Ralph and Sherry Pierce, parents of Amanda, left, and Kyle, have ambitious plans for educating their daughters.
“College wasn't in the cards for me,” recalled Ralph Pierce.
Mr. Pierce, a native of the Toledo area, enlisted in the Air Force, where he found love, marriage, and a lucrative vocation.
He was trained as an air traffic controller and now works for the Federal Aviation Administration at Toledo Express Airport, a job that pays about $85,000 a year.
He met his wife, Sherry, who grew up in New Jersey, at Keesler Air Force Base in Biloxi, Miss. She also had enlisted for six years.
She is now a purchasing technician with the U.S. Postal Service, a job that pays about $41,000 a year.
Because the Pierces work for the federal government, their military time counts toward retirement, and, as a result, they can retire in their 50s and receive about $72,000 annually from the Federal Employee Retirement System.
At first glance, it would seem the couple should have no financial worries.
Their net worth is about $200,000, including $55,000 equity in their $178,000 Maumee home.
However, they have ambitious plans for educating their daughters, Kyle, 10, and Amanda, who turns 17 next week.
They figure it will cost $10,000 per year of college for each daughter, in today's dollars, and perhaps $15,000 a year for law school for Amanda.
Planners Melvyn Wicks and Edward Leedom told the couple they need to save more, even though they have $125,000 in the government's thrift savings plan.
The planners said they need to put an additional $2,000 a month away for four years to pay for college and at least $1,000 monthly for two more years. Amanda is expected to start college in the fall of 2004.
“They will have to start saving more right off the bat,” said Mr. Wicks.
With after-tax income of about $111,000 a year and monthly household expenses of $4,300, the Pierces should be able to save the additional money.
“My checkbook says we can't,” replied Mrs. Pierce.
“Wow!” said Mr. Pierce.
The planners gave them some more bad news: Their original retirement goal is too ambitious.
Mr. Pierce, who turns 43 this week, wanted to retire at 50, and Mrs. Pierce, 40, wanted to retire at the same time, at age 47.
“I'm going to tell you that probably won't work,” especially with college in the way, said Mr. Wicks.
Mr. Pierce said he might work in retirement but has rheumatoid arthritis and can't be sure of his health in his 50s.
The advisers recommended the family use tax-advantaged Section 529 college-savings plans.
But, because of timing, they suggested the plan for Amanda be Ohio's Guaranteed Savings Fund, which allows purchasing tuition credits that can be spent at any college.
For Kyle, who won't start college until 2010, they suggested a Section 529 investment program.
They urged the Pierces to shop for the best plan, as other states have more and better investment choice, although they would not get the tax breaks from Ohio.
Recommended is this Web site: www.savingforcollege.com.
The advisers suggested the Pierces update their wills, drawn up in 1985, and get durable powers of attorney.
There was no recommendation on their government-sponsored life insurance, with total face value of nearly $800,000.
Mr. Wicks said the couple are perhaps too young to think of long-term-care insurance, but he told them: “The paradox is you probably don't need it now, but it's really cheap at your age.”