By turnercowles
November 5, 2014
The Niemergs are trying to meet everyday expenses and put money aside for the future too.
Julian Dufort

Joy, 41, has her hands full as communications man­ager for a federal contractor and mom to four boys—two with Kevin and two from her previous marriage. Kevin, 28, who served six years in the Army and National Guard, is only now graduating from college. An accounting major, he also has a paid, part-time internship at the Justice Department.

With all the work deadlines, exams, commutes, and day-care pickups, the Nie­mergs haven’t thought much about retirement (although they assume Joy’s comes sooner than Kevin’s). They don’t know how to invest their $156,000 retirement portfolio, 40% of which comprises stock in Joy’s former employer. “We pay our bills on time and keep a tight budget,” says Joy. “But I have no idea of how to manage our retirement money.”

Despite a combined income of $117,000, including Kevin’s $17,500 Post-9/11 GI Bill college housing allowance, the Niemergs don’t think they can increase savings. Joy invests 3.5% of her salary in her employee stock-purchase plan, which has a 100% employer match, vs. 50% for a 401(k); Kevin puts 6% of pay in the federal Thrift Savings Plan for retirement. Day care for the two youngest boys is $1,200 to $1,500 a month; the couple’s mortgage payment is $2,160. Add in other living ­expenses, plus payments on a $27,000 home-loan debt left over from Joy’s divorce, and nothing’s left. Saving for the children’s education is a nonstarter for now.

Fortunately, Kevin is confident that after he graduates in December, his internship will turn into a full-time job. That should raise his salary to $50,000, though he’ll lose his housing allowance. “I think about retirement ­every day,” says Kevin, who regrets not opening a TSP account while in the military. “I’ve seen too many people get to retirement and say, ‘Wait, what do I do now?’ ”

Helping the Niemergs answer that question early on is Russell G. Robertson of WealthCrest Financial Services in Springfield, Va.  The Niemergs have budgeted remarkably well, he says, given the cost of living in the D.C. area: “They definitely have the discipline to achieve their long-term goals.”

The Advice

Bump up savings: With Kevin’s take-home pay expected to rise more than $1,100 a month in January, Robertson says Joy should stay in her current employer’s stock-purchase plan to take advantage of the generous match, and also open a 401(k), contributing 4% of pay to get the full match there too. Kevin should stay in his TSP but move from the all-cash option he’s in now to a 2050 target-date fund. Unlike cash, that fund, now 85% in stocks, has plenty of opportunity to grow over the years until his retirement.

Roll over and simplify: Joy has ignored her investments, most of which sit in 401(k)s from two old jobs. She risks a lot with so big a stake in her old company. “That’s one big egg in that basket,” Robertson says. A good rule, he says, is to have no more than 10% of your portfolio in a single stock. (Joy hasn’t yet hit that limit with her current employer’s shares, now worth $8,500.) He suggests Joy roll her old 401(k)‌s into the new one, putting it all in a 2035 fund (dated earlier than Kevin’s)—an especially good fit for someone not monitoring investments.


Prepare for crises: Robertson estimates that Kevin will have about $700 of his monthly paycheck left over after the couple’s retirement contributions and higher payments on Joy’s old debt. Because the Niemergs are underinsured, they should budget $200 a month for term policies and add $500 a month to their emergency fund, now at $10,000, until it hits $19,000, or three months’ living ex­penses. Should the couple ever need more, they can sell Joy’s employee stock. Since it isn’t in a retirement plan, the only costs would be brokerage fees and taxes on any capital gains.

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