Budgeting with a Monthly Income Plan (MIP)

A monthly income plan (MIP) provides a set payment from an investment fund to an investor over an extended period of time. This payment is issued monthly, as the name would imply, to supplement the investor's current salary. The option is typically used by senior citizens or retired individuals who are on an otherwise fixed income.

Determining an MIP Amount

There is no "right" amount to set for your MIP. The factors you use will be, one, the amount of income currently in the investment account and, two, the income you need to meet daily expenses. It is simple math to determine how much a monthly payment will be if you would like to entirely drain the investment in 5 or 10 years. However, if you need more in the short term, then you may have to budget differently.

Budgeting with an MIP

A MIP is meant to supplement your income, not replace it. Thus, you should be able to meet your daily requirements out of your 401k, Social Security benefits and other accounts. The MIP is cash from another investment you have. Use this money to enjoy luxury expenses such as dinners out. If you cannot meet your minimum expenses, such as rent or mortgage, without dipping into your MIP funds, you may need to cut back on those expenses.

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