As if the pastor doesn't have enough to do! Preaching, Bible studies, visiting, planning, counseling, and committees are just a few of the many things pastors do. And now, under the new North America Division Retirement Plan and some others, pastors will have to make financial decisions about where to invest funds set aside for their retirement. It's time for the preacher to take a walk on Wall Street—to learn about its gurus, its bulls and bears, its ups and downs.
This article will not turn you, pastor, into an investment genius. But it will ac quaint you with some aspects of investment. If you are a Seventh-day Adventist employee in the United States, you need to know this because soon you will be under the new North American Division Retirement Plan. Employees outside the United States may participate in similar or considerably different plans, yet they may find the principles discussed here quite helpful.
Become an educated investor
In the proposed North American Division Retirement Plan, the employer sets aside for an employee a specific amount into a retirement account. The employee may add to that account. The employee assumes responsibility for making decisions as to where the funds will be invested. The employer will provide the employee with investment options, which will most likely involve mutual funds of some kind. A mutual fund is a collection of investments in various corporations. Depending on the type of fund, it may include government securities, bonds of various types, and bank deposits and shares in corporations.
With regard to stocks or shares in corporations, there are those who have a negative attitude. Some feel that investing in stocks is similar to gambling. It is, if you do it like a gambler, instead of as an investor. If you have the mind of a gambler, you can gamble with any possession. But buying the shares of a corporation is nothing more than buying a portion of that company.
The mutual fund buys company shares, and you own shares of the mutual fund. In vesting in a mutual fund means that someone is managing the investments for you.
How do you learn about investing? Libraries, community colleges, and investment firms often offer seminars on investment. Such seminars are best if they are not led by persons promoting their investment product. Make certain that the seminar gives you a broad picture of investing. Consult sources that will help you in understanding investing (see box on page 11). The mutual funds, from which you will make your investment choices, will likely have helpful literature. Also, if you have a computer you may want to check the web pages of various funds or investment firms.
Other good sources are larger news papers, reputable magazines, and a select number of radio and TV programs. Again, you must determine if these sources are merely promoting their investment products or giving information on investing in general.
Look at long-term performance
Be cautious of any source that promises unusually high returns. "Say, preacher, how would you like to double your money in 30 days? I guarantee it!" No matter who speaks those enticing words, don't believe them. No one can make such a guarantee if they want to stay within the law. They are as reliable as the street salesperson who wants to sell you a $1,000 watch for just $20.
What about the neighbor who tells you his mutual funds increased 14 percent in the past month? Or your cousin who is thrilled because her investments grew 37 percent in six months? You feel out of place because your retirement fund only grew eight percent in the past 12 months. Be happy for your neighbor and your cousin, but don't chase so-called "hot investments." Remember that neither the neighbor nor the cousin will brag about their investments when they take a nose dive.
Under the new retirement plan, you will receive various options as to where to place your funds. Look at the three- to five-year performance of funds instead of one or two years. High short-term earnings are not necessarily an indication how the in vestment will do over a longer period. Review the investment options and then choose several to spread the risk and the growth. No one can predict what a particular fund will bring in the future, but you can review the performance of the fund by looking at its past performance. And re member, you are in for the long haul. Just because fund values go up or down, you should not react to each move.
It is wise to invest in several funds. Choose three or four categories. Some funds will not fluctuate much, but their re turns are more modest. Others may provide a higher return, but they carry higher risks. Read the descriptions of the funds carefully and make your choices based on your age and tolerance for risk. Check the operating expenses of the fund before you make a decision. You need to feel comfortable with your investments.
Anticipate modest returns
Reading financial magazines or business sections of newspapers leads many to the conclusion that high earnings on retirement savings are the norm. Do not let these reports mislead you or encourage you to anticipate unreasonable returns. Remember that these reports look at past performance and often quote experts who analyze past performance. Financial experts, and most experts for that matter, are always better at analyzing the past than predicting the future.
Small savings become large investments
Most of us make the mistake of waiting for the day when we will have significant amounts to invest. That is a very costly mistake. Often that day never comes.
Small, regular investments can produce a significant amount over a period of time. A mere $25 set aside each month at 7.5 percent interest will give you $3,882.05 in ten years. If you save $100 monthly, you will accumulate $15,528.23, and $200 monthly will yield $31,056.46. All these illustrations assume inflation of 2.5 percent, and the accumulated amount reflects that assumption.
The principle of regular investing is an integral part of the new North American retirement plan. Under this plan, the employing organization will put aside for the employee a set percentage of the salary into a retirement account. The employee, in addition, may put aside up to an additional two percent of salary base, which the employer will match according to an announced formula. You should take ad vantage of the matching portion of the retirement plan. Even if you cannot put aside the maximum amount that will be matched, put aside that which is possible for you.
Taxes and retirement plans
The new retirement plan provides certain tax benefits in that the amount contributed is tax deferred. But remember, taxes are only deferred (deferred means you will pay taxes, but not now) on the amount contributed and the earnings made. Once you start taking out funds from your retirement plan, you will have to pay taxes. Of course, tax laws and policies may change.
Ask God to be your investment advisor
A large retirement fund is not a ticket to a happy retirement. There are people who have huge retirement accounts, own several homes, and travel the world, yet they are not happy. To be happy, much more is needed than a large retirement account. A Christian should plan for the future, but a Christian accepts the fact that the future is in God's hands. There is much more to life, now or in retirement years, than financial security. Of greater importance is our relationship with God, our families, our church, and our friends.
To a secular person, retirement is the final phase of life. To a Christian, retirement is just one part of life, and it is certainly not the final phase. The second coming of Christ gives us the hope in a future that is much more rewarding than having a financially secure retirement. That is why we place our hope in a future with Jesus.
