Q Next year I'll be rolling over my 401(k) cash-balance pension plan, which now has more than $600,000. I'd like to put the money into safe, guaranteed investment vehicles. I'd like a guaranteed stream of income of about $2,000 month. What would you recommend?
GARY
A I'm glad to see you're taking the time to research your question. The answer demands a lot more information before I could make sensible recommendations and you could make some sensible choices.
That said, here are a couple of reactions. One way to start thinking about what a safe portfolio means is to get a copy of "Worry-Free Investing," by Zvi Bodie, a leading finance professor at Boston University, and Michael J. Clowes, a journalist and editor. The authors are big fans of Treasury Inflation Protected Securities, or TIPS. They're skeptical of stocks, because they believe stocks are much riskier than conventional wisdom holds and that it's only sensible to roll the stock market dice after locking in your baseline financial goals.
"If you want to sleep nights secure in the knowledge that you will achieve your savings goals, you must invest in a way that eliminates the possibility that inflation will undercut your efforts," say Bodie and Clowes. "If you try to do it by saving less and expecting the stock market to do the heavy lifting, you may not get there at all."
That's one thought. Another is that for many people with a large portfolio and making a major life transition, it pays to talk to a knowledgeable person who can help you make sense of your options. I'd consider hiring a fee-only financial planner to look at your goals and values, and then look at what it might take financially to support those goals and values.
A classic way to find a good financial planner is networking. Talk to neighbors and colleagues who use a financial planner and get their recommendations. You can also go to the website of the National Association of Personal Financial Advisors at wwwnapfa.org. Another resource is the Financial Planning Association at www.fpanet.org. I'm biased toward fee-only planners with a Certified Financial Planner (CFP) designation. That gives you confidence that they're professionals well-versed in the basics of the business. With a fee-only planner you also get objective advice uninfluenced by commissions.
Once you've found several potential fee-only candidates, check their references and learn whether they deal with people in your income bracket. Finally, how do you choose? At that point, the deciding factor is which financial planner you're most comfortable with.
