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Living in Las Vegas
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July 18, 2000: 2:41 p.m. ET
CNNfn.com's Portfolio Rx suggests you diversify and conquer your portfolio
By Staff Writer Jennifer Karchmer
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NEW YORK (CNNfn) - Nancy Haack envisions bright lights and a big city for her retirement. She and her husband Steve plan on moving from their Milwaukee home to a new house they recently built 30 miles outside of Las Vegas.
Like many baby boomers, Haack, 49, is planning a lively retirement: she wants to continue to work part-time, and to study local culture, travel and play golf. She doesn't sit still easily. Six years ago, Haack even returned to college to earn a bachelor's degree -- the same year her daughter graduated high school.
"I didn't want to stay in the background. I wanted to be an example for my kids," she said.
So on the road to retirement, Nancy and Steve, 51, a former law enforcement officer who is currently working part-time as an airline ticket agent, want to be models for their two children, showing them that their long-term savings plan can work.
Financial experts say they're on the right path. But like many investors, it's critical that they diversify their holdings across a variety of stocks and mutual funds to cushion their long-term savings from market volatility.
 Portfolio Rx is a new CNNfn.com feature that looks at issues like diversification, asset allocation and rebalancing. In each article, we will review a person's long-term investing portfolio and ask financial experts to give their advice. If you want help with your nest egg, see below for more information.
Your age, your retirement goals and how much risk you're willing to take will determine how to allocate your assets. Typically, younger investors can buy more aggressive investments because they have a longer time horizon than someone closer to retirement, who might want to be more conservative to preserve that nest egg.
Leaving for Las Vegas
Living in the nation's heartland her whole life, Nancy has yearned to be closer to the ocean, to hear the waves crashing against the sand and to smell fresh saltwater.
While Red Rock Canyon, about a 15-minute drive west of Las Vegas, is still a five-hour drive to the coast, it's just a day trip away, so the couple built a home there to settle down during their retirement years.
And Nancy dreams of finding time to enjoy her hobbies.
"I want to read a book," she said. "I haven't been able to do that."
Steve, a retired police officer, too is looking forward to some relaxation during his retirement. "He wants to do something that won't put pressure on him every day," Nancy added.
The portfolio
The couple's retirement nest egg is comprised of each of their pensions, Social Security benefits they plan to collect at retirement, money they'll collect from the sale of Nancy's business, rent they plan on receiving from a Florida rental property, and part-time work.
Steve's annual pension of $46,000 will increase about $900 each year according to the contract. In addition, his retirement covers the couple's health insurance for life.
Nancy has a pension from a prior employer due at the age of 59 1/2 valued
at $40,000 today. But much of her retirement savings comes from selling her computer sales company for 9,500 shares of Medical Manager Corp. (MMGR) stock valued at $36 per share. 
In addition, Nancy holds a SARSEP-IRA plan of $16,000. (A SARSEP-IRA, or Salary Reduction SEP-IRA, is a type of IRA plan for small businesses.)
Nancy's annual income is $117,000 and she plans on partial retirement within 12 months and has a contract to work under the new owners for one year. After the one-year contract expires, the couple plans to work for about $15,000 to $20,000 annually in customer service for a local tourist business in Las Vegas.
"It's going to be fun and much less stress," she said.
Their new home in Las Vegas has a first mortgage of $120,000 at 7.5 percent and a second mortgage of $44,000 at 9 percent. In addition, the Haack's have a new car with a four-year loan at 0.9 percent purchased for $27,000.
On top of that, they have about $5,000 in credit-card debt. Both are eligible to receive about $1,000 a month in Social Security benefits when they retire.
Also, Nancy is considering getting involved in real estate as a way to add to their retirement nest egg. The couple plans to purchase a condominium in southern Florida that would be used as tourist rental income.
They'd like to retire at age 60 with an annual income of $80,000. Can they do it? Let's see what the experts have to say.
The doctor is in
The couple is fortunate to have pension plans available to both of them for their retirement, said Mark Groesbeck, a certified financial planner with the Stanford Group Company in Houston, Texas. Many companies today are shying away from the traditional pension plans and offering 401(k) type retirement plans.
 So the combined pensions are just one leg in the three-legged stool of retirement savings, he points out.
While Groesbeck says investing in the Florida rental property can be lucrative, he warns that they may find it difficult to manage the property from Las Vegas since it is so far away. Some of his clients have "horror stories in trying to have rental properties in different cities," he said.
But the biggest red flag of the Haack's portfolio are the assets tied up in the sale of Nancy's company, which total about $340,000.
"I think you're taking on lots of risk when your future is tied into one company," he said. "There's a lot more volatility and risk in one stock."
So Groesbeck suggests the couple sell the MMGR stock and pay capital gains tax which would net them about $275,000.
Then they should build a diversified mutual fund portfolio spreading their investment risk across a variety of securities: large-, mid- and small-cap, stocks on the growth and value sides, international investments, bonds and cash.
A diversified portfolio, according to Groesbeck, includes a minimum of 15 to 20 different stocks or at least five to seven mutual funds. Depending on how much risk you're willing to take on, you can pick and choose aggressive and more conservative investments.
Click here to read the latest Checks & Balances column
which appears Mondays in CNNfn.com's personal finance section!
CFP Larry Johnson agrees that the Haack's should first sell the one stock they own from the sale of Nancy's business, pay the capital gains tax and then create a diversified portfolio with the remainder. This personal savings would round out the retirement pension plans they both have and the Social Security benefits they each plan to receive.
"Don't tie up your retirement portfolio in one stock," advises Johnson, president of Sterling Financial Advisory Services in Itasca, Ill. "For the average person, if you don't work for that company and don't follow the stock closely, it's very risky to have" all your eggs in one basket.
Then Johnson suggests the couple pay off the $5,000 credit card since the finance charges usually run very high. With about $120,000, they can put a down payment on the Florida rental property and hopefully the rent from the real estate will pay for the mortgage by the time they're ready to retire in about ten years.
That leaves the couple with about $150,000 to create a diversified portfolio like Groesbeck suggested.
Check your mutual funds on CNNfn.com.
Depending on how much risk the Haack's want to take on, Johnson advises the couple to invest about 70 percent of the portfolio in stocks and 30 percent in bonds. As they get closer to retirement age, they can reallocate the portfolio more conservatively to preserve their capital.
"With a portfolio this size, you just do the fringe things, no biotech or emerging markets," Johnson said. "This is a finite pool of money that they won't add to so go plain vanilla with your investments and hopefully you'll return 8 percent a year."
So with daughter, Renee living in Japan and son, Paul residing in the Wisconsin, Nancy and Steve plan to make a go of it near Las Vegas.
"I love the mountains and you can get to the ocean in a day," Nancy said. "To me, you have to make a change to make retirement work and we love entertainment."
* Disclaimer
If you would like to be considered for our Portfolio Rx feature, send us an e-mail at retirement@cnnfn.com. Please include your age, occupation, income, assets, debt and expenses. In addition, please tell us about your retirement goals, such as when you wish to retire and what type of lifestyle you envision. Also include specifics about your long-term savings portfolio: your 401(k) and IRA accounts; which mutual funds, stocks and other securities you own; and information about any other source of retirement income you expect, such as a pension. If we choose your portfolio, we will use your information including your name in an upcoming story. 
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