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Being at Home With a Difficult Challenge : Illness Forces Change in Approach to Finances

June 10, 1997|HELAINE OLEN

Jane LaFazio and Don Strom never used to worry about money.

The San Diego couple traveled widely and dined out frequently. Strom, a high-ranking personnel officer for Hewlett-Packard, managed the couple's money.

"He handled all the finances; I just went to Nordstrom's or called the travel agent," LaFazio recalled with a smile.

That was before Strom, now 51, suffered a near-fatal brain aneurysm five years ago that left him permanently disabled and unlikely ever to resume full-time employment.

"I basically cried for the first 2 1/2 years," LaFazio, now 46, said.

"On the outside, we look like nothing has changed," she said. "But now, we don't have any discretionary income. I worry about finances, and my husband has brain damage and is still learning to read and write" again.

The couple, who have no children, are fortunate that Strom has been covered by a long-term disability policy, were insured with a health maintenance organization and that they had already saved a significant amount of money. Without the wise planning and insurance, the illness would have meant a quick, dramatic drop in standard of living and eaten a big hole in their savings.

But that's not to say that their crisis has been without severe frustrations. LaFazio repeatedly battled their health-care provider when it attempted to cut off Strom's speech therapy after a mere six weeks and several times thereafter.

Through it all, friends and family have helped out, earning the couple's enduring gratitude. For example, a former teacher LaFazio met in an art class now tutors Strom in reading and writing two mornings a week at no charge. Strom has improved, so much so that he now volunteers regularly, doing administrative work for the San Diego Brain Injury Foundation.

But Strom has been unable to fully continue his active, hands-on management of the couple's finances, relying instead on their longtime stockbroker for help because LaFazio is just beginning to learn about investing.

According to Margaret Wertheimer, a fee-only certified financial planner in Mount Shasta, Calif., this money-management predicament partly explains why Strom's and LaFazio's thinking about their finances has yet to be fully adapted to their current circumstances.

LaFazio, a marketing coordinator for an architecture firm, would like to be in a position to consider taking an early retirement so she can spend more time working on her painting, which she took up shortly after Strom became ill. But she wonders whether that will even be possible.

Together, Strom and LaFazio, now married 20 years, grossed about $125,000 a year before he became ill. Today, their income--LaFazio's salary and Strom's company and government disability benefits--is less than two-thirds of what it was. As for what they have saved, they have several hundred thousand dollars in various investments, Hewlett-Packard stock options worth slightly more than $50,000 that have not been exercised, and more than $100,000 in equity in their San Diego home.

Overall, 65% of their holdings are in individual stocks such as Hewlett-Packard, Boeing, U.S. Bancorp and Cymer; 28% is in bonds; 3.5% is divided among five mutual funds, the largest amounts being in the GT Global Growth and Income and the Smith Barney Concert Social Awareness funds; and 3.5% is in money market funds.

For a comfortable retirement in California, though, most planners would suggest a couple would need close to $1 million in savings, possibly more if they want to prepare for medical expenses as they age. Strom and La Fazio are now far from that goal and are not adding to their nest egg.

Also making an early retirement less likely, Wertheimer said, is the fact that Strom's disability payments--now close to 40% of their income--will stop when he turns 65.

"I would be wary about leaving the work force," the planner told LaFazio. "I don't think your investments can support your current style of living."

There may be room for a compromise, though, Wertheimer said. It's a matter of deciding on priorities. LaFazio has made numerous adjustments--from eliminating dry cleaning to seeking a less-expensive tax preparer--but she could reexamine her finances to search for additional ways to save.

"If you decide that the way you live now is the most important thing, you will have to keep on working full time," the planner explained. "You need to know how much you are spending and on what. Everything you do has a price tag."

The planner believes that LaFazio needs to take a more active role in the family's financial life. For example, LaFazio is still unclear about crucial matters such as whether Strom will be eligible to collect a pension from Hewlett-Packard, and she could not state the difference between a mutual fund and individual stocks.

"I'm not a number cruncher," LaFazio admitted.

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