Dear Dr. Don,
I am looking forward to retirement very soon and am eligible for Social Security. I am also eligible for a pension, which I will take in a lump sum.

I have rolled over my 401(k) into an IRA and invested the money in oil and utility stocks that are paying a dividend yield of 5 percent to 6 percent.

I am planning to invest part of my pension in dividend-paying pharmaceutical companies that pay dividend yields between 5 percent and 6 percent. I also plan to invest in bonds that pay 4 percent to 6 percent interest. What kind of bonds do you suggest I invest in?

I do not have a broker because I will have to pay them 2 percent. I would be grateful for your advice.
— George Goitalone

Dear George,
Not all brokers charge an asset-under-management fee. Many just charge commissions based on trading activity. An online discount broker could hold your securities and offer low trading costs. Not all discount brokers have good bond desks, so you’ll want to find one that has good debt offerings along with low stock trading costs. That can be difficult to determine. You may want to consider bond mutual funds instead.

That said, I’m not a big fan of investing so heavily in specific sectors of the market. I can understand why you’re looking at stock sectors that pay high dividend yields, especially in the low-yield environment of money market and bond investments. However, concentrating your investments in energy and pharmaceutical stocks, with a dollop of bonds, isn’t the recipe for success in retirement investing.

You’ve made it clear that you’re an income-oriented investor. Nothing wrong with that, it’s a common investment attribute of retiring seniors. One caution is that you don’t want to chase yield by taking on a lot of investment risk, for example with high-yield securities.

The answer as to what kind of bonds you should be buying depends on your attitude toward risk and your tax bracket, as well as the outlook for interest rates. You want to avoid investing in long-term debt if you feel interest rates are headed higher because rising interest rates mean declining bond prices.

I’d suggest you meet with a fee-only adviser who charges by the hour and have him or her walk you through your retirement investment strategy and how you might be able to improve on it. The Bankrate feature “Financial planners: Not just for millionaires anymore” can help you decide on a planner.

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