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Age 60, Saved $400,00 want to generate a decent income for retirement Ideas?

I saved up $400K  I am 60 years old...want to generate a decent income...any ideas?
There is risk involved no matter what you do. Hide it in a mattress, inflation might get you. Invest in stocks - well, we all know that is risky. Invest in CDs, you have low interest rates, inflation can get you, and don't go past 250K with any one bank or you can lose everything over 250K. Invest in gold, it, also, goes up and down. Invest in real estate (anything from rental properties to farm land) that goes up and down also. Diversification is advised by most, but then you have to decide on allocations. To add to our national motto (and maybe offend some), "In God we trust. In most others, we don't."
There are some well thought-out conservative answers with the questioner,  "I am a 72-year old woman......."
Me, personally, I have divided my holdings thusly:
1/2 in mutual funds, bowing to their expertise
1/4 in municipal ETF's, for tax-free income
1/4 in individual stocks, trading, monitored constantly
Not sure what your interests are, apart from safety; but as hodedofme advises, there is no sure thing (pardon the paraphrasing).

You seem to be new to the Community.  There is no hurry for you to invest!
In retirement, I would recommend a balanced portfolio, something close to 50/50 equity and fixed income. You should probably also have at ~ 2 years of (net) expenses in cash, so you do not need to sell funds when the market goes down.  I would use low-cost ETFs and mutual funds and hold them tax efficiently:
In IRAs: taxable bond funds; any other funds likely to throw off ordinary income or significant capital gains
Taxable accounts: tax-exempt/muni bond funds; index funds
As a rule of thumb, with a balanced portfolio holding a mix of equities and fixed income, you should not expect more than a 4% annual withdrawal rate to be sustainable, and 2.5-3% is much safer.  So, with $400k, that is no more than about $16k per year, escalating with inflation.. 
I would estimate my expenses in retirement, divided into necessities and luxuries. Then, look at whatever other guaranteed income sources I have (social security, pensions and other annuities) to figure out how much more income I need to generate from my portfolio (with no more than a 4% withdrawal rate) to cover my needs.  If I do not have enough to at least cover my necessities, then I need to do something else: work longer, maybe buy an annuity through a low-cost provider like Fidelity, move to a lower cost area, etc.
Hope this helps in thinking through the issues.
hodedofme points out risk, which is accurate, but it is not the question asked by Tjrking.  

I dare say that while risk is indeed an issue to be dealt with, it is not the overriding issue, since most investors are able to accrue gains over time. It is absolutely NOT the norm, IMO that most investors start with $400K and soon find themselves with nothing.

  • Buying US bonds of various maturities, so that ultimately you have bonds maturing on a continuing basis. This is called "laddering," but the downside right now is that interest rates are so low, you barely keep ahead of inflation. Right now, these pay around 2%.
  • Bond mutual funds are another option. They often pay monthly distributions, but reflect the current low interest rates. The downside with bond funds is that the higher-yielding ones are made up of longer bonds (ie ten year), and the NAV (share price) can get killed when interest rates rise. Junk bond funds (usually referred to as "aggressive" or "high yield" in the name) also pay better, but can get hurt when a fund issuer (usually a company) defaults. In other threads, I have said I favor Fidelity's Ginnie Mae fund FGMNX because it has been resistant to market downdrafts, showing scant downside in 2007-2008. This pays around 3%.
  • Preferred stocks often pay pretty generous dividends, but can have price volatility. These are kind of like bonds, in that they can be called by the issuing company (bought back) for a fixed price. You see people touting dividends in the 5-6% range here.
  • REITs and MLPs (real estate investment trusts and master limited partnerships) are investments that flow their profits directly to the shareholder, and are favored by some. They perform like preferred stocks, sometimes higher, but higher often means more risk.
  • Regular stocks often pay dividends, too. Usually the dividends are not massive, but again can be higher should the stock price suddenly drop. There are many here who do just that: Make a list of solid dividend payers, and wait to opportunistically buy shares. Often they will sell shares when the price appreciates enough to compensate for X quarters worth of dividend stream, and start all over.
  • Stock mutual funds and ETFs (mutual funds that trade like stocks) usually pay some kinds of distributions, which can be akin to dividends, but are usually not predictable. The income stream here – as with non-dividend-paying stocks – will primarily come from selling shares as the share price appreciates.
  • Options trading is also said by some to be a means of income generation, but only for very experienced investors. THIS can be a way to burn through $400K in short order.
At 60 you're still a young man with maybe 30+ years to live. You can't be too risk averse or you could run out of money. Now, we don't know your health history, any pensions, debt, etc so it's hard to say exactly what you should do, but I'd say don't get too cautious. None of us wants to lose money, but that's why it's called risk.
Great ideas from MayDay

One other possibility to consider would be putting some of it in Berkshire-Hathaway stock (BRKB) instead of mutual funds.


Berkshire-Hathaway is so large and diversified (in a limited way) that you could almost consider it the functional equivalent of a mutual fund, except that it doesn't pay a dividend, and therefore you don't have (taxable) distributions when you don't want them.  Instead, Warren Buffett plows earnings back into the company, where it can increase the price of the stock.  If you find that you do need to pull some money out, you can sell shares when and as you need the money, and any gain would be capital gain, and -- if long-term -- would be taxed at the preferential LTCG rate.  Thus you can take your income when, as, and in the amount you want.

The fact that no dividends are paid makes BRKB similar to an IRA in that the corpus grows untaxed (until you take some money out by selling some of the shares), and unlike an IRA the money you take out is not automatically taxed at the "regular income" rate.
If you have other sources of revenue and health insurance is in place along with long term care, I would suggest making arrangements to invest in some stocks that pay a reasonable dividend. You should be able to join a firm that charges less than $10. to trade and who will keep your shares in street name and maintain your cost basis especially if you wish to reinvest your dividends occasionally. Fidelity at $7.95 a trade is one that I use. I would look seriously at Att (T) and Verizon. The former pays 5%And the latter is just under 5. Do not speculate or look for capital gains.  Capital  losses cannot be replaced if you no longer have an income. However, I would not hesitate to put 50% into these two equities but your investment depends upon you risk tolerance. Do not look for an advisor who is going to charge fees that will eat up at least 50% of your income. Do it yourself.
Since you are risk adverse, but need inflation protection for the number of years that you may live, you might investigate TIPS (Treasury Inflation Protected Securities). They are available through the bond departments of most commercial banks. They pay 1% plus the rate of inflation every six months. There are some limitations as to the amount an individual can buy in one year. DO YOUR HOMEWORK TO SEE IF THESE MIGHT WORK FOR YOU.
Put $350,000 in investment grade bonds (the remainder will be used to pay the premium on these bonds).  Buy 100 bonds of CUSP 002824AV2, 100 bonds of CUSP 133428AF2100, 100 bonds of 65334HAE2100, and 50 bonds of CUSP 59156RAY450.  This investment will provide an annual interest income of $20,735 per year or $1,727.92 per months.  The average coupon interest rate is 5.92%.  These are all "A" rated or better bonds so you can't reduce the risk much more than that and get a decent interest rate. 
Not that you would never do this but it does illustrate about the best you can do with a conservative investment in today's economic environment.  In reality you would invest the same amount but spread it out over more bonds and maybe put a little (no more than 10%) in dividend paying stocks like XOM for growth and additional modest income (about 3%).
Hopefully you can live on $20,735 per year plus Social Security and your pension  after you turn 62. Good Luck!

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