Rethinking assets in an IRA several years before retirement

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Q: I am semiretired and, because of a recent medical diagnosis, I have taken a closer look at my IRA. I have a conservative large-cap stock fund, an aggressive mid-cap fund and a foreign-stock fund, totaling 60 percent of the account value. The remainder is in two bond funds. I have a low-cost total bond index fund, and a high-yield fund. I'm considering trying to improve my diversification by converting some of the high-yield bond fund to a gold fund. Is that a good idea?
Name withheld, via e-mail

A: Your IRA may be too fragmented, suggests Angela Thomson, a certified financial planner in Lincoln, R.I. She feels comfortable with your 60-40 percent split between stock and bond funds, but would not alter this to add a gold fund.

"Instead, I would change your current holding to 10 percent short-term bonds, and 15 percent each in high-yield and convertible bonds," says Ms. Thomson.

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On the equities side, Thomson says your conservative large-cap fund may be negating your aggressive mid-cap fund. She would reshuffle thus: 20 percent blended large cap (which utilizes both growth and value investment styles), 15 percent each in a mid-cap value fund and a small-cap growth fund, and 10 percent in an international fund. This mix will give you more depth and balance between asset classes.

With regard to your health, you still have a few years left before you qualify for Medicare and can receive the medical benefits associated with this program. In the interim, Thomson suggests that you consider obtaining disability insurance and look into long-term healthcare insurance.

Q: My husband and I filed for bankruptcy eight years ago. Since then, we have several late payments on our mortgage, credit cards, etc. We are trying to correct the problem by having payments automatically deducted from our checking account. What else can we do to improve our credit and gain favor from financial institutions?
J.A., via e-mail

A: The bankruptcy will be on your credit record for 10 years, so you have two years to go. The other blemishes, like late payments, will be on your record for seven years each.

Your credit record and credit score are made up of several factors that combine to give creditors an idea about how risky you are, says Jordan Goodman, author of "Everyone's Money Book on Credit." Among these are your payment history, the amount of debt you have, the amount of potential debt you have, and the mix of your credit profile. Creditors like to see different kinds of loans, such as credit cards, student loans, car loans, and mortgages.

You improve your credit score when you do well in all of these areas, pay on time, have a reasonable amount of debt, and have a proper credit mix. You can't take one action and instantly get a sterling credit score. But you don't have to wait seven or 10 years for it to improve.

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