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Q: My husband and I have pensions totaling $64,000 annually. We also have his Social Security of $18,000 a year.

Next summer I’ll start receiving my Social Security of $24,000 a year. With my Social Security starting at age 66, we won’t really need to use our IRA money — at least for a while. (We have been supplementing our income from the IRA.)

My question is: How, at ages 67 and 65, should we allocate our IRA money? It’s all at Vanguard. Currently there is:

• $215,000 in the Total Bond Market Index, Admiral shares (VBTLX).

• $115,000 Diversified Equity (VDEQX).

• $85,000 in the Total Stock Market Index, Admiral shares (VTSAX).

• $40,000 in the Total International Stock Index, Admiral shares (VTIAX).

• And in the Roth IRA, we have $32,000 in the Total Stock Market Index, Admiral shares (VTSAX).

When I look at the pie chart on the Vanguard site, it shows that I am allocated 55 percent in stocks and 45 percent in bonds.

Do you think this is an appropriate allocation for our age and income?

A: You can increase your allocation to equities more than most people due to your other sources of income.

Between your combined Social Security income of $42,000 and combined pensions of $64,000, you will have a relatively secure income of $106,000 a year before you start to consider your investments.

Since your investments total just under $500,000, they are not likely to safely add more than $20,000 (at 4 percent) to $25,000 (at 5 percent) to your income.

Although you have a large sum saved, its potential contribution to your other income is relatively small. This means you can take a bit more risk.

You can accumulate and reinvest until you need to do required minimum distributions (RMD). Even then, the starting RMD is only 3.65 percent.

Q: We have two pieces of real estate that we plan to leave to our children.

One will be left to our son (who wants to keep it). The other will be left to our daughter.

We would like to have it sold and the money put into an annuity for her. Our son is prudent with his money. She is not, and he doesn’t want to be responsible for her after we are gone. If we just leave her the proceeds from the sale, it will probably be gone within a couple of years.

Do you have any other suggestions that would give her a monthly income for years other than an annuity?

A: There are many kinds of annuity contracts.

The ones I don’t have much use for are variable annuities that allow you to invest money inside a contract that provides tax-deferred accumulation of investment returns until a later date. As I have demonstrated many times, the expenses of these annuities tend to defeat their purpose.

But there is another kind of annuity contract that may suit your purposes better. It is called a life annuity. To get such a contract, you give up your principal in exchange for an income that is based on the life expectancy of the beneficiary. You can explore how much income this might yield by visiting


Copyright, 2013, Universal Press Syndicate