Smartest Money Moves at Any Age
From first job to retirement, we tell you how to manage a dozen events that can change your life.
From Kiplinger's Personal Finance magazine, July 2005
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Reap the rewards of retirement
For John and Christine MacDonald, retirement is everything it's cracked up to be. Just back from a trip to London and Paris, and planning a vacation to Italy, the MacDonalds are living the good life.
But don't get the wrong idea. They're not trust-fund babies, lifelong jet-setters, Internet millionaires or lottery winners. The MacDonalds are hard-working people who saved toward a goal and are now reaping the rewards.
John, 66, spent his entire career working in the development and alumni-relations office at Temple University in Philadelphia, where he contributed steadily to the university's retirement plan. "That's the only way to do it if you aren't making the big bucks," says John, whose top salary was $84,000 a year. By the time he retired last year, he and Christine, 60, had amassed a total nest egg of nearly $2 million.
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John rolled over most of his retirement savings into an IRA. He now works with financial planner Joslyn Ewart, of Entrust Financial, to invest in a diversified portfolio of mutual funds, with about 60% in stocks and 40% in bonds. Ewart says her clients are the quintessential "millionaires next door." "They have the flexibility to enjoy themselves now because they were prudent and conscientious all along." Ewart is confident that the MacDonalds' nest egg will last their entire retirement.
Retirees should figure they'll need 70% to 80% of their preretirement income. So far, the MacDonalds haven't had to tap their retirement savings. They rely on their taxable investments to supplement John's social security benefits, and Christine plans to work for two more years as a secretary at a medical college. They bought their house for $18,500 in 1969 and paid off the mortgage 20 years ago. Earlier this year they netted a $200,000 profit from the sale of an investment condo -- money they are using to help fund their travels.
The MacDonalds don't have to worry about health insurance, which is paid for by the university. And they don't need life insurance. But they did buy long-term-care coverage more than a year ago -- before John's bypass surgery, which would have made him ineligible for a policy. They have drawn up powers of attorney and living wills, and established a charitable-gift trust to fund favorite causes after they die. -- Mary Beth Franklin
-- Research: Amy Esbenshade Hebert and Elizabeth Kountze