Q. I am a 37 year-old woman who has been recently widowed. I'm just starting to get a handle on my financial situation. I'm not sure where to turn for financial advice because I'm getting mixed messages from relatives.

My finances are in pretty good shape. My home is worth about $360,000, free and clear. We had about $100,000 between 401k, stocks, and bonds. And my husband's life insurance policy will pay out about $1.4 million very soon. I don't know where to invest.

My ideal goal would be to live off investments so I can continue to volunteer my time and energy at a local hospital children's program that I began three years ago when I quit my job. I figure I would need about $40,000 a year after taxes to maintain my current lifestyle (this is a very high estimate).

Doe this sound at all possible or will I have to give up my volunteer work and become employed again? Who should I talk to? There seem to be so many choices in financial planning and I'm very confused.

---K.N., Burnsville, MN


A. With $1.5 million in financial assets, you can reasonably expect to withdraw 4 to 5 percent a year from your account and sustain your standard of living indefinitely. You also won't have to do anything fancy, difficult to understand, or expensive. The 4 to 5 percent withdrawal rate calculates to $60,000 to $75,000 a year, before taxes. Either way, you'll have more than enough to cover your $40,000 budget.

To start your education, I suggest a visit to my website, www.scottburns.com, where you can read collections of columns on income investing, being a "couch potato" investor, and developing a "spenders portfolio." The last is particularly important because living on your capital is a very different process from trying to accumulate it.

Here are some suggestions:

•           Declare a moratorium on decision making for the next year. You'll be                surrounded by offers, from relatives and others, of advice, help, and                expertise. Most of your relatives will be uninformed and most of the                others will be drawing from a limited bag of investment products they                are trying to sell. Just remember that the world is full of investment                opportunities and they will never go away. What can "go away" is your                money.

•           Know that simplicity pays. You could easily put half of your money in                a ladder--- a series of interest bearing obligations maturing in                1,2,3,4, and 5 years. With careful selection through a website like                www.banxquote.com you'll average about 6 percent, possibly more. You                can invest the remaining funds in Vanguard Index 500 fund and have                great confidence that you will, long term, do better than 70 percent                (or more) of all professional managers. Together, you'll have enough                interest and dividend income to meet your goals and pay your taxes.

•           Start interviewing managers. If you are uncomfortable with the                responsibility for the money, start interviewing managers. They will                be eager for your business because $1.5 million is a good sized                account, Internet billionaires notwithstanding. When you do, always                remember that it is your money, not theirs and that you have simple                alternatives that have been proven to work well.


Q. My wife and I are nearing 80. We have no debts, own our own home, and have income from pensions and Social Security of about $5,000 a month plus about $6,000 annually from investments. We have a portfolio of about $350,000, mostly in communication related stocks (ATT, SBC, Bell South, VodaFone, AirTouch and U.S. West). We also have about $60,000 in tax-free bonds.

While these stocks have appreciated considerably, we're old enough to still believe that things that go up must eventually come down, at least somewhat. Is there a way to "lock in" our gains against a serious market decline? A brokerage firm holds our stocks.

----S.H., Garland, TX


A. There is no truly simple way to protect existing capital gains. Some investors learn to work with combinations of put and call contracts or with selling an equal number of shares short. For the vast majority of investors, however, this is not something you do on your own. If you do this at all, you should do it with an experienced broker who has established other "covered call" programs for other clients.

Personally, I think hedging capital gains, even with the help of a savvy broker, is too complicated and laden with probability calculations for most people. The alternative is to setting up a list of prices at which you will sell and let the market do the decision making for you. Remember, the capital gains tax is the lowest tax rate going.