Your Greatest Expense May Prove Surprising!
When a couple marries and/or begins their careers after college, they soon encounter the greatest expense of their young lives, purchasing a home. As children are added to the family, the home expense seems manageable compared to the infinite cost of years of clothing, school supplies, dance and music lessons, athletic equipment, transportation, proms, and looming college tuition. However, according to a Merrill Lynch and Age Wave study, “Retirement is the most expensive purchase most people will make.”1
How Do Americans Fare in Meeting the Expense of Retirement?
The simple answer is not well. Think Advisor subtitled a recent article, “A dark, detailed new look at why many employees may never be able to retire.”2 While the average cost of retirement is more than double the cost of a home, ten times the cost of a bachelor’s degree, and three times the cost of raising a child to age 183, a majority of Americans are poorly planning and saving to complete the purchase.4
Forty-one percent site insufficient funds remaining after paying expenses.5 An examination of tax-records has revealed that less than 1 in 5 employers provides a defined contribution plan for employees.6 Many admit to being confused about what will be needed in retirement, and there is a sense that talking about the issue is somehow taboo.7 Emily Zulz writes, “It seems Americans know they should be saving more, but they fail to do so.”8
Slaying the Dragon
If these are true for the general public, the hurdle for ministry and nonprofit personnel is probably higher. Those serving in faith-based occupations often have fewer opportunities to make pre-tax contributions to a retirement account. Congregations, mission works, and local nonprofits are challenged to meet expenses. Directors resist committing funds for retirement, because they worry about the ability to make future contributions. Ministers and missionaries have struggled with the belief that providing for retirement was, in some way, not “living by faith.”
Although many who have committed their lives to ministry do not envision a classic retirement, it is wise to prepare for it. One understandable approach is to envision three legs of financial support similar to a stool. The first leg is Social Security. While a significant number of ministers have opted out of the government plan, there are many reasons to remain in the program. Entitlement reform may certainly lie ahead, but a commitment to some form of Social Security and Medicare appears to have broad support.
The Christian Churches Pension Plan may clearly serve as the second leg of a financial stool. It is a defined benefit plan specifically developed for missionaries, church employees, ministry staff, and those serving nonprofit organizations. Designed to supplement Social Security, the Plan is simple, solidly managed by professional asset managers, provides a steady income for life, and has been trusted by thousands of people for nearly 50 years.
The third support leg for retirement relies upon an individual commitment to saving. A wide array of savings accounts, insurance annuities, Christian Credit Union accounts, church extension fund offerings, and mutual funds exists are available as funding vehicles. Specific savings and investment choices should be made based upon the individual and family risk tolerances.
There are many excuses and a few reasons that result in our failure to prepare for retirement. However, solidly planning for our most expensive purchase is within reach and expertise of everyone, in any occupation.
1 Finances in Retirement: New Challenges, New Solutions. Merrill Lynch in partnership with Age Wave. 2017.
2 Two-Thirds of Americans Aren’t Putting Money in a 401(k). Steverman, Ben. Think Advisor. February 21, 2017.
3 Retirement is ‘Life’s Most Expensive Purchase.’ Zulz, Emily. Think Advisor. February 17, 2017.
4 Two-Thirds of Americans Aren’t Putting Money in a 401(k). op.cit.
5 Retirement is “Life’s Most Expensive Purchase.’ op.cit.
6 Two-Thirds of Americans Aren’t Putting Money in a 401(k). op.cit.
7 Finances in Retirement: New Challenges, New Solutions. op.cit. p.3.
8 Retirement is ‘Life’s Most Expensive Purchase.’ op.cit.