Here is a thread that should prove helpful to all us, especially preachers who more often than not, are responsible for their retirement investements.

My current church is very gracious to me currently giving me $300 per month towards my retirment, of which I add an additional $100 for a total of $400.

Currently, I am in mutual funds.....but have you seen the stock market lately?? Gag!!! I have watched almost $700 of my principle.....slip away!! I would have been better off in a passbook savings account.

For a while, I was in the "Christian Church Pension Plan"......but here is the part of that I don't like. You begin getting your payments at age 65. At my current level of giving my retirement fund would result in an annual income of $26,000 per year....for life. That's decent....BUT.....here is the bad part.

Say I die at age 70 leaving my wife behind. She is only given 5 more years of payments. If she lives past that....she is without a retirment income. Not much security there. At least with mutual funds.....the money is yours.

Now......of course the benefit of such "plans" is the tax shelter aspect of it.....but if you are losing money.....tax shelter seems to mean little.

So very simply.....what are some of you guys doing??? (By the way....I opted out of Social Security......so it's all up to me.)

I'm looking for ideas, suggestions, etc.....that are working for you that give you the necessary tax shelters and......some peace of mind about your investments.

Let's really try to help each other out on this one.

-- Anonymous, December 07, 2000

Answers

Thanks Robin and Faris!!

Faris....correct me if I'm wrong....but CD's DO NOT offer any form of current tax shelter....do they??

-- Anonymous, December 08, 2000

Thanks for all the rational and realisitic answers.

Robin....you are correct. Over the long haul....the stock market is the way to go. One simply needs to hold on during the bumpy periods.

Once one actually retires.....then I see the CD's as the way to go.

BTW.....the biggest boost the stock market could get right now....is for Gore....to give it up!!!!

-- Anonymous, December 09, 2000

Danny,

It seems to me that AKelley had a suggestion some time back in the "Extra Income For Ministers" thread.... (If you don't mind a little 'off-shore' investing.....) :-)

Seriously, I forget just how old you are, but.... the Stock Market has historically out-performed other investment options Over The Long Term for years. Yes, it has been a bit poor as of late (depending on what you were invested in, as usual), and it may be a bit 'high' in some sectors right now... but, in the long haul, it should come out on top. Of course, there is always potential for negative returns. What you choose depends somewhat on your 'risk tolerance'.... You can go with a CD (about 7% right now)... or you can shoot for varying degrees of higher returns with stocks (mutual funds). People are spoiled right now because of the unusual high returns over the past few years from the market... they are expecting 20% or more. This, historically, is just not realistic. Be happy with 10% (doubles your investment in 7 years).

Disclaimer... I am in NO WAY a professional financial advisor... but do have an interest in that area. :-)

Good Investing to You!!

-- Anonymous, December 08, 2000

Danny

I do not offer the following as advice but simply to tell you my thoughts as I prepare to retire this year.

I prefer CD's at 7% over stock. My reason for this is 1.That the CD's will provide a 3 to 1 monthly income over my stock of equal face value. 2. My CD's are insured therefore I stand much less chance of major loss on them than on stock. Most retired people can not take a major hit and recover. I have a family member that works for Merrill Lynch. They have contact with at least 600 banks. He takes care of my CD's and stock. This cost $100.00 per year per account. It is well worth it.When local banks were paying 4.5% I got 7% through him. Of course there are many factors that can change this entirely. Up or down %, drop or rise in stock prices, etc. But I do not foresee that happening to the extent that it will reverse the situation.

For a somewhat secure monthly income I prefer CD's. I will never make big money on them but it is unlikely I will lose and if necessary I can use the principal.

Faris

PS. If I keep much in a checking account I prefer Money Market checking. It is paying over 6%. This take a little adjusting for some.

-- Anonymous, December 08, 2000

Danny

You might talk to someone about CD's as an I.R.A. My wife and I were advised to transfer our poor paying I.R.A.s into CD,s at 7% which we did about 1 year ago. I am sure there are ways to make more from an I.R.A. but I choose not to take the risk. This was done for me by my neices husband,a Merrill Lynch employee. It does not take long for such matters to go beyond me.

Faris

-- Anonymous, December 08, 2000

Danny, my uncle is a millionair. He made his fortune through the Stock Market. His best advice is not to be scared, the stock market will go up and down. But historically the market is on the climb. It will dip every now and then, but on the long haul it is rising. Tech- stocks are the best such as cysco (incorrect spelling). He advices to stay away from Walmart and other 'safe' stocks- not much return. Newer companies are more risky, but if you do your homework and watch- they far better. Also, stay away from brokers, do it yourself with companies such as Buy And Hold, they charge only a few bucks to buy and sell.

Offshore trusts can bring good returns, and they are safer than mutual funds. :)

May the Lord Bless You Anthony

-- Anonymous, December 08, 2000

Mr. Kelly

Tech stocks, new companies, offshore investments, stock market and river boat gambling. About the same odds on winning. I would not put my money there. But, maybe thats why I'm not a millionaire.

-- Anonymous, December 08, 2000

Faris,

You seem, IMO, to have a little bit too much fear of the Stock Market... which is fine, of course, as we all have different 'risk tolerance'. If you are approaching retirement age, then a low risk approach is best... CD's are great for that. But, I personally wouldn't rank the Stock Market beside some of the things you mentioned. As I said before, the Stock Market has beaten out other forms Over The Long Term.

I would definitely suggest Mutual Funds to someone considering the Stock Market (rather than direct Buy/Sell).... It spreads your money around (lowers risk) and is 'managed' by professionals... who sometimes get it right and sometimes not... but do get it right more than me! :-)

Danny, as Faris indicated, you can do CD IRA's for tax shelter.

AKelley: You put a lot more 'trust' in off-shore trust than I do. :-)

-- Anonymous, December 08, 2000

He that gives to the poor lends to the Lord.

-- Anonymous, December 09, 2000

ONE MORE POINT ON PREACHERS' RETIREMENT PLANNING

The most important point is to make sure that your retirement plan is tax-deferred. If you have $1000 to invest for retirement, if you pay taxes first, you will lose $280 of that 1000, and will only have $720 to draw interest on. But the real key is that the second year, you not only have the full $1000 to invest (instead of $720), you also have the additional income from the first year which is earning another year of interest. After 20-30 years, this differential will be enormous. For example, $2,000 per year invested at 8% interest will yield after 20 years $75,831. But if is placed in the same investment, but tax-deferred, it will yield $98,846. You want to make sure that you use a tax-deferred vehicle such as a 403b (same as 403k, except limited to people who work for a charity), or IRA. ANY investment can be make through a tax-deferred plan (money market, CD, mutual fund, etc), this is just the vehicle that makes it tax-exempt.

As to the investment vehicle, mutual funds are best in my opinion for the average person. Granted, the stock market is very poor this year, but on average, the stock market has gained 11% per year. You can NOT earn that rate of interest in C.D.'s, nor can you gain on average the 7% mentioned above with C.D.'s. Individual stocks are too risky, because other people always have more and better information than you will have. Select a mutual fund based on its solid historical performance, not a one-year rate of return. For example, Fidelity Blue Chip fund has earned an average of 21% per year over the past ten years. I will be happy to have a bad year with that kind of return. Their aggressive growth fund, (which I do not recommend for retirement planning unless you are pretty young because it is more risky) has a ten-year annual average return of 30.12%. The Janus Twenty Fund has an annual average over the past ten years of 24.39%. One mutual fund I often recommend to new investors (because it has a very low entry $ requirement compared to other funds, and excellent management) is Tiaa-Cref. This company is the largest retirement company in the world, having probably 80% of all college and university faculty. They have recently started (1997) a series of mutual funds open to the general public. Their Growth and Income fund has earned 27% per year, and Growth Equity fund has earned 33% per year. Those figures will, of course, be pulled down by this year's figures.

The key principles: 1. Tax-deferred 2. Regular, systematic investments. If possible, have money withheld from your paycheck and mailed in for you by the Church treasurer. 3. Maximize tax savings to use for retirement investment. Make sure you fully utilize the parsonage allowance. Instead of making donations to the church, have an agreement for a "voluntary contract reduction" so that your tithe is not actually paid to you. That way, you will not pay any taxes on it, nor any Social Security.

One final thought. Off-shore investment? You have to be dumb as a brick to even think about this. Why do you think the rest of the world is bringing their money to America to invest? There is only one reason to invest off-shore, and that is if you want to hide your money and not pay taxes on the returns. That doesn't quite fit my ethics. In addition, the U.S. govt has now virtually closed all of those loopholes, with agreements from most of the off-shore countries (Cayman Islands, Bahamas, etc.) requiring disclosure from their banks.

-- Anonymous, December 27, 2000