This faith in finance podcast is underwritten in part by Guidestone. Guidestone envisions a world transformed by Christian investing. Through screening, corporate engagement, and impact investing, our investment strategies allow investors to be more proactive with their investment dollars to make a meaningful difference in the world while preparing for their financial future. Learn more at guidestonefunds.com slash faith. C.S. Lewis once said, you are never too old to set a new goal or dream a new dream.
I am Rob West. Retirement from your regular job one day will give you the opportunity to find a new way to serve the Lord. But along the way, you can make mistakes that may slow the process down. We'll go over a few today so you can avoid them. 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 journey. Now I should point out that the biggest mistake you can possibly make with respect to retirement is to not save enough during your working years. We always recommend that you put 10-15% of your income into a qualified retirement plan like a 401k, 403b, or an IRA. The younger you are, the more likely a Roth IRA will be best for you. If you fail to contribute enough to your retirement plan, it won't generate enough income to support you when you stop working. You can't depend on Social Security alone. The earlier you begin putting money away for retirement, the better off you'll be due to compound earnings. So avoid the biggest retirement mistake. Make sure you're contributing regularly to your qualified plan. There are several more mistakes you can make, however, and many of them have to do with rollovers. If you don't do them right, they can cost you a lot of money. The first rollover mistake to avoid is not paying attention to the one-per-year rule.
This happens if you change your mind about where you want to move your money and grow impatient. In most cases, you can make only one IRA to IRA rollover in a 12-month period. If you do more than one, that money will probably be included in your adjusted gross income. That's potentially a huge taxable event.
But that's not all. The IRS will also treat the second rollover as an excess contribution, which will trigger an additional 6% tax for every year the money stays in the new IRA. So whatever you do, plan your rollovers carefully and never do more than one per year. The next big rollover mistake is to lose track of the time and miss the 60-day rollover deadline. If you withdraw money from your IRA, you have 60 days to deposit that money into another qualified retirement plan, usually another IRA. If for any reason you take longer than that, the distribution will be added to your adjusted gross income. Now, who would do something like that?
Well, just about anyone can get caught up in the daily grind and let time slip away. We hear from them occasionally, and there's really no way to help them, except to say that since the money is already out of the 401K or traditional IRA, they have until December 31st of that year to do a Roth conversion. They can take what's left of the distribution after taxes and put it into a Roth. Of course, the best way to avoid this is to never take a direct distribution from a qualified retirement plan if you intend to put the money into another qualified plan.
Just fill out the paperwork and have the plan administrator send the funds directly to the new account. That way you won't be taxed on the money since you never actually received it. Okay, another rollover mistake to avoid, losing the ability to take the 10% penalty exception. Most qualified plan distributions are not only taxable, they also trigger a 10% early withdrawal penalty if you take the money out before reaching age 59 and a half.
You may not even have known there are exceptions, but they indeed exist, although they're different for different plans. For example, if you're a first-time home buyer, you can take a distribution of up to $10,000 out of your IRA for a down payment without incurring the 10% penalty, but you can't do that with a 401k plan. Alright, here's the fourth rollover mistake, doing a rollover from a 401k to an IRA after you leave an employer if you still have an outstanding loan against the 401k.
Any outstanding loans will count as a distribution and will be fully taxable, plus subject to the 10% penalty if you're not yet 59 and a half. Obviously, you avoid that by paying off any loans before doing a rollover. So those are four potential rollover mistakes to avoid, but there may be others depending on your situation.
It's always best to consult with your CPA or another financial advisor before doing a rollover. Of course, we always recommend that you connect with a certified Kingdom advisor for advice and help on issues like retirement planning and rollovers. You can find CKAs ready to help you by going to faithfi.com. That's faithfi.com and click on the Find a CKA tab. Alright, your calls are next, 800-525-7000. That's 800-525-7000.
I'm Rob West and we'll be right back. Are you looking for a financial professional who aligns with your biblical values? Certified Kingdom advisors are trusted financial, legal, or accounting professionals who have completed a rigorous certification program to ensure they provide biblically wise financial advice as part of their practice.
You can find a local CKA professional in your area by going to faithfi.com and clicking Find a CKA. We're grateful for support from Guidestone, whose diversified suite of investment solutions align with Christian values to create positive change in the world. More information is available at guidestonefunds.com. Investing involves risk, including potential loss of principal. Carefully consider the investment objectives, risks, charges, and expenses of Guidestone funds before investing.
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Now let's go to Hobesound, Florida, WRMB. Hi, Charles. Go ahead, sir. Yes, sir. I just have a question on drawing Social Security. So I'll be 66 and a half next June on the 18th. So will I draw that month for Social Security? Do I have to wait until July? Yeah, it'd be the next month. Social Security benefits are paid the month after they're due. So if you tell them you want your benefits to start in, you know, October, you would receive your first payment in November.
Now, if your birthday is between the 11th and the 20th of the month, you would expect to receive your direct deposit payment each month to hit on the third Wednesday, but it would happen in the month following the month of your birthday that you start to claim benefits. Okay. Yeah. Is that helpful? All right.
Well, not really. I'm kind of hearing what you're saying, but so if I decided to claim it in June, I would need to file it in May? Well, but you'd want to wait until you reach full retirement age or else you're going to have a reduction, a slight reduction, you know, so if you want to get the full amount, you would want to wait until your birthday and then you'd start receiving it the next month. If you were willing to accept that, it'd be basically one 12th of 8% that you would lose if you took it a month, claimed it a month early, then it would kick in the next month. Yeah, I don't want to lose any of it, so I'd probably just be better to wait then. Yeah.
So if you claim it the moment you turn full retirement age, you get your full benefit and then that first check would come the following month. Okay. All right. Thank you. All right, Charles. God bless you, my friend. Thanks for being on the program. Let's head to Florida.
Hi, Mike. Thanks for your patience. Go ahead.
Yes. I have a question about capital gains tax. My mom, she's going to sell a piece of real estate, but potentially she's probably going to pay $200,000 in potential capital gains tax.
Is there any way that we can kind of, not avoid it, but kind of gift it to kind of... Yeah. So give me a rundown of what she's doing. How much is she selling this house for? She's going to list it for like a little over a million. Okay. So she has listed for a million and what is her cost basis? Cost basis, what she paid for it was, I mean, we're talking about over 40 years, like $60,000. Okay. And then has she made significant improvements to it or additions or anything like that? I would say probably, since she owned the house to now. Yes. I would say probably about like $50,000. Okay.
Yeah. And then what is her adjusted gross income? Is she married filing singly or as a single person or joint? She's married. What is their adjusted gross income roughly?
Do you know? Roughly combined, I would say no more than $30,000. Okay. Well, they're probably not going to pay any capital gains.
And here's why. So long-term capital gains rates have to do with your adjusted gross income. And if you're married filing jointly and your adjusted gross income is under $83,000, then your capital gain rate is zero. Okay. Even though that's not the primary house?
Right. If it was her primary house, then they would get, you know, up to a half million in gains they could offset. But she's got, so and you're telling me she's, let's say her cost basis is a hundred thousand, what she paid for it plus the additions, she sells it for a million. She's got a $900,000 capital gain. So then you would say, okay, what is the capital gain rate?
Well, to determine the long-term capital gain rate for 2023, you would go to the table and you'd say, okay, for somebody male married filing jointly up to $89,000, $89,250 in adjusted gross income, the capital gain rate is zero. Oh, good. Yeah. So, uh, she should be in good shape. Okay.
Now let me just finish with this. I will say, uh, you know, I'm getting a sliver of information, so always a good idea to check with your CPA just to go over all the final numbers and make sure we're not missing something here. But just generally speaking, a married filing jointly up to 89,000 capital gain rate for assets held more than a year in 2023 is 0% you don't get the 15% rate until you have income of over 89,251. So on 90,000, that's the mark we look at. That's the mark. Yeah. And that's income, not the gain.
That's your adjusted income for the year. But, uh, make sure you check in with your CPA because anytime you have a major event like this or, you know, something you'd just always want to get good counsel. Hey Mike, thanks for being a great son and we appreciate you listening to the program today. God bless you.
Uh, to Wisconsin. Hi Sherry. Go right ahead. So much for your ministry. I, I love listening to you.
I try to listen to you every day. Well thank you. Um, my son is 20 years old and he has a good job, um, makes pretty good money. Um, and he is looking to buy a new use vehicle and he has 15,000 saved.
But of course we know vehicles are very expensive and I'm just trying to get some information. We don't have a lot to pick from for options for a local bank. What do you suggest where he go, would go to get a decent rate on a vehicle to borrow money for the rest of the vehicle?
Yeah, very good. Uh, I'll give you two websites you can go to and what they do is every month they publish the lenders and the rates, uh, that they're offering and you can sort them, you know, by those that, you know, are the most compelling, uh, you know, the best rates and they will tell you for the various, you know, ranges of dollar amounts that you're borrowing, um, you know, what that rate will be. Uh, I would look at either nerdwallet.com or bankrate.com. Either of those would allow you to find who has the very best auto loan rates for used cars and, you know, you could shop around and maybe get two or three. If you want to use a Christian solution that aligns with your values, uh, you could check with Christian Community Credit Union as well. Going christiancommunity.com. They have auto loans as low as $5.99 right now, um, and even some further discounts if you have automated payments.
But, um, you know, if you're really just wanting to shop for, you know, that lender that has the most compelling rates right now, I think, you know, nerdwallet or bankrate would be a great source for you. Okay. Well, thank you so much. I appreciate it. Absolutely, Sheri. Thanks for your call today.
Uh, to Indianapolis. Hi, George. Go ahead, George.
Great. Hey, I have two quick questions. Uh, one, I have an emergency fund and for six months spending and it's just sitting in a savings account, not growing. I want to have some kind of return on that monies, uh, first. So what, what, what should I do there? And the second question is I'm 65. I, I'm trying to grow my, which I can't put anything in my 401k.
What can I do just to start investing? Yeah, very good. Well, for the first one, I would send you to the same place. I've sent the previous color bankrate.com. You would just be selecting to sort by the banks that are offering the best rates. What you're going to find is they're going to be online banks, uh, that are going to be able to get you North of 4% with no fees, no minimums. You'll see which ones are offering the most compelling rates. As long as there's FDIC insurance, I'm good.
They even offer a five star rating. Stay on the line just around the corner. I'll give you the answer to the second question.
We'll be right back. 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're grateful for support from Eventide Investments on the faith and finance program. Eventide's approach to values-based investing is grounded in the belief that humankind was created in the image of God with intrinsic dignity, value and worth. Eventide calls this investing that makes the world rejoice. More information is available at eventideinvestments.com. That's eventideinvestments.com. Welcome back to faith and finance. I'm Rob West.
Back to the phones we go to Indianapolis. We were talking with George before the break. He's got a six months worth of emergency funds and a savings account really not earning anything and wanting to know how he can do better. I was saying to George, bankrate.com would allow him to find who has the very best rates right now for high-yield savings.
You can find a bank with no fees, no minimums, link that to your checking account as long as there's FDIC insurance. He could do pretty well right now with over 4% a year, which is great rates we haven't seen until recently for more than a decade. The second part of George's question had to do with investing. George, you were saying that you really haven't started with your long-term investments.
You're just looking to put something away for retirement, which is just around the corner. Is that right? Well, I have. It's a small amount. It's like $70,000. I want to know how can I grow that being retired. Yeah, yeah.
Very good. At 65, I would tend to recommend that you still keep as much as maybe 45% in stocks. If you wanted to have an allocation of precious metals, maybe you go 35% or 40% in stocks, 10% in precious metals, and then the balance in bonds. The reason is even once you're in retirement at 65, you want to have some sort of growth component to this. With $70,000, you typically do that through a mutual fund or a few mutual funds, either a balanced fund that has both stocks and bonds or maybe an allocation to some stock funds up to that 40% target, and then the balance in some bond mutual funds, which would give you a good broad diversification. In terms of selecting those, you can either hire an advisor, although you may be just under the minimum that some advisors would have, and you could find a certified kingdom advisor on our website at faithfi.com, or our friends at soundmindinvesting.org through the Soundmind Investing newsletter could really provide some helpful suggestions and recommendations for an investing strategy that's consistent with your age and goals and objectives, and you'd actually be given the mutual funds to invest in, and then that would change over time.
You could direct that money yourself by either doing it from where it's currently housed or maybe move it over to a Fidelity or a Schwab, some kind of custodian that gives you access to a lot of mutual funds. Does that make sense? Yes, it does. I appreciate it. Thank you very much.
Okay, George. You're welcome. Thanks for your call today. Let's see.
We're going to head to Illinois. Guadalupe, thank you for calling. Go ahead. Hello. Good afternoon. Hi.
Hi. My question is, I have a teenager and my daughter would like to get her started with a little bit like want to make sure if she should bank where I bank, if that's a good idea, or take another bank where she could start getting like a debit so she could learn how to save, and if she needs to go somewhere that she has like that debit card, and if there's no funds that she could learn from that experience that when you don't have any more money that that's it. Yes. Yeah, exactly.
No, that's a great idea. You know, you certainly could do it at your bank. I mean, there are accounts that are geared toward teens. One of those that we've used with our kids is the capital one, they call it the money account. It's their teen checking that comes with a debit card, you can go that you can do that for children as young as eight years old. It's actually a joint account with the parent or the legal guardian and then once they turn 18, they can choose to open a checking account and transfer their balance to the money account. But prior to 18, that money account is great, primarily because it's really built for this purpose. So they have a great smartphone app that allows you to turn on and off that debit card. For instance, if they were to lose it, it's very easy for you to log in and monitor it. It's very easy for you to add money to it, you know, or take money out as you see fit from other linked accounts.
So, you know, I think that's a great one. And it's not going to help her build credit, but it is a way that you can have full visibility, help her understand the importance of hard work, understand the importance of limited resources, help her set up a budget or a spending plan, and then learn how to handle that money, you know, using the debit card, whether that's, you know, embedded in her phone, or with a physical debit card that she would use, but that that smartphone app that's designed for parents, you know, would give you visibility into everything that's going on. Does that make sense? That makes sense. So Capital One. Yeah, if you just search for Capital One money for teens, it will come right up.
Yep. And they can get that as low as eight years old, but we appreciate it. Hopefully that helps you Guadalupe. I'm delighted to hear that you're thinking long and hard about how you can train up the next generation and being wise stewards of God's money. We appreciate you calling today. Let's head to Kansas City. Josephine, thanks for calling. Go ahead. Hi, Rob. How are you?
Absolutely. Doing great. Thanks for calling. Thank you for taking my call. I was calling because my husband became retired a few years ago. But before that, he worked for a company that closed and they moved to another state to St. Joseph, Missouri.
And he never did get his retirement from them. And we've been trying to figure out, find a way to get it, but we haven't gotten nowhere. And I just wanted to know your advice of what you could tell us on that. Yeah. Josephine, did you all stop getting statements from the plant administrator?
Stop getting statements? Yeah. Are you getting any kind of statements? Yes. Okay.
So nothing's coming in the mail. Are you able to, I mean, first thing you could do, I mean, there are places you can go like the pension benefit guarantee corporation at PBGC.gov or, you know, unclaimed retirement benefits.com. But I would start with the company itself. I mean, just because they moved and relocated, you know, he should still have an account there. Have you called their customer service just to try to chase this down with his social security number?
Yes, we have. And they would transfer us to someone else and we just never got anywhere. And they would say, well, we'll call you back. We'll get this information and blah, blah, blah. But they never got back.
We never got anywhere. Well, unfortunately, I mean, despite their poor customer service that you're describing here, they are going to be the best way for you to get to the bottom of this and find out what's your own. Because anything else is actually going to kind of go through a government entity and that's just going to further complicate things. So I would just be really diligent, perhaps maybe call every day and just see if, you know, what you can do to get somebody on the phone who's willing to help you try to escalate it to another department or to a superior and just tell them, listen, I need to chase down this account and I need you to help me to do it. And, you know, I've been getting the runaround here. Anything else is just going to add further complication and red tape to you getting the bottom of this. So I just be diligent and continuing to call.
I wish I had better information. Hey, we're almost out of time, but I wanted to let you know that you don't ever have to miss a program. Just download our Faithfi app for your mobile device and take us with you anywhere. Thanks for joining us today. I look forward to talking with you again next time on Faith and Finance. Faith and Finance is provided by Faithfi and listeners like you.
