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Q: I have been very uncomfortable putting money into my 401(k) since the crash. I think tangible assets may be the way to go. Can you recommend a broker that can diversify in all tangible assets, not just coins and gold?

A: Sorry, no recommendation.

First, putting all your money into a variety of tangible assets isn’t diversification.

But, more important, if you bought a gun for self-protection, would you keep it at a neighbor’s house or in a safe-deposit box? No. Doing that would defeat the purpose of owning the gun.

The major reason for wanting to own hard assets is the anticipation of a truly catastrophic breakdown in markets and in our economy.

If that happens, having gold, silver or other commodities in your 401(k) or IRA is not a very good idea.

Neither is having them in a taxable brokerage account.

Much the same applies to holding real estate in an IRA due to valuation and distribution issues. The greater your concern with a possible future catastrophe, the more important direct ownership is.

Q: We are 83 and 88. We have about $830,000 in CDs and money-market funds that pay us next to nothing.

We have a $700,000 home with no mortgage and no other major debts. I have a small private pension. My wife and I have Social Security benefits.

Between my pension and Social Security, we are able to live OK. We have four children and several grandchildren. Is it worth it to put most of our savings in a balanced index fund such as Vanguard VBIAX?

A: At your ages it is a good idea to have some zero-risk liquidity ready at hand in addition to your investments.

You could, for instance, keep a cash reserve (earning next to nothing) equal to the estimated cost of one or two years in assisted-living or a nursing home as a safety measure.

A year of reserve will allow whoever is managing the money to make changes at a rational pace.

The same reserve can also be used to pay for home health aides for some period of time, if your ailments make living at home hard but not so difficult that you need to move to an assisted-living facility.

Having a reserve large enough to cover most contingencies, with the remainder invested in the fund you suggest, will help you strike a good balance between your personal needs and your bequest hopes.


Copyright, 2013, Universal Press Syndicate