August 1, 2004
Investing To Maintain A Lifestyle
W hen she immigrated to the United States from the Caribbean island of Anguilla in the 1980s, Jerone Buchanan was determined to gain financial independence. She pursued a career as a nurse and eventually elevated herself to assistant director of nursing at HHC Health & Home Care in New York City, where she earns slightly less than $100,000 a year. With that type of income, financial independence was attainable for the Harlem resident, but she needed a plan. Buchanan’s first portfolio was with Merrill Lynch, but when its performance didn’t match her expectations, she looked elsewhere. A fellow member of the National Coalition of 100 Black Women referred her to Patricia Kerr, a Mount Vernon, New York-based adviser with American Express who helped Buchanan chart a different course.
“Initially my main goals were to establish a six-month cash reserve, plan for retirement, save for a house, and keep debt to a minimum,” Buchanan recalls. After a complete financial review, she says Kerr “advised me to be conservative at first and then change my strategy as the market improved.”
Kerr’s approach with Buchanan was simple: “When we first met, she had experienced some portfolio erosion, so my goal was to build her portfolio gradually and use an asset allocation model to suit her moderately aggressive style.” Buchanan’s portfolio was divided into 40% large-caps, 15% mid-caps and small-caps, 15% international, 10% real estate, 10% cash, and 10% bonds. Some of the investments included Fidelity Growth & Income (FGRIX), which yielded a return of 6.6%; Goldman Sachs Mid Cap Value (GCMAX), which generated a 22.59% return; and Franklin Real Estate Securities (FREEX), which returned 12.62%.
Overall, Buchanan’s portfolio has shown a 12.34% average return despite a downturn in the market. Earning those types of returns has her on track to meet her goal of retiring in 10 years at age 55. She has been careful to control her debt and contributes $900 monthly to her 403(b) plan as well as the maximum $3,000 a year to a Roth IRA. Under Kerr’s guidance, Buchanan’s initial investment of $75,153 has grown to $107,000 without her having to make any significant economic adjustments. “My lifestyle is unchanged,” says Buchanan. “I love to travel to places such as Africa and the Caribbean, and I continue to do so.”
What’s left to do now is shop for the house she wants and address some estate planning matters. “We’ve talked about her getting a durable power of attorney, a healthcare proxy, and a living will. And by the time she’s 50, [we’ll have made] provisions for long-term care,” projects Kerr. Buchanan says she’ll heed Kerr’s advice, adding: “It’s important for black women to put money aside for retirement so that they can maintain their lifestyle as they get older.”