No. 3: Big Losses in Retirement Savings
A successful attorney in Bloomington, Ind., Sam Ardery appears to be the epitome of prosperity.
A successful attorney in Bloomington, Ind., Sam Ardery appears to be the epitome of prosperity. But even he is worried about playing catch-up after a failed real estate investment 14 years ago sidetracked his retirement plans.
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"I lost as much money as I could make in three or four years -- enough to put all three of my kids through college," says Sam. He and his wife, Patty, used all of their savings and remortgaged their home to settle the debt -- a fact, Sam says, that Patty "has never thrown up to me, which is probably why we have been married for 25 years."
Sam, who recently turned 50, sat down with his financial adviser, David Hays, of Comprehensive Financial Consultants, in Bloomington, to figure out what he needs to do to catch up now that retirement no longer seems so far away. Saving enough is still a challenge because two of his daughters are enrolled at DePauw University and a third is in high school.
"We're talking more than just skipping a Starbucks a week," says Sam. "We're really stepping up our savings."
He contributes about 8% of his income to his firm's 401(k) plan, but as a partner, he is not permitted to contribute the maximum in 2008 of $15,500. And although he is now old enough to kick in $5,000 more in annual catch-up contributions, he says that with private-college tuition bills for two daughters, it's not likely.
Sam has increased his salary draw to shift more into savings. For his youngest daughter, he is funding a 529 college-savings plan, for which Indiana offers a $1,000 state income-tax credit. He also contributes regularly to an investment account managed by Hays. His goal is to save $1 million over the next 15 years.
Hays thinks that's manageable. "I've seen people sock away one-third to one-half of their retirement nest egg during their peak earning years," he says. Because the Arderys have little debt other than a mortgage and generally live below their means, he predicts that Sam and Patty will easily reach their goal. "Sam's a doer. He'll make things work out."