The Van Almelos: Building a business

NEW YORK (Money Magazine) -- When Doug van Almelo's job as an airplane mechanic was transferred from Los Angeles to Indianapolis after Sept. 11, he and his wife Carole saw it as a chance to start over.

"With the high cost of living and the fast pace, it was hard to set aside money and time," says Carole, who runs her own Web design company.

Thanks to lower housing costs in the Midwest, the couple were able to use the proceeds from the sale of two homes in California to pay off all their debts and seed a $300,000 portfolio.

Determined to build up their investments even faster, they drastically cut their living expenses, hoping to save half of their six-figure salaries. Their plans hit another bump, however, when Doug was laid off in 2003.

Then, after working as a contractor for a year, he was called back to his old job - in Los Angeles. Now, Doug, 49, commutes home every three weeks for a two-day stay.

In two years, Carole and sons Alex, 15, and Nicholas, 11, will join him on the West Coast. "It's difficult, but we look at this as an opportunity to really save for all of our futures," says Doug.

Still, the van Almelos are eager to leave the corporate world behind and strike out on their own. Within 10 years, Doug wants to retire from his airline job. At that point, he and Carole, 48, hope to buy a small business or farm and work together in a second career.

Where they are now
Despite the fluctuations in their income over the past few years, the van Almelos have managed to build their total portfolio to $400,000, which includes $100,000 in 529 plans for the boys.

The rest of the money is spread among IRAs, 401(k)s and taxable accounts, with 35 percent in bonds, 39 percent in large-cap stocks and 20 percent in international equities. They also have $20,000 invested in a handful of individual stocks, including Google and Apple.

When they return to L.A., the van Almelos figure they'll buy a small condo, which should keep their housing costs roughly in line with what they are in Indiana.

Though he no longer gets a pension from his airline, Doug is socking away 20 percent of his pay in the company's 401(k), and Carole maxes out her Roth IRA. Luckily, Carole's parents have offered to help pay for the boys' school expenses, so they no longer need to add much to the 529s.

Carole and Doug have weathered several financial storms the past few years and have recovered admirably, says Indianapolis financial planner Walt Koon. But starting a new business at 60 is ambitious, especially considering that neither has a pension, Carole works for herself and Doug is in a volatile industry.

What they should do
The van Almelos' best shot at hitting their goal, Koon says, is to save as much as possible outside their retirement plans before they leave their traditional jobs - and to be far more aggressive in their investment strategy.

Right now about a third of the van Almelos' money is in Dodge & Cox Income (DODIX (Charts), a long-term bond fund. "A bond fund is for capital preservation. But at their age, they still need growth," says Koon, who recommends that they reduce bonds to just 9 percent of their portfolio.

He'd also like Carole and Doug to sell their individual stocks and pare back their stake in large-cap funds from 39 percent to 35 percent.

They should use some of that money to boost their stake in international stocks as well as mid- and small-cap domestic equity funds, which are more volatile than large-caps but historically have higher returns.

They can keep a lid on costs by selecting Money 70 index funds such as Vanguard Small-Cap (NAESX (Charts) and iShares MSCI EAFE (EFA (Charts).

"When it's crunch time, we've always been able to save money," says Doug. "I think we can stretch a bit more to fund our goals."(CNN)


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