To Live On Your Interest

I have about 100,000 invested in 401-K mutual funds and some in the fixed safe funds in the same 401-K. I am about to retire (age62) and would like to start drawing about $300-$500 monthly. Will I run out of $ in the future? Or should I put the $ into some preferred stocks (that pay dividends) and pull the interest each month to help me live on.

I have a small pension coming in that pays my medical and also will start my SSA. :confused:

The rule of thumb, to keep up with inflation, is to draw no more than 4% per year. On your $100k, that means $4k a year, or about $330 a month.

So you will probably be safe, if you stick to the lowest end of your monthly draw -- $300/mo. But bear in mind that if inflation gets out of control, you would need to draw less in order to preserve the capital for the future -- and that "less" would have less purchasing power.

Since you are so close to retirement, I would strongly urge you to consult with a professional. There may be ways to continue to grow your savings, or other vehicles such as annuities which might work better for your situation.

And you didn't ask this, but I'm going to stick my nose in it anyway. $300 a month plus SS plus Medical doesn't sound too secure. Are you sure you don't want to work a few more years, and save more?

I agree with everything Puck has said. Whenever I see someone in their 70s handing out food samples in the grocery store I always hope it's because they like to get out and meet people and not because they realized at the age of 75 that they didn't have enough income and had to get a job. Have you thought about doing something different, or working part-time?

You probably should talk to a financial planner, but be careful. Any mistakes will be hard to undo since you may not have a lot of high earning years left. Most will recommend some stocks or stock mutual funds in your mix, even in retirement.

friscolobo,

There are several cold, hard facts to look at:

1) $100,000 in mixed mutual funds can be worth $50,000 (or less) either after a ravaging bear market or even after 15 years of above average inflation.

2) Nowadays, company pensions suddenly have a way of dissappearing

3) Social Security may do the same thing before too long

Just be sure you are aware of the worst-case scenarios before you make any life-changing decisions.

Additional Information:

I did not mention some specifics. I have a State pension of $600 monthly that pays for my medical insurance. I also have a City pension that gives me $180 per month. SSA will give me $1300 a month. I have exactly $110,000 and my wife has about $95,000. She is 12 years younger if that makes any difference.

She has her $ in IRA Funds: Fidelity Dividend Growth, Fidelity Spartan US Equity, T.R. Price New Horizons and American Century Ultra (which I am about to get rid of). Any suggestions?

As long as your pensions keep up with inflation and social security doesn't dry up, you might be able to make it work. $2080/month until your wife draws SS. Do you have any other emergency savings? You will want to consider that before planning how to distribute the remaining $205,000+ for maximization.

Thanks to everyone for the financial tips. It will be helpful as I do my calculations.