Successful Money Management for Christians Lesson Eleven
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Successful Money Management for Christians Lesson
Eleven “Saving
Towards Retirement” “…Be
thou faithful unto death and I will give thee a crown of life.” (Revelation
2:10) One
of the dangers about the concept of retirement for the Christian,
from his job, is the way he views his obligations to God. He may
be able to retire from his “secular” job, but can a Christian
ever retire from the service of God? We are admonished to stay
faithful in our service to the end (Hebrews GETTING
OUR HOUSE IN ORDER The
prophet Isaiah had a message from the Lord for King Hezekiah, “Set
thine house in order; for thou shalt die, and not live.”
(2 Kings 20:1). You may remember that he prevailed upon the Lord
to spare his life at that time. A good steward who manages well
will have his financial resources in control and will be
knowledgeable of them. To effectively plan to save for retirement
there are some things that really should be done to get ready to
launch out into the investing process. (1) Organize your records,
(2) Cut all unnecessary spending through a planned approach with a
budget, (3) Develop a plan to minimize, reduce, and get out of
debt as soon as possible, (4) Develop a plan that will help to
minimize taxes that is legal and right (Romans 13:1-7), (5) Review
your insurance protection, (6) Update your will, (7) Develop a
systematic plan for investing. The
more conservative financial approach recommended by some financial
advisors is as follows: 1)
Eliminate small debts as quickly as possible….especially
higher interest ones. 2)
Put a month’s living expenses in your checking account. 3)
Put a 3-6 month’s living expenses into a Money Market
Fund for emergency purposes. 4)
Put money being saved for major purchases into a Money
Market Fund. 5)
Then,
begin investing to meet long-term goals: In Money Market Funds,
Growth Mutual Funds, Real Estate, Bonds, etc. By all means use
tax-sheltered tools for investing to lower your taxes. It
is probably obvious that most of us may have a hard time just
taking care of the first four and find it hard to do much
investing until later in life. This could be a mistake from one
standpoint….we would lose the benefit of the time element that
is so important to building for a retirement income. If you are
fortunate to be with a company that helps you save for retirement,
you may not have to be too concerned here. But for those who are
not as fortunate, a hard decision is called for in this area.
Hopefully, we can make it wisely. Some
people think of savings and investing as easy….that anyone can
do it. Well, the simplified approach that usually does not offer
much return is easy and this is what a large number of people have
done in the past. But to plan well for retirement will require a
lot more knowledge of how to invest, as well as, where to invest.
Following are some suggestions that are often given to help keep
people from making mistakes about investments that they will
regret later on: 1)
Don’t plunge into investments without a long range plan. 2)
Do your homework before investing. 3)
Stay mostly with high quality investments. 4)
Get
rid of the “get rich quick” idea and plan your investments
over a long period of time (Matthew 25:14-18). 5)
Do
not be ashamed to begin small, especially if you are very young. 6)
Do not tie up money you will soon need---have some
emergency fund to use for such. 7)
Be sure you start as early as possible! 9)
Do not fritter away your dividends or interest. 10)
Review investments often. 11)
Be
sure to plan your investments to deal with (1) emergencies, (2)
children’s education, (3) health problems or disability, and (4)
retirement. BEGIN
EARLY TO PLAN YOUR INVESTMENTS FOR RETIREMENT Income
for Retirement is probably one of the biggest things we have to
save for in our lives. The young person has a greater potential
than the one who is older in most cases. The reason is….his
money will have more opportunity to compound over a longer period
of time. For an example…..A one time investment of $ 1000.00 at
10% interest will double every 7.2 years. The illustration below
will show the differences at age 25, 30, 40.
25 years old 30 years old 40 years old
32.2------ $ 2,000
39.4------ $ 4,000 37.2------ $ 2,000
46.6------ $ 8,000 44.4------ $ 4,000 47.2------ $ 2,000
53.8----- $ 16,000 51.6------ $ 8,000 54.4------ $ 4,000
61.0----- $ 32,000 58.8----- $ 16,000 61.6------ $ 8,000
68.2----- $ 64,000 66.0----- $ 32,000 68.8---- $ 16,000
The
above is only looking at a one time investment of $ 1000. Imagine
what difference it would make if you were investing $ 1000 or more
a year into savings. And, of course, there is a variable here that
must be considered as well. If a person waits till he is around
40-45 to begin saving for retirement, he may have more money to
put into savings. Especially would this be true if all debts were
paid off, and even his house paid off. This would free up quite a
large amount of money for investment for retirement. An example
that might be of interest in this regard is given below. 1)
A
young couple buy a house at age 25 and finance $ 75,000 at 10.5%
interest for 30 years. They would have 360 payments of $ 686 per
month and end up paying $ 246,960 at the end of 30 years. 2)
Another
young couple buy a house at age 25 and finance $ 75,000 at 10.5%
interest for 12 years. They would have 144 payments of $ 918 per
month and end up paying 114,768 at the end of 12 years. This would
amount to a total savings of $ 132,192. 3)
If
this 2nd couple continued to invest the $ 918 per month
for the next 18 years at 12% interest, they would have a sizeable
retirement fund as seen below: a)
At age 55----It would be worth $ 653,367 b)
At
age 65----It would be worth $ 1,098,313 c)
At
age 75----It would be worth $ 3,431,109 Each
person’s situation will be somewhat different and will help to
dictate the approach he will take. But please don’t write off
the younger approach, because it has a lot of merit, as the
following examples illustrate: 1)
Saving
$ 3.50 a day ($ 1277 a year) at 12% interest from 25-65 (40
years). At age 65, the investment will be worth $ 1,098,313. At
age 75, it will be worth $ 3,431,109. 2)
Save
just $ 500 a year at 12% interest from 25 to 65. At 65, the
investment will be worth $ 430,037. At age 75, it will be worth $
1,343,425. One
of the biggest disadvantage of the young is his tendency to want
to buy, buy, buy. He overspends, goes into debt and has to use the
money he would be able to save for retirement to pay off his
debts. Then, he is at a disadvantage in that he doesn’t have the
knowledge, understanding, nor wisdom of an older person. He not
only may spend recklessly, but he may invest too recklessly as
well and tend to lose, rather than gain on his investments. Sound
financial management is something that has to be taught and
learned over a period of time. Blessed is the young person who has
been taught from his early years how to handle money properly and
successfully. Every father should take the time to so teach his
children! 1)
He needs to be taught the “Stewardship” concept. 2)
Taught proper reasons for saving and the value of such. 3)
Taught how to be prepared and trained for work. 4)
Taught how to use a checkbook. 5)
Taught how to manage what he has (whether little or large). 6)
Taught the value of financial goals & planning. 7)
Taught how to use a budget effectively to control his
spending. 8)
Taught how to invest wisely. These
things are not just automatically given to each person by God, but
must be learned. So begin early to teach your children or learn
yourself as early as possible. BEGINNING
A FINANCIAL PLAN FOR RETIREMENT It
takes money to invest….so, how can a person find the needed
money in the midst of raising a family, paying on a house, trying
to prepare for the children’s education, etc. If there is no
money left over, what can be done? 1)
You
must first see the necessity of planning for your retirement and
be motivated to diligently look for ways to find money to invest. 2)
Second,
there is a necessity also to be sure you have fully evaluated your
budget to the point that you feel you cannot cut consumer spending
anymore, all debts are being cared for, and you have cut your
taxes as low as you can legally. 3)
Third,
you still have several options open to you to explore and think
through thoroughly. a)
You
can rework your insurance program and use the cash value to
invest. Some go to term for higher coverage and lower rates which
frees up money for investing. b)
If
there are items you can sell that are not needed, the money could
be invested. c)
You
can get an extra job for a while in order to get started early in
investing. It is not wise to continue this practice too long. d)
Your
spouse could go to work for a while if you do not have children or
the children are old enough to be in school. There is a need to
evaluate to see if you come out ahead of the additional expenses
that will be incurred from her working. In some instances, it does
not pay. e)
Evaluate your big item spending, such as a car. For
example: A)
If
you financed a new car for $ 15,000 for 60 months at 10.5%
interest, you would pay a total of $ 19,320. B)
However,
if you financed a used car with low mileage for $ 7500 for 24
months at 10.5% interest, you would pay a total of $
8,352…….saving a total of $ 10,968. You could pay cash for
your next car. f)
Take
another look at your insurance policies on your self, car(s),
house, etc. Can you find better rates or not quite as much
coverage to free up money? g)
Inheritance
from family may give some money for investments. While this may or
may not come, it is still a possible way for some to have money to
invest for retirement. 6)
Fourth,
set your goal for making retirement possible. a)
Ask yourself questions, such as: A)
How can I know how much I will need? B)
What do I want to do in retirement? C)
What are the means of reaching my goals? D)
Will I have the discipline needed? E)
What will be my life expectancy at retirement? F)
What expenses will end or begin at retirement? G)
What about medical insurance? H)
Where should I live when I retire? I)
Should I continue to invest upon retirement? J)
What about estate planning? b)
Then, work at arriving at the amount you will need for
retirement. A)
Take
your present budget and project how much of this budget will be
reduced at retirement, such as: House payments, Social Security
taxes, Other taxes, Life Insurance, Contributions, Living
Expenses, etc. B)
Then
use the new budget projection as your goal. C)
There
may also be some things you would like to do differently that may
increase this new budget some, such as: travel, special giving,
helping others, etc. D)
You
may also need to or want to work part-time for a while. This
should be figured into the process to arrive at what is needed. 5)
Make a projection for Retirement using the form on the next
page. a)
In
looking over this form, please note that it has a pension income
to be listed from work. This may be sufficient to live on without
any further investments, as long as Social Security Income
continues. b)
But,
if you have no pension from work for you or your spouse, then your
own personal planned investment must furnish the needed income to
supplement Social Security. c)
How
does one arrive at how much will be needed? If you have worked up
a projected Budget at Retirement and can secure an Income
projection from Social Security, you should arrive at an
approximate amount of Income that will be needed from Investments.
Use the following form to do your figuring: A—Yearly
Budget at Retirement-------------------$ ________ B—Yearly
Income from Social Security-----------$ ________ C—Amount
needed from Investments-------------$ ________ d)
The
next step is to figure how much you would have to invest in order
to have enough income. For example: A—You
need $ 10,000.00 a year to supplement your S. S. Income. B—You
want to secure at least 6% interest on your money that is
invested. C---You
will need approximately $ 170,000.00 drawing 6% interest to give
you
$ 10,300.00 a year to spend. e)
The
final step is to figure out: A)
How
much money you will invest each month; B)
How
many years you will have to invest it; C)
And
how much average interest return on your investment. D)
You
may want to add an extra amount needed for security. (Instead of $
170,000.00, plan on $ 200,000.00 to be safe). E)
See
the next page for an illustration on how to arrive at what will be
needed to be invested. PROJECTION
FOR RETIREMENT AT
WHAT AGE?_______ 1
- Social Security Income: A)
Husband's………………………………
$ B)
Wife's…………………………………
$ 2
- Retirement from Work: A)
Husband’s………………………………
$ B)
Wife’s…………………………………
$ 3
- Investment Income: A)
Stock
Dividends……………………… $ B)
CD’s
Interest…….…………………… $ C)
IRA
pay-out..………..………………… $ D)
Rentals
Income…..……..……………… $ E)
Deed
of Trust Income….………..…… $ F)
Part-Time
Work……………………..… $ G)
Other:____________________…
$ 4
- Total Yearly Retirement Income………………………… $
Example: The interest rate paying on your investment at 10%
Amount Saved Amount at
Age Per Month Age 65
25 $ 16.00 $ 102,028
30 $ 26.00 $ 99,535
35 $ 45.00 $ 102,570
40 $ 75.00 $ 100,342
45 $ 130.00 $ 99,540
50 $ 245.00 $ 102,390
55 $ 500.00 $ 103,276
Example:
1—At
age 20—Invest $ 1000 a year at 12.5% for 45 years = $ 1,000,000 2—At
age 40—Invest $ 10,000 a year at 12.5% for 20 years = $
1,000,000 If
this seems too much for you to handle and want to get started, to
whom should you turn to for the needed help? You definitely need
to listen to God’s advice in His Word! Bankers have Trust
Officers that can help. Financial Advisors can help. Insurance
Agents are now serving as financial advisors on investments
through their plans. Their offerings are primarily through Mutual
Fund Annuities. Stock Brokers can help with investments. WAYS OF INVESTING1.
Annuities
from Insurance companies 2.
Mutual
Funds: a)
Bonds
(Municipal, US, etc.) b)
Tax-free
Bonds c)
Miscellaneous
areas for their investing 3.
C.
D.’s (Certificate of Deposit) at Banks 4.
Money
Market Funds of various kinds 5.
Checking
accounts that pay interest 6.
Collectibles 7.
Antiques 8.
Credit
Unions 9.
Saving
accounts at Banks & Credit Unions 10.
Mortgages: a)
Deeds
of Trust b)
Government
backed mortgages 11.
Government: a)
U.S.
Saving bonds b)
Treasury
Notes & Bonds 12.
IRA’s
(Regular & Roth) 13.
“Junk”
bonds 14.
Stock
Market (“Load” vs. “No-load”) 15.
Keogh
plans (401, 403, SEP) 16.
Pension
& Profit Sharing 17.
Precious
metals 18.
Real
Estate (Land, houses, apartments, etc.) 19.
Universal
Life Insurance & Investment 20.
Buy
home in which to live CONCLUSION May
we stress again of the need for planning for your retired years so
that: 1.
You
can care for yourself and not be a burden on others. 2.
Enjoy
your older (Golden) years. 3.
Be
a blessing to others still. 4.
Be
able to continue in your service to God on a larger scale. Remember,
you are storing up for a
purpose….to care for yourself and your spouse in your older
years. It is not to see how much we can amass. We must not forget
that we can have financial prosperity and wind up in spiritual
poverty! “Man
does not live by bread alone.” (Matthew 4:4). We are not
amassing money to be looked upon as an “important person”(1
Timothy 6:17; Proverbs 3:17). Money does not make a man, but money
has destroyed many a man! The money belongs to God and is to be
used according to His directions (Psalms 24:1). We realize that we
will be giving an accounting some day of our actions. (Romans
14:14). Homework
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