Planning Karen Klein’s Awesome Retirement

Karen Klein

By now you’ve heard about Karen Klein, a 68-year old bus monitor who became an Internet celebrity last week after video surfaced of her being bullied to tears by a group of kids.

Someone set up a fundraiser on IndieGoGo, hoping to raise $5,000 to buy her a vacation. Now with close to $700,000 in donations (and 26 days left), what should Karen do with all that cash?

Certified financial planner Cathy Curtis weighs in:

To help her avoid the pitfalls of sudden wealth (hello, in-ground pool) and make sure her windfall lasts, Karen should think about three things: liquidity(access to cash), stability (keeping ahead of inflation) and income (investments that generate interest and dividends). 

The goal is to live on about 4% of her nest egg per year. That plus Karen’s likely annual Social Security income of $9,600 gives her about $37,000—and protects the bulk of her assets (which she’ll need for health expenses as she ages).

Cash: Karen should keep $30,000 in a savings account linked to checking, for easy access, and another $70,000 in a high-yield account. This gives her a three-year cushion, says Curtis.

Stability: If Karen invests $250,000 in a couple of conservative bond funds, the estimated 5% yield will provide some growth and protection against inflation, without market volatility.

Income: The remaining $350,000 should go into a diverse portfolio of exchange-traded funds (ETFs) focused on dividends rather than aggressive growth. 

Meanwhile, Curtis recommends that Karen open a account to help Karen track her spending. A 246% income increase can derail even the most carefully-laid budget.

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