Q. My wife and I are 60 and plan to retire at 62.  At that time we will have $31,000 annual income from Social Security and $48,000 from a corporate pension. A 401k/IRA of $1 million will provide additional income from investments. 

Recently I have been reading a book titled "Crash Proof" by Peter D. Schiff.  He is expecting the value of the dollar to decline drastically in the near future. Consequently, he advocates investing 10 percent to 30 percent of our overall portfolio in gold-related investments and 70 percent to 90 percent in conservative foreign stocks through his company Euro Pacific Capital.  Until I read his book I had never heard of that company.

Do you agree with his expectations of the dollar value decline in the years ahead and, if so, what do you recommend we should do to protect our investments?

---G. M., by email

A. I worry when a book is premised on catastrophic change.  I do believe we are likely to see a continued long-term decline in the value of the dollar against other currencies. This will eventually create higher inflation in the United States and put pressure on interest rates.

That said, the positions recommended by Peter D. Schiff are extreme. Many investors urge owning some gold, but most limit it to an “insurance” position. The case for having some of your investments in other countries can be supported without an apocalypse--- it’s just good diversification.  Putting virtually all of your money in gold and foreign stocks strikes me as a very large bet on future misery.

What you need to remember is that the world has been ending for a very long time. Rather than living in fear of the worst, I suggest diversification--- and positive participation in a world of human beings that adapt.

Q. I am interested in converting a set of managed Fidelity funds to either index funds or ETFs.  However, I’m not sure if it is worth it.  My funds have about $200,000 in value and $35,000 in capital gains if I sold all of my funds today.  I think the advice you give on index funds and ETFs is beneficial, but is mostly geared toward new investors.  I have not been able to find info to analyze if index funds and ETFs still provide the best value when converting from an existing portfolio of managed funds with capital gains.

Do the advantages of index funds and ETFs transfer when converting from managed funds with capital gains?  How do I analyze the cost/benefit of lower costs vs. capital gains taxes I would incur by converting to index funds or ETFs?

 ---T.H., Austin, TX

Changing horses is changing horses. It doesn’t matter whether you are moving from one managed fund to another or to an index mutual fund or an index ETF--- the issues to be addressed are the same. First, what is the expected performance benefit for making the change? Second, how much will it cost--- in taxes--- to make the change?

 When you think about redeeming Fidelity managed funds to buy index funds, you are betting that Fidelity fund managers won’t be able to provide a return greater than an index fund in the same asset category due to management expenses, the cost of portfolio turnover, and lost tax efficiency. Since the average expense ratio on Fidelity Investment domestic equity funds is 1.25 percent (according to the Morningstar database) and you can buy major domestic market index funds with expenses less than 0.10 percent, the index fund products have a significant cost advantage the Fido managers may not be able to overcome.

Capital gains taxes should not be an impediment to decisions unless you expect to die in the very near future. (If you die, the cost basis for your fund will be its value at your death, not its value at purchase, so your estate will escape the capital gains tax on unrealized gains.)

If you don’t expect to die in the very near future, you might want to realize the gains now while the capital gains tax rate is only 15 percent. Wait too long and the next Congress may dutifully shoot the country in the foot with a higher tax rate to punish all those nasty rich people. (The same tax increase, unfortunately, would also cause the value of all stocks to decline relative to other assets, so every 401(k) and IRA account held by the non-rich would decline as well.)

In the end, the damage of a 15 percent tax rate can’t be that great. In your case, realizing every dime of capital gains would cost about $5,250 in federal income taxes, or 2.6 percent of your $200,000 nest egg. You can lose that much in a bad day--- and might recover it in cost savings in just more than 2 years.