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MIDDLE-AGERS' DREAMS CAN COME TRUE THESE SAVERS ARE MAKING UP FOR LOST TIME

Nine years ago, he was divorced and supporting three kids. She was working in essentially the same decent-paying job she'd been in since getting out of high school.

They got married. And they spent a lot of money. Then they started thinking about retirement. With savings that didn't amount to $40,000, they decided to shape up.

Now, she's 47 and he's 57. And together they've accumulated a portfolio of stocks and mutual funds worth more than $278,000 today.

Their goal: A $500,000 nest egg and an early retirement with $60,000 a year in today's dollars.

"I'm confident we're going to do it," says the man, who earns $52,000 a year as a manager for a Buffalo company.

He and his wife, who earns $35,300 a year, want to bid their employers goodbye when he's 62 (five years from now) and she's no more than 59 (or another 12 years).

Guess what? They're going to be able to do it, barring a calamity, according to a consensus opinion from a team of four certified financial advisers from Western New York.

The couple, whose names are being withheld, submitted to a Money Makeover as part of a continuing series in The Buffalo News in conjunction with the Institute of Certified Financial Planners.

The planners, Lawrence C. Jones of West Seneca and Claudia McKay, Gary Witten and Carol Martin, all of Williamsville, did throw some water on the couple's dreams.

They pointed out the couple needs some insurance policies to guard against loss of income through disability and deterioration of assets because
of costs of long-term care.

"One item that can throw a monkey wrench into their retirement is higher medical expenses and potential chronic illnesses such as Alzheimer's disease," said Jones.

Ms. McKay added that a stock market decline for several years also could dampen the plan.

But, if the market keeps humming and if the couple modifies its aggressive investment portfolio somewhat, they'll still have $3.47 million in their portfolio if the husband lives until age 100, according to Witten.

Of course, if the portfolio only returns 8 percent, the husband will be fine if he lives to age 85, but the money will run out by the time the wife is that age.

Ms. McKay and Ms. Martin are more skeptical than their male counterparts about the couple's ability to spend the equivalent of $60,000 in today's dollars every year during their retirement.

Witten is more optimistic. In fact, he says the couple may exceed their expectations and might face estate tax problem unless the tax laws are changed.

But he and his colleagues agree that the couple can set up trusts to prevent taxing authorities from withdrawing from their portfolio.

Indeed, there are a number of things the couple can do to protect their pursuit of plenty of money for a long life of leisure.

For one thing the couple, who own a comfortable and well-furnished townhouse, needs to continue their commitment to retirement saving. They've invested at least $15,000 a year during their marriage and are at the level of $21,000 a year now. Any raises they receive will bump up the investing, the husband promises.

That commitment is what got them to seven-fold growth of their retirement plan. They also have been helped by the stock market's remarkable bull period and some excellent mutual fund and individual stock choices made by the husband.

"My portfolio is up 27.4 percent for the 10 stocks," he said, adding that he checks his investments daily using a Deluxe Quicken program that he's become addicted to. "I can't believe it! The stock market has made so many people rich," he said.

The wife points out that his favorite pastime is to lecture people about the value of investing and the miracle of compound interest. "He harps at his kids constantly," she said.

Now he wants to make sure he's got enough stored up to last his wife if she lives to 95 and he lives to 85. Plus he'd like his three children to be able to split about $150,000 when he dies.

The planners said the portfolio should hold up.

But Witten suggests changing the mix of assets. He said the couple has too much of their money invested in large-growth, large-value and small-growth stocks and mutual funds.

Witten recommends they move money into emerging company funds and international stocks to create a more diverse portfolio. Plus, he said, the couple should move a bit of money, about 10 percent of their assets, into cash equivalents because they're almost fully invested in the market, particularly in aggressive, high-risk securities.

They have almost no money for other use, Witten said. The cash they set aside could be housed in a Money Market account and could be used to buy more securities at a discount if the market dives, Witten said.

The couple is putting the maximum their employers allow into 401(k) plans, which only became available in the past five years.

The husband's plan is allowing him to build wealth quicker because his employer matches his contributions into the plan.

The planners say that if the wife works through age 59, the husband should be able to quit at age 62 and begin preparing their 30-foot boat for long cruises.

Yet to make sure the tour isn't disrupted, the couple needs to consider long-term care insurance, the planners said. The cost of policies to cover both of them is about $1,650 per year through a "partnership" plan, a cost-effective program available through insurance companies, Ms. Martin said.

She said that the cost of such insurance is a lot less than paying about $63,000 per year per person for nursing home care.

She points out that long-term care costs are in addition to costs of medical treatment and therapy.

Those costs could be paid with a Medigap policy, she said. The policies start at about $700 per year per person. Those policies or a Medicare Health Maintenance Organization plan should be explored. The HMO plans could cost nothing unless they need prescription drug coverage.

Since it is the wife's income that will pay most of the bills when the husband retires, Ms. Ms. McKay recommends that the wife add to the disability coverage she gets through her job.

Also, the couple needs to get a will and a durable power of attorney, which allows someone to manage financial affairs of people who are incapable.

If the husband really wants to leave $150,000 to his children, he should take out a life insurance policy specifically for that goal, listing them as sole beneficiaries, Ms. McKay said.

"His second wife will have a much better life after he is gone if this is settled at his death," she said.

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