With a combined income of about $55,000 per year and no credit-card debt, the couple are on firm footing financially but just starting to save for retirement.

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Profile:
Bryan Pritchett, 30, electronics technician, and Rebekah Baldwin, 33, part-time caretaker and homemaker, Tacoma, married with three children.


Adept jugglers, this couple
between them have two jobs, a paid internship, an almost-finished associate’s degree, three little girls younger than 8, a newly built home and $10,000 in student loans.

Pritchett parlayed communications skills learned in the Army into a job outfitting State Patrol cars with electronic equipment. He’s completing an associate’s degree this year at Pierce College and hopes to continue for a bachelor’s degree. He also has a paid internship as an electronics technician with the federal government that he hopes leads to a better-paying federal job.

Baldwin cares for their girls and works part time helping a disabled relative. She dreams of earning a degree in interior design and working for a design firm or builder someday.

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Retirement goals:
With a combined income of about $55,000 per year and no credit-card debt, the couple are on firm footing financially but just starting to save for retirement. Pritchett’s state pension kitty holds $2,000 and he’s just started saving ($100 so far) into the federal system, a key perk of his paid internship. The money is divided 60 percent into stock funds and 40 percent into bonds funds.


“I have no idea what I need to do to secure my retirement. I need a jump start,” Pritchett says. “How much are you supposed to have — you read you need a million dollars. Do you really?” adds Baldwin, whose retirement goals include living abroad for a year.


The advice:

Brian Skaggs, a Kent certified financial planner, suggests this couple commit to saving for retirement now in favor of other goals, such as college savings for their children.


Retire vs. college:

“You can always pay for college ‘live’ when needed and stop contributing to retirement funds during those years. But don’t miss the chance to put retirement funds aside now to compound at tax-free growth for 25” or more years.


Timed funds:

Inexperienced investors should consider low-expense timed retirement funds, such as Vanguard Lifecycle, he recommends. The fund managers calibrate a mix of investments based on the year you expect to retire.


Save with stocks:

Pritchett should continue contributing to the federal retirement-savings plan as long as the internship lasts or if he gets a job with the federal government. “I’d bump him up to 80 percent stocks” in that account due to his young age.


Underinsured:

As the main breadwinner for a family of five Pritchett was underinsured and should buy $500,000 worth of life insurance.


Rainy-day Roth:

In addition, Skaggs suggests a novel way of accumulating a rainy-day fund for emergencies: Save money each month into a Roth IRA, using a conservative mix up to 75 percent bonds. Then, once six months of household bills are saved, convert the money to more aggressive stock funds.

Ideally the money will never be needed and will continue to compound for decades. “The problem with investing for retirement in the absence of a safety fund is that they may need to tap the fund at an inopportune time. The Roth allows the withdrawal of contributions anytime without penalty.”


Save extra pay:

And, Skaggs says, Pritchett should save his entire internship pay for retirement, using the federal plan that fully matches the first 3 percent he saves and then makes a partial match.