Get With The Plan: June 1, 2008

Aaron, 46, and Lynn, 42, want to retire at the same time they’ll be paying some of the biggest bills of their lives. Lynn doesn’t work and Aaron wants to retire at age 55, but the couple’s kids, ages 15, 12 and 7, will be racking up hefty tuition bills at that time.

‘‘I would love to retire at 55 and have my youngest daughter’s college fully funded,’’ Aaron says. ‘‘If not 55, then at the earliest possible age.’’

The couple have been saving, hoping they’ll reach their goals in time. They’ve set aside $377,870 in IRAs, $17,580 in 401(k) plans, $44,972 in an annuity, $83,453 in a broker- age account, $125,000 in stock options and $55,000 in savings. They also have $81,650 earmarked for college.

The Star-Ledger asked James Marchesi, a certified financial planner with Summit Asset Management in Florham Park, to help Aaron and Lynn see if their dreams are feasible.

‘‘This couple has all the right intentions,’’ Marchesi says. ‘‘The couple needs to include themselves as a key element in the family financial plan, specifically by identifying their wants and needs for their retirement.’’

The couple are saving $400 per month in 529 college accounts, with a goal of providing $140,000 toward each child’s higher education ambitions. Marchesi says with college inflation, they’ll need $182,000, $217,000 and $290,000 by the time each of the children finish their respective college careers — or a total of $420,000 in today’s dollars, which will be $689,000 once inflation is factored in.

To reach that amount, the couple would need to save an additional $3,100 per month, assuming a 7 percent return, he says.

With a desire to retire in 10 years, Marchesi says Aaron and Lynn need to develop a retirement vision, which includes where they want to live and what they want to spend. Education costs for college and private school tuition for their youngest daughter will be significantly reduced in 2018, when Aaron turns 55. But they need to take a look at their significant charitable contributions.

‘‘It is quite possible that a reduction in charitable commitments and an acknowledgment of the benefits from working a few more years will get them close to their desired retirement spending level,’’ he says.

Marchesi says the probability of a stress-free retire- ment at age 55, given their current budget and savings rate, is not high enough to make it a strong consideration.

One idea would be with their home, which Aaron and Lynn are considering downsizing from when Aaron stops working. The couple have more than $500,000 of equity, and they may be able to assign some of the surplus at retirement to address certain financial needs, such as health-care costs. Marchesi says because Aaron won’t be eligible for benefits through his employer after retirement, the couple will need additional funds to buy their own policies.

As for their investments, Aaron and Lynn have more than 35 mutual funds, which Marchesi says is probably too many. The couple should take a close look at their portfolio, get rid of funds that no longer perform well and consolidate funds that overlap in goals and investments.

The couple also own many individual stocks, which Marchesi says is more of a speculative approach as op- posed to an investment selection process. Aaron should eliminate low-quality stocks from his IRA, Marchesi says, because there would be no tax-loss recognition in retirement accounts.

‘‘This couple will have the benefit of multiple paths to consider, due to their young ages and their income level,’’ Marchesi says. ‘‘To best achieve their goals, they need to identify all possible planning assumptions, prioritize each variable and develop a comprehensive planning framework to assist in their decision-making.’’

6108