Before investing a nest egg for a child, consider the time frame

Q: I have about $12,000 in a retirement account set up by my former employer. The funds are available to me, but I don't need this money and would like to give it to my 11-year-old son once he is grown. I was thinking of investing the money in stocks but this is extremely risky. Is there a better way?
T.M., Florence, Ariz.

A: If the money is in a qualified account such as a 401(k) where it's growing tax free, then roll it over into an IRA that offers a wide range of investment choices, recommends Osmond Baptist, president of the Financial Planning Association of Georgia.

If your adjusted gross income does not exceed $100,000, you may be eligible to convert to a Roth IRA, he says. While a conversion offers many advantages, professional advice should be sought since the tax consequences vary based on your circumstances.

Growing this money safely depends partly on the time horizon involved. If these funds are intended to help pay for college, keep your money in short-term and relatively liquid investments such as bank CDs that let you control the maturity date, Mr. Baptist suggests.

You correctly observed that stocks are risky, he says. But if you're looking at a 10- to 15-year investment horizon, Baptist would opt for a mix of stock mutual funds. "Looking ahead, there are emerging trends in the areas of energy, healthcare, defense, and homeland security which should certainly offer opportunities for alert investors," he says.

Q: I just sold my condo and netted $180,000. I'm 65 and working two jobs. Where can I invest this amount to achieve solid growth, yet protect the principal? I already have Roth and traditional IRAs.
C.S., North Carolina

A: Without knowing your goals, aspirations, risk tolerance, and family needs, you've handed David Kauffman a tough nut to crack. Still, the Rockville, Md., certified financial planner says that historically stocks have had a greater return than bonds and other fixed-income investments. So if you want growth, he says you'll need to consider equities, via either mutual funds or individual securities.

Since interest rates are still near record lows and

you don't appear to be in immediate need of income, Mr. Kauffman advises against bonds. Their value moves inversely to interest rates, which are likely to rise in the future. As a result, you will lose principal in a rising interest-rate environment.

Kauffman says you may want to consider a variable annuity. They're sold by insurance companies and can be complex. But some annuities allow investors to invest in equities while providing guarantees that protect your principal if the market drops. You'll pay a fee for this protection.

Finally, Kauffman requests that you do not invest the money before seeking professional advice from someone who cares about your best interests.

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