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Thinking about retirement responsibly at every age

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God has blessed us with opportunities and skills to earn a living. Hopefully, we have planned for our future and have put away some savings. Whether you are planning for retirement or already retired, a change in mindset must take place.

A Season to Accumulate

Before we retire, we work to accumulate wealth. Investment advisers work with us on our IRA accounts, 40l(k)s, 403(b)s, or other retirement plans to reach one goal: wealth accumulation. We become conditioned to that mindset. That's not necessarily a bad thing if we realize that once we retire, our thinking needs to change.

Our economy is more volatile than ever before. The so-called Great Recession changed the thinking of millions of Baby Boomers who control trillions of dollars in the economy. Many of them are now in retirement or close to retirement. All of them have lived through three bubble bursts and cannot bear the thought of getting into an uncertain marketplace. Thus, they have become reluctant to get back into the market.

Unfortunately, many from the Baby Boomer generation have learned the hard way. They now understand that being 100% in the market may not be the right long-term strategy for their retirement needs.

A Season to Be Consumption-Driven

Our mindset for retirement should be this: The only thing that matters is our spending rates and the income we have to offset that spending and consumption. In retirement, we need to invest a portion of what we accumulated during our working years as a hedge against inflation and also shore up our emergency savings, if necessary. We should use the balance in a strategy built toward producing only permanent income, no longer making further accumulation a priority. This is a responsible and sensible way to remove the risk of losing what we have and not having enough money to support our spending patterns. It will dramatically reduce the amount we will need to take from our savings and investments to support our income needs, allowing those accounts to grow unencumbered by withdrawals.

Some may think our spending pattern decreases when we retire. Maybe, but it will be replaced with new expenditures. Some increases may include visits to grandchildren and children, increased medical and care needs and even living longer than expected.

Often, our income will depend on market conditions and on making a fixed amount of return on our investments. It usually does not count on any real downturns in our portfolio or on money invested in risky markets and a volatile economy—not a very appealing thought. The risk of running out of money to support our consumption is one of the greatest risks we face. When we expose our savings and investments to market volatility, the risk of it affecting our income is very great. I believe retirees must prepare for this risk by reconsidering how much they are willing to expose to downturns. Remember, we need to make what we have saved work hard for us. That becomes difficult when we still believe accumulation is our goal. Outliving what we have stored will be one of our biggest risks in the coming years.

So What Can We Do?

Our mindset needs to shift from wealth accumulation to meeting our consumption needs. We must work on ensuring a steady level of monthly consumption and enough income to meet the needs of that consumption. Focusing on wealth accumulation in our retirement years is a mindset that is difficult to change. But it must.

We cannot know exactly what our spending needs will be. For one thing, we don't know how long we will live. Statistically speaking, if you are a married couple and both of you are over 60 years old and in good health, one of you is likely to live into your 90s. So how can you plan wisely? Learn what you can from statistics.

Inconsistency in the marketplace—whether bonds or stocks, mutual funds or something sold to us as being secure with no risk to principal—will always exist. The 2008-09 downturn has taught us about the variables in the marketplace. Depending on exposure to the markets, investments in this volatile economy may not be the wisest decision we could make.

Some Issues to Consider

We need to have some money in a savings account for emergencies.

We should always have a portion of our accumulated wealth in a well-managed investment plan. These funds, stocks or bonds should be liquid—available to us anytime.

We must understand our consumption needs over the next 20 or 30 years, such as medical expenses, insurance and increased taxes, food, gasoline and utilities. Emergency savings may need to come into play, but we also need to develop a well-thought-out plan of income to meet some of these needs.

I often witness firsthand that there is a point in our life—somewhere around 75 to 80—where we become consumed with income. The only thing we care about is how much income we have. We stop monitoring what is happening with our investments and the stock markets. We need a financial adviser at that point, one we can trust to do the right thing on our behalf. By the time we are 65 or 70 we need to take some of the wealth we have accumulated and put it into something that will generate permanent income to see us through. One of the tools I recommend is Charitable Gift Annuities.

Charitable Gift Annuities

We should not perceive Charitable Gift Annuities as investments. See them as an opportunity to give to the Lord’s work and to receive a never-changing income to meet some consumption needs. The vast majority of people using Chartable Gift Annuities or Charitable Trusts to support their lifetime income will over the years receive more than their gift back as income. This is a benefit to their heirs, in that it will reduce their need to withdraw from their savings and other investments, allowing these accounts to grow unencumbered by constant withdrawals.

Here are just a few of the benefits:

  • Give to God’s kingdom. Have you ever considered giving a considerable amount of what you have accumulated to the Lord’s work when you die? Perhaps you have thought of it as your final tithe. A Charitable Gift Annuity makes it possible to contribute now while you are still living.
  • Guaranteed income. The greatest benefit of a Charitable Gift Annuity while you are living, of course, is the idea that you will have income that does not depend on the variables of the markets (the bond market, the stock market or any other market). This provides income that also does not depend on the federal interest rate. A Charitable Gift Annuity gives you an opportunity to carve out a piece of your wealth accumulation to make sure you have the income you need to help meet your consumption needs. When your consumption needs are being met through Social Security, other investments and a Charitable Gift Annuity, you can count on your needs being met. That income is not something anyone can take away or steal. It cannot be affected by dysfunctional markets or government instability. Even if the charitable organization goes bankrupt, the law requires enough reserves in their account to make sure the annuitants will continue to receive their payments.
  • Tax benefits. I also believe that a Charitable Gift Annuity or Charitable Trust is one of the great tax loopholes in this country, and I hope this will continue. About half the income will be tax-free for a long time. You will also get a slight charitable contribution deduction for the Charitable Gift Annuity when you establish it.
  • Peace of mind. In May 2013, the National Bureau of Economic Research released a working paper on research focusing on the consumption models of retirees. The report identified benefits people realize once they wrap their minds around this idea of generating income that meets some of their monthly consumption needs. On average, 75 percent of people surveyed indicated they would prefer an annuity that guarantees permanent income to a savings or investment account. It is likely a matter of peace of mind for the individuals. Remember, most of these retirees are Baby Boomers who have seen firsthand the fluctuations in the markets. They are sick of the risks and do not want to depend on a volatile economy.
  • Estate planning. Many people provide in their estates, wills or trusts for the establishment of a Charitable Gift Annuity for an heir—a child, a grandchild or another loved one. In effect, this leaves the heir a pension of sorts. When the heir turns a certain age, he or she will also receive a permanent income for life. Many people have used this provision because they do not want to see an heir get a lump sum of money and perhaps use it irresponsibly. It is one of my favorite planning tools.

From Underused to Widely Used

A Charitable Gift Annuity used to be one of the most underused planning tools and diversification pieces in retirement years. This is not true anymore. Largely because of the changed mindset of Baby Boomers, tens of billions of dollars have flowed into Charitable Gift Annuities. One large international charitable organization alone received over $20 billion through Charitable Gift Annuities between 2009 and 2013. They increasingly hear more people saying, “I have to take care of my income. My savings have been accumulated; now it is time to be able to live on them.” Over the past 25 years, it seemed no one but me talked about Charitable Gift Annuities. In the past several years, the Wall Street Journal alone has written many articles on the merits of Charitable Gift Annuities and permanent income for life.

This is encouraging to me because, frankly, I believe it should be a part of every responsible plan. It is the right thing for people to consider. Many years ago, I said it was something people should think about as they plan for their retirement. Now I say it must be a part of any responsible plan as you head into retirement. Countless people have told me over the years that one of the best things I ever did for them was to establish their Charitable Trust or Charitable Gift Annuity. They usually don’t tell me that until they are well into their 70s. By then, they realize this is one of the greatest assets they have. I am convinced people who participate in a Charitable Gift Annuity will live to appreciate their choice to support God’s work and to receive a permanent income.

When we think about the time lost waiting for recovery from a bubble burst, we quickly realize there must be a better way. More and more Boomers are coming around to my way of thinking: We must be driven by our consumption when we retire—not by continued accumulation.

Dan Celia is president and CEO of Financial Issues Stewardship Ministries, Inc., and host of the nationally syndicated radio and television program “Financial Issues,” heard daily on more than 650 stations across the country and reaching millions of households on several TV networks. Visit

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