This episode of the Faith and Finance podcast is brought to you by Christian Community Credit Union. Christian Community Credit Union, now joined with Adelphi, a division of CCCU, brings together the best of Christian banking for Greater Kingdom Impact. FaithFi listeners can earn up to a $400 bonus when opening a qualifying high-yield checking, savings, or Visa cash bag card with code FAITHPI. CCCU also offers a new high-yield money market, providing a competitive high rate on balances up to $100,000, while your deposits help support churches, ministries, and Christian causes. Visit faithfy.com slash banking and use the code FAITHFY.
Membership eligibility required, accounts are privately insured up to $250,000 by American Share Insurance. This institution is not federally insured. An emergency fund can be the difference between a financial setback and a financial crisis, but only if it's built the right way. Hi, I'm Rob West. Many people know they should have an emergency fund, but they're unsure how much to save or where that money should actually be kept.
Today we'll talk about why an emergency fund matters, how much is enough, and where it should live so that it's there when you need it most. And then we'll take your calls at 800-525-7000. This is Faith in Finance, biblical wisdom for your financial decisions. An emergency fund is money set aside for unexpected, significant financial disruptions. Those two words matter: unexpected and significant.
This money is reserved for the big disruptions that can shake up your financial life, job loss, a major medical emergency, a significant car repair, an urgent home repair, or another situation that suddenly interrupts your income or demands a large amount of cash. In other words, an emergency fund acts like a financial shock absorber. When something unexpected happens, it keeps the situation from turning into debt or financial chaos. Without an emergency fund, many people are forced to rely on credit cards or loans during difficult seasons. But with one in place, you create stability and breathing room during moments of uncertainty.
A helpful rule of thumb is to keep three to six months of living expenses in your emergency fund. That means enough to cover essentials like housing, food, utilities, insurance, transportation, and other necessary expenses. For example, if your household needs $5,000 per month to cover basic expenses, a fully funded emergency fund would typically fall between $15,000 and $30,000. Where you fall in that range depends on your situation. If your income is very stable and predictable, three months may be sufficient.
But if your income fluctuates, if you're self-employed, or if you want additional peace of mind, six months or even a little more may be appropriate. The goal isn't perfection, the goal is preparedness.
Now, some of you may wonder if saving for emergencies reflects a lack of trust in God, but Scripture actually encourages wise preparation. Proverbs 6, 6-8 says, Go to the ant, O sluggard, consider her ways and be wise. Without any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest. The ant doesn't worry about the future obsessively, but it does prepare wisely for what may come. That's the posture we want to take with our finances.
An emergency fund isn't about trying to control the future. It's about stewarding today's resources wisely so that when tomorrow brings challenges, we're not forced into panic or unnecessary debt. Planning and trusting God are not opposites. In fact, wise planning is often an expression of faithful stewardship.
Now, once you've decided how much to save, the next question becomes: where should you keep it? And this is where many people get tripped up. Because while an emergency fund should grow gradually, it's not meant to be invested. Why? Because investments like stocks and mutual funds fluctuate.
If the market drops at the exact moment you need that money, your safety nets suddenly become smaller. Similarly, locking emergency funds into something like a CD, a certificate of deposit, can limit your access. If you withdraw early, you may face penalties or lose interest. An emergency fund has two primary goals: safety and accessibility. You want that money to be protected, and you want to be able to access it quickly if something unexpected happens.
That's why many financial advisors recommend keeping emergency funds in accounts such as high-yield savings or money market accounts. These accounts allow your money to earn a competitive interest rate while still remaining liquid and accessible when you need it. They're also insured, meaning your savings are protected while they sit there, earning a modest return without taking unnecessary risks. And this is where our friends at Christian Community Credit Union come in. They've recently merged with Adelphi to form Adelphi Christian Banking, creating even more opportunities for believers to align their banking with their faith.
Right now, they offer a high-yield money market account that's a great fit for an emergency fund. With this account, you can earn around 4% on balances up to $100,000, giving you both strong returns and the liquidity you need if an emergency arises. Even better, when you bank at Adelphi, your deposits help fund ministry initiatives and kingdom work around the world. And for FaithFi listeners, there's a special offer right now. When you open an account and use the code FAITHPI, you can receive up to a $400 bonus.
If you want to learn more, just visit faithfy.com/slash banking. We'll be right back. If budgeting feels like a second job, the new Faith Phi Pro was built just for you. It learns your spending patterns, categorizes your transactions, and helps you build a budget based on your real life. Plus, scripture readings and biblical devotionals help you manage God's money God's way.
Try Faith Phi Pro free for 30 days and lock in 25% off a pro subscription. Download the FaithPhy app from your app store or at faith5.com/slash app. That's faithfi.com/slash app. FaithFi's preferred banking partner is Christian Community Credit Union, now joined with Adelphi, a division of CCCU, bringing you the best in Christian banking for Greater Kingdom Impact. With high-yield checking, savings, VisaCash back cards, and a new competitive high-yield money market account, your everyday banking helps advance the gospel.
Visit faithfy.com slash banking and use the code FaithFi. Membership eligibility required. Accounts are privately insured up to $250,000. This institution is not federally insured. Uh Great to have you with us today on Faith and Finance.
We're taking your calls and questions. If you have a question today, go ahead and call right now, 800-525-7000. Let's go to Texas. Diana, you'll be our first caller. Go ahead.
I'm I'm just a real basic person. I started a 403B after working high paying job, but finally, I was offered a four hundred three B not very long ago. And now I work a different job where I do no longer contribute, but it's accrued maybe around fifty thousand And my tax lady had told me Back then, because I was paying very high taxes, to go ahead and Stop doing Roth and put it in traditional, that I would not accrue that much money and I would be able to take ten thousand. out per year tax-free.
So I followed her advice. And so now I have part in traditional and part in Roth. It's the only nest egg that I have. I was wondering. Should I roll on sixty eight?
And I am still working, but I'm not continuing to contribute. Um with my other with the job now. Should I move what's in traditional into Roth? And how would I do that, if so? I got it.
Yes, it's a great question. And that would happen by way of what's called a Roth conversion.
So here's a simple way to think about it. First of all, I like this idea that you have both because having both the traditional and the Roth money gives you flexibility, which is great, to determine when it's appropriate to pull the money and pay tax on it from the traditional versus when you want to take the Roth money, the after-tax money. And a lot of that will be determined by the tax rates in retirement, but it gives you flexibility.
So, a Roth conversion means paying tax now. If you move the money from the traditional 403b to a Roth, the amount you convert is treated as taxable income this year.
So, the main question is: would I rather pay tax now or later? And generally speaking, that can make some sense if your current tax bracket is relatively low. You expect higher taxes later. because you think tax rates are going up, which they probably are. And you want to reduce Future required minimums because the Roth does not have a required minimum at 73.
The traditional does. But there are things to watch. Since you are still working, you don't want to push yourself or any portion of this into a higher tax bracket because you have more taxable income as you make those conversions. And you don't want any Irma surcharges on your Medicare, which comes from your modified adjusted gross income.
So a lot of people will work with their CPA to say, how much could I transfer each year, just a little bit at a time? You know, especially when you're talking about between retirement and when you start taking Social Security, if you haven't done that yet, that might be the window over maybe two or three or four years to do a little bit at a time.
So you don't experience any of those downsides that I mentioned. But give me your thoughts on that, Diana. I am in my second year now of taking I took it at sixty seven and a half my Social Security. And I worked really hard last year and made a lot of money. I'm trying to pay down a mortgage.
And get that done in order to retire.
Well, if that's going to continue this year, this would not be the year to do that conversion because it would not only put you back in that higher bracket with a portion of this, but it could cause Medicare premiums to go up because you have this higher income. Would you explain Irma? I'm not sure I understand exactly. Sure. Yes, IRMA is basically what's called income-related monthly adjustments.
And it's a surcharge for higher income retirees on their Medicare premiums. And so if your income is above a certain threshold, Medicare charges more for Part B, the doctor and coverage, and Part D, the prescription drug. Coverage and they look at your tax return from two years ago to determine whether you owe Irma.
So, two years from last year, so next year, you're probably because you said I worked a hard and I brought in a pretty good amount of income, that's probably going to result in you having an Irma surcharge on your Medicare premiums next year for last year's income. And if you did a Roth conversion this year and you have a higher income, then two years from now, you may have another IRMA surcharge.
So you just want to be careful there that you don't convert enough such that it pushes your what's called modified adjusted gross income above the threshold that's going to result in you paying more premium for Medicare. Do you know what that threshold is? Yeah, it's uh 109,000. Oh, I have no fear of hurrying that much.
Okay.
Well, but with a conversion, sometimes you can slip over that.
So if that's not you, then you don't have to worry about that.
So then it would just be limited to: am I going to pay more taxes on a portion of this? Because it's going to go from the 12% to the 22% bracket or something like that. And you just need to recognize that you're going to have less in that traditional IRA, which you could also pull out for charitable giving later and never pay tax on.
So those are some things to think about. But I think if you want to do this over time, I would just work with your CPA to determine the right frequency and amounts. Diana, we appreciate your call today. Thanks for being on the program. To Cleveland, Ohio.
Lawrence, go ahead. Yes. Hello, Rob. Thank you very much for your program. Greatly appreciated here.
I'd like to ask you I'd like to ask you a quick question. I have a four hundred one here at work. I'm sixty seven years old, and I'd like to withdraw money to purchase a car for, say, twenty five thousand dollars versus taking a loan, paying interest. Is that something that I'm allowed to do, or do I have to talk to the plant administrator, or is that up to the administrator? Or is it legal where they I can you can take us so you're talking about taking a loan from the 401k to buy the car?
Or just withdraw the money. Yeah, if you withdraw the money, it's going to be taxable. You're over 59 and a half, so you're not going to have the penalty, but 100% of what you take out is going to be taxable.
So it would be added to your taxable income for the year. And then the other piece is, which is perhaps the bigger issue, is just the opportunity cost because now that money is not available to compound and grow, you know, for the next 20 years while you're between now and when the Lord calls you home.
Now, you could also say, listen, I've worked my whole life. I've got plenty of assets. And we haven't gotten into the rest of your situation in terms of how you're going to cover your income in this season of life. But if you've got enough assets and you say, listen, I just want to take this out, pay the tax on it, buy the car.
Well, that's fine. But we just need to factor this into, okay, what other assets do you have? And how are you going to fund your lifestyle expenses moving forward? I'd rather you do that without taking the money out of the 401k just so we can keep as much growing for you as possible. But if you have enough in the way of assets, that may be perfectly appropriate.
Does that make sense? Yeah, I don't have enough in assets. I mean, I'm going to be stretched then.
Okay.
You know, so it'd probably be better to leave it, leave the money in there, like you say, and let it grow. I think so. And then the question is: okay, now how do we solve for the car? And do you have a car right now? I mean, the cheapest car you can own is usually the one you have right now, and you continue to drive it.
You know, if it becomes cost-prohibitive and you need to buy a new one, you know, maybe you find something for $18,000 and you take a, you know, a small loan out and, you know, you try to just pay on it as quick as you can. But I would try to preserve as much of that 401k money as possible just because it sounds like you're going to need that. And so let's keep that money growing for you. We appreciate your call today, Lawrence. Hopefully that gives you a few ideas.
Back after this. Stay with us. As the leading advocate for the Christian financial industry, Kingdom Advisors serves the public by promoting the integration of a biblical worldview across every aspect of the financial services industry. And we serve a growing network of thousands of Christian financial professionals, equipping and empowering them to carry biblical financial wisdom to their clients, peers, and community. For more information, visit kingdomadvisors.com.
That's kingdomadvisors.com. 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 impacts. Praxis aims to bring a faith-based approach to ETFs, mutual funds, multifund portfolio solutions, and money market accounts, reflecting their 500-year-old Anabaptist Christian faith tradition. More information is available at PraxisInvest.com.
This is Faith and Finance, biblical wisdom for your financial decisions. I'm Rob West. Looks like we have one line open today: 800-525-7,000. You can call right now. All right, back to the phones.
We go to Louisiana. Hi, Mary. Go ahead. I have a question. Say if I was interested in doing a reverse mortgage, once you do that, that means that house no longer would belong to me?
No, it just has a lien against it.
So it's similar to you having a conventional mortgage. You're still on the deed. It's just that that loan, that mortgage, has to be satisfied before you can transfer or sell the home to somebody else with a clear title.
So it's just like any other mortgage, Mary. There is one distinction, though, that actually works in the favor of the reverse mortgage.
So if you have a conventional mortgage, so a typical mortgage that you'd have on your home where you make a scheduled monthly payment over 30 years, you are signing personally for that mortgage.
So yes, the home is serving as collateral, but if the home ever lost value, And you owed more on that mortgage than the home was worth and you tried to sell it and the sale price didn't give you enough to pay off the mortgage, you'd be personally responsible to make sure that the mortgage is paid in full. With the reverse mortgage, that's not the case. The only collateral for the reverse mortgage is the home. And if the home lost value and the mortgage ended up being more than the home was worth, the Federal Housing Administration, the FHA, steps in and makes up that difference.
So you never have anything beyond the value of the home.
Now, if the mortgage, the reverse mortgage ended up being less than the home was worth, well, then after it's paid, whatever's remaining from the sale could be passed on to your heirs. But you still own the home. It's just that the reverse mortgage has to be paid either when you sell it or at your death. Does that make sense? Yes, so you can do it like a reverse mortgage propile about a year.
Well, so you've got a few options with a reverse mortgage.
So you can use it. Do you have an existing mortgage on your home? Yes, sir.
Okay.
And what is the balance roughly of that mortgage? Do you know? Not right off hand, but it's Is it less than half of the value of the home? Um Not really.
Okay.
Yeah, so that wouldn't work. You have to have at least 50% equity. In the house.
So the mortgage that you have today couldn't be more than 50% of the value of the home.
So if your home's worth 200,000, you'd have to have a mortgage less than 100,000 in order to qualify.
So if you don't, you would need to wait because that's one of the two big criteria. You have to be at least 62 and you have to have at least 50% equity in the house.
So perhaps you continue paying on that mortgage. And then when you get to 50%, because you're paying down the mortgage and your house is appreciating, well, then you could consider it. And one of the benefits is even if you didn't take any additional money out, you could just pay off your existing mortgage, again, assuming it's half the value or less with the reverse mortgage. And then you just eliminate that mortgage payment, which could help you balance your budget if you're running really tight in this season of life. Hope that helps you, Mary.
Thanks for your call. Let's head to Mississippi. Tammy, go ahead. Yeah. Yes, sir.
I have a quick question. I'm on full benefits disability. And I w heard that at retirement age that it would Flip over to retirement and not be disability. I'm not sure about that. But would it flip over at sixty two or sixty five?
If it did at sixty two, would I be able to earn any money? Or would I still be in uh not being able to earn anything?
Okay, so you're on SSDI, Social Security Disability Insurance, is that right? Yes, sir.
Okay, so when does disability switch to regular Social Security?
Well, if you're on SSDI, it automatically converts to regular retirement benefits at your full retirement age.
So for most people today, your full retirement age is somewhere between 66 and 67, depending on your birth year. There's no reduction. There's no new application. There's no change in the payment amount. It just changes categories.
But it's not 62 or 65. It's full retirement age. What year were you born?
Okay.
Well, I was born in 68.
Okay, 1968. Yes, sir.
So your full retirement age should be 67.
So your disability check will automatically switch to standard Social Security benefits at 67 with no change in the payment amount.
Okay.
Well, after 67, will uh roll over and be able to, you know, like take jobs without being penalized? Yes. So uh once you convert to social security, regular social security, then the social security rules apply. And after full retirement age, which is sixty seven for you, there is no earnings limit whatsoever.
Okay.
That's what I needed to know. Thank you so much. All right, you're welcome. Thanks for your call today. Let's go to Oregon.
Hi, Betty. Go ahead. Thank you for taking the call. My question is: I'm currently 71, but I'm a planner and a plotter. Regarding my IRA, I plan to do QCD to minimize the amount that I'm going to give to the Fed.
with that increase.
So Since my birthday is in August, Do I do my Q C D giving Prior to my August birthday, Or between August and December. I'm just wondering when do they calculate? The amount that my RMD should be. If it's about timing and I I want to be able to do my giving prior to them calculating the RMD. You know what I mean?
So that I totally avoid the tax hit. Yeah. Well, the RMD is calculated based on the balance December thirty first each year. You can c start doing qualified charitable distributions now because you can begin doing them once you reach age seventy and a half. And the money goes directly to the qualified charity.
It is not part of your taxable income. You don't get a deduction, but it's never taxed.
So, it doesn't hit your adjusted gross income. And when you start to have required minimums at 73, Any amount you give through a qualified charitable distribution will count toward your required minimum. But if you want to start lowering that balance now, you can start doing qualified charitable distributions anytime after 70 and a half.
Okay.
Is that helpful? Yeah, that's what I've been doing.
So they calculate the RMD at December 31st, right? That's bad. But it will be. That's correct. It's due in the next tax year, right?
That's exactly right. Yep.
Okay, there you go. And yep, you have until April after the year you turn 73. Your first year, and then by December 31st. Every year following.
So we appreciate you checking in with us, though, Betty. I love the fact that you want to get more of this into the kingdom through your giving. And if you can reduce taxable income as a part of that, then go for it. That's a great thing. Hey, thanks for being on the program today, Lord.
Bless you. Big thanks to my team today. Thankful for Taylor and Devin and Sandy and Patty and everybody that makes this possible here at Faith Fi every day. Go out and live as a faithful steward. Make God your ultimate treasure.
Hold money loosely. Make it a tool. Give it generously. Invest it strategically. And come back and join us tomorrow.
We'll see you then. Bye-bye. Faith in Finance is provided by FaithFi and listeners like you. Yeah.
