Question: 
My wife and I are 44 years old and we have about $90,000 in our IRA accounts. We are adding $1,000 to $1,500 a month. We wonder if there is a good way to invest our money without a lot of risk and volatility and still earn 9 percent to 12 percent a year. Our goal is to have at least $1 million in investments by the time we retire in 21 to 26 years. Any suggestions?

Answer:
You bet! It takes only a minute or two on a financial calculator to discover that the answer to your questions is yes, you can achieve your goal without taking undue risk.

For example, if you start with $90,000 and add $1,000 a month for 21 years, you can wind up with $1 million at the end of that time if you achieve an annualized return of 7.25 percent. You can do that and still be very conservative. If you added $1,500 a month, all you'd need to reach $1 million in 21 years would be 5.54 percent, which is essentially a money-market fund rate.

But you might think about this scenario: Shoot for an annualized return of 10 percent and add $1,200 a month for 21 years. If you achieve that, you'd wind up with $1.75 million. That is a worthy goal, and it sounds as if you regard it as possible to work longer than 21 years if necessary. That leads me to think that you could simply set a goal for the amount of money you want at retirement, then invest in a conservative way and keep working and investing until you reach that target. If your returns are higher, you'll reach it sooner, and vice versa.

To achieve a long-term return of 10 percent with moderate risk, I think you would be in great shape to invest in what we call the Worldwide Balanced program. This will put half your money in U.S. bonds, one quarter in U.S. stocks and one quarter in international stocks - all through no-load mutual funds. This is our most popular core investment strategy, and I think it is likely to meet your needs as well as it has met the needs of so many of our clients.

Specifically, I'd use Vanguard funds to implement this. For the bond part of your portfolio, I'd recommend you invest equally in these three Vanguard funds: GNMA, Short-Term Corporate Bond and Total Bond Market Index.

In equities, I'd recommend the following Vanguard funds (percentage allocations refer to only the equity part of the portfolio): 500 Index, 12.5 percent; Value Index, 12.5 percent; Small-Cap Index, 12.5 percent; Small-Cap Value Index, 12.5 percent; International Value, 18 percent; European Stock Index 14 percent; Pacific Stock Index 10 percent; Emerging Markets Stock Index, 8 percent.

You don't have to maintain these percentages exactly, but I suggest you invest your new money each year in a way that will rebalance your portfolio in line with these suggestions.

Do not make the mistake of expecting all of these funds to do well all the time. The whole point of diversification is to have various asset classes moving up and down at different rates and different times. So don't get into a panic when some of these funds lag the others. That is what's supposed to happen, and each of these funds should do well over the next 21 years.