Retiree Helping Children Still Should Balance Portfolio

At 70, he could still have a good 20 or 25 years ahead of him.

Nonetheless, there are some tax advantages to giving money to your children, the planners pointed out.

"The primary advantage to begin gifting during your lifetime is to reduce the value of your taxable estate," said Jennifer C. Owen, a certified financial planner at West Financial Services in McLean. "By giving money now, you remove it from your future estate."

In 2008, taxpayers are allowed to give up to $12,000 per person tax-free, she said.

Owen said Rogers should help with his granddaughter's college expenses by paying her tuition directly to her college. If he gives it to her so that she can give it to the institution, it will be taxable, she said.

If the grandchild is young enough, Sneed recommends Rogers start a 529 college savings plan, which works much like a 401(k) in which the individual puts money into stocks, bonds and other investments in the hopes that when it is needed, it will have grown. That would remove even more taxable assets from his estate, Sneed said.

As for his investment strategy, the planners said he is obviously lacking diversification.

"When he planned on willing it to his heirs, an all-stock portfolio may not have been a bad idea, but circumstances have changed and his portfolio should be changed to bring it in line with those circumstances," Boucher said.

But he warned that it needs to be done slowly, to take advantage of dollar-cost averaging, which is a technique used to minimize market risk by buying small and buying often.

Owen, however, recommends not making any moves yet. If he were to sell his stocks now, while the market is still dropping, it could "negatively impact the speed and amount" of his recovery.

Wait until the market stabilizes, she said, then allocate the investments this way: 40 percent in equities, 50 percent in fixed income and 10 percent in cash.

Either way, a balanced approach is the way to go for any investor. "It's never a bad idea to maintain a balanced portfolio that can be tweaked under changing circumstances rather than totally revamped," Boucher said.