Get With The Plan: January 4, 2009

Doug, 48, and Vivian, 47, are saving for the dual goals of retirement at age 60 and college educations for their twins, 11. They’d love to see Vivian cut back on work so she can spend more time with their kids.

‘‘We have a relatively high risk tolerance, having weathered the ups and downs in the market with high equity allocation,’’ Doug says. ‘‘We’re looking toward long- term returns rather than short-term gains.’’

Doug and Vivian, whose names have been changed, have been good savers and their only debt is their mortgage. They’ve saved $362,000 in 401(k) plans, $100,000 in IRAs, $91,000 in bonds and bond funds, $45,000 in a brokerage account, $50,000 in a money market and $5,000 in checking. Doug also has a cash balance pension plan with his employer. Finally, there’s $54,000 in 529 Plans for education funding.

The Star-Ledger asked Jody D’Agostini, a certified financial planner with AXA Advisors in Woodbridge, to help the couple see if they’re on track to meet their goals.

‘‘Their goals are to be able to educate their children while saving for retirement at the respective ages of 60 and 59,’’ she says. ‘‘They have been diligent savers and should be able to realize their goal of an early retirement.’’

A big plus for their retirement plan is Doug’s lucrative pension. He expects to receive a monthly payment of $5,500 when he leaves work. D’Agostini says the pension benefit, combined with their IRA and 401(k) assets, and eventually their Social Security payments at their full retirement age of 661⁄2, should allow the couple to continue their current standard of living well into their 90s.

Even with this bright outlook, there are areas in which the couple could improve.

It should be a priority to continue to fund Doug’s 401(k) plan and also to fund Vivian’s IRA each year. Then, their biggest challenge is repositioning their savings so they can accomplish their goals with the highest possible return for a reasonable level of risk.

The couple completed a risk tolerance questionnaire for D’Agostini and she found they are indeed aggressive investors, willing to take on risk to accomplish their goals with a timeline of a full 12 years. But, she says their accounts are currently out of balance.

Overall, Doug should pare back his investment in company stock. D’Agostini says no more than 10 percent of assets should be invested in any one company, no matter how profitable the company may appear to be.

They’ve got a lot of large-cap holdings, and D’Agostini says the couple should consider other aggressive, non-correlated asset classes in their portfolio.

‘‘If you spread your investments across different asset classes, you can help minimize the impact of market downturns, which will inevitably occur,’’ she says.

D’Agostini says the couple should consider long-term care insurance to help fund any care they may need in their older years. With longer life spans and with life expectancies for both genders into the early 80s, the need for long-term medical care is also expanding, she says.

‘‘The cost of this care can quickly erode your retirement assets,’’ D’Agostini says. ‘‘Generally, the earlier that you obtain long-term care insurance, and the better your health, the more palatable will be the premium.’’

They should also consider more life insurance, she says. Doug has coverage worth four times his salary, and Vivian 1.5 times her salary. But both policies are company plans, so they’d lose their insurance if they ever lose their jobs. D’Agostini suggests they get enough coverage separate from work to replace income, pay off mortgages and debt, possibly help fund college and help meet retirement needs.

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