a 20 000$ income

Otherwise, go with the annual 20 000$... why? 20 000$ that is guaranted for life no matter the market... is a huge advantage.

 

[zekko]

Been giving some thought to pulling the pin at 45 when my current obligation to the military runs out

Getting your medical benefits paid for through the VA is a huge plus for you. If you had to pay for health insurance, no way could you live on the kind of money you're talking about.

 

[Wilko]

Getting your medical benefits paid for through the VA is a huge plus for you. If you had to pay for health insurance, no way could you live on the kind of money you're talking about.

Not a US citizen, but yeah, it's a pretty similar arrangement where I'm from. Out of morbid curiosity, what does baseline coverage for a middle-aged man cost in the US?

 

[zekko]

Not a US citizen, but yeah, it's a pretty similar arrangement where I'm from. Out of morbid curiosity, what does baseline coverage for a middle-aged man cost in the US?

I think it's about $500-700 a month? That's single, mind you. Unless you get it through work.
I get a special rate, but it's still pretty close to that.

 

[Wilko]

Riding a bit of high at the moment. Was proving hard to get an estimate on my benefits for the scenario I was looking into. Finally got some numbers from the superannuation support team. Discharge at 45 and I'll be getting a $45k/yr pension from 55 onwards. Just have to self-fund for ten years - and I've got that in the bag. Phew. Wow!