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Today’s IRA your future meal ticket

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Your individual retirement account isn't yesterday's news. It's tomorrow's meal ticket.

Thanks to disciplined investing and a record stock market run, many American investors have small fortunes stashed away in these handy accounts.Take out your latest IRA statements now to remind yourself exactly how much you have and what investments you hold. Decide whether you still like those choices and how you'll earmark any additional money contributed this tax season.

There are plenty of ways to run a winning IRA, but you must pick your own strategy and stick with it long-term.

"We recommend that 5 percent of IRA money be taken out of stocks now and moved into cash," advised Arnold Kauffman, editor of the Standard & Poor's Outlook newsletter in New York. "Reallocation is justified because stocks have gained in value and represent more than the proportion originally intended."

Kaufman's model IRA allocation is 50 percent stocks, 30 percent bonds and 20 percent cash. Favorite stocks are Oracle, Canandaiguua Wine, Clayton Homes, Cognex, Columbia/HCA Health-care, Franklin Resources and Health Management Associates.

The bond portfolio would be primarily Treasury notes, with a sprinkling of junk bonds.

"I would keep an IRA fully invested in stocks even with the market at its current level," countered Eric Kobren, editor of the Fidelity Insight and the FundsNet Insight investment letters in Wellesley Hills, Mass. "But I'd be well-diversified and hold funds of some good portfolio managers."

Kobren would put 20 percent in an international fund such as Artisan International Fund; 25 percent in a small-cap value fund like Heartland Small Cap Contrarian Fund; 25 percent in a large-cap growth fund such as Oakmark Fund; and 30 percent in a large-cap growth fund like Janus Twenty Fund or Fidelity Growth Co.

"If you're nearing retirement and will have to start pulling money out of your IRA, you may want to think about rebalancing it," said Charles Carlson, market strategist with the Dow Theory Forecasts newsletter in Hammond, Ind. "But if you're 25 or 40, I'd be reluctant to start tinkering with a mix that's served you well."

A long-term IRA should have 75 percent in equity investments, such as stocks and mutual funds, Carlson believes. Using mutual funds, he'd invest in T. Rowe International Stock Fund; an index fund such as Vanguard Index 500; and a general fund like Strong Schafer Value Fund. He'd place the remaining 25 percent of the portfolio in a either a bond fund or a balanced fund such as Vanguard/ Wellesley Income Fund.

"I don't think an IRA should be any different from any other account, for a conservative investor should have a conservative IRA and an aggressive investor should have an aggressive one," asserted Sheldon Jacobs, editor of The No-Load Fund Investor newsletter, Irvington-On-Hudson, N.Y. "Your risk preferences, the amount of money you have and the amount you can lose play roles."

An investor would do well with 20 percent in T. Rowe Price Mid-Cap Growth Fund, Jacobs believes. Then put 15 percent in Babson Growth Fund, 10 percent in Vanguard International Equity Index-Emerging Market Portfolio, 10 percent in T. Rowe Price European Stock Fund, 5 percent in Vontobel Eastern European Equity Fund, 15 percent in the Yacktman Fund, 10 percent in CGM Realty Fund and 15 percent in T. Rowe Price Equity-Income.

"I'd have half an IRA portfolio in stocks, 40 percent in bonds and 10 percent in cash," said Marshall Acuff, investment strategist with Smith Barney. "The high valuation of stocks and likelihood of moderate earnings growth in the future implies stock returns will be down to 6 or 7 percent a year, which is in the neighborhood of bonds."

Focus on stocks with excellent growth prospects, said Acuff, such as Amgen, Kimberly-Clark, Williams Companies, Chase Manhattan and Altera. In bonds, stick with 10-year Treasuries.

"Although you might become more conservative as you near retirement, I wouldn't want to see someone market-timing IRA money and jumping in and out of stocks," warned Don Phillips, president of the Morningstar Mutual Funds investment advisory in Chicago.

Conservative funds can make sense for every IRA, since a retirement account is the bedrock of an individual's portfolio and money one can't afford to mismanage, contends Phillips. Some terrific IRA selections include the balanced fund United Asset Management's FPA Cresent Portfolio, the value-oriented Clipper Fund and the T. Rowe Price Equity-Income, he said.

Andrew Leckey, whose new book "The Morningstar Approach to Investing: Wiring into the Mutual Fund Revolution" (Warner Books) is now available in bookstores, answers questions only through the column. Address inquiries to Andrew Leckey, "Successful Investing," Suite 367, 76 N. Maple Ave., Ridgewood, NJ 07450.