Serve right after retirement, or wait?

When it comes to deciding when to serve there are a couple things to put into perspective. The first to consider is you and your spouse’s health. Although this can be a hard to quantify, a good perspective can be gained by looking at your current health and your family health history. After contemplating how you are doing, how you could be doing in the future based on family who have gone before, and seeking guidance from the spirit, you can then contemplate serving a mission from a financial perspective.

Cost of Serving

Next, assess the cost of serving a mission. Take a look at https://seniormissionary.churchofjesuschrist.org/ and consider the different service opportunities. The church provides estimates on the personal expenses along with 1ff fixed costs. After you narrow down a range of costs for service you could provide, then you can look at your sources of income and assets.

Assess Sources of Income

Now you can look at your sources of income to cover the expenses of serving. Make an inventory of:

• Social security
• Portfolios
• Pensions
• Annuities
• Portfolio Income

After you have inventoried the financial support you can draw from during your service, then is the time to figure out the difference between regular sources of income, and what your shortfall may be, if any.

If you have a shortfall, find ways to make those up takes some creativity, but can almost always be done. You may have some personal use assets you could rent, reverse mortgage, help from family or your local ward among many other ideas. Not everything will fit for everyone, but many ideas should be explored.

Considerations

One thing that may be tempting is selling assets you hold to cover the extra costs of serving. This may actually hurt you in the long run. If the market is in a slump when the time is right to serve, if you sell something to cover expenses, that can have an increasing negative impact on your portfolios size as time goes on. It’s a concept call “sequence of returns.” It is well documented that when you have a fixed cost, the more shares you need to sell, the worse the long term outcoming. This happens when things are sold when they are relatively down in value.

The best way to avoid the negative impact that selling positions at unfavorable times is by planning a head. For years while we are working, we learn how to invest for growth. As we get closer to needing income from our assets, we also need to learn to invest for income. About 5 years before you retire, a gradual changing from investing for growth should begin. Adding assets designed for income gradually until you need the income can elimate the need to sell as you begin to use the income your portfolio generates.

Monte Carlo Analysis

After the costs and incomes have been evaluated, then it’s time to calculate how the expense could impact your overall retirement years. I’ve found Monte Carlo analysis to be very helpful in this area. Through this analysis a 1000 scenarios are run with various returns. We can then see how your finances turn out in a lot of probable situations. We’d want to track how your portfolio and income withdrawals stack up. We’d evaluate how many times do you run out of money before you run out of life. Then we can tell how the expenses of a mission would affect you long term. Then specific ideas to maximize your chances of success can be put into practice.

Conclusion

When is it best to serve? Some of it depends on how and when you start to arrange your finances. The sooner you make the necessary calculations and adjustments, the better your outlook will be. You’ll be on your way out to serve sooner than you think!

Alan B. Faerber CFP®, CRPC®