You’ve accepted a ministry position with a new church, you’ve gotten settled and you’re filling out all the paperwork that comes with starting a new job. The last paperwork you complete is your salary reduction agreement for making contributions to your Servant Solutions’ retirement account. With a deep sigh of relief, you think, “I’m glad that’s done. Now on to my new role!” believing that’s the last you’ll ever have to think about what you’re contributing to your retirement account in this new job.
As good as it sounds to have to think only one time about what you’re contributing to retirement and be done with that decision, such an approach will likely result in a significant shortfall in retirement funds. To say you may find yourself exasperated with your account balance when you’re closing in on your time of retirement might be an understatement.
For you to build a retirement account balance that will be sufficient to see you through your final years on this earth, it’s critical that you consider several strategies on an annual basis that will help you meet the goal you have in mind. Though it’s not an exhaustive list, here are several strategies to consider each year to build your retirement account balance:
1. Take advantage of our planning tools. Servant Solutions offers many planning and goal setting tools that can be a big benefit to your retirement planning. Consider completing the Live Free booklet found on our web site as one of your first actions. It will provide you a solid foundation for building your retirement plan and is an excellent first step.
2. Set a goal. Most financial planners will tell you that you should contribute, at a minimum, 10% - 15% of your annual income totaling what you and your employer are contributing. If you aren’t starting at this level, how quickly can you get there? What will you need to do to get to this level in “x” years? If you aim at nothing, you’ll hit it every time.
3. Increase contributions. Don’t be satisfied with getting to the 10% - 15% level of contributing to your account. Look for ways to increase your contributions on an annual basis, increasing them by a minimum of 1% each year. Also, take advantage of the IRS rule that permits everyone under the age of 50 to contribute a maximum amount of their salary election each year, tax-deferred. (This year, it’s $19,000. NOTE: Does not include employer match and/or straight benefit.) Additionally, the IRS permits workers age 50 and over to contribute a “catch up” amount each year. (It’s $6,000 in 2019.) Maximizing your contributions by the time you’re 50 or older will provide much more of a benefit than you can imagine if you don’t plan to retire until between 65 and 70.
4. Leverage cash windfalls. What if you have a cash windfall opportunity come your way (a cash gift from a relative or friend or a bequest from an estate)? This provides you a wonderful opportunity to increase your retirement savings by using the windfall cash to help pay your monthly living expenses while simultaneously increasing your monthly contribution to your retirement plan through the completion of a new salary reduction agreement with your church. (Do you know you can complete a new agreement at any time during the calendar year?) If the windfall is a large enough amount, you can maximize your retirement contributions to the IRS-established legal limit provided you aren’t exceeding your includible compensation total. Such a move offers you a double benefit: 1) building your retirement account balance tax-free, and 2) minimizing your tax liability for the current tax year. What a win-win! And should the windfall amount be large enough to allow you to do this for two or three consecutive years, even better.
5. Combine accounts. If you have 401(k) or 403(b) accounts from previous employers, consider rolling those funds into your Servant Solutions account. Consolidating your retirement accounts means less paperwork to keep track of, and the low fees charged by Servant Solutions vs. what other retirement plans may be charging could result in more money in your account for your retirement. There’s a win! Additionally, if you have traditional or SIMPLE IRA accounts with other financial firms, consider rolling those into your Servant Solutions account as well.
6. Capture spouse’s retirement benefit. If your spouse works for an employer who offers a retirement benefit, be certain (s)he is taking advantage of this benefit and participating in it. And if the employer offers a matching contribution with the benefit, do whatever it takes to capture this match. It will only enhance your retirement planning and goals! Where else are you guaranteed a 100% return on your investment?
Giving careful thought to all these strategies each year…and implementing all that you can…will go a long way towards meeting your retirement planning goals. There, no doubt, will be some sacrifice involved. But you’ll not give that a thought when you reach retirement and begin taking distributions from your account. Rather, your heart and mind will be filled with praise to God for his wisdom, guidance and help in your years of planning and saving.
Rarely is “one-and-done” something that applies to many facets of life. It definitely does not apply to preparing a retirement plan and then executing it. Contact us today!