One listener that stands out that I worked with recently was this older couple that was interested in refinancing. You know, their credit wasn't the best. Not everybody has the 780 credit scores and never had any hardships in their life.
I'll walk you through what you have to do. How can you end up being able to do this refinance, whether it's two, three, six months from now? We worked with them for months and months to improve their credit, and we were able to get the loan done. We were saving them hundreds each month, thousands of dollars a year, and they could start saving money each month, saving for retirement, which just put a huge smile on my face. Financial author Doug Cass once said, when everyone thinks central bankers, money managers, politicians, and any other group are the smartest guys in the room, well, you're in a bubble.
Hi, I'm Rob West. There's an interesting, or that is an interesting quote, I should say, coming from a hedge fund manager. Are stocks overvalued?
Maybe, maybe not. I'll talk about that first today with investing expert Mark Biller and how you should plan either way. Then it's on to your calls at 800-525-7000.
That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. Well, it's always a delight to have my good friend Mark Biller back on the program. Mark is the executive editor of SoundMind Investing, where they've been teaching investors how to weather market ups and downs for decades. Mark, it's a joy to have you with us, sir. Well, thanks, Rob.
Always good to be back. Mark, I'd love for you to begin today by giving us your impression of the market these days, especially the last few days, but we're looking a little bit longer term than that. How overvalued are stocks and is the stage set for a significant correction anytime soon?
Well, that really is the million dollar question, isn't it? Especially after these last few days and couple weeks where we've had a little bit of a froth knocked off of this market. You know, I think as we look at this, Rob, you know, if we look at traditional measures that look at stock valuations in relation to things like corporate earnings or US GDP, all these typical measures, you know, stocks clearly are expensive today by these historical measures.
And historically, when we've reached these types of valuations, we have seen the stock market run into significant bear markets that readjusted and lowered those valuations significantly. What makes today's situation a little bit harder to interpret, though, is we're obviously in the middle of the central banking experiment that started way back after the financial crisis in 2009 and has never stopped since then. And basically what I'm talking about is how the Federal Reserve and other global central banks have taken interest rates down to near zero and held them there this entire 10, 12-year period. And in addition, they've been using these quantitative easing policies where they're actually buying assets in the open market to stimulate financial asset prices.
The COVID response that we've had over the last 18 months has just kicked all of this into overdrive, but this has been going on now for many years. And the net result of all of that is that asset prices across the board have been driven quite a bit higher. So we're talking about stocks here and the expensive prices of the stock market, and that is certainly true. But you can also look at other asset prices, look at home prices, commodity prices, basically any other asset. And the reason for that is we've got a situation where the money itself is worth less. So anything that you are measuring price-wise in that money, those prices are now higher. And we've seen that consistently with stock market and financial assets now for 10 or 12 years. But what we're now seeing what's new and makes it a little bit more tangible, I think, for people who don't watch the market super closely, is we're now seeing that on a more micro level in the form of consumer inflation. So that's now the hot topic as we're seeing the same phenomenon starting to be priced through in the everyday type of stuff that we buy. And so the question really is, are these stock prices really so absurdly high, or have they just been repriced to reflect a less valuable dollar? Yeah, really interesting, because that's a different way to think about it. Certainly a lot to process there.
About 45 seconds here, Mark. Tee up where we're going to go next with the big picture implications for investors. Yeah, I think, you know, big picture, it's do we protect against a falling market?
Yes, we still need to do that. But also there's a risk of a rising market if this inflation phenomenon continues. Yeah, very good. Investing expert Mark Biller joining us today, executive editor of Sound Mind Investing. The article that he's describing today in this interview is called How to Panic Proof Your Investing.
You'll find it at soundmindinvesting.org. Your calls for Mark around the corner, 800-525-7000. If you have an investing question, the first segment or two of the broadcast is your opportunity.
800-525-7000. Stay with us, more to come just around the corner. So glad to have you along with us today on MoneyWise Live. Joining me for the first half of the broadcast is our good friend Mark Biller. Mark is executive editor of Sound Mind Investing, and you can learn more at soundmindinvesting.org. If you have an investing question today for Mark, perhaps you're weighing the risks present in the market right now. Maybe you've received an inheritance or you want to start that retirement investing.
You're wondering if now is the time or some other investment related question. We'd love to hear from you. 800-525-7000. We've got some lines open.
800-525-7000. Mark, just before the break, we were talking about that of course investors have always had to prepare for the risk of a falling market. That's why we have varying asset classes and we're properly diversified. But you're describing another risk that we need to think about, and that is that we could see the purchasing power of each dollar declining while we own these assets, and that currency debasement is another piece of this. Explain what that means to the average investor. Yeah, Rob, I think the easiest way to think about this new risk, if you will, is we've always had to protect on one side against falling prices of our stocks and bonds and financial assets.
So we've always had to keep an eye on this particular risk that was on one side of our portfolio. And it's not that that risk has diminished. We still have to have to play defense against the possibility that those prices could decline and we could have a bear market. What's new is that, or new at least in the last few decades, we used to have to many, many years ago this was an issue, but it's been a long time since we've had to think about, well, what happens if this currency debasement continues, which continues to push up the prices, the, they call it the nominal prices, the inflation, non-inflation adjusted prices of my stocks just keep going up, even though the purchasing power of those dollars is going down.
They're really treading water. It's not that they're getting more valuable, but the price keeps going up. The implications of that, Rob, of course, are if I'm too nervous about a falling market and say I pull my money out of stocks and move to the sidelines, or I just get really, really conservative because I'm afraid that the market might fall, well, now that other risk can bite me a little bit where I don't have enough exposure to these rising asset prices just to keep pace with the rising cost of living as prices inflate that way. So basically, all I'm saying now is we kind of have to keep an eye on the risks on both sides of the portfolio instead of just on the one side of a potential falling price situation. Yeah, it's really helpful and we'll talk specifically about what your portfolio could look like to address that in just a moment. But Mark, first, the latest SMI newsletter has an article about taking the fear out of our investing. I'd love for you to touch on that because that's such a big part of this, especially in a choppy and potentially declining market like we may see in the years ahead.
Yeah, absolutely. And just the last week or so, even though stocks were only off about 5% off of the all-time highs at the very worst of the declines yesterday, there's a lot of fear. A lot of fear came in real quick into the market. You can see that in different sentiment measures. So that fear is not far away from many investors today. And so what this article is really trying to do is just figure out how do we put ourselves in a position to minimize that type of emotional response because it's almost always counterproductive. When the markets act up and that fear starts to rise, that's when people tend to make their worst financial decisions. So this article is looking at four steps that you can take to try to stay calm and steady through these panicky times in the market.
Very good. 800-525-7000. We'll take some calls here in just a moment for Mark Biller today on investing.
800-525-7000. So Mark, help us with that. What is the first step to keeping our emotions in check when there is a market correction? Yeah, well, the number one way to fight that panic, Rob, is to be prepared in advance. And that's why we write articles like this and spend a lot of time trying to prepare SMI members mentally and emotionally for downturns because they really are inevitable. They come along a little more often than most people think. And while that long-term trend of the stock market is upward, we know that the market regularly hits these corrections, these 10% reversals, those sorts of things.
And every single time, they're scary. So what we talk about in the article specifically in this regard is older investors, one way that they can prepare in advance for these market pullbacks is by using a bucket strategy. They might build right into their process that they're setting aside a couple years' worth of living expenses in savings-type investments like CDs, things that won't be affected by the ups and downs of the market. And knowing they have that cash reserve can really do a lot to help insulate them from that fear because they know they won't have to dip into their stock investments if the stock market does go down temporarily. For younger folks, it tends to be a little bit more of a mental, emotional preparation where a healthy understanding of the market's rhythms and the ups and downs, the history of the market and what's normal can give them a little bit more confidence to hold on during these downturns and not panic and sell. Yeah, really, really helpful, Mark. And obviously, you know, that's so key. Having an advisor can help with that because it allows you to be arm's length from your investments, but also you talk about having a plan as being a real key to weathering a market downturn and managing our emotions.
What does that look like? Yeah, well, having that written investing plan can be such a lifesaver just because staying calm is a lot easier when you can read essentially your own message to yourself that was written when times were calmer, when your head was clear, and you're basically seeing or reminding yourself of what you decided when times were clear and you were thinking about the exact scenario you now find yourself in. And you're basically giving yourself instructions from the past that when we get here, this is how we're going to respond. And that's so helpful just to clear your head and stick with your plan. And so that plan needs to spell out those investing objectives and strategies. But also, what am I going to do? What is my process for handling these market downturns when they occur? Yeah, that's very good.
Well, a lot of folks thinking about whether or not they should be investing in the market at this time and where to start. Esther's in Chicago. We're going to begin today with you, Esther. Go right ahead. Thank you for taking my call. Thank you, Mark Billard.
I have a question I'd like to know. My husband and I are seniors and we do have some money. And of course, the banks are not paying much. So we'd like to invest. I'm looking into actually Soundmind Advisory Group. Great.
Yes. So I'm looking into that right now. But I don't know how to go about it.
I mean, I've hooked up with Holly. But I don't know if I should just do like a little at a time to transfer over the Roth accounts or just do a whole large amount. So that's kind of where I'm at. Yeah. And is this...
I'll let Mark jump in here in a second, Esther. But is this your first time to work or consider working with an advisor? Have you been managing your assets yourself prior to this point? We've only been out of fear. We've only done like CDs. We haven't really had anything invested. All right. And what have you accumulated in your retirement assets, if you don't mind me asking?
Well, over $500,000. Okay, very good. So Mark, how would you, for a first time investor who's thinking about delegating this responsibility, how should she be approaching this? Yeah, I think it's a great question, Esther.
And we're thrilled that you've chosen to check out SMI Advisory. You know, I don't really think that there's a wrong way to do this, to be honest with you, because it really boils down to your comfort level. And, you know, for some folks, I think the process of turning over that portfolio manager to an advisor, you know, it can be like ripping off a Band-Aid, where it's just easier to just go ahead and do that all at once, determine with that advisor what the plan is, and how they're going to handle that responsibility for you, and then just tear the Band-Aid and go.
But, you know, for other folks, it is. It's a big decision, and it's a big transfer of responsibility, especially if they've been doing it on their own for a long time. And so there's nothing wrong with, like you suggested, maybe doing that an account at a time. Okay, let's start with this Roth IRA, and we're going to turn that over. And this is how I want you to manage that piece.
And then a little while down the line, you might turn over, you know, another chunk or something like that. And there's nothing wrong with either of those approaches. I think you just want to kind of ask yourself now, if I like the approach that the advisor is going to take, and I trust them to implement that for me, what is the advantage of me holding on to the other piece? Or should I just go ahead and put that all in at once? So either way, I think we'll work for you, Esther. I think you're making a great decision here, Esther. You know, if the Lord tarries and you're in good health, you've worked hard to accumulate this money, and we want to see it last for decades, and yet provide you an income. And that's where an advisor can really help. More to come on MoneyWise Live.
Stay with us. The article we're talking about today with Mark Biller of SoundMind Investing is one of our featured articles at MoneyWiseLive.org. How to Panic Proof Your Investing.
Check it out today when you visit our website. Mark, before the break, we were talking about the importance of having a plan as one way to fight an emotional response to a market downturn. And you said we should write that plan down, and we might even want to take the bucket approach, but it's really important to have the right stuff in those buckets, isn't it? Yeah, absolutely, Rob.
You know, we're not just talking happy talk here. We've got to actually have the investing side correctly done in the first place. So that's actually the next step we talk about in the article is making sure that your portfolio is suited to both your age and your tolerance for investing risk.
And that, you know, if you think about that, that's pretty obvious. A 65-year-old investor shouldn't have the same portfolio that a 30-year-old does, and that's why, you know, all of our models and most good advisors are going to have models that gradually reduce your equity holdings and ramp up your bond holdings as an investor moves through the seasons of their life. And that is also, you know, knowing that you've got that correct age-appropriate asset allocation is going to help you immensely when you get to these market rough patches, because it's going to help you both if you're a younger folk to interpret that as, hey, stocks are on sale. This is a good time to buy. If you're an older person, knowing you've got the right asset mix is going to help you by knowing that the ballast of those bond holdings should really keep the ship afloat through any rough patches there and smooth out the volatility. So it's really important.
You've got to get that investing piece right, and if you're not sure how to do that, if you're not sure how to create a plan like what we're talking about, there are a lot of resources and information available at soundmineinvesting.org that can help you with that process. Yeah, for sure. Check that out. Mark, just a couple of minutes left before we have to wrap today. I want to talk about the new SMI handbook, the new version of it that's out, but first, as it relates to fighting panic, talk for a moment about the spiritual component. Oh yeah, there's no better antidote to panic than prayer, and prayerfully recalling what God has said in Scripture and promised you can help you remain calm and confident. I think of verses like Isaiah 26 3, which says, you'll keep in perfect peace all who trust in you, all whose thoughts are fixed on you, and we've seen this in practice through the bear markets of the last couple of decades.
Our members really just through prayer and meditating on Scripture, being able to follow through on their plans and really have a lot of peace in the midst of market storms. Yeah, that's great, and we've covered these four steps that you can read about in the article at soundmindinvesting.org. Four steps you need to panic-proof your investing.
Be prepared, write out a plan, build a suitable portfolio, and above all, invite God into the process through prayer. Mark, as we wrap today, tell us about the new version of the SMI handbook. Yeah, well, it's hard to believe for us, Rob, but this is actually the seventh edition of this handbook.
We've sold over a hundred thousand copies of this over many years, and it's really just a practical how-to guide that's going to work whether you're a beginner or an investing expert and basically just boils all of our wisdom from 30 years down into one resource for you. Excellent. Well, we'll give several of those away today for people who call in with your questions. We're going to turn to any question on financial matters today from a biblical perspective just after this break. We've got some lines open. Here's the number, 800-525-7000. Mark Biller has been our guest today.
You can find the article we've been discussing how to panic-proof your investing at soundmindinvesting.org. Mark, great to have you with us, my friend. Thanks, Rob.
Always my pleasure. We'll see you next time. Stay with us. We'll be right back. So glad to have you with us today on MoneyWise Live. I'm Rob West, your host.
We've been talking about panic-proofing your portfolio. We're going to turn the corner, though, and start to talk about anything financial, applying the truth of God's Word to what's going on in your financial life. We've got a few lines open. I'd love to hear from you. 800-525-7000. We'll begin today in Grand Haven, Michigan. Hello, Julie. How can I help you?
Hi. I'm a 62-year-old widow, and I am getting my husband's pension plan from where he worked in the union. And I was just wondering, they have been sending me notices that their pension plan is in a red zone or a critical status. I also have my own IRA. And I was wondering, do I leave this pension plan there, or do I pull out of his and put into mine? Yeah.
Have they given you those options yet as to how you can move those funds? No. Okay.
All right. Well, I mean, there are laws that attempt to keep pensions safe. You know, single employer pension plans are in better shape than multi-employer plans for union members. But, you know, they can be underfunded. There can be a number of issues. The employer could go bankrupt. The pension could fall into one of the loopholes. So you want to, you know, review your records.
You want to, you know, get some help. You need to really understand what's going on with your particular plan. And if you have the option to roll it out, whatever portion is available to you, I would certainly explore that. You'd want to do it into another qualified plan so you don't create a taxable event. But, you know, having it out from under a company that's failing or whatever the situation is would certainly be in your benefit to kind of shore up those funds and make sure that you can redeploy them, you know, into a sound investment strategy moving forward.
So I would, you know, collect all the information you can, learn about what's going on, and then explore the options that you have. And clearly, if you could roll that out, that would be the option I'd be electing at this point, Julie. Does that make sense? Yes, it does. Thank you very much. All right. Very good. We appreciate your call today. May the Lord bless you. On to Washington State. Linda, hi there. How can I help?
Hi. My husband and I are in our late 60s, and we've got our house paid off. We're on kind of meager incomes, both of us, retirement incomes. But my challenge is when emergencies arise, I mean, we still try to keep an emergency fund, but it seems like it dips. You know, we had other issues going on. But our biggest thing is trying to keep balance of the day-to-days that come in, and then you've got car breakdowns or truck breakdowns, and we're trying to be faithful so that we can have our kids, our kids as kids, and here at our small farm, you know, thinking about what the Bible says, our inheritance for our grandkids, and just trying to figure it all out. Sometimes I'll do real good for a while, and then sometimes I don't.
So I just was wondering if there's any encouragement there. Yeah, well, Linda, I appreciate your question here so much, and you know, I think first of all, you've done what you needed to do to be in a place where you're debt-free at this point in life, which is a huge blessing and something you should celebrate that the Lord has allowed you to do, because that keeps your lifestyle need as low as possible. And yet, I realize on limited means, you know, there's often months where there's more month than money, and so that can be a challenge as you try to navigate the ebb and flow of the expenses and, you know, manage the emergency fund with the unexpected. I mean, clearly it's all going to come down to either, number one, can we generate more income?
Is there an opportunity to even work part-time or look for an opportunity to supplement while you have the ability to do that? Number one, and I would love for you if you had that opportunity to take 100% of those resources and, you know, sock them away to build up that emergency fund to where it needs to be. The other opportunity, obviously, is to cut your expenses, and then once you have that plan, it's critical, as you know, Linda, just to really manage the flow of funds in and out, and that means coming up with a spending plan and a control system that works for you, whether that's a pen and paper or a paper or the old tried and true physical envelope system that Larry Burkett used to talk about, or a more modern approach, our MoneyWise app, which I'd be delighted to give you a pro subscription for six months where you could connect it to your institutions, download all your transactions.
The key would be you can set up all of your envelopes digitally. The money then comes into your funding accounts, your checking account, and you would put it into those envelopes, and you and your husband, if you're adept at that and use smartphones at any time, could see, you know, what's in that particular envelope, and maybe we need to move this out of one and into another. But regardless of the approach you take, because everybody's unique and we need to find something that works for you, I think, you know, starting with that budget that has some margin built in so we can replenish the emergency fund, and then having that control system that works for you is so critical.
But tell me, what has been tripping you up? Is it largely just the unexpected expenses that come out of left field, or is it something else? Well, medical was one, you know, when they kind of jump out at you, or vehicles instead of a couple hundred, it's a couple thousand to get them fixed for the farm, or we still have some outlying smaller loans, and so they're really trying to snowball effect on them. And my husband is working so part time, you know, he's retired, he loves working.
And so he's, he's doing some help there. But I think he's just hit on something instead of us just paying and then using extra to have a little bit more relaxed time is maybe concentrate and do a 80-20, 80 for savings and 20 for her to get by on or something. Yeah, I think that's the right approach and being systematic about that so it never even hits your, you know, checking account or there's an automatic transfer out to savings. I think those kinds of things, automating that so, you know, it's out of sight, out of mind, and then it's there when you need it for the unexpected. And then, of course, trying to anticipate those discretionary non-recurring expenses like a car or a piece of equipment for the farm that is going to wear out.
You know that's going to happen. Let's, you know, start a fund just for that and start socking some money away. You know, let's put away one percent of the, you know, the value of the mortgage on the property every year or one month's, you know, payment into a fund for, you know, just general routine home maintenance. Those kinds of things, as you're able, are going to be critical, but you're obviously sitting in the seat trying to manage all that and I know, Linda, it's not easy. So let me offer two things. Number one is if you all do use smartphones, you'd like to try the MoneyWise app, I'd be delighted to give you a pro subscription. Hang on the line, we'll get you the information. And then secondly, our MoneyWise coaches might be a real encouragement to you as they just walk alongside you and help you think about perhaps, you know, some ways to save or ways to cut back that you haven't thought of, looking at your spending plan and giving you some ideas. Just an encouraging believer that can pray for you and give you some of that assistance may be a real help to you.
Just head to our website moneywiselive.org and then you'll want to connect with a coach. There's no cost for that and we'd be happy to assist you. But listen, all the best to you, Linda. I know you'll want to be found faithful and honoring the Lord with what he's entrusted to you and that's an encouragement to me. I know it's an encouragement to all of those listening. So all the best to you in the days ahead and we'll certainly be praying the Lord will give you some wisdom. Thank you for your call today.
Well, folks, we're going to pause for a brief break. When we come back, we'll be talking about timeshares, we'll be talking about roths and 401ks. Laura in Indianapolis wants to talk about annuities, that and perhaps your question. Here's the number to call 800-525-7000.
That's 800-525-7000. We have three lines open, perhaps ones for you. Hey, stay with us. Much more to come on Money Wise Live, biblical wisdom for your financial decisions. We'll be right back. Thanks for joining us today on Money Wise Live. I'm Rob West, your host. Let's go straight back to the phone. St. Louis, Missouri. I'm going to, you tell me how to say your name.
I don't want to get it wrong. It's a beautiful name, but tell me how to pronounce it. I like it.
I'm glad I didn't try. You go right ahead. Thank you for your patience. Okay, thank you.
Anyway, I normally listen to Money Wise. There was one time you talk about timeshare and there is a number that you gave out by then of people that, you know, can help you to get rid of your timeshare. That's why I'm calling to get the number.
And I believe those people are Christians. They'll be able to give me the right information and stuff like that. That's why I'm calling. Okay, well, I'm glad you called and I'm going to attempt to say your name. Falakama, I'm glad you called today.
I don't think it was me because here's why. You know, I've never found someone that can help you unwind these that I'm comfortable with. My friend Dave Ramsey does give out some phone numbers for folks from time to time.
Dave is a friend and does great work. But, you know, I have never found that to be very successful going about it that way. So how do I approach getting rid of a timeshare? Well, first of all, I'd call the developer and see if they will resell it for you.
They don't have much incentive to do that. They'd rather sell new ones, but that would be your best bet. You could rent it out.
That would be another. You could try to resell it and I can give you a website, not a phone number of somebody who can get you out, but a website for a user's group. It's called the timeshare user's group.
You'll find it online at tug2.com. That would be a place where you could list in their timeshare marketplace, your timeshare for sale. I've talked to some folks who have had some success with that.
Apart from that, you could try to market it locally, find somebody in the area where it is and see if they would try to sell it for you or take out an ad in the newspaper or something like that. It's not going to be easy. I wish I had better news for you.
There's just so many of these that folks are trying to unload that there's just generally far more sellers than buyers to make an effective market here, but let's ask the Lord to give you some wisdom and some favor and see if you can't get rid of this thing. We appreciate your call. I'm sorry I don't have a quick fix for you, but I'm grateful that you took the time to call in today. On to Indianapolis, Indiana. Hi, Laura.
How can I help? Hi. I had come into ten thousand dollars about 15 years ago and I put it into an annuity and it was an annuity that paid like five percent for five years and then it dropped to, I don't know, hardly nothing probably now. So I need to know should I just leave it in there but take it out when I retire later on or is there someplace else I can put it? Yeah, is this a qualified annuity?
Do you know if this money went in pre-tax? I don't know that. Okay, so you'd want to check that out because anything you do may have tax consequences.
You'd want to understand that. You know, I guess the real question, Laura, is are you willing to take some risk with this? Not that you would intend to lose money, but do you want to invest it in such a way where it has the potential to get a bit more return? But with that potential also comes the downside risk, but that's where you would match the investment strategy with the time horizon and you'd make sure that if you were invested, let's say in stocks and bonds, you'd have at least a 10-year time horizon.
Would that be something appealing to you or would you rather keep it in more of a guaranteed environment and in this case it's guaranteed by an insurance company? Well, I'm not one to take risk, but that's the only thing I have in my life. Sure, okay, well it's all about risk and reward. So, you know, in order to get a bit more, you know, potential for return, which by the way the stock market has been the very best place to build wealth over the last hundred years. It's a passive investment and you can match your investment strategy to your risk tolerance, but if you said, you know what, I just need to protect this. It's not about the return on my money, it's about the return of my money, then I think at that point you'd want to look at what is currently available inside this annuity and just match that against the best high yield, you know, savings accounts, whether that's an online bank or a credit union, you know, where you're going to get somewhere between a half a point and three quarters of a point in interest. Now, over time as interest rates head up you could do a little bit better.
So, I'd at least call and find out what they're paying, what the guaranteed rate is on this annuity, and at the very least look at perhaps transferring that to another annuity. You could also connect with one of our Certified Kingdom Advisors there in Indianapolis to evaluate what you have and give you some counsel. Just head to our website, MoneyWiseLive.org, and click Find a CKA, and we appreciate your call.
Latinas in Chicago, Illinois, how can I help? Hi, I have a question, a couple of questions. One is, what is an ideal amount at my age 48 should I have already saved in my 401k? And then the second question I'd like to know is, so I work for a company who matches my contributions. Maybe about just before a month ago my pre-taxes were 5% and my Roth was 17%, but before it was flipped, so it was the pre-tax 17% and the Roth was 5%, which of my company matches both of those. Am I able to take what I had, you know, in my 401k and put it in my Roth? No, you would have to do a Roth conversion and pay the tax at the time that you moved it into the Roth. So the way that would work is you would, once you separate from the company, you'd roll the 401k to a traditional IRA, a rollover, and then you could convert it to a Roth, but that generally doesn't make sense unless you've got a lot of time, you know, on your side for that to grow on a tax-free basis. You also may be in a higher bracket now during your earning years than you would be if you left it in the tax-deferred environment and pulled it out in retirement when you're not working, let's say, down the road. So I like the idea, Latina, of you accumulating your retirement savings in two buckets, both the tax-deferred and the after-tax with tax-free growth in the Roth option, because that gives you options in retirement based on where the tax code's at, you know, the rates, and whether or not you need the money, and therefore would or would not be subject to the required minimum distribution depending on what types of accounts you have. So I think that was a good move, especially since there was matching for both, but you would have to convert it and pay the tax to get it into the Roth. As to the amount you should have, you know, the rules of thumb may scare you because, you know, they tend to be somewhat high, but, you know, the average rule of thumb for a 60 year old is that you would have seven times your income in your retirement accounts. Now, that's a lot of money, I realize, but they're just looking at the fact that Social Security is only intended to cover 40% of your pre-retirement income, and they're looking at what would you need to have so that at a 4% rate of return you could generate the other 60% of your pre-retirement income, you know, without impacting the principal.
And, you know, that other folks will say, well, I'm going to reduce my lifestyle, live on less, and you certainly can do that, but that somewhere between five and seven times your income would be what the rule of thumb is. I know you also wanted to ask about the book that we mentioned earlier, and I'd be delighted to actually give you a copy. It's the seventh edition of the Sound Mind Investing Handbook by Austin Pryor, and that'll be our gift to you today, Latina. When you hold the line, my producer will get your information. Thank you for your call. Laureen is in Boardman, Ohio. Hi, Laureen. Hi, how are you?
Great, thanks. How can I help? I have never been taught how to budget or save, or I'm really good at spending, but I'm not very good at anything else, and I'm at an age now where, like, I am older and should know these things, and I don't know where to start, and I finally have a really, I have a good job, and I'm paying down debt, and I'm doing what I think I know to do, but I feel like I don't know what I'm doing. Do you have, like, a book called 101 Budgeting? Like, you've come to the right place, Laureen. Yeah, and be careful.
I heard a horn there. So let me mention the book, and I might give you some, okay, good, okay, good. I'm gonna give you some principles, and then unfortunately we're about out of time today. The book is called Your Money Counts by Howard Dayton. It's a great primer on biblical money management, which is my first point, and that is, Laureen, you've got to start with the recognition that God owns it all, that what you have has been entrusted to you, and it belongs to him.
You are his money manager, and with that comes, I think, a heightened responsibility for all of us when we realize we're the money manager for the creator of the universe, and then beyond that we need a vision for money being a tool, not an end, but a tool to accomplish God's purposes, and then we start to think about our values and where God is leading us and what does he want us to do now and in the future and how can money be a tool to accomplish that. I think we need to start by building in our giving, because that's going to loosen the grip of money over our lives and calibrate our hearts to the Father's. Then I think the next key piece, other than starting with your systematic giving, is living within your means, and that means you've got to have a spending plan, and so in addition to Your Money Counts, we'll get your information and get you a six-month pro subscription to the MoneyWise app which will help you build a plan, download all your transactions daily, get them into a digital envelope system so you're controlling the flow of money, so that way when the eating out envelope is empty, you're done, and when the closed envelope is empty, you're done. Now those may not be the discretionary items that are your budget busters, but whatever they are for you, and it's perhaps different for all of us, the key is that you control the money to say when the money is gone for the month, I'm finished spending, and when I live within my means, that gives me margin to then fund my goals based on where God is leading me, and I think that's so critical. Beyond giving generously and living within your means, you want to avoid the use of debt, set some long-term goals, and have some margin in your financial life. So Lorene, I believe you can do this with the Lord's help.
Make it a matter of prayer and hold the line. We'll get you a copy of your Money Counts and the pro subscription to the MoneyWise app, and we appreciate your call today. Folks, that's what it's all about, God's wisdom for our finances. This is a partnership between Moody Radio and MoneyWise Media, so thankful for our partner at Moody. Thank you for listening and tuning in today. I want to say thank you to Robert and Dan and Amy and Gabby as well.
Couldn't do it without them. Hey, come back and join us tomorrow, will you? I'll be here, Lord willing. We'll see you then. Bye-bye.
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