Impact of International Investing In Today’s Climate With Cole Pearson

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Provide for your family, put your kids through college, or prepare for the next stage of life. One Ascent believes your values can also inspire how you invest by directing your investment capital into companies that positively impact the world. Whether you invest on your own or work with an advisor, One Ascent's comprehensive values-aligned solutions seek to help you do well by doing good. To explore a new way of investing that aligns with your values, visit OneAscent.com. Click on Analyze My Investments on the homepage to tailor your portfolio to what truly matters to you. The U.S. has arguably the most stable stock market in the world, but does that mean it's always the best? I am Rob West.

Put another way, are we shortchanging ourselves if we don't consider international investing opportunities? I'll talk about that with Cole Pearson today. 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 a delight to have Cole Pearson with us again today.

He's the president of Investment Solutions at One Ascent, which is a family of companies dedicated to faith-based investing and an underwriter of this program. Cole, great to have you back with us. Thank you, Rob. Great to be here.

Well, thank you, and we're delighted to have you. You know, Cole, lots of investors are biased toward U.S. stocks, and there's obviously a lot going on around the world today. So how does One Ascent view international investing? Well, One Ascent views international investing as a critical part of an investment portfolio, right? It goes back to the philosophy, how we manage money at One Ascent.

We talked about that last time I got to speak with you. And that philosophy for us at One Ascent is three parts, values-based, long-term, and globally diversified. So when you think about global diversification, international investing is very important. It helps us invest in multiple markets so we can mitigate risk, enhance potential return.

We're very serious about that at One Ascent, so we focus our time. We have a specialty in the international space. There's lots of great companies, lots of great businesses that exist outside of the U.S.

So it's very important. Something that people may not realize is that international markets have actually outperformed U.S. markets in three out of the last five decades. Twenty-six in the last 50 years, international markets have outperformed the U.S. So recently, it's been biased towards U.S., but international is very important in a long-term approach.

Well, that makes sense. A key part of a well-diversified portfolio. Now, Cole, you mentioned that values-based investing is at the core of what One Ascent does, helping people invest in alignment with what they value most.

Is this possible when investing abroad? We absolutely think that it is. And part of that is because we believe God is a big God. He made every single person, every square inch with dignity, not just us here in the U.S. We can tend to forget that. I'm certainly guilty of that, but dignity is worth investing in, both here at home as well as abroad.

No different than missions. The way we think about missions and ministries that we support, we support those across the street, across town, and across the globe. So when it comes to investing, there's lots of exciting companies around the world. Innovation, brilliant minds that aren't here in the States.

A few facts for you. Harvard Business Review did a study a few years ago. Of the top 20 CEOs, 11 of them were at companies outside the U.S. Very diversified markets and different things. So there's a lot of really brilliant people that we believe the Lord has made, and they're applying those gifts and skills in their markets. Our team at One Ascent has decades of experience in international markets, so we're really passionate about investing in those companies that are bringing blessing to society all around the world, not just here at home in the U.S. Yeah, that's really helpful. Now, obviously the wars in the Middle East and Ukraine are concerning. Resources like oil and microchip production are precious, and we're about to enter an election year. So how can Christians invest wisely amidst all this uncertainty, Cole?

That's a great question, Rob. Much of investing today, especially international investing, is index funds and passive funds. A core tenet of value-based investing is knowing what you own, right?

Understanding that. So when you take a passive approach or an index approach, you're just buying everything. So at One Ascent, the way we help Christians invest wisely in international markets is our three-step process. Eliminating those companies or perhaps those countries where products and practices are causing harm, things we don't align with, evaluating to make sure they meet our investment objectives, and finally elevating those companies that are making the world a better place. So with those passive funds, one of the largest index funds has about 2,000 companies in them. There may be companies that are publicly traded now, remind you, aligning with ISIS, for example, forced labor deals in China, complicit in state-owned enterprise, stealing of intellectual property here in the U.S. So knowing what you own is very important.

That's what we do at One Ascent. We want to help you do that well and with wisdom, but also with excellence. And how can folks get more information and even maybe evaluate the investments they currently hold? You can learn more about values-based investing at oneascent.com. We have a tool called Click on Analyze My Investments. If you click there, it'll take you through a form we'd love to help you learn what's inside of your portfolios.

That sounds great. Cole, thanks for stopping by, my friend. Thanks so much for having us. That's Cole Pearson with One Ascent, an underwriter of this program. You can go to their website, oneascent.com. Just click on Analyze My Investments. We're back with your questions just around the corner.

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This can be a unique form of worship. More information is available at investments.oneascent.com. That web address is investments.oneascent.com. As a faithful listener of this program, you know that there's life-changing financial wisdom in God's Word, and FaithFi is here to help you and millions of others learn to be good and faithful stewards. As a nonprofit organization, we rely on help from monthly FaithFi patrons, supporters of this mission, to help us continue and expand our outreach. Has God provided financial answers for you through this ministry? If so, consider becoming a monthly FaithFi patron.

Visit faithfi.com and click Give. Welcome back to Faith and Finance. I'm Rob West. All right, it's time to take your calls and questions. The number to call is 800-525-7000.

Again, that's 800-525-7000. We've got some lines open. Let's dive in today.

We'll begin today in Cleveland, Ohio. Hi, Sarah. Go right ahead.

Hi. Yeah, I'm 65 and I'm going to retire in a couple years, and I owe about $50,000 on a private student loan that I signed for. Everything else I have is paid for in life, and I'm thinking about taking this money out of my 401k over the next two years and paying this off so I don't have that debt when I go into retirement.

So I was looking for some feedback on that. Sure. So let's talk about the assets that you'll have in retirement, more specifically the income that you'll be expecting. So as you enter retirement, will you start taking Social Security at that point? Yes, I will.

Okay. And how much would you expect that you would need to pull from this? What is 300,000 today might be less if you pull the money to pay off your student loans. How much would you expect to need to pull from this account to cover your obligations? It'd be about $50,000. You'll need $50,000 a year over and above your Social Security? No, just one payment.

So I owe $50,000 on the loan, but everything else I own, the house, everything are all paid for. Sure. No, I totally understand that.

That makes sense. I guess what I'm looking for is, is there going to be a gap between what it takes for you to cover your monthly obligations and what you're going to be receiving from Social Security, such that apart from paying off this student loan, you would need to pull a monthly income stream from your retirement account? Are you planning on that? No, I'm expecting to generate some income from that in the form of an annuity.

And also I'm planning on to still work part time. Okay. All right. And how much is your monthly payment on that student loan?

It's almost $500 a month. Okay. All right. Yeah.

I mean, I think this can make some sense. I like the idea that you're spreading it out over two tax years. Ideally, we'd leave that money in there and let it continue to grow and you'd fund this out of current cash flow.

I mean, that would be my preference because then we don't pay the tax on it. It's money that would be there continuing to grow on a tax deferred basis. I suspect some portion of your portfolio is probably, if not all of it, is still down with the market. So you'd give it time to recover once we get beyond whatever the fallout is of these interest rate hikes and the inflation.

We may hit a recession here, but eventually we'll pull through it. And I'd love for this money to stay in there and continue to grow so that you've got it there. So let's say down the road beyond your retirement, beyond you working full part time, you get to a place where you are no longer working. So you're relying solely on your social security, your annuity. But if that doesn't cover all the expenses, I'd love for you to be able to pull a monthly income from that $300,000. If we wanted to pull 4% a year from that $300,000, we'd expect you to be able to pull about $1,000 a month. But if that drops down to $250,000 because you paid off your student loans, that would throw off $10,000 a year or about $830 a month. So it might drop by about $170 a month, ideally.

And we're just talking about what I would want you to take from that. But you also have to factor in that you're now saving a $500 a month payment. So your expenses have dropped and pretty considerably.

So I could go either way. I mean, I think my preference would be if you could continue to work long enough to pay out the student loan out of current cash flow that preserves the full retirement account to continue to grow into the future so that you can rely on that when you need it. But if you have either a conviction to be debt-free or you'd just like to get your expenses as low as possible, and you're comfortable with that $300,000 being $250,000 that's now available to supplement your income, then I could get on board with that. And I can imagine why, especially as you're entering retirement, you might want to have your expenses as low as possible. And obviously, this is the last remaining large expense that you could do away with.

Does that all make sense? Yeah, and really what I'm looking to do is this year take $25,000 and pay it, and then over the next year I'll save another $25,000 and pay it because I'm aggressively putting that much in, actually. So it's kind of a wash next year. And then I'm thinking that that would actually boost my Social Security when I claim it as income, because it'll show as my income, though I know I'll be paying taxes on what I take out. That's right.

Yeah, so did you say you're putting in enough out of your salary deferral currently that you would offset that $25,000, roughly? Yeah. Yeah, I would. Yeah.

Okay. So what about just doing, instead of making those contributions for next year's payoff, what if you just redirected that directly to the student loans and then it just never goes into the retirement plan? So I could probably do that, and I thought about that too, except for I get an employer match on what I put as a percentage. I'm not even sure what it is right now.

Yeah, well, you'd want to find that out. I'd want you to maximize that for sure. But perhaps out of every dollar beyond that, after you fully maximize the company match, maybe you just go directly to the student loan payoff over and above that scheduled monthly payment. And then you're not putting it in where it actually may get invested, and then maybe the market falls temporarily and you've got a loss, then you're just turning around and pulling it out and adding as taxable income. You might as well, let's just try to preserve as much of that $300,000 as possible. Maybe you end up taking the $25,000 this year because we don't have that many months left. But maybe moving forward, you try to do it all out of your own cash flow and just drop your contributions down to the minimum to be able to fully take advantage of the match.

Alright, that makes sense. Yeah, I was just kind of playing around with it in my head, figuring out what I wanted to do. And since we're getting to the end of this year, I thought, oh, I thought I'd really add something about this. But I think at the end of the day, though, I like where you're going. Let's try to be debt free, especially as you're ending retirement. Let's get your expenses as low as possible.

But let's also try to maximize what you have available in retirement to pull from to supplement your income. So I think you're on the right track here. Sarah, we appreciate your call today very much. Tim in Sarasota, we're going to get to you just after the break.

And Dean in St. Louis, the same for you. Folks, we do have some lines open today. We'd love to hear from you. The line to call, the number to call is 800-525-7000. That's 800-525-7000.

Hey, before we hit this break, a quick email. This one comes to us from Stan and Stan writes, my parents have a whole life insurance policy for many years. Premiums are deducted from the policy's value. We would cash it out, but they still need insurance for my mom's benefit. Does it make sense to cash it out and reinvest in retirement or does it make more sense to keep the policy because they have a high amount of debt? You know, in most cases, it would make sense to cash it out and replace it with an inexpensive or less expensive term policy and then reinvest the savings.

However, a lot depends on your parents' age and health status, Stan. So, you know, I would probably, before you do anything, don't cancel that policy. Keep that death benefit in place.

But let's connect with an independent agent just to see if there's a chance that for a set period of time and until this need goes away, because maybe they've saved in other ways, you could get a term policy to provide the death benefit she needs and then you can take full advantage of that cash value. Thanks for writing to us. We'll be right back. Stay with us.

We'll be right back. Welcome back to Faith and Finance. I'm Rob West. This is the program where the 2300 verses on money and possessions found in God's word intersect with today's financial decisions and choices. The number to get in on the conversation, 800-525-7000.

That's 800-525-7000. Let's begin today in Worcester, Ohio, WCRF. Ben, I know we couldn't get you on yesterday, so I'm delighted that we are today. Go right ahead.

Hey, Rob. Thanks for taking my call. We are legal custodians of a minor and she is getting ready to receive, by all definitions, an orphan. Both parents are deceased, but she's receiving an inheritance from the estate, which the lawyers and everyone's kind of telling me that we should probably put in a custodial account, basically through a trust. But they mentioned UTMA and UGMA and I'm not really familiar with what those are. I've tried to look online.

What are those and what are the good things, bad things about them? Well, I'm delighted to hear that you're caring for this precious little one and we want to be good stewards of the resources that are going to be for her care and provision in the future. You're right. There are a couple of options you could go and I would get some counsel from an attorney who can help you navigate kind of the legal instruments and how to set this up in a way that allows you to keep this money for its intended purpose, to make sure that it's available for her care at the appropriate time. And that you understand the tax implications of all of it. UTMA and UGMA are essentially the same. The UTMA is similar to the original UGMA, which came first, which essentially allows minors to receive gifts and it allows those funds to be invested. They're under the control of the person that sets them up, but ultimately become the asset of the child at the age of majority, which is typically 18. It's managed by the adult custodian, but only up to the child's age of majority. So if that's 18 in your state at the age of 18, they take over full control of that money. Whereas a trust would have some other controls where, you know, based on how that money was received and what instructions came along with it, perhaps there could be some more controls in place that allow it to be distributed based on other triggering factors, reaching a certain age or it being distributed over time. There could be some guidelines around how that money is distributed versus the UGMA and UTMA, which just automatically becomes the child's control at the age of majority. So I think that's perhaps the thing for you to look into with an attorney is, you know, how do we want this to be distributed?

Are we comfortable with all of this being under the control of the child when he or she turns 18? And if not, should we consider a trust instead? Okay.

All right. Well, that requires some further consulting, you know, both I think on the legal side and the tax side, just to see how that needs to be set up so that, you know, you're handling that properly and the most effective way so that obviously the key is for it to be used for her benefit. But you also just want to be wise about, you know, where it is between now and then, does it get invested or not? What about the tax implications?

And then ultimately, how do we want to pass it over for her use at some point down the road? So I think getting some counsel on that will go a long way. Hey, God bless you, Ben. We appreciate you being on the program today. And may the Lord bless you.

To Ocala we go. Hi, David. How can I help you? I got a offer for taking a lump sum distribution of my pension benefit. And my question is, is there any way to avoid the 20% tax, federal tax on it? I have a few options of how I receive it, whether all of it, a partial direct rollover or a full direct rollover. Those direct rollover options would be a traditional IRA, an employee sponsored retirement plan, or a Roth IRA. I'll be 58 next month. And I just needed some advice because you're probably my only financial advisor I have.

Well, we only have a couple of minutes here on the radio. So it may behoove you just given the significance of these decisions for you to engage a financial advisor if you haven't already. There is a mandatory income tax withholding of 20%. That applies to most taxable distributions paid directly to you in a lump sum from an employer retirement plan.

Now, if you roll it over, you should be able to avoid that. And so that would be the key as to whether or not you could take that as a qualified rollover. Have you decided whether you're definitely taking the lump sum versus the payout? Well, I could take the lump sum or a monthly payment of around 87, which isn't much, or if I do nothing in 2030, I can start receiving 154. I do have a 401k at the employment that I have now and a pension plan. So I don't know if that helps you. Okay.

Yeah. I mean, I think you'd probably need to get some retirement planning here as a part of this. So you can really look at your overall financial picture. What are your income needs going to be in retirement?

What income sources do you have? And then they can look at kind of the internal rate of return calculation on, you know, what would you need to earn on this money to equal what you would get in the pension payments? You know, based on your life expectancy or, you know, maybe you go out to age 90, you need to consider, you know, what that payout would be for you or you plus your spouse if you're married, because you don't want this to be a key part of your income and then you pass away and then your spouse is left without that payout. You know, the pension payments for the rest of your life can give you some peace of mind there. There's also in some cases, you know, it's better to take the lump sum because then you have more control over the money.

It gives you flexibility over on how you want to spend it or invest it. You can do that how you see fit. So, you know, I would just have somebody look at your overall financial plan and help you develop a strategy that meets your goals based on your values, that addresses, you know, giving you the peace of mind that you and your wife are looking for, that meets your income needs for the rest of your life and your wife's life, and gives you the flexibility to be able to use that money as you see fit, invest it and even pass it on as an inheritance or, you know, give it away to charity at your death. So I think there's just a host of considerations there that you need to look at, you know, as you make this decision. So what I would do, David, is connect with a Certified Kingdom Advisor there in Florida. You could do that on our website at faithfi.com. Just click Find a CKA and do some of that planning.

I think that'll give you some more peace of mind just to make sure that you've thought through the whole picture before you made that final decision. Just before we go, I want to remind you, send in your donation of any amount and we'll send you the book Leverage Using Temporal Wealth for Eternal Gain. To send us your donation today, simply go to faithfi.com. Thanks for joining us today. I'll look forward to talking with you again next time on Faith and Finance. Faith and Finance is provided by Faithfi and listeners like you.