Q. I am 73 and my wife is 69, both retired. We have been receiving monthly income from a $700,000 note at 7 percent for the past two years. The buyer wants to pay off the note, which he can do with no penalty, in the next couple of weeks. We have been receiving $6,200 monthly to go with our $3,000 Social Security and small pension. Our attorney recommended a CFP with a major brokerage house to seek the best option for our retirement nest egg for the $630,000 payoff.

We'll pay off a few debts and keep some cash, so we would probably invest about $550,000.

The CFP has recommended the American Funds Income Fund of America and a withdrawal rate of $5,000 a month. She stated there would be a one time fee of 2 percent and the fund has a 0.61 percent management fee. The fund appears to be solid, but should we put all of our eggs in one basket? Is the up front fee negotiable? We have a bit of a problem in giving up $11,000 to start with.

---L.K., by e-mail


A. I won't second-guess this broker's choice. Income Fund of America, which Morningstar categorizes as a "moderate allocation" fund, hasn't been below the top 20 percent performers in the last 1, 3, 5, 10, 15, and 20 year periods. And like all of the American Funds group, it has annual expenses that are very low. It will probably serve you well.

The starting level commission on this fund, like many broker-distributed funds, is 5.75 percent. You are getting the 2 percent commission rate because you are making a large purchase. If you raised the ante to $1 million there would be no commission. (Although the broker would still be paid.)

I know $11,000 is a steep price to pay--- it's two years of typical management costs for an independent account--- but that's the way the brokerage business works. Brokers are salespeople and they are compensated in commissions. Another broker, perhaps at the same firm, might advise you to invest in three or four funds from different fund companies as a way to make smaller purchases and get a higher commission. In other words, you're doing about as well as you can inside the system.

Outside the system, however, you would find a handful of funds that are as good, or better, than Income Fund of America. And they can be obtained without paying a commission. Those funds are Dodge and Cox Balanced (ticker: DODBX, expense ratio 0.53 percent), Mair and Power Balanced (ticker: MAPOX, expense ratio 0.99 percent), and Vanguard Wellington (ticker: VWELX). Wellington has a normal expense ratio of 0.36 percent, but a $250,000 purchase could buy Admiral class shares of the same fund with an expense ratio of 0.23 percent, according to their website. There are, by the way, Certified Financial Planners who work at independent advisors who will help you with fund selection for an annual asset management fee of 0.5 percent if you feel a need for continuing advice. It would be 4 years before such fees would equal the up front commission.

Finally, I will second-guess the broker/CFP on the recommended $5,000 withdrawal rate. That amounts to 11.1 percent a year on the $539,000 that will be invested. That's a deeply dumb idea. Unsustainable. It will have you broke fairly quickly.

But don't believe me.

Go, as I did, to the online portfolio survival calculator at http://capn-bill.com/fire , enter the asset allocation, and you'll find that your 30-year survival odds are 13.6 percent. In other words, in about 86.4 percent of the historic 30-year investment periods you would have run out of money. If you want to learn more, check out the columns on portfolio survival on my website or visit John P. Greaney's webpage on early retirement, http://www.retireearlyhomepage.com. Withdrawal rates of 4 percent are safe and some will take a chance on 5 or even 6. Anything over that is suicidal. A CFP should know this because portfolio survival has been an active topic at professional meetings for years.