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I have a friend in an unusual position.

My friend has about $500K that he needs to last for the next 11 years. Some of the money is in the stock market. He is no longer earning substantial income, and is feeling nervous about the market, so wants to move this $500K into something "safer". He wants to be able to count on an inflation-adjusted $50K withdrawal every year for the next 11 years from that $500K. So for example, next year he will pull out $50K, the following year it will be $50K+inflation adjustment for that year, etc.


$350K of the amount is in a Fidelity 401K, so he is limited in where that money can be invested. He cannot touch this money for another 4 years, at which point he can take it out if needed.

$150K is liquid.

He is very keen on using "safe" investment vehicles - i.e. he's not so concerned with the return as he is on making sure he does not lose the principle in some disastrous event, such as the stock market tanking or some bank going belly-up.

Originally, he was planning on doing a CD ladder within his 401K. However, he told me that he learned that the CD ladders (brokered CD ladders?) within his 401K do not protect the principal. So he was thinking of putting the $150K into some bank's CD ladders, but otherwise is not so sure what to do with the $350K in his 401K. TIPS maybe? Or maybe it makes sense to park that amount in a money market, then withdraw it all in 4 years, and invest in a normal CD ladder at that time?

I can't really give advice here, because my strategy has always been to take more risk and hope for the best.

Does anyone have advice for safer investment vehicles that are pretty well guaranteed to protect the principal, with maybe some small return? Inside/outside a 401K?
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