Get With The Plan: March 30, 2008

Luke, 61, and Jackie, 60, are a few short years from retirement. They have raised five children, and now that the college bills are coming to an end, they are hoping they can afford the retirement they have dreamed about.

‘‘We would like to travel around the country and visit the major European capitals,’’ says Luke. ‘‘I would like to work part time and my wife wants to stay close to home and near our granddaughters.’’

And, time permitting, Luke wants to play more golf.

The couple, whose names have been changed, have saved $498,064 in a 401(k) plan, $69,837 in IRAs, $154,624 in a brokerage account, $7,179 in savings and $980 in checking. Luke also is expecting a pension worth $33,492 a year.

The Star-Ledger asked Douglas Duerr, a certified financial planner and certified public accountant/ personal financial specialist with Duerr & Duerr in Montville, to help the couple prepare for retirement.

‘‘They have amassed a good base of assets toward retirement and Luke will receive a small pension,’’ says Duerr. ‘‘When adding these items, plus Social Security, they will have a decent annual income to live off.’’

But, Duerr says, there are certain things the couple can do to help them enjoy a better retirement.

First, the couple need to take a close look at their current expenses. Based on the budget they supplied, they should have a considerable amount of funds available for savings, Duerr says. But this is not the case.

‘‘They need to look at their spending habits and determine where they are currently spending more money then they are accounting for,’’ he says. ‘‘At that point, they need to determine where they may be able to cut back on or modify their spending.’’

The couple isn’t maxing out their retirement plans. Duerr says they need to try and put in the maximum amounts possible in their retirement plans to have a better retirement base to live off.

Luke needs to put the maximum of $15,500 and the $5,000 catch-up contribution into his 401(k), com- pared with the $14,500 he’s currently saving.

Jackie, on the other hand, doesn’t contribute to any retirement plan. Her employer doesn’t offer a plan, but she should open an IRA and contribute the maximum amount to this account each year.

‘‘In order for them to do this, they will need to cut back on certain items, but it will have a big impact for them in retirement,’’ Duerr says.

Upon taking into account their Social Security payments, expected to be $2,230 at age 62, Luke’s Rich’s pension of $2,791 and IRA distributions of approximately $24,000 a year, they will have a total retirement income of $85,000, Duerr says. As part of his calculation, he assumed a 4 percent distribution from retirement plans, as this percentage will allow the assets to grow so they won’t run out of money during their lifetimes.

After taxes, they’ll have about $68,000 a year for retirement — approximately 70 percent of their current after-tax income.

‘‘Most individuals need at least 80 percent of their current after-tax in- come to live their current lifestyle,’’ Duerr says. ‘‘The couple will have to use some of their other investments to supplement their retirement payments in order to be able to maintain their current lifestyle.’’

Another option would be for them to work part time in order to supplement their retirement assets, he says.

The couple doesn’t have much debt, and the home-equity loan and car loans will be paid off within five years. This will give the couple an additional $1,100 of disposable income each month.

‘‘With some increases to their retirement plans, review of their current spending, and paying down of their debt, they will have a much better chance to achieve their goals and enjoy a good lifestyle in retirement,’’ Duerr says. ‘‘It’s a short-term sacrifice for a long-term solution.’’