As director of the Free Will Baptist Board of Retirement, the cover of the June Special edition of FORTUNE magazine caught my attention. There in big, bold letters was everybody’s dream, “Retire Rich.” The article listed “50 Great Stocks and Funds” to “help put you on the road to a secure future.”
At the Board of Retirement we don’t guarantee that participants in our program will “retire rich” by investing with us, but it is our goal to help put every Free Will Baptist minister and lay employee on the road to a secure future. People live longer today than ever before, and many live 20 years or more in retirement. Therefore, it is important to prepare ahead of time.
Two things need to be remembered when planning for retirement. First, you’re never too old to start saving for retirement. Second, saving for retirement is a long-term process.
From time to time someone will tell me they are too old to start saving for retirement. My response is, “You’re never too old to start saving for the future.” While you may not have time to build a huge account like a 25-year-old, you still have some good years left to set aside funds for the future. The amount available to you in retirement will be based upon what you—and your employer—put into your retirement account until you reach retirement age.
For example, assume that you and/or your employer were able to invest $500 a month into your retirement account for the next 10 years. If you received an average return of 8.62% (Retirement and Insurance average) on your contributions, you would have $94,582.79 available at retirement.
While that does not seem like a lot of money for retirement, it would provide you an income of $747.95 a month for 15 years during retirement. That extra $747.95 each month would be a wonderful blessing on top of your Social Security. Again, as noted earlier, one is never too old to start saving for retirement. Anything is better than nothing.
Second, saving and investing for retirement is a long-term process. Some people view their retirement savings like their checking and savings account at the bank, rather than the long-term investment it is designed to be. Even the Internal Revenue Service has placed restrictions on tax-deferred retirement funds as a way to discourage people from invading funds set aside for retirement.
After the Labor Department announced the unemployment rate had jumped to 5.5% at the end of May (the biggest monthly increase since February 1986), along with the continued rise in oil prices and dismal home sale numbers, the bottom literally fell out of the stock market, with the Dow dropping nearly 400 points in a single day in June.
Because of events like these, some investors are nervous, tempted to pull everything out of the market until things improve. Doing this means paying 20% in federal taxes immediately, a 10% penalty by the IRS if you are under age 59½. You also experience a realized loss on your investment. Those who withdraw funds prior to their retirement treat their retirement savings as a short-term investment rather than a long-term commitment.
It is important not to base investment decisions on one earnings period. The Board of Retirement has done very well for its participants throughout the years. The lifetime (39 years) average earnings rate is 8.62%. Our five-year average is 12.075%.
According to the FORTUNE magazine article mentioned above, the S&P 500 average is 11% for the same five-year period.
There will always be ups and downs in the financial market, but my advice is to hang in there. Don’t make any rash decisions that will cost you in the long run. Retirement will be here before you know it. In order to enjoy a comfortable retirement, you must plan for it.
Let the Board of Retirement help you develop an action plan that will start you on the road to a secure future in retirement. Who knows, you might even be able to “Retire Rich.”
About the Writer: D. Ray Lewis is director of the Board of Retirement and Insurance for the National Association of Free Will Baptists. Learn more about your retirement options at www.boardofretirement.com.