Generating an income from large lump sum

TCA

gadgetmind wrote: »

My wife holds an equity and IT portfolio in one of those accounts and it works well.

I've never traded by 'phone.

Yes, but that could change at any time. However, HL cap the platform charge at £45 pa in an ISA so I'd hope that any future charge would be at about that level.

Thanks. I edited my post re the 'phone charges. Pretty steep! And I'd be investing "unwrapped" so no ISA charges.

gadgetmind

TCA wrote: »

And I'd be investing "unwrapped" so no ISA charges.

Yup, I was just pointing to that charge to show what a typical post-RDR platform charge might be. Other platforms already have such charges for unwrapped, some flat annual, and some charged only for "inactivity".

TCA

gadgetmind wrote: »

Yup, I was just pointing to that charge to show what a typical post-RDR platform charge might be. Other platforms already have such charges for unwrapped, some flat annual, and some charged only for "inacvity".

I'm with you - the new regulations. Keep forgetting that charging will likely change because of that. Thanks for the reminder.

phuket

Thank you all for your replies.

I haven't quite decided where to invest part of the lump sum but I wanted to ask what people thought was a resonable percentage to keep held in cash building society bonds.

I am trying to balance out the need for some guaranteed income which I will get from the bonds against the risk of the money held in them being eroded by inflation. Does 50% held in cash bonds seem to much at present?

I have shortlisted several of the best 2-3 yr bonds which will give a net interest of 2.7 - 3.1%. My idea would be review the situation in about 2 yrs time when some of the bonds mature and if the markets are more stable then, reduce the amount I hold in cash bonds and increase the amount held in other investments.

Thanks!

gadgetmind

phuket wrote: »

I haven't quite decided where to invest part of the lump sum but I wanted to ask what people thought was a resonable percentage to keep held in cash building society bonds.

Don't think it terms of a percentage but it terms how many months/years of essential money. Work out what you need per year, subtract any guaranteed income, and then multiply by x. Of course, now you need to find x.

If you're relying heavily on equities, some would say you need x=3, so three years as cash. As Investment Trusts (but not income funds!) keep a dividend reserve, there are arguments to use only one year.

Does 50% held in cash bonds seem to much at present?

My gut reaction is "yes", but the real answer is "it depends". If you can achieve what you need while being that heavy on cash, then who's to argue?

I intend to enter retirement with a "three years essentials" as index linked cash.

TCA

phuket wrote: »

I have shortlisted several of the best 2-3 yr bonds which will give a net interest of 2.7 - 3.1%. My idea would be review the situation in about 2 yrs time when some of the bonds mature and if the markets are more stable then, reduce the amount I hold in cash bonds and increase the amount held in other investments.

I'm pretty much of the same mind. I already hold the bulk of my assets in fixed rate cash bonds (producing an income averaging 4.6% net - I'm a non-tax payer) and although I really like the idea of income generation from ITs whilst hopefully some capital growth, I think it'll be a phasing process from me as my lump sums mature over the next few years. I'm also very wary of markets at the moment and think we may see further dips to come in the short term.

That said, given that fixed rates for cash aren't great any more, I will likely start buying some small IT holdings when I've got some spare cash to hand, other than just waiting for maturing money. Slightly nervous about investing lump sums in ITs I have to say but not sure I'd want loads of cash sitting doing next nothing if I choose to drip feed. Decisions, decisions.....

jgh

TCA wrote: »

Like the OP I also have a lump sum ... I'm 43 now ...

I'm in a similar position. I'm currently 43 and unemployed and my dole has expired because I have assets, leaving me with no income. I'm going through various options and one is to liquidate my assets, which would leave me with about £50,000. I'd like to invest that to provide a some sort of future pension income. However, as I'm unemployed the DSS will instead insist I actually spend it, so in about 5 or six years it will all be gone. Is there something I can put it in which is ring-fenced as an asset for my future not something to !!!! away in the present?

Now, it's 25 years since I did compound interest calculations, but I've done some back-of-envelope calculations. All my grandparents who died of natural causes died in their mid-90s, so I'm budgeting to die in my 90s. DWP says I can receive state pension at 66.66yrs. So start with those numbers.

£50,000 invested at 2% for 25 years gives £82,000 at age 68.
£82,000 invested at 2% for 25 years taking out £350 a month leaves £286 overdrawn at age 93.

That's what my "Calculus One and Several Variables" says

If I can manage to find 8 years paid employment in the next 23 years I get a full State Pension (if it still exists) as well.

bigadaj

:jLaudable sentiments to save for retirement but you need to live now in order to get to your nineties!

gadgetmind

TCA wrote: »

I'm also very wary of markets at the moment and think we may see further dips to come in the short term.

You're right to be wary, and dips are pretty much guaranteed. However, timing the bottom of the market is impossible, so you need a plan (and stomach!) that allows for this.

It's very easy to invest in what's trendy and has just done well, just to see the tide turn. While not buying rubbish, you need to look at what's out of favour and therefore offers value.

Yesterday I bought into an IT that specialises in European equities.

Wish me luck!

gadgetmind

jgh wrote: »

I'm in a similar position. I'm currently 43 and unemployed and my dole has expired because I have assets, leaving me with no income.

Commiserations.

Is there something I can put it in which is ring-fenced as an asset for my future not something to !!!! away in the present?

Maybe you need to ask on some benefits related board? I'm not even sure if you can make pensions contributions. (BTW, this is why people are often advised to put their nest egg in pensions rather than ISAs.)

£50,000 invested at 2% for 25 years gives £82,000 at age 68.

Where does that 2% come from?

If I can manage to find 8 years paid employment in the next 23 years I get a full State Pension (if it still exists) as well.

I guess that's down to your skillset.