When Baltimore transplant Charlotte H. Brown retired from her job at the Bank of New York three years ago, she was a 57-year-old divorcee with no regrets. With an IRA rollover valued at $350,000, which generates income of about $35,000 annually, Brown embraced a life of leisure, extensive travel, and relaxation between visits with her two grown children, four grandchildren and three great-grandchildren. However, ennui soon set in, so in 1999 Brown started both The Brooklyn Achievers investment club and launched Garments of Distinction, a small side-business that sells African-themed garments.
Dissatisfied with her financial planner, Brown was relieved to meet Genie L. Zeigler, a financial advisor with Merrill Lynch, who not only attended St. Paul Community Baptist Church in Brooklyn, New York, as Brown did, but who also conducted financial seminars there, too. Zeigler’s strategy was to create a financial plan that focused on asset allocation, risk reduction, estate planning, and wealth preservation. “As a retiree, Charlotte’s primary objective is to maintain her pre-retirement lifestyle without depleting her principal,” explains Ziegler.
Zeigler devised a customized investment discipline that has met Brown’s income and growth objectives. Brown’s asset allocation consists of 45% stocks, 45% fixed income, and 10% cash or cash equivalents. Her portfolio includes a well-diversified mix of growth securities, such as General Electric (NYSE: GE), Citigroup (NYSE: C), Home Depot (NYSE: HD), Verizon (NYSE: VZ) and Pfizer (NYSE: PFE). In order to ensure a steady stream of income, Zeigler recommended fixed income investments such as a government-backed bond (GNMA), yielding 7.0%, and a real estate investment trust (REIT) — a group of real estate investments that trade like a stock. Zeigler invested in Cohen and Steers Advantage Income Realty Fund (NYSE: RCF) yielding 8.50% (see “You REIT What You Sow,” Moneywise, January 2002). Brown’s portfolio is balanced by growth-mutual funds, which are expected to provide strong investment returns over the long haul.
Employing the use of Sector SPDRs (Standard & Poor’s Depository Receipts) gives Brown exposure in various sectors by owning a basket of S&P stocks. Currently, she owns energy SPDRs (XLE), which holds Exxon and Chevron, and the consumer services SPDRs (XLV), which hold McDonald’s and Viacom. Similar to mutual funds, these securities provide flexibility and help to reduce volatility.
Zeigler also tailored a transition and estate-planning strategy that ensures adequate insurance coverage; a healthcare directive and proxy (giving specific directions about healthcare should she become incapacitated); a durable power of attorney (instructing who can legally act for her and under what guidelines should she ever become incapacitated); and an updated will.
“Such estate planning techniques,” Zeigler explains, “enable Charlotte to enjoy the comforts of retirement, knowing that her financial affairs are in order.” For those like Brown, who have the luxury of retiring early, that’s a benefit that is undeniably attractive.