retirement planning Archives

Is there a line we cross between making reasonable preparations for retirement and—obsessing over it?

Maybe I should back up a bit by hatching definitions of “reasonable preparations” and “obsessing”. By reasonable preparations, I mean setting aside only as much as you can comfortably afford to, then trusting the outcome to God. By obsessing, I mean chasing a predetermined number and believing that the ultimate success of your life hangs in the balance.

What are some signs that indicate that, as Christians, we might be obsessing on retirement planning?

Assuming A Level Of Certainty About The Future That Can’t Be Known

Retirement planning relies heavily on conventions, starting with an assumed rate of return on investment. This single convention is commonly expressed as some number between six percent and ten percent, and is based on the historical rate of return on a portfolio invested in the stock market over many years.

But somewhere along the line, the idea that this assumption is anything more than a convention has fallen by the wayside and been replaced by a presumption of certainty as to how much you can expect to earn on your investments.

There’s no arguing on what the stock market has done in the past—the problem is in assuming that it will behave in the same way in the future as though it’s some kind of cosmic certainty.

What does Scripture tell us about assumptions of certainty? In James 4:13-14 we read:

”Now listen, you who say, “Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.” Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes.” (NIV)

This verse doesn’t tell us that we shouldn’t prepare for the future, but it clearly warns to avoid having any notion of certainty about how events will play out.

Obsessing On The Future And Ignoring Today

Sometimes we can become so caught up in planning the perfect future that the present can get lost as we do. While we’re preparing for a distant retirement all kinds of things are playing out today. It’s not that we shouldn’t prepare for the future, we should. But at the same time we have to be careful that we aren’t prioritizing retirement—the future—over the present.

We can become so obsessed with that future that we might forego helping the poor, witnessing to an unbelieving world, and building up other believers under the assumption that we’ll have time and money for all of that later—when we’re retired.

Retirement—Or A Run For Riches

If you follow the financial media, in order to have the kind of retirement you should desire, you’ll need to have X millions of dollars by the time you retire. That would make you a millionaire! You’d be rich by most standards.

Statistically—barring a runaway inflation—the vast majority of people won’t be millionaires, even by retirement. I think most of us know this. But since retirement is considered a virtue in the modern world, it can quietly turn getting rich into an imperative. We might chase wealth with the conviction of a recent convert, always telling ourselves that we’re merely “working to provide a secure retirement” for ourselves.

[Does God want us to pray for money? <—Join the discussion]

We’re all human, and as such some of our greatest sins are the ones we don’t ever think of as sins. Yes, even retirement planning can become a sin if we take it too far.

[Is it a sin to be rich? Find out what the bible says]

Retirement As A False Idol

If we become obsessed with retirement, i.e., I have to have X amount of dollars saved by date Y,we may be constructing a false idol. It’s not that having goals is a bad thing, but that believing our future security hangs on meeting that goal comes dangerously close.

It can become an idol when it detracts from something else that we need to be doing…

Trusting In God

Do you ever find it at all curious that even when you’ve experienced failure in life, when you haven’t reached your goals or when you were certain you were looking down the road to a date with doom, that somehow…you survived it?

Do you think that all of those episodes were just happy coincidences?

We don’t need to achieve perfection in life. If we fall short of our goals, God will be there to provide for us. That’s’ something we need to believe in. If we ever think that we’ll be doomed because our retirement savings are inadequate, we’re probably elevating retirement to the level of an obsession.

Here’s the thing, God may not even want you to retire! Instead of money, he may provide you with excellent health, well into old age, that will enable you to continue working until the end of your life. You may decide that you don’t want to retire. God may want you to do the job your doing—or some other kind of work—because He’s working through you as you do.

[Does hard work reveal misplaced faith? <—Share your thoughts.]

We can’t know what God has planned for us, but we need to leave room for it.

Finding Balance—Making Reasonable Provisions For Retirement

OK, I’ve been beating up on retirement planning, but am I suggesting that you shouldn’t do it? Not at all! My point is that we shouldn’t obsess on it. Much of the world is telling us to do just that, and when the world starts shouting too loudly we should be on our guard.

The world is showing us slick looking charts, graphs and projections to tell us how easy it will be for us to become millionaires and to retire in splendid isolation. It’s all over TV, the web and even the print media. It’s called advertising. There’s big money in the retirement planning industry, and that’s why so many companies are willing to pay for that advertising.

In the end however, the retirement planning industry can promise us nothing—they can only give us projections. Projections are not worth obsessing over! They may happen, but they may not.

And if not, what are reasonable provisions for retirement?

Save some money for retirement, pay off your debts, live beneath your means, choose a career that you can do for your entire life—and trust God for the outcome. Only He, and He alone, can guarantee us anything.

Photo by Stephen Klein

[The following is a guest post by Jeff Rose about finding the right retirement plan for you – see his complete bio below]

Do you have aspirations of an early retirement? If so, it is important to investigate all of your options and even more important to start saving for retirement now.

The Typical Retirement Plan Options:

Employer-Sponsored 401(k) Plan

A 401(k) is a savings plan created by employers. Eligible employees can make contributions directly from their paycheck without being taxed. Subsequent earnings are tax-deferred. Early withdrawals are subject to penalties. If a 401(k) Plan is offered to you through your place of employment, take advantage of it.

[Take a look at the current 401k contribution limits]

Many companies offer a matching program. This means that whatever you contribute is matched by your employer, usually up to 5 or 6% of your income. In order to receive these additional funds, you need to participate at a certain level in your 401(k) plan, but as long as you can do that, why wouldn’t you? Free money is hard to come by.

Individual Retirement Account (IRA)

Another popular plan with definite tax advantages is the Individual Retirement Account. With a traditional IRA, you save tax-deferred money that gets invested in a variety of ways. If you already have a 401(k) through an employer, you can save even more for retirement with an IRA. Savings in an IRA is typically invested in the following ways.

Stocks and Mutual Funds – By far the most popular choices, these are arguably the best way to increase your savings. Some people are adverse to risk and, therefore, afraid of this option, but stocks and mutual funds generally beat inflation and allow your money to compound via dividends and increases in share prices.
Bonds – Putting your money into bonds is a good choice for the more cautious of investors. You will still end up with more than with money markets and CDs. Dividends can be spent or reinvested..
CDs and Money Markets – These options are your safest option, but give the lowest amount of interest.

[Here are the current IRA contribution limits]

Roth Individual Retirement Account

A Roth IRA is another type of retirement plan where your earnings grow tax-free, similar to that of a self invested personal pension in the UK. The difference is, you have to pay taxes up front and, in order to let your money accrue tax-free, hold the account for a five year minimum. There are fewer investment restrictions and withdrawals are tax-free, though certain rules may apply.

Changes occurring within your Roth IRA (interest, dividends, capital gains) are not taxable. Contributions are not tax deductible, but once deposited into your account, your money will grow free of taxes.

403(b) Plan

This type of retirement plan is solely for the employees of certain public schools and other organizations that are tax-exempt. Some ministers fall into this category. You, the employee, can not set up a 403(b) account for yourself. Only your employer can set one up for you. Contributions are made by your employer through salary reduction agreements. Some plans allow you to make after-tax contributions.

These are funds put into your plan from some other source of income. No income tax is paid on these contributions until you start withdrawing from your plan, normally not until you are retired. (Contributions made to a Roth program are initially taxed but then remain tax-free until you start withdrawing and, if certain requirements are met, sometimes even then.)

If you are ready to start saving for retirement, take a minute to educate yourself. You’ll be glad you did.

photo by jscreationzs

Jeff Rose is an Illinois Certified Financial Planner. He blogs at Good Financial Cents and Soldier of Finance. He loves Crossfit workouts, writes about Roth IRA rules and craves In-N-Out burger. You can follow his updates on Twitter.