My wife and I are doing some early retirement planning this week. Essentially we are getting our plan together for leaving the workforce in the next five and fifteen years, respectively and mapping out what that is going to look like.
As I have written about before on this blog, I consider work a privilege I am grateful to have as a man, and I for the most part enjoy my job so I am in no urgent rush to jump ship. I had a 'mini sabbatical' for a month or two in between jobs in my twenties and realized in taking that time to get a taste of "mini-retirement" that I actually enjoy and appreciate the structure and meaning work provides. On top of that, I have various incentives to stay for the long haul which can be utilized at age 59. My wife, however, is in a physically demanding job (albeit, part time) and probably has five years left in her to be able to continue doing it.
Of course we know God laughs at future plans; at the same time we also see the admonition for prudent foresight and preparation for times of want in Proverbs 13:4, 7-8:
A sluggard’s appetite is never filled,
but the desires of the diligent are fully satisfied.
One person pretends to be rich, yet has nothing;
another pretends to be poor, yet has great wealth.
A person’s riches may ransom their life,
but the poor cannot respond to threatening rebukes.
Part of that foresight for us as a couple is evaluating what we value and how we can move our lives closer in alignment to those values. One of those values is hospitality--we try to make a point to open our home to others as a welcoming place of refuge, fellowship, and comfort; another is service--we don't want to just indulge our wants, but make ourselves instruments of God's purposes to accomplish His will. In doing so, we made the decision years ago to make every effort to pay off all our debts and frontload as much of our paycheck into savings (including retirement) so that we can take full advantage of the value of time as it relates to compounding interest (what Albert Einstein called the "Eighth Wonder of the World"). We did this by making sacrifices and living frugally early, in addition to various good fortunes, privileges and windfalls that we banked rather than spent, so that we are (hopefully) in a position later in life to step out of the workforce and live off our savings in retirement and pass on money to our children.
However we see the frightful warning in Luke's gospel (Lk 12:16-21) of the "retired man" with his giant grain barns who has more than he knows what to do with yet hoards it for himself:
And he told them this parable: “The ground of a certain rich man yielded an abundant harvest. 17 He thought to himself, ‘What shall I do? I have no place to store my crops.’
“Then he said, ‘This is what I’ll do. I will tear down my barns and build bigger ones, and there I will store my surplus grain. And I’ll say to myself, “You have plenty of grain laid up for many years. Take life easy; eat, drink and be merry.”’
“But God said to him, ‘You fool! This very night your life will be demanded from you. Then who will get what you have prepared for yourself?’
“This is how it will be with whoever stores up things for themselves but is not rich toward God.”
What was the wealthy man's end goal? To take it easy, enjoy life, and be merry. I.e., live it up in his "golden years."
Now, there is nothing wrong with enjoying life, even the finer things in life, in old age. As Christ makes clear, the problem lies in storing up "things for themselves" who are not rich toward God. What does it mean to be rich toward God? Mercy and charity go hand in hand, since mercy seeks to alleviate burden and charity can be the means by which one does that monetarily. If Christ is in the needy, we serve God when we both tithe to the Church, and to those in need as well.
The thought of sitting back and making my life's purpose to enjoy material things and indulge my whims and senses ad nauseum is not appealing to me (or my wife) in the slightest. We don't talk enough about having a "philosophy of money" in the Church, I think to our detriment. Money (like the internet, or technology, etc) is a tool that holds the potential for evil purposes and self-indulgence, but can also be utilized for greater purposes; it shouldn't be taboo, or an overly emotional topic either. And God promises to multiply the dividends for the cheerful giver as well (2 Cor:9-6-7). We have witnessed this first hand in our life--that the more we give away to serve His purposes and His people, the more he lavishes upon us. It's crazy, actually. It's like a kind of "spiritual compounding interest."
The funny thing is, as my wife and I have discussed together, we are in want of nothing; in other words, there is nothing more that you could add to our lives in terms of increasing the happiness factor or value of the quality of our lives. We have exercised and trained the muscle of frugality (not cheapness, mind you, they are different) for so long that it doesn't take much to give us pleasure. We are trying to raise our kids with the same mindset, since there is nothing more off putting than spoiled children. And so, we have no desire for second homes, boats or nice cars, or lavish vacations. Just simple pleasures that are within the reach of many middle-class people, as well as the gift of the one thing you cannot buy: time.
Now, God can throw all kinds of curveballs, so it's important to defer to and follow His will in all things as it comes. But in learning more about our retirement options and the nuts and bolts implications of having a degree of saved wealth later in life, we realized that at some point, the power of compounding interest will be like rolling a small snowball down a mountain as it picks up speed and snow, so that at the bottom it kind of "gets away from you" and is a huge snow boulder. What that means in terms of finances is that your accumulated savings/investment interest begins to outpace your spending needs. So the question then becomes, what do you do with all that accumulated wealth, since you obviously can't bring it with you when you die?
Well, as I've said before, have all the babies. I also think it's good to help your children in their life if you are able, and also leave an inheritance to them to give them a leg up in life. Same goes for helping one's parents as needed, in fulfillment of the 4th Commandment. The Old Testament clearly extols this idea of inheritance to one's heirs, and is one of the benefits of staying married as well. I think it's best to find a balance between the "Die With Zero" philosophy and the miserliness of saving everything, which is what my wife and I plan to do. Between pension income, delayed Social Security, and various taxable accounts, it is very possible for us to live comfortably without touching our retirement accounts. Which means they have the potential to exponentially grow and develop a "problem" later on (albeit, a good problem to have, but a problem none the less) when it comes to taking Required Minimum Distributions in one's early seventies. This is money the government makes you withdraw, whether you want to or not, from tax-deferred 401k and traditional IRA accounts so they can get their tax money from it to fund their debt and incompetence.
One thing I have found in common among all wealthy people, is that they will do everything they can to minimize their tax liability. There are shady and immoral ways of doing this which many avow themselves of; but there are also legal and strategic ways of doing so that minimize the taxes you pay to the government. I am all in favor of not feeding the glut of government spending and minimizing taxes where at all possible (which I guess makes me a fiscal, as well as a social conversative?). And one way to do this later in life if you are charitably inclined is to make use of Qualified Charitable Contributions (QCDs).
At age 70.5, the IRS specifies that you can give up to $100,000 per year ($200,000 per couple) to qualified 501c3's from your tax deferred retirement savings; this is more effective than itemizing or simply writing checks from your already taxed income because you don't pay the tax on those distributions, and the charity gets a bigger share than they would have otherwise. If you need to take RMDs as well, those can be used as QCDs. You can read more about how to take advantage of this IRS allowance here.
So, that is part of our "money is a tool" strategy later in life--that we keep our spending modest and leave my wife's 403b account alone to grow from age 55 to 70.5, and then draw that down to close to zero over our lifetimes so that we limit our own tax liability (less money to the government), and fund charities that we value. This would include:
- One's local parish, of course
- Your local St Vincent de Paul Society
- The underground church in China
- Traditional monasteries and religious orders
- Organizations that foster Truth, Beauty, and Goodness, such as the Catholic Art Institute
- World Villages for Children, which my friend Kevin Wells is involved in and who do great work for exploited children
- The Laboure Society to help those with religious vocations pay off their school loans
- Perhaps scholarships for innovative new trade schools (like St. Joseph the Worker)
I'm sure there are many more worthy organizations, hopefully with low overhead and who get the money where it needs to go to do the most good. Of course, as a family we continue to make our weekly offerings to our local parish and help families we know as needed when circumstances arise. But the most "bang for the buck" in terms of very pragmatic, strategic, tax-advantaged giving can come from utilizing these QCDs later in life, in case you weren't aware of them (which is why I am writing this very boring post).
As a family, we don't want to see money as evil in and of itself, and maintain a kind of detachment from it; everything belongs to God, and we are, and want to simply be, good stewards of what He has given us. Money can be a means for self-indulgence or a tool to achieve good in the world and serve those in need, fostering charity in ourselves and the alleviation of suffering in others. All things for the glory of God, and our finances are no exception.
How about you? What are some other charities that do good with low overhead and are effective at fulfilling their stated mission? Feel free to comment below.
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