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Not the Retiring Types

Lucky for Two Who Started Saving Late, They Like Working


When Robert Pedigo met Cynthia Anderson eight years ago in San Francisco, he was lucky to have $20 in his wallet and enough in the bank to cover the next month's rent. Unpaid back taxes and student loans totaled $16,000. Saving was something other people did.

Anderson, for her part, was living comfortably within her means and had accumulated a nest egg equal to six months' living expenses. If not her top priority, financial security was certainly never far from it.

Today, after four years of marriage, Pedigo and Anderson describe themselves as two middle-aged (he's 50, she's 42) freelancers (he's a photographer, she's a video producer). They recently bought their first home, a cozy bungalow the couple calls "the cheapest in Culver City," and have some money--$93,400--saved, but no coherent strategy for investing it.

And though they worry that they're "frightfully behind regarding retirement savings," the good news is that they have no debts except a mortgage, are saving a whopping 25% of their $108,000 gross annual income, and together have started a sideline wedding photography business that is steadily attracting clients.

Fortunately, retirement, at least in the normal sense of the word, is not in their plans.

What Anderson and Pedigo want is enough financial security to continue their current life of freelance work and regular foreign travel indefinitely, adjusting the proportion as they age.

Now, they work far more than they travel, though in recent years they've been to Turkey and Portugal, and they're planning a monthlong sojourn in Mexico later this year. But as the years go by, they want to work a lot less and travel a lot more.

"I can't imagine not working," Pedigo says, as Anderson nods, "but I'd like to be doing the jobs I want at the pace I want."

As do all self-employed people, Anderson and Pedigo have a great deal of control over their work and can take a flexible approach toward their retirement.

The fact that Anderson and Pedigo like the idea of working long into the traditional retirement years makes it less urgent that they have a large nest egg. For as long as they can attract clients, their continued earning power can make up for their late start at saving.

But their current challenge, says Tom Lancaster, an investment advisor and pension consultant in Lake Forest, is to remain financially disciplined during their years of peak earning power while still satisfying their wanderlust.

If they can do it, Anderson and Pedigo should achieve their goal of greater financial freedom by the time Pedigo qualifies for his first full Social Security check in 16 years. (The age for full benefits rises to 66 in 2008 and hits 67 in 2024.)


Lancaster's plan, which assumes an average annual inflation rate of 4% and an average annual return of 10% on investments, would produce a portfolio for Anderson and Pedigo that is worth more than $900,000 by the year 2012. Lancaster says earnings on the portfolio should replace about 50% of the couple's current inflation-adjusted income by the time Pedigo turns age 65.

"Your late start hinders your progress toward your goals," Lancaster told the couple, "but your inherent thriftiness bodes well for the effort."

Why did Anderson and Pedigo wait for so long to think about retirement?

Pedigo, like so many of the baby boom generation, says he could never really take the concept of retirement seriously, let alone visualize himself as actually being retired.

And besides, he adds, money has never been terribly important to him.

"I'm a Vietnam vet. I'm just glad to be alive," he says. "I never thought about retirement until I got married and saw how important all this financial security is to Cynthia."

Although Anderson acknowledges that, she confesses that because she doesn't understand investments, her concern usually just made her worried that she would spend her retirement years "alone in an apartment eating cat food," but too paralyzed to do much beyond opening a money market account.

Since becoming a couple, though, Anderson and Pedigo have made considerable progress toward building a firm financial future.

When they moved to Los Angeles five years ago, Anderson recalls, their annual incomes increased immediately and have been rising steadily since then. Today, they each earn about $54,000 a year.

Beginning in January 1996, the couple started saving 50% of their gross income, much of which they later used to start their wedding photography business.

A few months later, they found a two-bedroom cottage in Culver City for $167,000, and took advantage of Pedigo's still-unused Veterans Administration loan eligibility for a no-down-payment mortgage. The monthly payment, including taxes and insurance, is nearly $1,600 per month.

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