In today’s financial environment, what would it take to generate $10,000 in annual income? I see two main consumer categories here: savers and investors.
Savers
The savers aren’t risk-takers, and they focus mainly on fixed products. The risk for the saver is the uncertainty of future rates. Looking at the current average rates from Bankrate.com, let’s see what lump sum would be required to generate $10,000 of annual income.
Investors
Now let’s look at an investor who may have a combination of fixed, bond and equity investments. Assuming a higher rate of return than the fixed products, the lump sum required for them is even smaller. But even though they need less money up front compared to the savers, investors risk the uncertainty of rate of return and longevity.
Alternatives
Here are two alternatives that eliminate return and longevity risks and require smaller lump sums: