July - August 2018

Written by Keith Schwanz
From his column It’s Your Money

its-your-money-07-18_article.jpgAs I reflect on the year I turned 38 years old, I recall important turns that take on much more significance now than they did at the time. That's when I began serving as the pastor of a congregation of about 50, the start of a nine-year relationship that was the best of my pastoral ministry. That same year, my wife began a doctoral program that has opened many doors for her professionally. It was also about this time that our two children began navigating high school on their way to college, important steps that set their trajectory toward families of their own and meaningful work.

During the move to that new congregation, I began asking questions about retirement planning I had previously ignored. At that time, my wife and I had less than $25,000 set aside for our later years. We were almost at the halfway point in our working lives, and we had saved only enough to provide $2,006 annually for 20 years (assuming a 5% return). By the way, a recent report by the Federal Reserve Bank says $25,000 is the median balance in retirement accounts, so our situation was typical for American households.

My wife and I could have made all kinds of excuses as to why we could not invest for the future. My compensation from the congregation was modest. She had come through a season where her employer had cash flow issues and paychecks were late on a fairly regular basis. Our kids were entering the most expensive years with increased costs as students in secondary and undergraduate schools.

The Federal Reserve Bank says $25,000 is the median balance in retirement accounts.

Financial consultants often hear people complain about not earning enough to save for retirement. When it’s already a challenge to pay regular monthly bills, it can be easy to brush aside the whole retirement savings issue as an impossibility.

In our case, we have never been burdened with long-term debt except for a mortgage, so that was in our favor. Both my wife and I have worked diligently to keep expenditures as low as possible. For example, we often use grocery coupons in our household. Such established behavioral patterns served us well as we intentionally started planning for retirement, something that seemed distant and exotic at the time, but now increasingly appears in sharper focus on the horizon.

Current statistics suggest people seem to be paying more attention to saving for retirement. Fidelity Investments recently reported that the personal contribution rate to the 401(k) accounts they manage now averages 8.6% of income, up from 8.4% the year before. (This does not include contributions from employers.) The average 401(k) balance, according to Fidelity, is $102,900, also an increase compared with previous periods. This balance would provide $8,257 annually for 20 years (assuming a 5% return).


For the third consecutive year, a Bankrate survey names the number one financial regret (18%) as not beginning to save for retirement early enough. Another 14% identified not saving for emergency expenses as their greatest regret. This means almost one in three respondents wish they had started earlier to save for retirement and establish an emergency fund.

The good news in the Bankrate report is that almost half of those surveyed had already made changes to address the issues that caused their regret. They adjusted spending habits and modified priorities to begin to work themselves out of their financial dilemma. Sadly, one quarter of the respondents had done nothing. They felt regret, but had not acted on it.

Financial Goals

One financial rule of thumb is that by the date retirement begins a person should have saved 11 times their annual income. According to a U. S. Census report, the 2016 median household income was $59,000. Eleven times that equals $649,000. This balance would provide $52,077 annually for 20 years (with a 5 percent return). Of course, more sophisticated calculations can be made, but this is a quick way to estimate what is necessary to maintain a standard of living in retirement.

In building savings for your retirement, take incremental steps if you must to get started. If you have ignored retirement savings to this point, begin with small contributions to a retirement account. If you regularly put money away for your later years but discover that you may end up with less than you need, increase your monthly contribution a little. It could be that years from now you will look back and see these decisions as significant choices that contributed to your financial well-being.

Keith Schwanz is a writer and editor. He previously served the church as pastor, church musician, and seminary educator.