DEAR BRUCE: My wife and I are both on Social Security. I am 71 and she is 66. We own our home and have no bills. Our 401(k) statement came today with a loss of $34,000 leaving a balance of $62,000. At our age could you give us some advice as far as riding it out? -- D.S., via e-mail

DEAR D.S.: The current recession is most difficult for people such as yourself. You worked hard to put money into your retirement account and saw it disappear in a heartbeat. The reality also is that it's very unlikely that you will recover this money actuarially. You may live to be 100 and that's a different story. No one can tell you what is the "right" thing to do under these circumstances. You haven't shared with me any other income you might have other than Social Security. If the 401(k) is the only savings you have, then I would be comfortable with you moving this into a very secure investment within the 401(k) if this is available. If not, you are very likely in the no tax bracket income and as a consequence you can take the money out without tax impact. The problem is then what are you going to do with it. If you're going to keep it in something very secure, you are condemned to a tiny interest return. Not a lot of good choices for folks such as yourself. That in itself is a crime. Given the circumstances, if you have other income, I might be tempted to leave it where it is since the biggest hit is probably over. If it's keeping you awake at nights then shift it over to some type of insured CD, which should yield you in the neighborhood of 2-1/2 percent.

DEAR BRUCE: I recently lost my job as a vice president. We have an adjustable rate, ARM locked in until 2010 at 4.75 percent. We have one car loan that is interest-free. I was able to find employment however the salary is nowhere near what I was making. My question is, we have enough money to pay off the home mortgage, would you recommend doing that or investing the money elsewhere? My wife and me are in our 50s. We are not having trouble paying bills but the state of the economy has us both worried, while trying to put together a plan for retirement. -- Reader, via e-mail

DEAR READER: Under ordinary circumstances, my inclination would be to say hang in there with a 4.75 percent. It is a very favorable percentage rate. The question is you say you have cash to pay off the mortgage, what is it doing for you? If it's in cash, the likelihood is it's earning considerably less than the interest that you're paying on the mortgage. Given that this adjustable will probably kick up a good deal and since you're salary has been reduced, your options are relatively small. I am not comfortable in using cash to pay off a mortgage for someone at your age. Why not take a look and see if you can get a permanent mortgage. Right now 4-3/4 percent to 5 percent is a doable number is you meet the income requirements and equity in the home parameters. You want a mortgage without a prepayment penalty. Given the difficulty with the economy, I would be more comfortable keeping the cash reserve. Unless you can get assurance from the mortgage company that you currently have and they will maintain the 4.75 percent, I would be looking for permanent money at that number. It is available.

DEAR BRUCE: Could you please advise a senior citizen (widow) who's Social Security is quite small due to husband's date of birth? She lives on the $12,000 a year from Social Security and interest from her savings. With the interest rates so low on CDs, what can she do? She promised her late husband she would never put her funds into anything that was not government insured (FDIC). Are there safe places that are insured that she is not aware of? -- Reader, via e-mail

DEAR READER: Your comment about the husband's Social Security and date of birth indicate that he was in that window that the people maintain that they got a short shrift from Social Security when the rates were adjusted. That matter has never been resolved. The fact that she committed to her husband that she would never put her funds into anything that was not government insured, dramatically reduces her options. In essence (for practical reasons), it's reduced to CDs insured by the FDIC. Unhappily, those CDs are paying a scant average of 2-1/2 percent today. If she wishes to continue her pledge to her husband, her options are almost nonexistent.