Save

The word of the wise is this: Save! Don’t spend to the max, save.

Who’s got some advice for us?

For many Americans, the golden years are quickly taking on a tin-like hue.

After a vicious decade of no growth for the stock market, including two 401(k)-eating bear markets and persistently sky-high unemployment, more Americans are finding themselves in their 50s and 60s with practically no money saved for retirement.

“We were in our 30s, blinked, and now we’re our parents’ age,” says Alan Tipps, a corporate jet pilot who typically earns more than $100,000 a year when he’s working. But Tipps, 52, has been laid off three times during the past four years, and says that has forced him to burn through what was in his 401(k) just to “keep the lights on” in his home in Portales, N.M.

Investors of all ages have suffered. But for those close to retirement, it’s been especially tough, because they’re faced with taking distributions from investment portfolios that in some cases are a fraction of their peak value. Forced early retirements and the near extinction of pensions are making things worse, creating a generation of aging investors in which some have little or no plans for how they’re going to pay for retirement.

It gets more ominous, given the other changes Americans are facing. Declining property values have drained home equity that many retirees might have counted on. Meanwhile, the number of people reaching retirement age is soaring as the Baby Boom generation ages.

Saving early and often is the way Americans typically fund their retirement, the biggest financial obligation most will face. Pensions for many have become a thing of the past. Retirement needs vary greatly, but the numbers are universally huge. A 65-year-old retiree would need to have $1.1 million saved to draw $50,000 a year in inflation-adjusted dollars, assuming 3% inflation and a 5% annual return from investments. That’s if the investor is lucky enough to get a 5% return, which, given the flat-line returns of stocks the last decade, might give some pause.

About Scot McKnight

Scot McKnight is a recognized authority on the New Testament, early Christianity, and the historical Jesus. McKnight, author of more than forty books, is the Professor of New Testament at Northern Seminary in Lombard, IL.

  • http://www.docsdining.blogspot.com Jason

    Though I dutifully plug my 401K, I am not convinced retirement is the ideal option for most people. From my limited understanding, Social Security was never set up as a retirement plan, for example. 100 years ago, most people expected to work through their whole lives.

    Can anyone provide a biblical defense of retirement, at least as it is defined in modern American society?

  • Jeremy

    Retirement is not a biblical concept so far as I can tell. But the family structure in Jewish society in biblical times was such that extended families had an obligation to take care of each other, and financial interdependence was the reality and value. Americans prize independence and self-sufficiencey above all, and feel our children have failed if they are not financially independent by age 22, and we feel our parents have failed if they can’t support themselves throughout their golden years…. We’re far from the culture of the Kingdom of Jesus. Very far.

  • scotmcknight

    Jeremy, ahem, this is where the redemptive movement hermeneutic, or what Samuel Wells calls “improvisation,” is important: what is it like to be wise, responsible and generous in an economy like ours?

  • Kristen

    Jason (1), from what I’ve heard, part of the idea of Social Security was to encourage older workers to leave the workforce with dignity and security so there would be more space in the workforce for younger workers.

    And anytime I hear someone talking about how “retirement is not Biblical” I wish to introduce them to my grandmother, who went back to school and work in her 40s after raising four kids, and still worked a full 30 years before retiring in her late 70s. A long and honorable working life by just about anyone’s standards. And then some. But she turned 96 last month and there has still been a lot of life to live (and pay for, as that is just reality) after one’s economically productive years are finished.

  • DLS

    We need to raise taxes on the wealthy to fund a ‘retirement with dignity’ for all because the middle class cannot be expected to save with all their other obstacles in life.

    I expect we’ll hear this starting in about a decade.

  • Jayflm

    I’m a 50-yr-old pastor who has lived in a parsonage throughout my ministry, and who has watched my modest contributions to the denominational 403c fund fail to earn a return over the past few years. My wife and I have decided that we need to shift most of our focus to purchasing and paying off a home before we get too old.

    Home equity might fluctuate if the wheels fall off of the economy, but it can’t be gamed like the stock markets seem to be today with high-volume, high-speed trading. The almost daily fluctuations of the exchanges have the appearance of manipulations that allow sophisticated traders to skim a little off the top from the money invested each month by retirement funds and the like. Until something like a transaction tax that will make such high-frequency trading a bit less lucrative, I frankly don’t trust the markets to do much more than nibble away at anything I put into my account.

  • RobS

    Headline news has been poor for the last 40+ years, and bear market troubles often change and revert constantly. I don’t know that all savings efforts are gone down the hopper. My family did OK saving some while living below our means from ’99 til now, most of that on one salary.

    I like Scot’s question about what is “wise, responsible & generous” as that seems to be a good question. People gripe about many things and fail to save for big things in life (the education debate was a different post) yet we constantly refuse to limit our consumption of automobiles, housing, cell phones, premium television and other items. In most cases, there is big failure with wise and responsible choices — which, both now & later, help us fail to be generous.

    I ask people if they gave more to their church or their cell phone company and that makes it tense for some people. Or, the excuses flow…

    Sure, some bad things happen, but irresponsible behavior is big in America. And while behavior problems exist, I’m not sure I can demand that government fix the problem (taxing the rich for example). Far too many people do far too little to get themselves prepared for major life events. How many people overspend at Christmas even?

    We need to consider the ant and be wise.

    (* and I do have reservations about flash trading and efficient markets… for another time *)

  • Fish

    Well, first let us remember that much of the wealth in this country is controlled by senior citizens who have had their lives to accumulate. They own their homes, etc.

    I’m simply glad the efforts to put my social security in the stock market so the bankers can profit from it have been beaten back, or it would look worse than it already is.

    As many allude to here, saving for retirement is complicated by the fact that no investment is truly safe from financial fraud and Wall Street’s insatiable greed.

    Access to a company’s pension fund, for example, is attractive for those investment bankers proposing mergers and acquisitions.

  • http://annsphillips.wordpress.com Ann Phillips

    According to my mother, Social Security was most certainly presented as a retirement plan at its inception. Of course, there were some assumptions that have changed, one being that most people would own their own homes free and clear at that point, and another assumed a retirement of around 5 years based on an average life expectancy at the time of around 70. In addition, I understand the worker/retiree ratio was something like 20/1, which worked much better than the current one, which I think is 3/1 if not fewer. Last would be that it assumed a modest retirement, meaning it was meant primarily to keep people clothed and fed. Obviously, we have come to expect quite a bit more than that.

  • http://anchorforthesoul.org Daniel

    Jesus had something to say about this in Matthew 6.

  • Diane

    Ann,

    I agree–my grandparents understood Social Security as a retirement plan. My father tells the story of his father, a masculine and hardworking bricklayer, weeping for joy when Social Security passed because it meant he would be able to retire. I also wonder what happened to the idea from the 1960s that increases in productivity would lead to earlier retirements and more leisure time, a better life for the common person? To move all the profits upstairs is a truly choice, not a mandate. As for retirement–I may not want to “retire” as I have the vista ahead of work I enjoy but I have compassion for those in hard, miserable jobs and wish–from compassion, if nothing else– for them to be able to retire with dignity.

  • http://www.sacredmisfit.com Sarah

    I don’t think I’ll ever retire.

    I watch retirees stop working, their perceived usefulness declines and along with it, their health and mobility. I watch my friend’s 98 year old grandma – she still lives on the family farm in Nebraska and works it…and she is doing well.

    Again I reiterate: I don’t think I’ll ever retire. I’ll just live well in my youth and my old age.

  • Diane

    Sarah,

    I agree with you–for myself, but I do want to protect retirement for those who need it.