Q. I am 80 and have an IRA worth about $59,000, a $9,000 savings account, and a four-bedroom house worth about $140,000. The house is about 21 years old and will need a new roof and some repairs soon. I also have a disabled daughter who lives with me and receives $900 a month in Social Security disability benefits. I receive $1,000 a month.

I hoped we could find a house in the mid-nineties, realize a profit after the current mortgage is paid ($65,000), and put down money on another house.

Would we be better to do this or stay put?

---D.L., by email


A. This is a tough decision but staying put isn't a good option. You're living in a house you really can't afford. Your daughter certainly won't be able to afford it when you no longer live there due to death or infirmity. The best near and long-term option is to sell the house and replace it with the smallest two bedroom, two-bath condo that you and your daughter can cope with.

Doing this will enable you to buy the condo for cash, eliminating the mortgage payment from your monthly expenses. Basically, it will increase the spendable income you and your daughter will have. Moving to a condo will also free you from the worries of maintaining an individual home.

Owning debt free will also be better than renting since it will allow you to qualify for Medicaid earlier if you need to move to a nursing home in the future. And, in the event of your death, your daughter would have the option of sharing the condo with another woman in a similar position.


Q. I will be 65  ½ this November. I have $513,000 in an IRA money market account with Vanguard, $190,000 in a bank money market account, and $26,000 in a checking account. My wife and I will draw about $2,800 a month from Social Security if we go "full term." Our home is two years old and worth about $250,000. As you can see, we were scared out of the market a few years ago.

I make $75,000 a year in a job I took after my first retirement in 1995. We owe no money on our home except taxes and insurance, about $5,500 a year. I know we have to change our strategy soon but I don't know what to do. What do you suggest?

---R.B., by e-mail from Dallas


A. You may be worrying more than you need to. With financial assets of $729,000 you could make annual withdrawals of nearly $30,000 (assuming a 4 percent withdrawal rate). Add the $33,600 from Social Security and you have $63,600 a year---compared to the $69,300 you net from your $75,000 job after taking out employment taxes. If you are spending any money on work related expenses or saving any money at all, you'd have no difficulty sustaining your current living standard without working.

Let me demonstrate. If you could invest $30,000 for each year of retirement in inflation protected securities, your current assets would fund 24 years of constant purchasing power--- that's about the joint life expectancy of a couple your age.

Cash is a terrible trap. Once you get scared or bearish it's really difficult to come out of the cash cave. That's why I've regularly recommended diversification, holding both equities and fixed income, and never going 100 percent into anything.

So let me make this suggestion. First, put 10 percent of your money in a total market index fund and 10 percent in a total international index. Then commit $300,000 (ten years of your cash needs) to an inflation protected securities fund. This will leave you with nearly $300,000 in money market accounts that are earning more interest regularly. You could earn still more by spreading the $300,000 over a 2-year Treasury ladder. That's very conservative. The equity commitment should be expanded as nerve permits.