Sunday, 29 April 2012
TALKING “RINGGIT AND SENSE” BEFORE YOU RETIRE
Biblical insights on financial planning for retirement
Whether it’s to escape from work pressure or to pursue unfulfilled dreams, few fancy themselves working till their last breath.
An overworked colleague of mine once vented his frustration: “He who does not plan to retire one day is a fool.” How he longed for the chance to retire early—hang up his stethoscope and go globe-trotting.
It is crucial to set our finances in order ahead of retirement. The need to plan is obvious, what with a longer life span and the ever-increasing rise in fuel and food prices, cost of medical care and nearly everything that impinges on our lives.
Faith vs. Planning
Some say planning implies we have little faith. Since God cares for us as He would care for the birds and the lilies, we should just concentrate on seeking and serving Him (Matthew 6:25-33).
Others become obsessed with financial planning for retirement. They save and scrimp so much that they become niggardly towards God’s work and often exclude themselves from social functions.
How do we balance these two extreme viewpoints—faith and planning?
Isn’t God’s planning evident in His creation and the instructions He gave for the building of the ark, and the tabernacle and temple of Jerusalem?
Likewise, we need to plan. But we must first acknowledge God as the source of wisdom; we may plan but it is God who directs our steps (Proverbs 3:5,6).
The industrious ant forages for food in summer so that it will have sustenance during winter (Proverbs 6:6-11).
Similarly, Joseph had the foresight to plan. And his family and a nation were saved when famine came (Genesis 41:35,36).
Lack of planning may cause us to outlive our finances. We may then have to depend on handouts from relatives or friends. We may even have to come out of retirement and go back to work but will our health permit it? How can we avert this potential financial time bomb?
Que sera sera
“Que sera sera, whatever will be, will be.” That’s the familiar refrain of many who do not plan for their retirement. They think they can rely on their EPF savings alone. But a shocking survey reveals that 70% of retirees deplete their EPF savings within the first three years of retirement.
Many depend on savings and fixed deposits for retirement without realising that inflation will erode their purchasing power. Others count on their children to support them during retirement. They invest heavily in their children’s tertiary education but yields are usually lower than expected.
The children may be able to fend for themselves. But after paying for the home, car and daily necessities, they can barely support their aged parents.
What if relationships turn sour? The parents are left high and dry financially. It’s heartbreaking but it has happened. In a neighbouring country, laws have been enacted to compel children to perform their filial duties.
Often people do not plan early enough; they tend to underestimate their needs. He who retires at 55 has to sustain himself for another 20 years. It’s advisable to start planning when we are in our 30’s or, better still, when we commence working.
Determining the size of the retirement nest egg, even with advice from financial planners, is difficult. It’s like aiming at a moving target.
That’s why we need to learn more about financial planning. We need to know our monthly expenses, learn to budget and live a modest lifestyle. We may even need to “add another string to our bow”—reinvent ourselves in a field unrelated to what we know best.
“Be diligent to know the state of your flocks and attend to your herds...the lambs will provide your clothing and the goats the price of a field” (Proverbs 27:23-26).
In an agrarian community, people attend to their flocks and gather hay for subsistence. But today we need not soil our hands. We have various investment vehicles, including property, shares or small enterprises.
Having faith doesn’t exempt us from working hard or taking personal responsibility for our finances. And we cannot rely on obsolete paradigms in these days of economic uncertainty. Secure, cradle-to-grave employment no longer exists.
Jobs may be axed in the wake of corporate restructuring. It would be too late when we realise Murphy’s law applies to us and we are caught unprepared.
Stocks or Property?
Many who want to get rich quickly usually invest in the stock market. Often, these punters realise to their chagrin, after getting burnt, the wisdom in the saying “he who goes after quick riches will suffer whereas he who gathers slowly will become rich.” One certainly needs patience to realise investment gains.
Investing in property in well-sought after locations reaps handsome benefits. Besides capital appreciation, property can be rented out. It is an effective hedge against inflation. It can also serve as collateral for further loans—the increasing equity built up over the years can be unlocked through refinancing.
But we need to pray for wisdom to invest in the right property—especially when to invest and the location. For those who wait patiently, its rewards are relatively consistent (Psalms 37:5-11). The limited supply of landed property in choice locations means that prices will tend to go up in the long term. As humourist Mark Twain quips: “Buy land, they’re not making it anymore!”
Through property investment, financial goals are often attained without losing sleep over the volatile financial markets, something often associated with investment in shares. But as with all investments, things can turn awry if the timing or location are wrong or if one bites off more than one can chew—such as when one over-commits and struggles to repay a huge mortgage.
Is planning for all?
But someone might retort: “I can hardly make ends meet, let alone consider these investments. How can I plan my finances?”
The need to plan our finances differs greatly. Donor-supported ministers or pastors mainly depend on God who is their inheritance, just like the Levitical priesthood. Government servants can depend on pensions and free coverage for hospitalization whereas private sector employees will have to fend for themselves. Singles will have a lighter financial burden compared to the family man or single parent.
Testimonies of God’s faithful provision for his servants abound. A minister once recounted the blessing of seeing his children secure scholarships to study overseas, something inconceivable even in his wildest dreams.
Although everyone’s financial situation is different, we still need to plan our finances even if we do not make major investments.
A word of warning: It’s easy to go overboard and emulate the man who hoarded material things for personal enjoyment without regard to God (Parable of the Rich Fool).
When we plan, we must not lose sight of our calling or amass wealth without giving to the needy. Finally, we need to know when enough is enough. “Do not toil to acquire wealth. Be wise enough to desist“ (Proverbs 23:4).
May good sense prevail—financial sense based on faith and prudence. Faith in a loving God who provides for our needs and prudence to plan for retirement.
The above article was first published in Asian Beacon magazine, December 2008, issue 40.6.
DOES GOD WANT US TO BE RICH?
HOW TO ATTAIN FINANCIAL FREEDOM
DOES FINANCIAL PLANNING NEGATE FAITH?
EDUCATING MALAYSIANS ON RETIREMENT SAVINGS