Retirement Savings Vs. Student Loans

[Klarisse]

Does it even make sense to invest in retirement if you plan to enter religious life?

 

My situation is this: I have student loans to pay off. My employer also matches 401k contributions up to a certain percentage. While I can't say for certain that God's calling me to religious life, I feel silly putting money away for retirement. If I were to need a retirement account, it would make the most financial sense to put as much money as the employer matches into the 401k, then pay off the student loans with any extra income. Without contributing to a 401k, I could potentially save 2 months on paying off student loans after compensating for the tax changes.

 

Then there's the moral element. This is only to state how it strikes me rather than to start a debate, since that's relevant to my conscience, which has frequently created false positives in the past. Frankly, now that I've started thinking about it, the main fruit I've seen coming from the stock market is evil: exploitation of workers and customers for the sake of somewhat myopic attempts to increase investors' profits. I certainly don't see any way in which it could be effective as a lasting solution for everyone's retirement needs. Without exploiting a group of people that contribute the work that creates the wealth but don't benefit from it, it seems like it would have to implode. When entering college, I viewed student loans as a necessary evil based on our society's structure, and I certainly regret participating in that now. I specifically chose "moderate aggressive" instead of "aggressive" for the strategy even though I know I'm supposed to invest aggressively at this point, but it still doesn't sit quite right.

[arfink]

If your employer matches 401k contributions and you have the ability to do so, I'd take it. If you don't enter the community and find yourself on the outside in a bit of a mess it could be a great help to you, and if you stay in the community it will help them. Win win.

[Kayte Postle]

I agree with Arfink. It's not common today to be with a company that will match 401k investments, so I'd suggest you take it. If you enter a community, and then discern out at some point you will still have that investment for later in life. If you stay and make final vows that retirement investment will be absorbed into the community and help everyone.

[arfink]

I know that if you ask on the phorums here you will surely meet plenty of people who have discerned they don't belong with a community and have found it extremely difficult to return to the world because they have no savings or investment of any kind. You can save yourself a lot of trouble if you have something to fall back on in case it doesn't work out.

[TheresaThoma]

I would say go ahead and save it, especially since your employer will match it. Like others have said if you do enter religious life it will be beneficial if you stay or if you discern out.

As far as the student loans I do know of someone who ended up using up some of her retirement savings to finish paying off her loans so that she could enter.

[NotreDame]

put money into your 401k at least up to the matching amount - at least.  Don't even think about it.  do it.

[cmaD2006]

If the order you are considering makes simple vows, then I would totally do it.

I found out (after making the mistake you could make by not contributing when I was young) from the 1st order that when the vows are simple you are allowed to keep certain assets such as a 401k. What happens is that when you are of retirement age then when you start drawing from the account the money goes to the community, ideally for your wellbeing/care.

Solemn vows are different ... that's the one case you have to divest the account.

Finally, most orders out there are simple vows. You tend to find solemn vows in enclosed communities that have been around for a very long time.

An expert in canon law can give you more specifics about solemn vs simple vows.

[cmaD2006]

Oh and another thing. If you do contribute and then decide to enter a religious community that takes solemn vows you may be able to leave the 401k alone until right before 1st vows. I'm not 100% sure but canonically that's when I'd think you'd have to not have any assets.

[cmaD2006]

From what I just found online I may be slightly wrong. So see below: (from http://canonlaw.wikispot.org/ReligiousLife )

Can. 668 §1 Before their first profession, members are to cede the administration of their goods to whomsoever they wish and, unless the constitutions provide otherwise, they are freely to make dispositions concerning the use and enjoyment of these goods. At least before perpetual profession, they are to make a will which is valid also in civil law. §2 To change these dispositions for a just reason, and to take any action concerning temporal goods, there is required the permission of the Superior who is competent in accordance with the institute's own law. §3 Whatever a religious acquires by personal labour, or on behalf of the institute, belongs to the institute. Whatever comes to a religious in any way through pension, grant or insurance also passes to the institute, unless the institute's own law decrees otherwise. §4 When the nature of an institute requires members to renounce their goods totally, this renunciation is to be made before perpetual profession and, as far as possible, in a form that is valid also in civil law; it shall come into effect from the day of profession. The same procedure is to be followed by a perpetually professed religious who, in accordance with the norms of the institute's own law and with the permission of the supreme Moderator, wishes to renounce goods, in whole or in part. §5 Professed religious who, because of the nature of their institute, totally renounce their goods, lose the capacity to acquire and possess goods; actions of theirs contrary to the vow of poverty are therefore invalid. Whatever they acquire after renunciation belongs to the institute, in accordance with the institute's own law. Can. 670 The institute must supply the members with everything that, in accordance with the constitutions, is necessary to fulfill the purpose of their vocation. 

[Klarisse]

Thank you for the responses, and sorry about the lack of response on my part; I've been jumping almost non-stop from one thing to the next.

 

I've been pondering over the past few days, and maybe the stock market is a little closer in nature to drinking alcohol. Its effects can be anywhere from bad to devastating when misused and more neutral otherwise. I can't honestly rule out that the stock market is either a bad idea in and of itself or compared to what we had before it, though. For my part, 401ks are designed to be so abstract that I have almost no control over what is done with the money, and I know that many financial institutions and publicly traded companies have been abusing the system. There's also the risk of highly immoral investments.

 

Chances are actually quite low that I'd end up destitute if I discerned out without savings, the primary reason being family. If I did end up completely destitute though, I'm sure it would be a valuable experience as long as it was approached wisely. There's also the aspect of "go, sell what you have and give to the poor" that keeps coming to mind. Ironically, having a retirement account may provide money to do so, but only if I cashed it in. The thought of keeping something for myself doesn't sit right, though: "I left everything to follow you... except some savings just in case if this doesn't work out." I want to make a total commitment, and setting aside money seems likely to erode that.

 

cmaD2006, thank you for the details! I wasn't thinking about the case with simple vows, and it's good to know what applies to everyone. I just began communication with a community that makes solemn vows. Since they're the first that I've contacted, it would be silly to jump to conclusions yet. Nonetheless, solemn vows are a definite possibility, so it is very possible that any money stowed away will need to be given away. I should research what the penalties are for closing a 401k so early; if I'd owe more than it costs as a result, the choice is easy.

[NotreDame]

Chances are actually quite low that I'd end up destitute if I discerned out without savings, the primary reason being family. If I did end up completely destitute though, I'm sure it would be a valuable experience as long as it was approached wisely. There's also the aspect of "go, sell what you have and give to the poor" that keeps coming to mind. Ironically, having a retirement account may provide money to do so, but only if I cashed it in. The thought of keeping something for myself doesn't sit right, though: "I left everything to follow you... except some savings just in case if this doesn't work out." I want to make a total commitment, and setting aside money seems likely to erode that.
 

 

Remember that prudence is a virtue and discernment is a two-way street.  Until you take final vows you don't know your vocation for sure.  The prudent thing is to save in your 401k at least up to the level that is matched.

 

One more thing... Having money in a retirement account shouldn't affect your ability to make a total commitment to pursuing your vocation.  Why would it?  Do the prudent thing, have faith, and things will work out.

[Kayte Postle]

I think you make some great points.  I want to encourage you to continue to pray and follow what the Lord is asking of you! That said I do have a few minor thoughts.

 

First, I think you might be working with a misunderstanding of how 401k plans work exactly. With a 401(k), you control how your money is invested. Most plans offer a spread of mutual funds composed of stocks, bonds, and money market investments. The most popular option tends to be target-date funds, a combination of stocks and bonds that gradually become more conservative as you reach retirement. In other words if you have moral qualms in stock market investing, you could invest in something like bonds. Usually you'd have to work with an administrator in your company to help you invest in the kind of things that you want to. (You can read more here.)

 

Again if/when you make finals vows any money or funds that you had would be given to and absorbed into the community. Final vows are the "total commitment", everything before that is still discernment; just deeper ways of discerning. For me I see holding onto a small savings or something of the like would give one the freedom to discern God's will more fully. You wouldn't feel as if you had to stay because it was your only option, but could freely say "yes" knowing that you are free to follow God in either direction. There's also the point that you might be discerning for years (many of us do). You have to live your current vocation in the state of life you are in now, even as you discern religious life.

 

If you are beginning to seriously discern with a community I suggest that maybe you ask what they think you should do. Many of the sisters might have been in the same situation before they entered, and they could give you sound advice. (I wouldn't recommend this though if you are just inquiring tho).

 

I hope this helped. Pax! =)

[Klarisse]

Kayte Postle, that's a really good point about bonds. I think the company listed that as an option in one section. I'm much happier with investing in governments. Though going into debt as a government seems likely to cause more problems than it solves.

 

Short of having an option like Ave Maria Funds I fear that I'd be contributing to reactionary investing or inadvertently supporting deadly things and never know it. It was nigh impossible to find if my company's insurance plan covered abortion or physician assisted suicide, after all, and I had a more obvious reason to ask for coverage details. I can't justify bugging HR about adding that option (if such a thing is even possible) unless I knew it was something I was going to use long-term.

 

If I enter, I'll figure out what to do with it then. It looks like taxes are generally around 40% for closing it early, so it's not a potential money drain to keep.

 

This reply was turning too much into a rant about the sort of imprudent worldly "prudence" that many adults have tried convincing me of since going to college, so I'll leave the thread here. There's generally been a viable, moral solution that works better, and it'll probably surface between prayer, research, and advice if I need to do serious long-term investment later on. For now, bonds will work.

 

Oh right, for leaving the back door open interfering with commitment, it's more that I fear it would make it harder to fully commit to anything because of the attitude it encourages. Our generation seems to have a problem with that due to things like looking at divorce as an option. Maybe it would work the way you said, Kayte.

Edited February 23, 2014 by Klarisse