Kjell Croce, a guitar builder and repairman, contributes more than enough of his $45,000 annual salary to his 401(k) plan to capture his employer's match. Still, as a relatively new employee, the meager $22,000 balance in his account falls flat. Kjell (pronounced shell), 43, and his wife, Michelle, 42, are also concerned with future college costs for their two young daughters, 8-year-old Josephine and 4-year-old Gabriella.
| Row 0 - Cell 0 | Six Ways to Build Your Retirement Savings |
| Row 1 - Cell 0 | How Working Longer Adds Up |
| Row 2 - Cell 0 | The Cost to Crack Your Nest Egg |
Traditional retirement savings are just one part of a long-term financial plan for Kjell and Michelle, who is a self-employed therapist. The Croces, who live in Marshall, Mich., also own a number of rental properties that generate income, a stock portfolio worth about $60,000 that Kjell inherited, and several IRAs scattered among different financial institutions. But with so many pieces, the Croces are missing the big picture.
To provide focus, Kiplinger's put Kjell and Michelle in touch with Drew Tignanelli, head of Financial Consulate, a fee-only financial advisory firm in Hunt Valley, Md. Tignanelli, who works with clients all over the country, recommended that the Croces start by doing some financial housekeeping.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For example, he advised them to consolidate the IRAs with a single custodian to make it easier to monitor their investments. He also suggested that they sell enough of their stock portfolio to fund annual Roth IRA contributions of $5,000 each for Kjell and Michelle, plus contributions to state-sponsored 529 college-savings accounts for both of their daughters.
In the process, the Croces may qualify for multiple tax breaks. For instance, Tignanelli noted that they could tap the stock portfolio virtually tax-free by using long-term investment losses to offset any gains, then transfer the money to their retirement and college funds. By contributing to Michigan's 529 plan, they will also qualify for a state tax deduction of up to $10,000 a year.
And the Roth IRA "is the most powerful accumulation vehicle you can possibly have because it grows 100% tax-free," says Tignanelli. (To contribute to a Roth IRA for 2008, your income can't exceed $116,000 if you are single, or $169,000 if you're married filing jointly.) When it comes time for the Croces to withdraw their money in retirement, that will be tax-free, too.
Tignanelli also recommended that Kjell and Michelle increase their life-insurance coverage; boost the deductibles on their home and car insurance to reduce the premiums; apply for a home-equity line of credit to keep in reserve; and make sure all of their beneficiary designations are in order. In addition, he showed them how to make better use of Michelle's business to improve their family's finances -- for instance, by hiring the children.
Tignanelli's recommendations "really opened our eyes," says Kjell. "There were quite a few things we didn't know or hadn't even thought about."
NEXT: BIG NEST-EGG LOSSES
SEE ALL NEST-EGG WOES
No. 2: Lack of Focused Strategy
-
The Best FSA or HSA-Eligible Amazon Prime Day Deals You Can Shop NowDouble down on savings by taking advantage of these early Prime Day deals that are FSA or HSA eligible. Save on fitness trackers, air purifiers, baby gear and more.
-
Stock Market Today: It's 'All Sectors Go' Ahead of Independence DayThe resilience trade continues to work, even for sectors and stocks with specific uncertainties.
-
457 Plan Contribution Limits for 2025Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025. That's good news for state and local government employees.
-
Medicare Basics: 12 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
The Seven Worst Assets to Leave Your Kids or Grandkidsinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2025SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $70,000 in 2025, up from $69,000 in 2024.
-
Roth IRA Contribution Limits for 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
SIMPLE IRA Contribution Limits for 2025simple IRA The SIMPLE IRA contribution limit increased by $500 for 2025. Workers at small businesses can contribute up to $16,500 or $20,000 if 50 or over and $21,750 if 60-63.
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
-
Roth 401(k) Contribution Limits for 2025retirement plans The Roth 401(k) contribution limit for 2025 increased, and workers who are 50 and older can save even more.
