Talking Money with Men (and Women) of the Cloth

Standing before a roomful of clergy, Zvi Bodie was not at all reluctant to upend the Gospel According to Wall Street, the supposedly sacred teaching that investing in stocks for the long haul is the cornerstone of retirement planning.

Bodie, BU’s Norman and Adele Barron Professor of Management, worked himself up like a righteous preacher, sweat moistening his blue shirt, as he proselytized for investment in Treasury Inflation-Protected Securities (TIPS)—inflation-indexed government bonds guaranteed to beat increases in the cost of living—and Series I Savings Bonds, another inflation-proof government investment. They are “the safest way to invest in the long run,” he declared. “It should be the starting point.”

Bodie’s homily came at a June 23 conference on financial literacy for clergy at the School of Management. Some two dozen religious leaders attended.

Bodie told the audience that his TIPS-invested money had doubled in recent years, at the same time that the stock market choked.

When one of his listeners, Maine pastor Peter Beckwith, pointed out that Bodie had singled out for comparison one of the worst losing stretches in Wall Street history, the SMG professor quickly responded. “That’s the point about risk!” he said. “You don’t get to pick what happens over the next 10 years.”

Indeed, he said, the argument made for stock investing is that it pays potentially higher returns than other investments because it’s riskier than other investments, and “by the definition of risk, things can actually be worse” in the future rather than better. Bodie said he puts a fraction of his own money in stocks for a shot at a higher return, but that commitment is “money I can afford to lose.”

Bodie was seconded by Laurence Kotlikoff, a William Fairfield Warren Distinguished Professor and a College of Arts & Sciences professor of economics. The duo also participated in a panel discussion that included PBS economics reporter Paul Solman and financial and insurance industry representatives. (Solman noted that he was persuaded by Bodie’s argument some time ago. He and his wife have placed half of their retirement income in a TIPS portfolio, he said.)

The audience ranged from 29-year-old Kathryn House (STH’08), from Boston, a candidate for ordination as an American Baptist minister, to 71-year-old Rev. Hazel Roper, a clergy pension board rep who was retiring two days after the conference. Roper works with an American Baptist–originated board that helps arrange pastors’ pensions. With the clock ticking to her own retirement, she attended the conference as a reality check on the advice she’d dispensed over the years.

The verdict? “I think I’ve really done quite well by my folks,” Roper said. As for her own retirement, she said, the profs offered information that “probably 20 years ago might have been useful.”

The Rev. Bert White, a School of Public Health lecturer in management policy, organized the conference to jump-start an evangelizing network for scholarly based retirement planning of the kind Bodie and Kotlikoff advocate. “The idea is that this group could be resources to their parishioners or others,” White said.

“There is this sense that ‘God will take care of me, so I should not be concerned about these worldly issues,’” said White, who also cited societal pressure on clergy “to not be involved with filthy lucre.”

That kind of thinking, he said, can render many clergy poorer-than-thou, because church pension funds are in some ways higher risk than corporate funds. Federal law exempts churches from requirements that pension funds cover liabilities, said White, citing the recent failure of a Lutheran church publisher’s pension fund that prompted a lawsuit by employees. Abroad, the Church of England faces a withering pension shortfall stemming partly from the credit crunch.

Kotlikoff, who created and markets financial planning software, said he would give the software gratis to any clergy in the country (the high-end version sells for $199). His invention helps users calculate the trade-offs involved in various financial decisions, he said, such as whether to take Social Security benefits early, at age 62, or put them off until age 70.

The government suggests 62, he said, calculating that it provides a person the same benefit on average as a later one. But that’s as spurious as the notion of risk-free stock investing, he argued, since averages mask the fact that people are living longer. “My mom is 90,” Kotlikoff said, “and doing great. She just got a boyfriend. She has no time to talk to me at night.” Every year a person waits before taking Social Security benefits, he said, the “benefit goes up 7 or 8 percent in real terms.”

Rich Barlow can be reached at barlowr@bu.edu.