The best path would appear to be a mix of distributions from taxable and nontaxable accounts; saving for grandon’s education.

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Investing

Q: I recently retired at 55. My wife is 52. Our family has about $2 million in taxable accounts and an additional $1.5 million in nontaxable retirement accounts. I have no source of income other than the dividends and capital-gains distribution from the mutual funds we hold, all of which are index funds.

At today’s tax rates — and assuming that they are only going to go higher — do you think that it would be prudent for me to switch my nontaxable accounts to 60/40 or more stock/bond allocation today and slowly change over a period of the next several years the allocation in my taxable account to, say, 60/40 or more bond/stock?

A: Having such extreme allocations can create trouble for you as you switch from accumulating to distributing.

Here’s the problem: Unless you live very modestly, you’ll have a high withdrawal rate from your taxable account. The consequence is that a bad year could put that portfolio into a death spiral, forcing you to change your plans.

Another issue is long term. If you build your qualified account excessively, you could be putting yourself into a forced high tax-rate position after you reach age 70½and take required minimum distributions.

A better route is to take distributions in a way that produces regular income but also moderates your tax rate. You could, for instance, take about $95,000 a year from your qualified accounts and not pay taxes at a higher rate than 15 percent. That’s about as good as it gets. Income from the taxable accounts, if in stocks, would also be taxed at 15 percent (the rate on dividends and capital gains).

If we look for taxes in moderation, the best path would appear to be a mix of distributions from both types of accounts.

To avoid having to sell equities in a bear market, it would be good to have more bonds in the taxable account. A 25 percent bond allocation, for instance, would cover about five years of withdrawals, if you were using a 5 percent rate. It would cover longer at a lower withdrawal rate.

Q: We are looking for a decent savings program to invest for our new grandson. We are aware of the 529 college funds and plan to max that out. But we would also like to add a bit more in some other way. My question is: Are EE savings bonds or I bonds still a viable option? Or is there something better?

A: Currently, you’d be better off in I bonds than EE bonds. I bonds are yielding 0.10 percent plus adjustment for inflation. EE bonds are yielding just 0.10 percent — without adjustment for inflation. Big difference.

Still, neither has a chance of keeping up with education inflation. So you’ll need to look for an alternative with risk, such as an exchange-traded fund (ETF) that invests in the total U.S. stock market. These funds are tax-efficient and low-cost. Schwab (ticker: SCHB), iShares (ticker ITOT) and Vanguard (ticker: VTI) all offer such exchange-traded funds.