Note: The below post relates to clergy in the Evangelical Lutheran Church of America (ELCA) and their benefits provider, Portico. This said, the method detailed below could well apply to clergy across denominations and non denominations as an option for pension investments.
According to a recent Portico publication, something like 45% of all Portico Benefits members have never changed their Pension investment elections. They remain in the standard 60e plan. This plan has its strengths and weaknesses, but by and large it lags well behind other potential investment options within Portico’s funds (lower risk often yields lower returns over time).
In this regard, there’s a lot to consider here, such as risk tolerance, time until retirement, social considerations toward investing and the like. This said, there’s a lot to leave on the table by not considering a custom blend of available funds that suits your long term investment goals.
Let’s say you could, for example, find a blend of funds that matched your investment tolerances and, based on historic considerations would likely yield say a 2 percent a year average return improvement yearly. If your portico contribution from your congregation was say $5,000 a year over 30 years, and earned a 5% annual return, it would be worth $332,195. If you instead earned a more optimized 7% annual return (by selecting better performing funds based on risk analysis) , this same investment would be worth $472,304 in 30 years. This is a difference of +$140,109!
Something to consider: the above created example used a variance of 2% in annual investment return. Because of compound growth, higher percentage variances, if achievable, would yield much more significant returns for retirement. If the hypothetical returns were say 5% better, the math would look more like an exponential growth over time with much greater multiples in returns. Every percentage point matters!
Action for consideration: Take some time to consider your retirement pension investment elections, perhaps with an advisor like Ernst & Young (Portico’s partner), a Thrivent rep or another competent and trusted advisor. It is quite possible that there is a better investment mix for you than the one size doesn’t really fit all 60e Portico base plan.
Finally, for the sake of information only (and hear this disclaimer: this is not in any way an endorsement of any type or suggestion of any action), the author's investment method has been to review, yearly, the 10 year running returns of the different funds provided as investment options within the pension. Using this information, I analyze my risk comfort level, current market conditions and fund objectives to then create a custom formula for my investment elections. I like the 10 year returns as a helpful guide as they reveal fund success and management style over a long period of time and may perhaps be a potential indicator of fund management and investment strength or weakness now and going forward. This said, no one can predict the future, so please do your own due diligence, and again, involving a financial advisor here may be well worth the effort. The key is to do some work here and make sure you are regularly considering your options. There's too much riding on what could be the missed out potential of doing nothing!
Reference: Here (you will probably need to log into Portico and go to Fidelity Net Benefits to see this page) is the 10 year fund average returns for all Portico funds. There's a lot to observe here. Remember too that past performance doesn't guarantee future results.
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Reconsider Your Clergy Pension Elections (Now!)
Consider Again Health Savings Accounts (HSAs) for Clergy
Clergy: Talk to Your Churches About Wills
Clergy & Financial Compensation Guidelines
About the Author
Hi, I'm Pastor Andrew, an ELCA pastor with a love for sharing empowering personal stewardship for fellow church leaders. I enjoy researching the financial wisdom of the scriptures and of fellow church leaders and I hope to share my findings in a way to help clergy of all types!