This Trainer Needed Financial Training

This Trainer Needed Financial Training

Social worker, entrepreneur, author, public speaker — Cassandra Mack was a lot of things, but “investor” wasn’t one of them. That changed after a chance meeting with a childhood friend, Ivory Johnson, director of financial planning at the Scarborough Group, an investment advisory firm in Annapolis, Maryland. “We grew up together,” says Mack. “Ivory told me that I needed to start investing. What’s more, having my own company [would allow] me to cut my taxes while I put money away for retirement,” says Mack, who in 2000 started a human relations consulting company, Strategies for Empowered Living, which provides training to human services organizations. “I didn’t do any real investing then. I had a small bank account and that was about it.”

Today, Mack has a six — figure retirement account, a college fund for her 2 — year — old, and a plan for the future. New York — based Strategies for Empowered Living is set up as an S corporation, so the company’s earnings flow through to Mack’s personal tax return, without being taxed at the higher corporate rate. Those earnings, in turn, can be sheltered from tax by a simplified employee pension (SEP) plan. The paperwork is minimal, and the money she invests in her SEP plan reduces the taxable income she reports to the IRS, to New York State, and to New York City.

Tax — deductible contributions to a SEP can be as much as 20% of self — employment income, to a maximum of $44,000 in 2006. “In the three years since I’ve set up this plan,” says Mack, “my account has grown to about $120,000. I try to make monthly contributions of $500 so it’s like paying any other bill.”

Mack’s account has grown not only because of regular contributions but also because of appreciation within the investment accounts. “Cassandra’s SEP plan is invested in stock funds,” says Johnson. She’s investing with a long — term horizon, and stocks have been outstanding long — term performers. “About 65% is invested in U.S. stocks and 35% is overseas,” says Johnson. “That’s a fairly large allocation to international stocks, but I think there’s lots of opportunity in foreign companies now.”

Johnson is especially upbeat about India. “It’s the largest democracy in the world,” he says, “with a highly — educated work force. U.S. companies are outsourcing work there so Indian companies are likely to do well.” Of the 35% of Mack’s portfolio that’s invested overseas, about 5% is in emerging markets such as India.

Small — and medium — sized foreign companies account for another 5% of Mack’s portfolio. “We’re hoping to own the next Comcast in Taipei or the next Jiffy Lube in Bangalore,” says Johnson. “On the domestic side, I have been increasing her exposure to energy companies.”

Although Mack’s SEP is fully invested in stocks, she has conservative holdings, too. “Ivory told me that I should keep some cash, in case of an emergency,” she says, “so I have a money market fund.” With a balance around $15,000, this low — risk cash reserve can provide her with several months