The Key to Long-Term Financial Success with Matt Bell

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 Look outside, get everything ready for yourself in the field, and after that, build your house. Proverbs 24, 27. Hi, I'm Rob West. That verse underscores the need for planning and execution, key elements for long-term financial success. Matt Bell joins us today to talk about putting planning and execution to work for you. And 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. Matt Bell is the managing editor at Soundmind Investing and underwriter of this program. Matt's an author and a frequent contributor here. And Matt, great to have you back. Hi, Rob.

Great to be back. So Matt, there's a great article about our topic in the latest Soundmind Investing newsletter titled Planning and Execution, the keys to long-term financial success. And my guess is that all the planning in the world doesn't matter if you don't execute, right?

Yeah, that's absolutely right, Rob. To be successful, you just can't have one without the other. But it's essential to get the ball rolling with that first step, with that plan process. So there's a saying that life happens to us when we're making other plans. Well, unfortunately for a lot of people, it seems a more accurate phrase is that life happens while we're making no plans. The fact is that millions of people don't have a plan to guide their use of money. And even those who start to put together something of a plan, many end up allowing themselves to get pulled off course.

I think as basic as this sounds, I think a lot of people just don't realize what a huge impact, what a huge benefit it is to put a plan together and to follow through. Yeah, I think that's well said. And clearly there is some empirical evidence for this that you cite in the article. Share that with us.

Sure. Yeah, there was some interesting research done back in 2011. Researchers analyzed data from more than 1200 people over the age of 50. They looked at the type of financial planning these people did or didn't do and how that influenced ultimately their net worth at retirement.

It was pretty interesting. So they grouped people into four categories. The first noteworthy finding was that two thirds of people in this first category did no planning whatsoever, even though their retirement was close at hand. Many had never even taken the step to learn what to expect from Social Security.

And that's a pretty simple thing to find out. Now, in contrast to this big group of non planners, a second group, people that the researchers called simple planners, they had at least thought about what their financial needs might be in their later years, and they tried to calculate how much of their income they should be setting aside for the future. But that's really where the good news ended for this group. Their follow through was lacking with only about half of these simple planners creating an actual plan. Then there was a third group which researchers called serious planners, they took more action, they sought out more financial information, they even paid for some planning advice. But just like the group before them, their follow through wasn't the best. About half of these serious planners failed to follow through. And then there was the last group which researchers called successful planners. They were the ones who put together a financial plan and actually followed through over the course of many years. And out of all the people studied, though, only about 20% made it to this level.

Yeah, that's a helpful overview. So Matt, in that four step continuum from non planners to successful planners, is it only that last group that benefited from planning? Or is there some hope for all the rest?

Yeah, that's a great question, Rob. And yes, the good news is there is some hope for all the rest. The research, this was really interesting, clearly showed the benefit of taking even a small step toward planning. For example, just moving up one notch from being a non planner to a simple planner, that doubled or tripled net worth at retirement.

And then moving up to the serious planning category that added another 25 to 35%. Yeah. All right, Matt, we've got just about a minute left. Sum this up. What is the take home message here?

Sure. So basically, it can be summed up really well by Proverbs 21.5, which says the plans of the diligent lead to profit. So for those who are listening, if you haven't started the planning process, or maybe you have a plan, but you're not really following it, I hope you're encouraged by this research that shows there's a lot to be gained by getting back on track. And as you know, Rob, at SMI, our members have access to a pretty sophisticated planning tool called MoneyGuide.

But even using one of the free online planning calculators that can be found easily, that would be a really good starting point for a lot of people. Yeah, the key is just to start somewhere. Well, Matt, we always appreciate our time with you. And we appreciate you stopping by today. My pleasure, Rob. That's Matt Bell managing editor at sound mind investing, you can read the article, it's worth the read, planning and execution, the keys to long term financial success at sound mind investing.org. That sound mind investing.org. Your calls are next 800-525-7000.

We'll be right back. visit faith by.com and click Find a CKA. Financial wisdom for living well, sound mind investing.org. Thanks for joining us today on faith and finance. This is the program where we help you manage God's money, bringing faith and finance together for God's glory. We want to get into those practical decisions you're making on a daily basis, but along the way, bring some encouragement, some hope as well, and take you into the Council of Scripture be theologically sound as we approach with reverence, see God's word and its application to every facet of our lives.

It's truth. And there's a lot in there around money, money themes and ideas. Jesus talked about it a lot. The apostles talked about money quite a bit. There's a lot in the Old Testament about money as well. And so we can glean those principles and passages, starting with the creation account and recognizing God created and owns everything. The earth is the Lord's and the fullness thereof. Everything is God's. And so once we surrender our lives to Jesus, it's about stewardship.

How do we manage God's resources and our time and our relationships and our talents and yes, God's word as well. Well, in this program each day, we want to zero in on financial stewardship and help you be wise and faithful, making wise decisions throughout the course of your life. So whatever's going on in your financial life today, we'd love for you to give us a call. That number to be a part of the program is 800-525-7000. We've got some lines open at the moment, so you can get right through at the moment. 800-525-7000. You can call right now. We're going to begin in Texas today. Ben, you'll be first up, sir. Go ahead. Thanks, Rob.

Thanks for taking my call. So I have a 401k that's contributing about 8% to and my company had just stopped matching their own contribution because they moved over to a new system, which is a pension system. And I think they are doing about 5% of the yearly package is being contributed to the system. And for me, I'm still contributing 8% which I have just up to 15% this month.

So I have a question. Do I need to, I'm thinking, would it be best to roll it over to Roth or to roll to Annuity? The amount is just about 32,000. Okay, got it.

Yeah. So in this conversion to a pension, which by the way, this is interesting because for several decades, companies have been moving the other direction from pensions to 401ks, putting more of the onus on the employee to decide whether or not to contribute and then matching a certain portion. You know, why would a company go from a 401k to a pension? Well, could be to attract and retain employees, pensions offer guaranteed benefits and appeals to older or longer term employees, you know, gives them more control over the contributions and kind of smooths those out over time, as opposed to the unpredictable spikes with employee 401k participation.

Usually some economies of scale, maybe less administrative costs, those types of things in terms of what you should do. So is it clear to you that they're giving you the ability to roll that 401k out as a part of this transition? Oh, yes, I have 100% control over the 401k, I can continue to contribute or do or roll it over to whatever funds, you know. Yeah. So they're going to allow that 401k to continue alongside the pension, but they're just not going to match to the 401k.

They're solely going to make the contributions to the pension moving forward. Is that right? Correct. Yes. Okay. Yeah. And have you been happy with the investment performance?

I realize you don't have a ton of money in there. But have you been happy with the investment performance of the options you have in the 401k? Yeah, I think it's, it's been, yeah, it's been doing well things, you know. Okay. Because I believe the market has been good for a couple of years now.

Yeah, very good. And do you have a Roth 401k option as well with your employer or only the traditional variety? I do not have anything other than the 401k. Okay, because there is a lot of companies are offering either a 401k traditional or a 401k Roth and you get to choose but it doesn't sound like that's the case here. Yes, it's 401k traditional.

Okay, got it. Yeah, I would probably consider maybe you start a Roth IRA separate. And you know, you could start contributing to that just since there's not any match any longer, you're probably just given the percentage of your income you had committed to put into the 401k, you're probably going to max that out. And if you're married, perhaps you do two Roths and you and your wife, you know, if you're under 50, you could put in for 2024, you could each put in, you know, a total of 14,007 1000 a piece. And as long as you do that, before you file your 2024 return, you could turn around and do it again for 2025 with another 7000 and 7000. So you could get a total of 28,000 into the two Roth IRAs. Over the course of this year, you'd have to do the first 14,000 before you file your 2024 return, then you could just leave that 401k right there. If you reach the max on your contribution limit in the Roth IRA, then I would say, you know, because it's been performing well, and it's easier to manage inside that 401k, I would just continue using salary deferral into that 401k. And so once you get to retirement, you're going to have three buckets here, you're going to have your your new pension, you're going to have that 401k that you'll likely be contributing to along the way, which you'll get a tax deduction on. And then if each year you could fund, you know, up to the max on the two Roth IRAs, now you'll have an an after tax bucket that's growing as well.

And you'd be able to pick and choose based on which one is most effective from a tax standpoint, when you get to retirement from those three different buckets. Does that make sense? Yeah, that makes sense. Thank you very much. All right. You're welcome, Ben. Thanks for your call today. Lord bless you, sir.

Let's go to Aurora, Illinois. Hi, Jeremy. Go ahead, sir. Hello, how are you? Doing great.

Thanks. I know we need to be generous with our money, which is what I want to do with God's money. So I was looking into St. Jude Hospital, and also my local church. I just wanted to know if I could do both, or if I should just double down and donate it to my local church.

Yeah, yeah, very good. You know, I love a generous heart, and I think you should give to the things that align with your passions and God's heart. When we look at Scripture, we clearly see the local church as God's plan A, and so I think we should be giving systematically and proportionately first to the local church to support the work of the local church.

But I don't think we should stop there. I think we should give beyond that. In terms of my own giving, I like to align that with the things I'm passionate about, but also in my search of the Scriptures, I think we should prioritize those things that are on the heart of God as well. So that would be the ministry of God's word, preaching and teaching and discipleship, the ministry of God's justice, where you might give to areas like human trafficking or other areas that would align with that area in Scripture. Perhaps the ministry of God's mercy for the oppressed and widows and orphans, people like that. So I think, you know, as we consider our giving, I would kind of lean toward first the local church, second to the things done that we see in Scripture. But I don't think it's wrong at all to give beyond that, even to what you might consider more secular causes that are creating human flourishing and meeting real needs, even the medical needs of those around us.

I would just make sure you're giving to the church first before you consider those other things. Does that make sense, though? It does. Thank you. OK, thanks for calling, Jeremy. Well, folks, we're going to head into our break here in just a moment, but we do have some lines open today. So if you have a financial question, you'd love to wrestle with it. We'd love to talk to you about it.

You can call 800-525-7000. We want to help you see God as your ultimate treasure and money, a tool to accomplish God's purposes. Let's do that together as we talk about a biblical worldview of money right after this break. We'll be right back.

We'll be right back. Health care is complicated. It doesn't have to be if you don't love how your health insurance works. Maybe it's time to leave traditional health insurance behind. Take charge of your health care with Christian Health Care Ministries. CHM offers you flexibility. Enroll anytime.

Choose your own provider and select the program that fits your needs and budget. CHM is the original faith based way of taking care of your medical bill costs. Learn more at CHMinistries.org faith. Thanks for joining us today on faith and finance got room for maybe one more question. If you have a financial question, something going on in your financial life today call right now 800-525-7000 back to the phones to Indiana and thanks for waiting. Go ahead.

Hi, Rob. Thanks for taking my call. Yeah, I have an HSA that I've had. I established it in 2006 and then I put into it for like 10 years and then I got on Medicare had to go on Medicare. And I have around seven and a half years of Medicare Part B premiums that were taken out of my Social Security payments each month from the last seven and a half years. And it's my understanding I can take those premiums out of my HSA, but I read online if I haven't done that and I read online that you can go retroactive.

I could take all those seven and a half years like this year if I want to. Is that true? No, I would look into that. My understanding is that is not the case.

Now, clearly, once you're 65, you can use HSA funds to pay for Medicare, you know, Part B and C and D. But you can't use it for any kind of Medigap or Medicare supplement and you can't contribute to an HSA beyond age 65, but you can use it for the premiums. Now, where I think you need to get some information is I do not think you can use it to pay back premiums you've paid in the past, specifically for Medicare. That's what I would want you to get a little bit more information on because that's not my understanding, although I'm not certain on that. And that's why I want you to check it out. Okay, well, in publication, you know, the Pub 959 is not clear on it either. But online, like Kippen, you know, Schwab and all those are adamant that you can go back on it.

And I can't find it anywhere, you know, in publication 969. Yeah, yeah. Do you normally file your own taxes? Or do you have a CPA you could run this by? I usually do my own.

Yeah, I do my own. Okay, yeah. So this might be the time where you just this is important enough that reaching out to somebody who could give you a, you know, definitive answer on this, who's a tax professional, I think would be a good idea. Because obviously, that'd be real helpful if you could go retroactive, and now you'd get all that money out tax free, and you could use that to shore up your emergency fund or whatever else. But I'm not not certain that's possible.

I know moving forward, you could pick up those premiums with tax free distributions along the way. And hopefully that'll help you moving forward for sure. Okay. All right.

Well, I'll try to find out up as an accountant or something. All right. Very good. And thanks for calling today. I wish I could have given you more definitive advice on that. But we appreciate you being a part of the program.

Let's go to Georgia. Hi, Mark. How can I help? Yeah, thanks for taking my call. I am 57. My wife is 62. And we were wondering if she should go ahead and start drawing Social Security, we do not need the money for income, we would take 100% of that and invest it.

And just didn't know what the drawbacks were of going ahead and doing that. Yeah. So she's qualified under her own work record. Is that right?

That's correct. Okay. And she would take that at what age? Well, we were wondering about taking starting that now.

She's 62 will be 63 this year. Okay, got it. Yeah. So she's gonna, you know, take obviously a pretty big, you know, cut on that by taking it early. So it could be, you know, as much as 25 to 30%.

And I'd love to see that grow. I mean, the difference is, yes, could you invest it and do better? Possibly. You know, I think one of the questions would be, just because you all are still working, more of it might be taxable, versus later, when you have maybe you're fully retired, and you don't have as much income. And so perhaps, you know, much less of it, if any, would be taxable. I think the second thing is, you're going to get a guaranteed return by waiting, as long as you live long enough to reclaim it through the higher check. But you know, you're going to get a guaranteed increase of, you know, nearly seven, 8% a year, by waiting until full retirement age, which there's no guarantee in the market. So I think that's why I mean, you know, we don't know which is going to come out better. So we just have to make an educated decision.

But if you, you know, expect to live, you're in good health, you know, and you expect just to have the longevity based on family history and your own current health status to live, you know, into your 80s and beyond delaying those benefits, increases that total lifetime payout. And that tends to be, you know, the better option. Okay, well, thank you very much. I appreciate it. Yeah, you're welcome. We appreciate you calling today, Mark. God bless you, sir. Let's round out the broadcast today in Chicago. Christine, how can we serve you? Thank you for taking my call.

And I appreciate your program. My question is, I'm 64 years old, and I have a significant amount of money in IRA CDs. And I was considering taking the money out little by little every year to have more liquid assets. And I understand that when I take the money out that that goes towards my annual income. What I wanted to know was, is there another way to withdraw the money to lessen the taxes that I have to pay? Yeah, there really isn't, Christine.

I mean, let me give you a few thoughts. But overall, apart from giving it away charitably, it's going to be recognized as income as it comes out. Now, you could be strategic about when you pull it out. So if in one particular year you had more income than another year, you might try to wait and, you know, take it as you turn the clock into a new calendar year if you had the ability to defer when you recognize it because you pay tax on in the year it comes out.

So you could be a little more thoughtful about when you take it out. And if you have the flexibility to make sure that you get it into that tax year where your income is as low as possible, so that you're not pushing any portion of it up into a higher tax bracket. The other approach would be once you're 70 and a half, and I realize you're not there yet, but that's going to be another opportunity for you because through the qualified charitable distribution, if you're doing any charitable giving out of your cash or your checking account or savings account, like most of us, so when when we write a check to our church or something like that, you know, we typically write a check or, you know, put our debit card in and make a gift. Well, what if you did the same giving you were already planning to do out of your cash after tax dollars, but instead you sent it from your IRA? Well, if it went from your IRA directly to your church or charity, now it's not added to your taxable income. So you're in a sense replacing the money that you were already going to give with after tax dollars and you're giving the same amount from your IRA, except now it's coming out without you having to pay any tax on it.

Again, you can't do that until you're 70 and a half, but when that time comes, that would be a great way for you to get money out without it, you know, increasing your tax liability. Does that make sense? It does. Thank you for answering my question. I appreciate your help. You're very welcome. Thank you so much.

God bless you. We appreciate you being on the program today. Big thanks to my team today, Sandy Dickinson handling our phones, our producer today, Devin Patrick, and also Taylor Standridge, helping me with some great research. Folks, thanks for being along with us. Come back and join us tomorrow. We'll see you then. Bye bye. Faith and Finance is provided by Faith Buy and listeners like you.