How to Create My Own Pension Without The Stock Market
In 6 months, I learned how to create my own pension plan without a lot of money. The cool thing was it did not involve the stock market or an annuity….
I’m using two tools to easily create my own pension plan that can last forever!
These tools are:
Lending Club – They are offering $150 bonus if you open an account over $5,000!
Lending Robot – They will manage your LendingClub account for free up to $10,000
Here are my numbers as of May
Here where it starts to get interesting!
This is a screenshot from LendingRobot and it shows that if I set my account to maintain it’s current amount. (This means, I do not drain the account.)
As of today, I would make about $25 for the rest of my life.
If I let the account reinvest in itself, by April 2024, it will be worth $5,955. This is more than twice today’s amount.
So, in 7 years, this account will more than double, 2.25% to be exact.
Which means if I don’t do anything, by 2024, I could maintain my account and make $63 for the rest of my life without doing anything. Here’s the chart.
How To Create My Own Pension – The Details
So, I always look for other options on how to invest my money… and not always in the stock market.
One night I read an article and it mentioned LendingClub and how it allows investors to loan money to those seeking loans.
This obviously sounded interesting.
After some initial research, I learned you can choose…
- The types of loans you can make.
- The type the return, dependent upon your risk, could be anywhere from about 0 to 20%.
I chose to go with a little higher risk and to help reduce the risk more, I’m using LendingRobot.
The minimum order was only $25, so I figured it wouldn’t really hurt too much. After all, $25 doesn’t go that far these days. I tested it for a couple of months.
Here’s what I found, I could easily invest $25 into an individual loan and get paid an average of about $.85 per month on that loan. This was consistent over a couple of months. Granted, there is the possibility that someone would not pay. This would effect the numbers. As the site states, with more loans, the lesser the risk or impact on your account. Disclaimer: I am not a financial planner and don’t guarantee anything here. This is just me sitting up one night having a drink and letting my mind wander.
Anyway, you can go to the site to learn more. One night, it dawned on me. If I had enough individual loans, the interest paid each month would buy MORE loans.
Therefore, this investment would feed itself!
It would feed/reinvest in itself sooo quickly.
After a night of fiddling around, I found that if I invested $200 per month until age 70.5 (when you can’t contribute any more to your IRA). In addition, you will have to start withdrawing from this account at age 70.5.
I found the following:
- At the mandatory withdrawal age of 70.5, I could safely withdraw 10% or an average of about $900 a month until age 100
- This withdrawal amount will allow the account to continue to grow.
- It will also leave a Lending Club account with about $256,000 to be passed on to beneficiaries if I die at age 100!
- I compared an annuity rate for guaranteed $900 a month until age 95 and it would I would have to buy a policy for $92,000 now. In this example, I would pay out $60,800. At the end of the annuity I couldn’t pass on anything to my kids. So, I would have saved about $30,000 using this technique.
Remember, go to LendingClub to learn more! Use the link to help contribute to this blog!
Notes on the spreadsheet below:
- IMPORTANT: I am NOT a financial expert and used to the best of my knowledge my spreadsheet skills to come up with these numbers. So, they may be off)!
- This is for an IRA.
- Columns are now included to calculate taxes
- The number of shares decline over the years based on an average 36 month loan from Lending Club.
- The estimate per share was based on 1 months average pay per loan.
- Contributions stop at age 70.5.
- It also assumes everyone pays and no one defaults. I’ll figure out how to add those estimates in later.
- It shows how the principal and interest will purchase more shares and keep the account alive and growing.
If you have any advice on numbers, feel free to let me know.