Q: I'm 63, and my wife is 60. We are both retired. Our retirement and Social Security total about $5,000 per month, gross. Our house is paid for. We have $220,000 in money markets drawing 5 percent, which are insured by the FDIC. We would like to earn about 8 percent on our savings. Any recommendations? -- H.H., by e-mail

A: Sorry, no recommendations. And if someone tells you he has an investment that will provide you with a safe 8 percent return, grab your wallet and run.

While all of us would love to find some hidden, safe little gem of an investment, the brute reality is that millions of people are scouring the world for investment opportunities, safe and risky, every minute of every day (and night). The result is a market that has no undiscovered havens.

Today, a safe investment pays about 5 percent. Anything that is higher generally involves some degree of risk -- liquidity loss or actual risk of loss of money. That's the way it is.



Q: I am 54 years old and divorced, earning about $80,000 per year. I have $175,000 in my retirement fund, to which I contribute 5 percent of my salary. My company matches 2.5 percent. I am invested entirely in stock: Legg Mason Value trust fund, T. Rowe Price Mid-Cap Growth, Mass. Investors Growth stock fund and MFS International Equity fund. My home is worth $550,000, with a mortgage balance of $180,000, and I plan to downsize in another two years or so. I have no other debt.

Am I doing OK? At what point should I switch my investments to something less risky? Any advice you could give me would be much appreciated. Thank you! -- C.M., Boston

A: You're doing OK, with caveats. You're in much better shape than the average worker, you have some amount of diversification in your investments, and you're planning to mobilize some of your home equity in the future. You'll also be due for a fairly hefty Social Security benefit. That's all good news.

Your current and future contributions would grow to about $147,000 over the next 13 years if you earned 9 percent. Over the same period, your existing balance of $175,000 could grow to $536,000 if it grew at the same 9 percent rate. That would give you retirement savings of nearly $700,000 -- more than eight years of your current income. Add some of your $370,000 in home equity to the mix (while reducing your shelter expenses when you downsize), and you could retire in very good shape.

I'd feel more comfortable if you put some fixed-income in your portfolio because you're in your 50s, the Nasty Decade, the one where things happen that really make a mess of well-crafted plans. So have some cash around. Put some fixed-income in your qualified plans.

And the faster you downsize, the better. Right now you've got nearly 70 percent of your net worth tied up in the real estate market. It's been very kind to you in recent years, but it may not be so kind in the future.

Finally, flexibility is your biggest asset. The money you have will go a lot further for you if you think about moving to a lower-cost area when you retire. Living expenses will be lower, and you're likely to be able to buy a lot more house (or condo) in places such as Arizona, Texas and New Mexico.

Q: As a 56-year-old with 33 years of employment with DART, a defined-benefit plan, my 401(k) ($200,000), my wife's 401(k) ($330,000), additional savings of about $200,000 and no debt, I know we are better off than most.

When I retire at age 60, I have two options for survivor benefits from my defined-benefit plan, 50 percent or 100 percent. The difference between the two options is a $350 monthly reduction in my starting pension. Since my wife is 47, I plan to select 100 percent. Is this a good choice? -- P.H., Mesquite, Texas

A: Yes it is. With you retiring at age 60 and with a nine-year age difference, your pension benefit will have much less purchasing power when the issue of survivor benefit comes around in 25 years or so. The 50 percent survivor benefit would be a slight cut in living standard on its own, since one person can't live for half the price of two.

Meanwhile, your $700,000 in retirement accounts should produce an inflation-adjusted long-term income of about $28,000 a year to add to your pension benefit.