[bobnjill410]

9-20-2010 I am 59, retired and have a 401k totally invested in a single source. I would like to begin with-drawing a monthly amount next spring. What is the best way to go and continue to have our funds grow in a conservative manner. That we can move into a more conservative source. I would like to begin drawing a specific amount monthly next spring. What is the best way to go and continue to have our funds grow in a conservative manner.

[ebaines]

First, you should consider diversifying your account so that it has a good mix of equities (stock funds) and fixed income components (bond funds). Since it's a tax-deferred account you can make changes in your investment direction at any tinme without tax consequence, so do it sooner rather than later. Your stock piece should include a mix of growth and value, and I also recommend a bit of international exposure as well. Not knowing the specific investment options available to you in your 401(k), it's impossible for me to be more specific, but as a starting point I would suggest that you should be invested about 50% in bonds and 50% in equities. You may also want to consider rolling your 401(k) to an IRA, which will typically give you a wider range of investment choices. There are many excellent choices of low-cost, no load investments through companies such as Fidelity, Vanguard, T Rowe Price, Schwab, etc. Make sure to do a "direct rollover" to avoid any tax implications.

As for how to make withdrawals - a reasonably conservative approach is to plan taking out about 6% of the account per year. This should allow the account to last a good 30 years or more. The 6% should be calculated based on the average value of the account over the previous 2 years - this helps "smooth out" any bumps due to short-term bull and bear markets. When you reach age 70-1/2 there are rules for having to withdraw a minimum amount each year - but obviously you don't need to worry about that for some time.

You should also consider investing a portion of the account into an immediate annuity - this is the traditional annuity type where you get a fixed amount of income per month (or quarter) in exchange for a one-time investment. It eliminates some risk, in that you'll continue to get income as long as you (and/or your spouse) is alive. Think of it as a pension from your retirement account. The down side is that the amount you get each month is typically not adjusted for inflation - that's one reason to invest only a portion in an annuity (perhaps half) and keep the rest invested.