Charity Begins At Home

Instead of retiring to a life of leisure, the Durhams are caring for a foster child and less-fortunate relatives. An expert looks at their finances.

Your Money

April 03, 2005|By Janet Kidd Stewart

For a couple in their 40s, Lola and Don Durham have built an enviable nest egg: about $325,000 in investments, a Virginia home worth $375,000 and two Navy pensions.

"I grew up dirt poor and still live a pretty simple life," said Don Durham, 44, who works in human resources for a state hospital. "Our kids think we're boring. We don't go out to eat, we do our own yard work, change our own oil in the cars. You see people in our income range buying a lot more, but we never had that thought process where we had to have a lot of toys."

After all that conservation and after raising two children to adulthood, the couple started dreaming of retiring early and spending the money on traveling the world.

But life didn't turn out that way for the Durhams, whose nest has been filling up in recent years instead of emptying out.

Lola Durham's 87-year-old mother and Don's 39-year-old mentally disabled brother live with the couple, along with a foster child who is almost 3 years old. The Durhams also are trying to take in the child's younger sister and adopt both children.

"It has been my heart's desire" to help children in need, said Lola Durham, 48. "It tears my heart to think of abused or neglected children, and I've always wanted to do this."

For now, the globetrotting must wait, while the Durhams care for the three generations in their home. Don Durham is a full-time compensation analyst, while his wife stays home caring for their relatives and the child.

"It's a bit chaotic at times, but we're both disciplined and structured, and the house usually runs pretty much like a ship," he said.

They would like to say the same for their money, but the couple's finances have become a bit unwieldy over the years as they changed jobs and added to their savings.

Their portfolio is spread across more than a half-dozen investment firms or individual stocks, and that's in addition to their Navy pensions. They have Roth and traditional individual retirement accounts, and several taxable mutual funds.

To help make sense of it, Your Money turned to Norm Mindel, a certified financial planner with Terra Securities Corp. in Schaumburg, Ill. Mindel also is a certified public accountant and an attorney.

Mindel was impressed with the substantial savings the Durhams have built.

"I see a lot of good news here," he said. "Compared with many, many people, they are doing very well."

The hitch is that their spending obligations, though admirable, are onerous.

Lola Durham's mother pays for her own expenses, and Don Durham's brother pays most of his bills with an inheritance from their father and government assistance. Getting the foster children to adulthood will require a huge outlay, especially since the Durhams want to help with college.

Another factor is the couple's strong financial commitment to their church. They give $250 a week to their nondenominational Christian church and more to individual members as needs arise.

His annual pay is about $50,000, but the couple more than double that figure with their Navy pensions. The way they see it, they're still earning six figures, and they want to continue giving at their previous level.

Cutting back on the charitable giving "isn't negotiable," he said, and she agreed.

Mindel said he respects the Durhams' charitable goals but that they need to understand that continuing to give in that way will mean delaying retirement. He pointed out that there are many ways to give - from volunteer work to setting up trusts.

The couple had dreamed of retiring fully by the time he turns 50, but they recently accepted that they would probably have to wait a decade. Mindel thinks it will be more like 15 years, depending on how their investments perform.

Mindel had two other big concerns. First, they have $300,000 in combined life insurance policies and "should have at least $750,000 in term [insurance] on Don's life," Mindel said, to replace the lost pension and other income when he dies.

Although Lola Durham is no longer working for pay, her pension, which ends when she dies, makes up a significant portion of the family financial plan. Hiring people to help with the family duties at home would cost a tidy annual sum, Mindel said, so the couple should consider adding term insurance on her life.

The couple also should start exploring long-term-care insurance and set up living trusts and wills, he said. With adult and very young children, not doing that would leave a lot of loose ends for their heirs to deal with.

Finally, the couple's stock investments are virtually all in U.S. companies with large capitalization, he said.

Forget the prognostications that large-cap growth stocks are due for a win and diversify into small caps and international funds, Mindel said. He recommended a portfolio with about 70 percent invested in stocks and 30 percent in fixed-income investments.

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