Plan for Future Tax Increases

Here's a riddle for you. What's worth $6 trillion and has a big red bullseye on its back?

Give up? Well, it's the huge pile of money making up the bulk of many retirement accounts, including your 401k. The tax benefits of 401k plans are fairly generous for now, but that could change as cash-strapped federal and state governments look to increase revenue. So today our host, Rob West, tells us how to prepare. And it's your calls on anything financial at 800-525-7000.

800-525-7000. I'm Steve Moore, planning for future tax increases. Next, right here on MoneyWise Live. Okay, Rob, so why are employer-sponsored 401k plans so popular right now? Well, there's no question that they offer a whole basket of benefits, Steve, including automatic contributions from your paycheck. You can include in that tax deferred contributions and earnings and possibly employer matching contributions. Yeah.

All right. So what's the problem then or the concern with 401ks? Well, notice that I said tax deferred.

Basically, that means grow now, pay later. Contributing to a 401k has always made sense because most of us assume that our income will be lower in retirement when 401k withdrawals are taxed as regular income. But it's that paying later part that now has some observers questioning whether the 401k is in fact the end all and be all of retirement planning. That concern is based on the belief that the government may well increase taxes on 401ks in the future, I presume.

So why do these observers think that will happen? Well, it's one more thing you can blame on the coronavirus pandemic. Business shutdowns and high unemployment caused a huge drop in government revenue. And in the cost of relief programs when that's added in, you have federal and state governments looking for ways to overcome budget shortfalls even more than they typically are. So no doubt some lawmakers are looking at the six trillion dollars held in 401ks as the solution. And that's why we might expect tax hikes down the road. Okay, so what can we do about it? Or what could maybe what should we do about it? Give up on our 401k?

No, I don't think so. I think that would be an overreaction for most 401k savers, especially if your employer still offers matching contributions, which many call and I would agree free money. Plus, in the event you suffer a financial calamity, your 401k is protected against liens and creditors.

Okay, so what should we do? Well, I would just say we often talk about the need to diversify your investment holdings. That's of course a biblical principle. It comes right out of Ecclesiastes.

Divide your portion to seven or even to eight for you do not know what misfortune may occur on the earth. The same way you diversify your portfolio, Stephen, stocks versus bonds or by holding equities in different sectors of the economy. You can also diversify between taxable and non taxable income streams in retirement. The easiest way to do that is by putting some of your money in a designated for a Roth account if your 401k plan offers that feature and many more are these days. This is essentially a Roth account within your 401k where you would contribute after tax money, then later in retirement with draws of those contributions and earnings would be tax free. So you're setting up a tax free income stream in retirement. Of course, there are limits to what you can contribute to a Roth 401k. Those deposits count against the total allowed for 401k contribution. So just as a reminder here in 2020, the limit is $19,500 or $26,000 if you're age 50 and older.

Okay. And what if your 401k plan doesn't offer that option? Yeah, well, then you would still want to contribute enough to your 401k to get the maximum employer contribution if there is one. Then after that, if you still have discretionary income to invest, you could open a Roth account outside of your 401k. However, if the government can raise taxes on 401ks, and we're concerned that they might, it can also raise taxes on Roth IRAs, right?

It certainly could. But politically, I would just say it would be nearly wouldn't be nearly as easy to start taxing Roth accounts as it would be to raise taxes on 401ks. You see what the 401k lawmakers simply have to raise income taxes, something they've done time and time again. But the Roth IRA was specifically designed to have tax free withdrawals. It's the whole reason for its existence. And remember, Roth contributions are taxed going in.

So it would be far more difficult for lawmakers to suddenly do a 180 on Roth accounts given the whole intention and design behind them. Okay, well, this is great information. I'll tell you what, Rob, I have one other question. Let's come back after the break and sneak that one in. If we can, then we'll go to our phones. Anything financial today that is of interest to you is of interest to us.

So make that call now while we have open lines, 800-525-7000. This is MoneyWise. God cares a great deal more about our money than most of us imagine. In fact, Jesus says more about our use of money and possessions than about anything else, including both heaven and hell. In Managing God's Money, author Randy Alcorn breaks it all down in a simple, easy-to-follow format that makes it the perfect reference tool if you're interested in gaining a solid biblical understanding of money, possessions, and eternity. Managing God's Money is available when you click the Store button at MoneyWiseLive.org. If you're investing for retirement or any other goal, you may be wondering if it's possible to enjoy both profit and peace of mind no matter what's happening in the market. Sound Mind Investing has a short video webinar on that topic at SoundMindInvesting.org. SMI has helped tens of thousands of Christians learn to be wise and faithful stewards in the area of investing.

Profit and peace of mind no matter what's happening in the market at SoundMindInvesting.org. My life was feeling a bit out of control. That's real, and I'm Hannah Lynn. I came to realize my discontentment, grew wheels, and took me for a ride. There's three categories of discontentment. Are you discontent in the season of life you're in? You want to finish school, you want kids, or retirement. Are you discontent with what you have? You want a bigger house, a better car? Or are you discontent in your relationships?

Do you wish you had better friends or were married? Discontentment can take you for a ride like you're sitting in a runaway shopping cart. Paul talks about the secret to contentment in Philippians 4. It is only through Christ's strength can we have contentment, and then we can say confidently like Paul, my God will supply every need of yours according to his riches in glory in Christ Jesus. That's real.

More on Instagram at That's Real Radio. If the heavy burden of debt is robbing you of freedom and peace of mind, Christian credit counselors can help. We're a nationwide nonprofit credit counseling organization that has helped over 300,000 individuals in the last 27 years get out of credit card debt 80% faster while honoring that debt in full. To learn how Christian credit counselors can help you, visit christiancreditcounselors.org.

Or call 800-557-1985. Hey, nice to have you with us today. It's MoneyWise Live where timeless wisdom meets today's financial choices and decisions. And when I say timeless wisdom, obviously it's not us we're speaking about. It's the Lord God himself, the wisdom that he provides to us through his word, the Bible.

Now, if we can help you today with anything. Yeah, Steve, I'm just thinking about what you just said. Our wisdom may age out before the program's even over, so definitely not timeless, right? Exactly right. That's good for maybe 30 minutes. Right. There you go.

On a good day. Then we'll check the stock market and maybe retract everything we just got from saying. Hey, one other question for you about these 401k options. Any other options for hedging against future 401k tax hikes? Yeah, there is one and that would be a taxable brokerage account. It would allow you to get around the caps and restrictions of a qualified retirement plan, but you'd incur taxes year to year, so it's not a great option.

But if you're able to max out your contributions to a 401k and a Roth and you still have money to invest, a regular brokerage account is a way to go. But I would say make sure if you're putting that much away for the long term that you've really defined what is enough. You know, what is your financial finish line? We don't want to just accumulate for accumulation sake. We want to have a plan. We want to pray about it.

We want to make sure we're giving as the Lord leads. And saving goes along with that, but not just unencumbered savings, if you will. You know, one example, Steve, of exactly what we've been talking about here. And just before the break, if you're just tuning in, we were talking about given potential future tax hikes, especially in light of what's going on with most states in light of the coronavirus pandemic, not to mention the federal government and what we might see in terms of increases in income tax rates down the road, we're talking about how that might affect future 401k withdrawals. And we're saying perhaps you should think about now more than ever taking advantage of the Roth option inside the 401k if you have it.

And that's what Mike did. We asked the question, do you have access to this kind of Roth 401k on Facebook? And he said, yeah. New York state employees are blessed with the optional 457 deferred comp, which, by the way, acts like a 401k. And you can do the pre-tax or the Roth funds. He says this year I contributed 50 percent to Roth, 50 percent to pre-tax. But he goes on to say, I've recently changed so that now I'm contributing 100 percent to the Roth option. So that's exactly what we're describing.

You can mix and match the money going into these pre-tax and kind of after-tax, tax-free and withdrawal and retirement options and have both options to choose from, depending on which is most advantageous when you get to retirement. Yeah. All right. Good.

I'm glad you pointed that out. And Mike, thank you very much for responding to us. Our Facebook question of the day is generally put up earlier in the day. So feel free to check us out on Facebook and all the primary social media sites. Or you can give us a call right now on this radio program 800-525-7000. So let us begin.

Indianapolis, Indiana, WGNR. Timothy, how can we help you, sir? Oh, good afternoon. I need some input on reverse mortgages. I've heard pros and cons. But if I could describe my situation a little bit, I really would like your perspective. I'm a 68 year old piano tuner. I live alone in a house that was built by my great grandfather.

So there's lots of memories here. It needs some serious renovation. But the piano tuning business just isn't as lively as it used to be. So I lack the money to invest in it. I live in an area where property values have skyrocketed over the past couple of years. And there is no mortgage on the home, only a small home line of credit.

And I'm pretty sure I'll live here for the rest of my life. But if I invested in the necessary repairs, I could easily double my investment or more if I did sell it. And houses like mine have been renovated and sold on my street for two to $300,000. And with all that, it would seem that my current situation doesn't have the pitfalls that a reverse mortgage might produce. But I really would like to hear your advice.

Yeah, you know, I think one of the keys is what you just talked about, Timothy. And that is if you're planning on staying put, you know, that's obviously a huge consideration. If you have if you've got if you're at the right age, and you've got enough equity in your home, certainly converting that to an income stream is something.

It's not my first choice, but it is a viable option. If you have the ability to keep up the taxes and insurance, you're going to obviously continue with the homeowners insurance. And you're not planning on going anywhere, meaning you're not going to get to an age where you say this is just too much house, I want to downsize.

You know, I'm going to stay put. You know, there are some disadvantages, though, that I think you just need to be aware of. You know, one of them is just that there are significant costs, you know, they are lender fees and FHA insurance charges and closing costs.

And this all gets added to the loan balance, which means, you know, it's just going to take on more debt as a part of this, the interest rates are structured so that both adjustable rate and fixed rate financing is available, but you're often going to have a rate that's higher than the prevailing rates. You know, there are other options, things as well, just with regard to, you know, considerations on does this property want to stay in the family, you know, after it's passed on, and then you're going to have a debt or an obligation against it that's going to obviously perhaps limit their ability to hang on to it. So I think you just need to weigh all of the options, realize there is a cost to it. You know, I never like funding lifestyle with debt, but I recognize you're sitting on a significant asset. And if you've checked all the boxes, you understand the cost, you've done your homework, you've considered this in terms of your estate plan, and what the plan is for the property after the Lord calls you home, and you're really confident you're going to stay there, you know, I'm not someone who would say it's never an option.

I just think you need to go in with your eyes wide open. And I prefer taking another approach, which would be, you know, perhaps downsizing limiting lifestyle, so you can live on whatever retirement assets and income you already have, as opposed to trying to live off of a debt income stream tied to the house. Does that make sense, though? It makes a lot of sense.

And my one question would be, is there an alternative to obtaining a large sum of money and not having to pay the payments, the monthly payment for the time being? I know it ends up in the end, but but there's such an increase in the value if it is mixed up. It's just insane the way the property values are going.

It's a really hot neighborhood right now. Yeah. But you obviously don't realize that unless you sell. And at this point, you're thinking of hanging on to it, though, right? Yeah. And then if I do hang on to it, there's really nobody in my family that is interested in it.

Yeah, yeah. Well, you know, I think that's what it comes down to is just recognizing that you're sitting on an asset that, as you said, has appreciated significantly, continues to appreciate. And you just need to know that, you know, if you don't have enough to cover your expenses, you've got a couple of options. One is you can convert that asset, as you're talking about, to an income stream.

And that would be either a lump sum or an income stream that comes at a cost or you sell it, you realize that gain, and then you take that money and you buy something smaller for cash, perhaps that's more manageable, and then you convert the balance to an income stream through investments. I think those are really your two options you need to pray and think through. Timothy, we appreciate your phone call today, sir, and we wish you the best as you pursue this. And I'm sure you'll be asking God's wisdom. Thank you very much. 800-525-7000, St. Louis, Missouri.

Anna, how can we help you? I am calling about a Roth IRA. I listened to your program and I opened one, but I'm confused about the taxes. I opened one with $7,000, so I was thinking I had to pay the taxes on the $7,000.

But my understanding from talking to people is that I don't. I paid that when I was getting my payroll checks. Could you explain the tax situation on it better for me?

Yeah, what you're describing, Anna, is exactly right. Keep in mind the alternative to a Roth IRA or a Roth 401k is a pre-tax option. So think about getting paid and having a pre-tax contribution go into a traditional 401k. It's excluded from what would be taxable to you in the form of income, meaning you're not paying tax on it as it goes in. So essentially you're getting a deduction for that amount because you're not, when you pay your taxes at the end of the year, that's going to be excluded for the rest of your income. Then it's going to grow tax deferred. And then when you get to retirement and start pulling it out, whatever you would draw in that calendar year is going to be taxed as ordinary income.

With the Roth IRA or 401k, you were paid on 100% of what you got. So you already paid tax on it. Then you make the contribution to the Roth. You're not going to pay taxes again.

You've already done that. You're just not going to get the deduction that you would get if it went into a traditional IRA or 401k. So you receive the income, you pay the tax, you make the contribution up to $7,000 if you're age 50 and older for 2020. And that money is now already been paid tax on. It's going to start growing and it's going to grow between now and when you start pulling it out at least five years from now or in retirement ideally and all the gains beyond what you put in as after tax contributions, all the gains are going to come out tax free.

And that's where it really shines because this money is going to grow over the next, let's say 10 or 20 years or more because you don't even have to pull it out with a required minimum distribution on a Roth IRA and all that money that you made in the stock market and your diversified portfolio is now tax free money coming back to you. Does that make sense though? Yes, it does. I understand better, much better. Okay, very good. Well, we appreciate it. I think you made a great choice here, Anna, and I would just be consistent in your contributions to that. Thanks for calling today. Yeah, thanks very much, Anna.

God bless you. If you're just tuning in and you're wondering who are those guys? I'm looking for my country western station. Well, the station is still out there somewhere, but this is MoneyWise Live. If we can help you with a money question and now's the time to call 800-525-7000. He's Rob West.

I'm Steve Moore, 800-525-7000. More radio, more MoneyWise Live after this. Money and life run on the same track, but unfortunately, sometimes it seems like your money is heading in a different direction from your goals. In Never Enough, Three Keys to Financial Contentment, author Ron Blue helps you to break down all your financial options to a basic four and then shows you how to keep it all chugging along in the right direction on the same track.

Never Enough, Three Keys to Financial Contentment, available when you click the store button at MoneyWiseLive.org. Hebrews 4-12 says, For the word of God is quick and powerful and sharper than any two-edged sword. Here's Beth Moore with a quick word. I don't care where we are on our walk of faith, the enemy has got a ploy to fit whatever our particular kind of walk is. If we're walking out in carnality and out in the things of the flesh, he's going to get us there.

He has a trap for us there. If we're walking in such a place to pursue the knowledge of God through his word, he's going to do his best to get us with arrogance. I told a group not too long ago, and I wish you could have seen their faces, it was a group of Bible students that I exhorted what Melissa exhorted me to do about, oh, I guess about a year and a half ago when she looked at me and said, Mother, you need to get a new Bible. Yours looks like you study it too much.

And I love that about Melissa. I love that kind of boldness in her that says, don't just carry around a Bible you'd hope people knew you studied all the time. You understand what I'm saying? To some Bible students, the hardest thing in the world would be to get a Bible that would look like they haven't been in it a lot, when God would know. God would be totally at home with our gold edges. You understand what I'm saying?

He does not need our Bibles to be worn out nor look worn out for somebody else. Pride, you understand what I'm saying? It's the trap.

It's the trap. You've been listening to a quick word with Beth Moore. Maybe you're like me, always on the go. The free living proof app is a perfect tool to help you stay connected, encouraged and in his word with Beth. Download the free app today. Just search for Beth Moore in the app store.

Thanks for listening to a quick word with Beth Moore. Do you know if you have enough? Enough money? Enough house?

Do you know how much is enough? If not, Ron Blue can help with his book, Master Your Money, a step-by-step plan for experiencing financial contentment. Learn how to save, invest and give wisely, how to create a long-term financial plan and how to get out of debt. You'll find it all in Master Your Money by Ron Blue, available when you click the store button at MoneyWiseLive.org. Nice to have you joining us today on MoneyWise Live. Here's a quote from the past host of this radio program, our good friend and the late Larry Burkett, who reminded us that the justification for anyone investing is that he or she has given what God has asked them to give, he has met the reasonable needs of his or her family and he still has a surplus. So if you're wondering about investing and when's the best time to do it, first you want to make sure that you have those basic minimums met.

800-525-7000 in Rockford, Michigan. Hello Elaine, how can we help you? Hi, my husband and I have a large sum sitting in our savings account that we intended for a down payment on a home, but now we're considering moving abroad to do long-term missions. So I'm wondering if it'd be smarter to continue renting and save the down payment to help fund our mission, or if we should go ahead and buy a home and take a chance that we might be selling it in less than five years.

Yeah, so you answered my question there right at the end. You think this could happen in less than five years? Are you targeting perhaps even sooner than that? Definitely it could be as soon as two or three.

Okay, all right. Yeah, you know, Elaine, I probably would pass on buying a home, especially if you don't plan to keep it and rent it out, which I would caution you against if you're going to be an absentee landlord because you're not here to watch over it and maintain it and deal with the repairs, unless of course you hired somebody to do that or you had family that would do that for you. So I like the idea of you continuing to rent given the uncertainty, the changes that are coming.

Last thing I'd want is for you to make this major purchase. And then, you know, after 10, 11 years of the housing market, really screaming on the upward following the 2008-2009 housing and credit crisis, if we were to kind of take a downturn, you may lose some money there. Not to mention the cost of buying and selling a piece of real estate is significant. So in order to miss all of that, as much as you might like to own a home and know that you're making some headway toward building equity, I think just the cost, the uncertainty and the potential dip in the housing market we could see in the next couple of years would cause me to say, I think you ought to just continue to rent at this point, hang on to your cash, and then, you know, develop a plan perhaps with a financial advisor for what you're going to do with that cash while you're on the mission field. If you need to convert that to an income stream or it's money that's just going to continue to grow, you don't have any intention of touching it unless something comes out of left field. Does that make sense though?

Absolutely. Is there like a generic standard of, you know, how long you should stay in a home? You know, like how many years would we have to stay here for it to be smart for us to buy a home? I mean, there's not a hard and fast just because we don't know what's going to happen with the housing market, but I would say given the uncertainty in that and given the cost of the transaction to both buy and sell, I would say you need at least five years and I would be probably for me, I would say five to seven years. I would like to see you in that home for it to make some sense. Certainly over five, you would expect that you can see a little bit of appreciation enough that you can enjoy it and hopefully cover the costs of buying and selling it.

So I think five is probably that key number, but if it could be one to two or even three, I'd say I'd probably hold off. And Lane, we hope that advice from Rob, which I think is great advice, we hope that doesn't discourage you. The same God who's going to meet your needs on the mission field will provide you with a home at the optimum time. Most likely when you come back, unless you stay in the mission field for much, much longer than typically expected. We wish you the best. Thank you very much. Rob, how about a quick email here before the next break? This is from Sharon.

She says, our bathroom needs remodeling. One company offers no payments for five years. I have retirement money. How can they do that? Is this too good to be true? What do you think? Yeah. So you know, as we look at this, Steve, you've got to think about all considerations here.

There's so many moving parts there. Let's do this. I know we've got to head to a break, so why don't we come back right after the break and I'll unpack the answer to that one. All right. When it comes to bathroom remodeling, there's no one more on top of this issue than Rob West.

And of course, we're not discussing at all about the difficulty finding toilet paper with the COVID thing. No, not at all. That's another thing altogether. This is Money Live.

We'll be right back. Investing is more than just returns. It's an expression of who you are and what you value. Does the way you invest your money reflect your identity as a Christian? At Eventide, we design investments for performance and a better world so you can invest with a confidence to reach your financial goals while remaining true to your Christian values and commitments. We call this investing that makes the world rejoice. More is available at investeventide.com.

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Interested? Learn more by calling 800-791-6225 or online at chministries.org. Hi, my name is Martha, a communications major at the Moody Bible Institute. The Moody Radioverse of the week is found in Ezekiel 36, 26-27. I will give you a new heart and a new spirit. I will put within you and I will remove the heart of stone from your flesh and give you a heart of flesh. And I will put my spirit within you and cause you to walk in my statues and be careful to obey my rules.

That's Ezekiel 36, 26-27, the Moody Radioverse of the week. All Christian parents want what is spiritually best for their children. Knowing how to pray for them can often be as challenging as knowing what to pray.

I'm Drew Dick, host of Moody Publishers' Reading for a Change podcast. Erwin Lutzer's new book, A Practical Guide for Praying Parents, challenges you to become more guided in the prayers for your children. Learn how to pray more effectively for your children, even those with hardened hearts or those that are particles.

Pick up your copy of A Practical Guide for Praying Parents by Erwin Lutzer at moodypublishers.com. The financial wealth you leave behind could be the best thing that ever happened to your loved ones, or the worst. In Splitting Heirs, giving your money and things to your children without ruining their lives, Ron Blue explains why it's important to make these decisions now, instead of forcing your heirs to do it later.

Splitting Heirs will foster a real appreciation for the precious resources that God has entrusted to you. And it's available when you click the Store button at MoneyWiseLive.org. With SRN News, I'm Bob Agnew in Washington. President Trump spoke today at a White House conference on American history at the National Archives Museum, along with Vice President Mike Pence.

Their message was on the importance of preserving and revering America's founding documents against the corrosive challenges of so-called cancel culture, as well as what the president called other leftist efforts to dismantle traditional American values. The number of Americans applying for unemployment benefits fell last week to 860,000. The Labor Department notes that 12.6 million are now collecting traditional unemployment benefits. That is up drastically from 1.7 million a year ago. The weekly total is an historically high figure, of course, that reflects the economic damage done by the coronavirus outbreak. On Wall Street, the Dow Jones Industrial Average struggled. It was down by 130 points.

The Nasdaq up by 140. This is SRN News. Glad to have you listening in today. It's MoneyWise Live with Rob West. And we do take your emails in addition to phone calls. If you have an email for Rob, just a couple of lines. The address is questions at MoneyWise.org.

And our email for today from Sharon, Rob, our bathroom needs remodeling. One company offers no payments for five years. I have retirement money.

How can they do this? And is it too good to be true? Any thoughts?

Yeah, a lot of moving parts here. Number one, no payments for five years. That sounds a bit long.

I mean, typically you'd hear one to two years. But regardless, why are they offering that? Well, the reason they're offering that is there's a finance company behind it, not the company offering the remodel. They've contracted with somebody that knows that if they give you a couple of years to pay it, even at zero interest with no payments, there's interest accruing. And if you haven't paid it in full within that period of time, and most people don't, there's going to be a ton of interest that's going to be attached to this. And so I would just discourage you from taking those options as much as they sound great. I would rather you save, save, save or have another plan to pay for it. Rather than just expecting you're going to come up with the money to pay it off over that period of time, only to find that you don't and now you got to tack all this interest onto which by the way is probably fairly high. As to retirement money, I don't like the option of using retirement money, leave that there.

That's what it's for. Let it keep growing. So I would save or if you have the ability to work in the budget, look at a short term home equity loan. By the way, according to the remodeling industry, and there is an association of remodeling, apparently, they say that homeowners typically recruit, I'll try that again, recoup about half of what they put into a bathroom remodel project. So if you're going to stay there for a long time and enjoy it, great, go ahead and do it if you can afford it.

If you're planning on selling though in the next couple of years, you're probably not going to get the money back out. Great information, Rob. Thanks very much. All right, let's go back to our phones. Missouri. Hello, Terry. What's your question for Rob? Yeah, I have a question about refinancing. And I currently have a mortgage for 3.75%. And if I could save a percent, should I refinance? Or should I only have eight years left to pay it off?

Oh, yeah, I would be hesitant, Terry. You know, I mean, perhaps if you were to do a 10 year mortgage, how much do you owe on it still at this point? About 60,000.

About 60,000. All right, so you could get a mortgage for sure. I mean, a lot of mortgage companies require at least 50,000.

Some might go down as low as 30. But the bottom line is the cost of refinancing is going to be right on the bubble there because you're probably not going to get a full interest rate reduction without having to pay either some discount points or a portion of a point and or some upfront costs in addition to just the typical costs of refinancing. And so the cost that you're going to have to incur in order to get that probably less than 1% reprieve on the interest rate for this short period of time is not going to pay off. Now, if you are really eager to explore it, you have some extra time, you could certainly take a look at it, you'd want to get a good faith estimate. So you know exactly what it's going to cost you and points and any origination costs, as well as the other costs that go into it, taxes and appraisals and those kinds of things, find out exactly how much it's going to cost you and then figure out how much interest you're going to save per month, and how much total interest over the life of the loan.

Let's say you were to do it for 10 years and just compare that with what you're on your current amortization schedule, what your mortgage company could provide, what you're going to pay an interest over the balance of this loan. And I think you'll find Terry that it's just not going to pay off. You're not going to save a whole lot of money if you do save any. And the hassle of going through the refinance is just not going to be in your favor. So I would certainly count the cost before you do it.

And I think what you're going to end up finding is that it probably just doesn't make sense. Terry, thank you very much for calling in today. Let's quickly move to Sauk Village, Illinois. Ayana, what's on your mind? Hi, I'm going to, I'm planning now for retirement.

I'm 45 years old and I'm a school teacher. And so my retirement plan is from the TRS. And my question is, is having a 403b, which I currently have and I sporadically put money in it, the best way to plan for retirement or is this something else that I could do that would have more bang for its buck? Yeah. I like the 403b, Ayana. Are they going to contribute anything in the form of matching for any of your contributions? No.

And I've been in the same place for 21 years and they have never matched. OK, no problem. It's still a good option because it's going to give you the most in the way of your contribution limit. You'll be able to put in $19,500. If you're over 50, you'll be able to put in a full $26,000. Not that you necessarily have the ability to do that, but I mean, you're going to be able to put in much more than you would in an IRA. And it's going to go in pre-tax, which means you get the deduction as it goes in and then it can grow in the investments that are inside it.

You may want to get some help in choosing those. And then as you pull it out in retirement, once you stop working and need to convert that to an income stream, you would just pay tax on it as it was income. So I like that. I think it's a great way on a tax advantage basis for you to be systematic in your contributions. Very easy to set up because they can do a salary deferral.

So it comes right out of your check before you even see it. And I think that would be a great option for you. Okay, Iana. Do you have any recommendations on the company or? Well, they're going to tell you. So the school board is going to have a 403b plan for you. And so you have to use whoever they have contracted with as a custodian. And there'll be investments inside that 403b. But when it comes to those types of retirement plans, 401ks, 403bs, you don't go out and choose it.

You just take the one that is offered to you on a retirement basis. Okay. And we wish you the best with that. Thank you very much. Let's see.

One more before the break. Wichita, Kansas. Pauline, you have a timeshare you're trying to deal with. What's the scenario there? My husband and I purchased this timeshare a little over 30 years ago.

I've been looking listening to your program quite often and I've heard you talk about it. But I'm really trying to find out is there a way to really get out of this without it being so costly or just get out of it all together? Yeah, you know, Pauline, we get this question a lot. And unfortunately, there aren't great options. You know, it's just difficult because the secondary market for timeshares is not good because there's just such low demand.

But on occasion, it can work. I mean, here's the steps I would take just to explore this. Number one, you may have already done this, but I would always start with the management company that oversees it just to see if they have the ability or a program in place to resell it or attempt to resell it for you. The people who are staying at the resort would be your best prospects. And they're already talking to the management company. So I would start there. Beyond that, there is something called the timeshare users group at tug2.net.

That's T-U-G, the number two dotnet. And they have a lot of great information about selling a timeshare. They also have a marketplace to help you do it where buyers and sellers come together.

So you could check that out. That would be a great place to go. Beyond that, you could advertise it locally, you can advertise it through social media. You could consider renting it instead of selling it. I don't recommend giving it to charity since the charitable organization would be responsible for the maintenance and most don't want to do that. They probably wouldn't even accept it. So I think those are the steps you need to go and let this be a warning for those who are considering a timeshare to just think long and hard, perhaps even talk to some people who have owned them before you make the leap, because it's a forever commitment and those maintenance fees don't go away.

And there are a lot better ways for most folks to enjoy a great vacation. Pauline, thank you very much for contacting us today. This is MoneyWise Live where we help you understand and establish God's plan for your life and your money. Buying a home is the largest, most nerve-wracking purchase most of us ever make. It doesn't help that you're entering a maze of unfamiliar words and confusing options that can leave you intimidated, frustrated, and afraid you've been taken advantage of. Navigating the Mortgage Maze by Dale Vermilion helps you clear up the confusion, unrack your nerves, and make the best mortgage decisions possible with confidence.

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Boy, we are loaded for bear, as they say. Amy is here and Deb is here. Gabby T. is here. That T, of course, stands for talented. And then, of course, Rich Roussel, bringing up the rear.

Not necessarily bringing up the rear, but maybe anchoring, maybe bringing, maybe anchoring the entire group. I'm not going anywhere near that. That's all you.

I wouldn't if I were you either. Tampa, Florida. Ethel, thanks so much for your patience.

How can we help? I am retired and don't have much money. I have like about $18,000 with the Merritt Prize. From the DROP program, I received $34,000 and I was going to invest that with the Merritt Prize, so I rolled it over. And I began thinking that I needed to put it into a CD, so I wouldn't lose the money. And I'm getting confused talking with different people about the best thing to do with it. It was suggested by me by a financial advisor to do a bearable annuity. That's too much fluctuation, I think, for me at my age.

I'm 67. And I was thinking of putting it into a CD. And if there is a CD, that would make it qualified because I'm just learning the difference between if it's not qualified and I put it somewhere, I have to pay taxes on it. And if it's qualified, I would not have to pay taxes on it.

And I was thinking about a FIT or maybe an immediate or deferred annuity. Yeah, yeah. Well, you certainly could do that.

And I appreciate that explanation, Ethel. You said you have $34,000 that came out of the DROP, is that right? Yes. Okay. And this is money you... And about $18,000. Go ahead.

So it's a total of about $52,000. Okay. And this is money you don't plan to touch unless you need it down the road or are you needing to draw an income from this right away? Not right away. Okay.

All right. Well, the bottom line is an annuity can be a good option if you're risk averse. And I recognize in this season of life, you're not looking to take on a lot of risk.

But what I mean by that is you have really two options that you have to decide on upfront. Do you want to take responsibility or hire somebody to manage this money for you? And the challenge is with $50,000 roughly, it's probably below the minimums of many investment professionals and so you're going to have not as many options for somebody to take this and actually put it to work for you as you might if you had $100,000 or $200,000, even though I recognize it's a significant sum of money. But do you want to assume the risk of figuring out the investment strategy or do you want to transfer that risk to, in the case of an annuity, transfer it to an insurance company? And basically, they'll give you an insurance contract that promises a state of rate of return.

With a variable product, that's going to be tied to a stock market index, maybe with a floor. And you perhaps get some of the upside of the market, but you don't get the downside, but you don't get all the upside. So you're essentially going to follow some of the moves of the market with some downside protection. Or as you said, with a fixed annuity or an immediate annuity, where you'd start collecting payments right away, or at the very least with a fixed annuity, you get a stated interest rate that's going to be a bit higher than a CD. And that's really the pro, is that you're transferring that risk, you're getting that guaranteed rate of return. So what's the downside?

Well, they're complex, they're a bit hard to understand. The fees associated with them make them more expensive than other retirement investments and the net returns on the withdrawals are taxed as ordinary income. And so you just have to recognize that and recognize what you're getting in terms of the guaranteed return inside them. It doesn't mean it's not the right option for you and in fact, as you're talking about just wanting to take as little risk as possible, I think an annuity may be a great option. The key is to recognize not all annuities are created equal in terms of what you'd receive in terms of the return and the cost side.

And that's what I want you to be careful about. I don't want you to pay a lot of high commissions and fees on this product such that it's going to potentially erode some of what's there in the cash value and just lock it up for a long period of time. So let me encourage you to do this. I would visit with a certified Kingdom advisor there in Tampa. You can find one on our website, MoneyWiseLive.org. This is going to be an investment professional who shares your values and can give you some counsel, probably direct you as to where you need to go next to evaluate either the annuity option or the investment option and see which one you feel most comfortable with at the end of the day. You can do that again at our website, MoneyWiseLive.org. Just click find a CKA, put in your zip code.

I'd interview a couple of them, pick their brain and then decide where you want to go from here. Sandy in Peninsula, Ohio. What's on your heart today? Yes.

Hi. We recently paid off our house and I'm 58 years old and I have no retirement plan whatsoever. I'm a substitute teacher. My husband has his own business. So I'm trying to figure out what would be the next, we have about $25,000 in savings on top of the house paid off. What we should do and we probably will earn some more income and get a little more savings as we go.

So what would be the best plan of action? And then I want to know about the Roth IRA. Can you do that on your own, get your own Roth IRA or you have to do with a company? Oh, sure. Yeah, absolutely.

Yeah. We were talking about the Roth 401k, which you would need to have through your company, but a Roth IRA you can absolutely do yourself and you'd be able to put if you're over age 50, $7,000 in it this year, each of you, as long as you have earned income. You know, I think the key for you all, I'm delighted to hear that your home has paid off. That's going to allow you to keep your lifestyle very lean. I think the next step is for you, if you haven't already, to do a detailed spending plan and budget so you understand exactly what it's going to cost you on a monthly basis to fund your lifestyle and really have an accurate accounting of not only the fixed expenses, but the discretionary ones just based on what you have been doing and what you think that will look like in retirement. Add to that some of the non-recurring expenses, maybe quarterly or annual expenses that you need to factor in on a monthly basis, putting some money into savings. Once you've got a real clear picture, and by the way, you know, paying off that house is going to take a big chunk out of that, then you know what you're solving for in terms of income.

So you'll know, okay, how much is Social Security going to make up? What do we need to do to supplement that, perhaps with some part-time work? And what can we be doing to sock some money away, you know, as we're able to on a, you know, tax deferred basis or with a Roth, you know, putting after-tax dollars in and then, you know, having it available on a tax-free basis. So it can be growing, you know, over the next 10 or 20 years. You know, even while you're in retirement, keep in mind, you know, you're going to still want that money invested at least a portion of it because that's going to get the returns up slightly. And, you know, you need to make sure that you have a strategy to fund your lifestyle, you know, for the rest of your life.

So, you know, there's not a silver bullet here, but I think the key is keeping your lifestyle in check and being able to save as much as you can as you continue to earn income in the years ahead. Does that make sense, Sandy? It does. But is a Roth a better choice than investing in the stock market? Well, so keep in mind that there's the type of account and then there's the investments in it. The Roth is simply the type of account. So a Roth IRA is just a retirement account that allows you to put in after-tax dollars and have it grow tax-free. So think of the Roth as the umbrella, the investments are underneath it, and it shelters the investments from the taxes. So as it's growing, there's no taxes eroding your investment returns. And then all the gains you have between whatever you put in and when you start taking it out are going to come out tax-free.

But the investments inside of the Roth are the same investments you could have in any account. Stocks, bonds, mutual funds, exchange-traded funds, anything you like. So I'd go to Charles Schwab, look at their intelligent portfolios. You could look at Betterment. You could visit with our friends at soundmineinvesting.org. And by the way, we'll send you a copy of the Soundmine Investing Handbook if you stay on the line.

That'll give you a good primer on all this and define a lot of these terms we were just talking about. Sandy, thank you very much. We wish you the best.

Down to Florida and Jeff, we're going to have to be super quick about this. I understand you're moving into self-employment. You're concerned about health insurance or any options in that regard. Is that correct?

Yes, sir. I'm looking to do that and also may end up going into partnership in the business. And the owner of the business also is looking for health insurance. And I've heard of the Christian-based share type insurance. So I'm just kind of figuring out what's best affordable starting out and then maybe get better as we go along.

Yeah. Well, I really like this option, Jeff, especially for somebody who's self-employed. When you're out there in the open market looking for health insurance, the costs can be just staggering given what we've seen in just the health care space as of late. So I would absolutely look at the alternatives, which is a Christian health cost sharing ministry. Our good friends at Christian Health Care Ministries would be delighted to explain exactly how that works.

You'll find them at chministries.org. But essentially, it's tens of thousands of Christians coming together, sharing each other's medical bills. You'll find it as a fraction of the cost.

Again, it's not insurance, but you would have the confidence that there would be the backing of CH Ministries to be able to pay per incident over, in most cases, $500 per incident, covered even up to unlimited amounts. And we even have some people on our team here at MoneyWise Media that have used it for years and love it. So I would definitely check into it. It's going to save you a lot of money.

It'll be a great alternative. Yeah, we certainly do have confidence in those folks. They've been around for a long time. Going all the way back to Larry Burkett when he was the host of this program, and they've been a great blessing to hundreds of thousands of Christians, chministries.org. Don't forget, you can find out more about who we are, what we do. You can also find some free resources and past radio archives or archives of past radio programs when you visit us online, moneywiselive.org. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media.

For Rob West, I'm Steve Moore. Thanks so much for listening. We hope you have a great remainder of your day. Tell a friend if you enjoyed this program so they can enjoy it as well. And we'll be back tomorrow with a brand new edition of MoneyWise Live. God bless.