How to Create a Reliable Schedule of Investment Income without Paying Fees
Here's a little-known secret... You can create a reliable schedule of investment income for a pre-determined number of years without paying fees using an income ladder. An income ladder is similar to a traditional bond ladder except that when investments mature, they are used to provide income rather than to purchase more bonds. When the bonds or other fixed-rate investments that make up the income ladder are insured or guaranteed, such as with bank CDs and US Treasuries, the investment income is highly dependable.
The challenge is that it can be difficult to figure out the schedule of fixed-rate investments needed to exactly provide the desired income each year from a combination of interest and matured principal. The free calculators on this site will do this for you. They will also calculate the total cost to fund your income ladder. Click Here to See an Example.
Income Ladders and the Defined Withdrawals Strategy
Investing for long-term reliable income poses a challenge. On the one hand the investor probably needs predictable income. On the other hand the investor probably also needs the growth and inflation protection that comes from investing in unpredictable investments such as stocks. One strategy is to split the investment portfolio into two portions where one portion is invested in an income ladder, while a second portion is invested in stocks. It is the income certainty of the first portion that allows the investor to manage the second portion with a cool head. Eventually stocks are sold to extend the income ladder, or in other words to replenish the income-generating investments. But with a long-term income ladder, the investor has the time and flexibility to hold out for favorable stock selling opportunities. This strategy is called Defined Withdrawals and you can learn more about it at: www.DefinedWithdrawals.com
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