Recession Planning

Recession Planning (Whitney Curtis photo for the Tribune / April 25, 2009)

Debbie and Kent Ketter have a lot to feel good about financially, but they're still worried.

They have a six-figure income, government pensions for retirement and their children are mostly on their own, but, like a lot of couples, they are concerned about the stock market and what could go wrong with their plan.

Kent, 43, is in a high-risk occupation, serving for more than 20 years as an active-duty officer in the Illinois Army National Guard. Beyond worries about his safety, Kent's career is at a critical juncture, with several possible promotions in the coming years from his current rank of captain that could make a big difference in his pension income.

Debbie, 44, a first-grade teacher, frets about the declines in their stock-heavy portfolio. And both wonder if their dream of retiring at about 60 will pan out.

"I'm not bad off, but with today's markets, it's a challenge preserving what we have saved," Kent wrote in a letter requesting a Money Makeover.

Nonetheless, the Ketters are on track for a comfortable retirement at roughly 60, provided they stick to a retirement budget geared to Kent's actual length of service and rank when he leaves and they watch inflation closely, said Jim Ludwick, founder of MainStreet Financial Planning, a fee-only planning firm in Odenton, Md.

Because of their market losses, they could make some moves with their portfolio that may pay off, Ludwick said.

They could face a retirement that is decades long. That would be nearly impossible to finance without the couple's government pensions, which are guaranteed for life and carry annual inflation adjustments, said Ludwick, who spent 21 years in the Air Force.

"They're in a good spot because they are both beneficiaries of defined-benefit plans," he said.

On top of that, they've managed to save $134,400 for retirement in workplace retirement plans and Roth individual retirement accounts. They also have non-retirement savings worth $44,115.

How did they do it? The couple has never spent big on lavish vacations, for starters. Occasional trips to big-league ballparks and a modest vacation cabin not far from their home are their major splurges for entertainment. They also watch the daily outflow, spending just $2,700 a year on groceries, for example.

At $312,215, their net worth is more than two times their combined annual gross salaries of $140,400.

College costs for their two children (daughter, Rian, 19, and son, Kent Jr., 21) are minimal because both receive scholarships that cover the bulk of their expenses.

But the Ketters face some big decisions.

As early as next year, Kent could retire from the military with an annual pension worth about $41,000. If he stays with the service, is promoted a couple of times and retires in 2018, his annual pension would be about $93,106.

"I love what I'm doing and have gotten good assignments as an officer," said Kent, who works as an inspector general.

The job requires a lot of travel, which is usually dangerous. His longest tour of duty in Iraq lasted from June 2006 to October 2007, and he has served in Afghanistan. Of his 20 years of service, he has been deployed on missions for nearly five of them.

He has been considering a career in teaching that would allow the couple summers off together, but it would mean a big hit to the pension.

"The civilian job market is bleak now too," Kent said.