I'm closing on the sale of my logistics company next quarter. After taxes and fees, I'll net around $1.8M. The buyer is paying a lump sum at closing. I'm in my late 50s and don't want to jump into another business, but I also don't want to just park the money and watch it slowly erode. I'm looking for reliable monthly income, not necessarily growth. What are the practical ways people here have set up steady monthly checks from a sale payout? I'm open to annuities, dividend portfolios, REITs, or anything else that doesn't require me to become a landlord or a day trader. I'd appreciate concrete examples or lessons learned.
Post-Sale Income
How to set up steady monthly checks from your sale payout
I did a SPIA with about 40% of my payout. It's boring but it does exactly what you're asking: fixed monthly deposit. The rest I keep in a conservative dividend portfolio. The annuity gave me peace of mind, but I locked in when rates were higher. Shop around, the payout rates vary a lot.
How much monthly income are you actually aiming for? $1.8M can throw off a lot depending on your risk tolerance. Without a target number, it's hard to suggest anything specific.
I'd be cautious about locking too much into annuities. They're fine for a base layer, but you lose flexibility. What if you need a big chunk for a medical issue or a family emergency? I put my payout into a mix of short-term Treasuries and a diversified dividend fund. The monthly checks aren't perfectly steady because dividends fluctuate, but the primcipal is accessible.
That's fair. I kept enough outside the annuity to cover surprises. But for me the steady check was the whole point. Not everyone needs the same balance.
Have you looked at a charitable remainder trust? If you have any interest in donating eventually, it can produce income for you now. I set one up after selling my hardware store and get quarterly payments. It's not monthly, but it's predictable. Might be worth talking to an estate attorney.
Most people I know who tried to build a DIY dividend portfolio ended up tinkering too much.If you want steady, consider a balanced fund or a managed payout fund from Vanguard or similar. They handle the rebalancing and you can set up autmatic monthly withdrawals. Not glamorous but it works.
I'd second the managed payout idea, but read the fine print on how they calculate the withdrawal rate. Some of them can eat into principal faster than you'd expect.
We did a combination: part annuity for the floor, part REITs for monthly dividends, and a cash buffer. The REITs have been okay but not as steady as we hoped. The annuity is the only truly predictable piece. Everything else has some variance.
Not sure if this is helpful, but I've been researching donor-advised funds and they don't provide income. Disregard.
Thanks for the responses. I'm aiming for around $6,000 a month before taxes. I have a small pension that covers about $1,500, so the sale proceeds need to generate roughly $4,500 monthly. That's about a 3% withdrawal rate on $1.8M, which seems doable with a balanced approach. The annuity quotes I've gotten so far would cover about $2,800 a month for Life with a 20-year guarantee. I'm leaning toward using a portion for that and then keeping the rest in a low-cost balanced fund with automatic withdrawals. Still weighing the loss of liquidity.