As a 77-year-old, how can I protect my principal in a maturing investment account with $500,000?

I am 78 years old and my wife is 77 years old. I have $500,000 in a maturing investment. My total income, excluding earned interest, is $63,000. How can I protect my principal?

Retirement, Retirement Living, Investing
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2 weeks ago
83% of people found this answer helpful

Be careful asking this question in this forum because you will get annuity agents coming out of the woodwork to sell you an "indexed" annuity where you supposedly get "most of the upside but none of the downside."  While it is true that you will get none of the downside, you won't get most of the upside either.  They are expensive and have long surrender penalties.  It will lock in your money and the expenses will significantly eat away at the gains, which by the way will have caps or monthly averaging etc... all designed to reduce the return to low single digit.  More importantly at your age, having surrender penalties is not desirable.

With the manipulation by the Central Banks driving interest rates down to artificially historic lows, CDs & money markets won't even keep up with inflation and bonds are dangerous now due to rising rates. So we must deal with the hand that we are dealt.  Anything completely safe doesn't earn enough return to keep up the cost of living.  Therefore in your situation, I believe having solid Blue Chip Dividend paying stocks but with a sell discipline is the best solution.  You can limit & manage drawdown risks or downside risks, which also means you will give up some to the upside.  But in the current environment, I think this is a far better solution.  After rates do rise then you can move back a portion into bonds.  Unfortunately, you also have to maneuver in the markets you are given and they don't care about you.

Now if you are looking for "guaranteed income" to supplement what you have, you could take a portion, say $100k (and you would back into the appropriate number), and do an immediate annuity, meaning annuitize it for income through 2nd to die.  This way you would know that you & you spouse had a minimum income amount for your lifetimes. But know that you are exchanging or giving up the "$100k" principal for a lifetime income. This is NOT my personal choice and I wouldn't do it myself, but I am an active manager who understands markets.  Many people don't, or at least want some portion that they absolutely don't have to worry about which would be the "fixed" minimum amount.  There is still always inflation risk, but I digress.  If you do decide to do this, make sure you get 3 to 4 competitive bids for the highest cash flow, and read the contracts carefully.  I am always skeptical of insurance companies.

Whole point is you have to do what's right and comfortable for you & your wife. 

Hope this helps and best of luck, Dan Stewart CFA®

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