Investing in the Future

Larry and Brenda Breland's savings plan funded their retirement andput their kids through college

The couple saved a portion of their earnings mostly through bank certificates of deposit, varying the maturities and interest rates. Each time a CD came due—every six to 12 months—they left the earnings but reinvested the rest of the money in another CD to garner higher rates of return. Brenda points out that at the time, in the 1970s and 1980s, CDs were earning 9% or more. The Brelands held about 25% of their investments in stock mutual funds and blue-chip stock through ING and Barclays; the other 75% was in CDs, savings accounts, and U.S. Treasury bonds.

As young parents the couple earmarked money in savings accounts for their children’s college education, holding CDs and U.S. Savings Bonds under each child’s name. As the children got older, the couple would put 10% to 15% of monies earned from chores or part-time jobs into savings. They also practiced a kind of family 401(k) by matching their children’s deposits.

Through diligent saving and investing, the couple covered the tuition costs of the first three years of Larry II’s and Larenda’s undergraduate studies, about $28,000 each. The couple had their children take out loans their senior year to help them establish credit. Their youngest, Lorenzo, received a full four-year athletic scholarship worth about $36,000, so the couple needed to contribute little to his college costs.

With respect to their golden years, the Brelands credit their home state with having a favorable public employee retirement system. Employees with 25 years of service are eligible to receive 2% of their salary for every year after retirement, Larry explains. After 28 years of service, the benefit compensation is around 2.3%. Basically, “you get a monthly check for the rest of your life,” he says. “Our goal was to work 28 years so that we could get a lump sum when we retired.”

When the couple retired seven years ago, they qualified for roughly $90,000 each, which they received as a lump sum. The two opted to leave their money invested (tax-free until they turn 70½) through the state, where it earns around 3% annually, depending on interest rates.

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