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WALL STREET, CALIFORNIA | Money Make-Over / Southern
Californians Learning How to Succeed in personal Finances

Enhancements to a Winning Strategy

March 17, 1998|LYNDA NATALI | SPECIAL TO THE TIMES

Mary Kaptur arrived in Los Angeles in 1937 with $100 in her pocket and a bachelor's degree in business administration.

Today, she's almost a millionaire.

Hard work over a varied career in bookkeeping and office management jobs had a lot to do with it, but so did a no-nonsense approach to money.

"I got out of school during the Depression," said Kaptur, 83, who grew up in Missouri and earned her University of Kansas diploma on a scholarship. "You learn to manage your money when you don't have much."

You also learn to plan for the future, she says. She applied those lessons through the years as she pursued a working life that included stints bookkeeping for movie stars such as Merle Oberon and Jeanne Crain. She saved, kept her expenses in line, and taught herself about investing by reading books and magazines.

"I always saved and had enough to live on," said Kaptur, who is single and has no children, in summing up her attitude. She saw people around her "just spend and live to the hilt" and not worry about later financial security, and she was determined she'd never be one of them.

In retirement, Kaptur, who enjoys good health and an active social life, has been able to reap the rewards of all those years of prudent financial management. Her portfolio of real estate, stocks and bonds is worth nearly $1 million, and her investments and Social Security provide her with a very comfortable annual income of about $70,000.

She turned to Money Make-Over for advice on getting better returns from her investments, on IRA strategies and on making sure her estate is being set up as tax efficiently as possible.

"You are a very astute investor," Brent Kessel, a fee-only Certified Financial Planner in Santa Monica, told Kaptur after he reviewed her portfolio. "You manage your investments better than the vast majority of people I meet with."

Kaptur has about $442,000 in equity in a seven-unit apartment building just outside Beverly Hills and valued at $550,000, and more than $100,000 in equity the Westwood co-op where she lives. Her holdings also include about $105,000 in long-term municipal bonds; $80,000 in individual stocks, including shares in U.S. telecommunications, financial services and energy companies; $45,000 in Fannie Mae mortgage bonds; $38,000 in bonds and cash in an individual retirement account; $5,000 in Dean Witter MSDW Competitive Edge BIT, a new growth mutual fund; and $25,000 cash in a savings account.

Kessel was particularly impressed with the way Kaptur has handled her income property, bought in the early 1960s for $102,000. Through the hot markets of the '70s and '80s, when many real estate investors were selling their properties or borrowing against them to buy others only to regret it later as the market chilled, Kaptur just held on. The building provided her with $40,000 in income in 1996.

What some would fancy as investment savvy, the down-to-earth Kaptur, who grew up in a family that didn't have a lot of money for extras, regards as just plain good sense. She's been responsible for her financial well-being since her early 20s, when she decided to leave her steady but low-paying job in Kansas City, Mo., for the promise of California.

It was a gamble, but one that paid off eventually as she made a life for herself here. Today, Kaptur enjoys her money within reason, but she always keeps an eye on her bank balance. She sees to it that all her interest and dividend income--about $16,000 in 1996--is reinvested. She recently spent $10,000 to redecorate her co-op, for instance, but she was quick to add that she immediately put herself back on a budget. Her main monthly expenses include about $1,000 a month for taxes, maintenance and other building expenses for her co-op and $900 for the mortgage on her apartment building. She owns her car, a 1995 Ford Contour, outright.

Kaptur is well aware that her wealth is such that her heirs, who will include her sister's children and grandchildren, would be likely hit with estate taxes, and she has been looking into ways to address that issue.

One way to minimize estate taxes is through life insurance, which is a good solution for someone who, like Kaptur, will be bequeathing an illiquid asset such as real estate. And, in fact, Kaptur is particularly concerned that her heirs be able to keep the apartment building, which provides a good source of income, and not have to sell it to pay estate taxes.

She has been investigating increasing the death benefit on her life insurance to help her heirs cover federal estate taxes.

A smart move, Kessel told her. Her current cash-value policy provides a $104,000 death benefit. After researching the issue, Kessel recommended converting her existing whole-life policy to a single-premium whole-life policy from Great West Life Assurance Co. It would provide a death benefit of about $216,000, and if she buys it through Charles Schwab & Co., there would be no surrender charges should Kaptur need to cash in the policy herself.

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