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A Nest Egg Is Not Just for the Birds
A Nest Egg Is Not Just for the Birds
By Lawrence G. Downing, DMin

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            When we made the decision to dedicate our lives to the pastoral ministry, most of us did not have achieving wealth as one of our primary goals; nor did we take a vow of poverty. When we were in our 30s and 40s, if not before, reality hit home: a financial nest egg does not happen by accident or miracle and it’s better to have one than not. The loaves and fishes may multiply, dollars are another matter. What this article sets out to accomplish is to share accounts of men and women in ministry who have successfully managed their finances and feel confident that the funds they have saved are sufficient to meet their present and future needs. The theory is that perhaps the economic success some have achieved will be a catalyst for others to follow a similar track.

            All the names in the article are fictitious and the accounts have been altered to protect identity. The rest is real stuff that comes from real pastors in response to the question: how did you manage to live on a pastor’s salary and save enough to feel good about retirement?

            Pastor Joel recently retired after more than 40 years in pastoral ministry. His wife’s income exceeded his. This enabled him and his wife to put their three children through college without debts. He reports that he and his wife were careful with their funds. They always paid their credit card bills in full. They did not buy expensive clothes nor take exotic vacations. They used birth control, thus postponing the costs that are part of raising a child until they were financially secure. Discipline in financial matters, he says, is essential. He took full advantage of the conference retirement matching funds. He made full use of the parsonage allowance by putting the maximum allowable in the house each year. In addition to the VALIC retirement fund, he and his wife invested in other mutual funds, bonds and property. Their net worth at retirement was in excess of 3.5 million dollars.

             Pastor Joel advises pastors to become educated in financial matters. Numerous magazines and other resources provide financial advice. Subscribe, for example, to Money Magazine, FORBES, FORTUNE or similar financial journals. Become versed in the fundamentals of investment planning and spend time to learn about the intricacies of how the stock market operates. (This exercise will likely not give you assurance your money is safe, but it will let you know a bit about the risks and pitfalls associated with owning stocks.)

            Pastor Alice advises pastors, to follow the old cliché, “Don’t spend more than you earn.” It’s true! She has observed the financial distress among pastoral colleagues when they take advantage of easy credit, spend their money to “Keep up with the latest,” whether its electronic gadgets, cars, travel, whatever. She noted that many of the expenditures that have drained her friend’s resources are not necessary to perform a pastor’s work. Let others brag and show off their toys, she says. Watch them jiggle the keys on their newest car as you deposit money in your savings accounts. If putting savings above gizmos creates angst, take time to evaluate your priorities, advises Pastor Alice.

            One financial decision that Pastor Alice would like to amend, when she thinks back on her financial history, was the decision to buy into a time share program. While it looked good at the time, she found that with all of the expenses involved it would have been much cheaper for the family to rent a condo for a week at a vacation destination.

            In looking toward her retirement, Pastor Alice has concluded, based on what she has read about retirement needs, that it would be well to have $800,000.00 or so in the family’s savings accounts. This is in addition to the income from pension funds which she reckons will be somewhere between $65,000.00 and $70,000.00 per year.

            Evaluating his present situation, Pastor Martin reports he and his wife are free of debt. They own several properties and have retirement accounts that provide them security and a sense of well-being. They live on their Social Security and pension fund income and have not drawn down any of their retirement funds. They find that they have money left over at the end of the month. As he evaluates how he and his wife have managed to accumulate about $1 million in their various investments he emphasizes one of the essentials: it is a team effort. Husband and wife together and both agreed on an economic philosophy and hold to it.   
            In answer to the question, Have you made financial decisions that you wish you had done otherwise? He reflects on his decision to opt out of Social Security for a time. He later opted back in, but did not contribute the maximum. His payments at retirement are less than they might have been.

            For the first ten years of his ministry, Pastor Alvin paid little attention to his financial future. He and his wife lived on his salary and had a small amount left at the end of the month.  A question from a tax accountant caught his attention: “How much do you want to put into your retirement account?” Pastor Alvin and his wife made the decision to begin putting $100.00 a month into a tax-deferred account. After a few years, the wonder of compound interest was evident. The pastor and his wife began to be more intentional about their future economic state. Pastor Alvin’s wife found work. They made the decision to put most of her income into their retirement account. They set a financial goal: they wanted to have an income of $55,000 to $65,000.00 per year when they retired. At this point in his carrier, Pastor Alvin believes they have exceeded this goal and is confident about his economic future.

            There are pastors who opt out of Social Security. Pastor Eli is one, but unlike some who do not contribute to Social Security, Pastor Eli and his wife took the money that would have gone to Social Security and invested it in the G. C. investment vehicle, and, for the wife, Vanguard mutual funds.

            In their early years of marriage, Pastor Eli and his wife struggled financially. They had a baby while in college and they took out a loan for his seminary education that left them with a debt of some $25,000.00. After completing seminary, the wife pursued a professional degree. With the added income provided by the wife’s employment, they were able to pay off the student loan, build a house, and begin investing the majority of the wife’s income into a Vanguard retirement account. They are on track to have savings in excess of one million dollars at their retirement.

            Pastor Eli emphasizes several principles of financial planning: make it a team effort—husband and wife working together. (Heard this before?) Pay off the house. He estimates that they saved more than $300,000 by paying off their home in ten years rather than the 30 years of their mortgage loan. He stressed the importance of making a financial plan and following it. A fundamental investment philosophy: Don’t spend more than you have. If you cannot control credit card debt, get rid of the credit cards. He recognizes that in today’s world, it is almost a necessity to have a credit card to day, but pay it off every month. “No debt is a good debt” is his motto. Practice good stewardship. God is a good partner!

            When asked about financial decisions that went south, he referenced money put into  schemes promoted by acquaintances or church members. He and his wife, early in their marriage, put some money in a couple of these get-rich, can’t lose investments. They did not collect a dime on any one of them. Lesson learned. When a too-good-too-be-true investment opportunity comes your way, put on your running shoes and head make a hasty retreat.

            Pastor Mary, when asked what her personal financial practice is reported that she believes it is essential to make God a partner in her financial plans. To her, tithe is part of that equation. After paying tithe, the next rule: “Pay yourself first!” Do not, she advises, go into debt and if you do have debt, pay it off quick as you can.  It is important, she notes, to consider both the pastor’s income and the spouse’s income as a package. Her goal is to have $350,000-$450,000 in retirement and savings accounts when she and her husband retire. This, she believes, along with their Social Security pension will prove adequate for their financial needs over the 20 to 25 years they may live after they retire.

            Pastor Amos, now retired, reflected back on his college and seminary years. These were not easy times for him and his wife.  In addition to his class work, Pastor Amos worked to pay his tuition and living expenses. The work program added additional years to his education but enabled him to finish seminary debt free.

            The first pastoral assignment did not provide sufficient income to afford a car so Pastor Amos rode a bicycle to visit his parishioners.  He and his wife created, and adhered to, a tight budget. They identified their expenses and allocated funds from each pay check to each budgeted item. Through careful management, Pastor Amos and his wife were able to save enough to buy a piece of property. They later borrowed sufficient money to buy a house, which one year later they sold for a profit.  

            Their economic situation was enhanced when Pastor Amos’ wife began to work. The extra income provided more discretionary funds that were invested in more real estate. The rental income was put into paying off the mortgage for each rental property. The income from these properties is an important component of the family’s retirement portfolio. Later, Pastor Amos and his wife invested in the financial market under the care of an investment professional. Pastor Amos reports that his total retirement income is something between $10,000.00 and $12,000.00 a month. He also recommends that the pastor have a savings account or Money Market account with funds sufficient to cover 6-8 months of expenses. This is the “Rainy Day” fund.

            Pastor Amos states that in his retirement years he and his wife have sufficient resources to provide a comfortable living and more.  They enjoy sharing their blessings with others in need. To provide for unexpected costs that may arise from unexpected health-care needs, he and his wife purchased I-Bonds that now have a value of more than $600,000.00. (I-Bonds are interest-sensitive U. S. Government bonds. When Pastor Amos bought them, each person could buy a maximum of $30,000.00 per years. That limit has been decreased.)

            Pastor Ted has been retired more than 25 years. He began his ministerial work in the office of a small conference. Later, he became a parish minister, a position he retired from at the age of 62. Pastor Ted, like Pastor Eli, opted out of Social Security. He began to invest in property, the stock market and CDs, which at the time he invested were locked in at rates of 10% to 15%.  When Pastor Ted retired, he found that he was not covered by medi-care and that it would be very expensive to pay the catch-up cost to participate in Social Security. It was then that he learned that he could be covered under his wife’s Social Security. She had developed a small part-time business, paid into Social Security, and through her, he was eligible for medi-care. He and his wife receive less than $10.00 a month Social Security payments, about $1,600.00 from the General Conference Retirement Plan, and benefit from S.H.A.R.P., the G.C. retirees medical plan. He states he did not count on his GC funds for his retirement years. He relies on the CD’s and property he owns to provide a secure future. His advice:  Pay off your house before you retire. Avoid debt like the plague. Pay cash for your cars.

            When I reflect on the information and advice the pastors shared, there were certain common practices evident.  
  1. Have a financial plan—a budget—and follow it.
  2. Don’t spend more than you have.
  3. Be a team: the income a working spouse generates is an important.
  4. Start saving early and watch the funds grow.
  5. Pay off all debts, especially your house, before you retire.
  6. Invest in property, stocks or other investment instruments.
  7. Become knowledgeable in the investment area you select.
            The salary a pastor receives does not put her/him in the high-income bracket. However, our income is considerably above the national average and likely above that of most of our parishioners. If a pastor implements the above investment strategies there is no guarantee that a secure future awaits. However, the odds are on the side of the person who does. The accounts of pastors who live in the real world and cope with real financial issues are evidence that a secure financial future is a realistic expectation. The women and men who shared their story took responsibility for their financial future, learned principles of money management, and followed an economic plan. Discipline is key, and this key opened a plethora of opportunities for a satisfying financial future.