I'd like to live off it for the rest of my life and don't know where or what to do with it. Any Ideas? I'm not into investing it in the stock markets. I'd like a safe investment that I can draw around 1000.00 a month
Without knowing your entire financial situation it is very difficult to recommend any specific investments. I recommend sitting down with a fee based investment advisor to assess your financial assets and liabilities and put a budget in place. Each investment strategy that generates income comes with a certain level of risk so it is important to access your risk tolerance for both near & long-term. There are insurance programs and asset management strategies that could be used to satisfy your income requirements. You are welcome to call our office if you are interested in going through a risk assessment. We are located in the San Francisco Bay Area.
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I am sorry to hear about your accident, but am glad you appear to be ok and have gotten a nice settlement that can help you set yourself up for the future.
Understanding your concern for stock market risk and need to draw down from the investment over time, there are a few options you could consider. The challenge is we would need to understand your overall situation better to make recommendations.
It would be inappropriate to make a specific recommendation on what you should do without looking further into your other assets, income and expenses.
I can say this, you should have several options available and be able to consider each very carefully as each option you may consider will have positive and negative implications.
I would recommend getting as much education and information about anything that is presented to you.
I would also like to point out that at 1K per month on 200K you would be drawing down from the pot at 6% per year, which is possible, but to have this last for your entire life, is a very aggressive draw down rate. I am not saying it's not possible, but you need to consider the impact and required return to sustain this kind of distribution.
I hope this helps some and if you would like further recommendations, I would welcome the opportunity to talk about your situation further.
You need to be very deliberate in your actions. Seek advice from a Fee Based Advisor who is held to a Fiduciary Standard. Simply stated, working with a fee based advisor requires that they will do what is appropriate for you, period. Don't take any action until you understand what is appropriate based on your specific circumstances. My website if full of content that is educational and easy to understand. Go to www.financialguideposts.com and look around. There are many educational videos available which may be helpful. If you need help, you can contact me via the website. The best to you in your journey.
Vicki, the suggestions that others have made are all valid. Here is your dilemma: no-risk investments like CDs are currently paying around 1% or less. So if you avoid the stock market, get a very low interest rate, and withdraw $1000/month. your settlement will last you about 17 years, assuming inflation doesn't force you to take out more in later years. If you seek financial guidance, I suggest an RIA, perhaps one who will charge you an hourly fee just to provide you with the options that are open to you. But I think that most of the people you will speak with will tell you that putting some of your money into the market via mutual funds is the best option for you. Even then, if I were providing the advice, I would tell you that a $1000 monthly withdrawal from $200 thousand portfolio for someone your age creates a high probability of running out of money before you run out of time.
I’m sorry to hear that you were injured. The silver lining after all that is the settlement. When you say as long as you live, that is probably much longer than you may think! The Annuity Tables suggest you are expected to reach age 89 (50% of people your age historically outlive this age). Social Security tables suggest reaching age 85. Both of these tables don’t take into account the fact that longevity probably will improve for us through continued medical improvements between now and then. Look how much medicine has improved over the past 30+ years!
My calculations suggest you should expect around $700/month based on these ages with only 40% in the stock markets with that sum. That little exposure is necessary to keep that payment up with inflation. These numbers are based on my contributions to retirement income research summarized here (http://blog.betterfinancialeducation.com/category/larry-frank/ ).
You could also look at immediate annuities, which provide monthly income you can’t outlive. The tradeoff is you give up the money in exchange for that income. You are also not protected from inflation. However, they guarantee you won’t outlive your income. And once you are eligible for Social Security (possibly the disability component now), that monthly income does provide inflation protection.
There are other options that may work, depending on your situation and desires. Each option comes with its own set of pros and cons. There is a wide range between guaranteed income and non-guaranteed income. There is no right or wrong answer – simply the one you decide upon. Only you may decide. However, you should make an informed decision.
I suggest you use the “Find an Adviser” feature on www.napfa.org/ to find a fee only adviser in your area who would help you, with your interests in mind, to determine the solution you prefer. With flexibility built into your income plan, you can choose other options later as you age.
You can also find advisors who are commission based or fee based. Being fee based does not mean they are fiduciary or they will always do whats in your best interest. Most financial advisors will advise you to keep some money in the stock market as it is a good hedge against inflation. If you don't want to ignore the inflation risk then alternatives are available, however, you will definitely give up some return opportunities. Usually I structure these as in 3 buckets, one guarenteed one low risk investments and the last one in a broad based stock market fund. It seems like you will have more in the first 2 buckets , however how much is up to you. I generally talk with my clients couple hours before guiding them. Sometimes the best thing is to just buy a 6 months CD and think about what you are looking for. I have given this advice several times and most of the time they have come back to me for advice thanking me and also with a set of new questions and concerns. I dont know if your injuries will make a difference in your life expectancy, or your future income potential, a car accident generally does not make you live longer. If something medically happens to you in 20 years because of this accident, that is something to think about as well.
Vicki, I am glad to hear you are okay and can enjoy your time on the sailboat. I work closely with PI attorney's and this questions always comes up when a client receives a large settlement. Any financial advisor that tells you they can give you a thousand a month is not telling you the whole truth, 6% withdrawal rate is a disaster waiting to happen when the market hits a rough patch. It sounds like you are a little concerned with not having to much exposure to the stock market and while I can understand, you will need some exposure if you are going to outpace inflation, how much more it cost for a gallon of milk or movie ticket compared to 10 years ago.
Find a good investment professional that you trust and has navigated PI settlements before and work with them to find out exactly how much money that you need. With Disability laws the way they are currently written you may be able to pick up a few hundred dollars a month to offset the amount you need in a low stress job that will not hurt your neck.
Have a great time on the boat. If you have any other questions feel free to contact me and I will gladly assist you anyway I can.