Where would you put a windfall you need to live on now?

[wanderlustgettingtome]

I have sold our old house and finally have tapped into a large amount of equity. It is enough money to support my family for the next seven to eight years - until I can access Social Security and retirement funds - without having to work ever again. My work is extremely dangerous, exhausting, and my income has dropped despite the danger level being at an all time high. I want to take the cash and just 'park it' somewhere safe, with a minimum of market risk. I'm thinking of splitting it into thirds: 1/3 savings account, 1/3 bonds and 1/3 balanced mutual fund -- BUT I feel very uneasy with this. I am thinking of just putting it all into savings/CD's and know that my money is safe. Yes, I know I will be losing to inflationary risks, however if interest rates go up bonds will take a hit and if the market has a serious correction, I could lose a large chunk of principal.

So, the question here is: What would you do with money you ABSOLUTELY could not take a risk with and you depended on to live on for the next 7-8-9 years? I would like to hear from someone who has actually done this or is doing it now. Is there something you would have done differently? What would it have been?

Once I leave work, there is no re-entry. Due to the high skill required, intensity, danger and risk - I have no desire to expose myself anymore, plus the pay has dwindled. I would not be able to return even if I wanted to because of not keeping up with continued skill requirements within a year or two after I leave. Given the choice - I would have quit the day I got the check at closing, but I legally have to give 60 days notice, which I will do the week after Labor Day. The job is physically and mentally challenging and draining - and thankless.

PS - this isn't all of our money. There is a retirement plan in which I have amassed 2 and 1/2 times as much as this new windfall which is invested in a balanced portifolio, about 50/50 stocks and bonds which will grow, tax deferred, over that time. I think I can leave that alone for the next 7-8-9 years and 'ride out' and financial storms, recessions, corrections, etc.

Any experienced and reasoned responses are appreciated. I will not entertain any 'offers' to invest. I would be happy if you list the name of your financial advisor and phone number or website so I could investigate their track record and appropriateness to my situation.

FEARS: 1) Inflation rising and interest rates rising; 2) A big stock market correction.

I would rather get a guaranteed pittance than a promise of 6-7% annually and end up losing 50%. On the other hand, if a significant correction occurs, I wouldn't be averse to putting in 1/3 into a balanced fund - BUT NOT NOW.

Thank you.

[likepepsi]

First, I don't think you don't need an advisor. Read The Bogleheads' Guide to Retirement Planning and you can do it yourself.

I think in your situation the answer is actually quite simple. You will not take any risk, so that really limits your options. As you know interest rates are at historic lows today but they won't stay there forever. Short-term bond funds do have some interest rate risk but it is small, because if rates go up they reinvest at the new higher rates. Laddered CDs would provide some protection since you could reinvest maturing CDs at new rates if they go up.

I would look at a blend of short-term bond funds, laddered CDs, and a money market fund. Given this money is going to cover you for many years, make sure you don't exceed the FDIC insurance limit at any one institution.

In your position - exiting from a career you can't re-enter, with sufficient capital to cover you for 7-8 years without having to touch your tax-deferred money - I agree that protection of capital is critical. But also keep in mind that even though you might not be able to re-enter your current career, you could choose to work in a different one. Even a comparatively low paying job that nets a few hundred a month can make a big difference in stretching your nest egg out longer.

Since this forum doesn't support a back-and-forth discussion, I recommend you join bogleheads.com and ask your question there. The members are helpful and know their stuff, and you'll get quality advice without having to pay an advisor.