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Your approach seems well thought out. You seem to be on the right track.

The Foolish recommendation usually is to put all the money--except living expenses for 3 to 5 years--in an index fund. The 3 to 5 yrs is invested in secure treasury bonds. There are boards to tell you how much can safely be withdrawn, but typically it is around 5%/yr of the index funds total value. On the first of the year, if the market is up, sell 5% of the index funds assets and buy a 5 yr treasury note at the market rate. If the market is down, you defer buying treasuries until it recovers and live off the existing treasuries.

Basically your living expenses are covered by the treasury that matures each year and the interest off the treasuries. Doing this will give continuous income for an extended period, with income that increases with time as the index fund grows.

I like your idea of buying the fund incrementally over some time to dollar average and avoid buying it all at an intermittant high.

Foolish wisdom usually recommends against balanced funds as they are excessively conservative and tend to give low returns--but by all means decide for yourself how much risk you are comfortable with.

Best of luck to you.
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