Can Living Off Interest From A $1 Million Investment Support Your Retirement Dreams? | Canada News Media
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Can Living Off Interest From A $1 Million Investment Support Your Retirement Dreams?

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The concept of living off the interest and returns from a retirement account has become a focal point for many Americans. The common goal is to accumulate enough savings by their late 60s to enjoy a secure, indefinite retirement.

For younger generations, the ambition often shifts toward amassing a substantial nest egg for early retirement. But reaching this milestone is not a simple task, prompting many to ponder: Is $1 million sufficient? And more importantly, is it feasible to live off the returns from a $1 million account?

Living off interest involves relying on what’s known as passive income. This implies that your assets generate enough returns to cover your monthly income needs without the need for additional work or income sources. The ideal scenario is to use the interest and returns while preserving the core principal.

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The first step in assessing the feasibility of living off interest is understanding personal expenses and lifestyle aspirations. It involves balancing essential monthly costs against desired lifestyle choices, ensuring a harmonious blend of financial prudence and personal satisfaction.

Paying off debts like credit cards or student loans is crucial, as they can significantly hinder financial growth. A realistic appraisal of both necessities and luxuries is essential in formulating a sustainable financial plan.

It’s also important to consider the role of Social Security benefits. These benefits are a critical component of most retirement plans.

Investing a $1 million savings wisely is key. Investment options range from low-yield, high-security choices like savings accounts and government bonds to higher-risk, higher-return options like stocks and index funds.

  • High-yield savings account: With an average interest rate of about 0.45%, this option offers around $4,500 annual income. It’s a low-return but highly secure option.
  • One-year treasury bills: Offering safer returns at about 1.72%, this could generate approximately $17,200 per year.
  • Certificates of deposit: With an interest rate of around 1.79%, this could yield about $18,000 annually, combining security with slightly higher returns.
  • S&P 500 index funds: Historically, these have offered returns between 10% and 14% per year, translating to $100,000 to $140,000 annually on a $1 million investment. However, they come with higher risks and market volatility.

Living off a $1 million portfolio requires a strategic balance between securing steady income and managing investment risks. While some may find comfort in the lower returns yet higher security of Treasury bills, others might lean toward the potentially higher but more variable returns of index funds.

A conservative approach involves setting aside a portion of returns in safer investments as a buffer against market downturns. This safety net should be substantial enough to support living expenses during periods of low market performance.

 

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Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX up more than 200 points, U.S. markets also higher

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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