Own a Fund That Pays $60,000 in Retirement Income

This isn’t an article about how to save money by discontinuing the daily latte to save $4.50 per day.

Now, if you are struggling paycheck to paycheck, this would be helpful. However, this won’t substantially affect your savings or retirement account.

But there is something you can do with that $4.50 a day to noticeably impact your savings!

If you were to put $4.50 a day in a savings account, you will have saved $1,298 in a year. That’s a meager return of $128 at half of 1% per year!

A much better plan is placing those funds in a high-yield exchange-traded fund (ETF) or closed-end fund (CEF). Several provide monthly dividends rather than quarterly and can pay as much as 1% per month versus a 0.5% per year in savings account.

For example, if you took that daily cup of coffee and invested in an ETF or CEF you could realistically see your first-year total be $1,608 instead of the original $1,298.

What if you started with an account holding $1,250? If you consistently add the original coffee savings, you will nearly triple your initial investment to $3,708 after the first year.

And this isn’t a linear projection. If you are in your 20s you can reinvest the income along with the coffee savings to continue this every month. Then, increase the additional amount when you can.

Your returns will increase exponentially by taking full advantage of compound interest. If you are close to retirement, you can convert your IRA and earn monthly income without touching your initial principal.

Income in retirement

One thing you need to consider are the required minimum distributions (RMD). As of age 72, you will have to take a distribution equal to the account size divided by 27.4 as of 2021.

So, if you have a $500,000 account, you will need to take a distribution (in a lump sum or over the course of the year) of $18,248.

If you were to earn 1% monthly and take a distribution of those dividends you would be taking $60,000 per year. You would meet this requirement easily.

Your account will grow at the rate of the CEFs or ETFs dividend rate. As long as you are taking distributions each month, you won’t have to worry about taking a larger distribution until you reach the age of 97!

When conducting research on high-yield CEFs and ETFs, the main argument against some of the funds is that they don’t have much price appreciation. This is short-sighted.

This shouldn’t be a concern if you are using it as an income vehicle. In fact, you don’t want it to change much. This might sound counterintuitive because it is ingrained to want assets to grow.

When you reinvest your dividends in the fund, which is where the compounding happens, you don’t want it to be drastically more expensive when purchasing additional shares. You would wind up buying fewer shares which would reduce your overall return.

Appreciation is only helpful if you plan to sell an asset at maturity. Without asset appreciation, the more you can buy, the more interest you can receive, and the more your investment compounds.

Recommended Articles

Biggest and Smallest National Gaps Between Rich and Poor (and Where America Ranks)

In the United States, the richest 1% controlled more than 40% of the wealth in 2016. The last time wealth inequality gaps were this wide was during the Great Depression.

3 Best Travel Websites That Save You Money

There’s a lot of travel sites out there and they all seem very similar. If you are planning for spring break in 2022, next year’s summer vacation or just getting

35 Healthy, Natural Foods You Should Be Eating

Did you know that the healthiest foods in the world are actually highly affordable, simple foods that can be found in any supermarket? The most healthy foods you should be

5 Ways to Boost Return in Your Investments While Actually Cutting Risk

Are you looking for ways to earn higher returns without risking it all? When it comes to investing your money today, there are plenty of options that promise attractive returns.

4 Effective, Easy Retirement Withdrawal Strategies

Many many years ago when my dad retired I remember him receiving a gold watch for his years of service and a nice pension for his hard work. Today, many

4 Strategies for Getting a Healthy Midday Nap

What is the best way to reduce feelings of frustration and stress? Yoga, meditation, listening to quiet music? While all of these can have a positive effect on stress levels,

Billionaires Commissioning Gold, Bejeweled Credit Cards Worth $50K

That may be because there are now more rich people in the United States than ever before. What changing is what they are willing to spend money on — such

When is the right time to retire? 62, 65, 70?

You may be trying to figure out what the most beneficial age is to say goodbye to your colleagues at work. Is it 62, 65, or even 70? Age 65

The Future of Medicine: 3D Printing

The technology of 3D printing is a technique that creates 3D objects from digital designs right before your eyes. Typically, 3D printers work with plastic or other malleable materials to

5 Special Risks Women Should Consider When Planning for Retirement

Even though the country is moving toward erasing the gender boundaries, there are some things where women and men have to acknowledge they are different. Retirement planning is one of

Depression Maybe a Side Effect of Diet, Lifestyle: Study

A study has recently been released that indicates that depression may be more closely related to an illness or allergic reaction than a mental condition. Numerous scientists have spent the

7 Steps to Enter Retire Early and Rich

The United States is home to over 20 million millionaires, about 80% of whom are self-made millionaires who worked and invested their way into the seven-figure club. Wouldn’t it be