BLACK ENTERPRISE - YEAR 2001 JANUARY ISSUE
Moneywise
Investment Strategies
Life After Retirement
Managing your personal finances during your golden years
Christine Albano
When Yvonne Banks ap-proached retirement three years ago, she had no preconceived financial plan to facilitate a transition from her blue-collar job to a cushy retirement. The 54-year-old Baltimore resident, who spent 30 years at Bell Atlantic (now Verizon Communications, NYSE: VZ), had $5,611.92 worth of employee stock options. Faced with losing her $38,000-a-year salary, she needed a financial plan and estate plan to ensure a comfortable lifestyle after retirement.

Banks was eligible for a $263,000 lump sum from her pension, IRA, 401(k), and stock options, all of which she converted into a Rollover IRA. She invested the money in three mutual funds, valued at approximately $361,789 as of September 30, 2000. The monthly income check she receives from her investments, plus two part-time jobs, has allowed her to maintain a $31,000 annual salary in retirement. "I could have gotten a pension check for $1,200 a month, but I wanted to do better than that," Banks said. She wanted to earn at least $1,500 a month to cover household, personal, and miscellaneous expenses.

Banks sought the assistance of Charlene D. Monts, the assistant vice president and certified financial manager at Merrill Lynch's Private Client Group in Baltimore. Realizing that aggressive-growth funds would deliver the best growth during retirement, Monts recommended Banks invest in the AIM family of funds. She pinpointed the AIM Blue Chip Fund (ABCAX), AIM Balanced Fund (AMBLX), and the AIM Weingarten Fund (WEINX).

For instance, the Weingarten Fund (class A shares) had a one-year average annual total return of 43.52%, a five-year return of 30.27%, and a 10-year return of 20.38%, according to Chicago-based Morningstar Inc. Monts set up a systematic monthly withdrawal that pays Banks $1,800 before taxes -- 10% for state and 10% for federal. Dividends and interest are automatically reinvested.

If Banks needs to withdraw lump sum of cash to finance a two-week Caribbean cruise, for example, she can liquidate shares of the fund. However, Monts cautions against repeated premature withdrawals. Individuals are subject to an additional 10% penalty tax on the withdrawal if they take it out before age 591/2, and must claim it as income, so they are taxed twice on the same money.

Banks' pension proceeds are growing tax deferred in her IRA fund. Banks has gained a greater comfort level about investing. Aside from mutual funds, she owns 20 shares of Intel (Nasdaq: INTC) valued at more than $900; her Verizon shares now total close to $10,000. While Banks was a late bloomer, she benefited by rolling over the lump sum vs. receiving monthly pension payouts over time, says Monts.

Banks' current portfolio can be tailored to meet changing lifestyle needs. For instance, finding the money necessary to send her 17-year-old daughter Miracle to college next year.




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