This faith and finance podcast is underwritten in part by Soundmind Investing. For more than 30 years, do it yourself investors have relied on SMI for proven strategies and trustworthy guidance. SMI helps people build wealth so they can provide for their families, prepare for the future and give generously.
Learn more at soundmindinvesting.org. One way you can help me, you don't happen to have 8,000 bucks on you. No, no, we don't use money in heaven.
Oh yeah, that's right. It comes in pretty handy down here, Bob. This is Faith and Finance, biblical wisdom for your financial journey. Well, James 1-5 tells us, God wants to be a part of your life, and that certainly includes how you handle money. To be a good steward, you need to be on the lookout for ways to save money so you can hang on to more of it.
Not for the love of money, but to have more to use for God's purposes and His glory. Today, I've got three ways you may be losing money. The first is not contributing enough to your 401k to get the maximum matching contribution if your employer offers one. But even if you're already getting the maximum match, you may not realize there's a way to get an even greater return on your 401k contributions. In addition to your regular payroll contributions, the more you front-load contributions at the beginning of the year, the more opportunity you have for compound earnings. Granted, that takes planning and diligence, but if you have the cash to live on while you make contributions that take up a big part of your paycheck early in the year, well, you'll be money ahead. Just keep in mind that the total annual contribution limit is $22,500 or $30,000 if you're 50 or older. The only hitch is if you contribute more early in the year, you still have to contribute enough each pay period to get the maximum match.
That's because most employers put in those matching contributions on a pay period basis. So you don't want to front-load all your annual contributions just enough to get the best of both worlds. But what if your employer doesn't offer a 401k at all? You can't just say, oh well, I'll save for retirement at my next job.
Again, because of compound earnings, time really is money. Every year you don't set up a Roth IRA, money is slipping through your fingers. A Roth has several key benefits, starting with tax-free retirement income. That's not the case with a traditional IRA where contributions are pre-tax. You deduct them from adjusted gross income on your tax return, but you have to pay income tax on your withdrawals when you retire. A Roth doesn't work that way. Your contributions are with after-tax dollars. True, you don't get the tax benefit now, but it's worth it because your withdrawals during retirement are 100% tax-free.
The IRS figures it already got what's coming to it. A Roth is especially good if you project your tax rate will be higher in retirement than it is now. Generally that means the longer time until you retire, the better a Roth works for you. Also, unlike a traditional IRA or 401k, you won't have required minimum distribution someday. And two more quick benefits, almost anyone can contribute to a Roth IRA, and if you bequeath one to your heirs, they won't have to pay taxes on withdrawals either. The second way you may be losing money is by not taking full advantage of a flexible spending account if your employer offers one. A lot of folks shy away from them because contributions not spent during the year are lost.
But with a little planning and calculation, you can set your contributions pretty close to what you'll spend on qualified items during the year. Now, there are actually two versions of the FSA. The first is for medical expenses, and the list of what's covered is too long to give here. The second is a dependent care flexible spending account, which covers childcare, care for an elderly adult, in-home dependent care, before and after school care, and nursery school. Both must be offered by your employer. You can't set these up on your own. You also have to sign up for and contribute to each separately.
Your HR department can talk you through the process. Bottom line, an FSA lets you pay for qualified expenses with pre-tax dollars, saving you a lot of cash. Okay, the last way to lose money is by lending it to Uncle Sam tax-free instead of putting it where it can earn money for you. I'm talking about having too much withheld from your paycheck for taxes. By the way, the average refund is about $3,000. That's money you could be using to pay down debt or increase your savings.
To adjust that withholding, just fill out a new W-4 withholding form. All right, those are the ways to avoid losing money. Your calls are next. 800-525-7000.
That's 800-525-7000. Stick around. Have you downloaded the Faith Buy app yet? You need to do that today because this is going to make your life easier. Yes, you can manage your money through the in-app envelope feature, but also plan out future goals. I want to buy a house in five years, and I'm on track to do that.
Here's also what I like. You can connect with people around the country. It's like social media, but better. Ask a question, get an answer, and share what you're learning about money and investing. So why don't you grab your phone right now and download the Faith Buy app? 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 faithbuy.com and clicking Find a CKA. Welcome back to Faith and Finance. I'm Rob West. All right, it's time to take your calls and questions today. We've got some lines open. We'd love to hear from you on a Friday with whatever you're thinking about financially. The number to call is 800-525-7000.
Again, that's 800-525-7000. We've got lines open, and we're ready to take your calls today. In fact, let's dive in. We're going to start in Georgia today. Delores, you'll be our first caller. Go right ahead.
Sir, I appreciate your program. I have some gold coins, and would you like to know if this would be a good time to sell those? And also, if it would be, how I would do that? And I also have some funds, up to 250,000, and a credit union. I have a credit union stable in Earth right now. I see. Yeah, very good.
So let's tackle those one at a time. With regard to the gold coins, you know, there's just a number of factors there as to whether or not it makes sense for you to hold on to that. Most notably, kind of how this gold that you own fits into your overall investment portfolio. What percent is it?
What are you looking for from it? Is this something you'll need to tap into now or in the future for income, or is it something you're really just holding to see the appreciation? Gold coins in particular are given nominal face values, but they're usually worth considerably more in terms of their fine gold content. So unless a gold bullion coin is of rare historical significance, the real value is better determined by multiplying its pure gold content by the gold spot price.
And again, unless you've got a rare coin. Right now, the gold spot price is around $1,945 an ounce. That's near the 10-year high, so it may in fact be a great time to sell gold coins. A lot of folks are wondering why it's not doing better just given all the uncertainty around us, but keep in mind as we head into a recession, people will buy less gold even though it is certainly a store of value and it's intended to be a fear trade. You know, it tends to go up when things are uncertain, but this looming recession, you know, is probably not going to allow gold to go out too much beyond where it is now.
So you've got a couple of options if you decided to sell. You could of course go to a local jewelry or coin shop to get an idea of the coin's value or online and you could check out a couple of the national services to find a reputable appraiser. The professional coin grading service would be one place to go PCGS.com. There's also the numismatic guarantee corporation at NGCCoin.com, numismatic guarantee corporation. Either of those could be a great starting place to find a reputable appraiser and ultimately a dealer. But right now you need to figure out what do you actually have, what is it worth, and then decide whether or not you want to go ahead and sell it and redeploy those assets in some other way in terms of investments or whether you want to hold on to it.
So given all of that, Dolores, what are your thoughts? Well, I think I would like to go ahead and cash them in right now. That's probably what I'll do. Yeah.
Okay. Well, I think the starting place is to kind of figure out what you're sitting on, what do you have, and then you need to find somebody that could give you a reasonable price to sell that or to buy it from you. And then you could at that point deploy that money yourself depending on what your objective is.
If you want to be ultimately safe with it, you could put it in a CDE or if you want to shore up your emergency fund, a high yield savings, or if you wanted to invest it for five years or more. And you had probably more than $100,000 or so in total, you could connect with a certified kingdom advisor on our website. There's something else we can help you with along the way. Don't hesitate to give us a call. God bless you.
To Chicago. Hi, Carol. Go right ahead. Hello? Hi.
Yes, sir. That's a question concerning capital gains. I have a 40-acre farm that I bought 50 years ago. Paid $40,000 for it.
Still live there. It's worth $600,000, $700,000. And if I was to sell it on the open market, there would be a lot of capital gains. If my children would inherit, if I understand right, then the capital gains wouldn't be as great. But the question is, if I, in my will, if I had, when I pass the farmers to be sold and given equally between my children, would they have to pay capital gains in that situation? Yes.
Yeah, very good. Well, first of all, if you were to sell it, and this is your primary residence, meaning you've lived there two out of the last five years as your primary residence, then as a single person, you could deduct $250,000 in profit away from capital gains, not paying capital gains on it. As a married person, half a million dollars in gains could be excluded.
Again, you'd have to live there two out of the last five years. And a principal residence can be located on a farm and be sold and replaced with another primary residence. So you would have to get the guidance of a probably a farm realtor to establish the, you know, just the cost basis on it and the sale. In terms of the inheritance, you know, if they were to inherit this property from you at your death, either by way of a trust or through your will, well, at that point, the cost basis would be stepped up to the market value as of the date of death. And so that's one of the benefits of inheriting the property as opposed to receiving it prior to death by way of a gift or a quitclaim deed or something like that. So if you're planning on them inheriting this property, they won't have any capital gains at all if they were to turn around and sell it because of that stepped up cost basis. But my question is, if they said I should decide how to dispose of it, and so I put in my will, well, I'll have them have the administrator to sell it, and then they get the recipient, but that would maybe come under complete capital gains for them then. No, as long as you've passed away and they stand to inherit it, then they would enjoy that stepped up basis. You know, it'd probably be easier just to, yeah, I would just give them the property and then let them turn around and sell it. At that point, you could also put it in a trust, which would accomplish the same thing and the trustee could dispose of the asset in the way and with the timing that you specify in the trust documents.
So either one would be fine. I'd visit with your estate planning attorney. Do you have somebody that drew up your will? Yes, yes.
Okay, yeah. I would give that person a call and just let him or her know what it is you're trying to accomplish. Make sure that everything you have is in fact up to date. There's nothing that needs to be updated or changed. You could review what you're intending to accomplish with the passing on of your estate, your wealth transfer, and it's never a bad idea to, you know, every few years or when something major changes in your life to have those documents reviewed and updated. But bottom line is you can absolutely do what you're trying to accomplish here, Carol, without them having any capital gains tax.
But as to how you go about that and which documents you need to use, whether it's a trust or a will or both, I would talk to your estate planning attorney just to make sure you are well planned and everything is in proper order. Thanks for your call, sir. God bless you. We're going to take a quick break when we come back. We've got just three lines open, 800-525-7000. A lot more questions just around the corner.
Stick around. faster while honoring your debt in full. For more information on how Christian credit counselors can help visit Christian credit counselors dot org.
That's Christian credit counselors dot org or call 800-557-1985 800-557-1985. Because of my past health history, finding affordable health care was nearly impossible. But then I found CHM where costs are not adjusted based on medical history. Christian Health Care Ministries even provides the freedom to choose my own providers. And the best part, CHM members pray for me. Too good to be true?
It's not. I'm a proud member of Christian Health Care Ministries, and if you think it could be right for you, learn more at CHMinistries.org slash Faithfi. Welcome back to Faith and Finance. I'm Rob West. We've got a few lines open today. 800-525-7000. All right, back to the phones. We go to Cleveland, Ohio. Emma, thank you for calling.
How can I help? Hi, I'm calling because I'm 62 years old and I have a 401k plan from my previous employer and I now have another job. And so my question is, is it more advantageous to roll it over to a traditional IRA or roll it over into my current employer's 401k plan? Hmm.
Yeah, it's a good question. I like you moving it out of that old employer's plan. The question is to a traditional IRA or your current company. And, you know, I think just for simplicity sake, I like you're going into your current 401k, we give you one less account, you could have a unified investment strategy there. And then at some point, you could roll it out to that IRA and not have another option. Now, how much do you have in that 401k roughly?
Do you know? About 450. Okay, so there's a significant sum of money there. Do you have an advisor that you would work with to manage this if you were to roll it to an IRA?
Well, that's just it. I have the current where it's currently at. They want me to, I think, and that's why I'm not a little concerned because I'm not sure if it's, you know, if they're advising me because they want to manage the book of business or if they, you know, if it's better to roll it over into my company's IRA or 401k plan. But yes, they have.
So I'm currently the place that has it. I've been in contact with them. And then my current employer, they are also the investment firm that they use. They have been in contact with them as well.
And it seems like they're both kind of encouraging it to roll into a traditional. Yeah, because they'd like to manage it. Yeah, I think with that significant sum of money, Emma, I mean, this is not just a modest amount. I mean, that's a lot that you built up in that portfolio. I think it makes sense to go ahead and go to an IRA. The reason is it's going to, you know, give you a lot more flexibility or whoever manages it a lot more flexibility in terms of the investments that are selected for you.
Because inside the 401k, there's that limited investment universe, the IRA, essentially, you can invest in anything. What I would do, I mean, certainly, you're welcome to talk to either of these folks that are with the firms that your plan administrator is with. But we prefer the Certified Kingdom Advisor designation here at Faith and Finance, which is a financial professional and investment advisor who's met high standards and character and competence and signed a statement of faith and been trained to bring a biblical worldview and pastor and client references.
I mean, there's a whole host of requirements. But you could look for a CKA there in Cleveland, I know there's some wonderful ones. And I'd interview two or three find the one that's the best fit. And I would wait if this is the direction you're going until you select that advisor before you do anything with that old 401k, because he or she will custody their assets at one particular brokerage firm, in some cases, it may be more than one. But let's say they're with Fidelity, then they'll open that account for you. There. And then you just request the surrender paperwork and transfer that over.
And that would, of course, not be a taxable event. And then at that point, based on the discovery they'd done with you and, you know, at length talking about your goals and objectives and risk tolerance, then they could deploy an investment strategy. But I think just given what you've got, that's probably my best advice. Okay, and what was the name again? Yeah, just go to our website at faithfi.com. That's faithfi.com and just click Find a CKA, Certified Kingdom Advisor. That'll be right at the top of the page.
And then you could search there in Cleveland, get a list of CKAs, and then I'd schedule two or three appointments, find the one that's the best fit. Excellent. Thank you so much. All right, Emma, God bless you. Thanks for calling today. We appreciate it. A quick email. This comes to us from Danielle.
She wrote to us at askrob at faithfi.com. She says, I'm getting a bonus at work that I'm considering putting into a CD at 4%. I have my six months emergency fund set aside, or should I put the bonus toward my 2.625% mortgage? Well, going strictly by the math, I'd go with the CD and of course get a higher return and then you would by paying down the mortgage at a very low rate. However, if you have a real conviction, Danielle, to be completely debt free, including your house, and you'd like to accelerate, you know, that payoff and get yourself a little bit closer, then I don't have any problem with that at all.
In fact, I think that'd be a great idea. I don't think I've ever had someone regret paying off or paying down their mortgage early. So again, I think that's completely up to you. There's more than just the financial side of that equation.
You've got the financial side, but then you also have to consider the, you know, the non financial side of that as well, which is why I would consider doing that. So hopefully that helps you. By the way, if you have a question, send it along askrob at faithfi.com. All right, let's head back to the phones to Ohio.
Hi, Chris, how can I help? Hi, yes. What is the difference between a trust and a will? Yes, so Which is better to Yeah, it really just depends on what you're trying to accomplish.
One is not better or worse. A will is a little simpler in that a will will basically just direct how you want your assets and personal items to be passed at your death. And so a will will go through probate, which is the probate court, there will be some costs associated with that, it will also take a little bit of time. But ultimately, at your death, your personal representative would distribute your assets and personal items according to your wishes. A trust is a legal arrangement made with a trustee. And your wishes will be carried out without going through probate. So it happens outside of the probate court, and a trust can go into effect prior to your death, or after your death. So one of the benefits is of a trust versus will, a will only takes place at death. But a trust, if you were incapacitated, and you want your trustee to be able to manage your affairs, prior to your death, that could be done.
It could also happen after your death. So let's say you had small children, or you had dependent children that you wanted to get an inheritance over time. That could all be done through a trust.
And the trustee, whether an individual trustee, a person or corporation, would manage your estate according to the trust documents. So you have a lot more flexibility with a trust, and you have the anonymity because it's not a part of the public record. And you have more efficiency because it's not going through the probate court. It is going to be more expensive. It's probably $1500 or $2000 versus a will, which might be around $500.
So I think it's ultimately about what is going to meet your needs the best. Not everyone needs a trust, but it can be a very effective planning tool. So I'd connect with a godly estate planning attorney in your area and talk through this for your situation. Well, we're almost out of time. If you liked today's program, why not share it with a friend and while you're at it, share the Faith Buy app with them as well. Help us get the word out. Thanks for listening and sharing and I hope you'll come back and join us again next time for another edition of Faith and Finance. Faith and Finance is provided by Faith Buy and listeners like you.
