Get With The Plan: January 18, 2009

Despite the struggling economy, Stephen, 35, and Tanya, 34, are doing okay. They have stable jobs and they’ve been good savers. Now, they want to go a step further and make sure they’re on track for their big goals.

‘‘We’d like to buy a bigger house, estimated around $750,000, within the next one to two years,’’ Tanya says. ‘‘We’re also saving for retirement and college.’’

The couple, whose names have been changed, also want to see how their finances change if Tanya soon goes to work part time instead of full time. So far, Stephen and Tanya have saved $190,834 in 401(k) plans, $102,531 in IRAs, $47,630 in mutual funds, $22,827 in a brokerage ac- count, $19,647 in a certificate of deposit, $10,519 in a money market and $2,000 in checking.

The Star-Ledger asked Jonathan Bernstein, a certified financial planner and certified public accountant with Hudson Wealth Management in Red Bank, to help the couple with their future plans.

‘‘They have done an excellent job of saving for their financial goals,’’ Bernstein says.

But in order to increase their chances of success, they need some tweaking, and over time, they’ll need to monitor the funding and the investment performance of the assets set aside for each goal, he says.

First, on their goal of upgrading to a larger home in the next two years, Stephen and Tanya need to continue building cash for the purchase.

If they can sell their home in the $475,000 range, they’ll have about $200,000 left over after paying off the mortgage. They have about another $30,000 in cash, and they’re on track to save an additional $20,000 a year in cash, earmarked for the down payment.

College savings is another area where Stephen and Tanya need to save a little more to reach their goal of funding a state education for their two children. To fully fund the tuition, they’d need to save an additional $100 per month per child, or a total of $350 a month for each child.

For retirement, they can anticipate Social Security payments of $28,000 a year for Stephen and $29,000 a year for Tanya once each turns age 67. Stephen and Tanya are currently saving the maximum to their 401(k) plans, and those savings will fund the difference of their estimated annual expenses of $157,200 in today’s dollars.

This assumes the couple’s investments earn 6.6 percent on average for the duration of the plan.

The outlook for retirement will be somewhat different, though, if Tanya switches to part-time work for a few years while the kids are young. She’ll have less income and that may affect their savings ability.

‘‘If they are willing to adjust the investment amounts, the date of retirement or the date of Tanya’s reduction to part-time, they can influence the results over time,’’ Bernstein says.

11809

Advertisements