Comments on: Getting Started in Investing, Part 4

By: adam mclane

adam mclane — Thu, 11 Jun 2009 13:18:15 +0000

@ken- I guess I stumbled on a blind spot in training. I have a BA in YM and parts of a MA in YM… and I can remember exactly half of a class where we talked about pay. And no one ever told me that if I didn’t get ahead on things early I wouldn’t be able to afford to be in YM forever.

There are so many options for investing. Really, the key is getting started and the hope here is to give people who know nothing a little motivation to understand that they have to do something NOW if they want to be in this for the long haul. I hope that’s come through.

By: Ken

Ken — Thu, 11 Jun 2009 06:23:27 +0000

Yes, you are right. I do own shares and because I had a dad to give me a heads up, I’m in it for the long haul and won’t take them out. But it is still not guaranteed to keep it’s value.

Your point is valid on CD’s. One can also get a high interest savings account from ING for nearly the same as CD’s and the money is liquid too. That is another option for the low risk investor.

dude, none of this info was available to me when I started youth ministry. Nice job, man.

By: adam mclane

adam mclane — Thu, 11 Jun 2009 01:32:53 +0000

Ken- you’ve not lost money, you’ve lost value. We’ll touch on this in a later post… but right now is a GREAT time to convert cash into shares of a mutual fund or stock. (my portfolio is actually up 11% in the last 12 months)

While you once had $2400 in value you still have the same amount of shares. Once that mutual fund (what backs most 529s) you’ll be right back at it. The key to 529s is a little phrase called “dollar cost averaging.” Basically, if you invest the same amount each month in a mutual fund the 10 year look at those funds will equal that return you were hoping for. There will always be market highs and lows. But the wise investor keeps chugging along. The tragedy is when kids hit college in 2008 and 2009 when those values die!

CDs are fine. The problem is that they aren’t tax-deferred and they generally require a min. deposit of $1000. Too rich for most YWers salary!

By: Ken

Ken — Wed, 10 Jun 2009 20:12:44 +0000

As always, Adam, Great series. Great stuff.

The bad part of compound interest is that it really matters when you get in. My dad told me and showed me how if I put $2K into an IRA when I was 18 for 10 years I would be a millionaire when I was 60 or something.

Unfortunately, at that time I thought $2K was an astrnomical figure and never did it. Then I got married, had kids, etc. BUT I WISH I HAD.

If I did it now, I could still do it, but I won’t be a millionaire until I’m 75…and then at that point…what will a millionaire really be worth? More than the $20K I would have put away!

I need to get on that! nice job adam!

one more thing: I’d recommend most people to NOT use a 529 because it is not guaranteed. You could lose it all. I guess it goes back to your risk factor. I’d put that money in a CD, that way you’ll never lose it and it’s always more than inflation…although not much.

Living in Kansas, the gov had a deal that if you put $600 into a 529 they would match it up to two kids. So we did that for our kids. We put in $1,200 and the state of Kansas put in $1,200. GREAT deal! Except…that $2,400 is down to $1,400 because of the economy. I’m still doing better than I had…but not by much. Wish I would have put it in a CD.

Great stuff my friend!

By: adam mclane

adam mclane — Wed, 10 Jun 2009 19:06:33 +0000

@ben- I like Matt’s recommendations. Personally, I’m a do it yourself kind of guy and I like to buy stocks as well as mutuals. So I have a Roth with http://etrade.com. I feel espeecially big time since they have an iPhone app.

I would be willing to be your church has a broker in the pews. Ask around as there are lots of people who do it PT.

By: Matt Cleaver

Matt Cleaver — Wed, 10 Jun 2009 18:59:29 +0000

Ben, on the IRA, any mutual fund company can open one for you. I would suggest a company known for low expenses such as Fidelity, Vanguard, or T. Rowe Price (I use Vanguard).

I’m sure Adam will chime in as well.

By: adam mclane

adam mclane — Wed, 10 Jun 2009 17:39:55 +0000

Kevin- If it’s a small church and they don’t have a 403b already (like, not part of a denom) than I think your shortest route is a Roth IRA.

here is stuff on the IRS site about Education IRAs, now called Coverdell Education Savings Accounts:
http://www.irs.gov/newsroom/article/0,,id=107636,00.html

Basically, if a child doesn’t use the money for college they can still have it, just have to pay taxes on it.

By: Ben

Ben — Wed, 10 Jun 2009 17:16:17 +0000

Adam,
Thanks again for the great post. This info is great. I have been in the ministry now for 3 years and haven’t heard a single thing about COLA or retirement or anything. I thought I was doing good because I have a savings account. I am wondering more about how to get started with a IRA – I think that would be my best option but I really don’t know. I’m 27 with no school debt and I want to get on my horse and get this done.
Thanks again for these great posts. In my experience, these types of things aren’t being discussed and they really need to be. Maybe this needs to be addressed in some way at a future NYWC. I know that I’m not the only youth pastor who needs more of that kind of info/advice/direction.

By: Kevin I

Kevin I — Wed, 10 Jun 2009 16:53:24 +0000

With the 403b’s and having your employer matching it, how do you go about that in a small church, how do you bring up the idea of matching?

Also with the education IRA, what if your kid chooses not to go to college?