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Contact them to get out of debt today at ChristianCreditCounselors.org. Age has its benefits, but cramming dozens of candles on a birthday cake isn't one of them. Hi, I'm Rob West. You probably remember looking forward to your birthday when you were a kid. As we get older, birthdays don't seem to hold the same charm. Today we'll look at some birthdays that are more important than others, financially speaking. Then we'll take your calls at 800-525-7000.
That's 800-525-7000. This is Faith and Finance – Biblical wisdom for your financial journey. Whether you prefer to ignore your birthday or you still celebrate with gusto every year, there are a few birthdays we all need to recognize. I'm referring to the birthdays with financial implications. Here's our list, and no need to take notes.
You can check it out later at faithfi.com. First is day one. Newborns can be signed up for Social Security right out of the gate, so to speak. Next, childhood.
Just enjoy it. When you turn 15, you can get a learner's permit and mom and dad's insurance rates go through the roof. Parents, don't just take this sitting down unless you are sitting down in front of your computer doing research.
Always shop around for the best auto coverage. Age 18. Legally adult.
You can register to vote, sign up in the military, and make medical choices for yourself. If you're a parent with one of these adult but not really grown up individuals in your house, this would be a good time to sit down and talk about grown up things like credit cards, insurance, and even investing. At age 19, parents or guardians can no longer claim you as a dependent for tax purposes. College students can put this off until age 24.
There's one good reason for staying in school. Age 21. If you're self-employed at age 21, good for you.
You can start investing in a SEP IRA. Age 24, the apron strings and the purse strings get cut all at once when you turn 24. If you've been in college and filing as a dependent on your parent's tax return, prepare to file on your own when you turn 24 unless you're already earning enough income to file separately.
Starting at age 26, you can no longer be on your parent's or guardian's health insurance. There's a gap in the milestone birthdays here to give you time to get your career and family underway, build for the future, and follow God's leading into adulthood. The next key financial birthday is age 50. This is when you can start putting extra money in your retirement plans. This is Uncle Sam's way of letting you catch up in saving for retirement. Age 50 is also the time when people start making annoying jokes about getting old.
Maybe it's time to pay for a gym membership as well. Now, age 55. Take advantage of the senior discount at the local all-you-can-eat buffet. Really, though, senior discounts can save you a lot of money even if you don't feel that old. Then when you turn 59 and a half, you can take money out of your tax-advantaged retirement plans without any penalty.
Try not to do it if you can. At age 60, widows and widowers can receive the full amount of their deceased spouse's benefits from Social Security. When you turn 62, you're eligible to receive Social Security income. If you wait to take Social Security benefits, you'll increase your monthly check.
If you need help with all of this, visit us at faithfi.com and click on Find a CKA. Next milestone birthday is age 65. Time to enroll in Medicare. Open enrollment starts three months before your 65th birthday and lasts seven months.
Don't miss the deadline. If you're 66 or 67, depending on when you were born, your full retirement age is either 66 or 67. You are eligible to receive 100% of your Social Security benefits.
Delay signing up and you could earn up to 8% more a year. According to AARP, wage earners who reach full retirement age at 67 but delay claiming benefits until 70 will get an extra 24% tacked on to their monthly payment. The delayed retirement credits stop at age 70. Now age 72 or 73, RMDs begin.
Required minimum distributions are minimum amounts you have to withdraw from your retirement plan accounts each year. Age 73 and above, studies show the older we are, the more complicated retirement gets both financially and personally. You'll need to address things like housing, driving challenges, caregiving needs, and staying healthy and fulfilled. No matter what birthday you're celebrating this year, we hope you will make your relationship with God a priority. Psalm 71 18 says, even when I am old and gray, do not forsake me, my God, till I declare your power to the next generation, your mighty acts to all who are to come. All right, your calls are next. The number 800-525-7000. This is Faith and Finance.
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This institution is not federally insured. Welcome back to Faith and Finance. I'm Rob West. I have a special offer that I want to mention.
Authors Ken Boa and Russ Crossan have created an excellent resource entitled Leverage Using Temporal Wealth for Eternal Gain. It's a great balance of spiritual and practical wisdom, and we're offering it with your gift of any amount to faithfi.com. Get a copy today. Alright, the lines are open to take your calls and questions. 800-525-7000 is the number to call. Let's head to Yorkville, Illinois. Linda, you'll be next on the program. Go ahead.
Thank you for taking my call. Last year, I bought two I bonds and maxed out the amount that you could take, and it's already accrued some interest. And I'm wondering, do I pay income tax on those gains as it accumulates in the bonds, or do I pay that tax when the bonds are cashed in? Yeah, the interest is credited at redemption. So when you redeem those bonds, you would then pay the tax that would be due, which is taxed as regular income at the federal level exempt from state.
You'd pay the tax in the year that the bonds are redeemed or reach maturity, whichever comes first. Okay, I see. Yeah, I'm at this point, I'm considering cashing them in and doing something else with them because I realized that the interest rate is going down. So I might do CDs and possibly invest in some money market. I'm not very good at this, but I'm loving it. Well, it sounds like you're doing just fine. I love the option that you picked up those I bonds, and now as the rate's coming down, and it is, you're exactly right, and it will continue to.
I love that you're switching out, and it's a very attractive environment for CDs right now. So I think you're doing all the right things, Linda. Hey, we appreciate your call today. God bless you.
This is Chicago. Vicky, how can I help you with a question related to the home sale from your daughter and her fiance? Thank you so much for taking my call. My mother sold my daughter and her fiance her home at a very good rate. What do those companies pay you when they come in and buy your house and flip it? So my mom sold it for about $100,000 less than market value. A year later, my daughter and her fiance have split up, and they've sold the home. They made about $100,000 on the sale, $50,000 each. My daughter's getting information from some people that it's going to cost her right around $20,000 in capital gains tax. She's been told that she needs to pay the federal government in September around $7,500 in the state, $1,000, and then to do that again in January. Is that sound about right?
Well, I would encourage you to have her check with the CPA just given that this is an unusual situation, which is always a good idea to get some tax advice just to make sure this is filed properly and on time. But let's just talk generally for a moment. So your mom sold this property to your daughter and her fiance, so they were co-owners on the deed? Yes, they were. Okay. And so they each put in half the money?
Basically, they got in for a little under $3,000, I think, and my daughter is the one who put down the majority of it. Okay. But they're going to split the proceeds, is that right? Absolutely, yes. Yeah. Okay.
All right. And so their filing status from a tax standpoint was single, correct? Yes, it was. Yeah, so as long as they live there at least a year, it'd be a long term capital gain. And the 2023 long term capital gains rate, if you're a single filing status, if you make under $44,000, you wouldn't have any capital gains, but between $44,600 and just shy of a half a million dollars in income, not the gain, but adjusted gross income, which is where most people fall, then it's a 15% capital gain rate, long term capital gains. So whatever portion is her portion of the proceeds, because they didn't live there a full two years out of the last five, which would have exempted all this from capital gains, but because they had a profit, they were there less than two years, but more than one year, it would be a long term capital gain, the federal portion of that, not the state would be 15%.
If again, the AGI was between 44 and 492,000. And so you would just she would take that profit. So but 15% on 50,000, that'd be 7500. And then you'd have maybe some state tax on top of that, but that's not I mean, 15,000 would be the full amount, you know, between the two of them, and then they would split that. Okay, so I would just again, have her work with a CPA this year to file her taxes. And she may want to go and establish that relationship, let that person know that she's got this because they may want her to go ahead and send it in ahead of time and prepay those taxes, make an estimated payment just so there's not any interest or anything like that.
But that's essentially the way it should come out if I'm understanding this correctly. Thank you for your call, Vicki. All the best to you and your daughter. We appreciate you being on the program. Let's head to Michigan. Hi, D. Go ahead.
Thank you for taking my call. Yes, we're questioning. We have a mortgage of about 58,000 on our house, and we have a 2% interest. And we have been paying 3100 a month, where we're only required to pay the 1200 a month. So we're paying it off quicker, and we would have it paid off in two years, approximately. And if we went with the 1200, it'd be six years. And we're just wondering if we should continue to pay the higher payments, being that all of our investments are making better, our money market is 5.5, and we're averaging 7.5 in our investments. So we're wondering if we would do better not to pay the 3100, but to cut back. Sure.
Well, I love this question. I think you all being debt-free is a great thing. The question is the timing. And apart from just a real conviction to be out of debt as soon as possible, and if you had that conviction, I'd say go for it. But apart from that, you're right. I mean, you've got a very low interest rate in the twos. That's great.
Today, it's seven. And you're getting a great return. You're getting a nice yield on the money that's in CDs. You said you're averaging more than 7% on your investments.
That's tremendous. So would you take and redirect this surplus that you were using for principal reduction? And would you put that into your investment accounts?
Is that what you were thinking? We were thinking we could do that or possibly some updates on our house, but we certainly would save it and determine if it should be used somewhere, but probably into investments for sure. Okay.
Yeah. And do you have enough in the way of investments to cover your income needs in retirement? We do.
We have 170 in each of our Roths and 25,000 in the money market. Okay, great. Let's do this. If you don't mind holding D, I want to give you my thoughts on this, but I've got to hit a quick break. So you stay right there and we'll be right back.
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That's kingdomadvisors.com get certified. We are grateful for support from sound mind investing in the faith and finance program. If you have money in a retirement account or just a general investing account, you know, the stock market can sometimes seem like a roller coaster, but it is possible to enjoy both profit and peace of mind and investing no matter what's happening in the market.
You can see a short video webinar on that topic at soundmindinvesting.org since 1990 sound mind investing has sought to offer financial wisdom for living well soundmindinvesting.org. Welcome back to faith and finance. I'm Rob West. Hey, we've got a few lines open today. 800-525-7000 is the number to call. If you have a financial question, we'd love to hear from you. Our team standing by again, 800-525-7000.
Just before the break, we were talking to D in Michigan. She and her husband have 58,000 remaining on their mortgage. It's down in the twos. It's in the nearly 2% if not 2% the interest rate on it. They should have it paid off in a couple of years just because they're adding a couple of thousand dollars a month over and above that monthly payment, but they're making 5% in their bank products. They're making an average of 7% on their investments annualized. And so they're just wondering, should we continue to accelerate this payoff so quickly?
They also have some projects they'd like to do around the house. And I think D, my bottom line is number one, there's the financial and then the non-financial side of this. The financial side says, well, absolutely, you can do better even with zero risk in a high yield savings account. You could double your return over what you're paying in interest at 2%. So why not go ahead and at the very least just start building up that emergency savings or putting it in savings, earning let's say 4.5% in a high yield savings account. And then as you sock that away, you've got a fund that you can use for the renovations whenever you're ready. Or you could start directing it maybe to some of your investment accounts for a longer term approach. You're certainly doing three to four times better on that return than your mortgage.
So that all makes sense. There's of course the non-financial side of owning your home. So if you said, listen, we just want the peace of mind to know that we owe nothing to anyone. Or we just feel like the Lord's telling us, get out of debt. If either of those are true, I would say, well, let's put the financial aside and just go for it.
And I don't think you'll ever look back and regret that. But if you're comfortable knowing that you could pay it off at any point because you've got the assets to do it. And you know that you have that lower interest rate and you just feel like as a steward, you just want to maximize the return. And you're comfortable waiting on that payoff of the mortgage, not two years, but three or four or five or six, whatever that scheduled monthly payment payoff would take you out. Well, then I'd say go for it and either sock it away and have it ready for the renovations and earn some good interest on it and an online high yield savings while you're waiting.
Or go ahead and take a portion of it and send it to those investments. Does that all make sense? It does. Yes, I appreciate that. That helps a lot.
Okay, good. You're welcome. And thank you for calling today. We appreciate it.
800-525-7000 is the number to call. We've got, let's see, just a couple of lines open to Chad Anuga. Hi, Danielle. Go ahead.
I think I tried to explain it as this. I have five children. We started a savings account for them when they were younger.
Their age is two to 15. And I just, I guess recently realized that was probably just a mistake and leaving it, it's earning, it was earning little to no interest. So we're looking to move those all into separate CDs for our children. And my question is, it's at a five percent rate right now and a minimum of six months. Should we invest in the six months reinvest? Does the market look like that interest is going to keep going up?
Or I guess my thoughts are, should we invest it longer or do the six months and reinvest it at the rate it is now? Yeah, very good. So that's really helpful background. And I'm thrilled to hear that you did this. And don't worry about not getting a whole lot of interest.
At least you were systematically saving. And so you have the ability to have something to work with here that you can ultimately give as a wonderful blessing to the kids. So I think that's great. And thinking about how to maximize that return in an appropriate way, given the time horizon on this money is also a good idea.
So I'm delighted that you called. So I think we can put it into two buckets potentially and say, OK, any of the children that are young enough where let's use 18 as a target, even though you may decide to wait longer or use it sooner. But let's say we're going to just plan the investment strategy for age 18. Well, any of the kids where that's less than five years, I'd say, yeah, let's go ahead and put it in a CD and I'd probably lock it in a little longer. I mean, I'd love to see you put it in a two or three year CD at five percent plus, because although we may get one or two more interest rates hikes, we're near the top and they're going to start coming down sometime next year. So I think you being able to say, I know that I know we're going to get five percent plus and we don't have to take any risk. And it's less than five years on when I might want the kids to get this. I think that's a great option.
You've got a little more flexibility with those that are young enough because I know they go all the way down to age two, where we're talking not only is it five years, it may even be more than 10 years. And I think in that case, you have to decide, OK, do we want since the time horizon's there, do we want to take a little bit of risk and try to grow this over the next decade at a rate faster than five percent? And if you did, I'd say let's pick some good, high quality mutual funds or some index funds and maybe systematically invest this money.
And then as you get below five years, then we'd convert it to a more safe environment. Are you all wanting to take a little bit of risk to maximize the return or would you like to keep everything in more of a guaranteed product? Well, to be honest, I'm not I'm not really savvy in the mutual funds or any of that. We're just kind of, I guess, realizing that we need to make some adjustments and I'm trying to learn.
But, you know, it's just a lot to take in. So I'm not really sure how to do mutual funds and those sorts of things. OK, well, a couple of options there. I'm going to send you a copy of the sound mind investing handbook. So when we're done here, stay on the line. We'll get your information. That'll just be our gift to you. That'll introduce you to mutual funds. And again, as long as you got more than five years, I'd say that's an option.
You may want to say, I'm only going to do that for those that are 10 years plus out. That would be even better because really over a 10 year period, you should absolutely have a positive return. And then you've got a couple of options on how to do that because we're talking about small dollar amounts. You could either go and look at one of the robo advisors like you could go to Charles Schwab and use their intelligent portfolios.
You could go to Betterment. And basically, as you make these deposits, it would automatically deploy it in what is called an indexed ETF. And basically, it's just a basket of investments that represent the broad stock market indexes. And it would be a mix of stocks and bonds. And the goal would be to outpace what you could get in a CD.
The other option is you check with our friends at soundmindinvesting.org and they could give you some just really high quality mutual fund suggestions. But if you just didn't get comfortable with that, then I think the CD route is great. But I would probably go out at least three years if you do that just to make sure you're going to lock in these 5% plus rates for the next three years. And I think that would be fine.
So either of those makes sense. Stay on the line. We'll get your information.
We'll get this handbook out to you. But this is a great thing, Danielle. Your kids are going to be really blessed by this down the road. Thanks for your call. 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 faith by 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 faith by and listeners like you.
