October 19, 1997

Q. I am 55 and would like to retire in 8 to 10 years. I have a retirement plan through my employer, I have $10,000 in CD IRAs, and I just moved another $5,000 that was in a CD IRA into Fidelity Growth and Income fund. I would like to roll over the $10,000 that remains in IRA CDs into the same fund when they mature. I also have $50,000 in a taxable CD, which I would also like to invest in mutual funds when it matures in June. Finally, I have $18,000 in a savings account for emergencies, and I am thinking of putting this into a money market account. My goal is to buy a vacation home and to supplement my retirement income with IRA distributions. Am I on the right track?

J.L., Woburn

A. I think you're too late to make a wholesale switch to stock mutual funds, since the 8 to 10 years remaining until retirement make you an intermediate-term investor, and the current bull market looks dangerous.

There's nothing wrong with moving $5,000 of your IRA money into Fidelity Growth and Income, and there's probably nothing wrong with moving the other $10,000 to the same fund as the IRA CDs mature. But when it comes to that $50,000 taxable CD that will mature next June, I would tread a little lighter, looking to balanced or fixed-income funds rather than all-stock funds such as Growth and Income. Fidelity Puritan might be a solid choice here. Also worth considering is Fidelity Asset Manager, which has produced solid, if unspectacular, results in recent years. Asset Manager is slightly more conservative than Puritan, which can be seen through its smaller stock portfolio -- 56 percent to 62 percent as of the last Morningstar Mutual Funds report. On the other hand, Puritan has a better record of weathering sour market periods.

Here's what I suggest. Go ahead with the program of moving the IRA funds into Fidelity Growth and Income. Then, when the taxable CD matures next June, move $28,000 of the taxable CD money into Fidelity Puritan (or move $31,500 into Fidelity Asset Manager), leaving the balance in CDs. What I'm getting at here is a portfolio that's very nearly divided 50/50 between stocks and fixed-income holdings.

Finally, since you're already dealing with Fidelity, why not move that $18,000 in emergency savings to Fidelity Cash Reserves, which had a 5.40 percent seven-day yield entering this week -- compared with the 2.64 national average for savings bank money market accounts. You can ask for check-writing privileges, and the risk provided by money market mutual funds is minimal.