Q. I retired in 2001 at age 48 with 30 years service from Verizon. I took my retirement in a lump sum with nothing withheld and then rolled it all into six different diversified accounts with Primerica Financial Services. I am currently drawing monthly from these 6 accounts at about 7 percent a year. I was told when I set this up that I could not stop the monthly payments or take any different amount out until I turn age 59  ½. After subtracting what I have drawn since June 2001, I have lost over $70,000--- $52,000 since June of this year. At this rate I will be broke within 2 years.

Is there anything I can do to take any of this money out and put it in something else? Is it true that I can't touch this until I am 59  ½?

I need to protect this money. This is my retirement. I am currently working at a job but it doesn't pay a lot. So I still need to take monthly payments. The funds I am in are in B shares. If I change, I think I will be paying a lot to change funds. What is your recommendation? Am I in a losing situation?

---J.H., Sherman, TX

  

A. There are government rules that affect your IRA rollover account and there are different rules that affect the investments in mutual funds that you make within your IRA rollover account. Let's work this problem from the inside to the outside.

•           It would be expensive for you to move to another fund family because you would trigger early redemption charges for your "B" shares. You can, however, move from one "B" shares fund to another "B" shares fund in the same family without incurring any charges from the fund family. I suggest that you review your current fund choices and tell your broker you want a more conservative asset allocation.

•           Under normal rules you are allowed to make withdrawals from a qualified plan before age 59  ½ provided you do so in a series of essentially equal payments and that you do it for at least 5 years or until you reach age 59  ½. Many people, however, are in your situation: the withdrawal rate they established a few years ago is now much higher because their portfolios have lost so much money. Fortunately, IRS recently recognized this and made the rules more flexible with Revenue Ruling 2002-62. You can reduce your rate of withdrawal without triggering penalties. To learn more, visit the IRS website: http://www.irs.gov/pub/irs-news/ir02-104.pdf

The second change is something you should NOT do on your own. I suggest a visit to a tax accountant or financial planner to discuss exactly how this change should be made. Given your age, it is very important that you reduce your annual withdrawal rate.

  

Q. I am a 40 year old, self-employed single mother whose daughter is in the 7th grade. After a period of unemployment, I have been saving money without designating it specifically for my daughter's college education. I have about $35,000 in mutual funds, $15,000 in a savings account, and about $33,000 in an IRA. Like many others, I have lost money in the past year.

My ex-husband will be paying for half of our daughter's college. What suggestions do you have for my investing to pay for my half? I am familiar with 529 plans but I am leery of them because returns are generally negative these days.

With the market returning so little, I am considering a prepaid tuition plan because the state guarantees a rate of return higher than what most people are getting on their investments. Would it make sense to make a lump-sum payment into one of these and let her father fill in the gaps?

---C.S., by e-mail

  

A. I think your idea makes great sense. With public college tuition expected to rise 6 to 7 percent a year, perhaps more, the pre-payment plans look increasingly attractive in the current market. The 529 plans are widely discussed as a funding tool but there are major variations from plan to plan. Some are burdened with high fees. As a result, there is a good chance a pre-paid plan will be a better investment than a 529 plan.

If you and your former husband get along well enough to discuss your daughter's welfare I'd like to suggest an additional move: that you and he contribute at the same time. That way each of you will know that you've fulfilled a major commitment. You may be divorced but you can still do good things together.