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Originally published Thursday, March 22, 2012 at 10:39 PM

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Financial makeover: A couple with four kids get a road map for retirement

With their kids leaving the nest and with dreams of travel, Carol and Tom Snider, of Woodinville, set out to figure out how much they needed for retirement. The answer: more than they realized.

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Like many middle-class families, Carol and Tom Snider spent their lives building careers and a family, investing in their home, their children's education, and when they could, their retirement.

Now on the verge of entering a new stage of life, Carol, 55, and Tom, 56, are looking at the future and are unsure of what to think. Their two older children have been on their own for a while, and their twins graduate from college in June.

To be certain, their retirement planning has gotten short shrift. They have some savings and investment funds and Tom's pension from his work at Boeing, coming up to a total of about $297,000 socked away for their golden years.

"That's why I'm worried," Carol Snider said, explaining that she came across an online calculator that said they'd need $2 million in the bank to live comfortably in their retirement.

This prompted them to fill out an online survey to participate in a free financial makeover. Because the Sniders are dreamers.

They dream of traveling after they retire at age 65 for Tom and 66 for Carol, buying or building a house in Hawaii (Tom more so than Carol, she points out) and continuing to get together with their children, which often involves going out to a nice dinner every couple of weeks.

One such recent dinner with three of the four children and one of their daughters' boyfriend came to $188.

"A lot of times we will say to ourselves, 'This is important,' " Carol Snider said. "And maybe that's what got us into trouble."

The Sniders' principal asset is their Woodinville home, which they bought in 1995 for $198,500, and thanks to a $47,000 home-equity loan they used for an extensive kitchen remodel (Tom did most of the work himself), a new roof and other repairs and enhancements, and a refinance of their mortgage this year into a lower-interest $208,000 15-year loan, they're still in about the same amount of debt as they were when they first bought the house.

They also have $58,000 in Carol's IRA, $28,000 in her Roth IRA, approximately $33,000 in another 401(k) from one of Tom's former employers, almost $65,000 in Tom's IRA, and nearly $129,000 in Boeing's deferred-compensation plan. Tom is also vested in Boeing's pension program, as well as one at Northrop Grumman, where he worked before Boeing.

This has been complicated by their work history. While they make a fairly good living — pulling down combined income of about $150,000 last year — they expect it to be less this year, and one or the other of them has been out of work periodically over the past decade, at a time when they were paying college expenses for up to three of their children at a time.

Right now Tom works as an environmental engineer at Boeing, while Carol has been trying to build a career as an educational-technology consultant, which hasn't resulted in as much work and income as she would have hoped.

"There are people who are a lot worse off than we are, we know that," Carol Snider said.

"We don't really have a right to complain," her husband added.

But, she said, "We lose sleep over our finances."

The Sniders' situation is quite commonplace among middle-aged, middle-class couples, said Gary Arford, president of Lynnwood-based Comprehensive Wealth Management and who worked up a financial plan for them.

"They spent all of their time trying to make the company successful, but not enough on themselves," said Arford, who is also a member of the Financial Planning Association's Puget Sound chapter.

The short version, Arford said, is that the Sniders can't retire when they'd like to and live the way they want. Not without some drastic changes.

He drew up two plans, one presupposing a retirement age of 65 and 66, the other postponing retirement by two more years.

The difference made by postponing retirement by two years is astounding, a $400,000 difference in their net worth by the actuarial end of the plan (at ages 90 and 91), Arford explained.

But to get there, there were three fundamental shifts that needed to be made, because the Sniders were not putting away anywhere near enough for retirement.

"They found out in a hurry that she has to go back to work as soon as possible," Arford said.

Anticipating this, Carol had already started the job hunt. She will need to draw a salary of at least $100,000 per year. From their combined income, they will have to put away an additional $40,000 per year.

Another adjustment is in Tom's retirement investing. He's been maxing out his contributions (at about 15 percent of pay) into a 401(k) plan at work, and while Boeing does match some of those contributions, the maximum match is 75 percent of up to an 8 percent employee contribution.

The problem is that 401(k) plans aren't very liquid, and choices are often limited, Arford explained.

"Generally we can get more money outside the program," he said. He recommends reducing Tom's contribution to 8 percent and putting the difference into his existing Roth IRA or some other taxable account in order to provide that sustainable source of cash.

The third adjustment they'll need to make is possibly increasing the amount of life insurance they carry, although they haven't worked out exactly how much. The question the Sniders will need to ask themselves, Arford said, is "How lucky do you feel?"

Taking these steps will put them comfortably on a path to a retirement that allows the Sniders to meeting their primary goals of quality time with their family, and also travel.

The plan drawn up by Arford budgets $16,000 a year for five years after they retire for traveling, based on a rule-of-thumb rule of $2,000 per week for domestic or North American travel (at a certain level of comfort) and $2,900 per week for intercontinental travel.

The Sniders might not be in a position to get that house in Hawaii (Tom: "I'll settle for a condo"), but at least they're coming away with a stronger sense of surety about their financial future. And though their future is still hazy and in flux, they've agreed to continue consulting with Arford over a longer period of time to refine their plan.

Financial plans, done correctly, are a relationship-based business, Arford said, and take a year or more to set up and run properly. But, he said, "the most important thing we will ever do for anyone is give them the plan as the road map."

"We were blissfully ignorant beforehand," Tom said. "Now I have more concerns, but only because I have more knowledge. I think he's given us a clear map of where we are and where we need to go to get where we want to be."

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