Retirement math: a simple five-step approach

Do You Have Enough to Retire? Do the Math

List from Wall Street Journal article:

1. Find the target
   
2. Estimate Social Security
   
3. Subtract pensions and other income
   
4. Subtract income from your target
   
5. Multiply the result by 20
   

Why 20 times? It's simple math. You don't want to run out of money, so to be safe you should really save enough to last for several decades. Many of those turning 65 in decent health these days should plan on lasting into their 90s. And when you are retired, you should probably plan on the basis that your investments may only earn 3% a year above inflation, maybe even less.

Investors may earn more, but those in retirement are probably going to want to play it reasonably safe. Based on those assumptions -- they are, I admit, conservative -- you will need to save about 20 times the annual income you need your savings to generate. Those who want to be even more secure could save 25 times.

Comment: Article has a simple worksheet. As for me I know that no true servant of God truly retires .... just has different opportunities. I haven't sorted out the whole "will I be able to fully retire?" question.

John Piper has some good thoughts on retirement:

Should I invest for retirement?

I want to bless those who lean away from big fat retirement accounts and big fat savings accounts. I want to bless the leaning away from those things and towards generosity and immediate-need-meeting.

The reason I don't think we can paint with a broad brush here and say that all savings and all investments are wrong is that it becomes extremely difficult to draw the line as to what is saving for the future and what is spending on a present need.

If you get paid once every two weeks, should you give it all away the day you get it and trust God for the other thirteen days? Or would keeping some of it in the bank for thirteen days—because you know a bill is coming in twelve days—be distrusting God for his provision twelve days from now?

That sounds silly, right? But it's not silly: it's an analogy. God ordains that we work for our living and that we use what we earn to pay our bills, whether it's food, clothing, housing, education for our kids, or whatever.

Those bills don't arrive simultaneously with our paycheck, which means that everybody saves if they pay their bills. Everybody does. Some just do it more consciously and briefly than others.

Then the question becomes, "Should you save for the replacement of your car?"

Suppose you're a traveling salesman and you have to have a car. You know this car: you bought it when it was eight years old with 80,000 miles on it. You've had it for seven years and it's starting to have problems. Should you put any money away? Should you have been putting money away? Or should you borrow?

Some may think it's just stupid to borrow for a car, but if you don't borrow for one then you've got to save for it! There's no other way! And so now you're in to a seven-year savings plan for a car. But why not trust God to give you a car? Now he very well might, and I wouldn't kick anybody out of my church for saying that they don't save for cars but trust God to give them to them, but that's just not the way the Bible demands that you do it.

Now just unpack that analogy into the retirement situation of our culture.

Retirement is forced for a lot of people. When you get to sixty-five or seventy you have to step back. Finding another job at age seventy that might support you or your invalid wife is not an easy thing. The way our culture is dealing with that is having you earn your money for the post-working years while you're working. And what do you do with it? You just set it aside.

Why should we assume that the post-working years should be provided for from heaven and the working years should be provided for from labor? I don't assume that.

The way I think about retirement—though I don't believe in "retirement" if you can avoid it—is that you should start doing different things for Jesus. And if you can do them without having to be paid by people because you've set it aside, then that's all the more wonderful.

I think of that like this: I don't want to get rich. I don't want to sit on a pile of money. I just want to be able to survive between the ages of sixty-five and eighty-five. And I'd like to be spent for the kingdom. So if I can have a house and have my bills paid and pour my life out for the kingdom, I would be thrilled.

Laying up treasures for yourself on earth is reflected in the man who built the barns. He had many goods. "What shall I do with them?" he said. "I'll build more barns." But he didn't need all those barns. He said, "I will eat, drink, and be merry." He shouldn't have been eating and drinking and being merry, he should have been using his money strategically to meet needs. But he was just cavalier about having all this money.

So it is the indifference to needs and the storing up of way more than you need that comes under the accusation of laying up for yourselves treasures on earth.

People are going to call this differently from family to family and person to person. I, for one, labor not to maximize my retirement. My employer here, Bethlehem Baptist Church, is constantly creating ways for us to maximize our retirement, because they (our financial guys) think that a lot of pastors here are not preparing for their families well.

I look at some of those things such as the option to contribute three-percent more to retirement savings and have it matched. But I don't do it, because I look at what I'm putting away and say, "That's enough!" I've got Social Security that I've been paying the government for all these years, and I've got this little retirement plan that I started when I joined the Baptist General Conference. I could put away more, but I look at what I have already and say, "That'll do. That'll bring in enough to live on."

I don't want to be an all-or-nothing type person here. I want people to think soberly and maximize their generosity.

I hardly put anything away for cars either, because we always get used cars. But I know it's stupid to not put some money away, because when trouble arrives I'm always scrambling to find a way to take care of the refrigerator that's broken or the car that's having issues. And I don't think it's an honor to my wife to be careless about that.

So, all that to say, Put a governor on your life. Make as much as you can, give as much as you can, and save what you need to in order to be a responsible non-borrower. Then do retirement with some minimalistic plan that frees you up for gospel ministry till the day you drop.