Plan Wisely Today for Tomorrow’s Retirement
- Wednesday, July 30, 2008
Oh, the good old days when things were simple. Time was when a young person completed school (high school if he was fortunate) it was time to begin a career. In those days, “career” was defined as being gainfully employed by the same company until age 65, after which one led a short retirement period, and then died on cue at about age 68.
Today, things have changed. Today, many Americans are living 20, 30, even 40 years into retirement. And the old advice about saving money in the bank and depending on Social Security doesn’t do the deal.
The people who crunch the actuarial numbers are telling us that if you reach age 65 in relatively good health, the odds are high that you will live well into your late 70’s or 80’s—or even your 90’s. This is great if you enjoy Christmas with the family, but it does require a more sophisticated approach to long-term retirement planning. One basic goal: Try not to run out of money before you run out of life.
Seriously no one, save God Himself, knows which day your coffin will roll into town; or when they’ll cut the roses that will go on top of it. So, understand clearly, that our goal as Christians is to remember the profound. Our eyes should always be on eternity. It is wrong to develop an unhealthy worry about tomorrow. Jesus told us to focus on the day at hand because the problems of tomorrow will be here soon enough. And, King Solomon summed it up with these words, “Remember also your Creator in the days of your youth, before the evil days come and the years draw near when you will say, ‘I have no delight in them.’” (Ecclesiastes 12:1)
But with that said, the Scripture also encourages us to be responsible stewards of our resources so our tomorrows will not be our undoing.
Today, people’s professional lives are different than they once were. Depending on which expert you listen to, it is estimated that many of us will have five or more careers throughout our lives. And, with fewer and fewer employers offering defined benefits plans (such as pensions) today’s employees are more on their own than ever before.
So, how does a wise steward plan for a dignified retirement? That’s a short question with a very long answer. Rather than going into deep detail here, let me share a few basic thoughts that you might find helpful:
1. Plan ahead. This is the oldest (and most important) advice of all. As the past generation of farmers was fond of saying, “Make hay while the sun lasts.” Take full advantage of all your tax-advantaged retirement programs. Vehicles like 401(k), 403(b), SEPs, and Individual Retirement Plans are great. Learn about them. I recommend that most families save a minimum of 10-15 percent of their income in such retirement plans.
2. Don’t get fixated on retiring at 65. Today people are living longer. Why not be productive and work longer, too? If you enjoy what you do, see if you can stay at your job after the traditional retirement age. Just recently, the Federal Aviation Association finally woke up and realized that they were putting some of their best, most experienced pilots out to pasture too early—and raised the mandatory retirement age from 60 to the more enlightened age of 65. After all, there’s nothing in the Bible that says you have to retire. Some of the most miserable people out there are the ones that blow out 65 candles, get the gold Timex, and go home to watch Oprah. Staying involved and engaged isn’t only financially wise—it keeps us energized and happy.
3. Build a new career. If your present employer won’t keep you past the mandatory retirement age (or, you simply don’t want to stay) why not do something different? I’m convinced that this decision has not only been financially profitable for many mature adults—it has also improved their health and lengthened their lives! Did you know that Colonel Sanders was in his 60’s when he built his fried chicken empire
4. Cut your lifestyle. In retirement you may be forced to live on less. Try cutting your lifestyle to that level before you retire. Get used to it.
5. Be realistic as to what it’s going to cost to live in retirement. Frankly, there is no “one size fits all” formula for this. The pundits are famous for telling us that in retirement we should expect to live off of about70-80 percent of what we spent prior to retirement. And, that may be accurate for some of us. After all, in retirement, there may be less eating out and less clothing and dry cleaning costs. And, presumably we won’t need to continue setting away that 10-15 percent in our retirement accounts. But, what if you have higher medical costs? Or, what if you’re healthy and you want to travel and do some mission work or visit the grandkids more often? Such scenarios could easily require every bit of your pre-retirement income.
6. Lastly, don’t be overly optimistic about investment returns. I cringe when some radio money guru tells people they can withdraw (I call this the “burn rate”) 8-10 percent per year—and never run out of money! Maybe—but, probably not. The studies I’m familiar with are much more conservative. Many experts believe that a more realistic figure would be to expect a burn rate of 4-5 percent a year. (This is based on several assumptions: First that you want 80 to 90 percent chance that the money to last for about 30 years. Second, the money should be well diversified: about 50 percent in stocks and 50% in bonds/fixed assets.) So, based on this formula, if you want $40,000-$50,000 per year in retirement, you should have roughly one million dollars in investments when you begin the process.
Steve Diggs presents the No Debt No Sweat! Christian Money Management Seminar at churches and other venues nationwide. Visit Steve on the Web at www.stevediggs.com or call 615-834-3063. The author of several books, today Steve serves as a minister for the Antioch Church of Christ in Nashville. For 25 years he was President of the Franklin Group, Inc. Steve and Bonnie have four children whom they have home schooled. The family lives in Brentwood, Tennessee.
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