On Tue, 18 Nov 2003 02:52:36 CST, darkness39[at]yahoo.com (darkness)
wrote:


- quote -

Yes, an annuity (or consuming capital) is an option, although not
"risk free". In the event that you die soon, it will prove to have
been a value. Except to heirs, of course. <grin
But the risk is living long - and the eroding purchasing power (fixed
annuity).

Again, an annuity can be an option, just not risk free. So I maintain
that there are no risk free alternatives to lifestyle reduction.


-HW "Skip" Weldon
Columbia, SC

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<l427rv0j3chrudh2u28huacqut5lmb216d[at]4ax.com> ...
- quote -

No other than spending capital (ie the same thing, effectively, as an
annuity: except the annuity transfers the risk of living too long to
someone else. If you are in poor health or have lifestyle issues
(smoking) then an annuity can be very good value).


- quote -

"HW \"Skip\" Weldon" <skip5700removethis[at]hotmail.com> wrote in message news:<l427rv0j3chrudh2u28huacqut5lmb216d[at]4ax.com> ...
- quote -

Purchasing an annuity might work if the person is old enough. A 60
year old male can probably get a 7% annuity and an 80 year old male
can probably get a 11% annuity. Of course, you really want to have a
good chance of reaching old age (non-smoker, no diabetes, cancer, or
heart disease) before you buy an annuity. It would be better to wait
until interest rates go up before buying an annuity.

--
Ron

On Thu, 13 Nov 2003 07:29:00 CST, darkness39[at]yahoo.com (darkness)
wrote:

- quote -

Ok then, are there any risk-free alternatives to reducing the
investor's standard of living? (Assume that the investor cannot
return to work for medical reasons.)


-HW "Skip" Weldon
Columbia, SC

zhendsch[at]yahoo.com (zak) wrote in message news:<a7a1bede.0311100432.2314883c[at]posting.google.com> ...
- quote -

Getting 7% in the current environment involves taking on a fair degree
of risk: A grade corporate bonds do not, AFAIK, yield 7%.


In other
- quote -

This is the biggest risk. www.efficientfrontier.com had a series in
the online journal called 'the retirement calculator from hell' which
showed the effects of withdrawing capital in a bear market.

palme[at]sympatico.ca (tbp) wrote in message news:<7cfb8980.0311081006.50d59d77[at]posting.google.com> ...
- quote -

A reasonable rule of thumb is that one can safely withdraw about 4%-5%
of one's portfolio a year (which is why insurance agents try to sell
20 times annual income worth of insurance). The 4% is based on a
portfolio return of about 7% and inflation of 3% a year. In other
words your $250K would earn $17,500 (7%), you could spend $10,000 (4%)
and leave $7500 (3%) in the account so that the balance grows with
inflation. That way next years 4% withdrawal from 257,500 will be
$10,300 (or $10,000 adjusted for 3% inflation).

So that is 10K a year (~800/month) you can get from 250K without
touching the principle. To get returns (and therefore withdrawal
rates) even this good, though, you require a diverisfied portfolio of
stocks and bonds. You can see from other posts how much worse you do
with just CD's or bonds, even without inflation adjustment. There is
a price you pay: uneven returns. You may have to downsize your
withdrawal in bad years for the market.

On the other hand, for every 10 years that you don't touch money, you
can expect it to double. So in 10 years you'd have 500K (able to
generate 20K/year income) and in 20 years you'd have a million
(40K/year income).

In article <7cfb8980.0311081006.50d59d77[at]posting.google.com> , tbp
<palme[at]sympatico.ca> wrote:

- quote -

Of course, depending on what you mean by "comfortably". Depending on
interest rates, you could get $500 to $1000 per month. If you have
a small plot of land with a reasonable home that is paid off, and
you tend your own garden and have a few domestic animals, you should
be able to live like a king. Just look at the Unibomber...he lived
happily on almost no income, yet still had money to travel and funds
for building bombs.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

tbp wrote:
- quote -


NO..........NO........NO.........
- quote -

You would simply select a "typical interest rate"
multiply $250K by that rate, divided by 12 to
arrive at a monthly income.

250,000 X 1.5% / 12 could produce ....... $312.50 per month

Do you think that you could live on that ANYPLACE in the world.......

--
Childhood is a time of rapid changes. Between the ages of twelve and
seventeen, a parent can age 30 years. Sam Levenson.

This signature file is generated by Pick-a-Tag !
Written by jeroen[at]vanbaarsel.net

palme[at]sympatico.ca (tbp) writes:

- quote -

Well, if one looks hard enough, one can probably find
a 5-year CD yielding as high as 4.50%. That will
throw off around $11,250 per year, or $937.50 per
month. I think it's safe to say that one couldn't
live on $937.50/mo in California.

- quote -

Go back to beginning algebra (or financial formulae).
Income = Principal x Interest rate per unit time x Time
(for simple interest)


--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

Hello,

As an new student to financial planning, there seems to be many
calculations and I am not understanding some fundamentals. So, here
is one question that I cannot quite figure out.

Here is the problem. If a person living in California, USA were to get
a lump sum of $250,000 US in 2004, could that person live comfortably
off the interest if that sum was saved in a bank? What would be their
monthly income?

How does one calculate this? As the $250,000 is hypothetical, what is
a base amount to work from? I am supposing the country and
state/region/etc., the amount, a bank interest rate, the year are
enough factors with which to figure out the problem. I am also
supposing that the formula could be used for any country.

Any assistance would help tremendously as I forge through the myriad
of information in financial education!

Tia