A retired couple's plan to buy their dream home

Tom and Mona Phifer want to buy their dream home, and Tom wants to restore old cars.

(MONEY Magazine) -- Tom and Mona Phifer, 62 and 59, seem to be set up for a worry-free retirement. They have no debt and $1 million saved.

Moreover, when Tom retired last January after 40 years with Union Pacific Railroad, he began collecting an inflation-adjusted pension of $4,200 a month before taxes -- enough to cover the couple's $3,800 monthly costs. Administered by a federal agency in lieu of Social Security, the pension also provides a spousal benefit. When Mona, a retired library aide, turns 60 next year, she'll get $2,000 a month.

Their concern: funding their lengthy retirement wish list without blowing the long-term security they've worked so hard to achieve. They'd like to buy a new home, travel more, indulge Tom's hobby of restoring old cars, and help with the costs of raising their four grandkids. "But only if we're sure we can afford it," says Tom, who notes that recent market swings have made him anxious.

The good news is that the Phifers have more than enough for a long retirement, says Overland Park, Kan., financial planner Kathy Stepp. She offers this plan to help them reach their goals without outliving their savings.

The solution:

1. Ratchet back risk

The Phifers' portfolio is nearly 70% in stocks, which Stepp says is justifiable given their large pensions. But she suggests cutting to 40%, which will reduce risk and Tom's anxiety, while maintaining reasonable growth potential.

2. Make the right moves

Tom and Mona's dream home is a ranch with a shop for his car hobby. Expected cost: $225,000. With $186,000 in cash and $150,000 in home equity, they could buy this outright if they sell their old house first.

Should they find the perfect place before closing, Stepp advises financing the remainder with a 15-year mortgage (now 3.7%), since using retirement funds would trigger a tax bill.

3. Draw strategically

Once Mona's pension kicks in, they'll have a monthly surplus of around $2,400. They can also tap retirement accounts for their wants -- but should aim to stay in the lowest federal tax bracket, Stepp says. (Part of the pension is tax-exempt, so they're now in the 10%.)

Next year, they can cash out $3,000. Starting in 2013, when the lowest bracket is slated to go to 15%, they can draw up to $22,000 annually. Taking the full amount every year, they'll have a 95% shot of their savings lasting 35 years.

Goals

• Have security through a long retirement

• Trade up their home and aid their grandkids

Assets

• $595,000 in IRAs and 401(k)s

• $186,000 cash

• $280,000 in stocks and funds

• $150,000 in home equity

Liabilities

• None