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Californians Learning How to Succeed in Personal Fiances

Widow's Cautious Savings Style Needs Only a Little Fine-Tuning

March 21, 2000|JEANETTE MARANTOS | SPECIAL TO THE TIMES

After years of scraping by, Joan Shampoe is in the strange position of being a childless widow with plenty of money and no heart to enjoy it.

Shampoe, 67, tended to her widowed father for seven years and then, after retiring, spent 10 years nursing her husband Robert through debilitating back surgeries, small strokes and, finally, Alzheimer's. Toward the end, she set up a bed in their living room so he could easily look outside and she could always be near him. She was by his side, alone, when he died in their Ventura home Nov. 22, 1998.

Now Shampoe wonders who will care for her in her old age. She's also concerned about making her money last. But her ability to make decisions about her life and her finances are still clouded by grief from losing her husband of 43 years.

"I just don't understand how anybody gets over a death. I had a doctor who told me, 'You get only six months [to grieve] and anything over six months is clinical depression.' I told him, 'Apparently you never loved anybody.' "

Fortunately, Shampoe is in good shape financially except for some small, ill-advised investments in annuities, said Robert Wacker, a San Luis Obispo financial planner who reviewed the widow's situation for The Times. He assuaged her fears that some of her moves, such as paying off her mortgage early, were "crazy."

"You're a good saver, and you avoided some big missteps a lot of other people don't," Wacker said. "What you've done is conservative, not crazy."

Wacker believes there are relatively safe ways for Shampoe to get higher returns on at least part of her money, but he also thinks she needs to give herself some slack.

"The loss of a long-term spouse is not an easy thing to get over," he said. "It's taken five years for my mom, if she's over it now."

After her husband's death, Shampoe began sorting through the myriad savings bonds, individual retirement accounts and certificates of deposit they had started over the years and was stunned to discover she had about $340,000. About $90,000 of that came from her husband's insurance, but the rest she attributes to compulsive saving.

"My middle name must be squirrel," she said. "I didn't know what I was doing. I was just trying to hold on to money, and if you put it where you can't find it or see it, you don't spend it."

She socked money away in the 1980s, too, when she realized she would have to retire early to care for her increasingly disabled husband. She began doubling up her mortgage payments and paid off their 30-year loan 10 years early.

"I know some people would say, 'You should have invested that money instead of paying off your house,' but there's something about knowing your house is paid for. It's the best feeling in the world," she said.

Shampoe receives $1,613 a month from three pensions and Social Security, but she lives on about $1,000 a month and saves the rest for big expenses, such as her $2,000-a-year long-term care insurance premium and the trip she took to Pennsylvania last year to visit an old friend and her closest relative--her husband's 53-year-old niece.

Shampoe says she has tried to convince the niece to move in with her in exchange for an inheritance. Shampoe says she has no one else to care for her.

"I have neighbors who will pull a trash barrel for me, but there's nobody around who wants to change your Pampers," she said. "I know she would never put me in a nursing home."

It would be good if an arrangement with her niece works out, Wacker said, but Shampoe shouldn't count on it. She should continue paying her long-term care premiums. "It could be that you'll end up relying on the kindness of strangers--strangers you'll have to pay."

Shampoe's most immediate challenge financially is to increase the returns on at least part of her savings, Wacker said, while minimizing taxes.

Her taxes have been low for years, but Shampoe got a nasty shock from a $3,000 IRS tax bill this year, largely because she cashed in $20,000 of her savings bonds to paint and repair her home. The savings bonds had $10,468 in interest that she had to claim as income in one year.

She's loath to touch more of her savings, especially after that tax bill. She wants to maintain her principal and help it grow, but she neither trusts nor understands the stock market.

"I don't want to get rich," she said. "I'm just trying to figure out how to plan the rest of my life."

Wacker said she shouldn't worry about running out of money. Even though she's only getting about 5% to 6% interest, she earned nearly $19,000 last year on her various accounts and plugged it right back into savings. She could use $10,000 a year of that on a vacation or home health care if she likes, Wacker said.

The best overall strategy is to delay spending any tax-deferred money as long as possible. That's because she earns interest on money that would otherwise go to taxes and because odds are that tax brackets will rise over time, allowing her more income at a lower tax rate in the future.

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