This episode of the Faith and Finance podcast is brought to you in part by Christian Credit Counselors. If credit card debt is weighing on your heart and you're unsure where to begin, our trusted partner, Christian Credit Counselors, is here to help. Their debt management program can help you pay off your credit card debt up to 80% faster while ensuring you honor your financial commitments in full. Take the first step toward financial freedom today. Visit faithfy.com/slash CCC or call 800-557-1985.
If you're drowning in debt and someone offers a lifeline, make sure it's not really an anchor. Hi, I'm Rob West. You have a few different options for paying off debt, but they're definitely not all equal. You have debt settlement, debt consolidation, and debt management. Neely Simon joins us today to explain the difference.
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 a pleasure to have Neely Simon with us. She's a certified credit counselor with Christian Credit Counselors, an underwriter of this program. And Neely, it's great to have you back with us. It's a pleasure to be here. Thank you so much for having me on the show.
Neely, we get calls from folks who need clarification about the different kinds of debt repayment plans, so it would help to go over these in detail and explain how each works. Does that sound all right?
Sounds great. I'm ready. Let's do it. All right, the one people ask the most about is debt consolidation.
Sounds self-explanatory, but there's more to it, isn't there? Absolutely.
So debt consolidation loans are often appealing because your debts are rolled into one loan, which usually has an interest rate between 15 and 22%, depending on your credit score. And it allows you to keep your accounts open. It's attractive because it's a quick fix.
However, it doesn't require changing your spending habits, which can potentially lead to doubling your debt in a hurry, making it a dangerous solution for many people. Proverbs 13:11 says, Wealth gained hastily will dwindle, but whoever gathers little by little will increase it. Mm. Yeah, let me just affirm that. I have talked to countless callers who go with the consolidation route.
They call me back six months or a year later and say, guess what? The credit card debt is back, but now I have the consolidation loan on top of it.
So changing the behavior is key. All right, Neely, another method for getting out of debt is what's called debt settlement. I'll go out on a limb and say that you're not a fan here either. Tell us about it. Not a fan at all.
So, debt settlement companies use unethical practices because they're not transparent with the consequences and can be very misleading. Debt settlement companies require that you stop paying your creditors, so you destroy your credit, and it can be almost as damaging as a bankruptcy. The other thing you need to take into consideration is the amount that is written off is taxable income, and you will receive a 1099 C at the end of the tax year. But most importantly, creditors start seeking legal action after a year give or take of non-payment, which can result in a lien on your property in most states and potential wage garnishment.
So, as Christians, we are called to pay back our debts and take responsibility for our actions. Psalm thirty seven twenty one states The wicked borrows but does not pay back. Hmm. Yeah. All right.
We've only got time for one more. This is, of course, my preferred way, and it's what you offer at Christian Credit Counselors. It's debt management. Explain that to us. Sure.
So credit counseling offers a debt management program that really enables you to get out of debt. the right way because you honor your debt in full. We're able to lower your payments and your interest rates. You continue making monthly payments to each and every creditor on the program. The payments are just made through us and are consolidated into one monthly payment.
You do need to be aware that the accounts you choose to enroll do get closed by the creditors, but you're not required to enroll all of your accounts. And then our interest rates will range in between 1 to 12% APR, allowing you to pay off your debt 80% faster from a biblical approach. Proverbs 3.27 states, do not withhold good from those to whom it is due when it is. in your power to do it. That's well said, Neely, and that's why this is my preferred option to get you out of debt once and for all and change your behavior in the process.
The team at Christian Credit Counselors leads with education, so it's a free consultation as they educate you about your options and how debt management works. It's also a biblical solution in that they're going to pray with you, encourage you, and really journey with you in your faith at the same time you're addressing your debt repayment. You can check them out at faithphy.com/slash CCC. And Neely, we are so grateful for our long-standing partnership with Christian Credit Counselors over the years, and we appreciate you being here today. Thank you so much.
God bless. That's Neely Simon with Christian Credit Counselors. Again, that website is faithfy.com/slash CCC. All right, a quick break and back with your questions today at 800-525-7000. That's 800-525-7000.
I'm Rob West, and we're just getting started. Don't go anywhere. Yeah. 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. Feeling burdened by credit card debt? As faithful stewards, we are called to manage our finances wisely. Christian credit counselors can help with a debt management program that allows you to pay off debt up to 80% faster while honoring your commitments with integrity.
Don't let debt hold you back from the life God has planned for you. Take the first step toward peace and financial freedom today. Visit faithfi.com slash CCC or call 800-557-1985. Uh Yeah. Great to have you with us today on Faith and Finance.
We're taking your calls today. We've got the phone lines building. We're nearly full, so we're going to go ahead and dive in. We'll begin in Tennessee today. Robert, go ahead.
I know you're not a big fan of annuities, but I've got a very diverse portfolio. I've got about 1.3. million between IRAs and a four hundred one K. About two hundred thousand I keep liquid. But my question is.
When an annuity becomes due, if you never take out, it's a five-year annuity. You never make any withdrawal. You just let it keep rolling. If you roll that, when it matures completely in five years and you roll that to another one, do you have to take taxes on it when you roll it? Yeah.
The short answer is no. You typically do not owe taxes if you roll it directly into another qualifying annuity.
So you move directly from one annuity to the other, and the IRS allows this without triggering taxes. And so your gains continue to grow tax deferred. The key rule is that it has to go insurance company to insurance company. It can't come to you first, even briefly. If they send you a check and you redeposit it, it becomes taxable, kind of like an IRA rollover.
When would you owe taxes?
Well, if you take the money out, withdraw it, or partially cash it out during the rollover. And remember, gains come out first and are taxed as ordinary income. You're going to want to watch any surrender charges. You know, if you're still in the five-year surrender period, there may be fees. And just make sure you look at is the new annuity actually better?
Is it better guarantees? Are there lower fees? But bottom line is, you should not have a taxable event if you do a 1035 exchange. And I hear you in that, although annuities aren't my first choice, especially as a sole investment or retirement strategy, as a part of a well-diversified portfolio where an annuity providing a guarantee can be one piece of that, that can make a lot of sense.
Okay, well, I appreciate you taking my question. Absolutely, Robert. Call anytime, sir. Lord bless you. Let's see, Luisha, go right ahead in Illinois.
Yes. My question is, are you able to save enough to live for like the next four or five years? We don't have any debt.
So my question is, should I just spend the money that I've been able to save to live for the next years before start pulling out of my retirement benefits? Or is it better to leave those savings and start pulling right now? Yeah, it's a great question. I'm glad you have the flexibility to choose which would be the better path forward. Let me just understand what you have.
How much savings have you built up? Uh is around three hundred thousand.
Okay, and that's just in a high yield savings account or where is it? It is. It is like in a C D, like it's making a little bit of uh in the middle of the great. And then what do you have in your retirement? It's like around five thousand per month that will uh that I will sell.
And the longer you delay it, I would imagine the more you're going to get. Is that right? Yes, yes.
Okay. And we're not talking about Social Security. This is a retirement plan from work.
Okay. Right. And so Social Security would be an addition. No, I will have not a social security at all. Oh, you will not have it.
Okay. And are you still working now? Ah, but I'm going to retire at the end of this school year.
Okay. And so once you retire, then the only thing you're going to have to depend on is the $5,000 a month and then whatever you do with the $300,000 in savings. Is that right? Yes. Mm-hmm.
Okay. And what are your monthly bills gonna be? Have you put your retirement budget together? What do you think you need? Around 2000 per month.
2,000. Got it. First of all, you're in a really strong position. But if, and I would double check this because that sounds like a lot. But the bottom line is that increase is huge.
I mean, if you're going to get an extra $12,000 a year every year you wait, that's a guaranteed lifelong increase. That's hard. It's going to be hard to replicate that kind of return safely anywhere else. And so if you were to delay one year, you need about $24,000 from savings to cover your expenses. In exchange, you get $12,000 more per year for the rest of your life.
Your break-even on that is two years. After that, you're ahead permanently.
So I think this is the strategy. It's to use savings, the CDs, to cover living expenses for a period of time and delay taking the pension to increase the monthly benefit. Because again, you're converting the savings into a larger guaranteed income stream. And because your expenses are low, the $2,000 a month versus the $5,000 in income, and you have significant reserves, you're not stretching. You're just really optimizing.
The only reason why you might not want to delay. Taking the retirement benefits is if you had major health concerns, which could lead to a shorter life expectancy, or just a really strong desire to preserve your savings, or just because you want peace of mind to maximize the income. But maybe one middle ground is just to delay maybe one to two years, not any longer than that.
So you get that boost in income, but then you stop any kind of continued withdrawal on the savings, still keep it working for you, but then you're living off of the retirement income that's now higher, maybe $7,000 a month instead of $5,000, and you're putting maybe up to $5,000 a month back into savings because you don't need it. And you could rebuild your savings at that point.
So I might consider waiting one to two years.
Okay, okay. Yeah, sounds good. Thanks.
Okay, you're very welcome. Call anytime. Lord bless you, Louisa. To Safford, Arizona. Arnold, go ahead.
Yes, Rob. I'm concerned about taking from a traditional RRA five hundred seventy five thousand, putting it into a Roth and being able to pay the taxes, doing it in five splits For five beers. And then after those five years, am I correct that I would not pay any money if I got interest on that money made from a traditional to a Roth? That's correct because once it's in the Roth, now it's growing tax-free, and you don't have any required minimums, so you wouldn't have to take anything out. I guess the only question would just be: are there other ways to get that money out without ever paying any tax?
Because you're going to have a pretty steep tax bill, you know, adding $100,000 a year for the next five years that would now be subject to federal and state income tax.
So, for instance, with the current giving that you're doing, what about, you know, if you're doing some charitable giving to your church or other ministries out of after-tax accounts, like from checking or savings, what if you replace that with money from your IRA through a qualified charitable distribution? And then you'd get that money out without ever paying tax on it.
So that might be a way to take a portion of it to kind of earmark for your giving. And that way you're not putting as much through your federal tax return and state and having to pay tax on it. Does that make sense? Yeah, I already looked into that quality charitable thing is, but that's not but my question was: after the five years that I left the money in there from switching it over from an IRA, to a Roth. There would not be no more future taxes on that money.
Is that correct? That's correct. Yeah, because you would have already paid it. You've accommodated for the five-year rule, so that's important. You can't take it out.
But as long as it's in there for five years and you've paid the tax, now that money is growing, and whatever you invested in, whether it's earning interest in a brokered CD or it's in stocks and bonds or mutual funds or gold, whatever it is, yeah, there's no tax to be paid on the gains from that point forward.
Okay, that's what you answered my question because as long as I stand there for the year. Making the split. My Medicare don't go up either. Ah, I see. Yeah, in the future.
Now, it would, while you're recognizing that income, but you mean beyond the five years? Right, beyond the five years. Yeah. All right. Well, listen, you're on it.
It sounds like you've done a great job. I would confirm all this with your CPA. You just don't ever want to have any surprises here, but I sound like you're on the right track.
So, great question today. All right, a quick break and back with much more, including your questions. Call right now with a financial question: 800-525-655. 7,000. We'll be right back.
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Great to have you with us today on Faith and Finance. It's our final segment. We're taking your calls and questions today on anything financial, helping you apply the wisdom from God's Word, the principles and passages that we see on money. By the way, there's 2,300 of them to your financial decisions very practically. And so, if you have a question today, we actually do have some lines open now.
We didn't earlier in the broadcast.
So, if you've gone to call right now, you can get right through. 800-525-7,000. We'll probably have room for two or three more questions before we round out the broadcast today. All right, back to the phones. We go to Indianapolis.
Brent, go ahead. Hello. Very good to be on your program. Thank you. I have a service contract with a HVA company after having installed a furnace and air conditioner in December of twenty five.
And I have the manufacturer's warranty of ten years on compressor, condenser and evaporator. And this service contract is a ten year plus warranty, and under that is one year money back guarantee, three year lemon guarantee and three year performance guarantee. And then ten year on parts and warranty or labor warranty.
So I'm wondering, is that contract the service contract, is that worth keeping or should I not have that? Yeah. And it's $592, you said? It's $41 a month.
Okay, so about $500 a year. And does that cover annual maintenance visits? It covers the Spring and fall maintenance visits. Yeah, yeah, got it.
Okay. The thing about it is, they still charge a service charge when they come out.
So, really? Yeah. Yeah. Yeah. Well, I mean, I think you've kind of answered your own question there.
I mean, I think with a brand new system under warranty, especially if the service contract still has service visits that you've got to pay for out of pocket, you know, I was going to say, if maybe an annual maintenance visit was even $100 a year, you know, that's $200 a year, which brings your $492 down to $292. And so you're paying for zero hassle and peace of mind. But if you've got labor and parts covered, it just seems like you'd be far better off taking that $500 a year, putting it in savings. And once you build that up to even $1,000, I think you just reclaim that in your budget and just rely on that manufacturer 10-year parts and labor. Labor plus the lemon, you know, on top of that, which, if that's the case, you're going to know it before that year's up.
I mean, it just seems like that's an unnecessary expense at this point, and a pretty significant one at that. Yeah, I agree. And I'm very thankful for your program. And thank you so much for taking the time to take my call. I'm happy to do it, Brent.
Call anytime, sir. And thanks for being on the program. Down to Florida, Margo, go ahead. Hi. Hi there.
I'm really appreciate your program. I wanted to say I am I've been at my job, my current job, for forty four years, and I'm going part time this current week, actually. And I am going to be retiring, but I'm going to stay part-time until August. But I have a 401, and I believe I can just roll over a portion of it. until August so that I can take a distribution.
in order to supplement Social Security, because I just started So Security, I'm 65.
Okay. Yeah, so are you wondering should you leave it there or roll it out? Yeah, should I just take perhaps it's about five hundred thousand, so should I take like one hundred thousand and Roll just a portion of it over now so that I can take distributions? Or should I? I am contributing to it still, so I don't want to close I don't want to take all of it and put it in the IRA.
Yeah. And you said you're going to go part-time. And when do you plan to fully retire and separate from service completely? in August of this year.
Okay. Yeah. And so what I would probably do is, you know, just wait until that point. The IRA that you have that you could roll it into, who's managing that currently? and power.
And yeah, that was the next question. Should I use Empower to roll it over with, or should I pick a Fidelity, Vanguard, or Something like Schwab.
Well, I think the key question is less about the custodian. I mean, you certainly want to pick one that's respected and not going to charge you unnecessary fees, but it's really about the money management. Who is actually going to pick the investments, especially with a half million dollar plus portfolio? That's a lot of money that you've accumulated. Are you wanting to pick those investments yourself, or do you want to have somebody do that for you?
Absolutely not. I want some yeah, and I would encourage you to head that direction.
So, you know, what I would probably do is head to findacka.com. There's some wonderful certified kingdom advisors, you know, that are likely in your area there in Florida. Go ahead and start interviewing. I'd probably leave the whole 401k where it is until you fully separate from service. Between now and August, make your decision on who is that advisor you're going to work with, where you've got a good rapport and you feel like you're a good fit for his or her practice and you understand how they're going to manage it and how often you're going to meet and communicate and all those things, how they get paid.
And then once you've made that decision, once you separate from service, I'd roll the whole thing over and they can coordinate the monthly checks that are coming out of the 401k versus now the IRA to make sure you've got the spending money you need. Maybe you take two months' worth the month before you roll it over or something, just so there's not a disruption. And then at that point, the advisor would take over in managing that half a million. But I don't see any need to go ahead and get it out of there, especially if you haven't selected the advisor that's ultimately going to be making the decisions. Oh, I think I was going to take some out because I needed a distribution now to supplement Social Security and My part-time.
Yeah, got it. But I would just do that from the 401k and just leave it all there. Take whatever you need on a monthly basis from the 401k to supplement your income and then make sure you get enough so that if you have a couple of weeks disruption as you're transferring it over to that new IRA with the new advisor who's going to manage it, I would just do all of that rollover, the full 401k, once you separate from service after August. Oh, okay.
Okay. Yeah. Yeah. I don't I don't see any need to do a partial rollover at this point, especially if you haven't landed on who's going to manage it. Leave it where it is.
Take the distributions as you need them, whatever amount you need. Go ahead and start interviewing and making that selection on the advisor. And then once you make that selection, then as soon as you retire completely, we roll it over to that new IRA, 100% of the portfolio. We close out the 401k and now you're taking your monthly distributions from the IRA at that point.
Okay. All right, well, thank you very much. I appreciate your help. You are so welcome, Margo. Call anytime.
Again, that website, findacka.com. Folks, that's going to do it for us. Big thanks to my team today, the amazing men and women that serve this program each day and make me sound a lot better than I am. Josh, Tahira, Taylor, Omar, and everybody here at Faith By, including our content team, our marketing team, station relations, all the various functions that are behind the scenes that you don't experience every day. They make it all possible.
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Yeah.
