24-year-old has money for savings, investment

Holly Dombkowski is on the staff at Lourdes College.

Holly Dombkowski is 24 and single, makes nearly $31,000 a year, and has no trouble paying her bills.

She lives in her parents' Point Place home, and even though she still owes for her college tuition, she has money to save and invest.

That's a good thing, according to planner Robert Schoonmaker. He estimates that, because of inflation, “if she retires at 65 and lives to 90, she could spend $5.7 million [in retirement].”

In looking at her goals, he recommended she start putting away at least $280 a month in retirement funds, including a 403(b) plan, which is similar to a 401(k).

Mr. Schoonmaker projected that she could need a nest egg of more than $3 million by the time her retirement rolls around four decades from now. She should build a savings fund for emergencies of equal to at least three months' income, he advised, and should start setting money aside to meet her goal of buying a house.

“Not paying Mom and Dad rent is a great situation,” Mr. Schoonmaker told her. “I would recommend deciding what type of home or apartment you see yourself in, and make sure you can squeeze that amount out of your budget. Earmark that every month to savings.”

Based on her income, he said, she could afford a home in the $80,000 range, with a possible monthly mortgage payment of $550. “But to avoid private mortgage insurance, you would need 15-20 percent down, or $12,000 to $16,000,” he added.

Mr. Schoonmaker advised her to start the 403(b) contributions at a level with which she is comfortable. “Too many people are too aggressive and stop contributing to their plan when it interferes with their lifestyle,” he said. “Start at 3 to 5 percent. That hurts a little bit, but you can digest that.”

Ms. Dombkowski said, “I probably will start with $100 a month.”

She doesn't know when, or if, she will boost contributions to the recommended 8 to 9 percent of adjusted gross income. “I'll probably scale it back to make the numbers more workable.”

For the moment, she is paying off her debt as quickly as she can.

She still owes about $10,000 from student loans at Kenyon College and $3,200 from a credit card used when she worked for a public-relations firm in Washington, a high-cost city.

She has about $1,000 in the firm's 401(k) plan.

Ms. Dombkowski admitted that a lifetime plan for a 24-year-old “is a bit shaky. I'm not sure if I will be married five years from now or if kids are [in the future]. But it's important to start thinking about the future.”