Dear Liz: I have a brother-in-law who has a very hard time finding employment because he has frequent seizures. He is 59 and needs about $40,000 a year for living expenses, including high health insurance premiums because of his condition. Thanks to a recent inheritance and some good investing when he was younger, he has about $1.3 million in assets. However, he has little chance for further meaningful employment, so he needs to live off of his investments. What is the best way for him to stretch his assets? Would a fixed annuity be a wise thing for him to invest in? Would a mix of an annuity and regular investments be a better bet? Or should he look at just a mix of fixed income and equity investments?
Answer: Any of those options could work, or could be a disaster, depending on the details of his financial situation.
A fixed annuity, for example, could give him a monthly check for life, with inflation adjustments if he chose, but he would have to commit a big chunk of his available funds to get the kind of return he needs. He also would be buying the annuity when interest rates are quite low, which means he would get a smaller payment than if he bought when rates were higher.
Investing outside an annuity would give him more flexibility, but no guarantee he’d get the kinds of returns he would need to last him for life.
His best bet is to consult with a fee-only financial planner who can review his options and suggest the best course for him. He can get referrals to fee-only planners from the National Assn. of Personal Financial Advisors at www.napfa.org or to fee-only planners who charge by the hour from Garrett Planning Network at www.garrettplanningnetwork.com.