Bridging the education gap with strategic fixed income.
With three children aged 8, 12, and 15, the Johnsons face the daunting prospect of funding multiple college educations while maintaining their retirement savings trajectory. Initial projections revealed a $25,000 funding gap per child, totaling $75,000, based on current savings rates and projected college costs. They needed a strategy to safely increase investment income without significantly increasing risk.
By using the Credit Spread Calculator, the Johnsons, along with their financial advisor, identified opportunities to reallocate a portion of their fixed income portfolio into carefully selected corporate bonds with slightly wider credit spreads than their existing holdings. This allowed them to conservatively increase their annual fixed income return by 0.5%, generating approximately $6,000 in additional annual income, significantly closing the $25,000 funding gap over the projected college savings timeframe.
The Credit Spread Calculator enabled precise comparisons of risk-adjusted returns across various corporate bonds, facilitating data-driven investment decisions. This was coupled with the Tax Equivalent Yield calculator to ensure the higher yield remained competitive after accounting for tax implications.
$18,000 of additional investment income over 3 years to better address the education funding gap.
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