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Old 03-20-2008, 10:48 AM   #21
Recycles dryer sheets
Join Date: Aug 2003
Posts: 470
Originally Posted by philo View Post
My Mother has 600K and is 80 years old. She wants to leave the 600k to her children and needs it to supply $2,500/ + inflation per month to live.

What is a safe approach for her?
I'm surprised people weren't more forceful about the op's request. I believe you are asking for three things: 1) 5% + inflation returns, 2) perservation of principle, and 3) safe. We should be clear: no investment exists that satisfies all these requirements.

You can get ~0% + inflation safely with preservation of capital (at redemption) from TIPS and IBonds. You can get a nominal 5% (not inflation adjusted) with minimal risk from CDs. You can get $2,500k monthly (not inflation adjusted) from a ~$250k annuity, but not be able to leave that portion to heirs. You can get $2,500 inflation adjusted from a ~$350k annuity. You can get an expected return of 5% + inflation with risk and likely drawdown of principle from a balanced stock/bond portfolio.

Assuming your monther is in good health, a blend of these approaches, with a corresponding relaxing of the safety and preservation of principle requirements, is probably the way to go.

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