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).
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.