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Providing for them, saving for yourself
© St. Petersburg Times, The Koerner family is paying for diapers for 9-month-old Tyler, dancing lessons for 4-year-old Lauren and a family-room addition for their Hudson home. The Shannon family is moving to a new house in St. Petersburg and launching a college fund for 9-month-old Sean. In Tampa, the Wood family is supporting 13-year-old Doug's favorite hobby, racing BMX bikes. And all three families say they are continuing to save for retirement, just not as much as their bosses would allow. Saving money for retirement is a challenge at any stage of life, but it is particularly tough during the child-rearing years. While family income often is going up, so are expenses, from day care and sports camps to the really big-ticket items such as braces, car insurance and college tuition. "With three kids, we have a lot of expenses that aren't planned for," said Jeanne Wood, 36, who works part time for a janitorial supply company. "Every other day it's something new." Growing families also create a demand for bigger houses, roomier cars and family vacations. Even if incomes are going up, managing all those costs can be difficult. Some families also take a deliberate reduction in income, choosing for one parent to work fewer hours or stay home during the years the children are young. Then the planning really gets tough. Juggling it all is primarily a matter of setting priorities, St. Petersburg certified public accountant Robert Doyle said. "I'm not telling clients to forsake all joys of life," he said, "but as with everything else, unless you have limitless resources, you have to limit your expenditures." And it isn't just the expenses that have to be considered. At this stage of life, saving for retirement competes with other savings goals, such as accumulating a down payment for a house, establishing an emergency fund or saving for college. Successful savers say two things help a lot: setting specific goals and increasing retirement savings gradually. The Koerner family did both. Sandra Koerner, 34, went back to her teaching job after daughter Lauren was born four years ago, but she was determined to stay home with baby No. 2. To make that possible, the family pared expenses while she was still teaching at Richey Elementary School, paying off car loans and socking away money in certificates of deposit. "I saved like a squirrel after my daughter was born," Mrs. Koerner said. "I knew I could not go through it again, leaving him with sitters." The Koerners' goal continues to give the family an incentive to keep expenses low now that she is at home. It also takes precedence over some competing goals, such as starting college savings funds for the children. But it has not stopped James Koerner, 33, from contributing to his retirement savings plan at work. Koerner, a computer systems administrator for an engineering company, said he increases his 401(k) plan contributions each year and is now up to 9 percent of his salary. "I started just contributing enough to get the company match and then once a year, I bump up the percentage," he said. "If you do it a little at a time, you don't really notice it." Mark McCarthy, 41, of Odessa, said he also started out contributing the minimum required to earn his employer's matching contributions. "I realized that a 100 percent immediate return couldn't be beat," said McCarthy, who works as risk management director for a finance company. "We're trying to increase it half of a percent every six months or at least every year. Whenever I get a raise, I increase it every time." Diverting pay raises to savings is one of the least painful ways to save because families never have a chance to get accustomed to the extra income. Joe Morris, 42, of Tarpon Springs, said that when each of his three children was born, he used that year's pay raise to start a college savings fund for the newborn child. Morris, a manager for a defense contractor, continues to add to the college savings each year without cutting back on his 401(k) retirement savings contributions. "The biggest challenge in executing this plan was to have the shared commitment with my wife to resist the temptation to use salary increases to increase our everyday standard of living," he said. "We figure the sacrifices over the last 10 years will pay off greatly in the future." Saving for college is an important goal for many families. One year of college costs $10,000 to $12,000 at Florida's public universities and three times that much at many private colleges. And, of course, costs go up every year. "I want to give Sean the opportunities that my father gave me," said Andrew Shannon, 34, a fifth-grade teacher at Academy Prep in St. Petersburg. His alma mater, the University of Notre Dame, now costs more than $33,000 a year. At 9 months, Sean already is enrolled in the Florida Prepaid College Program, a gift from one set of grandparents, and has his own mutual fund accounts. Shannon said he is still saving regularly for retirement, but is far more concerned about being able to pay tuition bills, especially since he and his wife, Erika, hope to have more children. "We're just trying to save as much as possible," he said. "I don't know how my parents did it." But accountant Doyle of Spoor Doyle & Associates warns against putting too much emphasis on saving for college. "When your kids get to college, there are grants, scholarships, student loans and part-time jobs," he said. "However, when you are 55 or 65 and you're ready to retire, there is no scholarship, grant or student loan you can take out to fund your shortfall." He also said parents should be cautious about saving large amounts of money in a child's name in case it isn't all needed. The child might attend community college or decide to skip college entirely, he said. "There's nothing wrong with overfunding college if you can get the money back," he said. "But just don't ignore 401(k) deferrals during that whole period of time." One alternative is to ramp up retirement savings during the years before college, then cut them back during the college years, freeing up income for college expenses. Other parents find starting a small college fund provides peace of mind even if they cannot save the full amount required. McCarthy said he and his wife, Bonnie, bought Florida Prepaid College Program contracts for their 12-year-old twin daughters, Chelsea and Megan. "It was a short-term goal that we met," he said. "Now we know that at least we can afford a state school. But I think I'll focus on retirement now." For many young families, retirement seems too distant to worry much about. That's certainly true for the Koerners. "I haven't really thought about it," James Koerner said. "I'll wait and see how my 401(k) looks when I'm in my 50s." Sandra Koerner said she expects to return to teaching in a few years. "It's so rewarding," she said. "I don't see me giving it up for a very long time. The only thing that scares me is the changing world around me."
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From the Times Business report
From the AP
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