Married just three years, James and Laura Kremko have already seen seismic shifts in their income.
After completing her nursing degree this spring, Laura secured a position at a Vacaville, Calif., hospital, boosting the couple's annual earnings from $145,500 (courtesy of James' Air Force pension, his job as a state employee, and rents on two properties) to $221,000.
Great news, but they can't get too used to the cash glut: Laura, 38, has started classes toward her master's, and her daughter, Heather, heads to college next fall. Heather also has plans for medical school, and the Kremkos want to cover the whole eight years.
"Now that I have a family to worry about, I want to know if I'm making good choices," says James, 44.
Thanks to their super savings rates and his two generous pensions, the couple should be able to swing the tuition bills without derailing their retirement -- if they make a few adjustments, says Sonoma, Calif., financial planner Alice King.
Redeploy savings. The Kremkos have been able to cover the $1,100 a month for Laura's schooling out of their income. But there's still the issue of Heather's education. The University of California at Davis, her top choice, will cost $30,000 or so a year.
Based on their new income, the couple planned to sock away $61,000 a year for retirement and another $27,600 into taxable accounts.
Since they already have an ample emergency fund, King says they can redirect the taxable savings to tuition. This will nearly cover the tab, without compromising their retirement.
Refi to speed up debt payoff. The mortgage on the Kremkos' home is at 4.99%, but with their credit scores they can get a 15-year fixed loan at 3%.
King suggests a cash-out refinance exceeding their balance by $45,000, to allow them to pay off their one mortgaged rental (now at 5.12%) and effectively consolidate the two loans into one at a lower rate.
Continuing to make the same total payment, they'll be debt-free by about the time Heather hits medical school, freeing up $3,000 more a month.
Reallocate for retirement. Since marrying, James and Laura haven't reassessed their investment mix as a couple.
With a combined 84% in stocks and 16% in bonds, they're too aggressive, King says. She says a 65% stock and 35% fixed-income portfolio will help them better weather a bear market.