Have you ever heard a sermon on retirement or saving for retirement? Me neither.
According to Teresa Ghilarducci in Rescuing Retirement, America is facing a DIY retirement, economic, and moral crisis. She warns elder poverty or near poverty is the devastating result of this “Great-Depression-like…watershed moment” in America because millions of people won’t have enough money saved to last throughout retirement.
She states that the main culprit for this crisis is the 401k and other prevailing defined-contribution retirement income plans like IRA’s. The shift from defined-benefit pensions to the defined-contribution plans since the 1980’s has as a result placed the burden, risk, and responsibility for saving for retirement entirely on the employee instead of the employer. This shift has “eroded the essential second tier of savings” in the 3-legged stool model of retirement savings by the ineffectiveness of these rather new vehicles. Ghilarducci calls the 401k “a disastrous forty-year experiment” which has “failed miserably” despite it accidentally, unintentionally, and ironically becoming the primary U.S. retirement vehicle.
An over-reliance on Social Security on top of American over-reliance on defined-contribution plans is another factor of the DIY retirement crisis. The average benefit of Social Security does not cover the baseline needs of most retirees, yet Ghilarducci observes that one third of retirees rely on Social Security for 90 percent of their income, while 24 percent rely on it as their only source of income. This over-reliance is made worse as many retirees claim Social Security too early. If a retired person waits to claim till the age of 70, this would result in receiving delayed retirement credits and increase benefits by 76 percent according to Charles Ellis in Falling Short. However, most retirees cannot wait till the age of 70, and retire earlier than the Full Retirement Age of 67. And ironically, according to Michael Hiltzik of the LA Times, only 4 percent of retirees claim at the optimal time, leaving 3.4 trillion on the table. And only the rich are able to wait to claim till 70, while poor and lower income retirees who need it more claim earlier out of necessity and thus receive less monthly benefit.
Retirement security is now a luxury for the privileged few within the DIY retirement crisis according to Ghilarducci. And America’s retirement gap is stark as “more than one and a half times the nation’s GDP would be required to get every household on track to a comfortable retirement.” She exclaims that an aspect of this gap is the fact that retirement wealth inequality is worse than America’s income inequality. The new class divide as a result within this crisis and inequality is the presence or lack or level of “retirement anxiety.”
Two recent surveys on pastors and retirement are the Barna State of Pastors Report, and the National Association of Evangelicals “Evangelical Pastor Study.” Barna concluded that churches need to help pastors with financial matters as one important way to help them thrive in ministry. The NAE study dove deeper into the financial realities of 4,249 pastor’s across 19 denominations. And while the study found that the vast majority were completely (46%) or mostly (45%) confident in shepherding their household finances, and over three quarters considered their household financial situation either very solid with no concerns (29%) or mostly solid with few concerns (49%), their biggest financial stress factor was specifically saving for retirement (92%). And those who said their church and personal finances were solid only had a median of 40,000 saved for retirement respectively among other concerning findings.
As for Church of Christ pastors, James Knapp’s two recent studies offer the only academic look at the state of their retirement savings (see this Christian Chronicle article from 2007). His findings reveal that COC pastors are a microcosm of the American DIY retirement crisis and anxiety. He found the same over-reliance on Social Security and defined-contribution plans, as Social Security and IRA’s were the only sources of retirement income breaking 50 percent utilization by participants in both studies. Knapp concludes stating the need for pre-retirement education and for churches to take their pastors’ retirement more seriously.
Now experts on retirement savings like Ghilarducci state that what is needed are better products, not better financial education, because “we cannot educate ourselves out of this crisis.” She says we need pension-style retirement income on top of social security and Medicare to resolve this crisis, but “the system offers no cost-effective means to convert retirement savings into this life-long income.”
We may never have the perfect retirement vehicle, but Knapp mentioned that what we do need right now is to have a qualitative conversation with pastors to find a way forward, and that’s why I have created the Almost Essential podcast as part of my Doctoral final project at Fuller. My hope is that this podcast serves as somewhat of a “room where it happens” for pastors, church leaders, et al. You can find this podcast on Spotify and Apple podcasts where we interview both experts in the field as well as two pastors from each of 8 different regions around the country. One hope I have is that after listening to these episodes, people may realize that retirement wealth inequality is a justice issue that is essential for the church to act upon to help resolve for both pastors and everyone alike.