A revised plot for writer’s retirement

Most mornings Glen Golightly wakes up at 5:30 a.m., pours himself a bowl of granola, feeds his gray-and-black tabby, Mrs. Parker, and sits down to write.

Over the years, Golightly, 45, has collaborated with a former Green Beret to capture the gritty horror of the Vietnam War for a screenplay. He has traveled to the Oklahoma panhandle to research another script.

By spending about 20 hours a week writing, he has produced four screenplays, a novel, numerous short stories and even a haiku. Trouble is, he hasn’t made a cent doing it.

Though writing the next Hollywood blockbuster is Golightly’s passion, he makes his money the 9-to-5 way, working as a publicist in the aerospace industry. But Golightly wants to change that.

“This is my dream,” he said of his off-hours writing. “I either need to do it or forget about it.”

The Long Beach resident wants to retire from the corporate rat race when he’s 55 and devote himself to writing full-time. He also is thinking of buying a condo in Hollywood to be closer to the entertainment action. And it would be nice to have more free time to travel and pursue his other hobbies, such as biking and hiking.

But can he afford to ditch his day job?

Golightly makes $95,000 a year. He has saved nearly $300,000 so far: about $120,000 in his 401(k) retirement account, a like amount in stocks and mutual funds and about $36,000 in a savings account.

Aside from the $215,000 mortgage on his Long Beach condominium, he is debt free. He tools around town in an 11-year-old Kia Sportage and pays off his monthly credit card bills.

All of that keeps Golightly in good financial shape. But it’s not enough to fund an L.A. dream of becoming a Hollywood writer.

“He might have the next big blockbuster. But it’s a dangerous decision to make,” said Scott Leonard, a certified financial planner and founder of Leonard Wealth Management in Redondo Beach. Leonard, along with his associate, Eric Toya, also a certified financial planner, reviewed Golightly’s finances.

Because Golightly doesn’t have a history of making income as a freelance writer and has yet to hit the big time a script, Leonard counseled him to hold onto the security of his corporate gig. A steady paycheck, good healthcare and a pension are just too good to give up.

If he keeps working at his current job, he could retire at 65 with an income of roughly $75,000 -- receiving $17,000 from Social Security, about $14,000 from company pensions and the rest from his 401(k) plan and other investments.

But Golightly doesn’t have to abandon his dreams. After all, anything can happen in Hollywood. Leonard said that if Golightly got traction with his writing he could leave his workaday life sooner. The catch: He would have to work a decade longer.

Leonard said that if at age 55 he could make at least $76,000 annually with his writing, he could quit his corporate gig. But because he wouldn’t be saving as much, he’d have to keep working after age 65, making at least $38,000 a year before he could retire at 75 with an income of $75,000.

“I want to get his hopes and dreams realistically set,” Leonard said.

Either way, Golightly will need some financial fine-tuning to secure his retirement.

Though he is a natural saver, he isn’t saving enough. His investments also aren’t diversified properly.

Golightly contributes only 8%, or $7,600, of his income to his 401(k). Leonard said he needs to max out his contributions to as much as $15,500 annually.

He also has been warehousing as much as $36,000 in a savings account with the aim of saving as much as a year’s salary in case of a financial emergency. That’s far too much, Leonard said, because he is missing out on higher returns he could get by investing elsewhere, he said.

Because Golightly’s current job is stable, he could get by with just three months’ salary for an emergency. If he still felt uncomfortable with that amount, Leonard said, he could take out a home equity line of credit and have it waiting in the wings. Then if a financial emergency befell him, he would have access to additional funds.

Golightly also needs to shift the mix of his assets.

“His portfolio is woefully unbalanced,” said Leonard’s associate, Toya.

Golightly invested half of his money in U.S. big-company stocks, an additional 20% in a savings account and about 8% in international stocks. He also has about $8,000 in his employer’s stock and buys more shares monthly, which continues to skew his portfolio toward large companies.

Leonard’s advice about that is blunt: “Don’t buy stock in your company.”

Leonard argues that doing so often leaves your portfolio less diversified than you’d like and makes you personally and financially vulnerable. If your company stumbles and you lose your job, you’ll get hit with a double whammy by losing on your investments as well.

The only exceptions to his rule, he says, are if you are given a discount to buy your employer’s stock or if your company operates as an employee stock ownership plan in which shares are distributed to workers.

To balance Golightly’s portfolio, Leonard and Toya had to dance around the limited number of funds offered in his 401(k) plan, which doesn’t, for instance, include any international funds. They also wanted to be efficient and avoid selling off any separate investments that might trigger capital gains taxes.

They suggested carving up his assets this way: 40% in indexed funds holding both large and small U.S. stocks; 50% in indexed international funds holding both large and small stocks, and about 10% in a money market account. Because all of Golightly’s future contributions will go into U.S. equities in his 401(k) plan, the planners weighted international funds a bit heavily.

What about bonds? Golightly is still young and won’t tap his investments for years. So, Leonard said, he can afford to be more aggressive.

Given Golightly’s frugality, he could wind up feathering his nest even more in the future.

Golightly’s father used to pour water in the ketchup bottle to make the sauce last longer and, perhaps unwisely, he once drove across town to buy cheaper gas. The parsimony rubbed off on Golightly.

He once fell into debt after the transmission of his GMC pickup blew out and he got socked with a $4,000 dental bill. After that, he vowed never to be in a financial hole again.

“I like a pillow under my head,” he said.

Perhaps that’s why he wasn’t too disheartened to learn that he wouldn’t be ditching his day job any time soon.

“I suspected it would be tough to do,” he said. “I’m learning to relax and be patient.”

He has already taken Leonard up on some of his advice. He upped his 401(k) contributions and stopped plowing more money into his company’s stock. In coming months, he plans to rebalance his portfolio.

He also may buy a condo in Hollywood and rent out his place in Long Beach. Leonard and Toya say he could afford to buy a place -- with some caveats.

The first is that he covers his mortgage and expenses on his Long Beach condo. The second one is that he finds a Hollywood condo for about $250,000 and can put down $60,000 on a 30-year-fixed loan with an interest rate of about 6.5%. Another catch is that the properties need to appreciate 5% annually.

If Golightly can’t make all that happen, he can always rent a place in Hollywood to get more into the entertainment mix.

Regardless of where he lives, Golightly plans to keep plugging away at his writing.

“I don’t think you should defer your dreams,” Golightly said. “But I think you might have to manage them a bit.”

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This month’s makeover

Who: Glen Golightly, 45

Pay: $95,000

Financial Goals: Retire at 55, organize investment portfolio and consider buying a condo in Hollywood

Savings: About $240,000 in 401(k) and brokerage accounts and $36,000 in savings accounts

Assets: Long Beach condominium valued at roughly $450,000

Debt: $215,000 mortgage

Recommendation: Don’t quit your day job any time soon. Continue working for 20 more years to secure retirement. Rebalance portfolio to include more small-company stocks and international stocks. Stop buying employer’s stock. Shift some current savings into other investments.

About the planners: Scott Leonard is a fee-only certified financial planner and founder of Leonard Wealth Management in Redondo Beach. Eric Toya is a certified financial planner with the company.