Q I'm 88, a widower, self-sustaining and active. I have roughly $150,000 split between IRAs and bond holdings. That includes $75,000 in mutual funds, $15,400 in government agency bonds, and $15,000 in CDs. My home is worth about $160,000. Unfortunately, my investment income is falling, while maintenance costs on my securities are rising. I have sought stability of principal and income. Little has changed in my holdings in 20 years. Any thoughts?
G.E., Racine, Wis.
A "I would shift away from government agency bonds (such as GNMAs) and try to get higher yields through AA-rated or higher corporate bonds, as well as AA-rated or better asset-backed securities, such as securities issued by the Residential Funding Corporation," says Peggy Farley, who heads up the financial firm Ascent/Meredith Asset Management in New York.
She also recommends that you purchase an international fund involving Europe and/or Japan, for diversification. "Stick with large-cap mutual funds," she says, and "only buy high-yield bonds through funds."
Q Can an individual establish and manage his/her own SEP IRA? If so, can they manage it via the Internet? My money is currently tied up with one company, and I'm not satisfied with its management. I'm also concerned about the costs of breaking free.
L.W., Inglewood, Calif.
A "Sure, you can manage your own SEP IRA," says Ed Slott, a CPA and expert on IRAs in Rockville Centre, N.Y.
An SEP is a "simplified employee pension," which lets you set aside self-employment income in a tax-sheltered account somewhat similar to an IRA.
"Go to any financial company you want that sets up SEPs and have them do a direct trustee-to-trustee rollover. That way you won't take possession of the money and incur any tax liability," says Mr. Slott.
Find a company that has Internet capabilities, he says. Then you can structure the new SEP in the way you want.
Hopefully, the higher gains you make should offset any charges from your old company for transferring the account.
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