how do you get enough interest to live on off 350k?

Question

I inhereated 500k from my mom and will be getting it shortly i want to sell my house and buy a smaller house. i want to invest the money so i dont have to work any more i dont know what to do!!!!!!!!!

Answer 1

If you can live off of $17,500 a year, put it in a CD that is paying 5%. That's the safest bet to keep the balance, but if you are ready to risk, then talk to a financial analyst and they can help you have a steady income with more risk and higher rewards. But there is no guarantee.

Answer 2

First - forget the CD. Even if the $17,500 income is enough today, it will not be enough 20 years from now. The CD, at today's rates, has no way to stay ahead of inflation.

I would say you make it a 10-year plan to retirement. Spend $70 buying "Rule #1", "Buffettology" and "The Warren Buffett Way". Then, demand 15% from your investments and grow your portfolio to roughly $1.4 million in 10 years. Then, live off 8% a year and leave the other 7% (15%-8%) to grow your wealth and keep ahead of inflation. That would be an initial income of $112,000 a year.

Is this possible? Absolutely! Will most financial advisers be able to do this or help you with it (or even agree with me), no way. You need an adviser that specializes in growth or you need to do it on your own.

Answer 3

You probably don't.

If it's 350K after taxes, then if you put it in a bank at 5% interest, the interest will by 17500 per year, which will be taxed. After taxes it's about 10K per year.

Even if you can find an investment at 10% interest, that will leave a little less than 30K per year after taxes on the interest.

If you save that 350K for a long time while you support yourself with a job, you may be able to live off the fund when you retire.

Answer 4

350K @ 5% = $17,500/yr puts you in the 15% tax bracket. Subtract your personal exemption, and you only pay $980/yr tax (5.6%). That leaves $16,520, or $1,376/month.

As the first poster replied, a lot depends on your living expenses. If you can cut down to $1,000/month, you'll actually be making an extra $376/month off the interest. So I recommend reducing consumption as much as possible: the tradeoff between financial freedom + free time + low stress + peace of mind VS. material goods + luxurious lifestyle + outward status is worth it.

I live abroad in a cheaper foreign country with favorable USD exchange rates + low costs of living/inflation. Not only is it a great life experience, it also reduces my basic living expenses to about $300-400/month. I also work very part-time self-employed (2x a week), which I do more for social contacts + personal enjoyment, but it also offsets my living expenses even more. Actually, I'm currently saving money from my work. Working 9-5 sucks - but working 10 hours a week? It's great. I have tons of free time to pursue my interests, and I feel damn lucky. And unlike you, I only have 100K.

350K isn't a fortune in the urban US, but it certainly is in many rural areas and MANY countries of the world. Take advantage of that. Consider trying it for a short time and see if it's for you - after all, you got loads of free time now!

Some online CDs have over 5% APY, but those rates are probably not going to last forever. You can also look at annuities or bonds.
Me, I have to invest in stocks, but that's definitely NOT for everyone.

But for you, I strongly suggest you don't get greedy and blow your money on ANY risky high-yield investments/businesses. You're already richer than 95% of the entire world.

With your loads of extra free time, you can also learn more about finance/investing/building passive income streams, or more importantly, finding some work that you really LOVE and getting paid for it. Work no longer is a necessity and a drudge (it sounds like you hate yours), but a pleasure.

Don't pay an advisor: go DIY and keep ALL your costs as low as possible. Avoid touching your principal (your 350K) at all costs for ANY reason!!! Not only live off the interest, but save $$$ off the interest/work if possible to use for your luxury expenses. If Time = Money, then do your best to keep both.

Good luck! Or should I say, good learning. Don't depend on luck - it's extremely undependable. The best to you.

Answer 5

Using simple interest if you need $100K to live the the formula is i*350K = 100k

Solve for i, divide both sides by 350K, i=100K/350K, 29%

But do add inflation to this or you will wind up being poor.

Answer 6

CD's at 5%...booo hah!

There are other funds which give guaranteed 13% Returns, 0% loss of capital.
Thats 350,000 *13/100= 45,500$ yearly. Thats more than double you would receive with CD's.

Compound it for 5 years and see your portfolio, you would be amazed at what can be achieved. Yea, retire young, retire happy.

Regards

Buzz me if you want more information.

Answer 7

Ask a.. umm.. money.. investment.. person.. or something.. not "Yahoo Answers"

Personally I'd love to buy a couple of business and have that money grow and grow until I owned half a city. :-D

...but you said NOT work anymore.

Answer 8

Try finding a 770 account and not worry about being taxed

Answer 9

Don't listen to him--there is no investment that guarantees 13% per year.

Answer 10

Depends on how much $$ you need to live.