IT'S NEVER TOO LATE TO INVEST.

Byline: Kenneth Hooker The Boston Globe

Q. I am 65-1/2 years old and because of that I must retire toward the end of this year. I will have a pension of $475 a month, and anticipate $1,000 a month from Social Security. I feel I will need $200 to $300 more per month to meet living expenses.

I have nearly $45,000 in my 401(k) plan, with $24,600 in a fixed income fund, $14,665 in an equity index fund, $3,000 in Fidelity Asset Manager, $1,680 in Asset Manager Growth and $972 in Asset Manager Income. I add $112 a week to the 401(k). I have also accumulated 212 shares of McDonnell Douglas stock through an employee stock purchase plan.

Finally, I have an IRA of $19,000 invested in AARP Growth and Income fund. Until the first of the year, it was in AARP GNMA and US Treasury fund.

When I retire, I must roll over my 401(k) money to avoid taxes. Some of the funds I have been considering are AARP Balanced Stock and Bond fund, Twentieth Century Vista or Ultra, AARP Global fund and Fidelity Growth and Income. How would you suggest I proceed? M.E., Long Beach, Calif.

A. Although it has proved to be a profitable short-term move, I don't understand the switch from AARP GNMA and US Treasury to its Growth and Income fund. Approaching retirement, most people would be inclined to make precisely the opposite move. Yes, it's been profitable, with Growth and Income gaining 7.44 percent year-to-date through April 24, compared to a 0.45 percent loss for the GNMA fund, according to Lipper Analytical Services Inc. But I would reverse the transaction - what you'll soon be needing is a steady income stream, which is what the GNMA fund provides. What you don't need is stock market risk, which is what Growth and Income brings you.

While the funds you are considering for the 401(k) money have their virtues, it seems to me that your need for income is stronger. It will take something in the range of $40,000 to $60,000 to bring you that $200 to $300 a month you'll need for living expenses.

I estimate your 401(k) will total something in the neighborhood of $48,000 by the time you retire. So I suggest that when you retire you roll over an additional $31,000 of the 401(k) money into that fund, which sports a yield of 6.06 percent at the last tally from Lipper. The remaining $17,000 or so in the 401(k) can be used more aggressively, to protect you against inflation.

My suggestion would be AARP's New Balanced Stock and Bond fund, which held 56 percent stocks and the balance in cash and fixed-income holdings as of the last Morningstar Mutual Funds report.

As an employee, you probably have a better idea about the McDonnell Douglas stock than I do. However, the dividends won't help you much - the current payout is only 1.1 percent. Once you're retired you may want to consider a sequence of annual sales of this stock, calculated so as to reduce your tax liabilities on it. If you need additional income, the proceeds could be put into a fixed-income fund, or if you think of it as long-term capital, they could go into either AARP's Balanced fund or its Growth and Income fund.

Q. I am a single 65-year-old retired man who has never done any investing. I receive $51,000 a year in retirement income, own my home and vehicle, and have no outstanding debts. All the recent hype on mutual funds has me itching, which brings me to my question.

AARP offers several funds, and three of them appeal to me - GNMA and US Treasury, Balanced Stock and Bond, and Growth and Income. If I were to select two and invest $500 monthly in each over the long term, which would be better? Are there more desirable choices? Would Fidelity or Vanguard be better? Or should I stay with money market funds? R.P., Bridgewater, Mass.

A. These three funds are probably just what you're looking for - conservatively managed, with a straightforward investment style, and loath to take undue risks.

Both AARP GNMA and US Treasury and AARP Growth and Income have won above-average grades from Morningstar Mutual Funds, and their long-term records tend to be fairly smooth. Over a decade, the GNMA fund has produced average annual returns of 7.56 percent, and Growth and Income's average is 12.87 percent.