My mother recently won a lawsuit. She will have about 300k to invest. She will be able to work part time (25k annually?) and will need about another 25k annually to live on. An 8% return on her money seems reasonable, which allows the interest to make up the missing 25k, but this is best case, and doesn't allow for compounding the interest. She may need more/make less and need to dip into the principle to make ends meet. I know this is a tough spot to be in and there isn't a "winning" answer, but I'd like to know, in general terms, what a solid plan would be. Here is what I'm thinking so far:
1) Keep 50k (2 years of expenses) in an very liquid state - maybe a high interest (4+%) savings account with monthly allocations to a checking account. 2) Ladder 150k in safe investments - CDs, T-Bills, etc., reinvesting as they mature. 3) Invest the remaining 100k in a long term equity investment - Probably split across a few Index Funds.I'm hoping that by keeping the 50k relatively liquid I can avoid her watching her equity account, allowing it to ride out dips in the market and letting the investment grow over (hopefully) a minimum of 2 years.
I don't have any practical experience with this, but these are the things I've picked up along the way. I'd appreciate input from someone a little more experienced. She is a little nervous about just handing it to an advisor and letting them have their way.
Thanks!
-Ryan