As a missionary, one size does not fit all when it comes to retirement planning. In fact, general retirement savings guidelines often do not account for many of the expenses you may face upon returning from your ministry outside the U.S. That’s why assessing your unique situation and adjusting your savings plan accordingly is essential. These practical tips can help you do that.
Starting early and saving consistently is critical to effective retirement planning. When it comes to saving for retirement, time is money and delaying retirement preparation can cost you significantly over the course of your career. Global workers often balance multiple priorities, competing for limited resources, so it’s critical to start saving for your future as soon as possible.
A good rule of thumb is to set an annual retirement contribution goal, working toward at least 15% of your compensation (including employee and employer contributions, if applicable). You may not be able to contribute that total amount immediately but start by identifying a monthly contribution that fits into your family’s budget and gradually increase this amount by 1-2% each year until you’ve reached your savings goal.
Even small contributions make a big impact over time. But keep in mind that you may need to contribute more depending on your savings timeline and income needs in retirement.
Missionaries often pay little to no income taxes while on the field by claiming the foreign-earned income exclusion or child tax credit. This can create a unique opportunity to set money aside for retirement on an after-tax basis while your current income taxes are low.
Roth contributions are often utilized by global workers looking to maximize their savings when they are in an advantageous tax situation. Roth contributions are made on an after-tax basis, and qualified distributions (both contributions and earnings) can be withdrawn tax-free.
Roth contributions may be made into your employer’s 403(b) retirement plan regardless of your place of service or foreign-earned income status. Roth IRA contributions, on the other hand, are restricted if you have no U.S. earned income due to claiming the foreign earned income exclusion.
It is important to choose investments that align with your:
Periodically review your investments to ensure they continue to match your savings needs as you near retirement.
Generally speaking, young investors may be able to invest more aggressively due to a longer time horizon. Investors nearing retirement may need to consider a more moderate approach to reduce volatility and potentially help preserve investments. Of course, actual investment options will vary by plan.
Traditional employees typically need 70-90% of their income during retirement. However, the needs of global workers may vary significantly from this rule of thumb due to the unique expenses they may encounter in retirement.
As you near retirement, you should take into account the different resources you have available as income sources for retirement to help you develop a retirement withdrawal strategy, such as:
Then, create a retirement income budget by projecting your retirement income and expenses to help determine if there is a shortfall to consider.
You can invest for your non-retirement goals by setting additional funds aside with an investment account. This vital piece of your financial plan may help you build an emergency fund, grow toward a down payment on a home or cover a significant life event.
Establishing a separate account can help you prepare for expenses you’ll encounter during your working years and avoid prematurely tapping into your retirement savings.
By prioritizing retirement planning now, you can ensure that you can remain focused on your vital work today without the added stress of an uncertain financial future in retirement.
GuideStone understands the unique complexities that missionaries face when preparing for retirement. We can help you tailor investment and retirement strategies to fit your circumstances and build a solid financial foundation. It’s part of our mission to enhance the financial security and resilience for those who serve the Lord.
For more information about retirement planning and considerations for global workers, please visit GuideStone.org/GlobalWorker or call us at 1-888-98 GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. CT.
This educational information should not be considered tax or financial planning advice. You may choose to consult a financial or certified tax professional to discuss your unique situation.
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