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BUSINESS WEEK ONLINE
Transcript of July 27, 1995, conference


YOUR FINANCIAL FUTURE


Lorraine R. Decker, a financial planner in Houston, was the guest of the July
27 conference on planning your financial future, with Pam Black of Business
Week.


OnlineHost:    Copyright 1995 America Online, Inc.


OnlineHost: Material entered into AOL by persons other than those identified
as Business Week's employees or authorized representatives, acting on behalf
of Business Week, is material for which Business Week assumes no
responsibility.


OnlineHost:    Good evening and welcome! Tonight Business Week Online presents a
special conference on planning your financial future. You may need to chart a
course to send the kids to college, buy a new house, invest that nest egg
from Aunt Harriet, make your retirement years secure. Whatever the goal,
here's a chance for advice from an expert -- Lorraine R. Decker, president of
Decker & Associates in Houston, a financial planning service. Lorraine's
screen name tonight is DECK PLAN.


Lorraine Decker has a BA in journalism from the University of Texas and an MS
in financial services from American University in Bryn Mawr, Pa. She's a
Chartered Life Underwriter and a Chartered Financial Consultant who has
appeared in many forums, especially on retirement planning -- a subject on
which she has advised Congress. Earlier this year she appeared on ABC's Good
Morning America to discuss "The Retirement Myth."


Lorraine Decker will be on stage with Pam Black (Pambw), a staff editor of
Business Week who writes for the Personal Business section on topics ranging
from taxes and investments to health and travel. She's a graduate of the
University of Wisconsin and the Columbia Graduate School of Journalism.


The moderator of tonight's conference is Jack Dierdorff (JackBW), consulting
editor of Business Week Online. And now on to our discussion of how to plan
your financial future --  and answers to the questions you send us here on
stage via the Interact button.


JackBW:    Good evening to all of you on AOL. Hi, Lorraine Decker and Pam Black.


DECK PLAN:    Hi, Jack, glad to be here.


Pambw:    Hi, everyone.


JackBW:    Pam Black, you get to ask the first question.


Pambw:    O.K. Lorraine, is financial planning gender-blind, or are some issues
particular to women?


DECK PLAN:    Good question. Everyone wants to be financially independent, but
there are some things that women need to pay particular attention to. First,
they need to be willing to take personal responsibility for their planning,
rather than relying on others, whether those others are spouses, parents, or
professional advisers. And second, because their careers aren't as
predictable, it is important that they set their goals for financial
independence earlier than age 60.


JackBW:    T2CB in the audience has an investment question for you, Lorraine.
Question:    $50,000 invested in no-load mutual funds should grow to about what
in 25 years?


JackBW:    Some quick math, maybe, Lorraine?


DECK PLAN:    In 25 years? A good, no-load mutual fund in the top 25% of
performers should average a 12% annual return. So you can figure it should
double every six years in value.


Pambw:    Lorraine, what are the most important things to consider when starting
a financial plan?


DECK PLAN: To expand on my previous answer just a bit, the key to achieving
that rate of return is making certain your fund is in the top 25%. Now, to
Pam's question. The most important thing is having goals that you are willing
to make the financial sacrifices for today. For example, if I really am
serious about being in control of my financial future in 15 years, I have to
be willing to do whatever it takes to get there. If I am not prepared to save
or do investment homework, or spend time figuring out where to invest my
money, then I'm not serious about being financially independent in 15 years.
So I should stop kidding myself about being financially independent, in that
case.


JackBW:    Elena1915 in Los Angeles aims this one at you, Lorraine.
Question:    I have done pretty well with my investments in stocks during this
past year, but I am worried because I hear on TV that there may be a drastic
fall in the market. Am I better off just having my dollars in a bank savings
account?


DECK PLAN: As long as your funds are in mutual funds that are in the top 25%,
you shouldn't be concerned, unless, of course, you must have access to that
money immediately. If you are investing for the long run -- seven-plus years
-- you want to take advantage of a decline in the market by putting more
money in. If the real issue is should you try to time the market, studies
have shown that if you were perfect at market time -- selling at the absolute
high and buying at the absolute low -- the difference in your rate of return
would amount to less than 2% in a 20- to 30-year period.


JackBW:    RoxWllmsn in Sarasota, Fla., has a retirement-investing question.
Question:    Is there a minimum percent return that indicates success or less
than success in retirement investing?


DECK PLAN: Good question. The work we've done with thousands of families
shows that most individuals need a minimum of an 8% aftertax rate of return
to combat inflation, provide them funds that will allow them to maintain
their standard of living until they die. If you're investing in a sheltered
investment such as a 401(k), you need an 8% gross rate of return.


JackBW:    We're still in Florida. DRAMBOIE in Orlando asks this one.
Question:    Why mutual funds, why not blue-chip stocks?


DECK PLAN: Oh, goodness. Our experience indicates that if you are serious
about investing and will spend the time, you can achieve good returns in
individual stocks, but most people will not spend the time that a top fund
manager will spend in making a stock-selection decision. We believe that it
may be easier to hire talent than to compete with it.


JackBW:    MspenGR tosses this in.
Question:    What kind of investment plan would you suggest for someone who is
self-employed, and wants to be financially independent by age 55. I'm 39 now
and have amassed about $100,000 in net worth.


DECK PLAN: The first question is does the $100,000 include house, car, and
furnishings? If it does, then you should only be looking at the assets you
have for investing as your real net worth. If that's the case, you should be
looking at self-employed qualified plans, such as profit-sharing, for 10% of
your compensation and investing on a pretax basis. Meaning that you should
use tax-deductible dollars. By saving with pretax dollars, over 20 years
you'll have twice the value as saving with aftertax. One more point: For
self-employed individuals qualified plans are normally sheltered from
creditors. So they're a way to save money and keep it in a litigious society.


JackBW:    Pam Black has the next question.
Pambw:    Lorraine, by what age should one have a will?


DECK PLAN: If you own personal property such as a house or car or have
children, you should have a will.


JackBW:    Try this next.
Question:    Back to the self-employed, what's the difference between the
qualified plan you suggest and a Keogh plan?


DECK PLAN: Keogh was the name of the congressman who pushed the bill that
allowed self-employed people to have qualified plans. He's now dead, so we
call them qualified plans for noncorporate businesses. So they're the same.


JackBW:    SAMCHAP in Oak Ridge, Tenn., has a basic question about housing.
Question:    Is renting a bad financial decision?


DECK PLAN: (Laughing) Of course, it depends on your personal situation --
your tax bracket, how much rent you're paying, what your downpayment would
be, what rate of return you could have made on the downpayment, and whether
you're buying in a housing market where prices are expected to rise. Here's
the punch line: For most people, your home is NOT your best investment. Our
studies show that, contrary to popular belief, renting -- and saving the
difference -- will help you achieve financial independence a minimum of five
years sooner.


Pambw:    Are you better off going to a broker or investing directly in mutual
funds?


DECK PLAN: That's a tough one. We believe that you have to do your homework
either way, and that nobody cares more about your money than you do. So if
you do the homework, you probably should consider doing it on your own.


JackBW:    E129 just moved from Virginia to California and seems to have a
problem.
Question:    My fiance is $28,000 in debt. Is bankruptcy a good idea for him. He
is behind on all of the accounts. Any ideas would be appreciated.


DECK PLAM: Being in debt may be the least of your problems. It would be good
for the two of you to have serious discussions about what your goals are, and
how much you need to be saving to achieve your goals for financial security.
In most families, one person tends to be the saver, the other the spender.
And never do they talk about their long-term goals. Bankruptcy is not a good
option if you're simply going to go back into debt. People who go into
bankruptcy tend to do it more than once. The solution: Save, pay down debt,
and get good financial counseling. If you have to declare bankruptcy, don't
let it happen again.


JackBW:    BooBoo1969 would like some guidance next.
Question:    I'm 26 and married -- no kids. I'm the primary money-maker, and I
put 10% a week in a 401(k) (about $2,000 so far this year). My company
doesn't match very much. Should I lower my contribution and invest the money
elsewhere?


DECK PLAN: It depends on the value of the investment options available. Are
they good, competitive investments? And it also depends on your current tax
bracket. Normally, if you're in a 28% marginal tax bracket and your 401(k)
investments are above average return, you would be better off in the 401(k).
One caveat: Make sure you have sufficient funds to handle short-term
emergencies -- medical, auto collision, property losses, and the possibility
of losing your job.


JackBW:    Comco3 asks this.
Question:    I'm 30 years old, have $16,000 in mutual funds right now, want to
retire at 55, with $75,000 future per-year earnings. How much per year should
I save?


DECK PLAN: O.K., let me figure. You need to use one of our software programs
or call us (713 782-9974), and we'll be glad to talk about it. It's just too
complicated to explain here -- how much you need to save is based on five
major considerations: mortality, expenses, rate of return, inflation, and
taxes. If you vary any of the five, you get a different answer. And over a
lifetime all five will change. So you need software to let you have a plan
that evolves as your circumstances change. It's easy to plan with the right
tools.


JackBW:    Ebrian62 needs help with a fairly short-term investment.
Question:    I recently sold my house and made a nice profit. I would like to
invest this for 6 or 12 months, before reinvesting in another property.  What
are the best bets, options that I have?


DECK PLAN: Assuming you're still employed, you should consider a short-term
municipal bond fund. If you aren't employed or are retired, then you may have
problems on taxation of Social Security benefits. In either case, six months
is a very short time, so simply go into short-term Treasury bills -- or shop
interest rates on CDs. But you should not be "investing" and subjecting that
money to risk.


JackBW:    Condor31 has some worries about the stock market at this point.
Question:    Are mutual equity funds such a good idea now with the Dow and P/E
ratios being so high?


DECK PLAN: It depends on when you'll need the money. If you'll need it to be
financially independent in 20 years, I would still look at good, top-quartile
mutual funds and strongly consider going international.


JackBW:    LALOMAX wants your personal favorite, Lorraine.
Question:    What's the best investment you would make yourself today?


DECK PLAN: Gee. There are so many good opportunities. In the mutual fund
area, I like Longleaf Partners. I think for the long run, it's a good time to
get into international, especially emerging worldwide markets.


Pambw:    Lorraine, is it possible to do financial planning if you have no
disposable income?


DECK PLAN: Absolutely. When you are "investing," there are two forms of
investment you make. One is of time, and the other is with capital. When you
have no money to invest, it's sometimes hard to get motivated to study
investing. But by spending the time to do that, you will find that you'll
positionyourself in a career where you get the money you need to invest.


Pambw:    Lorraine, how do you map out priorities to make a workable financial
plan?


DECK PLAN: The first objective is to have sufficient funds to handle
emergencies. The next is to determine what income you need to live. Then, you
want to see what the difference is between your income and your expenditures.
The key is to understand what you NEED vs. what you WANT. Then, you set an
aggressive goal for when -- by what age -- you want to be financially
independent.


Financial independence means being able to show up for work on Monday because
you want to, not because you have to. Then you determine what you must save
-- and earn -- to achieve that goal. Most people can be financially
independent within 20 years of starting a job, if they know what they need to
do and have a plan for doing it. This isn't any get-rich-quick scheme. It's
just simply knowing where you're going. But in our society, we don't teach
people how to plan. So most individuals go through life without any financial
direction.


JackBW:    That's it for tonight. Thanks so much, Lorraine Decker and Pam Black.


DECK PLAN: Thanks, Jack.


Pambw:    Thank you, Jack and Lorraine.


OnlineHost:    Thanks to Lorraine Decker of Decker & Associates in Houston, Pam
Black of Business Week, and all the BW Online team for this conference on
    financial planning. And thanks to all of you on AOL -- with apologies to
those whose questions we didn't have time for. If you'd like to continue the
discussion, we invite you to move to the BW Online Chat Room or post comments
and questions on the BW Online Message Boards (try the Personal Business
category).


Transcripts of all BW Online conferences are available soon after the event
(look under Talk, Special Events, or Search BW, and for this one under Women
& Business, via the What's New button). Join us here in BW Online every
Sunday at 9pm ET in the Globe for our weekly conference with editors and
newsmakers. Thanks again and goodnight!


Copyright 1995 by The McGraw-Hill Companies, Inc. All rights reserved.