What type of retirement plans should Christians consider?

Contribution for a guest commentary series entitled “Radical Economics.”

by Rob Gailey

I recently attended one night of a several-weeks seminar on getting your family’s finances in better order. I am interested in this topic, in part, because I believe our PLNU community needs more opportunities to discuss personal financial management. Too many students are unable to pursue specific vocations because of the debt load they acquire while getting the education they need to do their jobs well. The seminar I attended did a wonderful job of describing the debilitating effects of living with too much debt. It contrasted the restrictions placed on people too heavily in debt with those who had found financial freedom through disciplined savings and adequate investment in retirement accounts. While I appreciated the session, there was one area of the presentation that caused me to pause. In discussing retirement accounts, the presenter used a rate of return of 12% per year as a decent expectation to calculate as a return on retirement funds over the course of a lifetime.

At the age of 11, I remember a trip to the bank when I first realized the power and value of compound interest. By keeping my money in the bank, the bank had paid me a significant sum for what little I had saved with them. Granted, interest rates back then were huge compared to what you can earn in an account today. When I started working full-time, I learned that compound returns work even better in retirement plans, if you are patient enough not to touch your money for decades. Knowing this, and wanting to be a good steward of my family’s resources, I have faithfully contributed to a plan every year. I used to eagerly await the quarterly statements that featured my retirement balance, what my employer and I had each put into the account and how much the value of my account had changed over the previous three months. A big highlighted box on the front page was used to show the "growth rate" my money had earned. Often, the number was impressive, like 20% or 25%. Other times, not so much, perhaps 2% or 5%. Occasionally, there was a negative interest rate because my "assets" had devalued that quarter.

At PLNU, I teach a course that focuses on how the world’s poorest 2-3 billion people live and what can be done to change their circumstances. One issue that repeatedly comes up is how multi-national corporations, in pursuit of "maximizing profits in the short-term," can cause real damage to the environment and to the poorest people by their actions. As I began to explore how people in big business could continue to operate in such fashion when confronted with the harsh impact of their decisions, I started to realize that the pressure they felt for high quarterly returns came, in part, by people like me wanting to see our retirement funds make maximum returns, say 12% a year, on our quarterly statements.

There are no easy or simple answers to this question. Retirement funds have created investment vehicles for Christians who do not want to invest in alcohol, cigarettes, or defense companies. When I’ve asked them if they have funds that invest in companies that seek to minimize environmental damage and/or pay their laborers a fairer wage in countries where they operate, the fund managers doubt such funds will ever exist because they don’t envision there being a strong enough demand for these types of investment vehicles. I believe that with enough Christians asking these questions of their retirement funds, some change is possible!

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To provide the PLNU community a wide variety of perspectives and experiences on economics, the CJR and the FBEI have coordinated a series of students, alums, and professors to share their ideas on a variety of topics, most of which can be found in the PLNU Weekly, the school newspaper. PLNU, the Center for Justice and Reconciliation (CJR) and the Fermanian Business & Economic Institute (FBEI) value different viewpoints on important topics, and therefore we have also posted the articles here in the News Section (to the right). The opinions expressed in these articles, as well as those of Ched Myer, are those of their individual authors and do not necessarily reflect the views of PLNU, the CJR or the FBEI.