At the age of fifty, they must retire from their regular service and work no longer.
401(k)s vs. Roth IRAs
Baby Boomers planned for retirement by maxing out their 401(k)s and putting 20% bonds and 75% mutual funds in their 401(k) portfolios. The same trend will probably somewhat exist with Millennials, but I predict there will be more of them using Roth IRAs as retirement accounts and using ETFs instead of mutual funds.
There are two main reasons in favor of choosing a Roth IRA retirement account:
1. Millennials job hop way more than Baby Boomers would have ever thought of. Today’s business culture is now called the “gig” economy. They are (and myself included,) almost completely against the notion of working for one company for 30 years, and planning their whole retirement out, by staying committed to longevity with that one company. Plus employers do not put much stock in their employees anymore, not nearly as much as they used to about 40 to 50 years ago. They often fire people on a whim. The high turnover rates in all these companies make 401(k)s an impractical retirement tool. Sure, people can “rollover” their 401(k)s from one company to another, but this can be difficult at times; and in the best case, it’s a form of financial slavery to the company. It’s a string attached. Also, they often expect you to own stock in your company; and that could lead to an accusation of insider trading in some cases. It keeps people locked down and shackled to that business. Sooner or later, after several job changes and 401(k) rollovers, these people will often break down and finally switch over to a Roth IRA. These allow them to save for retirement, and still be able to change jobs with more freedom, or become independent contractors whenever they’re ready. The bottom line is, that Roth IRAs enable retirement planning along with more employment independence.
2. You pay taxes every year with the Roth IRA in smaller annual amounts. This means that in the long run, you will be able to accumulate more money than you would with a 401(k), because the IRS won’t be able to take out a massive chunk of capital gains tax, from your complete retirement savings of $1 million or more. In 2050, the capital gains tax percentage will also probably be higher than it is now, because 30 years of inflation will have passed. When you’re old, you are going to need every penny of that retirement money, to live comfortably for the last 30 years of your life. Roth IRAers will be able to withdraw all their retirement money when they are 65, without any capital gains tax, except for the tax on that last year’s Roth IRA deposit.
Mutual Funds vs. ETFs:
The Battle for Stock Transparency
I can’t explain how or why ETFs have become the new diversified financial product for investors, but they are clearly competing with mutual funds right now. Mutual funds have a longer history that goes back to around the 1920s, but just like Roth IRAs seem to be trending out the 401(k)s, I could see the same thing possibly happening with ETFs trending out mutual funds…in a century or so. Currently the sheer volume of mutual funds held far outweighs ETF holdings, but this might be because of the Baby Boomers. It could be possible that more mutual funds are held by Baby Boomers, but more ETFs are held by Millennials. I don’t know; this would require another study to prove. But exchange-traded funds (ETFs) have been around since the 1990s, and they are built on the same concept: a low-cost stock fund that bundles 100 stocks or more into one investment product, which offers both affordability and diversification, and provides a level of security against the risky fluctuations of the stock market. In the long run, both mutual funds and ETFs, if included within retirement accounts: and if those retirement accounts are maxed out annually: are a practically surefire way to retire with $1 to $2 million, if the deposits are done methodically and repetitively, over a 30 year time span. The key to a good fund selection, is to find one that has a track record of performing better than the S&P 500 on a stock chart. Usually this means that the fund should have at least a 40% return every 5 years. It should look GREEN, and NOT RED, if you were to type the stock ticker into Google and look at its stock chart.
Biblically Responsible Investing and the Inspire Impact Score
My explanation for the rise of ETFs is that it’s probably linked with Socially Responsible Investing (SRI), ESG, green investing, and Biblically Responsible Investing (BRI). Inspire Investing only offers ETFs, for example, at inspireetf.com. Their tickers can be purchased through a Roth IRA account with either Charles Schwab or Fidelity Investments. I personally like BIBL, ISMD, and BLES in terms of their ethical cleanliness and their projected 5 year performance on Google. If they are all invested in together as a trio, then I can’t see why they wouldn’t beat, or at least keep pace with, the S&P 500 when it comes to performance. This BRI firm was founded by Robert Netzly in 2015; and he also published a great book about his BRI philosophy in Biblically Responsible Investing (2018). They probably will never offer mutual funds on principle. Their tool inspireinsight.com shows that they are all about stock ticker transparency. And I will try to say this modestly, but honestly: I think if Timothy Plan, GuideStone Funds, and Stewardship Partners want to keep up with Inspire Investing, then they will either need to use inspireinsight.com on a regular basis, or create other free and publicly available BRI screeners that match or improve on their Inspire Impact Score. If they refuse to do either of these things, then I predict that they will lose more BRI clients to Inspire Investing every year, as more and more BRI investors will become aware of the dirt that exists inside of their BRI funds! They will come to be seen as BRI firms in name only; and probably this is already the case with many Christian investors.
This is a very rare case of Christian business competition, unlike anything I’ve ever run across, in the whole history of Christian economic ethics. Not even the Puritan merchants, competing with each other in London and Boston, have come up to this on a moral level. And I’m sure that they consider themselves all friends, and respect each other professionally and as members of the body of Christ: but in terms of what BRI clients really want: I can tell you what I want: and that is something like inspireinsight.com that will help me make informed decisions about stocks, ETFs, bonds, bond funds, and mutual funds. I would like to see all of the BRI firms make use of the Inspire Impact Score or get out of the BRI business! I’m totally serious about that. I know that might sound impolite, but these are some heavy ethical issues at stake here. And also millions of dollars of misspent Christian money. It should be approached seriously and with a spirit of excellence. I am very sorry to say that these BRI firms have funds that are filled with many stocks that donate to LGBT things, abortion things, hotel pornography, telecom pornography, etc. This has got to break God’s heart! (see 1 Cor. 6:9-11; 2 Chron. 33:6; Matt. 5:28).
Ethical blindness about stocks might have been acceptable in the past, but now Bible-believers just have no excuse. I have even seen Dave Ramsey explain away Biblically Responsible Investing on a recent YouTube video (see “Are My Investments Funding Immoral Companies?”). Do you know why? Because he’s been telling people for years to invest in Timothy Plan. Currently the only Timothy Plan tickers with a positive Inspire Impact Score are the “Israel Common Values” funds (TPAIX, TPCIX, and TICIX). They have a great rate of return that beats the S&P 500, but neither they nor GuideStone Funds will respond to my several emails, that I’ve sent them about all of their Inspire Impact Scores, and all of their very dirty mutual funds! For this reason, I think it’s only a matter of time until the “Israel Common Values” drop into the red on morals. I know this might sound graceless, but maybe it’s time for a little bit of repentance in this area. That way Ramsey won’t have to make excuses for Timothy Plan anymore. If BRI firms want to not only cooperate against worldly investment firms, but also healthily and helpfully “compete” with each other, then they will all have to up the ante on stock transparency with their websites. What a rare case of righteous business competition! I wish more industries had the capability to compete for righteousness’ sake!
The ETF concept and the Inspire Impact Score, are both all about explosive levels of transparency, concerning what is going on ethically inside of all these stock tickers. If that kind of information is not free and publicly available online to BRI investors, then investors will not be able to make informed and clean conscience decisions about their stock investments. It is easier for investors to view the stock holdings inside of ETFs than it is with mutual funds (see Michele Cagan, Investing 101, pp. 109-110). I don’t know why this is, but the ETF websites don’t lie. All of their stock holdings can be seen with the click of a button. ETFs tell me that more and more people care about the companies that they are investing in, due to social awareness and things like environmental, social, and governance (ESG) reports that come out about companies. My guess is that ETF owners generally don’t want to invest for retirement with moral blindfolds on. They are much more willing, to trade one ETF for another throughout the retirement planning process, if they feel like one ETF has fallen off the moral bandwagon. From an ethical investing point of view, ETFs offer more accountability and transparency than mutual funds do. To view the holdings of a mutual fund, you have to dig into their complicated-looking annual reports and their “schedule of investments,” and it is just really complicated to look at. For whatever reason, the way ETFs are created, allows for all of their holdings to be displayed with an out-in-the-open and obvious transparency on their ETF websites.
Mathematically, if you put $2k into BIBL (18% ROI every 5 years), $2k into BLES (10% ROI every 5 years), and $2k into ISMD (16% ROI every 5 years), then they would yield a return of $880 as a trio.
But if you put all $6,000 into TPAIX (45% ROI every 5 years), then the return would be $2,700.
This BRI mutual fund called the Timothy Plan Israel Common Values Class A (TPAIX) matches the performance of Vanguard’s VTI fund and almost matches the S&P 500 (SPX, 48% every 5 years).
If you are a brand new BRI investor and you only have one fund to choose, then I would have to say, that from a performance point of view, TPAIX wins at both having a decent Inspire Impact Score (inspireinsight.com) and an above-average level of performance (Google stock chart).
However, I would also say that if at any point, the TPAIX fund’s Inspire Impact Score goes into the red and starts to accumulate negative ethical violations in the area of LGBT promotion, abortion drugs, and porn, then accept the loss and trade the fund. If such a thing happened, then switch all $6,000 from the fund over to BIBL. Even though the returns would be substantially less (18% every 5 years), BIBL still would qualify for Larry Burkett’s minimum return that a mutual fund should have: 15% every 5 years (Investing for the Future, p. 154). The same goes for ISMD which is performing at 16% ROI every 5 years. Personally for me, I’m going with BIBL as my first fund. It will be easier for me to sleep at night knowing that my fund is getting at least a bare minimum return, but more importantly, it will be in the hands of really, really good ethical screeners. I can’t say that I have the same good conscience and confidence in the screening abilities of Timothy Plan, GuideStone Funds, and Stewardship Partners. They use different screening tools than inspireinsight.com and a subjective “trust me, I got this,” approach, instead of stock transparency and openness. Timothy Plan has been leading the way in BRI since the early 2000s, but unless all of their mutual funds start to acquire decent Inspire Impact Scores, then how could I ever invest in their funds with a completely clean conscience? I don’t want to “trust” a group: I want to see the evidence right in front of my eyes: that such a stock or fund is clean as a whistle. As of the writing, inspireinsight.com is the only tool on the internet that offers this kind of objective and transparent information, that BRI investors need, in order to make informed decisions about their investments. I want to sleep well at night and have that “godliness with contentment which is great gain” (1 Tim. 6:6). I don’t want to worry about my fund slipping into LGBT and abortion promotion overnight! And I don’t mind getting some flak about it: Timothy Plan and GuideStone Funds have awful Inspire Impact Scores. Just awful! How in the world are thoughtful Christians going to be able to put their money into these funds unless they can be assured that they’re clean! Personally if it was me, I’d constantly be in a state of anxiety and worry about such funds giving money to gay pride parades, abortion drugs, and hotel porn, all while they are speaking against such things on their websites. Its inconsistency if their funds are doing this by accident, but hypocrisy if they are doing it on purpose. Jerry Maguire said, “Show me the money!” But I say, “Show me the morals!” Proverbs 16:8 (KJV): “Better is a little with righteousness than great revenues without right.” In either case, open up a self-directed Roth IRA with Charles Schwab to get started. This brokerage house takes both Timothy Plan and Inspire ETFs. You can debate with yourself till you’re blue in the face about whether to go with this BRI fund or that one: all within the safe walls of Charles Schwab.