(MONEY Magazine) – Travis and Peggy Otto both entered the work force young. Travis has supported himself since he was in high school; Peggy, 43, has worked at University of Michigan Hospital since she was a teenager. So the couple, who married in October 2004, figure they'll be very ready to retire when Peggy turns 60. "I've got a lot of extra work years on most people," says Travis, 35, a construction manager. "I just want to get done and spend time with my wife."

To hit this goal, the Ottos, who live outside Ann Arbor, have been stashing more than 22% of their $115,000 income into retirement accounts. Such aggressive saving means doing without certain goodies. Travis drives a 1994 Ford Escort. The Ottos shop at used-clothing stores and forgo extras like high-speed Internet. Their few luxuries include afterschool activities for Peggy's children, Whitney, 14, and Brandon, 11, and a big vacation every other year. "It sometimes feels like we're struggling more than we need to be," Peggy says. Still, she recalls all too well the nine years she barely managed to make ends meet after her first marriage ended. "I want to retire comfortably," she says.

Where They Are Now

So far the Ottos have amassed $283,400 in their retirement accounts and own a vacation home in northern Michigan free and clear. They also own 10 acres of land where they hope to build a new home this year. The couple, who now rent, plan to sell another property to pay for most of the construction. They don't expect the move to increase their housing costs, but until the construction is complete, they can't be sure. Travis, a self-taught investor, recently sought advice from a local broker. But the broker simply took the $4,000 the Ottos invested with the firm, divided it among eight funds and charged a 5.75% fee. "I walked out of there pretty disappointed," Travis says.

What They Should Do

The Ottos certainly have the motivation to hit their early retirement goal, says Ronald Shaw, a financial planner in Ann Arbor. If Travis and Peggy keep up this pace of saving, they would meet their goal of retiring in 17 years. Right now they save $1,500 each month even after contributing to their retirement plans. But the onset of college tuition bills in four years will make it much harder to keep putting so much aside, particularly if their housing costs rise. Plus, the $1,000 a month they now receive in child support will be cut in half once Whitney turns 18. "They have a number of financial trade-offs to consider," Shaw says.

One point that's not negotiable: Travis and Peggy need more life insurance. Shaw says that Travis, who now has just $10,000 in coverage, should buy a $500,000, 20-year term policy, and Peggy, who has $200,000 worth of coverage through her employer, should buy enough to double that amount. The couple should immediately draft a will and a health-care proxy, then make the following changes to their investment portfolio.

› GET BETTER RETURNS WITH FEWER FUNDS Overall, says Shaw, the Ottos have too many large-cap growth stocks and not enough international holdings. Peggy allocates a third of the $176,000 in her 403(b) to a fixed annuity and two-thirds to a variable annuity. Shaw says that both annuities, managed by TIAA-CREF, are solid, low-cost choices. But he recommends that she shift half of her variable annuity, which holds mostly large-cap stocks, into Fidelity Spartan Extended Market Index (ticker symbol: FSEMX), a small- to mid-cap fund. Travis can pare down his 401(k) to just two funds, Vanguard 500 Index (VFINX) and Artisan International (ARTIX), which would give him plenty of diversification as well as boost the couple's allocation to foreign stocks. They should sell the eight funds in their brokerage account and set up two Roth IRAs instead, investing in low-cost Vanguard Value Index (VIVAX).

› USE TAX-ADVANTAGED ACCOUNTS FOR COLLEGE SAVINGS Shaw recommends that they invest $400 a month in Michigan's state 529 plan, which would be enough to cover two year's worth of in-state tuition by the time Whitney enters college. The Ottos could also deduct the 529 contributions from their state income taxes each year. Brandon, on the other hand, may forgo college and follow his grandparents into farming instead. So instead of a second 529 plan, Shaw recommends that Travis and Peggy try to put the maximum (currently $4,000) in their Roth IRAs each year. That way they can use the Roths for retirement or tap the principal without penalty for tuition if Brandon opts for school. "The Roths offer the Ottos more options," Shaw says.

› STAY FLEXIBLE Shaw urges the couple to be open to scaling back their early-retirement ambitions, especially as their expenses grow. Travis admits that if he had to, he could work part time after Peggy retires. Still, he adds: "I would certainly like to keep this up for the next five years. I came from nothing, and I don't want to go back to that."

the makeover

THE OTTOS

DEXTER, MICH.

Travis, 35, construction manager

Peggy, 43, administrative assistant

GOALS

• Retire when Peggy is 60

• Fund two years of college tuition for the children

• Build a new home

ASSETS

$283,400 in retirement accounts

$270,000 real estate equity

$24,000 cash

THE PORTFOLIO

Adding more foreign stocks should boost the Ottos' returns.

20% BONDS

30% LARGE-CAP BLEND

10% LARGE-CAP VALUE

20% SMALL-CAP/MIDCAP

20% FOREIGN

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