Wondering where to put that extra cash? Before you buy a flat screen, try these suggestions and improve your long-term financial well-being.

Question: I’m thinking of using my stimulus check to make my home more energy efficient. Do you think this is wise choice, and do you have suggestions for other ways to use this extra money? -D.D.

Answer: I’m glad you asked because in a rare display of bureaucratic efficiency, it appears the federal government is actually getting those economic stimulus payments out ahead of schedule.

Which means two things:

First, you may find yourself on the receiving end of a check or direct deposit from the IRS of anywhere from $300 to $1,200 (plus a possible $300 per qualifying child) sooner than you think, if indeed you haven’t gotten the payment already. (The IRS Web site has a calculator that estimates your payment.)

Second, it means that people in the more than 130 million American households eligible for these payments will soon be asking themselves much the same question you pose: What should I do with this little windfall?

Well, the honchos down Washington - not mention the nation’s retailers - are hoping you’ll quickly spend this manna from DC and in so doing, rejuvenate the flagging economy. And if that’s what you’ve decided to do with this extra cash - or, given the rising price of food and other living expenses, that’s what you have to do with it - fine.

But if you’re in a position to do otherwise, I don’t think it would be unpatriotic to use this money to improve your financial prospects.

Certainly your idea of using the stimulus rebate to boost the energy efficiency of your home in the face of increasingly burdensome energy costs can be one way to both spend and invest your money, although I caution you that there are also plenty of people out there touting all sorts of energy-saving home improvements and products that may take decades to generate a decent return.

Keep in mind that the extent to which those savings enhance your financial security depends on what you do with the extra cash. If lower utility bills allow you to increase your contributions to a 401(k), that’s great. If the savings end up going to more lattes, then I’d say the long-term benefit is more tenuous.

So if you’re looking to really turn this bonus of sorts to your financial advantage, I’d be more inclined to consider moves where the payoff is more direct and easily quantified. Here are some suggestions.

Pay down debt. It’s no secret that a rising tide of borrowing helped fuel the last economic boom - and contributed to its demise. So if you went a little crazy during the good years and piled on too much credit-card, home-equity or other debt, this rebate check could be a good way to lighten the load.

To get the biggest bang for your loan-repayment buck, start with debt that carries the highest rate (most likely credit cards, which charge an average rate of 12%) and then move on to lower-rate loans.

Of course, this move will pay off even more if you keep your debt under control once you’ve pared it down. You can then apply the money that used to go toward repaying loans to one of options below.

Build an emergency reserve. With the economy flagging and it looking more and more like we’re sliding into recession, it’s even more important than usual to have a cushion of ready cash equal to three months’ of living expenses that can help tide you over a layoff or other financial setback. If you don’t have such a reserve, your stimulus payment can be your first step to building one.

Remember, this is money you have to depend on in a pinch, so you want to keep it in a secure place where it won’t get hammered if the financial markets head south. For the most part, that means keeping it in a short-term bank CD or a money-market fund run by a well-known investment firm. You can check out CD rates and compare yields on money-market funds on sites like Bankrate.com.

Invest it. If you’ve got your debt under control and have a decent emergency fund, then why not use this government grant of sorts to either start an investing program or add to one you already have? You don’t have to do anything fancy. Indeed, given the recent experience of how supposedly sophisticated investors got tripped up by securities backed by subprime debt, I think simpler is better.

There are no guarantees, of course, but if you stick with a mix of low-cost mutual funds with solid track records like the ones you’ll find on our Money 70 list of recommended funds, you should do just fine.

Invest it in an IRA. As long as you’re investing your check, why not consider investing it in an IRA and improve your retirement prospects at the same time? And assuming you qualify you can also get a nice tax deduction (if you do a traditional IRA) or enjoy tax-free withdrawals down the road (if you opt for a Roth IRA).

And you may be able to cash in on another tax bennie. If your income falls below certain thresholds, the Saver’s Credit program can provide a tax credit of up to 50% of your contribution to an IRA or other retirement accounts up to a maximum credit of $1,000 for singles or $2,000 for married couples. And yes, this credit is in addition to the regular tax benefits IRAs and other retirement accounts offer.

Finally, at the risk of sounding preachy, I’ll throw out one more idea. If your finances are pretty solid, you might want to consider donating a portion of this money that you weren’t expecting (at least not until recently) to a charity or a cause that you feel deserves your support. That may not improve your financial well being like the others I’ve suggested, but you may collect dividends in other ways.

Got a question? Ask the expert.

No one can predict what the future holds, so you might be better off hedging your retirement by tax diversifying.

Question: I’m 33 and have invested in a Roth IRA for 13 years. This is my only retirement account as I don’t have access to a 401(k). With all the talk of a flat tax and other tax reforms, it seems possible that by the time I retire the income tax could be less of a hit than it is currently. So do you think it would make sense for me to split my IRA contributions between traditional and Roth IRAs? —Michael, Portland, Oregon

Answer: Let me start by saying that I have no special insights into what type of income tax regime a future administration might propose and that Congress might enact.

I suspect that given how entrenched the current tax system is and how many different interest groups have a stake in keeping the status quo that the chances for a radical overhaul are slim. And given the looming shortfalls in programs like Social Security and Medicare, I would also expect that if we do stick with the current system that tax rates would more likely rise than fall in the future.

But I freely admit that I could be underestimating the will for changing a system that is far too complicated, subject to all sorts of manipulation and, perhaps worst of all, wastes an astounding amount of resources when you consider all the time and energy spent by people either trying to comply or evade its provisions.

So for all I know, maybe we could eventually end up with a flat tax with a lower rate than many people pay today but with fewer deductions. Or perhaps we’ll get the “fair tax” system that taxes consumption. Or maybe Congress will pass a “Just send us your paycheck, we’ll take what we need and send you back the rest” tax. (Okay, I made that last one up.)

But even if some crystal ball could tell you what sort of system we’ll have in the future, I doubt that it would also be able to foretell all the details that will eventually determine the rate you’ll pay - what sorts of exemptions and exclusions might apply or what length of transition period we might have.

So what does all this mean for your situation?

Well, as I’ve noted before, although there are some additional wrinkles involved in deciding between a regular IRA and a Roth (or a regular 401(k) and a Roth, for that matter), you’re generally better off doing a Roth if you expect to be in the same or higher tax bracket when you withdraw your money, while the regular IRA is generally the better deal if you expect to be in a lower tax bracket at withdrawal compared to when you put your money in.

But given how difficult it is to forecast future tax rates, I wouldn’t want to put all my money behind the assumption of higher or lower rates. Which is why I advocate “tax diversification.” The idea is that, come retirement time, you want some money in tax-deferred accounts that will be taxed at ordinary income rates. Some in Roth accounts that will be tax-free. And while you’re at it, I think it’s a good idea to have some investments in taxable accounts that are subject to the long-term capital gains tax rate.

I’m not saying this strategy is foolproof. I don’t for a minute underestimate Congress’s inventiveness when it comes to ways of squeezing more revenue out of us. But you can’t cover every contingency, and I believe the approach above is a reasonable one given your options. All of which is to say that I think your instinct to hedge your bets by having money in both a Roth and a traditional IRA is a good one.

There are any number of ways you might pull off this strategy, and I’ve laid out one method in a previous column. In the case of a person like you who is young and presumably has decent prospects for a rising income, I’d probably be more inclined to stick to the Roth for now on the theory that you still have plenty of time to build tax-deferred accounts. You can always fund a regular IRA later if you’re in a higher tax bracket. Or you may have an opportunity to fund a tax-deferred 401(k) later on if you switch jobs.

But if you’re anxious about having your entire retirement stash in a Roth and would like to start this process of diversifying your tax exposure sooner, I think that’s a perfectly reasonable decision as well. Essentially, it’s a judgment call.

Ultimately, you have no control as an individual over what tax system or tax rates you’ll face in the future. But you do have control over how much you save.

So whatever you do, make sure that you continue to fund some sort of IRA to the max every year. Otherwise, your nest egg may not be large enough to support you in retirement whatever your tax rate turns out be.

A variable annuity inside of an IRA is usually not a good move. But there are a few ways to get out.

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Question: On the recommendation of my financial adviser, I recently moved my 401(k) into a variable annuity within an IRA rollover account. I now know that this was not a great move. But I’m not sure how to get the money out of the annuity, nor do I know what doing so will cost me. What should I do? —Gregory P.

Answer: When it comes to financial products that are sold via dubious sales pitches, annuities rank right up there at the top of the list.

You’ve got one group of salespeople out there pushing all manner of questionable annuities to seniors at free lunch seminars, a tactic I’ve warned about for years and that the people at Dateline NBC recently covered in a hidden-camera investigation.

And then there are advisers trying to convince people like you that instead of simply moving your 401(k) funds into an IRA account funded with mutual funds or ETFs, you’re better off putting your 401(k) money into an IRA rollover and investing the funds in a variable annuity.

That’s not to say that an annuity can’t be a reasonable investment for IRA rollover money. For example, I’ve long suggested that a plain old immediate annuity – a.k.a an income or payout annuity - can be a reasonable choice when you’re retired or on the verge of retirement and you want to assure that you’ll have income for the rest of your life. At that point, depending on your situation, it can make sense to invest a portion of your 401(k) or IRA stash in this type of annuity that’s still held inside an IRA account.

But many advisers these days want to get your IRA rollover money into an annuity well before you need regular income. On the face of it, though, that makes little sense. True, investment gains aren’t taxed as long as they remain inside the annuity. But money within an IRA is already sheltered from taxes, so you don’t need the tax-deferral benefit of an annuity when you’re dealing with IRA funds.

So instead advisers typically make the case for holding a variable annuity within an IRA by touting a variety of riders and special features, including the GMIB (guaranteed minimum income benefit) or the GMWB (guaranteed minimum withdrawal benefit). But as I’ve noted before, annuities that include the GMIB or GMWB feature have several drawbacks, including poorly disclosed annual fees that often top 2% a year. That sort of expense drag can limit the growth of your nest egg during your career and impair its ability to generate retirement income that will stand up to inflation over the long term.

Which brings us back to your situation: How do you get your IRA money out of the annuity?

Since the annuity is in an IRA account, you should be able to move your money without triggering any taxes by doing a trustee-to-trustee transfer to a new IRA rollover account. You could then invest in something other than an annuity.

But there’s a hitch. Nearly all annuities have surrender charges. These charges usually start at 7% to 10% a year and gradually decline until they disappear in eight to 10 years, although they can be higher and last longer. (In the case of a variable annuity, these charges are spelled out in the prospectus. In other annuities, you can check the contract.)

You may be able to sidestep these charges by invoking the annuity’s “free look” period - that is, a specific time during which you can return the annuity, typically for its contract value or your original contribution. Unfortunately, that period is usually only 10 days, although it can be longer in some states. (To see how long you have in your state, ask your state insurance department.)

If the free-look has expired, there may be another way for you to transfer at least some of your money into another IRA account without incurring onerous surrender fees. Most annuities allow you to withdrawal a certain amount each year (usually 10% of your account value) without paying surrender charges. The specifics are spelled out in the prospectus or contract.

So by taking advantage of this “surrender free” option, you can at least start moving some of your money out of the annuity into another IRA account and then transfer the remainder when the surrender charges have disappeared or at least dropped to a less burdensome level.

Of course, you could also go back to the adviser who sold you the annuity, explain why you think it was inappropriate and simply ask him or her to reverse the transaction without penalty. I doubt that this will work, but it can’t hurt to try.

If you really feel that you were duped or misled in some way, then I definitely think you should complain to the regulators who oversee annuities and annuity sales. That would be the Securities and Exchange Commission, FINRA, your state securities regulator and your state insurance department.

Even if doing this doesn’t help you, your grievance along with the complaints of others might lead to tougher oversight of annuity sales so that fewer people will find themselves in your position in the future.

Got a question? Ask the expert.

Don’t lose faith in your planner just because he keeps you invested in a down market. Ask yourself these questions first.

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Question: I saw many signs in 2007 that indicated that this would be a tough year in the market. But when I mentioned my concerns to my adviser, he resisted my suggestion to move into more conservative investments. His recommendation has cost me a lot of money, so I’m wondering: Should I stick with an adviser who only seems to have a pat answer of buy and hold? Shouldn’t he be managing my investments and giving me advice based on market conditions? –Rod G., Lexington, Ohio

Answer: First, let me say that it’s not at all clear to me that your adviser has done anything wrong. Frankly, I’m more suspicious when advisers are eager to dump existing investments and buy into new ones. After all, making more buy and sell recommendations is usually in the adviser’s financial interest, since more moves can generate more commissions, or at least make it appear that the adviser is on top of the situation.

So the fact that your adviser didn’t play yes-man to your urge to move into more conservative investments doesn’t automatically suggest to me that he’s incompetent or lazy. Quite the opposite. As long as you were going into 2008 with a reasonably diversified portfolio that made sense given your particular situation, then it seems reasonable to me that he would want to caution you against making any big moves.

That’s not to say that an adviser shouldn’t be ready to re-evaluate a strategy in light of market conditions, and perhaps even make changes. But I think a big part of an adviser’s job is also preventing clients from acting on whim or emotion.

Oh, but I forgot. You saw “many signs” that 2008 was going to be a bad year. Please. The world is full of people who, with the benefit of 20/20 hindsight, knew that the market was headed for a crash in 1987 or that dot-com stocks would melt down in 2000 or that the real estate bubble would burst in 2007. Of course, we rarely hear about the other calls these prescient investors made that turned out to be false alarms.

You say you want “advice based on market conditions.” But it seems to me you really want your adviser to predict the future. That’s unrealistic. No one can do that consistently. And if your adviser did offer a warning of an impending downturn, moved you into more conservative investments and that prediction turned out to be wrong, I suspect that you would be howling about the money you lost from being out of the market.

All of which is to say that I think you need to re-think what to expect from an adviser and how to evaluate your adviser’s performance. Here are three questions you can ask yourself to help you do that:

Have you and the adviser talked about why you’re investing?

I got a kick out of a cartoon that ran in The Wall Street Journal last week showing a broker asking his client, “Are you investing for growth, wealth preservation, income or excitement?”

Funny, yes, but it raises an important point. You can’t invest in a vacuum, at least not sensibly. To choose appropriate investments and assemble a reasonable portfolio, you’ve got to have a goal or objective in mind. (And, no, big gains with low risk is not a bona fide goal.) If your retirement is 20 years away, you’ll take a much different approach than you would if you’re going to be calling it a career in a couple of years.

Your adviser should be talking to you about your goals as well as how much risk you’re willing to take in order to reach them and how you might react to market setbacks along the way. If you haven’t had this sort of discussion with your adviser - and if you don’t touch base periodically to re-assess your situation - then I don’t see how an adviser can make sensible recommendations.

Has your adviser set a coherent strategy?

Once your adviser has a good sense of your goals and risk tolerance, he or she can set a reasonable strategy. The foundation for that strategy should be a diversified asset mix that includes a variety of different stocks (large, small, growth, value, domestic and foreign) or stock funds and bonds or bond funds.

The idea is that the mix of assets should be designed to give you a good shot at the returns you’ll need to reach your goals with a level of volatility that’s acceptable to you. While the adviser can’t guarantee performance, he or she should be able to give you a reasonable forecast of how that portfolio might perform over the long run and at the very least tell you how that mix has done in good and bad markets in the past.

I’d also want the adviser to go beyond pure investment advice and help you look into such issues as whether you’re saving enough, whether you’re taking full advantage of tax-deferred accounts like 401(k)s and IRAs and, if you’re retired or nearing retirement, the odds that your nest egg will be able to support you throughout your golden years.

Does your adviser provide regular updates on how you’re doing?

No strategy is going to go exactly according to plan. So your adviser should be providing periodic reports - quarterly seems reasonable to me - that show you how you’re doing versus an appropriate benchmark. If your portfolio’s performance is out of line - either above or below its benchmark - then your adviser should explain why this is the case and you should both discuss whether any changes or tweaks are needed.

A good adviser should also know, however, that market turmoil will naturally upset many investors and lead them to wonder whether they’re still on the right course. So aside from scheduled updates, an adviser should make a special effort to keep in touch during especially chaotic periods.

It’s not enough at times like this for an adviser to say “hang in there and all will be well.” An adviser should be ready to go over the strategy again, make sure it’s still appropriate for your situation and, most important, explain to you why the strategy still applies even if it’s losing money at the moment.

If something about your situation has changed or if it turns out you drastically overestimated the level of volatility you can stomach, then it could make sense to fine tune and perhaps re-jigger your portfolio. Remember, though, if you’re constantly making changes, then you probably don’t have a real strategy anyway. You’re winging it.

If, after asking yourself these questions, you decide your adviser comes up short, then fine, go look for a new one. But if you’re going to jettison him because he can’t predict the future, good luck in your search for a replacement, because I don’t think you’ll find anyone who’ll measure up.

Got a question? Ask the expert.

You don’t have to be Warren Buffett to secure a decent nest egg. Saving early and often is more important than picking the right investments.

Question: I will be graduating from college in May and starting my first full-time job. I want to start saving correctly so I can prepare for my future. What is the best way to do this? —Matt, Lansing, Michigan

Answer: Before I give you an answer, let me just say that I love your question. Why? Well, most people looking for advice about saving for retirement or achieving financial security immediately begin asking about investing. How can I find the best stocks? Which mutual funds should I buy? Foreign stocks or domestic? Taxable bonds or munis? Real estate or gold? The presumption is that the road to wealth and security starts with picking the best investments.

You, on the other hand, are seeking advice about the true way to improve your odds of achieving financial security: adopting a disciplined savings strategy. I don’t want to suggest that investing isn’t important. Clearly, you want to earn a decent return and see your money grow. But what you really need to rev up the engine of wealth generation is regular saving. If you don’t have a decent sum to invest, then all the investing savvy in the world, to paraphrase Bogey in Casablanca, won’t amount to a hill of beans.

Indeed, researchers at Putnam Investments did a neat study a couple of years ago that illustrated this simple truth. They created a hypothetical “Average Joe” who not only contributed very little to his 401(k) but also had the misfortune of investing too conservatively and being a lousy fund picker to boot. They then examined the effect that a better asset mix, wiser fund choices and a higher contribution rate would have on his 401(k) balance. Each move increased his account’s value. But contrary to what most people would expect, the biggest boost came from plowing more dough into his 401(k).

Unfortunately, many people don’t seem to grasp the concept that it’s all got to start with saving. So instead of living on less than they earn and sock away money on a regular basis, they live large, run up their credit card debt, borrow against their home equity - and then obsess about getting a high return on their paltry savings.

Which brings me back to you. You seem to get it. Your question suggests that you understand that to assure your financial future you’ve got to get into the habit of regular saving today.

So how do you do that?

The single best way is to sign up for your 401(k) or similar plan at work. The beauty of workplace retirement savings plans is that they make saving automatic, which allows you to set the money aside before you get a chance to spend it. Whether your company offers a regular 401(k) or a Roth version, sign up and then try to contribute at least enough to take full advantage of any employer match.

One caveat, though. More and more 401(k) plans these days automatically put you into the plan. That’s good, especially for young people like you who are more likely to skip enrolling since retirement seems like a far-off mirage. But the default contribution rate may be something like a measly 3% to 6%. You’ll probably want to do more. Consult an online calculator if you’re not sure how much.

If you don’t have access to a 401(k) or similar plan - or you want to save more to increase your odds of achieving financial security - you can sign up for an automatic investing plan at most mutual fund firms. You agree to have a certain amount - say, $50, $100, $500, whatever you can afford - transferred from your checking account into your fund account each month. You can do this with a fund that’s part of a traditional IRA or Roth IRA account (assuming you qualify, or you can invest in a fund in a plain old taxable account.

Now, if you’re one of those types who is motivated enough to sign up for your 401(k) or open up an automatic investing plan simply because you know it’s the right thing to do, good for you. But some people need more incentive. Some of us may even have to resort to fooling ourselves into saving. If you’re one of those people, you may want to check out some additional savings techniques I outlined in a recent column. Some of these techniques are a bit, shall we say, unconventional, like creating a contract to save a certain amount each month and agreeing to pay a penalty of $100, $500 or whatever if you don’t reach your target. But sometimes you gotta do what you gotta do to sock those bucks away.

Again, I don’t want to suggest that you should ignore investing. But all you really need to do to succeed on that front is settle on a reasonable asset mix, invest in some decent low-cost funds like those in our Money 70 and then make sure you don’t sabotage yourself by buying into the fads and gimmicky products that Wall Street specializes in churning out.

So start saving early and often. If you do that, financial security will follow.

It’s tough to watch your funds losing value in a tough market, but cashing out an IRA before you’ve reached retirement age is going to hurt you even more.

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Question: I’m 57 and retired and the value of my IRA rollover keeps going down. Should I just take my money out now and pay any charges, or should I just let it sit and lose more money as stocks decline? –Lloyd, Niles, Michigan

Answer: How about doing neither?

You present this situation as if you have only two choices. That’s not the case, though, which is good for you since I don’t think either of the courses of action you’re considering are very good.

Let’s deal with the first option, just cashing out your IRA rollover. That would be about the absolute worst thing you could do. Why? Well, first you would owe taxes on whatever portion of your account’s value consists of pre-tax contributions and investment gains (which, if you’re like most people, means all or nearly all of your account balance). What’s more, since you’re under age 59 1/2, you would also owe a 10% penalty for early withdrawal of your IRA funds.

Besides, even if you pull the money from your IRA, you still have to address the question of how to re-invest that money. In short, you would be in the same position you’re in now, except that you would have given up a big chunk of your account to the IRS and you would no longer enjoy tax-deferred compounding on any gains your IRA might generate in the future.

Now let’s examine your second option, just letting your money sit where it is. That’s definitely a better choice than cashing out, since you’re retaining the tax advantages of an IRA. And, on the surface at least, this option could be a sensible move. After all, investment advisers often tell their clients that “staying the course” is the best approach in uncertain and volatile times like these.

But advice like “stay the course” makes sense only if you’ve gone into the downturn with a bona fide investment strategy that you set in advance. If you have created a diversified mix of stocks and bonds that’s appropriate given your age, goals, risk tolerance and time horizon - and you believe your strategy still makes sense - then by all means hang in there. You don’t want to abandon a sensible long-term strategy just because of short-term turmoil.

But the fact is that many investors haven’t gone into this market downturn with a coherent strategy. Many people don’t have a well-thought-out portfolio. They have a haphazard collection of investments that they chose because a particular stock was mentioned by some pundit on TV or because a fund popped up on list of a top performers. In short, they haven’t employed the concept of asset allocation to create a portfolio with different investments that work together and hedge risk. A hodgepodge of holdings can generate decent returns when a rising market is lifting all boats. But it can get swamped by losses and leave you floundering when the investing seas get turbulent.

So what do I recommend you do?

Well, if your IRA funds are actually part of a well-balanced portfolio that you put together before this downturn began and you think that your mix still makes sense, then I don’t see any reason to begin making radical moves. You may continue to take some losses, but it’s more important that you’re solidly positioned for the long-term. I think you’re better off sticking with your plan than trying to figure out where to move your money every time market conditions change. That’s a futile guessing game.

But if you don’t have an actual investing strategy - and judging by your question I suspect you don’t - then the first thing you need to do is create one. Begin by thinking about your goals. Since this is an IRA we’re talking about and you’re 57, I assume you’ll be relying on this money for income throughout retirement.

That means you want enough of your IRA in bonds to provide some ballast in times like these, but you also want to own stocks that can provide long-term growth to maintain your purchasing power in the face of inflation. After all, you may be spending 30 or more years in retirement.

Generally, I’d say that someone your age should have roughly 60% or so of his portfolio in a broadly diversified group of stocks or stock funds (large and small stocks, growth and value) and 40% in bonds (most likely short- to intermediate-term so you don’t get clobbered if interest rates rise). But you can adjust your mix based, among other things, on what other resources you have to draw on for retirement income and how much additional risk you’re willing to take for extra return or how much return you’re willing to give up for greater security.

If you’re not comfortable with the idea of building your own portfolio, then you might consider investing your IRA in a target-retirement fund. You simply choose a fund with a date that roughly corresponds to the year you plan to retire, and you get a stocks-bonds mix appropriate for your age.

By the way, one other advantage of keeping your money in an account like an IRA is that you can rejigger your portfolio if necessary without fear of generating a tax bill, as you don’t pay tax until you withdraw your money.

So banish any thoughts about cashing out your IRA or shifting your money around every time the market soars or dives. Instead, take the portfolio-building approach I recommend. It won’t completely immunize you from short-term losses, but it can offer enough protection to get you through difficult times like these while also positioning you to capitalize on the eventual rebound.

Got a question? Ask the expert.

Having a lot of fancy acronyms after their name doesn’t mean they’re experienced or honest. Do your own research before you choose an adviser.

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Question: I expect to retire in about three years at age 66 and need advice on what I should do with my 401(k) and a lump sum from my pension plan after I leave my job. I met with a “retirement planning specialist” whose card also said he had a “Wharton certificate in retirement planning.” I have no idea what any of this means. Can you shed some light on these credentials? –H.G.

Answer: When it comes to advisers touting their retirement-planning expertise, there’s no shortage of credentials. You’ve got your CSAs (Certified Senior Advisors), CRFAs (Certified Retirement Financial Advisers), CSCs (Certified Senior Consultants), CRCs (Certified Retirement Counselors)…and lord knows how many more designations that have popped up in the time it took you to read this sentence.

But as I’ve noted before, the difficulty isn’t finding people who claim to have designations that suggest special expertise. It’s determining whether a credential requires rigorous training that can truly improve an adviser’s effectiveness or whether it is really a convenient way for advisers to impress potential clients.

In the case of the adviser you mention, I can tell you that the certificate in retirement planning issued by the Wharton School of the University of Pennsylvania is part of a special executive education program created by Wharton and AXA, the big insurance and financial services company.

The program, which is open only to AXA advisers, is essentially a five-day affair. The certificate that attendees receive attests to the fact that they attended and completed the course. There’s no exam. I don’t want to suggest the course is fluff. The advisers study a variety of retirement issues with such well-known Wharton professors as Olivia Mitchell and they do a case study, which is critiqued. But it’s not as if they’re getting a Wharton MBA in retirement planning.

As for that term “retirement planning specialist,” it’s a purely internal title that AXA allows advisers who attended the program to use.

Why, you may ask, are we seeing this proliferation of men and women of letters? Well, one reason is that with the baby boomers marching into retirement, there’s clearly a growing need for more proficiency handling such issues as saving and investing for retirement and turning 401(k)s and other accounts into lifetime income. No doubt many advisers want to learn as much as they can to help clients navigate such matters.

Then there’s a less charitable explanation, which is that initials and designations can create an aura of credibility, warranted or not, and make it easier to sell products that generate fees.

And make no mistake, the use of some credentials by some advisers has been a problem. In testimony last year before the Senate Special Committee on Aging, Massachusetts Secretary of the Commonwealth William Galvin claimed that the Certified Senior Advisor designation has been used by annuity salesmen as a deceptive marketing tool.

In the wake of such allegations, the Society of CSAs has begun requiring that advisers who use the designation provide a disclosure statement to clients that, among other things, says that “the CSA designation alone does not imply expertise in financial, health or social matters.” Well, thanks for clearing that up.

So how can you increase your chances of ending up with an honest and competent adviser who can really help you address retirement-planning issues as opposed to just salesperson with a string of letters after his or her name?

Well, the first thing you must realize is that no designation - even the mighty CFP (Certified Financial Planner), which is generally considered the creme de la creme for advisers dealing with individuals’ personal finances - guarantees competence or, more importantly, integrity. You’ve still got to assess whether this person has sufficient expertise and is willing to put your interests ahead of his or her own.

Ultimately that’s a judgment call - and a tough one - but you’ll increase your chances of making a good decision by checking with state, federal and other regulators to see whether the adviser has a history of complaints from clients.

It’s also a good idea to get referrals from well-regarded industry groups like the Financial Planning Association or the National Association of Personal Financial Advisors, as well as recommendations from friends or relatives who have had success with an adviser.

On the other hand, I’d be wary of any advisers who contact me unsolicited, and doubly wary of ones who run free retirement-planning lunches or seminars. Many times such sessions are just a come-on to sell high-priced investments.

Above all, though, you’ve got to maintain a healthy sense of skepticism and trust your instincts. I think you can tell when someone is trying to sell you something as opposed to listening to you talk about your needs, concerns and goals then trying to create a solution that addresses them.

If an annuity or some other product the adviser sells always seems to be the top solution or if the adviser is reluctant to outline fees in writing, then perhaps the letters that should be on that person’s card are GSA (glorified sales associate) - and maybe you should just walk away.

Got a question? Ask the expert.

Individual trading comes with many caveats. Most investors would do better investing in index funds.

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Question: I do a lot of stock trading online, but then I see my profits eaten away by taxes. What can I do to avoid that? –Yaseen Qureshi, Cincinnati, Ohio

Answer: How about not trading so frequently?

I’m not being flippant. I’m totally serious. Aside from the fact that high tax rates on short-term gains can seriously undermine your performance, there’s also a body of research that suggests that more active investors generally fare worse than those who are more restrained - and those who trade the most tend to do the worst of all.

One reason for this “the more you trade, the farther you fall behind” syndrome is overconfidence. Investors who trade tend to overestimate the value of the information they have, with the result that the stocks they buy as replacements often fare worse than the stocks they sold.

Then there are transaction costs, which drag down returns. True, online trading has dramatically lowered the cost of brokerage commissions. Even so, brokerage fees haven’t completely disappeared, plus investors also incur other transaction costs, such as the bid-ask spread, essentially a mark-up brokerage firms charge in additional commissions. These costs act as a significant drag on performance over time.

And although I’m sure that you and many other traders probably consider yourselves savvy stock pickers able to sift through the thousands of choices out there to find the best buys, research shows that investors don’t usually cast a very wide net. Instead, they tend to buy the stocks that are often in the news. Not surprisingly, these attention-getting stocks are the ones that have been most scrutinized and whose prices are most likely to reflect their actual value, thus offering the least potential for outsize returns.

Add up all these factors - the overconfidence, the trading costs, the narrow focus - and it’s already difficult for investors to outperform passive indexes like the Standard & Poor’s 500 or the Russell 2000, benchmarks for large and small stocks respectively.

Throw in the effect of taxes on short-term trading - profits on sales of stocks held a year or less are taxed at rates as high as 35% versus a max of 15% for those held longer than a year - and you’ve got an even higher hurdle to overcome.

University of California-Berkeley finance professor Terrance Odean has written extensively about the performance of individual investors. If you’re so inclined, you can read about the deleterious effects of rapid trading and taxes at his web site.

But I find that many people are unmoved by such research, perhaps because they believe that they’re the exception to the rule.

So here’s another suggestion: if you aren’t already doing so, keep records of all your trades and calculate your profits and losses after all costs. By looking at how your trades fared over the same time period compared to the return of a relevant index, such as the S&P 500 for large stocks or the Russell 2000 for small shares, you can get a pretty decent sense of whether you’re adding any value after accounting for costs (except, of course, the cost of your own time).

It’s more difficult to calculate the return of your portfolio overall - particularly if you’re adding new money or withdrawing funds over time - but you can do it by using a financial calculator or by consulting investment performance web sites.

If after keeping track of your portfolio over several years you find that you can consistently beat the indexes, congrats. Maybe you’re one of those rare individuals who possess the insights and skill to beat the market on an ongoing basis.

But if you find that’s not the case - or you’re not willing to track your performance carefully enough to understand how you’re really doing - then you might want to consider abandoning the trading game and simply investing in broad-based index funds or ETFs. You’ll get a diversified portfolio with low cost, plus a shot at higher after-tax gains, since index funds and ETFs tend to generate taxable distributions less frequently than other funds.

One final note: if you insist on continuing to trade, you may at least want to confine your buying and selling as much as possible to tax-deferred accounts like a 401(k) or IRA. Doing that won’t help the basic issue of poor performance associated with trading, but at least you can postpone taxes on any gains you do manage to generate until you eventually make withdrawals from your account.

Got a question? Ask the expert.

With different banking regulations and no FDIC protection, foreign banks bring additional risk that might outweigh the relative safety of CDs.

Question: My wife and I are both unable to work and live on a fixed income. We supplement our income with interest from a 5.5% CD which matures this month. If we let the CD renew, the interest rate will be around 3.5%. I found a 6% CD at a bank in St. Vincent and the Grenadines, but I am somewhat leery of a foreign bank. What are your thoughts? –Alan Brady, Greensboro, North Carolina

Answer: My first thought is of the movie version of “A Man for All Seasons,” which depicts the life of St. Thomas More, the scholar and author of “Utopia” who was beheaded for treason in 1535 for refusing to recognize Henry VIII as the supreme head of the Church of England. I’m thinking specifically of a scene at More’s trial in which More, played by the late actor Paul Scofield, confronts Richard Rich, who has perjured himself and betrayed More to secure the position of Attorney General of Wales. “Why Richard,” says More, “It profiteth not a man to gain the whole world and lose his soul. But for Wales?”

What does this have to do with buying a CD from a bank in the Caribbean island nation of St. Vincent and the Grenadines?

Well, it seems to me that you and your wife could be jeopardizing your financial security by taking extra risk with money that you clearly depend on. And for what? A couple of percentage points of annual return?

I suppose it could all work out fine. But do you really want to subject this money to foreign banking rules and regulations? Do you even know what those regulations are? (I noticed that one bank in St. Vincent and the Grenadines that advertises U.S. dollar-denominated deposits won’t allow early withdrawals from some of its CDs.)

And by moving your money outside the U.S. you’ll also be foregoing the protection of FDIC insurance, which means you’re relying solely on the solvency of the bank.

Of course, the desire for a higher yield often leads us to overlook potential risks. But that doesn’t mean the risks aren’t there.

Indeed, today we’re seeing thousands of people who are paying dearly after stretching for extra return in what they thought were “can’t lose” deals.

Take the case of bank-loan mutual funds, which invest in variable-rate corporate loans and were touted as ways to earn higher returns than money-market funds without much extra risk. Investors who bought into that argument 12 months ago are now nursing losses of 7% or so.

And how about investors who snapped up auction-rate preferred shares, investments that were marketed by closed-end funds and other issuers as a way to get safe high returns on your cash? Problem is, the auctions for these securities has dried up, leaving most investors unable to sell their shares for cash and investment firms scrambling to provide liquidity for disgruntled investors.

Even supposedly sophisticated investors like hedge funds and investment banks are still reeling from billions of dollars of losses they sustained after reaching for extra yield in what they believed were highly-secure packages of subprime mortgages.

I know that falling interest rates can make it difficult to get by for people like you and your wife who are depending on income from CDs or other fixed-income investments. But it’s important to understand that just because you need more investment income or a higher return doesn’t mean you can get it, at least not without taking on more risk.

So what do I suggest you do instead of moving your money abroad?

Well, normally I would recommend against relying on any one asset class, including CDs. Instead, I think it’s generally a better idea to create a diversified portfolio that would include CDs, high-quality bonds and even some stocks that can generate both current income and the potential for growth in order to maintain purchasing power in the face of inflation.

But I understand that many people simply aren’t interested in pursuing this sort of strategy for any number of reasons and may prefer to stick with something they understand and feel more comfortable with, like CDs. So assuming you fall into that group, I think your best bet is to find the highest-yielding CDs you can that are also backed by FDIC insurance. This way, you may be able to get a slightly higher yield than you can find at your local bank without subjecting your money to any significant additional risk.

I notice that you also talk about having “a” CD - that is, just one. When it comes time to renew your CD, you and your wife may also want to think about creating a “CD” ladder - that is, spreading your money among several CDs with progressively longer maturities, say, from six months to five years.

By doing this, you’ll have some CD money coming due on a regular basis. Thus, if interest rates begin creeping up again, you’ll be able to reinvest funds from maturing CDs at prevailing higher rates.

I realize that this may not be as appealing a solution as getting a fat yield on a foreign bank’s CD. But if nothing else, the mess that many investors are dealing with now shows that sometimes it’s smarter to accept a lower but secure return than shoot for a higher and riskier return that may turn out to be illusory.