Expert: Paul Henneman - 7/2/2009

Question
My husband recently died.  We were both retired and lived on social security and two relatively small pensions.  Since my husband died his social security payments have stopped.  My current monthly income is about 2600 and I need an additional 1500 per month to replace his social security.  He had a $250,000 insurance policy which will be the only thing that will save me from bankruptcy.  Please advise me how to invest $200,000 of the proceeds so it will generate about $1500 per month in income while protecting the investment.  Thank you.

Answer
Sharon,
   Thank you for your question!
I suggest that you look into an annuity. This is a type of investment that you purchase up front, then pays you a set amount either for a set period of time (for example monthly for 10 or 20 years), or until you die.
   The problem may be the amount you need. If you need $1,500 a month, that amounts to $18,000 a year. This means a 9 percent return on your $200,000 investment per year. That is high for an annuity. The only way to really achieve that would be to invest in some additional riskier things. The problem with that is if there is a bad year, or the economy continues to worsen, a riskier investment could really backfire on you, and greatly affect your finances for the rest of your life. I agree with you completely that after you retire, you want to set a stable income flow for yourself as much as possible, with little to no risk.
   I urge you to look for a local financial advisor in your area that can help you run the numbers for an annuity, and see if you can get what you need with that. The only risk to an annuity would be if the issuing company had trouble or went under, but if you choose a large, well respected and rated issuer, this is a very small risk.  Your expenses may also drop a little bit. Things like food, medications, clothing, travel, and other expenses will be a little less for you. I say this only because if you drop your needed income from the $200,000 by a few hundred dollars a month, it becomes much more possible to do with little to no risk.
    But don't do this on your own. Interview or speak with at least several financial advisors, and try to get a recommendation from a family member or friend if that is possible. I can provide a recommendation if that would help, but it would not be local. That is fine in that you do not need an advisor to be local, but if you prefer to deal personally with whoever helps manage your financial well being it would be of concern. Make sure that the advisor accounts for all fees in their quotes and information they offer to you. Insurance experts can also offer annuities, so contacting some insurance offices may also be worth it.

I hope this helps gets you started. I am very sorry for your loss. What you outline is possible, if you can get your needs down a few hundred dollars a month with an annuity, with little to no risk. I urge you to look into it! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com