No. of Recommendations: 3
Life is full of trade offs -- and investing with the desires you posted means you must, make trade offs.

Here is the real rub -- the Fed is currently holding interest rates very low -- they are less than inflation and that is intentional to continue stimulating the economy. That is not going to end if you believe the statements by the Fed until 2014. I don't see interest rates rising significantly until we start to have some inflation - but I have guessed wrong in the past.

I am assuming this 78 year old woman does not need more of her $500K than say the mandatory IRA withdraw amount -- that being just under $25K. Assuming that is the case, I would say put $75K in checking account and the rest in Vanguard Wellington. This means worst case, she takes $25K a year out of the bank and leaves the reminder in the mutual fund to ride out any volatility. If these funds really are IRA and she is going to be forced to withdraw, than the $75 should be in a money market of whatever broker handles her investments. (I trust you know you can buy a Vanguard mutual fund without having your account at Vanguard.)

If the "distrust" of the stock market trumps all else, but the money in two different checking accounts -- that way it will all be insured by the FDIC.

Contrary to what a lot of people believe, bonds have risk -- and today that risk probably larger than mutual funds that invests in large, dividend paying stocks. The only reason I pointed to Wellington instead of some other mutual fund is stock do have inherent volatility. I hope you understand there is a difference in risk (loosing money) and volatility (value of investments going up and down).

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