In a bit of a pickle trying to figure out how to generate around 5.5% to fund obligatory distributions. Long story short, my dad died a few months ago and the terms of the estate planning documents require a distribution to the wife in a fixed amount that essentially equals about 5.5% of the principal. We funded the account with cash and if we simply paid the amount from cash it would last roughly 19 years which may or may not be beyond her life expectancy. Any amount left over would then get split between my brother and myself so there is an incentive, for me at least, to try and generate income to make the distributions. I've spent a few weeks looking at dividend paying stocks but you really have to take a bit of risk to generate that kind of income. I'm trying to do it in such a way as to diversify the stock holdings so we are not concentrated in one sector but at the end of the day its likely going to be made of of MLPS, telecom stocks, utility stocks, a CEF, two REITS, and a few consumer staples and beverage companies. Our financial advisor wants to put all the money in a balanced fund and try to make the distributions in cash and let a part of the portfolio appreciate enough to make up the cash distributions. I feel like that is more risky since I'd prefer to use present income generation to cover most of the distributions instead of relying on capital appreciation.
I really sympathize with retirees since this exercise has really opened my eyes how hard it is to generate income in this market right now without taking excessive risk. Anybody been through this exercise before that has any suggestions?