Q. Do you recommend the "couch potato" approach for an 89-year-old woman who needs to safely invest $600,000 from the sale of her home? She has an additional $350,000 in Treasurys and individual stocks managed by Wells Fargo Bank and another $200,000 invested half in U.S. Savings Bonds and half in life insurance policies on her children that pay 4.9 percent.

Her fixed income from two small pensions and Social Security totals $39,000 annually. Dividends and interest from the Wells Fargo account generates about $18,000 annually.

To date, the dividends and interest have been reinvested.

The woman has recently entered a nursing home. Her estimated annual expenses are about $72,000. There is need to generate enough cash to meet her living expenses. Her children want to preserve as much capital as possible.

---B.M., by e-mail

A. The children need to remember that the money still belongs to their mother. The amount of money would not be so large if mom hadn't lived below her means and reinvested her dividends and interest. With a total of $1,150,000 in financial assets and an additional income need of $33,000 you're talking about generating a current income return of only 2.9 percent from those assets. No problem.

This can be done easily with a 50/50 Couch Potato portfolio or with a traditional 60/40 portfolio.

Q. I am a 56-year old single woman intending to work until I'm 70, if possible. I own my condo and have about $25k of equity at this point. I have modest IRAs and pension benefits. I would like to rent out my condo and buy a 2nd condo, using my present condo for rental income. The problem: my income will not qualify me for having two mortgages at the same time, even though my present condo payment would be covered by rent.

Is there a way to work around the mortgage problem? Do you have any other suggestions to help with retirement plans? I certainly won't have a substantial nest egg when I retire.

---J.N., by e-mail

A. Even if you could work around the mortgage problem, it probably wouldn't be a good idea to become a small-scale landlord. Unless you have substantial savings and surplus income you are exposing yourself to significant risk by depending on rental income to cover fixed expenses such as a mortgage. A single Tenant-From-Hell could put you into foreclosure. That's what makes lenders edgy.

Here's what I suggest. First, get familiar with what kind of retirement benefits you can expect from Social Security. Lower income workers are often pleasantly surprised. Second, concentrate on getting your condo mortgage paid off. You probably aren't getting any tax benefits from it and you'll want to own it free and clear by the time you retire.

One reason to avoid buying another condo is that you already have a substantial commitment to real estate. To be diversified, you should be accumulating other kinds of assets such as stocks and bonds.

Q. I have just finished reading you column "Supporters of variable annuities short on analysis". So, I turn to you for some insight into my personal situation: Recently I was caught up in a layoff situation after twenty-seven years with the same company. I was offered early retirement, plus a fair severance package. I am fifty-eight years of age. I intend to go back into the workforce soon. I have decided to take the lump sum payment from my retirement account and 401K and roll them over into an annuity. The total amount is $600,000.00. I do not expect to withdraw any of this money until age sixty-six at least.

I, like many, have lost a lot of money in Mutual Funds over the last four years. Therefore, I do not have any confidence in the stock market and want my money secure. My question to you is this; does an annuity make sense in this given situation? If so, which kind?

---D. C., by e-mail    A. No, an annuity doesn't make sense. It just adds a layer of cost when you already have tax deferral. The accounts you mention can be rolled into an IRA rollover account with a low cost mutual fund firm like Vanguard or a relatively low cost firm like T. Rowe Price or Fidelity. You'll retain tax deferral and avoid the higher costs, retaining more of the return for yourself.

You may have lost money in mutual funds but you need to understand that an annuity is only a legal "wrapper" that goes around a mutual fund sub-account. The insurance wrapper makes the returns tax deferred. You've still got the mutual fund--- and its risk--- inside the wrapper.