How much is needed to live with R$ 10,000 per month in each application? – 07/20/2023 – From Grain to Grain

The first step in any planning or journey is knowing where you want to go. When talking about retirement or financial independence, the finish line is the equity needed to have the desired income. I present what income to estimate for each investment and what assets are needed to have a monthly income of R$ 10,000.

Today’s goal is not for you to choose just one of the assets, but to understand what each asset can provide you with income.

Understanding what each asset can provide you with income is important to know what savings effort you need to make today to have the desired income and what risk you will have to take in the future.

Those who make a greater effort to save during the accumulation period can select more conservative assets to benefit from the income.

Those who have not managed to accumulate much will face greater risk in retirement to have the same level of income.

To arrive at the monthly return during retirement, remember that what counts is the return above inflation.

You cannot consider that because the CDI today is above 13% per year, you can calculate a monthly gain above 1% for the next 30 years.

Neither the CDI will be at 13.65% per annum for the next few years, nor can this total return be considered in the account. Remember, the IPCA is just the update of purchasing power over time.

Over the last 20 years, the return on the CDI and Selic rate above the IPCA was only 3.5% per year, gross of income tax. Thus, net of income tax, the annual return to be considered in the income calculation should be only 2.4% per year. This equates to almost 0.20% per month.

The other assets follow the same reasoning.

In the table below, I present the expected annual return, the monthly return and the equity needed to live on R$ 10,000 per month. Remember, this is a very conservative estimate. These returns are lower than current returns. As the period to enjoy the income is usually from 10 to 40 years ahead, conservatively, it is appropriate to consider a lower income.

Net income tax return and above IPCA			Patrimony
	Yearly (%)	Monthly (%)	R$
Savings	1.5%	0.12%	8,054,852.15
CDI or Selic	2.4%	0.20%	5,054,764.48
CDB IPCA	4.0%	0.33%	3,054,610.53
Infrastructure Debenture.	5.0%	0.41%	2,454,515.51
Real Estate Funds	6.0%	0.49%	2,054,421.39
Property Rent	3.0%	0.25%	4,054,706.47
Actions	5.0%	0.41%	2,454,515.51

The assets above are ranked in order of risk. Savings is the first not because it has the lowest risk, but because of the lowest return. Its risk is similar to that of CDBs referenced to the CDI and the IPCA, that is, the FGC limit.

Realize that the greatest asset needed is for those who intend to live on income with investments in savings accounts. It would be necessary to accumulate a total of R$ 8 million if you want to live off income from the account.

The lowest equity needed would be for those who invest in real estate funds. For these, the necessary equity is 4 times smaller than in savings.

The biggest risk at the moment for real estate and stock funds is a possible taxation of dividends. In this case, both vehicles would lose part of their attractiveness.

A portfolio that has the best return-to-risk balance would be a combination of IPCA CDBs, infrastructure bonds (CRIs and CRAs also included here) and real estate funds. In this combination, the more conservative you are, the greater the weight in the share of CDBs and LCIs or IPCA LCAs.

In this income calculation I considered that the principal would be inherited. So you would only consume the interest for the income.

If you want an income of R$ 5 thousand per month, just consider half of the equity in the table. If you want to have an income of R$ 20,000 a month, just multiply the necessary equity by two.

Now that you know how to estimate your goal, the next step is to create intermediate goals. This is done with financial planning.

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

Talk directly to me via email.

Follow and like De Grão em Grão on social networks. Follow the investment lessons in Instagram.

PRESENT LINK: Did you like this text? Subscriber can release five free hits of any link per day. Just click the blue F below.