— Saving for retirement is a source of financial
anxiety for 29 percent of Americans, a recent survey by
life insurer Northwestern Mutual estimated.
hello to two members of that 29 percent: Gail and Sid
Ouattara, who live outside Seattle.
Ouattaras are frugal, hold steady jobs and are so averse
to debt that they saved up $8,000 for a trip to Africa
— and came home with $2,000 left over. It went back
into the bank.
don’t like debt, period," Gail Ouattara said.
the couple, both in their 50s, worry whether they will
have enough money to retire.
asked for help, and the Puget Sound Chapter of the
Financial Planning Association put out a call for a
planner who would advise the Ouattaras at no charge.
Steve Burkett raised his hand. He’s an investment
adviser and principal with Palisade Investments.
urged the Ouattaras to save more money and offered a
novel approach for putting their additional savings to
work, among other things.
long as they’re able to keep on the track they are on
now, with the knowledge that they may have to delay
retirement by a year or two, they’ll be fine,"
Ouattaras are building wealth. But are they building it
Ouattara, 59, is a teacher at the Seattle Vocational
Institute, while Sid Ouattara, 55, works as a medical
assistant at the University of Washington Medical
Center. Their combined paychecks before taxes range from
$73,000 to $83,000 a year, depending on Gail’s
also owns a home-based business, Marquis Resume
Services, that generates between $6,000 and $15,000 in
annual net income.
have about $3,300 in a regular savings account that
doubles as their emergency fund.
have taken advantage of their employers’ retirement
plans. Sid Ouattara signed up for a Public Employees
Retirement System plan, for which he has contributed
about $19,000. Gail Ouattara is contributing to a 403(b)
retirement savings plan that has a balance of about
are also in line for Social Security benefits when they
biggest debt is the mortgage on their home. They bought
it for $183,000 in 2011, when the real-estate market was
in a ditch. They still owe $169,000 on the mortgage, but
the home is now worth about $250,000.
also owe about $10,000 on a home-improvement loan, as
well as about $3,000 on credit cards.
that their children are grown, the Ouattaras are
considering their own futures. "Our focus now is
retirement," Sid Ouattara said.
first instinct — remember, the Ouattaras hate debt —
was to pay off the mortgage early, while they are both
working. So they increased their monthly mortgage
payment to $2,000 a month from $1,100. The additional
$900 pays down the principal.
that rate, the Ouattaras figure they can retire their
mortgage in 2026, when they are in their 60s.
Burkett examined the couple’s finances and saw a
household in need of a larger emergency fund and deeper
endorsed the Ouattaras’ accelerated mortgage payments,
only with a twist.
suggested reducing the extra monthly mortgage payment to
$500 and channeling $500 a month to a new investment
account with a mixture of stocks and bonds.
investment account, he explained, would double as an
emergency fund and earn money more rapidly than the more
conservative investments in their retirement plans.
the Ouattaras put $500 a month into the investment
account without fail, it could be worth about $79,000 in
in 10 years the couple would probably owe about $71,000
on their mortgage. At that point, the Ouattaras could
use their investment account to pay off the mortgage,
with a reasonable expectation that they could have a
little left over.
also advised the couple to increase their retirement
savings by having each put $2,500 a year into new
individual retirement accounts. The money would come out
of household spending.
suggested a traditional IRA for Gail Ouattara and a Roth
IRA for Sid Ouattara, in part to give the couple more
tax options when they tap the accounts in retirement.
Contributions to traditional IRAs may be tax-deductible,
and withdrawals can be taxable. Meanwhile, contributions
to Roth IRAs cannot be deducted, but the withdrawals are
not taxed. The accounts also serve as emergency funds.
saw an opportunity for Gail Ouattara to increase her
retirement nest egg by investing more aggressively in
her 403(b) account.
35 percent of the account is in stock, but the remainder
consists of low-yield bonds and stable value funds.
Burkett suggested boosting the account’s returns by
putting more money into stocks.
would rather see 55 percent of the Ouattaras’ combined
investments in stocks and 45 percent in bonds; their
current ratio is the reverse of that.
retirement does come, Burkett said, the couple’s
average annual spending should be about $42,000, plus
$13,000 for medical expenses.
noted that the Ouattaras have two particular attributes
that work in their favor: They have positive outlooks,
and they roll with the punches.
that kind of attitude," he said, "they’re
going to be fine."