NEW YORK (CNN/Money) - Beatrice Brennan has made a career out of caring for others. It began in 1980, when she volunteered to look after a friend who fell seriously ill. "I started helping her -- my mother's boss's wife -- with treatments and doctor's appointments, and I realized I'd found something I really liked to do," she explained.
The rewards of helping her friend return to health sent Brennan headlong into a new line of work -- nursing. "She was a nurse herself -- she was a midwife," Brennan added. "I felt like I had found a profession where you could make a difference, where you could see the results." Before her career change, she had worked in retail and for the city of Philadelphia.
These days, though, she's also paying attention to her own needs. At age 46, Brennan says it's time to get her own financial house in order. She doesn't think she's saving enough for a comfortable retirement, which she forecasts in about 20 to 25 years.
"The money I make is just being spent," she said. "I want to get a handle on my money, pay my bills and really save."
And Brennan, who is unmarried with no mortgage bill, pays more than she'd like to Uncle Sam every April, because she has no deductions. As such, she's on the hunt for tax shelters. She also lives from paycheck to paycheck and wants to put money aside for emergencies.
The situation
As a registered nurse with Progressive Nursing in Balancynwyd, PA, Brennan brings in $55,000 a year. She owns her own home, valued at around $65,000. As such, her long-term debts are low. She owes about $6,000 on a home equity loan with a 10 percent interest rate and about $500 on old school loans. Her monthly expenses, including fun money, are about $3,000.
And should the unexpected crop up, Brennan worries she's unprepared.
"I want to save in case of an emergency," she said. "I've really got nothing in the bank if something goes wrong."
Brennan, however, doesn't contribute any part of her monthly income to a retirement nest egg. She has a First Union Alliance IRA with about $11,500 split between three mutual funds: Alliance Quasar, Alliance Growth and Income, and Alliance Premier Growth. There's also the $3,000 she saved in a Kemper mutual fund from a previous nursing job, which earns interest comparable to a savings account. "I'd like to move that money into a different account," she said. "But I don't know what the best option would be. I'd like to retire between the ages of 65 and 70."
The plan
Gather emergency savings: Brennan's first move should be to save 3 to 6 months' worth of expenses in an emergency fund, said David R. Bergmann, a certified financial planner and enrolled agent in Marina Del Rey, Calif. The fund should be closer to 3 months' worth if her job is stable, and closer to 6 months' worth if it is unstable.
Brennan's monthly take-home pay is about $3,000, Bergmann said, yet she finds herself living from paycheck to paycheck. He recommended she first save $6,000 of emergency expenses in a Roth IRA. She'd have to deposit $3,000 this year and the other $3,000 in 2003, according to federal limits.
If the money were needed, she could withdraw her contributions from the account -- in some cases without paying a penalty.
If not, it would continue to grow tax-free in the Roth. The rest of her emergency funds, he said, could go into U.S. savings bonds, offering 4 percent interest on purchases made through April of this year.
Cal Brown, a CFP at The Monitor Group in Fairfax, VA, suggested another route: establishing a home equity line as her emergency fund.
"It would provide tax deductible interest if she needed to make a withdrawal, it would force her to pay it back, and that would discourage her from using it unless it's absolutely necessary," Brown said. "If she tries to save up in a savings account, something will always come up."
Building her nest egg: After she's saved an emergency fund, both Bergmann and Brown agreed she should start contributing to a 401(k) or 403(b) retirement plan through her employer. "She should make the highest allowable contribution," Bergmann said. "This year, the federal limit is $11,000, and it increases annually until it reaches $15,000 in 2005."
If no retirement plan is offered through her employer, Bergmann said, one option is to establish herself as an independent contractor with Progressive Nursing, which would allow her to set up her own self-employed pension plan.
"If Progressive Nursing is a nurse-staffing service, she might be able to do this. If it is a bona fide employer-employee relationship that cannot be structured as a self-employment relationship and it has no employer-sponsored retirement plan, then she is stuck using IRAs and savings vehicles," Bergmann said.
In that case, a consistent, dollar-cost averaging investment strategy would suit her retirement needs. By dollar-cost averaging, Bergmann means investing a set amount of money each and every month in the stocks and mutual funds she chooses. Many people think this is a sound way to invest, because the cost of what you buy averages out over time.
Tax-efficient mutual funds or index funds would be suitable investments for her, because she has no deductions and keeping any more income off her return is the prudent thing to do, Bergmann said. For more information on tax-efficient mutual funds, click here.
Consolidating assets: New tax laws allow unrelated retirement plans to be aggregated, Bergmann notes, as long as your new plan allows former "non-like plan" assets to be rolled into it. If Brennan opens a 401(k) plan through her employer, she could roll the money from the Kemper fund into the new plan.
The other option is to merge the Kemper fund assets into her First Union Alliance IRA. "Review the investment options currently available within the plan first, before you begin wholesale transfers and exchanges," Bergmann cautioned. "You might have to pay certain transaction costs, so make sure you like the investing options you're getting."
Curb spending: Saving for her future would automatically slash Brennan's monthly spending and force her to budget. Saving pre-tax dollars in a 401(k) or traditional IRA would also serve the dual purpose of providing a comfortable retirement and shelter for her taxable income. And Brown notes that it's not as painful as it sounds.
"If she takes about $1,000 a month from her pre-tax income and saves it in a 401(k) plan, her spending budget doesn't decrease by $1,000, but by about $600, because you're saving the money before it's taxed," he said.
Gimme shelter: Besides her retirement accounts, Bergmann said Brennan should consider a few other tax-friendly options as well. Other tax savings tools that may be available to her include the Lifetime Learning credit for any on-going nursing continuing education. To find out more about possible tax breaks, click here.
"She may also be able to qualify for a new above-the-line education expense deduction of $3,000, available for individuals under $65,000 AGI levels in 2002. That's in addition to or instead of the Lifetime Learning credits," he said.
Another tax-savvy choice would be to pull some of the equity out of her home and use the money to purchase rental income property, Bergmann said.
"With a twenty-year horizon until retirement, she could invest in a rental property with a 15-year mortgage, which provides deductions," Bergmann said. "She would own the rental property outright around the time of her retirement. Then she would have two properties at retirement, giving her rental income without mortgage payment obligations." 
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