A FRESH START.

Sheldon Blunt needs a new financial plan to help recover from a financial setback, shore up his retirement funds, and care for his aging parents

SHELDON H. BLUNT WAS SIX CREDITS AWAY FROM being awarded a master's degree in 1999 from Temple University. But when he filed a discriminatory conduct suit against Pennsylvania Hospital's School of Nurse Anesthesia, where he was receiving his clinical training, he was removed from the program. "At that point. I had invested in two years of schooling without any income," says Blunt, who works as a critical care nurse. "I paid for school from money I saved up; I [laid out] about $24,000."

Blunt represents a small pool of African American critical care nurses--fewer than 4%, according to the American Association of Critical-Care Nurses in Aliso Viejo, California. He pursued graduate studies in hopes of increasing his current $70,000 salary to $90,000-$120,000-plus. Now he is faced with trying to get into another program without depleting his savings the second time around. "For the last two years, I have been trying to build back wealth," he says. "After I got out of school, I became more aggressive about saving and investing. I looked at my financial situation and realized I didn't have any money saved up for my future."

Fortunately, the 40-year-old single male nurse has minimal debt of about $2300 from credit cards and a student loan. Trading online, he has created a stock portfolio worth $8,000 with positions in 14 companies, including Pfizer (NYSE: PFE), Southern Energy (Nasdaq: SEHI), Citigroup (NYSE: C). 3Corn (Nasdaq: COMS). General Electric (NYSE: GE), Texas Instruments (NYSE: TXN), WorldCom (Nasdaq: WCOM). Cisco (Nasdaq: CSCO), and El Paso Energy (NYSE: EPN). His strategy was to invest in companies that pay dividends. He also owns shares in six mutual funds valued at about $16,500, including a Roth IRA to which he contributes each year through automatic deductions and dollar-cost averaging.

But because of the $2,000 annual contribution limit to a Roth RIA, Blunt says his primary financial concern is to find another way to reduce his taxable income. Blunt lives in a duplex next door to his parents, who own the property, and he wants to save $10.000 to $12.000 to pay off his father's outstanding $9,000 loan before the property can be subdivided, and Blunt can own the duplex outright. Blunt is also planning for the inevitable--caring for his aging parents, both of whom are retired and in their 70s, "I will bear more financial responsibility as they get older," he says. "I have four siblings, but I am one of the few who is able to help (my parents)."

THE ADVICE

Blunt is still banking on the fact that once he finally acquires his master's, he will see his salary climb. To help him craft a plan to aid his parents, increase his net worth, and shore up his retirement savings, BLACK ENTERPRISE had him consult with Mark A. Mitchell, a registered financial advisor with AXA Advisors in San Juan Capistrano, California. Mitchell offers the following recommendations:

* Consider a reverse mortgage. Since the property is his parents' largest asset, it can be used as a potential revenue source through a reverse mortgage. He has a lot of income, is in the highest tax bracket, and has few tax write-offs. His parents have low income, are in the lowest tax bracket, and have some tax write-offs. The senior Blunts could sell their property to their son, who could take out a loan to pay them back in one lump sum, or he could make monthly payments. This is a win-win situation for everyone involved, says Mitchell, because this produces an income stream for his parents, and it gives Blunt property ownership, for which he can deduct the interest.

* Open up a SEP-IRA. Because he works for an agency and is not considered an employee, but more of an independent contractor, Blunt may be able to qualify for a simplified employee pension-individual retirement account (SEP-IRA), which is designed for those who are self-employed. This would allow him to get an immediate reduction of his taxable income and at the same time accrue retirement money at a much faster rate on a pretax basis. Individuals can contribute to a SEP-IRA--of 15% of their salary or $30,000 at year, whichever is less. Blunt currently has a Roth IRA, but lie runs the risk of his income increasing. Should he exceed an adjusted gross income of $115,000, he would no longer be eligible to contribute to the goth, The SEP makes mote sense for him.

* Apply for grants and student loans. Next time around, he should apply for student loans instead of depleting his savings. As long as he doesn't exceed the required adjusted gross income, he can deduct interest from student loans. But if he gets property and follows the aforementioned tax planning strategies, these things will lower his adjusted gross income.

* Keep cash on hand. Because he is giving his patents money--a couple of hundred dollars a month, he needs to keep a significant cash position. He should possibly look at Zurich money market: funds, which have no loads (sales fees).

* Stay invested in the market, He should keep his current contribution level as it is and maintain his asset mix of large-cap, midcap, and small-cap companies. Given recent market corrections, Blunt was wondering if he should bail out. But Mitchell notes that based on age, propensity for risk, and time horizon--he won't need the money over the next 25 years--he will do better staying invested in stocks than going into fixed-income investments.