Originally created 02/10/01

Retiree seeks fiscal control

Terry Grosberg shuffles into the office of her new financial planner, carrying a cup of coffee, a bulky file of personal information and a polite look of wary uncertainty.

She's wishing she didn't have to do this.

"The one magic question is: How long will I live?" said the 71-year-old widowed retiree. "If I knew the answer to that, I could do this myself."

Mrs. Grosberg is participating in The Augusta Chronicle's financial makeover series, in which four local residents are paired with financial planners for a year of advice.

The Chronicle will track their financial progress throughout 2001 and will have personal finance stories on various issues along the way.

Ms. Grosberg is paired with Will Rogers, senior financial adviser at American Express Financial Advisers Inc. Her main objective is to maintain her current lifestyle, which costs her about $4,000 a month.

"There's no single solution for handling all her money," Mr. Rogers said. "By having different financial solutions put together in the right ratios, we can really help her with taxes."

Right now, all Mrs. Grosberg's assets are in standard individual ownership, which leaves her open to heavy taxation. Mr. Rogers suggested taking a "pro-active" stance on taxes.

For example, Mrs. Grosberg, who donates faithfully to her church, could take her $140,000 in General Electric stock and create a charitable remainder trust that would allow her to manage the money without paying capital gains taxes.

Mrs. Grosberg could sell the stock within the trust, reinvest in income-producing stocks and take low-tax withdrawals spread out over the remainder of her life.

When she dies, the principal value of the GE stock goes to the charity of her choice.

"It's basically planned giving," Mr. Rogers said. "You leverage the tax code so you can get the most out of what you're doing."

He said such a trust may not be the best move for Mrs. Grosberg because she likes to have more control. They discussed other tax-saving strategies, such as investing in tax-free municipal bonds and tax-sensitive mutual funds.

Discussions continually led back to asset allocation: How can Mr. Rogers rearrange her assets to save her the most money on taxes while providing the most comfortable monthly income and allowing her to maintain some control? The answer may be in a tax-efficient stock portfolio.

If Mrs. Grosberg decides a trust mechanism isn't for her, Mr. Rogers said he would suggest transferring a portion of her GE assets into low-dividend stocks, because dividends are taxable.

"The tax benefits aren't nearly as strong as with a charitable remainder trust," Mr. Rogers said. "But the control issue is much stronger."

The two will meet again in two weeks.

Reach John Bankston at (706) 823-3352 or jbanks15@hotmail.com


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