Monthly Income

Q. Dear Jeff Thanks for taking my question. I was forced to retire due to an accident. I made a cash settlement and need to invest in a monthly income. I can purchase a fixed annuity from Fidelity for 75,000.00 that will pay a monthly payment of 364.19. I would also like to invest in a growth fund of some sort that also pays a monthly income. what would be a good option for me to pursue? A. Thanks for asking your question...and I'm sorry about your accident. Can you tell me a little more? What is the total amount of your investable assets and if any are already invested, how? What monthly income do you need? How old are you? This will help me narrow down a recommendation. Q.The total amt of investable assets is 150,000.00. I am 60 years of age and my wife is 55. I need an income of five to six hundred dollars monthly to compliment my social security. I have no investments other than our home which is debt free. A. Now that I understand your situation a little better, let's look at your investment options. You mentioned the Fidelity annuity and referred to it as a fixed annuity. Are you referring to an immediate annuity? A fixed annuity pays you a set rate of interest for a set period of time and then you get all of your principal back. An immediate annuity is like a home mortgage in reverse. Each month you get a payment that consists of interest and a return of some of your principal. Immediate annuities guarantee the set payment amount for 10years certain, life, joint life, etc.. There is a big difference between the two. If you can get $364/month and it be a fixed annuity, then that's a great deal---over 5.5%. That is considerably above market rates, so I expect you are referring to an immediate annuity. If so, that return is being made up by them giving you back your money and some interest. The interest rate used in that calculation is probably less than 4%. Was it an immediate, and what were the terms--10 year certain, life or joint life? Let me know and I will be able to provide some different alternatives. Also, you mentioned wanting to invest some in a good growth fund--is that money that you wouldn't expect to touch for several years? Do you anticipate investing the full $150k or will you need some of it to pay off expenses, cash reserve, etc? Obviously, it is very important that you invest this money wisely because you will be depending on it. I'll help you make the right choice. Q. I think your correct that it is an immediate income annuity. Here is what it says on the quote. income amt. $364.19 monthly for 20 years guaranteed and as long thereafter as either or both measuring lives shall live.income amts commence on 4/25/2005. taxable portion 172.63 non taxable portion 191.56 I will invest the full 150,000.00 amt. I have set aside funds to have a cash on hand situation after spending 15,000.00 on home repairs paying off a vehicle and buying a used 3,500.00 bass boat. Im sure that will leave enough cash to get by for a year. I must say that I dont know beans about investing and not to say this as an insult to you. I feel like a housecat in a room full of bulldogs. Thats why I got in touch with you. Your credentials speak for themselves and you are highly respected in the investment area. A. I've been doing some calculations and you should be able to withdraw $600 per month ($7200 per year) without any problem. Here are some of the numbers. If we only earn an average of 3%, your money will last 34 years. If we earn an average of 4% you money will last 46 years. If we earn an average of 5% you will not ever run out of money and will be able to increase your income slightly each year. Assuming 5% and withdrawals of $7200 per year (without any increase) your money would still be worth about $170,000 after 30 years. Realistically, based on the fact that you were considering putting 50% in a growth fund, I believe you could average 6-7% per year if I managed your money using conservative methods that will limit any potential losses to 2-3%. To put that in perspective, the potential losses using a growth fund like you mentioned in the first email could be 20-30-40%. In fact, in 2002 the better growth funds lost over 20%. I've developed a proprietary money management system that allows you to participate in the growth of the market while rigorously controlling losses. It is designed for those who are more concerned about keeping what they got instead of growing it with a lot of risk. There aren't any commissions (I get paid by fees), no set-up charges, no surrender penalties and no time committments. If you like, send me your name/address info and I can send you some additional info. I will be happy to help you in any way I can.