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Old 04-21-2011, 05:35 PM
 
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My dad recently passed away and my mom is receiving a life insurance payout of $250k. My mom will be turning 60 this year and so far only has about $30k saved up for retirement. What would be the best way to invest this money so that she has a source of income in the next few years while limiting the tax liability?
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Old 04-21-2011, 05:42 PM
 
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Quote:
Originally Posted by Journey2LS View Post
My dad recently passed away and my mom is receiving a life insurance payout of $250k. My mom will be turning 60 this year and so far only has about $30k saved up for retirement. What would be the best way to invest this money so that she has a source of income in the next few years while limiting the tax liability?
What does "few years" mean for her?

What amount does she extra per year, besides social security, to live the way she wants?

Is she planning to retire at age 62, 65, 70, or does she plan to work past 70?
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Old 04-21-2011, 05:54 PM
 
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She plans on retiring sometime between 65 and 70. She likes her job and it keeps her busy for now. Her house should be paid off by then so she will need about 30-35k a year in addition to social security.
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Old 04-22-2011, 09:15 AM
 
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Taxes probably are not a big issue for her since she's over 60 so any retirement funds can come out tax free and she's probably in a good tax bracket with only one income. I'd say just stay safe with maybe 30% equities at most focused on dividend payers. The rest should be a mix of fixed income and fixed income like instruments such as preferred shares. Did she already turn down the annuity option from the insurance company? Also insurance companies pay pretty attractive yields on funds right now, that could be a good option until market yields pick up for the part of her funds she might need before Social Security kicks in.
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Old 04-22-2011, 10:20 AM
 
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Originally Posted by Journey2LS View Post
She plans on retiring sometime between 65 and 70. She likes her job and it keeps her busy for now. Her house should be paid off by then so she will need about 30-35k a year in addition to social security.
If she needs $30,000 a year more, she is living high on the hog, compared to me, especially if the house is paid for.

You'll never earn $30,000 a year off $250,000 unless you get a stable return of 12% and that is not easy to find.

My S.S. will be around $12,000, and my job history stinks, so your mother should get more than $12K. Add $30K and that makes $42K.
My bills are about $7000 a year.
I can not imagine your Mother needing $42k.
But, I do not know her lifestyle.
But, good luck, you might find 12% in some foreign government bonds like Sweden or Switzerland.
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Old 04-24-2011, 01:54 PM
 
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Originally Posted by howard555 View Post
If she needs $30,000 a year more, she is living high on the hog, compared to me, especially if the house is paid for.

You'll never earn $30,000 a year off $250,000 unless you get a stable return of 12% and that is not easy to find.

My S.S. will be around $12,000, and my job history stinks, so your mother should get more than $12K. Add $30K and that makes $42K.
My bills are about $7000 a year.
I can not imagine your Mother needing $42k.
But, I do not know her lifestyle.
But, good luck, you might find 12% in some foreign government bonds like Sweden or Switzerland.
No way do Swedish or Swiss bonds pay anywhere near 12%!!!!! You might make it up on the currency difference, but I wouldn't count on it...Even if you do, it won't be a steady 12%.
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Old 04-24-2011, 02:17 PM
 
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Quote:
Originally Posted by Journey2LS View Post
She plans on retiring sometime between 65 and 70. She likes her job and it keeps her busy for now. Her house should be paid off by then so she will need about 30-35k a year in addition to social security.
A realistic withdrawal rate for 250K would be about $10K per year. It sounds like she is in trouble if she needs an additional 30K in addition to Social Security. Unless she is saving like mad in her retirement accounts, she is not going to be able to get that.

Some mutual funds you might want to consider that have good income payouts:

Loomis Sayles Bond
Loomis Sayles Global Bond (more conservative than the 1st but somewhat lower returns).

With 250K, she could get the cheaper "institutional share" class of either of those funds, which means more money paid out.

The trailing 12 month payout for the 1st fund is 5.66% and for the 2nd is 3.71%.

LSBDX Loomis Sayles Bond Instl, mutual funds, quote, price - Morningstar

LSGBX Loomis Sayles Global Bond Instl, mutual funds, quote, price - Morningstar

I like both funds because they can invest in bonds in other countries so they can benefit from a falling dollar and can avoid some of the debt problems of the US government.

These funds will probaby pay out more over time since interest rates are very low across most of the world right now.

Another good option might be something like Vanguard Wellesley Income. This fund invests about 60% in bonds/cash and 40% in stocks. It tends to favor dividend paying stocks, and those dividends should increase over time.

It has a trailing 12 month payout of 3.71%. In theory, this fund should be more volatile than the above 2 funds. In practice it's less aggressive than Loomis Sayles Bond, but slightly more aggressive than Loomis Sayles Global Bond. But it's hard to say if that will be true in the future.

VWIAX Vanguard Wellesley Income Adm, mutual funds, quote, price - Morningstar

Another thought is that she should take some of that 250K every year and use it to max out her 401K an an IRA. It would save her a bundle with taxes.
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