College Financial Makeover: Tuition need not delay Boeing worker’s retirement goal

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College Financial Makeover Tuition need not delay
Boeing workers retirement goal
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Boeing mechanic plans for retirement soon and to
help daughter pay for college. Michelle
Almoslino, a 63-year old Boeing mechanic, is so
ready to retire that in her free time she studies
overseas rentals online on Home Away, daydreaming
about the travel she can book in her future. She
also wants to volunteer, maybe driving folks who
need help getting to activities or appointments.
But before she packs her passport, she wants to
double-check whether shes prepared for the
journey.
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Throughout her more than 25 years at Boeing,
shes saved in the company 401(k) plan and will
collect both a pension and Social Security
payments. She also has plenty of equity in her
two-bedroom house she bought in the mid-1990s in
Seattles Columbia City neighborhood. But along
with those assets, she faces new expenses Her
19-year old daughter enters college this fall
Almoslino plans to pay up to 28,000 annually
toward her four-year education. Can she leave
behind her salary, help pay for college and live
comfortably for years to come? If so, how soon?
I really want to retire, Almoslino says. Ive
always invested in my 401(k), but I never got
advice about it. What I probably needed was some
financial planning.
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To get a professional opinion, Almoslino
completed an online survey to participate in a
free financial assessment from a member of the
Puget Sound Chapter of the Financial Planning
Association. She was paired with Bobby Reamer, a
certified financial planner with Icon Consulting
in Bellevue. All of Michelles concerns and
emotions were typical of someone about to
retire, Reamer says of his work with her. We
took a look at what would be a sustainable way of
living for her in the future and how soon she
can start living it. Almoslinos goal is to
retire within three years, so Reamer modeled how
retiring in 2014, 2015 or 2016 would affect her
future, as well as her options for housing and
funding her daughters education.
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First, the duo took stock of Almoslinos assets
She earns about 77,000. She has 310,500 in her
401(k) has a house worth 344,000 (with 152,000
left on the mortgage) 2,500 in general savings
and 7,000 in debt. As a Machinists union
member, she got the 10,000 signing bonus this
month that was part of the new contract with
Boeing. She decided to put most of the money,
6,378 after taxes, toward her daughters gap
year in Israel.
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To learn future pension amounts, Almoslino had to
make some calls. Because she worked at Boeing on
two separate occasions, she has two plans, one of
which she tapped six years ago. A pension
representative had to make custom calculations to
determine that shed get annual payments totaling
16,000 as a retiree. Like many who plan to tap
Social Security, Almoslino wasnt sure of the
optimal age to begin taking payments. Reamer
determined that if she began taking payments in
2017 at her full retirement age, 66, shed
receive about 25,000 annually. This doesnt mean
she has to wait until 66 to retire just that
she will wait until then to collect Social
Security.
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Reamer recommended that Almoslino sell her house
in early 2016, then put 130,000 toward the cash
purchase of a smaller property or condo, meaning
shell have no mortgage and only small monthly
housing costs in the form of insurance, taxes,
homeowner dues and utilities. While 130,000 is a
small budget for Seattle, she is ready to
downsize and would consider moving outside the
area. To get a handle on a realistic
contribution to her daughters college education,
Reamer had Almoslino double-check her daughters
eligibility for scholarships at her future
school. Fortunately, her daughter qualifies. By
working with scholarships, Almoslino could
allocate about 15,600 per year to her daughters
education, or 12,400 less per year, and retire
six months earlier than if she contributed the
28,000 a year.
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As for the 401(k), Reamer had reallocation
suggestions. Shes over-allocated to stocks and
fixed income right now. She has too much risk.
He suggests she take her money and place it in
three buckets representing near-term,
medium-term and long-term financial needs.
Near-term, he proposes keeping 125,000 in
readily available, conservative forms such as
cash, bonds or CDs medium-term, he suggests
50,000 in diversified fixed-income products with
fairly low risk long-term, 135,500 in equities
and funds to beat inflation. Reamer also suggests
she take advantage of an opportunity to move
funds into a Roth IRA for this third bucket
before she retires. By placing funds in a Roth
IRA, she can save on future tax bills.
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By taking these steps, and using some of her
short-term funds over the next few years before
her Social Security checks start during 2017,
Almoslino can retire comfortably as soon as next
summer. Im thrilled, Almoslino says. Theres
light at the end of the tunnel.
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ICON Consulting 1412 112th Avenue, Suite
102Bellevue, WA 98004 Phone [phone]
(ICON)Fax [phone] (ICON)Info_at_ICONconsultin
gllc.com
www.iconconsultingllc.com
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