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Whole Heart Finances

Faith And Finance / Rob West
The Truth Network Radio
June 5, 2024 6:17 pm

Whole Heart Finances

Faith And Finance / Rob West

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June 5, 2024 6:17 pm

For many, money is the number one source of stress. But what if you could transform your relationship with money from one of fear and dread to one of trust and joy? On today's Faith & Finance Live, host Rob West will welcome Dr. Shane Enete to discuss how we can do that. Then Rob will answer your questions on different financial topics. 

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Are you tired of feeling overwhelmed and anxious about your finances?

You're not alone. Hi, I'm Rob West. For many, money is the number one source of stress. But what if you could transform your relationship with money from one of fear and dread to one of trust and joy? Dr. Shane Enet joins us today to discuss how we can do that. Then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance Live, biblical wisdom for your financial journey. Well, we're excited to have Shane Enet with us today. Shane is an associate professor of finance at Biola University and the author of the brand new book Whole Heart Finances, a Jesus-centered guide to managing your money with joy. Shane, great to have you with us.

Thanks so much for having me. Shane, your book is about taking your commitment to Jesus to the next level, including the area of finance. I know you have a great story about how a game of Monopoly got you thinking along those lines.

So why don't we start there? So the game of Monopoly is usually a game that I dread playing, partly because it just doesn't end. I don't know if you've had that experience, but I have and I don't like it when I lose. And it's so often it just, you know, you get handed money and then you have to try and do well and you have to kind of accumulate as much as you can. And so we were in the process with my friends, you know, we're in community, but we're getting competitive.

It's just not fun. And all of a sudden I notice out of the corner of my eye, someone takes some money from the center pile and, you know, you build up some money in this free parking kind of pile in the center. And then I kind of let it go. And then I saw it again. And then I immediately stood up and said, you know, you're cheating. And he turned super red, my friend.

And he said, I'm not cheating. I'm actually tithing. And we couldn't believe what we just heard. And he had been trying to secretly put some of his money back into this pile. And we thought it was such an amazingly fun type of way to engage the game that we all started to try and secretly tithe. And it transformed the game in the same way Jesus, you know, when he gets entered in and we get a heart to do something different than the traditional way of managing money, it becomes more of a delight to play.

Oh, that's so good. Well, let's continue to unpack the book because there's so much to cover here. Now you write that the most dangerous question to ask is, should I give away all of my money?

Now, why is that so dangerous? It's kind of a hidden presumption that Jesus doesn't really approve of us having money, that he's mostly spiritual, you know, this Gnostic view that what's good is what's spiritual, what's bad is what's physical. And because Jesus, you know, answered to the rich young ruler that you should give away everything, and we're already assuming Jesus disapproves of the material world, we just assume, hey, if I'm actually honest, and I approached Jesus with a question about my bank account, he's just going to kind of shake his head and say, what are you doing with that money? How about you just get rid of it?

And so if we actually are honest with Jesus with money, it feels very dangerous, because he feels like an untrustworthy person that just wants to get rid of our money. Yes. So help us navigate that. What then is the answer to that question?

I think there's two things to consider. The first is that Jesus actually has a physical body. And, you know, when he came to earth, he came word made flesh, and that flesh had to eat and that flesh had to drink, that flesh had to consider finances. And then he didn't just abandon that flesh, you know, when he died and was resurrected. He actually ascended into heaven and merged the physical world and the spiritual world together, making our financial needs, our physical needs, something that is real and legitimate. So we can kind of own that and understand that Jesus doesn't despise our physical needs, despise our need for financial planning. And that really takes out so much of the fear. And the other thing we need to consider is that we're in Christ as a Christian. We're in his physical body in a spiritual way.

And so there's no dangerous question anymore. It's all grace. There's no way we can earn his love. There's no way we can lose his love if we don't give away everything and there's no way we can gain his love if we do. That's so helpful, Shane.

That's an important question to answer. And I think you've given us some handles there to think about it. Well, when we come back, folks, we'll continue our conversation with Shane Enoch today. He's the author of Whole Heart Finances, a Jesus centered guide to managing your money with joy. We'll talk about what does it look like and what happens when we separate Christ from our finances. We'll also talk about some exercises you can do to experience joy in managing money more fully. Back with more on Faith and Finance Live.

Stick around. Great to have you with us today on Faith and Finance Live. I'm Rob West. Today we're talking Whole Heart Finances. Our guest today is my good friend, Dr. Shane Enoch. Shane is Associate Professor of Finance at Biola University and the author of the brand new book, Whole Heart Finances, a Jesus centered guide to managing your money with joy. Shane, before the break, we were talking about what it looks like to take the fear out of our money management and lean into Jesus instruction for us with regard to whole heart finances. But what happens when we separate Christ from our finances?

It's really what we're seeing in culture is we're seeing anxiety and we're seeing alienation. So we're sensing people feel alone with money and we also see that people feel this great burden of financial responsibility. And we weren't meant to bear all financial responsibility. It's too big of a burden. Christ has promised to be there for us and the Father has promised to be a good Father. And so essentially when we try and bear full financial responsibility because we don't trust Jesus, we think He's kind of a wild card with money, then we're fracturing our hearts and we're not living with a whole heart.

Yeah, and that's really challenging, right? Because so often we can try to bear the burden of that, Shane, and we put on top of that just the circumstances that we all face, which can be really challenging. And so what would you say to somebody today who finds themselves in that desperate position financially where they just don't know where that next paycheck is going to come from?

How might you encourage them? I'd say first to meditate on what it means to have God be a good Father and how if we truly believe He's a good Father, then there's a certain sense of comfort that comes from that. And you know, and the second thing I'd say is try to bring that heart of worry and despair to the Lord. You know, He wants all of us and too often we'd say, all right, Jesus, you can have all of me except this whole world of money.

I don't want you to be a part of it because I don't trust you. And money is so intertwined with our heart and our feelings that it's very, very important to bring those anxieties to the Lord, to bring them as a part of the relationship so that you can grow together in that. Yeah, no question about it. And what an opportunity for those who have more than they need to lean into being the hands and feet of Jesus and helping those on their path. Now Shane, as we talk about whole heart finances, I love that you use some illustrations that can help us understand this in the book. And one in particular, you write that we should be like the Sea of Galilee, not the Dead Sea.

Share that with us. So a nature analogy, I feel like is just a great teaching tool. It helps you see a deeper truth by looking at something that's evident to us. And Paul in 2 Corinthians, he's trying to help the church and the Christians in the Church of Corinth understand how they're supposed to manage money. And what he tells them to do is to excel in the grace of giving.

And he says that this benefits you. And so I wanted to help provide an analogy for that kind of big concept, a big cerebral concept. And what I saw a good analogy was to look to Israel and to look to the Sea of Galilee and the Dead Sea, which are both fed by the Jordan River. So you have these two seas and they're really lakes, but the Hebrew didn't have a word for lake, so they just have sea. And I've learned the Sea of Galilee has been renamed to a certain lake. So you have this kind of water source of the Jordan River feeding both bodies of water, but one is alive and thriving and the other is dead.

And the only reason for the difference is that the Sea of Galilee has an outlet, whereas the Dead Sea just accumulates and accumulates and then the salt builds up and kills whatever's in it. So this is basically an analogy for we're in a posture of receiving God's gracious provision. And if we just close our hand to it, then there's a certain toxicity that develops and grows in our hearts that kind of kills our ability to do mission. Oh, I love that.

So we want to be a pipeline allowing God's provision to flow through us and not a bucket, if you will, where it stops with us. That's powerful. Let's get practical here, Shane, at the end of each chapter, you recommend doing some what you call whole heart exercises to experience joy in managing money more fully.

So share some of those examples. You know, one of the coolest ones, and this is actually based on research, is to create a financial gratitude journal. So a basic good money practice is to track your expenses in an app like the FaithFi app.

And if you do that regularly, you're treating your role as steward seriously. But I think you can take it to the next level and treat it like a gratitude journal where you're seeing how God is providing his daily bread as you track your expenses and income. And then that becomes a formative liturgy. And so I like to embed my tracking in my quiet time. And I just, I enter into a space of such gratitude because I'm seeing it, you know, with this, you know, car fee or with a mechanic or groceries or utility bill, I'm just overwhelmed with how God is providing his daily bread for me. And so that's a really neat way of doing something that's practical and formative for our walk with Jesus.

Shane, that is so good. Do you have another example for us? Sure.

Yeah. You know, when you think about building, so retirement fund, I like to use the word elder years reservoir and to try and treat it. So borrowing from the Sea of Galley analogy, you know, we want to have as big of a flow going out of us sustainably over our whole life and reservoirs, you know, or marshes are tools for a river or body of water to help sustain a flow from the inevitable droughts that may occur or shut off of our water supply. And so we can meditate on our elder years reservoir to figure out what's the amount that will create the greatest sustainable flow over our whole life. And so that is, that's a mathematical question, but it's also a heart question. And so that's another type of exercise you can engage.

Shane, for somebody who wants to take that a step further, because I love that idea. We talk about it often and set a financial finish line. As you said, there's both a financial side to that equation and a non-financial side.

How might you encourage them to think about that either on their own or with their advisor in terms of defining enough? You know, I think most people approach, you know, with every dollar given, you spend it, you save it, or you give it. And they're all three can be done well.

All three can be done poorly. But really, Paul in Second Corinthians, I think he gives us the answer. He says, of those three, excel in the grace of giving. And so you start by saying, what's the max amount I can give and get away with? And with saving, you think, what's the minimum amount I can save and get away with?

Whereas for most people, it's a flipped equation. Yes. They say, what's the max amount I can save and get away with?

And what's the minimum amount I can give and get away with? And so as a Christian, just because we're in a posture of receiving everything from the Son, the Spirit, and provision, we've been transformed and we're in Christ. And so now we have a different maximizing quest, if you will. Yeah. And that requires that we start with the why, right? That below the waterline of the iceberg is really the values that should inform the decisions we make each day.

Isn't that true? Yeah. And so I'm kind of obsessed with, let me calculate savings and try and figure out, I think it's proper to have a bit of a reservoir, but I don't want it to be my all.

I want the whole purpose of the reservoir to sustain a greater level of generosity. Incredible. Well, Shane, we've just scratched the surface. We'll have to have you back, but thanks for stopping by my friend. Thanks so much for having me.

That was Shane Enad. He is Associate Professor of Finance at Biola University and the author of the brand new book, Whole Heart Finances, a Jesus-centered guide to managing your finances with joy. We'll be back with your questions after this break. So call right now, 800-525-7000. Or if you'd prefer to email your questions, send it to us at AskRob at faithbuy.com. Stick around. The opinions offered during this program represent the personal or professional opinions of the participants given for informational purposes only.

Any information provided is not intended to replace advice from a financial, medical, legal, or other professional who understands your specific situation. Great to have you with us today on Faith and Finance Live. I'm Rob West. What a great conversation with Shane Enad from Biola University. I'll tell you, I'm still thinking about a few of the things he said. I love this idea that we can actually see our management, our daily management, of our spending plan as a way to give glory to God, seeing his provision and faithfulness in our lives through our income and expenses. You know, as you work on your budget, celebrating the fact that God allowed you to cover those obligations and spend the money that way in a way that creates enjoyment and provision for your family and even generosity. It kind of takes the daily habit of budgeting, if you will, and managing a spending plan and turns it around and creates it a worshipful experience as a part of it. I also love what he said about creating a financial finish line.

You know, so often we think about, what does that look like? And listen, I realize you may find yourself in a really tight financial position today. And if you are, you're just trusting God for that next paycheck so you can cover your bills. And yet some of you find yourself in a position where you have a bit more, you have a surplus, more than you need. And you could go that exercise to say, what would it look like to save only the minimum that I need to continue to fund my lifestyle in this next season of life? And what would it look like for me to maximize my generosity even right now? Which may mean that you have the opportunity to give even more.

I mean, maybe you do a charitable gift annuity with Moody Bible Institute or give appreciated stock or whatever that might look like as you give as unto the Lord as he leads, but not waiting to do it out of a bequest in your estate plan of death. But perhaps you accelerate that giving right now because you've drawn a line in the sand and said, God, everything comes from you. But I've gotten to a point and I've after prayerful consideration, I've decided what's enough. And that has allowed me to accelerate my giving because I may be on a path to over accumulate. And that's not a number I can tell you, but it is a number I think you can arrive at with some thoughtful planning and prayer as you invite God into that process.

So perhaps you think on these things for the next few days and see where God may lead you. All right, let's turn the corner and take some phone calls today. We've got lines open. We're ready to tackle whatever you're thinking about in your financial life. That number to call today is 800-525-7000.

Again, that's 800-525-7000. You can call right now. Let's dive in today. We're going to begin in Minnesota. And Elizabeth, you'll be our first caller.

Go right ahead. My question is about how I split my retirement. I currently save 19% of my checks with 12% going to my 401k and 7% going into a Roth. And then every year when I get a raise, I generally raise the contribution by 2% and increase the 401k by 1% and the Roth by 1%. And now lately, I'm just not sure if it's a good idea to be contributing that much to the Roth. And my Roth is also kind of new, newer. It's got way less in it than my 401k.

Yeah, very good. And how far are you Elizabeth from retirement to the best of your knowledge today? Well, I'm 55 and I'm not sure probably after work 10 years. Okay. Yeah, but what you're saying is you have far more in your 401k today than you do in the Roth version, correct? Yeah, the Roth wasn't available to me a couple years ago. Yeah.

Okay. And so are you wondering whether you should pivot back almost exclusively to the 401k? Or are you thinking the opposite that you should put more in the Roth?

Where are you at on this? Well, I got this advice from a financial advisor of my husband's based on the fact they said we'll make a lot of money in retirement and should have money in Roth. And I kind of disagree. I think it was bad advice because of how much money we make now.

Don't we want to, you know, be putting in the 401k and have it pretax dollars? Yeah, yeah. It's a good question. I kind of agree with where they're coming from. And here's why. So there's several factors here.

I mean, one is exactly what you point out. And that is, there's a real benefit to you in what could be considered the prime of your working years at probably close to or if not the peak of your earnings to go ahead and get that current year tax deduction, which obviously is meaningful versus what will be your retirement income bracket tax bracket if you're earning much less because you don't perhaps have earned income in that season. You're just paying, you know, taxes on the interest and, you know, IRA or 401k distributions, that type of thing.

With that said, we're probably there's a couple of things. Number one is the argument for putting more in the Roth and having both buckets is it would give you flexibility in terms of which bucket to pull from because we're probably at the low end of the tax brackets. I mean, we know if nothing changes, the Trump Tax Cuts and Jobs Act is going to expire at the end of 2025. So tax rates are going higher now. Could it be extended?

Sure. But if you're if tax rates are going anywhere, they're going up. They're probably not going down from here. And that's going to include both income taxes as well as, you know, possibly capital gains as you know, on top of that. So that's one consideration. I think the second consideration is if you all are in a place where you're not going to need all of this money and some of it's just going to be able to continue to grow and then you're going to pass it on, let's say to your heirs. You know, the Roth doesn't have the required minimum distributions. And so some people find themselves with all of their money in the pre-tax environment where they get to a place where the IRS is making them pull money out at what is now age 73, that RMD age, and they don't need it. So unless they use a qualified charitable distribution, they're paying tax on money that they don't really need. They'd rather leave it there. The Roth allows you to do that.

So I think from that standpoint, given how little you have in the Roth, I'd probably just stay right on this path. But does that all make sense? Yes, it does. I feel good about that now. Okay, excellent. We appreciate your call, Elizabeth. Thanks for checking in. If you have other questions along the way, don't hesitate to reach out. May the Lord bless you. When we come back, more of your questions.

We've got lines open, 800-525-7000. This is Faith and Finance here on Moody Radio. We'll be right back. Stay with us. Great to have you with us today on Faith and Finance Live.

I'm Rob West. Before the break, we were talking to a caller about how much to put in a Roth 401k versus a traditional 401k. She was struggling with that right amount.

It was Elizabeth that we were talking to. Because the Roth 401k was newer, a newer offering from her employer or her 401k provider, she had very little in there. She was continuing to put a good bit in the traditional version, the pre-tax version, but a lesser amount in the Roth, and she was just wondering if that was a good idea.

We did talk about this last year actually with Mark Biller, and he cited a very interesting study that, Elizabeth, I want to share with you because I think it speaks directly to this. And the University of Arizona, some researchers did a study to look at hundreds of actual retirees' situation and looked at what was the optimal amount to have in your pre-tax versus the Roth. And what they suggested was adding the number 20 to your age and then putting that percentage in the traditional with the rest in the Roth. And this approach considers the risk of changing tax rates in the future, which I mentioned, and having some in the Roth can mitigate against tax rate increases or at least the potential of that. So, you know, as somebody who's 50 years old, you'd add 20 to the age of 50 and you'd come up with 70, and that would be how much you'd put in the traditional, the pre-tax version where you're getting the current deduction, and then the balance, 30% of your retirement contributions would go into the Roth.

So based on that study, perhaps that is a helpful formula for you, 20 plus your age, put that in the traditional and put the balance in the Roth. I hope that helps. All right, let's head back to the phones. We'll go to Cedar Lake, Indiana. Hi Kim, go ahead.

Hi Rob, thank you for taking my call. I have a question. I am, I'm a nurse, I was a travel nurse and I was three hours from home. My mom was with us. My husband helps take care of her.

He's a pastor and my mom fell and broke her hips. So I had to come home. So I'm my mom's main caregiver now. So I'm no longer working. I went from making very good money as a travel nurse to being unemployed right now. I have applied for a couple of jobs.

I think I have two things against me. One is my age because they know I'm near retirement. Second is there's a lot of new nurses coming out that could be making $25 less than me and they would bring them in. So I'm currently in dog grooming school and that was my retirement plan.

And I won't be done with school for about four months. So I had listened to your program a couple weeks ago and you had mentioned that you can collect Social Security now and it's just based on from what I make from the time I collect Social Security, not since January. Am I correct? Yes. So say that last part again.

What was the question there on the tail end of that? Well, I thought right now I would collect by Social Security. And if by some chance down the road I get a nursing job, I can stop collecting. Yes, exactly.

Did I hear you correctly? That is correct. So, but there are some requirements on that. When you do that, you would have to repay what was paid out to you. And you have to do that within 12 months of beginning to receive those benefits. If I started collecting, I don't think I understood what you said. If I started collecting now, I would have to pay back what?

Whatever, yeah, if you started collecting, whatever you collect prior to suspending those benefits, if you want that to continue to grow by delaying those benefits, you'd have to pay that back, everything you received, and then you could delay it up to age 70 and get that additional 8% per year for every year that you wait. Oh, so it really wouldn't be beneficial for me to collect now. And then I'm worried about the next six months.

I really am with no income. I'm not sure how to handle it. Yeah, well, I mean, you could, but obviously that money would be gone. And so that would be an issue. Yeah, but the benefit of waiting is that you'll let that money continue to grow. Obviously, if you need it, then you would, you would go ahead and take it and just use it. And obviously you're locking in that benefit at full retirement age. But you know, so long as you wait until you reach full retirement age, you know, you will get at least the full amount that was coming to you if that makes sense.

Okay, yeah, it does make sense. Okay, I didn't realize that I would have to pay back if I stopped it, that I would have to pay back what I earned. Yes. It's a one time option and you do have to pay back in full the amount that you have been paid. So it's essentially a do over where you're retracing your steps.

And as long as you do it in those first 12 months after you become eligible for Social Security benefits, then you can do a withdrawal of benefits. Okay. All right. Well, thank you. That helps me a lot. You're welcome. Thanks for your call today. Let's go to Davenport, Iowa. Hi, Meg. How can I help?

Hi, I have a question. My husband has moved furniture for a long time and he's trying to retire. But so he doesn't have a lot of moves. It doesn't have a lot of employees. So we hire somebody, you know, for the day to load a truck or unload or whatever. Okay, he was paying these people.

The regular the rate is $200 a day and he was taking taxes out and all that. But they came to him a couple weeks ago and they said, we want to pay get paid 220 a day we want cash and we'll sign a labor receipt. But when they do that, they sign a fake name a lot of times and they make up a Social Security number. In other words, they don't want to pay taxes, but they want the cash. So what does a godly employer do?

Yeah, it's hard enough to find people with a good work ethic and people that'll do a, you know, have a part time job like that. Yeah. And so what is your husband's part in that? He's asking them to handle this differently in order so they can not claim this.

Is that right? Yeah, well, he was paying them by the day and then he really, you know, he decided he was just going to do it the right way. Because what can you do up to $600 and you have to charge taxes and all that. So they got to that level. So since January, he was doing it and taking off the taxes. And now they don't they want them more money.

And just every day. Yeah, no, no question about it. Yeah, unfortunately that I would just that's not something I would be involved in. It's considered under the table employment and it's illegal.

You're required by law to withhold Social Security and Medicare taxes, the FICA from the wages. And you know, these are crucial. And it's, it's required. So I think just given that he has knowledge that this is what they're doing and why they're asking to be paid in the way that they are. I wouldn't agree, you know, to that arrangement at all. And just tell them, unfortunately, he's not able to do that. And so, you know, there's one way that they can work for him. And I realize they're good workers, and he wants to hang on to them. And yet, you know, he needs to honor what he knows is right, you know, and, and do this by the letter of the law.

So that, you know, they're, he's not enabling them to do this the way that they are. Does that make sense? It does, but I don't know where he's going to get anybody to help him load in the tracks.

He's 76 years old, almost 77. And yeah, it's hard work. I totally understand. Well, let's, let's reach out to your local church. Let's work his network in the area. I mean, let's trust the Lord will provide and honor his willingness to do the right thing and handle this the way that he knows that he should. And I believe that God will provide that the right skilled labor that he's looking for in a God honoring way. We'll pray for you, Meg, and your husband as, as he tackles that.

I know this is challenging. Thanks for calling today. We'll be right back. Faith and Finance Live.

Great to have you with us today on Faith and Finance Live. Let me clarify one thing for Kim. Hopefully you're still listening, Kim, with regard to Social Security benefits.

I want to make sure I understood you correctly. There's two ways you can suspend, essentially suspend or withdraw your benefits if you've already started collecting. The first is what's called a suspension of benefits if you've reached full retirement age.

And that was what I was unclear on as I thought about it during the break. I was thinking you were taking it before full retirement age. But if you are going to wait and take it at full retirement age or later, you have a suspension of benefits option.

That means you stop receiving your monthly payments until you re-estate them. And unlike a withdrawal of benefits, you don't have to pay anything back. The key is you have to get to full retirement age first. And if you get to full retirement age, then at any point beyond that, you can suspend benefits, not pay anything back. If you find new ways to earn income in retirement, let's say, and let that benefit continue to grow prior to full retirement age. So anytime between 1962 and full retirement age, you can do a withdrawal of benefits in the first 12 months you begin taking it. That's where you have to pay it back. But I just wanted to clear up that if you're waiting until full retirement age to take it, at any point between full retirement age and 70, you can suspend those benefits, not pay a dime back and let that continue to grow.

So hopefully that helps you and depending on which scenario you were in, understand the implications. All right, let's head back to the phones to Chesterland, Ohio. Hi, Luke, go ahead. Hi, Rob. Thanks for taking my call. Sure.

I got a quick I got a question. My wife and I have a total of three retirement accounts from employers. My wife has about 150,000 from a previous employer, and then I have 50,000 from a previous employer. And we're not contributing to those anymore.

I believe they turned into IRAs. And then now I have a new job where I have about 15,000 in there that I'm contributing to 10%. And it has an employer match of 6%. So I'm just wondering if I should keep doing that, or if I should start contributing into the larger accounts that would not have an employer match because they're IRAs now? No, there's no benefit there. And we absolutely want to make sure that you take advantage of that, that full match. Is that 6% dependent upon you putting in 6% first? Yes.

Okay, yeah. So you certainly want to do that at the very least. Now, the previous employer 401ks, the one for your wife and the one for you, those won't automatically convert to IRAs, you would have to do that you'd have to initiate that rollover, which I'd recommend you either do that roll it over to an IRA, or you could take at least yours, which I think you said was 50,000 and roll it in to your new 401k with your new employer, if they'll allow it and most do. But if they don't, or you choose not to, then I would, at the very least, get it out of there and roll it to the IRAs. But in terms of new contributions, I would just put that all in that new 401k, certainly the first 6% to get every penny of that match. And then beyond that, just because it's pretty easy to do, although if you got the full six and you wanted to pivot over to the IRA, you could do that. It's just that the IRA contribution limit is pretty low. You know, so for this year, if you're 50 or older, you could put in 8,000, your wife could do the same. But a lot of times you're going to bump into that limit pretty quickly if you're trying to max that out, and then you're going to have to come back to the new 401k anyway. So I think for me, I'd roll those out to IRAs, and then I'd probably put all your new contributions in your new plan. Okay, that makes sense.

And that's what we're doing. I just wasn't sure because it's a much larger sum of money, especially my wife's account. Shouldn't we be putting more eggs in that basket, so to speak?

Yeah, there's really not. I mean, mathematically, there's not any benefit to that. It really is just going to come down to which investments you select. I mean, you don't get any added benefit by putting more money in an account that's already larger. That's not going to increase the balance any more than you putting it in your 401k with a starting balance that's smaller. It's all going to come back down to what investments did I pick in the IRA and what investments did I pick in the 401k and how do they perform?

That's going to be the sole driver of the performance of that new money, not whether it was added to a larger account. Okay, that makes sense. All right. You're welcome, Luke. Thanks for your call, sir. To Jesse in Concord. Go right ahead, Jesse.

How can I help? Thank you for taking my call. My husband and I live in a small home with a big yard in New Hampshire. It's paid off. We intend to retire in it and stay retired as long as we can, but should we not be physically able or we give up the desire for snow blowing and yard work when we're older, we're considering buying a condo. I don't know why you'd want to do that.

That's so much fun, Jesse. So we're considering buying a condo in the next few years, maybe, and getting it paid off prior to retirement so that if we wanted to stop the yard work, we could. My wonder is what happens to the capital gains if we were to sell the house with the big yard and move into a condo that we had previously bought and paid for? Yeah, the capital gains on the sale of your existing home has nothing to do with whether or not you own another home before or after that. It's only based on whether or not you have a gain, first of all, in that property from when you originally purchased it. And then secondly, if you've lived in that property two out of the last five years. So from the date of the sale back five years, if you've lived in that property as your primary residence, two out of those five years, then you would get half a million dollars in gains that would not be subject to capital gains tax. And that is true regardless of whether or not the home you're moving into or condo you're moving into after the sale you've owned previously or you're buying it after you close on it or any of those factors.

That's fantastic. So as long as our gain isn't more than a half a million, which is not going to happen, then we're fine and we don't have to worry about a big tax bill. You do not. And you could go and buy that condo early before the sale if you had the ability to do so. Or you could wait and buy it after you close.

That's up to you and has no bearing on the tax structure of the game. That's just the best news ever. Thank you.

Well, I'm so glad I could be the bearer of good news today. Hey, thanks for calling. Take care. All right. You call any time. Take care. Let's go out to Cleveland. Hi, Jay. How can I help you, sir?

Hey, Rob, real quick. This is a raw question. I opened up a brokerage account earlier this year and I put seventy five hundred in for last and seventy five hundred in for this year. But how much more can I contribute to that account or is that that the max? Well, the max for this year is seven thousand. If you're if you're under 50, it's eight thousand if you're 50 or older. What is your age, Jay?

Sixty one. OK, so you can put in eight thousand this year as long as you have at least eight thousand in earned income. That would be the max you could put in. And if you're married, you could have a spousal IRA that with another eight thousand, as long as your spouse is over 50 or older. But that would be the max you could put in for twenty twenty four.

Yeah. So there's no extra and above you can put into a Roth IRA. No, the only other way to get money in a Roth beyond the annual contribution limit is to convert a traditional IRA. So if you and it's sometimes called a backdoor.

So you essentially fund that traditional IRA and then you would convert it to a Roth and go and pay the tax on it. OK. All right. I was just I was just making sure before I started thinking about add money to that account. Got it. Yeah.

It sounds like you've only got another five hundred this year that you could put in and then you'd have to wait until twenty twenty five to continue to put money into it. Yeah. All right. Well, thanks for clearing that up for me. I was making sure. Absolutely. Happy to do it.

Thanks for calling today. Let's see. We're here in our final segment. We've got time for one more.

Let's go to Winter Garden. Hi, Frank. Go ahead, sir. Hi, Rob. Thank you for your service.

I greatly appreciate it. So we're looking to move into a new home, a different home, and we need the proceeds from our current home to purchase the new home. But in the region we live, the type of home we're looking for just doesn't last very long on the market. And those sellers aren't interested in a contingency offer. So I heard about a bridge loan.

I hear more bad things than good things about it. But I'm wondering if you know more about it and if there's other financial strategies we can consider to buy our next home before we sell our current home. Yeah, I mean, unless you're going to put a contingency on it, which I understand you're saying is not favorable or you're willing to sell it and close and then, you know, maybe rent it back from your new owner. So you're renting back your home that you just sold to stay in it for a period of time. You'd have to negotiate that with the potential buyer.

You know, that would be one option. And given that we're still in a seller's market, I mean, I think you have a little leverage there. But apart from that, a bridge loan is not a great option because, number one, it requires you have significant equity. So you'd need enough money to be able to put down to qualify for it. You'd have the potential risk of two mortgages if something went sideways and your home doesn't sell before the bridge loan's term ends, which is usually six to 10, 12 months. And then thirdly, you've got the closing costs and typically a higher interest rate. So it's a more expensive option, usually eight and a half to ten per ten and a half percent in this interest rate environment for that bridge loan.

So I think your better option is pray for somebody that would take that contingency, sell it, come up with a temporary option, family, rent something short term or negotiate to rent your place back after the sale until you can get something new. Does that make sense? Yes, thanks.

Well, we'll look into those options. Appreciate it. All right, Frank. Sure. Thanks for calling. Hey, this is Faith in Finance Live, and it's a partnership between Moody Radio and Faith by big thanks to my team today to hear it. Again, Lisa Taylor. Couldn't do it without them. We'll see you tomorrow. Bye bye.
Whisper: medium.en / 2024-06-05 22:32:14 / 2024-06-05 22:49:05 / 17

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