Decision Time

Will Victoria Reddic be able to retire early and pay her daughter's college expenses?

Victoria Reddic is trying to avoid getting squeezed in a financial vise. The 50-year-old widow is feeling the tension of wanting to retire early but recognizing that in the next few years she’ll need to make college tuition payments for her 17-year-old daughter, Veronica. A compliance consultant, Reddic has spent the bulk of her 33-year career at insurance giant MetLife. Feeling the lure of retirement, she says it would be great if she could ease into her golden years at age 55. But one of her big aspirations is to send Veronica, a junior in high school, to a four-year public college or university.

According to The College Board, for the 2006—2007 academic year, the average cost of tuition, room, and board at a public university was $12,796. Reddic is fortunate that she makes a very good living, bringing home approximately $89,000 annually. Yet, because of her assets and income level, it will likely be difficult for her daughter to qualify for need-based financial aid. At the same time, Reddic needs to ensure that her nest egg is large enough so that she’ll be able to withdraw $45,000 a year during her retirement.
The St. Louis native is used to facing tough financial choices. When her husband, Sylvester, died in March of 2000, she had to decide what to do with $200,000 in life insurance benefits. Initially, she put the money in an interest-bearing money-market account. In a year’s time, she had spent about $10,000 on remodeling her two-bedroom home. She also opened a brokerage account and invested another $70,000. Reddic put all her eggs in one basket, investing all of the money in a technology fund, per the suggestion of a financial adviser. Unfortunately, following the dot-com crash and 9-11, the tanking stock market added to her misfortune and the value of her portfolio was nearly cut in half.

Looking to reduce her debts, Reddic eventually used $40,000 of the death benefits to pay off her mortgage. “Paying off the mortgage allowed me to start dumping all of my extra pay into my 401(k),” says Reddic, who began socking away her former monthly mortgage payment of $800.

During the past five years, Reddic has tried to replenish her coffers. Total investments in her retirement plans, educational savings, and cash savings are now estimated at $403,539. Her liabilities consist primarily of a $9,000 credit card balance, with a 0% interest rate, which she expects to pay off within the next few months given her discretionary income and by drawing on her $25,000 money-market account. Coping with the death of a spouse is always a difficult situation. In spite of her solid financial standing, Reddic believes she is just recovering financially since losing her husband of 17 years. “I didn’t do badly, but I could have done a better job,” she says. “I would have been further along.”

The Advice
BLACK ENTERPRISE paired Reddic with Danny Freeman, a financial adviser with Darda Wealth Management in Winston-Salem, North Carolina. Taking into account Reddic’s desire to retire early,

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