workers comp settlement - how to invest it

**scfr** · 09-06-2008, 07:27 PM

You could divide the money so that some went in to a MMA and the balance was divided among CDs with staggered maturities (1-year, 2-year, etc). The money in the MMA would be for your current year's expenses. When each CD matured, you would move the money in to the MMA.

For one year CDs, you can find rates of 4% or higher.

Here is a little calculator that you may want to play around with:
How Long Will My Money Last With Systematic Withdrawals? - Financial Calculators from CalcXML

Is there any way you could withdraw a bit less than $1,000, to stretch the money out a bit longer?

For example, I ran the calculator and plugged in a 3% annual increase in withdrawals (for inflation), a interest rate of 4%, and a marginal tax rate of 15%.

According to the calculator, with $1000 monthly withdrawals, the money would last 4.3 years. But with $800 withdrawals, it would last 5.3 years. And with $700 withdrawals, it would last 6.1 years. (Of course, you wouldn't have to keep taking the withdrawals. Once your husband turns 65 you may just be able to put any extra that remains for a rainy day or for when you yourself retire.)

Good luck with whatever you decide to do.

**KellyJef** · 09-06-2008, 07:48 PM

Thanks for your post -- it was really helpful.

Thanks also for the calculator link -- I've bookmarked it to check out later.

I do have an HSBC online account that has a 3.5% interest rate which looks like it's almost as much as a CD would pay.

**jIM_Ohio** · 09-07-2008, 02:33 AM

The 50k is not going to last long. 4% of 50k is 2k- meaning general asset allocation suggests 2k per YEAR withdraws are what is considered safe.

More info is needed- is there a retirement check which starts at a given time? How long does the 50k need to last? Are taxes an issue?

I would suggest looking at a diversified bond fund like T Rowe Price Spectrum income. You could put 50k into the fund (RPSIX) and it will generate 4% income per year. It will also take the 50k and appreciate between 0-2% per year.

You might also consider putting 24k (2 years income) in a money market, then the remaining 26k into a fund like spectrum income.

**disneysteve** · 09-07-2008, 08:38 AM

Originally posted by KellyJef View Post

My question is what do we do with the $50,000 settlement? We need to have about $1,000 a month to live on until DH reaches age 65.

Is there some kind of investment we can make that will generate a couple hundred dollars of interest a month in addition to the $1,000 a month withdrawal from the $50,000 that we will have to make?

Your DH is 61. You need $50,000 to provide at least $1,000/month for 4 years until he turns 65. 48 months is $48,000, so you are fine, and that doesn't include any interest the money generates. Obviously, you need to keep this money safe. I'd suggest a mix of high yield money market and CDs.

Put half the money ($25,000) in a MMA. That'll get you about 3% and provide the funds for the next 2 years. Put the other half in a 3-year CD. That will grow at 4.7% for the next 3 years, so will be worth $28,700 at that point. You can transfer $12,000 to your MMA then and put the remainder in a 1-year CD. After year 4, put the remainder in the MMA to carry you to age 65.

**jIM_Ohio** · 09-07-2008, 09:49 AM

I missed the part of only needing 50k to last 4 years.

I would put 12k into savings account and transfer 1000/month into checking account.
I would put 12k into a high yield savings account and transfer this money to checking at end of year. If you can get a better return with 1 year ibonds or tips, I would consider that.
I would put 24k into two year ibonds, tips, or money markets shooting for a 4% return. Maybe a diversified bond fund.
I would put 2k into an investment which targets growth- maybe a 60-40 balanced mutual fund or a 40-60 fund. In 4 years this might be worth 3k or 4k. Because this money was not needed (2k), I would invest it longer term for other retirement expenses.

**disneysteve** · 09-07-2008, 12:00 PM

I just realized my response doesn't make sense. You can't buy a 3-year CD with half the money. That would leave you with no money for one year. It has to be a 2-year CD.

**atomicrc11** · 09-07-2008, 05:53 PM

Might this be a good time to invest in a fixed annuity? At least this way you be guaranteed a stream of income.

**disneysteve** · 09-07-2008, 06:07 PM

Originally posted by atomicrc11 View Post

Might this be a good time to invest in a fixed annuity? At least this way you be guaranteed a stream of income.

They need virtually 100% of this money over the next 4 years. An annuity isn't going to return the whole principal that soon.

**KellyJef** · 09-09-2008, 05:28 AM

Originally posted by disneysteve View Post

Put half the money ($25,000) in a MMA. That'll get you about 3% and provide the funds for the next 2 years.

Is there an advantage to doing that -- as opposed to just leaving the money in the savings account earning 3.5% interest?

**disneysteve** · 09-09-2008, 05:32 AM

Originally posted by KellyJef View Post

Is there an advantage to doing that -- as opposed to just leaving the money in the savings account earning 3.5% interest?

No advantage. If you've got a savings account paying 3.5%, that's great. Where is that?

**anonymous_saver** · 09-09-2008, 11:53 AM

"I do have an HSBC online account that has a 3.5% interest rate which looks like it's almost as much as a CD would pay"

Online Savings Account - HSBC Direct

**disneysteve** · 09-09-2008, 11:59 AM

Originally posted by anonymous_saver View Post

"I do have an HSBC online account that has a 3.5% interest rate which looks like it's almost as much as a CD would pay"

Online Savings Account - HSBC Direct

Thanks. Didn't bother to read back to see that. OP, no reason to move your money from HSBC. That is a good place with a great rate.

workers comp settlement - how to invest it