- Do I have enough to retire?
- Do I have enough to send my kids to college?
- Do I have enough to buy that second home?
As I have written elsewhere:
As financial planners, we have a tendency to rely on our spreadsheets for proof that we have the future nailed down. We fool ourselves and I am afraid God laughs at us. The variables that we know, in conjunction more so with the mind of God that we do not know, make any certainty with respect to the future an illusion. We far too easily strive after the false idol of security in materialism-which is bondage.
Nevertheless, planning is important. We do not mean that one should not work hard or plan. A “failure to plan and prepare will undoubtedly yield the worst result of all.”¹ And rules of thumb can be helpful for the peaceful stewarding of our assets.
Charles Farrell has written an interesting book entitled Your Money Ratios that contains such rules of thumb. Farrell recommends that you save 12% of your income before age 45 and 15% thereafter. The goal, per Farrell, is to have savings of at least 12 times your income by retirement. He is a strong advocate of paying off all debt by retirement.
William P. Bengen is somewhat famous for a 1994 paper showing you could have withdrawn 4% annually from a properly allocated portfolio over any 30 year period of the previous 75 years. The 4% withdrawal rate has been questioned lately due to the historical low interest rates.
Again, these are just rules of thumb and every individual’s financial needs are different. We like to use advanced financial planning software to fine tune the projections and make specific suggestions. You must remember that nobody knows the future. I guess that is where faith comes in (yes, I do not like it either.) Let us know if you would like for us to perform such projections to better determine the direction you need to go.
Mortals make elaborate plans, but God has the last word.
Proverbs 16.1 (The Message)
¹Richard B. Wagner, It’s All about the Numerators (Financial Advisor magazine)
Let us know if you would like for us to perform such projections to better determine the direction you need to go.