Q. My wife and I are 81 and 84. We have $400,000 (all our savings) in two $200,000 CDs that are averaging 3.8 percent interest. One CD matures in May 2010. The other matures in May 2011. We have no debts. And we can live on our income from Social Security and a pension. I feel that something bad is going to happen to the U.S. economy, but I have no idea what it is. We would like to maintain the $400,000 as a safety net only; we have no interest in leaving it to our estate. What do we do with it? We don't mind closing the CDs and taking the penalty. — G.W., by email from Dallas, TX

A. I don’t think there is an investment-based cure for the anxiety you (and millions of others) are feeling. We could be dealing with asset and income deflation for some period of time. If that happens, your 3.8 percent-yield CDs and other, longer-term fixed-income investments will look very smart.

If we have the inflation many people are expecting, on the other hand, those CDs may be maturing into a much higher interest rate environment. We could, for instance, experience a replay of the stagnation and inflation (remember “stagflation”?) of the 1970s. If that happens, nominal corporate earnings will rise along with interest rates but neither will keep up with inflation. So stock prices will be flat to declining and bond prices will fall. It’s not a pretty picture.

The best (but highly imperfect!) protection is broad diversification. Americans own virtually no foreign bonds and very little in foreign equities. We need to change that and diversify as widely as possible.

Given your ages, you might also consider doing a term annuity. Not a life annuity, this would take a sum of money and return it to you in monthly payments of principal and interest for a chosen period of time such as 5 or 10 years.

Q. I am 70 and my wife is 67. We are both retired. My retirement pension is about $120,000 a year. My wife has a pension of about $14,000 a year. Our adjusted gross income is about $150,000 a year. We have about $850,000 in equities, bonds, and cash. About $500,000 of it is in traditional IRAs funded with before-tax funds. The only liability we have is the mortgage on our house.

We are trying to decide if we should consider converting some or all of our IRAs to Roth IRAs. We do not need the income from our investments. It seems like this might be something to consider since you can spread the tax bill over two years, even though the tax bill would be sizable, and we would lose the earning power from that principal. What is your opinion? —D. P., by email from Cedar Hill, TX

A. In “Spend ‘til the End” (Simon & Schuster, 2008), economist Laurence J. Kotlikoff and I use his consumption-smoothing software to explore that issue. We were surprised to find that Roth accounts, in general, provided little or no lifetime advantage for your standard of living. They may, for some, provide some advantage for having a larger or more flexible estate— but that’s different from your lifetime standard of living.

Another way to think about the unrealized tax liability in qualified plans is to think of it as a reserve for medical expenses. In that case, the tax liability may disappear.

How could that happen? Simple. In the event of a major illness or long-term nursing home care, it would be necessary to make large withdrawals from qualified plans. Since the account withdrawals are likely to be offset with major tax deductions for medical expenses, there is a grim chance that qualified plan accumulations may come out at lower tax rates— not the higher tax rates everyone fears.

No one would choose this as a way to reduce their taxes, but it isn’t unreasonable to think of the unrealized tax liability in qualified plans as a “reserve” for long-term nursing care or catastrophic illness. Stay healthy and you’ll pay it out in taxes. Suffer a major illness or long-term care need, and you’ll pay it out in tax-deductible medical expenses.