Scott Pankratz and Julie Osborn are phenomenal planners and money managers -- except when it comes to their own investments.
In 2000, Pankratz, then a science teacher, and Osborn, an ecologist, quit to launch a nonprofit that gets high schoolers involved in hands-on science projects. Today Ecology Project International is a thriving $2.4 million operation with 21 employees worldwide. "It's a fun, very active life," says Osborn.
But since the birth of Natalie, 4, and Lucas, 1, diapers and doctor's visits have consumed every moment that isn't booked with field trips and board meetings. "We have no bandwidth left over for finances," says Osborn.
So now they're full of questions: How much of their portfolio should be in stocks? Does it make sense to pay an extra $600 a month on the mortgages of their home and rental property in Missoula? Are they on track to cover half of Natalie's and Lucas's college costs?
The problem
For a fortysomething family, their 58% stock allocation is far too low, says Littleton, Colo., planner Bob Morrison. Moreover, their current monthly 3% employee and 3% employer contribution to their nonprofit's Simple IRAs, $300 to their Roth IRAs, and $50 each to their 529 plans will not be enough for Julie and Scott to retire in 14 and 24 years, respectively, and fund half of their kids' college. The good news is they can get there with a few painless adjustments.
The advice
Free up cash. Scott and Julie are paying 4.9% on their home mortgage, which has a $387,000 balance left on the original $417,000 loan. Refinancing to a 4% rate would cut their payment by $352 a month. They should also stop putting $600 extra toward their mortgage each month. Those steps will free up $11,400 a year; two-thirds should be funneled into retirement accounts and the rest into the college funds.
More stocks, more savings. The Pankratzes should boost their stock allocation to 82%. With home equity to spare, there's no need to have an 11% REIT stake. And they should replace the company Simple IRA with a 403(b) plan, which would allow employees to contribute up to $16,500.
Get fully insured. Scott always considered life insurance a waste of money. Morrison convinces him that it's essential, and points out that the nonprofit can get excellent group rates for both life and disability policies. That seals the deal.
Says Scott: "This would also be valuable for our employees, which is really important to us."
Income: $110,000
Assets: $140,000 in retirement accounts; $5,400 in college savings; $25,000 in cash
Goals: Retire at 65 (Scott) and 55 (Julie), pay 50% of college expenses.
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