This Faith in Finance podcast is underwritten in part by Sound Mind Investing. For more than 30 years, do-it-yourself investors have relied on SMI for proven strategies and trustworthy guidance. SMI helps people build wealth so they can provide for their families, prepare for the future, and give generously. Learn more at soundmindinvesting.org. With college costs soaring, families are exploring every possible avenue, but one meaningful option doesn't get nearly enough attention.
military service. Hi, I'm Rob West. For students who feel led to serve, Military Pathways can provide full tuition, a monthly stipend, and unmatched leadership development. Matt Bell is here today to walk us through how these programs work, and then it's on to your calls at 800-525-7000. This is Faith in Finance, biblical wisdom for your financial decisions.
Matt Bell is the managing editor at Sound Mind Investing, one of our valued underwriters, and he brings a personal connection to today's topic. One of his sons is currently attending the U.S. Air Force Academy, and we're delighted to unpack this amazing opportunity. Matt, welcome back. Thanks so much, Rob.
Great to be with you again. Matt, with college costs climbing faster than inflation, it's no surprise that many parents feel overwhelmed. And you note in your SoundMindInvesting.org article that military service is an often missed but significant way to fund higher education. Tell us why that is. Yeah, Rob, for the right student, and that's the key for the right student, someone who's willing to serve their country and take on hard things, the military offers really generous education benefits.
And there are several pathways. These aren't the only pathways, but several pathways include the five U.S. service academies and also the ROTC, which stands for Reserve Officers Training Corps.
So, Rob, in addition to being able to graduate from college debt-free through these pathways, each one provides some really incredible leadership training and other experiences that you just can't get anywhere else. For example, our son is right now debating for this summer's activities to either go to jump school, that's learning how to parachute, or go to soaring school, which is about learning how to fly a glider.
So, those are not typical college experiences. That's incredible.
Well, let's unpack each of these. I want to start with the service academies.
So, what are they, and what should families understand about the application process? Sure.
So there are five U.S. Service Academies. There's the Military Academy, otherwise known as West Point. There's the Air Force, Naval, Coast Guard, and Merchant Marine Academies. At each one, tuition and room and board are fully covered.
Plus, there's a monthly stipend for the students. The academies are tough to get into. They're very selective.
Some have an acceptance rate as low as 9 or 10%.
So if they're looking for students that have a great academic record from high school, strong scores on their ACT or SAT. Fitness. A lot of these students have been varsity athletes in high school. They're looking for leadership, not just participation in clubs, but leadership roles and character.
So they need some letters of recommendation from people who can vouch for their character. And Rob, as if all that's not enough, then they need a nomination from a member of Congress or even the Vice President of the United States. That's true for all the academies except the Coast Guard, and that's quite a process unto itself. Yeah, that is a high bar. All right, well, what happens after students graduate from a service academy?
Sure.
So they're committed to serving five years of active duty plus three years in the reserve.
So, in that sense, this is not a free education. They pay for it with their service to their country. And then there's some specialized tracks. Like, if you become a pilot, if you're chosen for pilot training, that's a 10-year commitment after that training experience. But as I said, all of these students graduate as officers, they gain invaluable leadership experience and other types of experiences, and they have access to a wide range of career options.
That's really helpful. We've got about 90 seconds left. Let's do a flyover of the ROTC. How does that differ? Sure.
So it's offered on more than 1,700 college campuses. It's more of a traditional college experience in that these students who are accepted into the ROTC are in uniform a day a week versus all the time at the academies. Scholarships can cover tuition and room and board. They graduate as officers at the exact same rank as at the academies. And they have a little bit, a slightly lower service commitment afterwards, but still are committed to serving their country.
So what would you leave parents with who are listening today as to how to make the right selection? You know, I think one of the overriding things that anybody needs to really, really keep in mind if they're considering this pathway is that, yes, there's no college debt once you get through one of these programs. And yes, it's an incredible experience and very prestigious to have gone through one of these programs. But at the end of the day, you're signing up for service to your country, and that includes the possibility of going to war. Yeah, that certainly matters and an important note.
Matt, really important information. I'm delighted you wrote the article on it where our listeners can get more information. Thanks for being here today. It's my pleasure, Rob. Always good to talk with you.
That's Matt Bell, managing editor at Sound Mind Investing. For decades, SMI has helped everyday investors make wise decisions with clear, proven strategies rooted in biblical wisdom. Learn more at soundmindinvesting.org. Back with your questions after this. Stick around.
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Uh Faith in Finance is grateful for support from Sound Mind Investing. For more than 30 years, they've offered financial wisdom for living well. SMI provides step-by-step guidance for do-it-yourself investors, from those just getting started to those getting ready for retirement. More information, including a short video webinar on profit and peace of mind no matter what's happening in the market, is available at soundmindinvesting.org. Thanks for joining us today on Faith and Finance.
We're looking forward to taking your calls and questions here in this segment. All right, let's head to the phones. We're going to go to Alabama. Welcome, Bill. Go ahead.
Uh, yes. I'm an old man and I have parking needs. And I have a home that I live in and it's paid for. But I have a home on the beach that is not paid for. And I'm going to have to quit work sometime in the next month or two.
And when I do, I'm not going to be able to pay for that house on the beach. I've had it up for sale for a year and a half or longer. have not been able to sell it. Yes, sir. When I let it go back and let them foreclose on it, what are the ramifications going to be for me as far as what do I do with the 1399?
For the forgiven debt, and how's it going to affect my income tax? And how's it going to affect that? Paid for a house that I live in now. Oh, Bill, I'm so sorry to hear not only about your situation here with this home, but also your health. We're going to ask our faith and finance community to be praying for you, praying for you physically.
We serve the great physician, and we're going to ask him to intervene here. But secondly, that he would just help with this home, that in the name of Jesus, he would bring that buyer, and this home would get sold in short order. You know, and I'm sure, given how long this has gone on, you've probably tried to pull every lever. But I just want to lean into that for a second before we talk about what happens in foreclosure and just ask: you know, have you considered changing realtors? Perhaps find somebody who has a little bit more expertise in the particular area that you're in?
Have we looked at dropping the selling price? You know, what is it, Bill, that you feel like, if you know, is holding up this sale? Because what we know is they're not. Creating any more beachfront. And so, you know, it should be fairly desirable, especially if it's priced right.
And getting somebody who's going to market it properly, price it properly and get this thing sold is what we need to focus on. And we need to ask for the Lord's help in that because we want to avoid a foreclosure At all costs. But give me your thoughts on that first, and then I'll walk you through what happens if it does go into foreclosure.
Well, we have dropped the price many times, but there's no other houses in the area that are selling.
So, for some reason, They're notifying it. And I think we have a real estate agent that's doing a very good job.
Okay. Uh have there been any other closed sales In what I'll consider to be the similar neighborhood or the surrounding area recently.
Well, there have been a a customer housing that are sold But There's a lot more on the market. And and for over a year now, they've just not been se they've just not been selling.
Okay. Yeah. Um and and what do you owe on that property right now?
Well, the total on the first mortgage is $400,000. And on the second watch, it's $190,000. And the home is definitely worth a lot more than that.
Okay. All right.
So you said $190 on the second. What do you owe on the first? Four hundred and seventy.
Okay. And what do you have it listed at right now? 440, okay. And what do you have it listed at right now? I think it's six fifty-nine.
Okay. So it's not much more because between the first and the second, you owe six. Uh thirty And you've got it at $6.59, is that right? Yeah. Yeah, okay.
We would have to we would have to take money to the closing. Yeah, yeah, no question about it.
Well, you know, I know how discouraging that can be. You know, I think the first step is let's confirm what's really happening in that local market. If no other homes are selling, Then I mean, that's just the reality of the situation. And there's a lot of issues going on in vacation spots right now, especially given these higher mortgage rates and insurance costs and property and HOA fees that deter buyers. You know, the other option is to consider alternative uses, renting it out.
But obviously, if there's a, you know, if there's a glut of homes on the market, that may not be an option. But I would be exploring every potential lever you can pull with that realtor. Here's what's going to happen if it goes into foreclosure.
So, first of all, if you stop making payments, the lender's going to take back the property. The property would be sold. The proceeds will go toward paying off the loan. There's going to be a deficiency balance, and they would come after you for that. And that just depends in part on the state in terms of how that goes down.
Your credit score would take a major hit. I'm not terribly concerned about that. You probably don't, you know, aren't out looking for more credit at this point. If the lender forgives the remaining balance, the IRS would treat that as taxable income, and you'd receive a 1099 C. If the property is held as an investment, not personal use, then there could be capital gains or losses reported.
In this case, it'd be a loss. You'd want to talk to your attorney. In terms of alternatives to foreclosure, before walking away. Again, if there's not an option just to continue to drop the price and try to get out from under this by coming to the closing table with some money, and there's not an option to rent it out, then you could engage the lender around a loan modification where they allow a short-term pause if you can show good faith efforts. or what's called a short sale.
which is where the home is worth less than the mortgage balance, which may be the case here. The lender allows a short sale where they accept the sale proceeds and forgive the rest, but that's agreed to prior to the sale.
Now that's still damaging to your credit, but it's far better than foreclosure. And then as a last resort. There's something called a deed in lieu of foreclosure, where you voluntarily transfer ownership to the lender in exchange for release from the debt. It's cleaner and faster and sometimes avoids a court action. But again, if this lender is involved in lots of properties in this area and they're going through this with a lot of folks, they may be less inclined to do that.
Because your main home is paid off, You know, that won't be able to be touched unless you personally guaranteed or pledged it as collateral.
So I think I would talk to that realtor, see if there's any other levers you can pull, and you need to look at whether you could bring some money to closing and let's continue to drop the price. Second, talk to the lender immediately. And then consult the CPA, I would consider renting it. But again, that may not be possible just given what's going on in this market. But is that helpful at all?
Yes, it is, but we have been renting it.
Now in the summertime June, July, August. It that takes care of the mortgage. But we know that beginning in right now, it's not raining and it's not going to rain again until June. I see. Yes, sir.
That makes sense. And with your health status, you're going to need to step away from paid work here. I certainly understand that. And so this is a critical time. Have you looked at the other homes in the area to see where they're priced?
And is it possible you could get down under all of those? The one. We we have looked, yes. My wife is taking care of this and and she She's actually a real estate agent. herself.
Okay. So she knows all the ins and outs and she's we're doing everything we can.
Okay. All right.
Well, you're going to want to get some legal counsel and and I would reach out to that lender and see if either a short sale is possible or if they'd be willing to do you know help you with a short term assistance on this. And I'm going to be praying that the Lord would intervene here and asking to bring a buyer. Um even uh miraculously. To be able to help rectify this situation. God bless you, Bill.
We appreciate you being on the program. We're going to be praying for you. And if I can help along the way, let me know. We'll be right back. What does your money say about what you truly treasure?
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Thanks for joining us today on Faith and Finance. Before we head back to the phones, let me just remind you: here at Year In, this is a critical time of year for us in terms of listener support. If you love the ministry, maybe you listen regularly, or you've been able to apply something you've heard to your financial life, we'd invite you to support the work of Faith and Finance here at Year In. Before December 31st, every gift is doubled up to $175,000 because of some generous friends. And with every gift, as a thank you, we'll send you my new devotional, Our Ultimate Treasure in the New Year.
Just head to faithfi.com/slash give. Again, that website, faithfi.com/slash give. All right, let's head back to the phones. Let's go to Illinois. Hillary, go right ahead.
Is a will sufficient enough or do I need some type of estate planning? Yeah, so estate planning is the process of determining how you want to set up your estate for the purposes of an efficient transfer. After your death or prior to your death, if you were incapacitated.
So, that process is called estate planning because everything that you own-both your personal property, the assets that you have, your home, when you put all of that together, the term for that is your estate.
So, the idea of estate planning says, okay, if everything I have is my estate, then I want to make a plan for what happens to my estate when I'm no longer here. And that's the process called estate planning.
Now, generally, when people do estate planning, that includes not only either a will or a living trust, a revocable living trust, but it also generally includes things like durable power of attorney for somebody to make financial and legal decisions on your behalf. It can include a medical, durable power of attorney, which is somebody who can make medical decisions for you. It can also include something called. A living will, which is where you make end-of-life decisions in advance.
So the people acting on your behalf know what your wishes are. That all kind of rolls up under estate planning.
Now, what you may be asking is: do I need, is a will sufficient or do I need a trust? Perhaps, is that what you're looking for?
Well, I would assume that the will would just go directly to my children. And it feels like everything I read says not necessarily.
So I want to know do I need an estate plan? Do I need a will? Do what do I need in order to make certain that my children get everything that I want to leave to them?
Okay. Yeah. So the will is the most basic estate planning document, and here's what it does: it tells who should receive your property when you die. Who should take care of any minor children if you have any, and who will serve as your executor? That's the title of the person handling your estate that you will name in your will.
everyone should have at least a will. Even if you don't have a large estate, because that's going to ensure, to your point, that if your wishes are that your children receive everything that you have, that's going to ensure that your wishes are followed and that's going to save your family confusion and possibly conflict.
Now, you can do that on your own. Either free or paid online. But my preference would be that you engage an estate planning attorney, a lawyer who specializes in this, who could design that will for you. And then at the same time, do that durable power of attorney, do that healthcare power of attorney, do the beneficiary designations. And that might be the other piece.
That you have missed. And basically, a beneficiary designation would be the named recipient on, let's say, your retirement account or your life insurance. And that happens outside of the will.
So that might be a situation where, as long as you have a will, And you have up-to-date beneficiary designations on, let's say, a 401k or an investment account or a life insurance policy, as long as both of those pieces are in place. Then you've probably covered your bases with regard to what you're asking about, and that is, how do I know that my kids are going to get everything that I have? Those two things, beneficiary designations and a will, should cover that.
Now, the other things that I mentioned would go beyond that. And then a trust would be yet another tool that offers a little bit more flexibility in terms of how you distribute your assets. But for most people, if your situation is fairly simple, it's not necessary. But give me any additional questions you have.
So Moving forward. I should They already have a will in place. I needed updated obviously because it was done many years ago.
So I wanted to update that. But then everything I'm reading. About estate planning, that I should have that done. And I am like, well. I know in my will it says that everything is going to go to my children.
But then now I hear you say, but doing estate planning as well.
Well, so it's kind of one and the same.
So the moment you went in and got a will prepared, you did estate planning. The question is, are there other aspects of estate planning beyond a will that you need to cover? And I would say there are, and that's the power of attorney. Who's going to handle your finances if you're incapacitated? The healthcare power of attorney.
Who's going to make medical decisions and end-of-life wishes for you? Beneficiary designations. Who's going to get your retirement account?
So those things are a part of estate planning, but they're in addition to the will.
So you've started your estate planning with your will. The key is when you go to update it, let's see what other items the attorney says you need to do. But all of that is under the wrapper of estate planning. I hope that clears it up. Hillary, thanks for your call today.
You're on the right track here. You're going to get there. Call anytime. Let's head to Chicago real quick, Molly. Unfortunately, I only have about a minute left.
Understand you're taking early retirement from the government and you're wondering about what to do with that thrift savings. How much do you have in there? I think it's a little over a million less. I checked. It's Been a while.
Yeah, no problem. And are you planning to go get another job or retire fully? I plan to be a full-time mom and daughter of a parent. Yeah, I know that can be challenging, but what a blessing that is. What is your age, if you don't mind me asking?
Early fifties.
Okay, cool. Yeah, I mean, so I would say you still, you've got a long time horizon. We want this money to grow. I mean, typically in your 50s, we would say probably at a 60-40 portfolio, 60 stocks, 40 bonds. You could get more conservative or more aggressive from there, but that's a good benchmark.
And that would be for the portion, the 60 that's in stocks, probably half of that in the C fund, the other half in the S and the I. And then for the 40 in bonds, that would be the F fund. You could also connect with a certified kingdom advisor at faithfi.com if you wanted somebody to manage it. But I'd say stay the course, get a little more conservative, and congratulations on your early retirement. Folks, so grateful to have you along with us today on the broadcast.
We'll be back tomorrow, Lord willing, to do it all over again. Our goal, help you see God as your ultimate treasure and live as a wise and faithful steward. Big thanks to our team today, Pat, Devin, Jim, and everybody here at FaithFi. Have a great day. We'll see you tomorrow.
Bye-bye. Mm-hmm. Faith in Finance is provided by FaithFy and listeners like you.
