Low risk investment for 900K Help

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scottl73

Dryer sheet wannabe
Joined
Oct 4, 2023
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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!
 
That is less than a 3% return. You can buy a 20 year treasury that pays 5.08% right now.
 
scottl73 said:
Aren’t we limited to 10K per person?
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I think you may be thinking of I-Bonds. There is no limit on regular Treasuries (ie., Treasury Notes, Bills, or Bonds). You can buy literally hundreds of millions of dollars worth. You may get these at essentially any brokerage, or through Treasury Direct.
 
There is no such thing as a risk free investment.

Interest earning investments to last possibly 50 years are risky, because inflation will eat them alive.

In your shoes, I would be cautious and conservative, but I would still invest in the stock market, and by that I don't mean using an advisor who will charge 1% , but rather you put it in a brokerage example Vanguard/fidelity , and you buy the ETF's and then ignore them.

She could put $300,000 into SCHD and VTI etfs , and the rest into a combination of Treasury Inflation Protected bonds TIPs (not bond fund), Treasuries, I-bonds and CD's.

You can buy an unlimited amount of I-bonds by using the gift choice so that is not an issue, but the TIP's do pay more right now.
 
COcheesehead said:
That is less than a 3% return. You can buy a 20 year treasury that pays 5.08% right now.
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Yes, this is the better way for them to go is Treasury Notes. A long-term commitment but a fixed rate for them.

Ten-year treasure notes too, I believe.

Totally agree with COcheesehead.
 
scottl73 said:
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!
Click to expand...

COcheesehead said:
That is less than a 3% return. You can buy a 20 year treasury that pays 5.08% right now.
Click to expand...

chris2008 said:
With all due respect, please consider # 102 at

https://www.early-retirement.org/forums/showthread.php?t=119422

Best wishes to you and your family.
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OP: Understanding your concern about stock market fluctuations, yet factoring in inevitable inflation over the long term, why not "split the difference?" Buy 700,000 Treasuries, and 200,000 in Total Stock Index fund, or a similar mix that you'll be comfortable with.
You'll get a bit of inflation protection [i.e., over the long term] and in the interim have income exceeding your required $2000/month.
 
There are no 4-5% real (after inflation) returns without holding a good percentage of stocks. But being able to mentally handle the inevitable ups and downs in the stock market is up to you.

A safe long term investment is a TIPS ladder, that can be built out to 30 years. Those are inflation adjusted and I believe the current inflation adjusted long TIPS are near 2.5%, meaning you get that as a real, after inflation, return. A tool to set up a ladder is at tipsladder.com.
 
Sunset said:
There is no such thing as a risk free investment.

Interest earning investments to last possibly 50 years are risky, because inflation will eat them alive.

In your shoes, I would be cautious and conservative, but I would still invest in the stock market, and by that I don't mean using an advisor who will charge 1% , but rather you put it in a brokerage example Vanguard/fidelity , and you buy the ETF's and then ignore them.

She could put $300,000 into SCHD and VTI etfs , and the rest into a combination of Treasury Inflation Protected bonds TIPs (not bond fund), Treasuries, I-bonds and CD's.

You can buy an unlimited amount of I-bonds by using the gift choice so that is not an issue, but the TIP's do pay more right now.
Click to expand...

I like this one... We're going with CD's for new money right now. Getting an average 5% on ladders right now. 5yr paying 4.85% on non-callable @ Fidelity. Just split it up with $250k or $500k depending on the account you use (single vs joint to fdic insurability.

Money markets are paying 5.3%, but vary with rates vs locking in a long-term cd/treasury. Depending on where you live, consider treasuries over CD's is you have a state income tax...
 
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6 month T-Bills are 5.56% as I type and no state taxes on them.
 
CD's that pay monthly, might be an easy way to get that reliable monthly income you want. I just bought several monthly paying CDs w/yields of 5.5-5.6% that don't mature for 5 and 6 year terms. They are FDIC insured up to 250K and easily found at major brokerages.
 
Affinity4Investing said:
CD's that pay monthly, might be an easy way to get that reliable monthly income you want. I just bought several monthly paying CDs w/yields of 5.5-5.6% that don't mature for 5 and 6 year terms. They are FDIC insured up to 250K and easily found at major brokerages.
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Can you share where you bought them?
 
ShokWaveRider said:
If they need monthly income, are T-Bills a good solution?
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Sure. Just ladder them. If you have a lump sum to invest, buy a 1-month, 2-mo, 3-mo, 4-mo, 5-mo, and 6-mo bill. Then every month when one matures pull out the interest and buy a new 6-month bill. You'll have one mature monthly from then on and can pull out the interest and reinvest the principal.


Personally, I don't need monthly income so I have a T-bill or CD maturing every 3 months for the next 3+ years.
 
disneysteve said:
Sure. Just ladder them. If you have a lump sum to invest, buy a 1-month, 2-mo, 3-mo, 4-mo, 5-mo, and 6-mo bill. Then every month when one matures pull out the interest and buy a new 6-month bill. You'll have one mature monthly from then on and can pull out the interest and reinvest the principal.
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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.
 
ShokWaveRider said:
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.
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I totally agree. I wasn't really addressing OP. I was answering the question about getting monthly income out of T-bills.
 
What is out there to lock in a long term but risk free investment? Any help would be appreciated!
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I am personally considering purchasing a US Treasury ladder going out the full 30 years.

With long term rates in the high 4.x% to low 5.x% this seems like the time to be addressing this (first time in my investing life) I am also looking at zero-coupon (ie STRIPED) versions of these so that I don't have all the reinvestment risk/"work".

I probably will have the majority of them in Roth accounts or perhaps some in Traditional IRAs (if I haven't full converted to Roth). This should simplify taxes and be somewhat wise from a tax-efficiency perspective.

In my case, I would also keep perhaps 10-15% of my fixed income allocation in short term investments so that I would have "working capital" in addition to the yearly maturities of the US Treasury ladder for spending if I need it.

-gauss
 
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I would suggest that you check out tipsladder.com

A TIPS ladder that would pay you $25k a year adjusted for inflation for 20 years, would cost about $505k and yield 2.5% real. As each bond matures once a year you could put the proceeds in a money market fund or online savings account and then have automated transfers to your checking account fot the proceeds divided by 12. So you would have your own home-grown 20 year inflation adjusted annuity.

The remainder could be invested in a rolling 10-year CD or UST ladder that would likely yield around 5%.

Another alternative would be a rolling 10-year CD or UST ladder where each year as maturities occur you withhold what you need for the next 12 months and put it in a money market fund or online savings account and reinvest the rest.
 
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scottl73 said:
Can you share where you bought them?
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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
 
Income needs to be enough and reliable enough. I’ll give up some yield to lock in a better non callable option and there are a lot out there yielding 6%+
Going short gives you today’s best yields, but maybe not tomorrow’s income.
 
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