JUGGLING RETIREMENT ASSETS BABY BOOMERS NEED SAFER BETS FOR THE GOLDEN YEARS.

Byline: Evan Pondel Staff Writer

Grant Murphy, 42, has three retirement goals: to live in Paris, soak in ample theater on Broadway, and skim a few hundred thousand dollars a year from the fixed income investments in his portfolio.

The security software executive calculates that if he can sock away enough money over the next 13 years, all of his dreams should come true.

"I know 55 seems a bit young to retire, but that's the goal here," said Murphy, whose portfolio manager will be busy buying stocks over the next few years to help him reach his goal.

Still in his early 40s, Murphy is among the youngest of the baby boomers the generation that popularized stock market investing. But as the oldest of that generation now turns 60, they'll need to begin shifting their retirement assets into more secure, fixed-income investments a market that has played second-fiddle to equities over the past few decades but is now placed to get a boost, financial analysts say.

Those facing retirement in the near future will be looking at certificates of deposit, preferred stock, money market accounts, municipal bonds and annuities the safest bets for the golden years.

Fixed-income investments are safer because they pay a fixed rate of return and do not have the same sensitivity as a common stock. Fixed-income investments are also tied to interest rates, and with shorter term rates on the rise, shorter term fixed-income investments such as CDs and money market accounts become more appealing.

But before an investor can decide on a fixed income investment, John Yoshitake, branch manager of TD Waterhouse in Long Beach, said investors need to determine how much money they will need in retirement.

"You essentially need to work backward. If you are going to retire at 65, think about how much money you will need at 55 and 60 to prepare for the future," said Yoshitake, who recommends higher exposure to stocks the farther an investor is from retirement. "You also have to assume that if you are going to spend money on travel and restaurants when you retire, you might need a little more than you think."

Another consideration is the investor's tax bracket. For example, people in higher tax brackets may consider a certain type of fixed income investment simply because it is tax deferred, such as a municipal bond. Yoshitake said the better investors tailor their fixed-income investments to fit their needs the more disposable income they will have come retirement.

Of the more appealing fixed income investments, Certificates of Deposit and money market accounts are finding favor among financial analysts.

"Rising interest rates are resulting in higher yields on money market accounts and CDs. And investors don't have to risk losing any principal," said Greg McBride, senior financial analyst with North Palm Beach, Fla.- based Bankrate.com.

Countrywide Bank, NetBank and UFBDirect.com were all offering money market accounts with introduction rates between 3.9 percent and 4.4 percent as of March 9. Minimum balances on these accounts were $1,000, $100 and $1, respectively. At the same time, one-year CD rates from ING Direct, MetLife Bank and State Farm Bank were all hovering around 4.4 percent. Minimum deposits on these accounts were $1, $1,000 and $500, respectively.

But baby boomers and retirees investing in CDs and money markets will also want to make sure they are outpacing inflation. McBride said buying power gets cut in half every 23 years and since people are living longer, "you don't want all of your eggs in fixed-income investments."

"Retirees at 65 could have a good 30 years in retirement, and they are not simply going to shift all of their money to fixed," said McBride, noting that up to half of their investments would ideally be in stock or other aggressive securities.

Some investors also prefer to "ladder," a technique used to reduce the risk when investing in CDs and other fixed-income investments. The strategy smooths out the ups and downs of interest rates by investing in CDs with different maturities.

The problem with CDs is that investors are locked into the investment until the maturity date. Bump-rate CDs counteract this by allowing the investor to "bump" a CD to a higher rate when interest rates rise. But the bump is usually a one-time option.

Municipal bonds are another popular fixed income investment, especially in California. David Landes, chief executive officer of BondsOnline Group in Seattle, Wash., said even though most bond investors are waiting for long-term rates to rise, California municipal bonds are tax-free and offer a decent return. Several California bonds with maturity dates 20 years from now offer yields between 4.3 percent and 4.6 percent.

"People like municipals because they are cheap and the spreads are pretty good," Landes said. "But in general there is nothing in the bond market at the moment that stands out as a screaming buy."

But screaming buys aren't always what they seem. John and Carmen Miglicaccio were talked into buying a "hot" annuity several years ago. What they didn't realize is that they both would be nearing 115 years old before the annuity reached its maturity date.

"I couldn't believe someone would sell me something that matured when my husband and I were well over 100. They never told us," said Carmen Miglicaccio, 75, who now resides in Palm Desert. "My husband and I were taken advantage of, and that's just not right when you consider elderly people are on a fixed income."

Gail Roque, a senior financial adviser with Ameriprise in Pasadena, advises her baby boomers to read the fine print before committing to an annuity.

"It cannot be brushed aside," she said. "Long-term investments aren't always disclosed. Things like fixed income investments needs to be managed just like anything else."

evan.pondel(at)dailynews.com

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