Mom Needs Income

Q:

Please help with advice! My 76-year-old widowed mother has sold her home, has $100,000 to invest and needs an investment tool to generate monthly income. Her teacher's retirement pays for her room and board and insurance. She needs from $400 to $500 monthly income for the rest of her life. What low-risk, no long-term investment prescription do you suggest?

A:

Let's split the difference and say she needs an additional $450 a month in income. That means she needs to earn about 5.40 percent on her money to meet her income needs and not touch the principal balance. Unfortunately, finding a risk-free investment that will yield 5.40 percent isn't readily available at this point in time.

Just living off principal would meet her income requirements for more than 18 years, so a return of less than 5.40 percent would still allow her to meet her income needs over her lifetime.

An immediate annuity would allow your mother to have a guaranteed income stream over her lifetime. This site will calculate the approximate cost of an immediate annuity without any sales people contacting you -- unless you request it.

Your mother could buy an immediate annuity for about $60,000 and that would guarantee her $500 a month in income for life. She wouldn't outlive this income stream. She could then invest the $40,000 as a reserve for financial emergencies.

There is a host of ways to structure an annuity so the annuitant receives a lifetime income. Here are some examples along with their estimated costs:

Single Lifetime Income Annuity Cost

We wanted to establish a bit of extra income. There was a good recommendation about ImmediateAnnuities.com on CNN. We also liked that we could see excellent reviews about them on Google. They were very thorough from our first inquiry to when we decided to buy our annuity from Mass Mutual. They always answered our questions promptly and followed up with the insurance company, too. We have been receiving our monthly payments since last November and couldn’t be happier. What more can we say?
Keith and Samantha Isley
Read 650+ verified reviews
• With no payments to a beneficiary ("SL") $59,918
• With up to 5 years guaranteed to your beneficiary ("5CC") $61,529
• With up to 10 years guaranteed to your beneficiary ("10CC") $66,279
• With up to 15 years guaranteed to your beneficiary ("15CC") $73,260
• With up to 20 years guaranteed to your beneficiary ("20CC") $80,802

Source: ImmediateAnnuities.com

Which approach to take depends on the goals your mother has for the money besides meeting her needs for income. It would be worth it to hire a financial planner to help her make this decision. The National Association of Personal Financial Advisors is a good place to learn more about hiring a fee-based financial planner.

Source: bankrate.com 09-09-2003