Weekly financial Q&A, with advice on Social Security and 401(k)s.
I’m a pastor, and I’d like to know your opinion on opting out of Social Security.
Under the law, pastors are allowed to be “conscientious objectors” where their pastoral income is concerned, and opt out of our country’s Social Security program. So, yes, you can decide to opt out. Now, the big question is whether or not I think you should do that.
If I were a pastor, I could easily look at the horrible mathematics involved in Social Security — what an absolute rip-off and terrible program it is — and decide as a Christian that sending money to those clowns in Washington, D.C., is a terrible use of God’s money. To use the Christian term, I would view it as bad stewardship. I could conscientiously object on a spiritual basis in a heartbeat!
Now, once you’ve done this, you need to understand that you’re giving up three things Social Security tries to accomplish. You’re giving up a Social Security check when you retire. It’s not much, it’s enough to eat dog food on, but it’s a check. So you have to make sure you fund your own retirement.
Second, you need to get long-term disability insurance. Social Security would provide a little something had you been paying in, but if you haven’t, it’s all up to you. You don’t get money from the government for long-term disability if you opt out. And the third thing you need is life insurance. Social Security would pay your family a little bit if you died, but only if you’d been paying into the program. If you opt out and don’t have life insurance in place, that means the money is gone when you’re gone.
But guess what? You should be doing these three things whether you opt out or not. It’s called wise financial planning!
Bailing at the wrong time
My wife and I are both 58, and she has $250,000 in a 401(k) that has lost 20 percent in the last couple of months. This represents the vast majority of our savings. We probably won’t need the money for at least another five years. Should we move it to something else?
It’s normal to be a little bit scared when the markets are as crazy as they’ve been lately. The fact that the news media has been going bananas with all this doesn’t help matters, either.
Here’s the deal. Ninety-seven percent of the five-year periods in the stock market’s history have made money. So far, 100 percent of the 15-year periods have made money. That’s a pretty solid history. You’ve got time for the markets to recover.
Chances are, you won’t be using this money for another 10 years or so. Even if you retire early, you’ll probably just pull an income off of it instead of cashing it all out and hiding it in your basement, right?
Think about this, too. Since 1978, the market has dipped 10 percent or more about a dozen times. It has recovered within two years 90 percent of the time. If you got out now, John, you’d be leaving at exactly the wrong time!
For more financial help, go to daveramsey.com. You can also see him at 8 p.m. ET weekdays on Fox Business and hear his radio show weekday afternoons. Find a station or listen on his website. Dave also is on Facebook and Twitter.