Understanding Financial Discipline

Words that don't sound like much fun, discipline is certainly included. But is that really fair?

I am Rob West. Without discipline, there would be chaos and destruction. We all need it, especially with our finances. Discipline may not be fun, but it sure is necessary. I'll talk about that today and 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 journey. Well, if you need any convincing that discipline is a necessary part of life, look no further than Proverbs 25-28. It reads, A man without self-control is like a city broken into and left without walls, and that from King Solomon, arguably the richest man who ever lived. If discipline doesn't seem like fun, it certainly provides many other positive things to make your life better, peace of mind among them. When you have discipline to follow God's financial principles, for example, you worry a lot less about creditors calling you for bills you can't pay.

Instead, you are putting money aside for emergencies and investing for the future. You can't put a price tag on that. The word discipline has developed a negative connotation over time. You might think of disciplinary action, which is punishment for wrongdoing.

But that's not how the word started out. The verb disciple means to teach. A disciple is a student.

Jesus taught his disciples how to spread the gospel. They certainly weren't being punished. These days, besides being thought of as punishment, discipline is often thought to be restrictive, that it limits our ability to do what we want. And that's what often makes self-discipline so difficult. Given a choice, we'd rather not limit ourselves.

Now, here's where things get a little counterintuitive. If you think that discipline limits your freedom, actually it does the opposite, especially in the case of self-discipline. And let's use money as an example. You see, we have to train or discipline ourselves to live on a budget, to save and be generous as laid out in God's financial principles. We don't want to do those things naturally.

We'd rather spend our money on whatever we want, whenever we want. We don't want to limit our options. But discipline doesn't really limit those options.

It merely delays and focuses them. Over time, practicing self-discipline actually adds to your choices, to your freedom, because you're not in debt and you have money in the bank. Saving and investing require discipline. Proverbs 10-4 reads, A slack hand causes poverty, but the hand of the diligent makes rich. As we acquire wealth, we also acquire more freedom, not to spend foolishly, but to live an appropriate, comfortable lifestyle, and to serve God more fully. That's true freedom, and it only comes from discipline. And if discipline has developed an unfair negative meaning, freedom has developed an unfair positive connotation. You might think it means you get to have anything you want, a better car, a bigger house, or an expensive vacation with all the frills. But unless you're paying cash, all of those things only lead to debt, which of course is the opposite of freedom.

Proverbs 22-7 warns, The rich rules over the poor, and the borrower is the slave of the lender. You see, true freedom requires discipline, or it leads to disaster. Freedom without virtue becomes a license, from which we get the word licentious, which means having a complete disregard for rules or morality. You know, our founding fathers knew this. They gave us more freedom than any people have ever enjoyed in history. But they knew that our nation could only survive if the people remained virtuous. To paraphrase many of them, without virtue or discipline, there is no liberty. There's a story about a woman stopping Benjamin Franklin as he was leaving the Constitutional Convention. She asked, What kind of government have you given us? Franklin replied, A republic, madam, if you can keep it.

Old Ben probably would have fainted if someone told him his new country would someday have a national debt of 31 trillion dollars. We need to remember that discipline is a good thing, and that freedom can be dangerous. Don't be fooled by appearances. Discipline only appears to restrict you, while freedom only appears to give you anything you want without earning it. The truth is that without discipline, there can be no real freedom.

Hebrews 12-11 reads, For the moment all discipline seems painful rather than pleasant, but later it yields the peaceful fruit of righteousness to those who have been trained by it. And if you think you can't discipline yourself to handle money, according to God's financial principles, well, pray and ask the Lord for help. And we'd love to help too, with tools like the MoneyWise app and the best content you'll find on how to manage your money wisely at moneywise.org. All right, your calls are next, 800-525-7000. We'll be right back. Great to have you with us today on MoneyWise Live.

I'm Rob West, your host. This is where we apply the wisdom from God's word to your financial decisions and choices. You know, the goal of handling our money is to do it in such a way that it draws us closer to the heart of God, that we work out our finances, that which can be a competitor to lordship, but do it in such a way that we hold it loosely and see it as a tool to accomplish God's purposes. And when we do that and when we align our values and our heart with our spending decisions, well, I believe it has a ripple effect throughout the rest of our spiritual lives, because one of the key ways God shapes our spiritual journey is through our financial journey.

But we have to seek his heart and his wisdom going back to a biblical worldview and to scripture to inform our thinking in this area. Well, we do that together each afternoon on this program as we address the very specific financial questions and concerns you have. We'd love to hear from you today. We've got lines open. Clara standing by today to take your calls. We'll get you on the air quickly. The number to call is 800-525-7000. That's 800-525-7000. Let's head to the phones to Illinois. Barb, you're going to be our first caller today.

Go right ahead. Hi, I have a question about life insurance. My husband and I are 62 and 63, and our current life insurance policy is ending, and we need to get something different. And I was just wondering about your recommendation for the best policy for us to get at this point in our lives.

Yeah. Well, I think the first question is just to make sure that you need life insurance. And then secondly, what's the appropriate amount of death benefit for this period or season of your life? So the purpose of the insurance would be to offset a risk that would exist if, let's say, your spouse were dependent upon you for income, and the Lord takes you home, and now that income goes away, that might create a hardship. And the opposite might be true about your husband, providing for your income that helps you to meet your obligations, so pay the house, and continue to cover all of your lifestyle spending. Is there a need for that death benefit to offset a risk, or are you seeing the death benefit as really meeting some other need?

No, there probably would be a risk, yes. OK. And when are you all planning to retire at this point? You know, probably 65 to 67. OK. So you're still saving for retirement at this point, but you believe you're on track that by the time you get between 65 and 67, you will have enough in retirement assets plus Social Security to continue to maintain your lifestyle? Yes. Yeah. And I will be having a little part-time job as a retirement agent. Like part-time job as well. OK. Yeah.

OK. So there's a need for insurance, it sounds like, but not for an extended period of time. So the most cost-effective way for you all to do this would be probably a 10-year term policy, a level term policy where you're just paying for the pure insurance. There's not a savings vehicle attached to it that gives you enough death benefit that if the Lord were to take either of you home, it would provide what's needed to offset the income that you would have been providing to the family for that period between now and retirement. Because at that point, you're essentially you're not saving for retirement any longer. You should have the assets in place, apart from your part-time income, to be able to sustain your husband and the opposite true for you. So I think other than just income replacement, you would probably want to look at, do we want to also be able to finish off the mortgage?

Or are there any other expenses you'd like to be able to cover as a part of that? And that would help you determine how much death benefit you need. And then at that point, it's just a matter of shopping for the most cost-effective policy with a reputable company that could give you that 10-year term policy. And when you get to that point, if you decide to retire at 65, you believe you have enough assets, you could drop it at that point. Or you could continue to keep it until it runs out in 10 years and then drop it at that point. But it doesn't sound like you'd need it any longer than that for sure.

Does that make sense? Right. So you don't think we would need it for the 20-year. Because by the time we're in our 80s, we would not need that money. Because we would have money saved already.

Exactly. That's the idea is that during our working years, especially when the kids are at home, we have a significant risk. If the Lord were to take one of us home and that income goes away, that hampers our ability to continue to fund our lifestyle. So oftentimes, we would have 10 to 12 times the income that's being replaced as a death benefit. So $80,000 a year, you'd have $800,000 to $1 million in death benefit. And then some cases, you might add on to that the cost, the amount of the mortgage. So you could go and wipe out the mortgage. And then the other spouse that is remaining then has that to supply the income that was lost throughout those working years. But you get to a point where that death benefit is no longer needed because you've already saved. There's no hardship being created if one of you were to pass away. And so then that just becomes an unnecessary expense during that season of life where you're trying to eliminate expenses where possible.

And this would certainly be one of those. OK, great. That sounds great.

OK, thank you so much. You are welcome, Barb. We appreciate your call today. And thanks for listening to the program. We've got some lines open today. 800-525-7000, quickly to Florida. Shelby, how can I help you?

Hi. I guess I just have a question. It's about I just need some direction or advice. I recently just stepped into a new career where I'm making about $70,000 a year versus before I was making like $15,000. So I just find myself spending a lot more money now and not being able to save. And it's just creating a lot of anxiety.

And if you could kind of give me some advice about how I could start saving for emergencies, I do want to get a house in a year. And I'm just not sure where to start. Yes, all right. Very good. Do you have, Shelby, a written budget? Have you taken the time to put together a listing of all of your expenses, both the expenses you get a bill for, what I call fixed expenses, but also the discretionary spending, which is often the budget busters eating out and clothes and entertainment and gifts and those kinds of things. Have you taken the time to capture all of that? Yes. So just the other day I sat down and I wrote down my monthly bills and how much it would cost me just to sustain like food, gas, you know, just the monthly things that are going to come out anyways. I have done that. Okay.

Yeah. And then I think beyond that, it'd probably be helpful to you to either carry a little notebook around with you and write down everything else you spend because you might be surprised at how those add up. Or better yet, if you like smartphone apps, you want to take a more digital, modern approach to it, our MoneyWise app could help you with that.

And I'd be happy to set you up with a six month pro subscription where basically you'd connect it to all of your financial institutions. If you use credit cards or checking or savings account, you'd link all of it up. And then every time you spend something, it would show up as a transaction automatically. And then you'd create using the envelope system that Larry Burkett popularized 25 years ago. We created the digital envelope system where every one of your spending categories becomes a digital envelope.

You fund the envelope out of your paycheck and then the transactions come into those envelopes to reduce the amount that's in there. And the key is, Shelby, that when the money's gone, you stop spending in that category. And that becomes your control system. And we've got some folks that would help you actually set all of that up and get it working and answer your questions. And I think once you have that plan and you can see it working, that will probably help you feel a lot more confident that I've given every dollar a name, my budget balances, and yeah, there's gonna be some surprises along the way, but I've got a plan to take care of it.

Stay on the line. We'll help you out with that. We'll be right back on MoneyWise Live.

Thanks for joining us today on MoneyWise Live, where we apply the wisdom from God's word to your financial decisions and choices. I'm Rob West. Hey, we're taking your calls today. We've got a couple of lines open, 800-525-7000. Let's head to Tennessee. Let's head to Tennessee. Chris, you're next on the program. Go ahead.

Yes, good afternoon. Just need some help in managing a 401. I have a 401, which has a lot of my retirement in it, and it's with a large Fortune 500 company. A couple of years ago, in my upper 50s, I had diversified some of it throughout the variety of options and had more concentration into some bonds. And of course, with the interest rates rising, a lot of that has taken a pretty significant hit.

And I'm just trying to determine whether to continue to leave things where they are as hopefully, over time, things improve or to make changes now, or if there's someone that can help advise through that. Yeah, very good. So it's a Fortune 500 company, a 401k, and you're still employed there, Chris? Yes, sir. Okay. And do you mind if I ask your age and roughly what you have in that account? I'm 57 and currently it's about $570,000, but that's after about a $75,000 drop.

Yeah. And what percent is in bonds versus stocks? I would say more than half. Definitely more than half.

Probably about three quarters. Okay. And did you make that determination yourself or do you have somebody advising you? No, that was me. Okay. Yeah. And so your attempt was to try to be on the more conservative side, correct? Absolutely.

Yeah. And so, just to encourage you, you didn't make a mistake. And this is an unusual period where we've almost never seen anything like this, where the stock market is falling as quickly as it is. And because rates are rising so rapidly and so quick, so rapidly, but in such a significant change from where they were to where they are today, we've seen these bond prices just really fall. Now, as the Fed starts to indicate that they're going to stop raising rates or if next year as the economy continues to cool, we see the interest rates start to fall. Not only will these yields continue to be very attractive, but we will also see a rise in the bond price. So I think if that's really the allocation you're looking for and trying to be on the more conservative end, you've already experienced the lion's share of the downside in terms of the actual bond prices and what they've done because of interest rates.

So I would stick it out because I think what you're going to see is a leveling of those prices. You're now going to enjoy the higher yields. I would want to be on the shorter end of the bond durations, so the bond mutual funds that you're in should be not long-term bonds, but probably short-term to medium-term at the most, and then you're going to see those stabilize and then your portfolio will benefit from those higher rates.

The Fed won't leave the rates where they are today forever, so eventually that will come back down and you've still got time on your side to see all of that recover. So I think you're probably in a pretty good spot. I think the only question would be, do you want to wait to get advice between now or do you want to wait until you retire, until you're ready to roll it out of the 401k into let's say an IRA and then have an advisor manage it for you? I mean, this is a significant amount of money that you've accumulated and even though you have a limited universe of investments inside the plan, it would still, I think you could make the argument that having a professional look over all of those investment options and help you not only select the right allocation, but the actual individual funds that would be used could make some sense just to make sure you're protecting what you've got and growing it in the most prudent way possible given your age, risk tolerance and time horizon. But if you feel like, no, I'm comfortable with this allocation, I just want to know do I stay with the bonds or not, I would say I would probably stick it out and know that it will recover and then get ready and be ready to select that advisor when you retire so that you know where you're ultimately gonna transfer this and who's gonna be managing it. Does that make sense?

It does. I guess my biggest concern is time on my part as far as having the time to really put in to finding a good advisor and that I feel comfortable with. And so that's kind of been, probably my biggest hurdle is I'm a healthcare professional in the middle of a pandemic and it's been a bit challenging.

Yeah, I totally get it. Well, here at MoneyWise, we trust the Certified Kingdom Advisor designation. This is the only industry accepted designation for financial professionals who have either had 10 years of experience or they already have another professional designation like a CFP or a CFA or a CPA. But then on top of that, they've met significant requirements both in terms of character, competence, they've had pastor references and client references and they signed a statement of faith here to a code of ethics, but also they've been trained in a university level certificate course on the application of a biblical worldview to financial decision-making. So there's 1300 of them around the country. I would head to our website at least as part of your consideration and just click find a CKA at moneywise.org.

You could do a zip code search and I would probably interview at least two or three before you selected the advisor you were looking for and then you could have that person begin to weigh in on your allocation today and then be prepared for that person to take over and manage these assets when you're ready to separate from the company. Sure, I appreciate the information. Thank you so much. You are welcome, Chris. Thanks for your call today.

God bless you. If we can help you further along the way, don't hesitate to reach back out. Well, we're going to take a quick break here in just a moment, but when we come back, a lot more of your questions, some great ones coming up. Plus also, Jerry Boyer stops by. It's Friday and Jerry joins us each Friday as he weighs in on the market and the economy looking over the data that's been coming in. Let me just remind you as we head toward year end, this is a great time for you to know that we rely on your listener support for the work that we do here in MoneyWise Media. If you want to consider a gift here between now and December 31st, it would go a long way to helping us meet our budgets, stay on track, and be ready for another great year of ministry next year. If you want to help us teach and train others, or you're a part of the MoneyWise family, you can make a monthly or one-time gift to MoneyWise. Again, by December 31st, by going to moneywise.org and just click the give button, you'll find a way to give online securely or over the phone or even through the mail. Again, it's moneywise.org. Just click give and thanks in advance. We'll be right back with much more. Great to have you with us today on MoneyWise Live, biblical wisdom for your financial decisions. Back to the phones we go to Washington. Paul, thanks for calling today, sir.

How can I help? I may be wrong about this, but it seems like I heard that you could make charitable contributions out of your 401k that were tax-free. Unfortunately, that is not true. You may be talking about a qualified charitable distribution or a QCD, but you can't make one directly from a 401k. You would need to do a rollover to a traditional IRA first, and then you can make the qualified charitable distribution from there. So if you've separated from the company, then you would be able to easily roll out that 401k to an IRA. And there that would be the opportunity then to, once you're 70 and a half, to do a qualified charitable distribution where it's not added to your adjusted gross income. So there's no taxes owed. And then the charity or ministry gets the full value of your donation.

And then at 72, you're also satisfying your required minimum at that point. Okay, well, I have an IRA and a 401k. So I could make... Because I rolled part of my 401k into an IRA. So I could make charitable contributions out of my IRA?

Yes, that is correct. So you could do that. Once you're 70 and a half, you can make that contribution directly from an IRA through what's called a qualified charitable distribution. So you would contact your broker-dealer, the custodian of that IRA, let them know that you want to do, or your advisor, let them know you want to do a qualified charitable distribution.

They'll give you the paperwork or you can complete it online. And basically, you can send up to $100,000 to a charity or ministry of your choice. They'd receive that.

It would not be added to your taxable income. And then you could use it also to satisfy your required minimum if you have one. Okay, but you have to be 70 and a half to do that?

You do, yeah. Otherwise, there really is no way to give directly to a charity. You'd have to take a distribution first, recognize it as income, and then turn around and make a charitable contribution at that point. So I was 70 in September. So next year would be where I turn 70 and a half. Is that correct? That's exactly right. So you'd be able to do that in the next calendar year with regard to the 2023 tax year. Is there like a limit to how many times you can do that? Or is it like you only do it once? No, you could do that each year. No, I mean, say I wanted to give money to several ministries.

Oh, yeah. Can I do that multiple times in the year? Or is there like a limit to how many times you can do that? No, you could do that multiple times to multiple charities.

It doesn't have to be just one. Oh, cool. Yeah. Okay. And you've got $100,000 limit for a potential total of $200,000 if you have a spouse as well. Oh, okay. Well, I don't think I'd be giving that much. That would be 25% of my savings. But I will do some. That sounds like a good idea to me.

Yeah. And that limit is per year. So you could do this every year. And again, you could do it to multiple charities. So it's a great option to do a lot of giving that's very wise and effective because you're not paying any tax on it.

And the charity is getting the full benefit of the amount coming out of the account. So just give your advisor or your custodian a call. Let them know that that's what you want to do.

Although it sounds like it's going to wait till next year. Paul, thanks for checking in with us, sir. God bless you.

To Avon, Ohio. Hi, Angie. How can I help you?

Hi, good evening. I have a couple of questions regarding my current financial situation. I'm unemployed now due to a medical condition. And I get $1,600 in child support. I'm going to get $1,700 in Social Security. It's me and my two children. And I don't have enough money right now to pay the bills.

I hope that I will soon. But I have a couple of things that I have out there. Both the kids have life insurance policies for 50 grand.

I have one for 50. And I've got an old 401k with $12,000 in it. No savings.

Okay. I don't know what to do with that 401k, first of all. Yeah, well, let's leave that alone for now, because if we can avoid touching it, that's best, because it's never a good idea to take money out of a 401k, just because it's expensive money.

If you're under 59 and a half is going to be a 10% penalty. Plus, it's all going to be added to your taxable income for the year. So you have the taxes on top of that. So you can easily take 30% of that and send it to the government.

I'd rather you leave it there, invest it, whether it stays in the 401k or you roll it to an IRA. And then you've got something working for your future. But beyond that, we've got to solve for you to be able to live within your means. And I realize you have a limited income that sounds easier said than done.

But we've got to get you to a place where you can cover your bills and you have a little bit of margin left over so that we can start to build up an emergency fund. You mentioned you have a couple of kids. How old are they?

Seven and eight. Okay. And you've got life insurance policies on them. So if they were to pass away, then there's a death benefit paid out? Correct. Okay. So that would be an unnecessary expense in my view.

I mean, there's no real need for that. It's just something that's in your budget that you're paying for because the purpose of life insurance is really to offset a risk that exists. So if something were to happen to you, there's clearly a need as a single mom to provide for these kids for whoever their new guardian would be so that there's assets to provide for their care. You need a lot of life insurance up to the ability you can afford it. They don't need any life insurance.

If the Lord were to take them home, there's not any kind of hardship that's placed on anyone else as a result of that premature death. And so that's just an expense we don't need. So if it were me and ultimately you've got to make this call, I would drop those policies because you need every dollar back into your budget as possible. And the next step, I think, is to really then go back to that budget and begin to work on that in detail to determine exactly what you're spending and where by category, looking for every area to cut back. And then to the extent you don't have an emergency fund, I would suspend any new retirement contributions right now just so you can build up a little bit of a cushion. And I would look at increasing substantially that life insurance that you have that would benefit the kids and make sure you've got a will to name their guardians and a plan for who would have access to those assets that would use them for their care upon your death.

So I think that's really your next step here, Angie, as you begin to try to get all of this in order. How far are you away from being able to cover all of your bills and have anything at all left over? Well, I actually opened up a credit card because I couldn't afford things.

So I've got like two thousand dollars in credit cards right now, but that's only on sixteen hundred dollars a month. So I really I'm already not making enough right now. Sure.

Yeah. Are you able to work at this point? No, I have no I have stage four cancer and have a hard time just kind of doing normal things.

So right now, no. Well, I would look for any kind of assistance you can get with regard to food from the from the government. I would be making your church family aware of this need that exists because it's significant. I'd be looking to free up any kind of expenses that you possibly can, starting with those life insurance policies on the kids and and then kind of go from there.

Let me have my team get your information and we will have one of our coaches reach out to you to see if we can help you start working through your budget and give you some other ideas on perhaps how we can make all of this balance. There'll be there's no cost for that. So you stay on the line. We'll get your information, Angie, and we'll be right back on MoneyWise Live. Stay with us. Thanks for joining us today on MoneyWise Live.

I'm Rob Last year host. We're taking your calls and questions today on anything financial before we head back to the phones. It's Friday, which means our good friend Jerry Boyer joins us. Jerry is president of Boyer Research, a columnist at The Christian Post, and he joins us each Friday as our resident economist to help us look at the data and talk about what's going on in the markets and the economy. And, Jerry, it seems like this strength tells us that despite all of the headwinds out there, anything related to the Federal Reserve ever so slightly taking their gas or their foot off the gas pedal, that's what's driving these markets, huh? Yeah, that's absolutely what's happening.

When the expectations for what the Fed is going to do in the future change, then the markets move accordingly. And we live, again, in this weird world where bad news is good news. And the analogy that I like to look at is essentially easy money is like an addiction. It's like a morphine drip. So you have a car crash and you break a bunch of bones and they take you to the hospital and they put you on a morphine drip. And you still have broken bones, but you feel better. But then over time, let's say the doctor comes into your hospital room and, good news, Mr. Boyer, or good news, Mr. Market, your leg is largely healed. Oh, wait, so are you going to take me off the morphine drip? It doesn't feel like good news.

So, you know, or the other way around. Oh, it seems like you re-broke your leg. Something went wrong.

Oh, OK. All right. But so the morphine is going to keep coming. So what happened is this week we had some bad news in the beginning. We had the bad news of the Fed saying, I know you think that we're going to you know, we're going to start easing up a little bit, but we're not, even though last week the inflation numbers indicated we were. And then in came some bad news. The housing starts weren't so good and the housing sales today weren't so good.

So what does that mean? Oh, bad news is good news. We haven't, you know, the patient, the doctor says to the patient, your housing market isn't healed yet.

OK. All right. I guess the morphine drip is going to continue. And that's why today was a good day in the markets, starting with the revelation that the housing markets were weaker than expected. So this is what happens when we have a world where our central planners think that their job is to use monetary debasement to make us feel good rather than to have a stable dollar.

Yeah, it seems kind of backwards. How then should it work, Jerry, if we look at it through a biblical worldview and God's design for economics and productivity? Good news should be good news and bad news should be bad news. And the only thing that the Fed should be responding to is whether it's debased the currency and that it needs to deal with it. So we don't try to make the way that you have in the biblical system is unjust way to measures are to bother an abomination to the Lord. It is not the job of the central bank, not the temple in ancient Israel was the central bank. It's not their job to add a little lead or dross to the shekel when people are feeling feeling down. It's supposed to be a fixed exchange rate.

The value isn't supposed to change. And if some bad economic times come, there's a bad harvest or something like that, then you go through it and you learn from that suffering. The job is not for monetary authorities to just make us feel good when when there's something wrong with the economy. We're supposed to feel the wrongness of it. We're supposed to adjust ourselves. We're supposed to reallocate. If we build too many houses like we did in the housing, you know, in the housing bubble, then we have to stop building all those houses. And that's a painful adjustment, just like in life, just like the economy is just part of life.

If we have a painful adjustment, we don't anesthetize our way through it. We deal with it. Jerry, I want to ask you a question. Jerry, I was just looking today, speaking of easy money and the Fed at in light of these interest rates, they're projecting that next year the interest payments alone on the U.S. national debt could top one trillion dollars. That's a byproduct of all this that you're talking about, isn't it? What happens is when the central bank creates inflation, that drives up interest rates because you need a premium. If someone's going to lend, they say, I'm going to I'm going to lend you one hundred dollars.

Well, but if you give me one hundred dollars back, I really lost money because one hundred dollars isn't worth as much. So if I give you one hundred dollars and you give me one hundred and five back and the inflation rate was five percent, I didn't make anything. So interest rates have to go up to account for that risk of inflation.

So that's number one. That's one of the reasons interest rates rise. But the other problem is when the central bank does that, when they have to fight inflation, they have to come in and not only get rid of the inflation, but they have to pull money out of the system. So they're taking money out of the credit markets, which means the interest rates are always highest after the Fed starts fighting the inflation, because you've got two things. You've got an inflation premium in there, and then you also have the high interest rates that come from the Fed raising interest rates to fight the inflation. And that's the situation we're in now. And if the Fed really has a dilemma, if it does what it's supposed to do in terms of fighting inflation following the one mandate, you have high interest rates. Well, the biggest borrower in the world is the United States government and it has an adjustable rate mortgage. So that could trigger a credit crisis or you keep interest rates low and you don't fight inflation. And then we have habitually high inflation.

There's no easy way out of this. Yeah, no doubt. Jerry, as we move forward here, what is it you're watching as you use the gift of data to really understand where we're headed? Well, next week, what we're going to see is some new data, especially, well, I'd like to look at what people were actually managing supply chains are thinking and feeling.

So we have some of those surveys coming out tomorrow. And then next week, we get the minutes, the notes from the meeting of the Fed meeting from several weeks ago. They don't when they when they announce what they're doing with interest rates, they don't explain what they were thinking. I don't know why they think we can't handle both pieces of information. They come out and say, we're going to raise interest rates 75 basis points. And in three weeks, we'll tell you why.

So we're going to get the minutes from that, the notes from that. It's a little bit like going back to that analogy, the doctors, you're like looking at your chart and seeing how they think the patient is doing. So if we get a glimpse into how they're thinking about what they're going to do, the market will react. Because remember, the largest investor in the world is now the Fed by a wide margin. Nope, not Elon Musk is not even close to the size of the Fed's balance sheet. So what they do affects markets more than anything else, because that's how much power we have, in my opinion, unwisely given to them in a quest to avoid economic pain.

We've handed over power to central planners and an expert class, which has not shown itself up to the job. Yeah, interesting. All right, Jerry, I always appreciate your comments and insights, my friend. Enjoy your weekend. We'll talk to you next week. Same to you. God bless. All right. Bye bye. Jerry Boyer, president of Boyer Research.

He joins us each Friday with his market analysis and economic commentary. All right, just a few moments left in today's broadcast. Back to the phones we go. We'll get to as many calls as we can.

Spokane, Washington, KMBI. Hey, Ray, thanks for calling. Go ahead, sir.

Hey. Oh, thank you for taking my call. I've been retired for about 12 years from a public service job. So I have my pension, which is very unblest.

But our state has decided to improve our pension. So they're going to give me, by the end of January, a one-time payment of $34,000. And they've given me three options of how to handle that. I'm kind of wondering what's the best thing to do, you know, given tax implications and stuff like that. So they say I could buy an annuity or I could dump it into my former retirement account that I had when I was working for them or just take a check.

Yeah. What about a rollover into an IRA, Ray? I don't have an IRA. All I have is I called it a 401k.

Is that right for a public service employee? No, it typically would not be. It could be a 403b or a thrift savings plan. But you should be able to open very easily an IRA at any of the major brokerages, Fidelity or Schwab. And then if you would be allowed, you could roll that in. I think the idea here is let's try to avoid creating a taxable event.

So let's keep it in a qualified environment. If the only option to do that is, and I don't like the annuity option. So if the only option to do that is to put it into your old retirement plan, well, then you should be able to take it from there and roll it out to an IRA. But the question would be, could you go direct from this additional pension lump sum that was that's been described to you and go right into an IRA? I think that would be great because then you don't have to take any out. You could decide the time and the place to take it out, thereby creating the taxable event. But in the meantime, you could redeploy it, especially while this market is down.

We're looking at the prospect of a recession next year. In light of that, you get this invested. And I think you could perhaps do well with this money over the next five years or more. And then maybe down the road, you need it for some other purpose.

But that would be the time to take it out. So I would go back to them and see if you could open an IRA and roll it in and then just invest it in some high quality stocks and bonds, maybe through indexed ETFs or mutual funds, or if you have an advisor that's helping you, perhaps he or she could take over responsibility of this. If that's not available, then I'd go into your old retirement account. Right.

You know, I don't know. I'm sorry I'm taking up your time here, but that leads me to I do have an advisor for my account that I do have. And after looking more closely at their statements, I realize now they're charging $500 a quarter to manage it. And I don't know if that's excessive or normal. What are they? What's the amount of assets they're managing? Well, now, because of the big losses that I've taken, I'm down to now like $155,000. Okay.

What was it? $200 or so? Right. Okay. Yeah. So you would probably expect to pay somewhere between one and one and a half percent a year. One percent a year would be $2,000, which is $500 a quarter. So that's perfectly appropriate for what would be normal and customary for an advisor who's taking discretion and making the buy and sell decisions for you.

So I'd probably just add that to an IRA with the same advisor and then just manage it from there. We appreciate your call today, Ray. God bless you, sir.

Belinda, I apologize. We didn't get to your question. I see your question there. And you were wanting to know about the I bonds paper versus electronic. The only way to purchase the I bonds right now is through the electronic bonds at treasurydirect.gov unless you're using a tax refund. So you can buy up to $10,000 per person per year. The current rate is 6.89%. If you were to buy it today, you'd get that rate for six months. At that point, it would adjust to the new rate, which we won't know until May. And that will be based on the consumer price index as of May of 2023. And you've got to hold those for at least a year.

But there's a great rate on them right now, even at 6.89%. Thanks for your call, Belinda. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Thanks for being along with us today. I want to say thank you to my team, Deb, Amy, Clara, and Jim. Hope you have a great weekend. And we'll see you next week. God bless you. Bye-bye.