Get With The Plan: January 20, 2008

Susan, 69, and Jack, 79, are gearing up for retirement, and they’re not planning to slow down. While many couples think they’ll spend less money when they retire, that probably won’t be the case for this couple.

‘‘Health insurance, travel, family vacations, furniture, home renovations,’’ Susan says. ‘‘We currently receive health benefits through my employer, but since I won’t have worked for 25 years, we’re not entitled to free benefits.’’

The Essex County couple (whose names have been changed) have set aside $661,300 in mutual funds, $465,084 in a brokerage account, $177,690 in bonds, $70,000 in a certificate of deposit, $59,573 in money markets, $42,000 in checking and $20,000 in an annuity. When she retires, Susan can expect a pension worth about $15,000 a year.

The Star-Ledger asked Nick Spagnoletti, a certified financial planner with MACRO Consulting Group in Parsippany, to help the couple look closely at their retirement needs.

‘‘They should have sufficient assets to maintain their present standard of living throughout their retirement,’’ Spagnoletti says. ‘‘Our analysis tends to be very conservative and they still appear to be in good shape.’’

Susan and Jack first need to reallocate their portfolio. Spagnoletti says that overall, they’re a bit too conservative.

When they start withdrawing assets for retirement, their initial withdrawal rate will be a hair more than 4 percent, he says, which should provide them with enough income even with inflation adjustments. But right now, if they experience poor investment performance or have an increase in spending early on, such as higher-than-expected health-care ex- penses, they could be looking at a much less favorable outcome. Spagnoletti encourages Susan and Jack to increase their equity holdings to at least 50 percent, perhaps even 60 percent, and some international and small- and mid-cap exposure.

‘‘Their portfolio is also very interest-rate-sensitive due to their bonds, bond funds and preferred stocks,’’ Spagnoletti says. ‘‘Current interest rates are still on the low side historically, and if they start to move up in the future, they could see their portfolio take a hit.’’

The couple hold dozens of funds in their portfolio, the majority of which were inherited, so too many holdings are spread out among multiple accounts.

‘‘It’s tough to keep track of what you have and how you’re doing this way,’’ he says. ‘‘They should consolidate where they can, but they need to take into consideration the tax ramifications of any moves they make.’’

Another of Susan and Jack’s goals is to buy a larger home to accommo- date family visiting from out of state. Whether or not that’s feasible will depend on how much more aggressive they are willing to be with their investment portfolio. If they get more aggressive and consider a town with lower property taxes, Spagnoletti says, they should be able to find something larger they can afford.

The couple also have to consider estate-planning issues. Spagnoletti says they have an unbalanced estate, with Susan owning the majority of assets because of an inheritance. If Jack were to pass away today, they would lose his $2 million exclusion because he does not own that much outright, so the estate could be subject to some estate tax after she passes.

‘‘I’d look to equalize their estate by retitling the home into his name and perhaps even some of the investment assets,’’ Spagnoletti says, noting if the estate is properly structured, the heirs could avoid all estate taxes depending on what estate laws are in effect at the time. He recommends they talk to an estate-planning attorney to look more closely at their situation.

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