David McPherson Answers Your Money Questions

Steven, from Wellsville, N.Y., asked: "I am 60 years old and am getting retirement pension payments from my Kmart Corporation administered by State Street Financial. How can I tell if my pension is in jeopardy? Are pensions protected by the government?"

McPherson answered: Steven, yes, pension plans like the one it sounds as if you have are guaranteed by the federal government in the form of the Pension Benefit Guaranty Corporation. There is a limit on the pension amount guaranteed. The current limit is $51,750 a year. For most retirees receiving smaller amounts, that's plenty. But some retirees from high-wage jobs could lose some of their benefits if their pension plan runs into trouble.

I'd suggest a visit to the Pension Benefit Guaranty Corporation's Web site, www.pbgc.gov, to learn more about the guarantee program.

For information about the health of your pension plan, you might want to review the public financial statements of Kmart's current owner, Sears Holding Corp. These filings are available through the Securities and Exchange Commission Web site, www.sec.gov., and other sources.

Robin Connell, from Stewartsville, Mo., asked: "My husband, age 71, has retired but still works part time and earns about $16,000 per year. I teach school -- earn $34,500 and am five years from retirement. About one year ago we moved almost all of our 401(k) money ($200,000) to money markets and Stable Value funds, thankfully. However, I know at some point we need to get back into the market just to keep up with inflation. What kind of investments should we be considering for our investments which have now been put into IRAs? And, what is the best way to start moving back into the market?

McPherson answered: Hi Robin, I think you're correct to think about reinvesting some of your money. It's tough for me to say exactly how much should be reinvested without knowing more about your situation. But in general I'd suggest you consider low-cost index mutual funds or exchange traded funds, both of the stock and shorter term bond variety. You want to create a well diversified portfolio that includes both domestic and international investments. The key question to consider is what percentages should be dedicated to stocks, bonds and cash. That's something only you can consider.

As for the best way to reinvest, it sounds like in your case a series of small steps is the way to go. Rather than invest all $200,000 at once, break it down into a series a purchases so that if the market continues to fall, you're not too exposed. But I think now is a good time to start given the low prices we see now. You don't want to miss out on the current buying opportunity, but you also don't want to over commit yourself given the current environment. Good luck.

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