SEATTLE — Fourth-grade Seattle-area teacher Andrea O’Ferrall has tried to do all of the right things to be financially secure and get her son off to a good start in life.
She signed up for her employer’s retirement plans, socked away some money for the teenager’s college education and watched her day-to-day spending with proud frugality.
And yet, she had doubts.
O’Ferrall, a single mom, wondered whether she was saving enough for her son’s college — and for her own retirement.
“Isn’t everyone worried about that?” she said.
O’Ferrall, 53, asked for some free financial advice. The Financial Planning Association of Puget Sound put her in touch with volunteer Angie Furubotten-LaRosee, a financial planner with The Advisor Benefits Group.
“She’s made a really good start,” said Furubotten-LaRosee. “I’m just not sure that it’s enough.”
O’Ferrall has a lot going her way.
She is a longtime teacher in her school district, earning about $72,000 a year. That’s just under the median household income of $75,331 for the Seattle-Tacoma-Bellevue metro area in 2015, according to the Census Bureau.
She has two pensions through the school district with a current combined value of about $184,000.
She also signed up for a 457(b) deferred-compensation plan, a tax-deferred retirement savings plan available to employees of state and local governments, as well as tax-exempt organizations. Her 457(b) account now has about $40,000.
In addition, O’Ferrall has about $10,000 in an individual retirement account and about $18,000 in savings, which doubles as an emergency fund. Another retirement-savings plan, a 403(b), has about $33,300.
She has no consumer debts and pays off her single credit card every month, avoiding finance charges. She buys clothes for herself and her son at Goodwill. Her son’s father has never been in the picture, she says.
Projections difficult
Although O’Ferrall is confident about managing her household spending, she feels out of her depth when it comes to financial projections and managing the investments in her retirement accounts.
Her only direct investment in company stock came years ago, when she paid about $8,000 from savings for shares in a then-promising telecommunications company called WorldCom. In 1999 she doubled her money by selling the shares to raise the down payment on her home.
In hindsight, she calls it her “one memorable financial moment.”
She paid $164,950 for the house, which is now worth about $338,800, according to Zillow. Meanwhile, WorldCom was rocked by an accounting scandal and filed for bankruptcy in 2002.
All of O’Ferrall’s debts are related to the house. About $42,000 remains on the mortgage. She also owes her mother about $12,000 on a $25,000 loan that paid for installing solar panels.
O’Ferrall recently weighed whether to build an addition to her home for about $50,000. But Furubotten-LaRosee ran a financial projection that showed the expense would reduce O’Ferrall’s odds of having a secure retirement. She shelved the project.
The financial planner also urged O’Ferrall to delay her retirement until 67, when she will be eligible for full Social Security benefits. If O’Ferrall retires at 67, Social Security and her pensions will provide about 80 percent of the income she needs to support herself, Furubotten-LaRosee estimated.
Another challenge is saving enough money to pay for her 15-year-old son’s college education. The cost of earning a bachelor’s degree at a public university is typically a six-figure expense for students and their families.
O’Ferrall has work to do when it comes to building a college nest egg. She has two 529 college savings plans for her son. One has $18,000, and she doesn’t know the balance in the second one.
Other family members may contribute to the college funds. Furubotten-LaRosee urged O’Ferrall to reduce the uncertainty by getting financial commitments from them. One option, for example, would be to contribute directly to the 529 savings plans.
O’Ferrall and her son are also talking about how to pay for his college degree. Both of them want him to graduate without debt.
They are comparing in-state with out-of-state tuition, as well as considering well-paying summer jobs for her son that could help pay for his degree. One promising job option is working on a commercial fishing boat in Alaska.
