Mdthbs

How much money do I need to make in order to generate 1k/month for the rest of my life?

Is that even possible? If yes, in what way?

What you are describing is a lifetime annuity. You pay a lump sum now and then get a fixed amount until you die.

Included in this calculation are estimates of (1) how long you will live (2) how much your money will earn when invested. Both of those are difficult to estimate, so in order to be confident you don't run out of money before dying, you must do one of the following:

1. Massively overestimate how much you need to invest today. Lots of money will be left over, probably, when you die.


2. Purchase an annuity from a financial intermediary. That's what they are for. That will offload the risk that you will live a long time to the annuity provider. Some people who buy the annuity will die early and others will die late, so you don't have to overestimate. The company bears the risks.

My suggestion is to call up your favorite financial services provider (Fidelity is who I use), tell them your age, and ask how much a lifetime annuity will cost (tell them when it will start paying as well). They will give you a better quote than random people on the internet will.

There’s a general “rule of 4%” for investing. It means that a given sum invested in a total market Index fund can usually generate 4% a year indefinitely. Using that rule, $300,000 would generate $1000/mo.

Simple math that all (and I mean all) depends on the interest rate.

• At 1%: (1000 x 12)/0.02 = 1200000
  


• At 2%: (1000 x 12)/0.02 = 600000
  


• At 3%: (1000 x 12)/0.03 = 400000
  


• At 4%: (1000 x 12)/0.04 = 300000
  

Of course, interest rates change, so you'd have to be conservative with your forecasting, and 1000/month isn't very much at all.

EDIT: the elephant in the room is inflation. 20 years from now, 1000 units of currency (said because the actual currency isn't relevant) won't buy as much as it does now.

First, there's the issue of how much money you have to earn versus how much money you have for your endeavor after taxes. And then there's the issue of taxation on the yield. You can adjust the numbers per your current and anticipated futures tax brackets.

From a U.S. perspective:

Money market are variable. At the current rate of about 2%, you'd need $600k to generate $1k per month.

You could get about 6% from selective investment grade preferred stocks. Since they are tied to interest rates, that yield would vary modestly as rates change and issues are called. You'd need $200k for that. With some active swapping of issues (reallocation), in most years you could bump that yield to 10% and sometimes even better if there's an interest rate cycle (pre 2008). Preferred stock ETFs have provided about 5.5% return over the past 10 years.

There are a variety of annuities that provide lifetime income. A fixed annuity would be the obvious choice. You'd have to check to see what current rates are.

A variable annuity would be another possibility. The money would be placed in sub-accounts (similar to a mutual fund). I don't know what the current offerings are but historically the guaranteed deferred income component has been 5-6%. You'd get the higher of the two values (market investment versus the deferred guarantee). I had one with a 10% guaranteed deferred side growth. It's a lot more complex than a description here can provide but essentially you're paying higher fees and therefore under performing the market in return for guaranteed income for life.