Home  >  Financial Articles and Q&A  >  I just got a settlement of $200k from a auto accident. ...

I just got a settlement of $200k from a auto accident. I'm only 52 going on 53. What or where should I invest my money?

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

Dec 13, 2014 by Vicki from Santa Cruz, CA in  |  Flag
7 Answers  |  8 Followers
Follow Question
6 votes
Peter C. Karp Level 20

Vicki

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.

Disclosure: The posted information is for informational purposes only. This message does not constitute an offer to sell or a solicitation of an offer to buy any security. All opinions and estimates constitute Karp Capital's judgment as of the date of the report and are subject to change without notice. Accordingly, no representation or warranty, expressed or otherwise, is made to, and no reliance should be placed on, the fairness, accuracy, completeness or timeliness of the information contained herein. Securities offered through Infinity Securities (a registered broker-dealer, member FINRA, SIPC). Infinity Securities and Karp Capital Management are not affiliated companies.

Comment   |  Flag   |  Dec 15, 2014 from San Francisco, CA

1|600 characters needed characters left
3 votes

Hi Vicki,

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.

Brett brett@comprehensiveadvisor.com

1 Comment   |  Flag   |  Dec 13, 2014 from Carlsbad, CA
Vicki

I sent you a email

Flag |  Dec 13, 2014 near Santa Cruz, CA

1|600 characters needed characters left
2 votes
John A. White Level 7

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.

3 Comments   |  Flag   |  Dec 13, 2014 from Blue Ridge, GA
Vicki

I'm On SSD now I really dont owe many bills. I wanted to invest in annuities but I'm too young for that. I'd like to invest 90% of my settlement. I got more than the 200k and i was going to use that to finish fixing up my 45 ft sailboat and take off after hurricane season. I'm not into playing in the stock market because I dont know anything about it. I want a safe investment where I can draw a little out each month. I DO NOT want to pay the government ANYTHING if I can help it. I'm glad my settlement isnt tax deductible. Really the only thing I need to do is Invest and take off. I can live pretty good off my SSD.

Flag |  Dec 13, 2014 near Santa Cruz, CA
Vicki

Thank you for the Info

Flag |  Dec 13, 2014 near Santa Cruz, CA
Vicki

I will never work again since this wreck almost broke my neck. Go figure it was a truck driver who rear ended (45mph) me 16 days after my last surgery for breast cancer. I had to have a neck my neck fused. So now I have 3 screws In it. I do need to warmer weather because this cold is killing my bones. The plan was to sail to Mexico and then who knows where. Around the world sounds good to me. Have the boat paid off. I only owe 20k in misc bills and thats it. My husband on the other hand owes the IRS a little. He has his CDL from Nevada. Mine is from Ca for Medical and tax reasons. Our trucking company was in the oilfield industry. BIG bucks. But he's retired now and what his son owes us will pay off the rest of his bills. I've been looking at a sailboat In Flordia. I'm in no rush. The CD thing sounds good until I figure something out. I do have my feelers out to a few people and I'll wait to see what they come up with that Is out of the Box

Flag |  Dec 13, 2014 near Santa Cruz, CA

1|600 characters needed characters left
2 votes

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.

Comment   |  Flag   |  Dec 16, 2014 from Suffolk, VA

1|600 characters needed characters left
1 vote
Larry R Frank Sr Level 20

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.

1 Comment   |  Flag   |  Dec 13, 2014 from Roseville, CA
Vicki

i'm on SSD now and will be forever unless the government goes broke

Flag |  Dec 15, 2014 near Santa Cruz, CA

1|600 characters needed characters left
1 vote
Tunc Tanin Level 10

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.

View all 9 Comments   |  Flag   |  Dec 13, 2014 from Somerville, MA
Vicki

I'm Into different that's for sure. Nothing in my life has been easy when you grow up in the streets after running away from a rich but dysfunctional family. It's all good because I'm a better person for all I've done and been through. And will continue to go through. I Like out of the box thinking because I'm out of the box for sure.

1 like | 
Flag |  Dec 13, 2014 near Santa Cruz, CA
Tunc Tanin

If you are looking for out of box thinking, I am very good at it. Unfortunately, I am on the East coast. I only visit the west coast every few years. As the others said, you wont be able to find something that can give you 1000 a month and also keep up with inflation. Since whatever you decide to invest in, you are better off filing jointly so that you can reduce your taxes. In most cases, you are better off filing jointly. You probably have personals reasons for filing separately and you may not wish to discuss this on board. Still cutting expenses is the best way to go and you should explore these things before deciding how to invest.

Flag |  Dec 15, 2014 near Somerville, MA

1|600 characters needed characters left
1 vote

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.

Tim Hudson

Comment   |  Flag   |  Dec 15, 2014 from Summerville, SC

1|600 characters needed characters left