5 tips to protect your lump sum

Will you outlive your savings? Building a nest egg was tough enough. Managing it is an even bigger challenge. Here are five tips that might help you protect your retirement savings.

•Don't be hasty about rolling over your money. If you want to transfer your money to an IRA, but don't know how to invest it, move it to a money market fund at a discount brokerage firm until you figure out the appropriate mix of investments, advises Sheryl Garrett, founder of the Garrett Planning Network of hourly, fee-only advisers.

And make sure you do a direct rollover, also called a trustee-to-trustee transfer, which moves money electronically to your financial provider of choice. The alternative is to get a check for your lump sum. The problem is, you'd have to get this money into an IRA within 60 days; otherwise, you could face taxes on the distribution and a 10% tax penalty for early withdrawal.

•Find a competent financial adviser. Check out the websites of the Financial Planning Association and the Garrett Planning Network.

Financial planners in the Garrett Planning Network usually offer fee-only, pay-by-the hour advice, and might be a good fit if you are a do-it-yourself investor and want a one-time check-up or regular financial reviews. Financial Planning Association offers planners for investors of all levels of financial sophistication.

Ask the adviser for references and a copy of his or her ADV form — get both parts I and II — to find out about fees and qualifications, as well as disciplinary or legal issues against him or her.

Also check a broker's background, free, at the website of the Financial Industry Regulatory Authority, the self-regulatory body for brokers. Or pay $49 for a report from Investor's Watchdog, a company started by Pat Huddleston, a former enforcement branch chief in Atlanta for the Securities and Exchange Commission.

Huddleston says his firm's report contains information not necessarily in FINRA's database, including investment cases that were settled and expunged from the broker's record. The report also assigns a "safety rating" to the broker of between 40 and 80 — with 80 being best — based partly on the broker's education, employment and disciplinary history.

•Diversify your portfolio. Retirement is not the time to take unnecessary investment risks that could deplete your nest egg.

Make sure you're adequately diversified among different asset classes as well as among large-, small- and mid-cap funds. And stick to mutual funds rather than individual stocks if you're not financially savvy, say financial planners.

To figure out the appropriate mix of stocks and bonds in your portfolio, some planners rely on this rule of thumb: Subtract your age from 100 to get the percentage that should go into stocks or stock mutual funds. Under this formula, a 62-year-old would have 38% of his or her holdings in stocks and the rest in fixed income or cash.

You should tweak these percentages, though, to account for your risk tolerance. Also realize this formula might be too conservative, considering that people are living longer and health care expenses are skyrocketing.

•Consider long-term care insurance. The exorbitant cost of nursing home care can deplete your retirement portfolio without adequate planning.

Middle-income consumers are most at risk of being squeezed by these costs, according to Jack VanDerhei., a fellow at the Employee Benefit Research Institute and a business professor at Temple University. That's because consumers with limited income and assets probably will qualify for Medicaid, which covers most nursing home costs, while the wealthiest consumers can probably afford these costs on their own. Middle-income consumers likely won't qualify for Medicaid and won't have the resources to pay for nursing home care, says VanDerhei.

Before buying a long-term care policy, understand what they cover and what they don't. Insurance agents recommend that you buy these policies well before you retire, because the cost increases as you get older, but realize that if you follow this advice, you'll be paying for benefits you might not end up needing for years longer.

•Speak up. If you feel your money is being mismanaged, complain to the financial adviser's supervisor.

Some brokers mishandle investors' accounts, and investors don't file a formal complaint, hoping it'll never happen again, says Huddleston. The problem is, if the investor ever files an arbitration claim against the broker, the adviser and his firm could argue the investor knew about the incident — and condoned it — because he or she didn't speak up, Huddleston points out.

If you believe outright fraud has occurred, file a complaint with state securities and insurance regulators and the Federal Trade Commission.