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Dear Dr. Don,
I'm a single woman, with no dependents and in my mid-forties. I recently sold a home, with no plans to replace it with another, and need a little help with my future financial plan. I am considering going to a Certified Financial Planner but have some concerns about how they are paid. I have some knowledge about investing but am afraid of making big blunders if I go it alone. I'm also interested in socially responsible investing and would like to know your opinion on this approach to investing. Finally, I have a 401(k) with a former employer and need to decide where to put this money. What do you think about annuities, Roth IRA or other retirement investing plans?

Dear Rita,
Whew! Dr. Don doesn't know if his editor will give him the space to respond to all these questions. Let's start off with the easy one. If you want to choose investments based on how good a corporate citizen the company is, go ahead -- it's your money. You may lose a few percentage points in return, but that's not the point. People invest to reach future goals. One of your goals is a better planet. Who is going to stand in your way?

In choosing a financial planner, you need to know how the planner is compensated for time spent helping you. Fee-based planners will charge you explicitly for their work. The fee may be based on a percentage of assets, or on time spent, but you'll know exactly what you're paying for their services. Planners who don't bill you for their work are being paid a commission on the investments you purchase. I recommend a fee-based approach, because it takes sales pressure out of the picture. A CFP designation is desirable, but isn't the only standard for professionalism in the field of personal finance. If you are interviewing planners who aren't CFPs, ask about their professional designations and how it prepared them to advise you on investments. You also will need competent tax advice, especially concerning the proceeds from the sale of your home.

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Finally, you're wise to take your time in deciding how to invest money held in your previous employer's 401(k) plan. The financial planner you hire will help you with your decision, but Dr. Don wants to leave you with a few things to think about. You have at least four choices. You could do an IRA rollover into a brokerage account, mutual fund(s), an annuity(s), or pay the taxes now and establish a Roth IRA. I prefer mutual funds to insurance-based products (annuities) because you can better control sales charges and expense ratios. I think you would be better off in mutual funds than in a brokerage account where you have to choose individual stocks. Write back and let us know how things worked out.

Related information:
Dr. Don's biography
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Archive of Dr. Don columns

Bankrate.com writers base their answers on our editorial content and advice of financial professionals. We make no claims or representations about the accuracy, timeliness or completeness of such content, advice or the answers provided to you. Our content, advice and answers are intended only to assist you with your financial decisions. However, by its nature such information is broad in scope. Your financial situation is unique, and our content, advice and answers may not be appropriate for your situation. Accordingly, we recommend that you get different opinions and seek the advice of your accountant and other financial advisers before making any final decisions or implementing any financial or investment strategy.

-- Posted: Aug. 11, 1999

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