Sudden windfalls, such as inheritance or lottery winnings, are almost always welcome. However, without a viable investment strategy, these funds can quickly diminish. What’s more, you’ve also missed an opportunity to live off of the interest payments of your windfall for years to come.
Let’s explore how to live off the interest payments of your windfall with the right investments.
We will look at various lottery and inheritance investment options, including private mortgage REITs, to help you discover the best choices for generating consistent income from investment interest.
Let’s Start Investing
Investing your windfall wisely
Windfalls such as lottery winnings or inheritances can be depleted quickly due to several factors.
One study found that one-third of people who received an inheritance windfall had negative savings within two years of the event.
A windfall often follows a significant increase in lifestyle expenditures. Lottery winners and inheritance recipients may rush into buying expensive items and indulging in extravagant lifestyles, which can quickly deplete their funds.
Many sudden wealth recipients lack the financial literacy needed to manage large sums of money. This can lead to poor financial decisions, such as:
- Overspending
- Making risky investments
- Accumulating debt
The concept of living off interest
Living off the interest means investing the principal amount of your windfall in a way that generates sufficient interest income to cover your living expenses, preserving the principal for future income generation.
Setting realistic expectations
To successfully live off interest, setting realistic expectations regarding your lifestyle and spending is important.
Create a budget that aligns with the expected interest income and make disciplined financial decisions.
Investment options for windfalls
Savings accounts and CDs
High-yield savings accounts and/or Certificates of Deposit (CDs) tend to be viewed as safe and stable investment options, but they have specific limit capabilities.
These accounts are insured by the FDIC, which protects your principal investment up to a certain limit.
- Savings accounts offer ready access to your funds and provide a modest interest rate
- CDs lock your money for a fixed term, typically offering somewhat higher interest rates compared to savings accounts
However, both options have limited growth potential due to low interest rates.
While they are excellent for preserving capital, the interest income generated is usually insufficient to sustain a comfortable lifestyle, especially in a low-interest-rate environment.
Bonds and bond funds
Bonds are debt securities used to raise capital and issued by:
- Governments
- Municipalities
- Corporations
Investing in a bond means lending money to the issuer in exchange for a period of interest payments. At maturity, the principal is returned to you.
Bonds are generally categorized into three types:
- Government bonds, such as U.S. Treasury bonds, are considered the safest, but they offer lower returns
- Municipal bonds—local governments issue these and often provide tax-free interest income
- Corporate bonds carry higher risk compared to government and municipal bonds but offer higher yields
Bond funds gather or ‘pool’ money from different investors to purchase a diversified portfolio of bonds. They offer professional management and diversification, reducing the risk of investing in individual bonds.
While bonds and bond funds provide steady interest income, their returns may still be modest compared to other investment options.
Dividend-paying stocks
Dividend-paying stocks are another investment option where shares of companies distribute a portion of their profits to shareholders in the form of dividends.
These stocks can generate regular income through dividend payments, which can be reinvested to purchase more shares or used to cover living expenses.
Additionally, dividend-paying stocks have the potential for capital appreciation, meaning the value of the shares can increase over time.
Markets can turn volatile
However, investing in stocks comes with risks. Stock prices can turn volatile and are often subject to market fluctuations.
To mitigate these risks, it’s important to carefully select dividend-paying stocks with a strong track record of consistent payments and financial stability.
Real estate investments
Investing in real estate can provide a steady stream of rental income and the potential for property value appreciation.
Owning and managing rental properties can be lucrative, but it also comes with challenges such as:
- Property maintenance
- Tenant management
- Market fluctuations
The case for private mortgage REITs
Private mortgage REITs are specialized REITs that invest in real estate mortgages and mortgage-backed securities and are not listed on stock exchanges.
They can generate income for accredited investors through interest payments from these mortgage investments.
Pro Tip: An issuer of unregistered securities can often verify your investor status, which may involve reviewing your financial statements, tax returns, and other documentation to confirm your income and net worth.
Benefits of private mortgage REITs for living off the interest
Private mortgage REITs offer several advantages for those looking to live off investment income.
- They can provide higher potential returns compared to traditional fixed-income investments like bonds or savings accounts
- The interest income from mortgage payments is generally stable and regular, making it a reliable source of income
- Private mortgage REITs are managed by professionals with expertise in the real estate and mortgage markets. They help mitigate risks and enhance returns, making them an attractive option for investors seeking consistent interest income.
Marquee Funding Group and private mortgage REITs
Marquee Funding Group is a long-standing provider of private mortgage REITs with a proven track record of balancing accessibility with the potential for attractive returns.
With a minimum investment of $50,000, you can benefit from Marquee Funding Group’s professional management and expertise in the mortgage market and start your way to achieve financial stability and consistent interest income.
How to live off of interest from your windfall or inheritance
Sudden windfalls from an inheritance or lottery winnings can vanish quickly without proper investment strategies.
By understanding how to live off the interest payments of your windfall and exploring various investment options, you can ensure that your funds generate a steady income stream for years to come.
Make Marquee Funding Group’s private REITs work for you
By carefully selecting the right private mortgage REIT and meeting the necessary investment requirements, you can make your windfall work for you, ensuring financial stability and peace of mind for the future.
Start investing in Marquee Funding Group’s Capital Fund 1 today.