Low risk investment for 900K Help

[scottl73]

Which should I choose, Schwab or Fidelity?

 

[pb4uski]

Which should I choose, Schwab or Fidelity?

Flip a coin, they are both fine. I have both.

 

[Lsbcal]

Both me and my wife are disabled and can't work. I got paralyzed in 1989 at work and have a good income from an annuity set up since then and until death. My wife got paralyzed 4 years ago from medical malpractice and we won the case. She will get 900K soon. It will roll into a high yield savings account for now. I'm 52, she's 48 and we are not willing to go risky in the stock market. We would like to draw only about $2000 monthly for in case we need it and re-invest it if we don't. Ideally we would be satisfied with 4-5% gains per year. I know the stock market averages better over time but we would rather see a low steady return and not risk it. Need advise on what options there are out there. We are also not interested in doing an annuity for her because she would loose the principle and we want to leave it to our children. What is out there to lock in a long term but risk free investment? Any help would be appreciated!

What you want to do is to define the real return per year you would need. For instance, the 5 year TIPS are paying around 2.5% real return which is high and last seen way back in 2006 . But do you have the tax free space to take advantage of them? Nominal Treasuries are safe but you are taking inflation risk. And don't for get reinvestment risk should the rates come down in a recession.

Really you need to take a look at the overall financial picture which includes taxes, inflation risk, special safety risk, etc. The answer could include a percentage in equity.

Perhaps consider trying out the Vanguard advisors (or Schwab or Fidelity) for the first year of setting this up and then do it on your own to save on yearly expenses of that approach.

 

[ivinsfan]

Are you getting SSDI? What are your extra expenses? With 2 seriously disabled people living in your home it seems you would need a lot of extra income for personal help and household chores. I don't think you are thinking far enough into the future as to your expenses. Since your income is fixed until your die I don't think plain saving accounts or CD's are going to do the job. What would your younger spouse live on if you die and she loses your annuity income. Leaving money to your kids should probably not be first on the list of things you worry about.


Or perhaps you have more savings stashed away and haven't mentioned it but you have a lot of things to think about.

 

[mcbraemer]

Problem with that approach is that if Interest rates go down there is a chance of a near future downside risk.

If they opt for a 10 year CD ladder, followed by 7 and 5 year and perhaps 3 and 2 year, there is a little downside protection, for a while at least.

I agree with the above statement. Interest rates are "probably" as high now as they'll be in the foreseeable future. Locking in today's rates for the longest possible term, in either a CD or bond ladder ( or a combination of both) makes the most sense to me.

 

[Lsbcal]

Are you getting SSDI? What are your extra expenses? With 2 seriously disabled people living in your home it seems you would need a lot of extra income for personal help and household chores. I don't think you are thinking far enough into the future as to your expenses. Since your income is fixed until your die I don't think plain saving accounts or CD's are going to do the job. What would your younger spouse live on if you die and she loses your annuity income. Leaving money to your kids should probably not be first on the list of things you worry about.


Or perhaps you have more savings stashed away and haven't mentioned it but you have a lot of things to think about.

Agree.

I think this forum is not the place to get such serious financial advice. People here do not have the whole picture and are not really qualified to give the advice that might require a full financial disclosure.

 

[jazz4cash]

Schwab has them and Fidelity should have them also. Rates got better as the day went on and after 4pm today, there were multiple 5.65% monthly payers available. Added them to my ladder. All were 5yr terms and eligible for auto-rollover into new CDs when they mature. CUSIPs: 063330AG9

, 85511RBQ4

Sounds good but these are callable in a yr or two, right?

 

[scottl73]

Are you getting SSDI? What are your extra expenses? With 2 seriously disabled people living in your home it seems you would need a lot of extra income for personal help and household chores. I don't think you are thinking far enough into the future as to your expenses. Since your income is fixed until your die I don't think plain saving accounts or CD's are going to do the job. What would your younger spouse live on if you die and she loses your annuity income. Leaving money to your kids should probably not be first on the list of things you worry about.


Or perhaps you have more savings stashed away and haven't mentioned it but you have a lot of things to think about.

You are absolutely right. I can still cut grass on my mower. My wife still can do a lot as she can still walk with a leg brace. So we take care of our home 100%. She get SS benefits she worked for, Not SSDI. We both are on Medicare. We both carry a whole life insurance policy, enough to pay of mortgage and then some. Yes, our care will come before our kids inheritance. We can actually live off of our income now and will try to save most of all the returns from this money as long as we can. But yes that is the biggest worry about if I die in a week from now, she will lose my income. That's why we cannot get into a long term investment or something that is not a locked in rate. I'm thinking something locked in a decent rate and doing a ladder. Just not sure if it should be CD's, Bills or Bonds.

 

[calmloki]

Are state taxes something you are writing a check for every year? If so that makes state tax free Bills or bonds a better return when at the same interest rate as CDs.

 

[scottl73]

Are state taxes something you are writing a check for every year? If so that makes state tax free Bills or bonds a better return when at the same interest rate as CDs.

Yes we do have State income tax here in Louisiana!

 

[ivinsfan]

You are absolutely right. I can still cut grass on my mower. My wife still can do a lot as she can still walk with a leg brace. So we take care of our home 100%. She get SS benefits she worked for, Not SSDI. We both are on Medicare. We both carry a whole life insurance policy, enough to pay of mortgage and then some. Yes, our care will come before our kids inheritance. We can actually live off of our income now and will try to save most of all the returns from this money as long as we can. But yes that is the biggest worry about if I die in a week from now, she will lose my income. That's why we cannot get into a long term investment or something that is not a locked in rate. I'm thinking something locked in a decent rate and doing a ladder. Just not sure if it should be CD's, Bills or Bonds.

So I'm not trying to be difficult just trying to understand. how can you be on Medicare? Is your wife at present getting a check or are you talking SS in the future? Have you actually applied for SS disability benefits. I took the word paralyzed literally, which was apparently a mistake. When you say you can live off your income, where exactly is the income coming from. Even for fixed rate investments these answers make a difference. The problem with saving the returns from a fixed investment is you can't hope to keep up with inflation. This matters more when you have no other income coming on line in the future. Maybe you don't care to get into that now and that's fine just wanting to help you get to the best option for the future.

 

[scottl73]

Problem with that approach is that if Interest rates go down there is a chance of a near future downside risk.

If they opt for a 10 year CD ladder, followed by 7 and 5 year and perhaps 3 and 2 year, there is a little downside protection, for a while at least.

How can it be risky if I lock in a percentage rate CD or Treasury note at let's say 5% that matures in 2 years? Don't I get that 5% no matter if rates go down?

 

[pb4uski]

^^^ Yes, there is no risk of loss... you get 5% for 2 years, but you have reinvestment risk... when that 2 year bond matures then you will reinvest at then current rates whenther the then current rates are 2% or 5% or 7%.

OTOH, if you have a ladder then any rate changes blend in over time as rungs of the ladder mature and are reinvested at whatever the then current rates are. A rolling ladder gradually reflects changes in rates.

 

[Henry Lili]

Flip a coin, they are both fine. I have both.

Same here

 

[Hope and Dream but Plan]

$2k x 12 x 10 = $240k

Lots of good ideas in the responses about where to invest at 5%-ish. I’d just like to point out that since you are looking for a maximum $2,000 per month withdrawal, would you be comfortable keeping 10 years of withdrawals in cd/treasury ladders ($240k), and the rest in an S&P 500 index fund?

 

[DrRoy]

You could do a treasury bond ladder, or high grade corporates.