By Scott Burns

Q. We recently took all of our IRA money ($527,000) out of the stock market and put it in a Money Market account. We don't plan on using any of it for seven years when my husband retires at 67. He plans on fully investing in his retirement fund until then. Where can we invest our money so as to earn enough to keep ahead of inflation while not risking our principal? —F.G., by email 

A. In the current market it is not possible to earn an interest rate greater than the rate of inflation in a no-risk investment. At the end of May the Consumer Price Index (CPI) was 222.95. In May of 2010 the same index was 214.12. That means inflation over the last 12 months has been 4.12 percent. Even a 10-year maturity Treasury bond yields only 2.96 percent in the current market. Shorter maturities yield substantially less. A 2-year Treasury yields only 0.37 percent. Yields are also low on FDIC insured CDs and on relatively safe CD-like annuity investments.

We are in a truly rotten time for savers and retirees, a time where you are virtually guaranteed to lose some of the purchasing power of your savings by insisting on safety. This has not always been the case. Historically, savers have earned about 1 percent a year over the rate of inflation on safe, short-term investments and up to 3 percent a year over the rate of inflation on longer term investments.

The suppression of interest rates is being done to rebuild the banking industry, but you could think of it as a very high tax rate on savers— ALL of their return.

Q. I just started meeting with a financial planner. He recommended Jackson variable annuities. A friend told me you say stay away from variable annuities. I am 62. My husband passed away 6 years ago. Until now I have left the money with my husband's 401(k) plan. It took me quite a while (6 years) to go see a planner. I felt I could trust the planner but now I do not know what to do. I have not transferred the funds yet. Do I stay away? — H.N., from Austin, TX

A. Yes, stay away. The money you mentioned is in a 401(k) plan. These are plans that allow a worker to save income while deferring taxes. In addition, whatever the investments in the plan earn is also tax-deferred. You can move the assets in the plan to an IRA Rollover and continue to enjoy tax deferral. You will only pay taxes when you remove money from the plan. At that time it will be taxed at ordinary income tax rates.

I'm telling you this because having money in a tax deferred account means you already have one of the main benefits of a variable annuity— tax deferral. Since you are a widow, you probably don't need the death benefit— a contractual guarantee that your beneficiary will get an amount at least equal to the original investment. So, you don't need the major benefits of what the salesman is selling. Since he didn't consider this, I think it is safe to say that he is more salesman than financial planner. Buying the product he is offering would subject you to needless expenses— a typical variable annuity has total costs over 2 percent a year, all coming straight out of your money.

It is possible to get a better deal at lower cost, even at a traditional brokerage firm. I regularly suggest that people look for a broker who specializes in the funds offered by the American Funds group. You'll pay a commission to buy the funds, but the ongoing expenses of the funds will be very low— typically a bit more than 0.60 percent a year. This is about as good as it gets in what I call the legacy financial service firms.

Another alternative is to arrange for a rollover to one of the major no-load firms such as Fidelity, T. Rowe Price, or Vanguard. All three offer good balanced mutual funds that have no up-front commission and cost about 0.60 percent a year or less. You’ll find Puritan fund (ticker: FPURX) at Fidelity, Capital Appreciation fund (ticker: PRWCX) at T. Rowe Price and Wellington fund (ticker: VWELX) at Vanguard.  Over the long term the lower costs of all these funds will mean that you get more of the return on your investment.