Opinion – Grain in Grain: See how much you need to retire with only fixed income

When we think of passive income for retirement, alternatives such as real estate, real estate funds and dividend-paying stocks automatically come to mind. However, it is also possible to retire and have a periodic income by investing in fixed income.

At the present time, in which long-term interest rates have risen above 5% of real interest rates, the challenge of retiring only on fixed income becomes easier.

The advantage of using only fixed income is predictability. The return on stocks, real estate funds and real estate may even be higher, but it carries a risk.

The portfolio can be assembled with public and private bonds. Government bonds carry less risk. However, with a well-spread portfolio of corporate bonds, it can have the advantage of exemption from IR and still capture the additional premium that these bonds have in terms of remuneration.

The first point in deciding how much you will need to retire is whether you want to live on interest alone and leave the principal of your investments as an inheritance or if you want to consume all the capital.

Let’s assume you want to consume all the capital.

Then you need to think about what life expectancy, that is, how long you intend to receive the income from the applications.

The IBGE provides a table with the average life expectancy for each age. See the link. For example, if you have reached the age of 57, your average life expectancy is another 25 years. Evaluate if there are relatives in your family who have lived longer, as you do not want to risk living longer than the time of depletion of the heritage.

So, if you are 57 years old and want to have a monthly income of BRL 5,000 for another 25 years, considering a real net interest rate of 4% per year, you would need to have a net worth of approximately BRL today. 937.3 thousand.

The calculation of the equity needed to have an income is very dependent on the interest rate and the benefit period.

The table below presents a simulation of what amount you would need to have today to live with a monthly income of R$ 5 thousand if you applied only in fixed income.

The simulation considers various interest rates, as well as time possibilities in years of using the income benefit.

In order to have a remuneration closer to 5% per annum, it is necessary to have a portion of more relevant exempt private securities in the portfolio.

The first step in starting your retirement plan is to set an equity goal. And you, do you already have your goal?

Michael Viriato is an investment advisor and founding partner of Investor’s House

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