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A Camarillo divorcee takes financial control

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Special to The Times

During her three marriages, Marjorie Diehl says she never felt in control of her financial destiny.

“I was raised to be a mother and a housewife,” said Diehl, 58. “I deferred and didn’t take a stand.”

When she completes her divorce from her third husband at the end of this month, Diehl finally will be in charge of her financial future. The trouble is that she doesn’t know what to do with her money.

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A human resources manager for a uniform company in Burbank, Diehl makes close to $90,000 a year. She also picks up $6,600 a year renting out a room in her Camarillo house. Her only debt is the $92,000 mortgage balance on the three-bedroom home, valued at $400,000.

She has about $422,500 in savings and retirement accounts.

Those savings, however, will have to carry her well into old age. Diehl has longevity in her genes. Her 85-year-old mother still works as an extra in movies -- often as a grieving grandmother in funeral scenes -- and plays golf every weekend.

Diehl’s vision of retirement isn’t lavish. She dreams of hanging out with her three grown children, all living in Southern California.

A crossword puzzle whiz and self-professed game show diva, she said it would be fun to land an appearance on a television game show.

But most of all, she wants to know whether she’ll be financially secure.

“It’s going to be a close call,” said Mark Gleason, a chartered financial analyst with Wescap Management Group in Burbank. “She doesn’t have a lot of money, so the money she has needs to be working very hard for her.”

Thus far, Diehl’s misstep in managing her money has been focusing on the wrong risks. Fearful of losing money in the stock market, she’s harbored funds in low-yielding bank savings accounts.

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But the bigger jeopardy for Diehl isn’t losing money in stocks.

“The risk lies in her outliving her assets,” Gleason said.

She’s done a better job on cash flow. Several years ago, she refinanced her home into a 20-year loan with an interest rate of about 5.5%, allowing her to pay it off by the time she hopes to retire at age 70. She’s avoided the temptation to cash in on her ample home equity and pile on debt with more refinancings or credit lines. As a result, her monthly mortgage is just $770.

Diehl also pinches pennies. She takes the Metrolink train from her home in Camarillo to Burbank daily, slashing an estimated $400 in monthly gas costs. She took in a renter to boost her income, adding $550 a month. Her car loan is paid off. And the last vacation she took was a trip to the Hotel del Coronado in San Diego that she won from the game show “Merv Griffin’s Crosswords.”

Diehl helps her 21-year-old daughter pay for tuition and books at a local community college. She’s also been paying legal and court fees for her divorce, totaling $45,000 since her separation from her most recent husband four years ago.

Altogether, Diehl’s annual expenses tally $56,400. She plows what’s left into savings and her 401(k) account, stashing away nearly $10,000 annually in the company retirement plan.

“I don’t know how much more she could ratchet down,” Gleason said.

With her divorce behind her, Diehl said her expenses probably would go down. Meanwhile, her priority will be getting her investments into better shape so they last into her retirement.

Nearly $219,000 of her money languishes in bank savings accounts that earn a paltry 3% in interest. An additional $204,000 in her 401(k) isn’t optimally diversified. A little more than half is in big-company stocks, a quarter is in bonds and the rest is in a money market account.

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“Her money is working at about two-thirds speed,” Gleason said.

To reap bigger gains on her investments, he recommends moving $61,000 from her 401(k) into an individual retirement account. Doing so would give Diehl more investment options than she has in her current 401(k) plan.

Gleason suggests that she spread the remaining amount in her 401(k) among more of the funds it offers, investing in mid-size and small-company stocks. His recommended mix: 40% in large and mid-size U.S. company stocks, 30% in large and mid-size foreign company stocks, 15% in small U.S. company stocks and the remainder in money market funds and bonds.

He recommends doing the same with about $157,000 in her bank accounts, one of which is at failed IndyMac Bancorp. And the rest of the bank money should go into an “extremely diversified” grouping of different asset classes, including foreign stocks, energy and other commodities and real estate investment trusts.

That mix is far more diversified than most of Gleason’s clients have, but Diehl needs big returns fast without adding too much risk. By investing in a variety of assets, she’ll earn the money she needs for retirement while keeping her portfolio’s volatility under control.

Gleason projects that Diehl will earn 8% to 10% annually on her investments.

The other part of Diehl’s financial picture is her earning power. Both she and the planner figure she’ll need to keep working for at least 12 more years to secure her in retirement. Although Diehl said she was raised to be a homemaker, she has worked steadily throughout her life and plans to keep working until she’s 70.

If she balances her portfolio, keeps working and hangs on to a renter to pad her income, she’ll have about $1.3 million when she retires, Gleason predicted.

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“More likely than not, she’ll be fine,” he said.

But there won’t be a lot of wiggle room. Since Diehl expects to live a long life, she’ll need to earn solid returns in the coming years so her money will last through retirement.

If her health falters or she’s otherwise unable to keep working, her expenses will soar and threaten her financial security. As with most retirement plans, Gleason noted, inflation will eat into Diehl’s nest egg in the years ahead.

To keep her expenses low, the planner said, she and her daughter should try to get financial aid for college. If Diehl’s savings are on track in a year or two, she might then be able to help her daughter pay for school costs.

Should Diehl’s retirement plans falter, her financial parachute will be her house. Gleason recommends that Diehl take out a line of credit on her home to cover future emergencies.

Diehl is taking Gleason up on his advice. She and her estranged husband withdrew enough money from their IndyMac account before the bank’s collapse to bring it within the limits covered by the Federal Deposit Insurance Corp.

Diehl is relieved to be in charge of her finances and have a plan for the future.

“At least I’m not out in left field,” she said.

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Begin text of infobox

Taking charge

Who: Marjorie Diehl, 58

Income: $90,000

Goals: Invest her money more wisely so she will have a financially secure retirement

Assets: $422,500

Debts: $92,000 in mortgage debt

Recommendations: Move money out of low-earning bank accounts and into a higher-earning mix of large-, medium- and small-company stocks and bonds, both domestic and international. Roll over about $61,000 in her 401(k) to an individual retirement account with a similar mix, and diversify her remaining 401(k) money similarly. An “extremely diversified” portfolio should help her reap greater returns while controlling the volatility inherent in such a mix.

About the planner: Mark Gleason is a fee-only planner and a chartered financial analyst with Wescap Management in Burbank.

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