Get With The Plan: December 7, 2008

Mickey and Chrissy, both 41, are willing to take a high degree of risk with their investments, despite the downturn. They hope their willingness to take chances will help them reach their goals.

‘‘We want to retire by age 62 and pay for four years of college for our kids,’’ Mickey says.

The couple, whose names have been changed, has saved $52,000 in employer-sponsored retirement plans, $76,000 in IRAs, $10,000 in a money market and $3,000 in checking.

They’ve also set aside $34,000 in 529 plans for their two children, ages 6 and 4.

The Star-Ledger asked Michael Pirrello, a certified financial planner with Mill Ridge Wealth Management in Chester, to help the Morris County couple see where they can improve their financial plan.

Pirrello says while families battle rising living costs and unemployment risks, the goals of retirement and college savings often take a back seat.

‘‘In the midst of this unprecedented financial market correction and economic recession, Mickey and Chrissy are fortunately safe, but they are still finding it a real challenge to make progress on their financial goals.’’

On their side: They carry no debt other than their mortgage, have proper term life insurance coverage and an untapped home equity line to serve as an emergency. Still, they must make some adjustments to keep on track and be realistic with their goals.

Mickey and Chrissy have 21 years to create a nest egg to support them in their retirement years. They believe they can live comfortably in retirement on approximately $79,000 in today’s dollars, which amounts to approximately 75 percent of their current gross income. But Pirrello says at their current savings rate with an 8 percent average return, they will potentially run out of retirement funds at age 79.

To increase their chances of success, they should adjust their goals, Pirrello says.

If they can tighten their belts and save an addi- tional 3 percent each year, plus work until age 66, they can provide themselves with the retirement they desire. In addition, future considerations like Chrissy returning to work full time as the children get older would have a significant impact on their projections.

They’ve done a great job jump-starting their college savings plans, but college costs are soaring. The sticker shock: In 2008, the average public in-state school cost is $17,336 a year and New Jersey’s is the second highest in the nation, and college costs rise on average 6.5 percent a year, he says.

Pirrello says that means they would need more than $160,000 to fund four years of public school for their older child and more than $180,000 for their younger child. To meet those costs, they’d have to save approximately $825 per month, assuming an 8 percent return on their savings — but that sum doesn’t fit into their budget.

When juggling the dual goals of retirement and college savings, Pirrello says retirement has to come first.

‘‘It is impossible to get a loan to retire, but it is very possible to get a loan to attend college,’’ Pirrello says. ‘‘Similar to the oxygen mask on the airplane theory, take care of yourself first and then you will be more able to take care of those you may be responsible for.’’

He says as cash flow permits, they should continue to contribute funds to the 529 plans, but not at the expense of their retirement savings.

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