We have about 1.6 million in IRAs. (Rollovers from our pension funds and 401Ks etc.) We want to invest 1 million in a very safe way to insure a minimum income and get more agressive with the rest. What is the lowest risk place to put it and can we get 6%+?
Treasuries. The yield for 30 year treasuries yesterday was 6.01%. They aren't subject to state tax, either.
But we need immediate income.
Has anybody done an analysis on the benefits of pre-paid funeral plans. At age 51 this does not look like a good investment as I can get a potentially better return by just investing the same money on my own and earmark it for this purpose.Look at preferred stocks. Insured Municipal bonds, corporate bonds, Federal agencies bonds (GINNMAY etc.) Probably a mixture.
<<Treasuries. The yield for 30 year treasuries yesterday was 6.01%>>But he said he wanted a *safe* place. A 30-year note is anything but safe. Ask the S&L's! No danger of default with treasuries, but a huge danger of market risk--the value of the bonds will vary wildly as interest rates change. Everything I have read says that you shouldn't go out more than about 3-5 years.www.scottburns.com has a very good treatment of these issues, and recommendations.Another thing you might want to look at is the "Utility/dividend strategy" in JOS's book "How To Retire Rich". This screen begins with the stocks rated #1 for safety by Value Line.Ray
Take a look at the Bond and Fixed Income Board under Investors Roundtable.You can probably set up a laddered maturity bond portfolio that will pay 6+% with minimal risk. Interest rate links on that board let you look up todays interest rates. Links to other postings will tell you how others have set these things up.Best of luck to you.
It sounds like you're looking for a money market type return on the $1 million. If you want six percent, you can find that with ultra short bond funds.However, here's my question. How long until you tap these IRAs? If it's more than five years, I would definitely have at least 50 percent in stocks.
In answer to tony44, we have already retired and will need the income immediately. Right now we have it all in blue chip growth funds but my wife, and to a lesser extent I, are getting antsy. With the market cooling and interest rates on the rise and the drought etc. we would sleep a lot better if we had a guaranteed $60K income and only had to worry about actively investing the rest. Bond funds seem almost as volatile as bluechip stock funds. One of the investment options in my 401K was a guaranteed interest option underwritten by an insurance company that was paying over 6% at the time and rates were lower then. Is there a vehicle such as this available? I don't want to buy an annuity. I'd like for the grandkids to get the principle. Thanks to all who have replied.
<<In answer to tony44, we have already retired and will need the income immediately. Right now we have it all in blue chip growth funds but my wife, and to a lesser extent I, are getting antsy. With the market cooling and interest rates on the rise and the drought etc. we would sleep a lot better if we had a guaranteed $60K income and only had to worry about actively investing the rest. Bond funds seem almost as volatile as bluechip stock funds.>>At a time like this, it's easy to become "near sighted" (short term thinker). Your biggest fear as a retiree is inflation. While low now, if it returns to historic levels, it could easily eat away your guaranteed income in a few years. And depending on your current age and family history, you might easily live another 30+ years. Search back in the Foolish Four daily articles and message board under "maximum withdrawl" or "retirement withdrawl" and it'll give you a few ideas and comfort about "living" off a stock portfolio.JLC
The laddered maturity bond portfolio is usually considered fairly conservative. As long as the bonds chosen are investment grade and not likely to default, you can hold them to maturity. This means that you do not have to worry about fluctuations in interest rates and bond values.If your ladder is set up to buy 5 year maturities, initially you would buy them so 20% matures each year for five years. You live off the interest. When the shortest bond matures, you buy a new bond with a five year maturity.The effect is a five year moving average on interest rates. Your income changes only slowly--slowly upward when interest rates rise and slowly downward when interest rates fall. This gives you few worries about stability of income, but you have no inflation protection. So you will want to maintain an equity position in addition to cover that aspect.
Please look at my message #13041. The method discussed provides for a fixed income, adjusted yearly for inflation. Remember that you don't want to cash in more than 5% of your investments, per year, if you want them to last forever. In this case, it will provide $80k/year.Zev
Obviously, for minimum risk, CDs (paying 6.6+% or more on 5 year CD) or long bonds paying 6% would meet your criteria. However, since you will need income and some of the principle over the years, a CD ladder, with maturities every year over a five year period, will provide you opportunity to withdraw principle, plus will pay you 6.6%+ interest each year. With 1 million to put into, you would need to diversify with 10 bands (you are only insured to 100,000 per bank), getting two $100,000 maturing each of the five years. After five years, you would have CDs maturing every five years, and would track interest rates up and down. I suggest you look at the "Couch Potato" portfolio on the www.scottburns.com site for ideas about how to diversify with minimum risk.
It sounds like you're looking for a money market type return on the $1 million. If you want six percent, you can find that with ultra short bond funds.Actually, putting it all in ultra-short MM type of bonds might be the most dangerous option - what happens if MM yields go down to 5%-4%-3%-or even 2% ??? (In Japan MM yields are nearly 0 - ZERO!)
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