Millionaires in the Making: IT Specialist

Posted on May 22, 2007

CNNMoney just released a new format (at least I think it’s new) for the Millionaires in the Making section. It now contains more of a blog feel with the post at the top and comments below. This edition highlights Jeanette Courts commitment to financial independence. Here are the stats the article lists for her:

Age: 38
Occupation: IT specialist at the Pentagon
Salary: $94,000 a year
Government Thrift Savings Plan: $107,000
Roth IRA: $6,000
Savings Bonds: $2,000
Online savings account: $10,000
Brokerage account: $1,000
Other savings: $4,000
Home equity: $190,000

CNNMoney expert’s recommendation:

She wants to retire at age 58. They recommend waiting 4 more years and retire at age 62 which serves three purposes: She will receive a higher pension at age 62, more time to add the 15% she is contributing to her Thrift Savings Plan as well as less time to wait for Social Security. In my opinion asking someone to work an extra four years when they were not planning on it is a tough sell. I think it would depend on how bad I wanted the extra money as well as how much I liked my job. The best position would be to at that stage in your life enjoy your job enough to work until mid 60s at least.
Consolidate her Thrift Savings Plan investments into a 2030 target retirement fund instead of doing the asset allocation herself. This takes the stress out of asset allocation and puts the responsibility on the fund instead of the individual investor. Be sure to check out the expenses involved with these prior to buying.
Move her son’s college savings from an online savings account into a 529 college savings plan. The 529 has three main advantages over the online savings account: The money grows tax free, she will get a tax break (depending on which state’s 529 college savings plan she chooses), and it can be distributed tax free. This seems like a no-brainer to me.
Increase cash reserve emergency fund from $4,000 to $15,000 and put it in a Virginia tax-free bond mutual fund. the tax-free bond keeps the liquidity while sheltering the money from federal and state income taxes. Increasing cash reserves is always a safe bet and something I am working on.

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