This Faith in Finance podcast is underwritten in part by Movement Mortgage. Movement provides residential home loans in all 50 states. Founded in 2008, amidst one of the biggest financial meltdowns in American history, Movement set forth on a mission to create a movement of change in their industry and in communities. Learn more at movement.com slash faith. Movement Mortgage LLC supports equal housing opportunity.
NMLS number 39179. For licensing information, please visit nmlsconsumeraccess.org. Long-term care is becoming one of the biggest pressures families face, and many aren't sure where to turn. Hi, I'm Rob West. Rising costs, limited coverage, and an aging population are creating challenges that few retirees are prepared for.
Today, we'll talk with Harlan Akala about the financial realities of long-term care and how home equity can play a strategic role in meeting those costs. And then it's on to your calls at 800-525-7000. That's 800-525-7000. This is Faith and Finance, biblical wisdom for your financial decisions.
Well, it's always great to have Harlan Ackler with us. He heads up the reverse mortgage team at Movement Mortgage. And Harlan, it's a joy to have you here. Thanks, Rob. Always good to be here.
Harlan, you're seeing firsthand how many families are struggling with long-term care decisions.
So what are you hearing and observing these days?
Well, you know, it's really the elephant in the room. It's just exploding in importance because more and more boomer retirees are continuing to age and families always want to help. But they're feeling overwhelmed because they're taking care of their own families and unsure how they'll keep up with a very expensive care in a nursing facility or any long term care facility. And most people just don't know what their options are because it's something often the family is not even talked about. Yeah.
When you look at the numbers, they're hard to ignore.
So do you think we're approaching an aging care moment that many families simply haven't planned for? I think it's the biggest concern, not only from a country standpoint, but from a family standpoint. That is the biggest worry, the biggest risk out there. Anywhere from half to 70 percent of retirees are going to need some level of long-term care. More than 90 percent have not purchased any insurance or most of them don't even have a plan to pay for it at all.
And the biggest worry is so many people assume that Medicare covers long-term care in nursing homes, and it doesn't. That's when Medicaid comes in. But you have to be broke, essentially, to pay for it as a poverty program. And so most families simply aren't prepared for this huge scale of the need, which often can run $10,000 a month. And a lot of people are feeling anxious about just what the future may require as they see some of their parents failing.
I think that's right. Let's dig into the financial side a bit more. Harlan, why is long-term care such a significant burden for retirees and their families? Depending upon the area of the country that you're in, it goes from anywhere from $80,000 to $120,000 a year, which most people simply don't have the plan for. Even if they do home health, that's $30,000 to $40,000 an hour.
And just a year or two of intensive care can drain retirement savings that are left over very quickly. And here's the biggest worry that we have. The healthy spouse who's left behind after that person that used up a lot of long term care is left financially vulnerable because there isn't any planning for her, which is typically the wife when the husband ends up using a lot of care and using up a lot of the money before he passes.
So we have a huge concern about that healthy spouse.
So let's talk about one of the planning tools that can help here, and that is housing wealth. How can a reverse mortgage play a role in long-term care planning?
Well, this is very personal for me because it's something that my parents used before they passed. Dad had a stroke. Mom's Alzheimer's got worse. And what a reverse mortgage does is create a tax-free pool of funds independent of the IRAs or any other savings that can be used for in-home care, can be used to continue to fund long-term care insurance premiums or any other care-related costs. It simply allows people to stay in their homes longer and they don't have to go to the expense of $10,000 a month.
They can just use a little bit of home care. And then it also protects the surviving spouse. My dad lived longer and he was not left without financial resources at the end. And their situation is very similar to literally hundreds of thousands of other families out there. And this isn't the only solution, but certainly part of the plan.
Yeah. Just about 30 seconds left, Harlan. What shift in thinking do you hope most families will take away as they prepare for these needs?
Well, they should just look at options. I'm not saying that everybody should do a reverse mortgage to take care of long-term care, but certainly it should be one of the things that people are thinking about that they should not just tune it out because there's a lot of wealth sitting in people's homes that could be the scenario that gets people to take care of that last expense that can be one of the most worrisome. Yeah. Well, I really appreciate your help on this. It's perhaps the planning tool that a lot of folks have overlooked in this season of life, and it can be a real blessing.
Harlan, thanks for your time today. Thank you, Rob. Always a pleasure. If you want to learn more about whether a reverse mortgage might help in your situation, connect with Harlan and his team at Movement Mortgage by visiting movement.com slash faith. That's movement.com slash faith.
All right. Your calls are next. 800-525-7000. This is Faith and Finance, biblical wisdom for your financial decisions.
Are you a financial professional looking to grow your practice while offering advice that aligns with your Christian values? By becoming a certified kingdom advisor, you'll gain the biblical wisdom and professional credibility to serve clients who are seeking faith-based financial guidance Each year more than 75 people search for a certified kingdom advisor Join our community and share your expertise with clients looking for someone who shares their faith and values Start your journey today by going to KingdomAdvisors slash get certified We're grateful for support from Movement Mortgage, who provides residential home loans in all 50 states. Guided by a mission to love and value people and a goal to redefine the mortgage process, Movement seeks to help others achieve their financial goals. You can find out more at movement.com slash faith. Movement Mortgage LLC supports equal housing opportunity, NMLS number 39179.
For licensing information, please visit NMLSConsumerAccess.org. Great to have you with us today on Faith and Finance. for taking your calls and questions today on anything financial, 800-525-7000. That's 800-525-7000. Let's head to Texas.
Joe, how can I help you? Yes, sir. Thank you for taking my call. Of course. I plan on retiring at 70.
I'm 66 in four months right now, and I can take full retirement at 66 in 10 months. Would it be a good idea to take my retirement and go ahead? And I'm going to work 40 hours a week until I'm 70.
Okay. Put my Social Security in IUL or IBC or in my Edward Jones account. Yeah, got it. The whole check. All right, very good.
Well, yeah, certainly once you hit full retirement age, you're going to get your full benefit based on your high 35, your highest 35 years. of earnings. And the benefit is, or one of the benefits of waiting to full retirement age is not only to get your full check, but you can work full time and collect Social Security with no earnings limit or penalty.
So no matter how much money you make, you'll still collect your full benefit, which would not have been the case. You would have had an earnings limit prior to full retirement age.
So you certainly don't have to wait until age 70.
Now, what are the benefits of waiting past full retirement age until as late as age 70.
Well, if you do delay it, your benefit grows by 8% per year through age 70, thanks to delayed retirement credits. And you're not going to get 8% guaranteed anywhere else. You may get 8% in your Edward Jones account or more, but it's not going to be guaranteed. It is with social security. And if you're continuing to work, meaning you don't need the money, you were just going to sock it away, you know, then in my view, you might as well wait and get that 80, that 8% a year guaranteed, because that could mean a check as much as 32% higher than claiming at full retirement age, which is really a nice inflation protected boost for life, because all the cost of living adjustments in the future are going to be based on that higher amount.
Now, you need to be able to, you know, live long enough to enjoy that.
So typically the where where that break even occurs is around 12 years.
So you'd have to live until at least age 82, which, by the way, once you reach age 65, your life expectancy as a male is, in fact, 82. And as long as you live to at least age 82, you're in good health, you've got longevity and your family, then you will be paid back in the form of that higher check for all the money you did not collect between 66 and 10 months and 70. And then from that point forward, you enjoy that 32% higher check for the rest of your life.
Now, there's a question there because none of us know the day or the hour the Lord is going to call us home. And if you died before that, you'd obviously be leaving money on the table. But I just think for somebody in your spot where this is going to be a meaningful part of your retirement income and you don't need the money, I kind of like getting that higher check locked in. But I don't think there's a wrong decision here, Joe, especially if you're not going to spend it, you're going to sock it away and invest it. But give me your thoughts on all that.
Yes, actually, that's what I plan on doing was just stocking it away. I'm an excellent help. I'm not on any kind of meds. And we do have longevity in my family. My mom recently passed away at 93.
Okay. Yeah. And I mean, yeah. I'm like you. My grandmother passed away at 104.
And so I understand that. And, you know, I would just say, you know, if you live past 82, you will have collected 100% of what you would have received by starting at full retirement age. and you get that 32% higher paycheck.
Now, you might say, well, but that money I socked away could have been growing, and that's true, but there's a question as to how will it do. And it could grow. It could actually decline in the market. That's where I think this nice 8% increase guaranteed is not something to just gloss over. Right, right.
How about an IBC or an IUL? Yeah. Well, again, you know, I just think, you know, with an index universal life, I mean, it's tied to the performance of a market index, but a portion of it's going toward insurance costs. And at your age, that's going to be pretty steep. And I just don't think you need that life insurance at this point.
So I'd rather you either delay it, let the Social Security Administration give you the increases, or just drop that in your Edward Jones account and invest it in a way that's appropriate for your age and risk tolerance, rather than mixing it up with the cost of a pricey insurance policy. Oh, okay. All right, then. All right. Yeah, that sounds good.
Thank you so much. You're welcome, Joe. Hey, stay on the line. I want to send you a gift. I'm going to send you the latest issue of our magazine, Faithful Steward.
I think it be an encouragement to you and we appreciate you being on the program today Let go to Mississippi Robert how can I help Hey how are you doing today Doing well Thank you sir Yeah Question I have a 401k over the last 10 12 years I borrowed from it about three times paying myself back interest. My question is, because I hate paying interest on loans like buying a car or buying a car.
So is that a good idea compared to other options, just getting a regular loan? Yeah, I mean, I'm not a huge fan, and here's why. I mean, number one is you've got the lost investment growth.
So the money you borrow isn't invested while it's out.
So you could miss years of compounding, and especially if we're in a period like we were the last several years and the couple of decades before that where the market's done well, you know, you're missing out on that compounded growth, which is significant, especially in a tax-deferred environment. You've got tax risk if you leave your job.
So if you retire or quit or laid off before the loan is repaid, it's going to all become taxable, plus a penalty if you're under 59 and a half. You've also got what I would call double taxation on the interest.
So here's what I mean. You're repaying the loan with after-tax dollars, and then you're going to pay the tax again when you withdraw that money in retirement.
So it's kind of being taxed twice. And a lot of people don't realize that. And then you've got reduced contributions.
So some borrowers pause new contributions while they're repaying, and then they're missing out on the potential for the employer match and the growth.
Now, you may say, well, I wasn't planning on doing that. And so then that would come off the table. But that's what happens a lot.
So I would just prefer to do this, even though it's not terrible. And you're right, you are paying interest to yourself and that's better than paying 22% credit card interest to another institution. But for the reasons I mentioned, this is just not my go-to. It's not as great as it sounds at face value. Does that make sense?
Okay. Yeah. So if I like have an auto loan for, you know, five, six percent, it's definitely worth going through the bank. Yeah. I mean, if you have an auto loan at five or 6%, I'd just leave that right where it is and just ride it out.
And, you know, unless you're talking about getting a new car and so you're wondering how to pay for it. Yes. I'm thinking about getting a new pickup truck.
So got it. Got it. Yeah. No, I'd rather you just get a straight loan with the, with the pickup truck as the collateral and you just try to keep your lifestyle lean with plenty of margin and maybe you try to accelerate those payments. But I would far prefer that than you having this money out of that 401k, not compounding, not growing, paying it back with after-tax money.
You know, I would much prefer you just get a standard loan and try to pay it off as quick as you can. Robert, thanks for your call, my friend. Call anytime. We're going to take a break, folks. Much more on the way, plus your phone calls, 800-525-7000.
You can call right now. We'll be right back. www.faithby.com and clicking app. That's faithfi.com and click app. We are grateful for support from Praxis Investment Management.
Since 1994, Praxis has offered investment products designed to meet practical needs for everyday investors seeking to steward their assets consistent with their desire to promote positive social and environmental impact. Praxis aims to bring a faith-based approach to ETFs, mutual funds, multi-fund portfolio solutions, and money market accounts reflecting their 500-year-old Anabaptist Christian faith tradition. More information is available at PraxisInvest.com. Thanks for joining us today on Faith and Finance. All right, we're going to go back to the phones.
We'll get to as many questions as we can before we round out the broadcast today. To Tampa, Rebecca, go ahead. Yes, I want to know that if on a mortgage and a small loan, if small extra payments a month would be about the same as making one yearly payment to principal only? Does it make a difference? It does.
You know, the sooner you pay toward the principal, the better, because every month that goes by that you're not paying interest on the amount that you reduced through that principal reduction payment is good for you.
So all things being equal, if you were to send $100 a month starting in January versus $1,200 all at one time in December, you'd be better off doing the $100 a month.
Now, if you could do the $1,200 in January, that would be better than $100 a month for the year. You see my point here.
So the sooner we can make that payment to principal, the better. And if we do that systematically, either through an annual principal reduction payment or through a monthly small amount to principal reduction, both of those are going to work for you. But if you're really just looking to crunch the numbers and figure out which is better on paper, paying it off sooner rather than later is always better.
Okay. Is that helpful? It is, yes. Thank you.
Okay. You're welcome. Let me also mention, Rebecca, if you're comfortable on the Internet, there's a lot of great mortgage calculators out there. if you just type in, you know, principal reduction calculator, you'll find a lot of free calculators where you can put in your loan amount, the balance that you have today, the interest rate, the scheduled payment and then you can start playing with the calculator to say how much interest would I save if I pay a month How much would I save at a month How much would I save if I do right now And you can see that play out in the amortization schedule and will tell you exactly what the benefit is. And you may find that that's the incentive you need to do a little bit more just because you see how quickly those numbers add up.
Thanks for calling. Let's head to Mississippi. Kathy, go ahead. Hey, Rob. Thanks for taking my call.
Yes, ma'am. I have a question about beneficiaries on IRAs. I'm curious about what the tax hit would be on someone to be a beneficiary on a fair amount of money. Is there a better way to go about designating that money to them? Yeah.
Other than just a straight beneficiary on an account. Yeah. Yeah. Very good. No, I mean, I think it is probably the best way if it's already in a tax deferred retirement account, like an IRA, an individual retirement account.
And then in terms of, you know, if you want to give it away to your church or a ministry or a charity, well, there's there's not going to be any tax. But if you want to get it to an individual, a family member, you know, through the beneficiary designation, that is the best way because with a spouse, you know, they can basically make it their own and then just have the ability to take it out at their leisure. And the only thing that would require any kind of distribution is once they reach 73, they would have required minimums with non-spouse beneficiaries. When they inherit an IRA, they have to open what's called an inherited IRA. And according to the the newest law on the book, Secure Act 2.0, they typically have 10 years from the original owner's death to get the money out.
But that's really helpful, actually, because it allows them, especially if it's a meaningful amount, to spread those withdrawals out over 10 years so they're not taking it out all in one or two or three years where those withdrawals could push them way up into the highest tax brackets. and then they'd have more tax to pay on it. By having this 10-year runway, they can work with a tax professional to take it out systematically and hopefully keep it in the lower tax brackets as they withdraw it. But somebody's gonna, unless it's given away, tax is going to be paid. And so having time on your side is your friend because you can manage it in such a way to minimize the tax liability.
Does that make sense?
It does. My husband and I both are on each others, and then we have contingent beneficiaries, two family members on both of ours. And I just was wondering if that was the best way to do it. Yeah. But, yes, that makes sense.
I will pass that information on. Also, I do want to say that I learned about CKAs on your program. Yes, ma'am. And about a year ago, my husband and I got with one in Floyd, Mississippi, and we have just been so pleased with how he has handled things. I mean, we've become really friends with him, and that's one of the things that when we first saw him, he said, You know, we like to build relationships, and we just are so pleased with Him, and I want to thank you for putting that information out.
Wow, Kathy, that is incredible. I really appreciate you sharing that testimony. You know, that's our hope and our prayer. When we created the CK designation, Certified Kingdom Advisor, it was for that reason, so that God's people could find a trusted advisor who had met high standards and character and competence and pastor reference and client reference and experience, but also that they aligned with your values and understood the counsel of Scripture as it relates to money and its role in our lives. And I am just so thrilled to hear that you've formed that relationship with your Certified Kingdom Advisor.
Thank you for mentioning that today. Lord bless you, Kathy. Thank you.
All right. Folks, if you'd like to find a CKA in your area, Certified Kingdom Advisor, just go to findacka.com. Quickly to Texas, Susanna. I've got just a minute left. Go ahead.
So the question is the following. I am 45 years old. My husband will be turning 50. We are thinking about doing a 1031 exchange on a property that we have. The capital gains will be about 250,000.
We're almost done paying that property outright. We have about 15,000 left on it.
So we're just wondering if it would be a good idea to continue with that thought process or maybe to kind of go some other route. No, I like that because that's going to continue to kick the can down the road. You know, the only potential risk is that capital gains taxes are higher in the future. One option to consider, even if you do the 1031 exchange, is to give a portion of it to a donor advised fund before you sell. If you at some point want to do some giving based on this asset, even down the road, you could give a portion of it at the sale to your donor advised fund, that's never going to be subject to capital gains.
And it'll fund an account that you can then grant out over time. But, you know, I think the 1031 is a great option. It allows you to continue to roll over that money into new investments without having to pay that capital gains, which gets more into growing it for the future.
So I like it. I'm on board with it, Susanna. Thanks for your call today. God bless you. Folks, that's going to do it for us.
So thankful for the folks that make this possible every day, Sandy and Devin, and grateful for Jim Henry as well, and everybody here at FaithFive. Hope you have a great rest of your day, and come back and join us tomorrow. By the way, if you'd like to support FaithFive and the Faith and Finance broadcast, you can do that online quickly and securely at faithfi.com. Just click give. Lord bless you.
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