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Investing $400,000 to live off. Any ideas?

maxthelols 3 10 August 12, 2013 at 02:07 AM in Finance (2)
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I'm hoping to retire soon and I've saved about $400,000.

This is my retirement money (I have no retirement plan worth mentioning) so I want it to be something reasonably low risk. I know absolutely nothing about investing please help.

What are my options?

*Buy 1 great house without a loan and live off the rent?

*Buy 3-4 houses with loans and let the rent pay the interest and live off whatever is left?

*Put it in some kind of savings account? But will that return enough money to live off? This is what I''ve been doing so far but its just with my bank and I'm not getting much off it.

*Stocks? I know nothing about stocks. Are there stocks that are safe enough?

Any help is greatly appreciated and please bare in mind I know nothing about investing.

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#2
How old are you? When are you planning on dying?

I wouldn't count on rental income as a source of retirement income. What happens if you can't rent it out? or even worse, a terrible tenant?

What does one great house mean? Where do you live now?
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#3
As questioned above, what is your current age? Do you have family other than yourself you wish to provide for?
What budget do you anticipate for maintaining the quality of life you desire?
There are quite a few factors that we rarely take into account when planning retirement and it all comes down to creating a balance sheet for yourself which includes covering a wide array of expenses as well as contingencies.

Personally, I am following this approach for planning my eventual retirement.
http://www.thelivingbalancesheet.com/
This helped me prepare for what I will need for the foundation of my eventual retirement.

From there I have been able to establish my goals in respect to the level of expenses I hope to have available to me upon retiring.

The option of owning income producing property is definitely a possibility, however, make sure you have all bases covered when it comes to 'the big picture'.
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#4
What's your budget?

Common withdrawal rate is 4%. You can live off of 16k a year?

Health Insurance will be a crap ton.
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#5
As stated before when are you going to retire. Where, it is not the same if you live in NYC compared to say Idaho Falls, Idaho [kiplinger.com].
And while a rental property could work it depends on cash reserves and how long it takes in your state to evict a non-paying tenant.

tl;dr version: Age/Location/Debts/Other Assets
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#6
Without knowing basic factors like your age, income needs, and even an idea of life expectancy, it's a little hard to give good advice. Are you currently married, and if so, does spouse have retirement savings as well? You may want to consider an annuity for a portion (25-50%) of the money. I know it's a 4 letter word for a lot of people, but it will pay you a guaranteed stream of income for the rest of your life. Then invest the rest of your money in 2 buckets, one short term (next 5 years) and one for the long term.
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#7
I'm presuming that the $400,000 is in cash accounts. Without your age, and your plans for the future years it would be hard for anyone to give sound or any advice.

$400k isn't enough to just live on, you would need to live at near poverty levels or supplement with another source of income.

If you are already thinking of being a landlord, there are some very easy ways to do it and mitigate your living income. The easiest can be a duplex where you live in one side and rent out the other. The tenants usually pay all or most of the mortgage and you live for cheap. The upkeep is would be one factor to look at but is usually pretty low on a decent duplex. If you want to avoid all dealings with the other side you can have a property management company run/maintain/lease the space. In my area that rate is 10% of the rent price -- parts and labor for repairs are extra of course. Carrying costs for a small duplex unit if not rented shouldn't be enough to break you if you budget for a mortgage properly.

I wouldn't go beyond that unless you have experience in the rental market. I live in a town where the rental property business is huge and I've seen it all, sometimes a piece of cake -- sometimes a nightmare so be cautious.

Find something you love to do and get paid to do it. You'll need the extra income to maintain a cash positive lifestyle.
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#8
Quote from saladdin View Post :
What's your budget?

Common withdrawal rate is 4%. You can live off of 16k a year?

Health Insurance will be a crap ton.
No it won't. Unless the republicans have their way. Under Obamacare if someone only has 16K in income, health insurance will either be free or subsidized so much as to be really cheap. About $45/month.
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#9
Quote from sunnysidescape View Post :
No it won't. Unless the republicans have their way. Under Obamacare if someone only has 16K in income, health insurance will either be free or subsidized so much as to be really cheap. About $45/month.
Under Obamacare it likely won't be a crap-ton for this individual, but that's because everyone else will take on the burden. Hooray for burdening the rest of us!
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#10
Quote from sunnysidescape View Post :
No it won't. Unless the republicans have their way. Under Obamacare if someone only has 16K in income, health insurance will either be free or subsidized so much as to be really cheap. About $45/month.
Yeah, so WE have to pay for it! fark Obama and his Obamacare. That prick has done nothing but ruin everything.

OP, retirement advice requires more info. Primarily location, age, and if you have any dependents or not.
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#11
Quote from robertclemens View Post :
Under Obamacare it likely won't be a crap-ton for this individual, but that's because everyone else will take on the burden. Hooray for burdening the rest of us!
We already pay for it. Just in the most inefficient way possible. The world holds up the US as the way not to run a health care system. Now we pay for it a little more efficiently.

Quote from mo.karney View Post :
Yeah, so WE have to pay for it! fark Obama and his Obamacare. That prick has done nothing but ruin everything.
WE already pay for it. That's the thing that the wrong side doesn't seem to get. Now we pay for it a little more efficiently and thus pay a little less than we would have.
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Last edited by sunnysidescape August 12, 2013 at 02:52 PM
#12
Quote from sunnysidescape View Post :
We already pay for it. Just in the most inefficient way possible. The world holds up the US as the way not to run a health care system. Now we pay for it a little more efficiently.



WE already pay for it. That's the thing that the wrong side doesn't seem to get. Now we pay for it a little more efficiently and thus pay a little less than we would have.
I think you and I have different definitions for the word efficient.
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#13
Sorry guys. I've been away at work. I'm working for another 2-4 years and I'm in my 50s. So yeah...hopefully I'll live for a while longer Smilie.

What I meant by a great house is I can probably buy something that's not a dump for 400K outright. Or should I get a loan and invest more?

My personal accommodation won't be a problem. I mainly just want to know what's a good safe thing to invest 400K in, Its currently just in a bank account earning me peanuts....

Thanks so much for all your help guys!
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#14
Quote from maxthelols View Post :
I mainly just want to know what's a good safe thing to invest 400K in, Its currently just in a bank account earning me peanuts....
Sorry, but if anyone could answer that, they'd either be telling you a Ponzi scheme or lying. There's no such thing as a "good, safe" investment. There are good investments (stocks, some real estate, etc) that earn decent returns and there are safe investments (savings accounts, CDs) that currently earn diddly.

You may want to look into landlording in your area (this can be rewarding, but it can also be a pita) and you may want to look into some ETFs or mutual funds.
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#15
Quote from maxthelols View Post :
Sorry guys. I've been away at work. I'm working for another 2-4 years and I'm in my 50s. So yeah...hopefully I'll live for a while longer Smilie.

What I meant by a great house is I can probably buy something that's not a dump for 400K outright. Or should I get a loan and invest more?

My personal accommodation won't be a problem. I mainly just want to know what's a good safe thing to invest 400K in, Its currently just in a bank account earning me peanuts....

Thanks so much for all your help guys!
Sit down with a fee-only financial planner. This is someone who simply charges a flat fee (that they'll tell you up front) for their services - no commissions. This removes the vested interest many commissioned financial planners have in putting you in things that line their pockets with commissions but may be horrible for your wallet. They will go over your entire current financial picture coupled with your financial goals and give you a plan.

You can find a good one at Garrett Planning Network [garrettplanningnetwork.com] or the National Association of Personal Financial Advisors [napfa.org].
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