Widow's $115,000 retirement savings plan too risky

  @Money February 13, 2013: 5:10 AM ET
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As a single professional, Lisa Bowman wants to be on top of her finances.

NEW YORK (Money Magazine)

When a loved one is ill, saving for retirement is never top of mind.

That was the case for Lisa Bowman, whose husband suffered a debilitating stroke six years ago and passed away in 2011.

With a steady stream of medical bills not covered by their high-deductible plan, the couple just managed to get by.

Since Bowman was relocated from Watertown, N.Y., to Arkansas for work last year, she has made saving a priority.

In 2012 she contributed $17,000 to her 401(k), socked away $4,000 in a Roth, and put another $11,000 into individual stocks in a taxable account.

She'd like to buy a home and take a vacation, but she worries that would be too profligate.

"I feel panicked," she says.

Occupation: Retail manager

Goals: Create a retirement savings plan, buy a new home

Total income: $104,000

Total assets: $195,000
Retirement savings: $115,000
Home equity: $36,000
Stocks: $24,000
Cash: $20,000


To reduce her fear, Bowman needs an allocation that won't cause sudden losses, says Jeremy Kisner of SureVest Capital Management in Phoenix. And she deserves to have a place she can truly call home.


Diversify. The bulk of Bowman's retirement assets are in growth-oriented stocks that can be volatile.

"If we had another 2008, she'd be down 40%," says Kisner. He suggests adding more bonds as well as stocks of companies that tend to grow more slowly but are more dependable.

Related: Couple with $455,000 plays it too safe

Since bonds have had a good run, a 15% allocation makes sense for now, says Kisner; she can add more bonds over time.

At Bowman's current savings rate, she's on track to retire at 63 -- and she can take vacations too.

The right investing strategy for you

Stop picking stocks. For her taxable account, Bowman has been picking stocks willy-nilly. "I feel like I'm throwing darts," she says.

Kisner suggests she invest in a global allocation fund such as BlackRock Global Allocation (MDLOX) or First Eagle Global fund (FESGX); both carry sales loads, but annual fees are low.

"For relatively small amounts of money, a global allocation fund is easier than choosing a bunch of funds based on market trends," he says.

Buy a house now. Bowman recently listed her New York home but expects it could take a long time to sell it.

She'd planned to save for a 20% down payment on a $150,000 house in Arkansas, though that will take a couple of years or cut into her retirement contributions.

Related: 5 retirement choices: Get 'em right, live well

Rather than risk interest rates going up, Kisner suggests buying now using a Federal Housing Administration loan, which requires just 3.5% down. At today's rates, her monthly nut on a 30-year FHA loan -- including taxes and mortgage insurance -- will be less than her $1,250 rent.

Bowman says she'll take his advice: "I feel much better about where I am." To top of page

A less risky retirement plan
Bowman owns too many small stocks and not enough bonds. She can add more large company stocks to her portfolio and still get the growth she needs.
Current portfolio Recommended portfolio
Large cap stocks 38% 45%
Small-cap & mid-cap stocks 47% 20%
International stocks 9% 20%
Bonds 6% 15%
SOURCE: Jeremy Kisner, SureVest Capital Management
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