9) The Backpage: Do You, As A Missionary, Think About Retirement?

Depending on your age, the assurance you have of future employment, your health and your country of origin, you just might. In my own informal surveys, I’ve discovered that — these days — essentially everybody is willing to consider retirement, assuming someone will help lead them down the road of that discussion. Again, depending on what your homeland does for retirement funding, you might or might not have much set aside. As a result, it seems to me that this implies a certain burden of responsibility for those of us who are mission agency heads, missionary care-givers, missions ministers, missions committee chairman, and church leaders.

As a young missionary in my mid-twenties, I remember what a nice gesture it was when a medium-sized church in southwestern Louisville took out a small pension plan for my wife and me. They didn’t ask our permission. They didn’t even tell us. They just did it. And one day, we got the first annual statement. Today, that little pension plan is the centerpiece of our retirement planning. It seemed “courteous” and kind at the time. Today it seems mission-critical.

Want to make a big splash in the life of the missionary family you love? Talk to a financial advisor in your church. Ask about some kind of portable pension plan. If you’d like, confirm things with your missionary’s sending agency. (Always a nice thing to do.) But either way, ask. Take some initiative. Your “courtesy” might become “mission-critical” in 30 years. :-)

Want to see some discussions on this stuff? Blogs abound. Check out, for example:
http://www.thinkretirement.com/

Got an opinion about missionaries, retirement, pension plans, savings, social security, or the like? Just click on “Comment” immediately after this item on the web and share your story. Your “lesson learned” just might become someone else’s battle plan. And … thank you for taking time to share.

Doug

5 Responses to 9) The Backpage: Do You, As A Missionary, Think About Retirement?
  1. Anonymous Reply

    Re: Retirement

    Brigada’s latest post featured a good one, a theme that I know we don’t look at a lot. Retirement. I am a 55-year-old nondenominational missionary with virtually nothing in any such fund. I relegate my future to what Billy Graham once said: the preacher preaches until he drops. However my wife does not settle for such a simple answer. Neither do I have one. I am working to stay in shape so I can preach too until I drop. There must be more to this issue.

    Thanks for posting this, Mark
    http://www.RiverOfLifeMinistries.com

  2. Anonymous Reply

    We probably all hope that Christ will return before we are ready to retire. Of course, if He comes back too soon, I know a lot of people who will be in a pretty difficult place (since they have barely heard, much less responded, to some important news). So maybe it’s best if He delay a few more years at least…

    And we may be able to exit the world still in full employment, with some sort of income, and not need to depend on any kind of savings. But some of us are likely to end up with poorer health, or other situations which prevent us from working right up until we die.

    Social Security should provide some base of support. But it will probably not be enough for most people, especially if more changes are necessary to keep it from going broke. And there may not be an employer who has looked after us and provided a pension. So probably everyone needs to give some thought, and probably some action, into saving some sort of fund which can be drawn on in retirement.

    There are a great variety of options available, depending on details of the type of income we receive, with a variety of tax effects. Some time invested now in looking at the different options could pay off greatly years in the future. It may even be worth consulting with a professional (preferably one who will not be overly influenced by commissions on the products they sell – you want recommendations which are in your best interest, not theirs).

    The most important things to consider are amount of savings, time until you need the money, diversification of investments, tax nature of the investments, and how you will eventually access the money.

    First, you need to save money. Probably lots of it, if you are just starting to look at this now. The more you save, the more will be available later. It may be hard to save a lot all at once – if so, start small, and increase it gradually over time. To make this part easier, you might consider tracking all of your expenses so that you know where your money is going.

    Second, the time until you need the money is important. You will start needing money at your projected retirement date (earlier if you end up with health problems, later if you end up working longer). But you will not need all of your money immediately – you could live for a long time after retirement. The trend is for longer lives. This will affect your diversification of investments.

    The longer you have until you need money, the more it can grow. Investment returns will compound. If you invest $1000 at 8% for 10 years, it will be worth $2,159. But the same $1000 at 8% for 20 years would be worth $4,661. And if you had 30 years, it would be worth $10,063. True, the value of the dollar will decrease over the years due to inflation, but you see the great impact of time. If you have a long time, even a little money can make a big difference.

    Also, the longer you have, the greater risk you can afford to take with your money. If you need money within 5 years, it is pretty risky to put it in the stock market. Just look what happened over the last few months. But the longer you have, the more time your investments would have to recover after a large drop. Money needed soon should be kept in a more stable investment, even though those tend to have smaller returns over long periods of time – they don’t always even keep pace with inflation.

    Third, you need to diversify your investments. It is good to have a mix of stocks, bonds, real estate, and some cash as you get closer to needing the money. Mutual funds are good ways to get diversification within these classes. It is good to have international stock exposure, as well as large cap, medium cap and small cap. Some mutual funds will give you a very broad mix, and others are more focused, so that you would want several different kinds.

    As the market changes, some of your asset classes will do better than others. So you will want to rebalance sometimes, selling a bit of what has done well, and buying a bit more of what has done poorly.

    As you get closer to needing the money, you should also change your asset mix to be more conservative – fewer stocks, and more bonds and cash. You should probably always have some stocks, since you may be in retirement a long time. But you don’t want to be all in stocks just before you retire, since stocks could drop and take several years to recover.

    Fourth, you should consider the tax nature of your investments. A Roth IRA or Roth 401(k)/ 403(b) is one of the best options available in the US, since under most conditions, the gains on the investments are never subject to income tax. You have to invest after-tax money (unlike some kinds of IRAs and normal 401(k)/ 403(b) plans) but that is often not a great burden, and there is a great advantage to having the money never be taxed. There are also tax deferred accounts (like normal IRAs, 401(k)/ 403(b) accounts, savings bonds, and deferred annuities). These you would not need to pay taxes on from year to year, but taxes would be due eventually. And there are regular taxable accounts. The income on these is taxed every year, and when the investment is eventually sold, capital gains tax is due on any increase. These accounts also have different rules for withdrawal – some have tax penalties for withdrawing before a certain age, or within a certain number of years since the account was opened.

    It is helpful to have a mix of different kinds of accounts, since you never know what is going to happen to tax rates and tax law. But getting as much money as possible into Roth IRA and 401(k)/ 403(b) accounts would be a good thing.

    Finally, it is important to consider how you will eventually access the money. Some accounts have rules about needing to make withdrawals at a certain age (so that the government can start collecting taxes). Others have limits as to the amount you withdraw (some employer plans essentially require you to take an annuity – regular payments for life). Most accounts would have the option to take an annuity, or to use the money to purchase an annuity.

    It is probably a good idea to use a portion of your investment in annuity form, since that way they payments will last as long as you live. But you would not want to tie up everything in an annuity. For one thing, unless there is some inflation increase, the longer you live, the less your annuity income will be worth. You should have some means of increasing your income in later years. You may also need to access a larger amount at some point, either for a special purchase (condo?) or an emergency (health issue?). Also, annuity rates depend on the interest rates at the time of purchase. Right now, interest rates are low, so it is not the best time to buy an annuity. You would not want to lock in a bad rate on your entire retirement investment.

    If you discover that you actually have a lot of money saved for retirement, you can consider a type of insurance plan called long term care insurance. It would cover nursing home and similar expenses for some period of time. These insurance policies vary widely in terms of benefits and costs, so you should investigate them carefully before buying one. And it is more important to build up a retirement fund than to get long term care insurance, since you would be more likely to retire than to need long term care.

    Much more could be written about this. And it is easy to get confused, or worried, and put off doing anything. These sort of investments can never replace our trust in God – nothing in this life is certain. But it good to be prudent and to have some sort of savings for a rainy day.

    If you do nothing else now, it would be good to open up a mutual fund account with a broad stock market index at a company like Vanguard or Fidelity, and start putting in money every month. Stocks are cheap now, so it is a good time to get started. You can always add to this, or switch it into something else, as you have opportunity and learn more.

    Tim

  3. Anonymous Reply

    Here are some musings I recently wrote that include comments on retirement. They were intended for publication in a church bulletin, but were not. Perhaps the thoughts will be more helpful in this venue.

    ARTICLE
    “Response to the poor economy”

    I’ve been thinking about my financial situation for some time. Mainly, I’m grateful. I’ve been supported well by this church for 18 years of my life, 8 as a missionary, and another 10 on the ministry staff. A few years ago, the church leaders added medical insurance as a benefit and then a retirement account. All of that is a great blessing.

    As I get closer to retirement age, thoughts about financial security for retirement loom larger. Before I put down one more word, please know that the purpose of this article is not to make people feel sorry for me. Re-read the paragraph above. Instead, I want to offer a perspective that we all need to consider. The fact is, I have not prepared as well for retirement as I should have. Lack of financial discipline when I was younger and some poor decisions have brought me to this place. Perhaps there is some solace in knowing that there are many others in the same predicament, some for similar reasons, others because of very unfortunate circumstances such as health challenges, business reversals, etc..

    Now, with our country’s current economic downturn, the challenges are heightened. There is a feeling that I ought to put even more resources into my retirement years—-batten down the hatches, and all that. Some would even suggest reducing giving to various charitable causes to shore up personal finances. There is dread among those who depend on others’ generosity that the economy is going to wreak havoc for charitable giving.

    I am resisting the intense pressure to retreat into my shell and stop giving. I’m not very good at it, but deep down I feel I should stop worrying about my retirement. Isn’t God blessing me richly now? Hasn’t he always taken care of me? Won’t he take care of me then?

    What if I’m not able to retire? I say, so be it. Perhaps I’ll be one of those who has to keep working long past the normal retirement age—maybe it will be what is best for me anyway. Or perhaps I’ll go to be with the Lord long before I expect. That isn’t such a bad option, is it?

    This church continues to need strong, faithful, and generous givers. And there are so many other wonderful opportunities that continue even during the downturn. I do hope missionaries continue to find funding for their needs, and that organizations that promote the gospel and help the helpless will still receive what they need to go on. I’m going to do my best to continue. I’m tired of worrying about retirement when God has been so good to me and my family for many years. The blessing is from God, not my own hand. As the song says, “without him I could do nothing.”

    In no way is this short essay meant to chastise. How could I when there are so many wonderful givers here? And please do not lift me up as an example; note again my lack of discipline in paragraph 2. It is meant to give food for thought and to encourage: “God is the fountain whence ten thousand blessings flow!” Let us remind one another again and again in these challenging times, that God is sovereign and His will reigns supreme. Best of all, the outcome of the last battle is pre-determined!
    END OF ARTICLE

    Now that you’ve read the article, if you’re still with me, I have just a few more words.

    First, I’m not a missionary now, but I still think with a missionary mind-set.

    So…am I foolish or faithful for putting my retirement years in God’s hands? I don’t want to be a burden on anyone in my later years. At the same time, God tells us that those who build bigger barns for our stuff (does that include retirement funds??) are foolish.

    Roger

  4. Doug Lucas Reply

    I’m still with you Roger. I’m not sure about *just* putting it in God’s hands. But one thing’s for sure: God will see you through. My own take on this is that he also asks us to use the mind that he gave us to plan and take stock… in the same way a man building a tower is expected to take stock before building it… or the “wise man” that chose to build his house on a rock. I’m sure God *loved* the man that built his house on the sand, but it still fell flat. So my own conclusion is — God will bless you because of your life of investment for Him. But if a 20-year-old has a mind for this stuff, we’d better help him try to plan his house wisely.

    Somewhere in between there, I think there’s some truth.

  5. J Reply

    There’s more to the issue than money, our issue is where and with whom? We have little family left and we long for community. Does anyone know of missionary retirement facilities? I’m dismayed at the comments I’ve seen in various parts of Brigada on this subject that seem to narrow things down to “invest” or you’re negligent. I have a friend whose retirement was in stocks–their income was cut in half when the stock market crashed. What if your agency won’t let you “live on what’s left?” Ours would not.

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