Well it is kind of a crap sandwich. Sorry to your friend.

First off ROTHs are out, you need earned income. Secondly, I don't think the focus should be on retirement planning until there is again an earned income. Thirdly, this person is just in a bad spot.

Lets assume that you can find some really good mutual funds, that consistently return 10% per year. At best this person can only pull out 10K per year without touching principle. At that income level, taxes are not much of a concern; not as much as surviving. If this person knows anything about investing, they know funds don't work like this. They could be down 5%, down 5%, up ~40% in three years to give an average of 10% return. Which of course further complicates matters.

This person (IMO) should seek to start a different career. One that can cater to any long term issues this person has with pain/disability. The money could be used toward training/education in order to get money flowing again. That is not to say the full amount should be used for a BA in Russian Folk Literature, but some minimum training to get a career that starts earning real money.

Well this is not the best situation. Sorry to your friend.

First off ROTHs are out, you need earned income. Secondly, I don't think the focus should be on retirement planning until there is again an earned income. Thirdly, this person is just in a bad spot.

Lets assume that you can find some really good mutual funds, that consistently return 10% per year. At best this person can only pull out 10K per year without touching principle. At that income level, taxes are not much of a concern; not as much as surviving. If this person knows anything about investing, they know funds don't work like this. They could be down 5%, down 5%, up ~40% in three years to give an average of 10% return. Which of course further complicates matters.

This person (IMO) should seek to start a different career. One that can cater to any long term issues this person has with pain/disability. The money could be used toward training/education in order to get money flowing again. That is not to say the full amount should be used for a BA in Russian Folk Literature, but some minimum training to get a career that starts earning real money.