Never Work Full Time Again, but Still Save?

A year ago, Alisa Reinstein’s obsession with exceeding her sales quotas drove her to work 10-hour days and travel up to four days a week.

She earned as much as $125,000 a year selling computer software, and she bought whatever she wanted: designer clothes, meals in nice restaurants, sports equipment and new cars.

Today, Reinstein, 36, spends five mornings a week surfing and two days attending the American Institute of Massage Therapy in Costa Mesa. And now that she’s an unemployed student, she scrutinizes each and every expense. Her goal: to never work full time again while continuing to save for retirement.

The transformation from go-go account executive to beach bum began last December while Reinstein was awaiting a flight home to Los Angeles. She called her boss and said, “I can’t do this anymore. I’m not having fun.”

Although she changed her life rather abruptly, Reinstein had been thinking about it for a few years. Constant stress and a never-ending schedule of one-day sales trips out of town had robbed her of personal time and life’s joys, she said. “I even worked during my vacations,” she recalled. “Once, when I was in Florence, Italy, I was up at 3 a.m. having a conference call.”

Reinstein credits her artistic and free-spirited boyfriend’s moral support with giving her the courage to quit her job and seek training to become a sports massage therapist, a vocation that suits her interest in athletics and desire to be self-employed. After becoming licensed next March, Reinstein plans to take a course in equine massage, so she can specialize in massaging horses.

Despite a more leisurely pace, Reinstein is not completely carefree. Part of her $210,000 portfolio, made up mostly of stocks and mutual funds, has bankrolled her dramatic career shift. “I never could have done this if I didn’t have savings,” she said. Still, “It’s scary for me to be paying bills and not have any paychecks coming in.”

Not only does Reinstein not want to run out of money, but she also expects to grow her investments while she works part time. She also wonders whether her investments are positioned for safety as well as growth.

Michael V. Glowacki, a certified financial planner and certified public accountant in West Los Angeles, evaluated Reinstein’s finances at The Times’ request. Glowacki said Reinstein’s seemingly disparate goals are achievable--with careful planning.

Glowacki calculated how much she needs to work and made suggestions to reduce risk in her portfolio.

If Reinstein were to work four days a week as an equine massage therapist, she probably would be able to support herself without tapping into her investments until age 66, Glowacki projected, using Reinstein’s estimates of earning $60 an hour, five hours a day.

Neither Glowacki nor Reinstein expects her work schedule to reach that level until she has spent as many as 12 months building her clientele, so she may tap some of her savings again next year. Based on Reinstein’s current spending habits, Glowacki figured she would need about $36,000 a year for routine expenses, including a monthlong vacation. “Sticking to $36,000 a year in living expenses is hard in Los Angeles,” he cautioned.

But Reinstein is confident of meeting that challenge.

Being unemployed has motivated her to economize, resist the temptation to buy more clothes and view spending differently, she said.

“I don’t need to make the money I made before. I need to make enough to live on and save some.” Although Reinstein spent liberally in the past, she always saved money. She is debt-free, and owning a home is not a priority.

In estimating the growth of Reinstein’s portfolio if she were to work four days a week, Glowacki assumed an annual inflation rate of 3.5% and average annual investment returns of 9.5%.

Because of a possible long life--Reinstein’s maternal grandmother is 102 years old--Glowacki projected the portfolio’s value 65 years into the future. If she were willing to work four days a week, it could amount to more than $16 million in the year 2064, when Reinstein turns 101, even taking into account that she would have started withdrawing money for routine expenses at age 66.

Under a three-day workweek scenario, Reinstein would run out of money at age 81. By contrast, by working 3.5 days a week, her portfolio would remain intact and be valued at about $5 million in the year 2064.

Countless variables, such as Reinstein’s actual earnings, the possibility of another career, fluctuations in interest rates, her financial needs and economic gyrations could easily skew those results, Glowacki warned. However, the long-term projections serve to guide Reinstein’s decision on how much she should work in order to preserve her portfolio for retirement.

Learning that it’s possible to reach her goals is a relief, Reinstein said, and a four-day workweek a prudent move. “I don’t want to work full time, ever,” she declared.

Glowacki said he has met other burned-out professionals who also wish to downshift to a less hectic, more simple lifestyle. “Alisa is following her passions. These people take a hard look at what’s important to them.”

Reinstein is a safety-conscious investor, Glowacki concluded after evaluating her answers to a questionnaire probing attitudes about money. “Alisa is not a big risk taker, but she has a very aggressive portfolio,” he said, noting that is not consistent with some of her holdings, particularly certain individual stocks and two technology mutual funds that are likely to be volatile in price.

Reinstein acknowledged that her approach to investing has been haphazard.

While saving money, she relied on the advice of a stockbroker who usually pitched her whatever was currently popular. “The broker would call and sell me investments,” Reinstein recalled. “I didn’t know what I was doing.”

Several months ago, after deciding her investment results were too erratic, she transferred her account to Charles Schwab--a discount brokerage that manages accounts but, for the most part, does not offer advice.

Since then, Reinstein has picked investments that performed well in the recent past, without much thought to long-term history or future performance. “This is an error a lot of investors make,” Glowacki said. The lion’s share of Reinstein’s portfolio--98%--is devoted to large-capitalization stocks, with only 2% in small-cap stocks. Corporations with a market capitalization exceeding $10 billion are considered “big caps,” while companies with a market capitalization of less than $1.5 billion are generally considered “small caps.” Noting that about 40% of Reinstein’s portfolio is dedicated to individual stocks, Glowacki suggests that no more than 20% of her holdings be in individual stocks.

Although large-cap growth stocks have done well during the past four years, Glowacki said, they won’t be market leaders indefinitely. He urged Reinstein to consider using the “modern portfolio theory,” which suggests dividing one’s nest egg among different kinds of investments--large-caps, mid-caps, small-caps, international equities and bonds.

If Reinstein decides to rearrange her portfolio, this is a good year to do it because she has little income. “I doubt whether there will be any other time in your life that you’ll be in such a low tax bracket,” Glowacki said. Any long-term capital gains she has this year will be taxed at a 10% rate, rather than at the 20% rate that kicks in for singles earning more than $26,251 in adjusted gross income.

The advice reassured Reinstein and she is looking forward to her new life, being her own boss and setting her own schedule. She recently volunteered to massage horses at a local stable to gain experience and make contact with equestrian enthusiasts. “I’d like to possibly work with racehorses so my sports massage background could be used for horse and jockey,” Reinstein said.

And she’s willing to remain flexible about her future too. “My father gave me the best advice,” Reinstein noted. “He said, ‘If it doesn’t work, it doesn’t work. At least you’ve tried it.’

“I didn’t want to say: ‘I wish I had done something else.’ ”

*

Suzy Hagstrom is a regular contributor to The Times.

To be considered for a published Money Make-Over, send your name, age, phone number, income, assets and financial goals to Money Make-Over, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053 or to money@latimes.com. You can save a step and print or download our questionnaire at https://www.latimes.com/makeoverform.

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This Week’s Make-Over

* Investor: Alisa Reinstein, 36, massage therapy student

* Gross annual income: About $30,000 from investments

* Goals: Decide how much she needs to work to maintain her retirement savings through change in career.

Current portfolio

* Money market funds and bank accounts: About $25,000

* Mutual funds: About $80,000

Amounts shown with three-year average annual returns:

$24,348 in American Express Blue Chip Advantage Class A (21% return), $23,610 in American Express Growth Class A (23%), $10,384 in Janus Olympus (43%), $10,448 in Invesco Technology (35%) and $10,073 in Seligman Communications & Information Class A (34%)

* Individual stocks: About $86,000

Holdings worth $10,000-$15,000 each in Amazon.com, AT&T; Corp., Exxon Corp., Lucent Technologies Inc. and Procter & Gamble Co. Holdings worth $2,000-$7,000 each in Deere & Co., DuPont, PepsiCo Inc., Quiksilver, SBC Communications Inc. and Warner-Lambert Co. Also, shares of Tricon Global Restaurant Co. and Iomega Corp., each worth less than $1,000

* Individual retirement account: About $18,000

Split between the Schwab 1000 (three-year average annual return, 25%) and Value Line Special Situations (31%)

Recommendations

* Sell all or most individual stocks; reduce heavy concentration in large-capitalization stocks and mutual funds, with goal to diversify portfolio and make the portfolio less risky to suit a safety-conscious investing temperament.

* If Reinstein decides to sell any investments, she should do so this year, when she is in the lowest tax bracket and subject to a low capital gains tax rate of 10%.

* For same tax reasons, consider converting IRA to a Roth IRA.

* Increase deductibles on automobile insurance to get a lower premium.

* Draft a will.

Meet the Planner

Michael V. Glowacki, a certified financial planner and certified public accountant, is a partner at fee-only financial planning firm Glowacki Framson Financial Advisors in Los Angeles. He is chairman of the Los Angeles County Chapter of the International Assn. for Financial Planning. Glowacki has a master’s degree in business taxation from USC.