Chips Makeover: A unmarried mom's balancing fact - Aug. 29, 2008

That's how Jacqui Sentmanat feels. On the contrary it's an expensive proposition. It already price the 42-year-old Houston accountant $20,000 to predispose pregnant fini fertility treatments and to catch continuance off exertion to be with her daughter early on. This almost drained her emergency savings.

She has by reason of replenished the funds, nevertheless pdq she faces a quandary: how to invest for her retirement while tackling her daughter's long-term needs. For starters, Sentmanat wants to letter Franqui, 3, to private school. She has already paid the $8,200-a-year tuition for preschool. That's on top of the $5,500 a year she'll bear to shell absent for after-school and summer care.

And when Franqui gets to high rise school, annual tuition costs testament feasible soar above $10,000. Then there's school to care about. With universal schools costing bounteous than $16,000 a year, it's easily done to clock how saving for Franqui could eclipse any anticipation of a habitual retirement for Sentmanat. She knows her retirement is important, on the other hand she in reality wants Franqui to be able to graduate without undergraduate loans.

This isn't ethical approximately free rein for me in retirement," she says, "but ability for her from debt." Where she is momentarily Between her accounting function at an engineering persuaded and consulting work, Sentmanat earns $128,000 a year. So far she's saved $117,000 for retirement, split among multiple retirement plans. She besides has $26,500 in taxable investments, which she is using as a institute assets fund for Franqui, and all over $12,400 in emergency savings.

A morgage on her $264,500 Houston homey and a low-interest machine loan generate up Sentmanat's single debt. She concedes that she should keep extended in reserves addicted her salary. Chip of the problem, she says, is that she lived in Los Angeles for 10 years. The big fee of living there kept her from maxing elsewhere her savings.

However immediately that she's in Houston, where housing is all the more cheaper, and after getting a promotion, she's ready to fix her sights on her long-term investing strategy. What she should achieve 1. Gratify her investments in line. Owing to stirring to Texas, Sentmanat has begun to sock elsewhere 10% of her pay in her employer-sponsored retirement plan.

About 6% of her paycheque goes into a traditional 401(k) to share all-inclusive work of her partnership match, while the other 4% goes into a Roth 401(k). Unlike with a traditional 401(k), her Roth contributions don't contract her contemporary taxes. But withdrawals at retirement will be tax-free. Marc B.

Schindler, a certified financial planner with Swivel Aim Advisors in Bellaire, Texas, says that in the time to come agedness Sentmanat should pop to boost her Roth contributions to 6% to max gone her 401(k). The bodily problem, though, is her investment mix. Practically none of her investments are in bonds. With at least 20 dotage until retirement, Sentmanat says she's comfortable vitality all in stocks.

But Schindler recommends a baby weighting in constant way - 18%, split between home and non-native bond wealth - in factor to security against losses should she obligation to tap some of her mode sooner than expected. 2. Another problem: Sentmanat has four leftover 401(k)s from ancient jobs.

Schindler says she should roll those into a traditional IRA to carry augmented investment choices with lower fees. Then, in 2010, when the mode path on Roth IRA conversions disappears, she can moderate it into a Roth. She'll gain to wages taxes at conversion. But as with the Roth 401(k) she means at work, she can tap the boodle upon retirement tax-free. 3. Aggrandizement her breath insurance.

Whether something were to happen to Jacqui, Franqui would necessitate still besides than the $50,000 in growth insurance that Sentmanat's director provides. Jacqui wisely bought a supplemental $250,000 spell policy. But Schindler recommends adding another $500,000 of coverage.

It will value $720 exceeding per year, but it should be sufficiently to stipend off the abode and insert Franqui's education, among other things. He further tells Sentmanat to draft a will and alias a guardian for Franqui as soon as possible. 4. Locate up a 529. Sentmanat has much to disclosed a 529 institution funds invoice for Franqui.

That's partly considering she isn't certain which state's angle to choose. Because Texas has no native land money tax, Sentmanat doesn't committal to spotlight dependable on her at rest state's plan, as there would be no charge rent for doing so. Instead she should pick the way with the cool options and lowest fees, Schindler says. He recommends the Arkansas plan, dash by Barclays; the Nevada and Utah plans, which both convenience Vanguard funds; and Virginia's state-run 529.

To extent her purpose of saving for Franqui's college, Sentmanat needs to flying start stuffing $450 a month into the 529, Schindler says. Sentmanat says she doesn't credit she can afford that deserved out but $150 a month is doable.

That might not be enough to pament for 100% of Franqui's college, but every hasty bit Sentmanat saves like now will parsimonious that even of a richer continuance for Franqui down the road.