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Has anything been set aside for
YOUR Pastor's retirement?
by Larry Schoonover
Larry@southsound.org
After serving many years in a local congregation and stretching every dollar to make building payments, to keep the heat and lights on and meeting commitments to missions pledges, many pastors find themselves in a very precarious situation. After doing his best to be mindful of other peoples needs, he neglected to make provision or consideration of any retirement income for he and his wife.
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| Smaller to medium size congregations often just figure somehow this is being taken care of. Some pastors feel
awkward about bringing it up. So let me do the honors. I wish to share with you a simple answer to this often unanswered question.
We have been guilty of thinking so short term at times we have neglected to realize the value of time. Let's say your congregation has made no
provision at the present and you are not sure what to do or where to begin.
Your first objective would be to save or make an appeal or even several appeals to raise $2500.00. This is the amount many mutual funds require as initial investment. You then commit to investing lets say, $250 per month there after. Time is now the greatest denominator. Time is now your friend.
A fare number to use when calculating return on your low-risk investment would be 7% annually. So on your $2500 initial investment and monthly deposits of $250 in a mutual fund earning at least 7%, in twenty years your fund would be worth $137,276.00. Yet you would have only invested $62,500.00 out of pocket.
If you are a church board member and you are aware that up until now there has been no provision for ministerial retirement, please keep reading. If you pastor is forty and retires at 65, your fund would be worth $210,436.00 and your investment out of pocket will be $77,500.00 or $250 per month. You see, time is the only variable that changes. You will be setting aside $250 per month and that never changes unless you want it to.
Let say your pastor retires and begins drawing from a pot worth $210,436.00 but you continue to invest $250 per month above what he draws. If you retired him at $3000.00 per month, in ten years he would have received $360,000. You would have invested only $107,500.00 out of pocket and your fund would still have $96,964.00.
If a church which was founded just 50 years ago would have operated on this concept, their ministerial retirement fund, building fund or missions fund would be worth $1,338,994.00 Yet their own out of pocket would only be $152,500.00 or in other terms, $250 per month.
Sorry, you cannot get back the past, so think long term, think about the future, think about your kids.
Proverbs 13:22 - A good man leaveth an inheritance to his children's children
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Your savings is worth $210,436
after 25 years.
If you save $250 per month your savings may grow
to $210,436 after 25 years.
This includes a starting balance of $2,500 and a 7.00% annual rate
of return.
| Results Summary |
| Starting amount |
$2,500 |
| Years |
25 |
| Additional contributions |
$250 per month |
| Rate of return |
7.00% compound annually |
| Total amount you will have contributed |
$77,500 |
| Total at end of investment |
$210,436 |
|
| Year |
Additions |
Interest |
Balance |
| |
|
|
$2,500 |
| 1 |
$3,000 |
$288 |
$5,788 |
| 2 |
$3,000 |
$518 |
$9,305 |
| 3 |
$3,000 |
$764 |
$13,069 |
| 4 |
$3,000 |
$1,027 |
$17,097 |
| 5 |
$3,000 |
$1,309 |
$21,406 |
| 6 |
$3,000 |
$1,611 |
$26,017 |
| 7 |
$3,000 |
$1,934 |
$30,951 |
| 8 |
$3,000 |
$2,279 |
$36,230 |
| 9 |
$3,000 |
$2,649 |
$41,879 |
| 10 |
$3,000 |
$3,044 |
$47,923 |
| 11 |
$3,000 |
$3,467 |
$54,390 |
| 12 |
$3,000 |
$3,920 |
$61,310 |
| 13 |
$3,000 |
$4,404 |
$68,714 |
| 14 |
$3,000 |
$4,923 |
$76,636 |
| 15 |
$3,000 |
$5,477 |
$85,114 |
| 16 |
$3,000 |
$6,071 |
$94,184 |
| 17 |
$3,000 |
$6,705 |
$103,890 |
| 18 |
$3,000 |
$7,385 |
$114,274 |
| 19 |
$3,000 |
$8,112 |
$125,386 |
| 20 |
$3,000 |
$8,890 |
$137,276 |
| 21 |
$3,000 |
$9,722 |
$149,998 |
| 22 |
$3,000 |
$10,612 |
$163,610 |
| 23 |
$3,000 |
$11,565 |
$178,175 |
| 24 |
$3,000 |
$12,585 |
$193,760 |
| 25 |
$3,000 |
$13,676 |
$210,436 |
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Definitions
- Starting amount
- The starting balance or current amount you have
invested or saved.
- Additional contributions
- The amount that you plan on adding to your savings or
investment each period. The investment period options
include monthly, quarterly and annually. This calculator
assumes that you make your contributions at the
beginning of each period.
- Years
- The total number of years you are planning to save or
invest.
- Rate of return
- The annual rate of return for this investment or
savings account. The actual rate of return is largely
dependant on the type of investments you select. From
January 1970 to December 2004, the average compounded
rate of return for the S&P 500, including
reinvestment of dividends, was approximately 11.5% per
year. During this period, the highest 12-month return
was 64%, and the lowest was -39%. Savings accounts at a
bank pay as little as 1% or less. It is important to
remember that future rates of return can't be predicted
with certainty and that investments that pay higher
rates of return are subject to higher risk and
volatility. The actual rate of return on investments can
vary widely over time, especially for long-term
investments. This includes the potential loss of
principal on your investment.
- Compounding
- Earnings on an investment's earnings, plus previous
interest. This calculator allows you to choose the
frequency that your investment's interest or income is
added to your account. The more frequently this occurs,
the sooner your accumulated earnings will generate
additional earnings. For stock and mutual fund
investments, you should choose 'Annual'. For savings
accounts and CDs, all of the options are valid, although
you will need to check with your financial institution
to find out how often interest is being compounded on
your particular investment.
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