Q. My wife and I are retired, own our house, and have no debts. Besides Social Security, our income consists of dividends from the Vanguard High Yield Bond Fund (we have $27,000 in the fund), and the Vanguard Ginnie Mae Fund (asset value: $34,000). These dividends total about $400 per month. We also get $125 from an annuity and $200 from an IRA. In two or three years, the annuity and IRA will be exhausted and we will need to start drawing on the Vanguard funds. Can you suggest a fund, preferably from Vanguard, into which we could put these fund assets and from which we could receive a monthly withdrawal?
A.J., Palmyra, Va.
A. "Your choice of these two Vanguard Funds is very smart," says Daniel Wiener, editor of the Independent Adviser For Vanguard Investors, published in Potomac, Md.
He suggests that you keep the two funds, and, if you have not done so, open a money-market account with Vanguard. Then have Vanguard move the monthly dividends into the money fund. You can write checks against the money fund, he says.
If you do need to draw against your principal in either fund, says Mr. Wiener, cash out an even amount and have Vanguard move it into the money fund.
Q. Because of recent stock-market declines, our portfolio has lost a considerable amount of its value. My husband and I have a few bank CDs. We are considering investing in US Treasury securities because they are so safe. Does it make sense to seek safety now instead of trying to get higher returns?
A. In his new book "Beating the Dow With Bonds" (Harper/Perennial), Michael B. O'Higgins argues that in some uncertain markets, there are no really attractive places to make money. In such cases, the best strategy is to invest in ways that preserve your principal.
If you turn out to make money, then that should be considered "gravy," he says.
Mr. O'Higgins likes the US Treasury market, both for safety and because Treasury bills provide nominal returns.
Other experts note that you can also protect principal and make nominal earnings over short periods with bank CDs, which are federally insured.
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