Robert and Stefanie Fucci, 56 and 46, of Cortlandt Manor, N.Y., are seeking financial advice on paying for college and saving for retirement.
(Money magazine) -- Raising three daughters born within a five-year span, the Fuccis knew they'd face steep tuition bills one day. But saving was tough.
The family lives in high-cost Westchester County, where their property taxes have tripled over the past decade.
For many years Stefanie worked part-time as a personal trainer. Now Kimberlee, 17, plans to go to James Madison University in Virginia this fall, where costs top $30,000 a year; high school sophomore Celine, 16, has pinned her hopes on going out of state too.
The Fuccis have already co-signed $14,000 worth of private loans to pay for 21-year-old Brittany to attend New York's Fashion Institute of Technology (she also has $14,000 in federal Stafford loans). Still, they are determined to let their kids go to their dream schools.
"Out of state goes against our plans, but it's the right fit for Kimberlee," says Stefanie.
Helping out is Stefanie's second part-time job as a pharmacy technician and Robert's new position as a vice president at a regional bank. That will boost their household income from about $100,000 to $130,000.
Brittany also works part-time and moved back home last year, reducing her nontuition expenses to $7,000 a year.
The Fuccis have only $35,000 set aside for the girls' college, divided into three custodial savings (UTMA) accounts. Robert wants to use $10,000 of a $75,000 lump-sum pension from an old job to help finance Kimberlee's freshman year. He'll put the rest into an IRA.
The Fuccis are also behind on retirement savings, says New York City financial planner Annette Clearwaters. As a part-timer, Stefanie doesn't qualify for her employer's 401(k).
When Robert becomes eligible to fund a 401(k) later this year, he plans to start with a 3% contribution, a rate that will leave the couple well short of the amount they'll need to hit their goal of retiring at 70 and 65, respectively, says Clearwaters.
They're also trying to pay off a $40,000 home-equity loan and $10,000 in credit card debt that they racked up paying for a vacation and getting a new boiler.
THE FUCCI'S FINANCES
Assets: $212,000 in retirement plans, $35,000 in college savings, $10,000 in cash
Goals: Fund college, retire at 70 and 65
Make retirement a priority. Robert should contribute at least 6% of his income when he opens his 401(k). That extra 3% will reduce his income just $2,700 a year but give him the full company match. Stefanie should put the $5,000 max into a Roth IRA.
Get savvy about financial aid. The Fuccis should spend the money in the UTMAs instead of pension funds, since money in a child's name is counted heavily in financial aid formulas, says Kal Chany, president of Campus Consultants, which advises families on financial aid. The couple are also eligible for a $2,500 education tax credit for each child.
Public universities reserve most of their aid for in-state students, says Chany, so the Fuccis are looking at taking out big loans for Kimberlee's tuition.
Kimberlee can cut her expenses, however, by being a resident adviser at her dorm next year; she'll also get a part-time job.
Going forward, the couple should take out PLUS parent loans, which have a fixed rate of 7.9% and more flexible repayment terms, instead of variable-rate private loans.
The Fuccis should be able to pay off their credit card debt by spring, which will enable them to cover more school expenses out of pocket and help Kimberlee repay the loans after she graduates.
Finally, if Celine wants to go out of state, she should apply to private colleges where her grades (she's an A student) and standardized test scores exceed the average for attendees. "Privates are more generous with grants," says Chany.
Lower investment risk. The Fuccis say they're comfortable with risky investments.
Robert has $137,000 in two 401(k)s from former bank employers; half are in each company's stock. All the girls' UTMAs are in Janus 20 (), an aggressive-growth fund.
But "being aggressive doesn't mean putting all your eggs in one basket," says Clearwaters, who recommends a 70% stock/30% bond allocation for the retirement money, with no more than 5% in company stock, and suggests that they move the girls' UTMA funds to a low-risk bond or money-market fund.
A small contribution adds up. If Robert doubles what he puts in his 401(k), the Fuccis can reduce their risk and still come out ahead.
Robert currently contributes 3% of his income to his 401(k). If he continues at that rate, the Fucci's $212,000 in retirement savings is estimated to grow to $614,000 over the course of 12 years. But if Robert doubles his contribution to 6%, that same portfolio is expected to swell to $715,030.
FIXING THE FUCCI'S INVESTMENT MIX
NOTES: Estimates for 401(k) growth assume 6% annual return, 3% annual salary increases, and company match. SOURCE: Annette Clearwaters, Clarity Investments & Planning.
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