The 15-Year Turnaround
Tips for growing your nest egg over your remaining working years
Here you are in your 50s, and you are finally beginning to think about retirement. Your goal is to work another 10 to 15 years, and then you’ll be ready for that next chapter of your life. You’re dreaming of overseas missions trips, visiting grandkids, writing a book, etc., and then reality sets in ... you haven’t saved enough to retire! You prioritized other things ahead of your financial future.
There are currently more than 70 million baby boomers in the U.S., many of whom lack financial stability. According to the Stanford Center on Longevity, this generation holds less wealth, is deeper in debt, and will face higher expenses than retirees who are a decade older. Nearly one-third of boomers had nothing saved for retirement in 2014.
So, what can you do besides berate yourself for not saving and investing earlier in your ministry? Here are some tips for growing your nest egg over your remaining working years.
Maximize Your Savings
First and foremost, don’t wait another day! By delaying your savings, the power of compounding interest becomes less powerful. To take advantage of compounding for these final 10 to 15 years, you will need to set aside a larger portion of your income. Make use of tax-deferred savings options such as IRAs and 403(b) plans.
These types of savings vehicles not only allow your nest egg to grow faster, but they also have built-in catch-up provisions for those aged 50 and older. For example, in 2019, the IRA catch-up limit is $7,000 and up to $25,000 in a 403(b). The General Council of the Assemblies of God encourages ministers to use the MBA 403(b) plan because of its unique benefits.
Utilize the Church Board
While the burden of saving predominately falls on your shoulders, you can get help. It’s surprising how many churches are not providing a 403(b) retirement benefit for their pastors. Usually, the board members of churches are gainfully employed at jobs with 401(k)s and pensions, and they often don’t think about this type of benefit for their pastors. Don’t be afraid to ask. Just as pastors must prioritize their savings, churches also need to prioritize funding their pastors’ retirement.
First and foremost, don’t wait another day!
Consider the Stock Market
Your portfolio allocation plays a large role in the future value of your savings; however, this is an area where everyone has a unique personality and risk tolerance, both of which require careful consideration. Ten to 15 years is still a long time to make your money work for you. And remember, when you retire, your portfolio growth still needs to outpace inflation for another 20-plus years. Take the time to read AG Financial’s three-part series on investing at agfinancial.org/invest.
Reset Your Expectations
It’s good to think and dream about your future, but you need to be realistic. Retirement can last many years, and you will have many bills. Lower your expenses today, so that not only will you have more to save and invest, but also to lower your overall cost of living once retired. This may mean moving to a smaller home, driving your current car a few more years, and reprioritizing your financial future ahead of your kids’ education expenses.
Remember, the best gift you can give your children is a secure retirement nest egg for you and your spouse. The last thing you want is to burden them for financial assistance in your retirement years while they are trying to support their families.
Delaying retirement is rarely a fun option, but many are finding this necessary to help make their retirement years more affordable. Whether you continue in full-time or transition to part-time employment, delaying retirement can save thousands of dollars since it continues to provide you income, which could further delay when you start withdrawing your retirement funds.
Minimize Taxes in Retirement
Ministers have the ability to distribute funds from their MBA 403(b) during retirement as a housing allowance. Taking advantage of options like this means paying less in income taxes and keeping more in your pocket. The tax savings on 20 years’ worth of property taxes, homeowners insurance and home repairs can add up to thousands of dollars.
You now realize that you need to take action and that you have options for getting back on track. All of this information can seem overwhelming, so be sure you are asking for help along the way. AG Financial has a dedicated team of specialists to serve you.
This article originally appeared in the March/April 2019 edition of Influence magazine.