The Secured Credit Card—Fantastic Plastic?

If your credit's a bit sketchy or maybe you just don't trust yourself with a credit card and all of its temptations, fear not. There's a great alternative just for you, and it's called a secured credit card. A secured card might be just the ticket to stay out of debt and to improve your credit score along the way. Financial planner and teacher Rob West has the lowdown for you, and then it's your calls at 800-525-7000.

800-525-7000, go ahead and call now. I'm Rich Rosalind for Steve Moore again today, and is a secured credit card fantastic plastic? Well, we'll talk about it next on MoneyWise Live. Well, Rob, it is great to be back with you again today. I'm usually sitting in the producer's chair, but you get to fill in occasionally. Steve just keeps it infrequent enough so that I don't get comfortable in his chair, not to worry Steve. Well, I'm glad you're here, Rich.

Well, thank you very much. You know, we do get a lot of calls about this topic of secured cards and best types of cards to use. I think folks are usually asking about prepaid cards, but again, we are talking about secured credit cards today, but there are some similarities between the two, right? Well, that's right, and people often confuse the two because they work the same way to a point, but in either case, they're both just another way to pay for something. Instead of using a regular credit card, you can use either a prepaid or secured card to make purchases online or in stores, just about anywhere actually. They use the same payment networks and look like a typical MasterCard or Visa, American Express or Discover, and with both, you have to load money into them first, but that's where the similarities end. NerdWallet, a popular finance website, describes it like this, a secured card is buy now, pay later, and a prepaid card is pay now, buy later. That probably confused a lot of people, me included. What do you mean by that?

Well, here's what it means. With a secured credit card, you're required to put down a cash security deposit, let's say from $200 to $500. That becomes your spending limit. You're allowed to carry a balance on the account up to that amount, but the credit card issuer isn't using your deposit money to pay for things you buy.

With a secured card, the bank is actually extending you credit up to the amount of your security deposit. That's why it's buy now, pay later. Now, at the end of the month, you get a bill or a statement for everything you purchased and you have to make at least a minimum payment. Of course, it's always best to pay the whole thing off so you don't get hit with any interest. Okay, but that's not the case with a prepaid credit card, right?

No, it isn't. With a prepaid card, you still have to deposit cash, but when you buy something, the issuer pays for it with your money. Of course, you're limited to the amount, you've already loaded onto the card, but that's why it's pay now, buy later.

I'm getting it now. This is actually a little bit like a debit card then. If the money's not on the card, then it doesn't work. That's exactly right. So, which one of these is better than the other, in your opinion?

Yeah. Well, in my view, the secured version has the edge, Rich, at least for most folks who call into the program asking about this. You see, a secured card can help you improve your credit score because the issuer is in fact extending credit to you. That's not the case though with the prepaid version, so it has no impact on your credit score. Okay, so how should you use a secured card then if you want to do the best at improving your credit score? Yeah, you would want to make at least one purchase a month. I would recommend a budgeted item, of course, and then pay for it right away when you get your statement at the end of the month. When you do that, it will slowly establish your payment history and build your score.

That's why they're great for young people just starting out. Now, as long as you make the minimum payment, you're allowed to carry a balance of up to the amount of your security deposit, but you don't want to do that. Pay it off in full each month because that will help another factor making up your score, which is credit utilization, and you won't get hit with those interest charges. Okay, well, this is already a lot to keep up with, but is there anything else that we need to know? Are there other ways to make the most of a secured card? Well, two things, yeah, Rich, to keep in mind. First, make sure the card is one where the issuer reports your transactions to the credit bureaus. Ask about that ahead of time.

That's probably one of the reasons you're doing this in the first place. Second, never attempt to spend more than your security deposit. The transaction won't go through and it could negatively affect your credit score. Okay, well, now that helps me see how a secured card can help you stay out of debt then.

Is that fixed limit, if you will? Well, that's right because you can only spend up to the amount of your security deposit, but it still gives you the most convenience of a regular credit card. Okay, any downsides? Well, you might have trouble renting a car, perhaps, with a secured card unless your security deposit is high enough. And, of course, you have to keep the money on deposit. Therefore, you don't have use of it while the account is open.

But that's a small price to pay for the advantages, for sure. All right, well, there you have it, all you need to know about secured cards. Thanks, Rob.

Back in a moment with your calls. 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. For 30 years, SoundMind Investing has been helping Christians reach their financial goals, with step-by-step guidance for investors at every stage, from those just getting started to those getting ready for retirement. Through scriptural principles and practical suggestions, SMI offers Financial Wisdom for Living Well.

More information, including a short video webinar on profit and peace of mind, no matter what's happening in the market, is available at SoundMindInvesting.org. What's in a name? Would you believe a girl named wrote a bike? How about Cheers Boozer? A retired policeman has a collection of strange names, every one of which he says is a real name he came across on duty.

Names like Rock Pile, Cherry Pits, and Billy Club. Perhaps the downside of modern technology and electronic communication is a loss of personal identity. In some places we are better known by a number than by our name.

It is also more common in a world of over 7 billion people to feel all alone. But the Bible says God so loved the world that He gave His only Son, that whoever believes in Him should not perish, but have everlasting life. God loves you and offers you eternal life.

He knows your name and why He created you. If you would like to know how to begin a personal relationship with Jesus Christ, please call 888-NEED-HIM or chat with us at chataboutjesus.com. 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. That's christiancreditcounselors.org or call 800-557-1985. Welcome to MoneyWise Live, finding God's plan for your financial life, with your host Rob West. I'm Rich Rozzle, sitting in for Steve Moore.

And you know, I often think when I'm sitting in the producer's chair that Steve does little more than drink coffee and eat bagels while he's doing the program, but he remembers things like giving the phone number out, which I kind of forgot to do. Let me do that now. 1-800-525-7000. Again, 800-525-7000. Or you can email us at questions at moneywise.org. And we're going to jump right to the phones now. We'll go to Crawfordsville, Indiana. Lee, hi, you're first on MoneyWise Live today.

How can we help? Well, thank you for taking my call. I'm 65, soon will be 66. Obviously looking at retirement, my wife's 63. With all the information you see on TV and such about Medicare supplements and so on, I was just wondering, how do you know which is the best way to go and what's right? You know, should I pay for supplements? Should I get the free supplements? Or how do you go?

Yeah, yeah, it's a good question, Lee. And you know, I think everybody should have the Medicare Advantage plan. Basically, it's an all in one solution, if you think about it, where it offers the A and B part of the plan, you know, which part A is the hospital insurance, B would be the medical insurance and the Advantage plan or the supplementals is called the part C. But it usually bundles in, in addition to A and B, the drug coverage, which is for another letter, the part D coverage. So it covers everything that original Medicare covers, but also things it doesn't cover like vision, hearing, dental, even some discounts or, you know, fitness programs, things like that.

So you ought to check it out for sure. In some cases, there's not even an extra cost to the original Medicare. And keep in mind, these are private companies, but Medicare is paying them for these plans. And then they add on top of that there will be in some cases, though, some out of pocket costs if you need a referral, depending on if you need a referral to a specialist, or if you have to go, you know, to a doctor facility or supplier that belong to the plan for non-emergency or non-urgent care that the rules, of course, can change year to year.

But I think the bottom line is having the most coverage in this all in one solution is the place to go. And if you just go to medicare.gov, that would be a great starting point. There's a lot of really helpful information about how do you get started with it?

How do you get A and B? What are the different types of advantage plans? What about the medical savings account? You know, you'll get all of that information there. And I think once you read through that, which of course, that's the official US government website for Medicare, you'll have a much better understanding of what you're looking at. And then you can begin shopping it on the open market. So hopefully that's a helpful primer for you.

And again, Medicare.gov is the site to go to. This is almost like alphabet soup, isn't it, Rob? Keeping up with just a bit. It sure is. All righty. Thank you very much. We appreciate the call on to Fort Lauderdale, Florida. RIV, welcome to MoneyWise Live. I believe you are the first RIV we've had. How can we help? Hi, thank you.

I just have a real quick question. I am 59 years old. My husband is also 59. We recently moved from Chicago to Fort Lauderdale about two years ago. So we're renting. I'm ready to buy something. He doesn't want to buy anything.

He feels like we're newly married, too. So he had a home and lost it with the bubble burst and things like that. I have two homes that I am renting out as rental properties. We're paying 1900 a month. So far, we've paid almost 40, just about $45,000 in the last two years. We just signed another lease.

That's going to be about $68,000. I'm trying to convince him that, let's move. He feels like we're up in age.

We don't need to take on that risk or that mortgage. I'm just wondering, what do you think we should do? Yeah, well, you know, I think the bottom line is we've got to start with God's plan for the two of you. You know, what is the vision that you have for where God is taking you and how can money as a tool be used to accomplish those purposes? Keep in mind, it all belongs to the Lord.

The earth is the Lord's and everything therein, including the cattle on a thousand hills, right? So that puts us in a position of steward or manager. So when we see money as a tool and we realize that we want to align the use of that resource with our values and our priorities, perhaps the goals that we believe the Lord has for us, it maybe gives us a little more clarity about how we should use that moving forward.

We want to be wise in our stewardship of that. And I can certainly appreciate his concern about taking on a major debt in this season of life, although at 59 years old, I would say you still, if the Lord tarries and your health is good, have plenty of time to be of service to the Lord. And, you know, if you have, for instance, got a 20-year mortgage and it was paid off because you accelerated or even if you paid the minimum payment by the time you all were 79, you keep in mind when you reach age 65, the life expectancy is 83 and beyond for men and women. So, you know, I would say obviously you're in a part of the world where housing prices have appreciated significantly and you're not selling one to benefit from those high real estate prices that you can roll into another. And yet if your finances support it, I would allow that to be the second driver beyond your prayerful consideration of what God has for you all in this next season of life. If the finances can support it, meaning, do you have the 20% down payment that's going to keep you out of trouble if we had another downturn in the housing market?

And if you don't, what would it take to get there? And, you know, that may be one of the showstoppers because with the prices of homes in South Florida and what you all would be looking to buy, obviously that's no small amount of money. Even a $200,000 home, we're talking $40,000, a $300,000 home of $60,000. And then I think the second issue is with that mortgage, and again, depending upon the term, if you wanted to keep it on the shorter end, given your age, you could certainly do a 20-year.

If you wanted to go out to a 30-year, you certainly could. There wouldn't be any problem with a mortgage company extending that to you if you had the income and the assets. You know, then the question is, does the principal interest taxes and insurance payment fit into the guideline we use there, which is no more than 25% of your take-home pay? And I think by giving it prayerful consideration and then looking at some of these principles on the financial side in terms of the down payment and the resulting mortgage payment monthly and how that fits into your budget, you'll gain some clarity as to whether or not this makes sense. I would certainly concur with you. I'd rather you be an owner in terms of building equity in something that's a real asset that could be sold down the road. But at the same time, I wouldn't want you to do that prematurely by trying to get 100% financing or having a mortgage payment that your budget can't afford and then put you all in a real tough financial position, especially newly married.

It could add a lot of stress and strain to the marriage. So I think those are perhaps the things to think through as you make this next step. Does that make some sense, Riv?

It does. Yes. And we do have the 20% and we thought about those things and I can easily sell my places and things like that.

I kind of just wanted, we were both thinking we would still continue to work until about 67 or 70. And then from there, I'll sell whatever, you know, but we have the money and everything. It's just kind of an attempt to go in that direction.

Yeah. And so I think you'd look at it like this. It's an asset, right? Yes, it's your home. And so we look at it slightly differently because a true investment is something that's sold when it accomplishes its purpose.

But you have a dual purpose here. And that is this is where you're living. But at the same time, because you all have the financial wherewithal to buy it, perhaps even for cash, or having a very small mortgage, then I like the idea even there in South Florida in this season of life of you guys building some equity, having this asset to be sold down the road as opposed to just putting all of your money into rent.

Rob Rives question brings up an issue that often comes up. And that is the fact that that money can be something that tangles up the marriage relationship quite a bit when husband and wife may disagree about something. And I'm reminded that this month, as a matter of fact, if you go to our website, MoneyWiseLive.org, you'll see a special offer that we've got. It's a book called Thriving in Love and Money. It's written by Shanti and Jeff Feldhahn. They refer to it and we refer to it as a non money money book. It helps you uncover the issues that cause money conflicts and learn truths about, well, everything you need to know that can be relationship builders rather than relationship destroyers in the money conversation. And we'd like to make that book available to you as our gift with your gift of $25 or more. And again, you can go to MoneyWiseLive.org, click the donate tab and request your free copy there.

But I don't know. We appreciate the call, Rive and Rob. Good advice.

Thank you, sir. Back with more calls at 800-525-7000. You're listening to MoneyWise Live. Having 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.

Navigating the mortgage maze available when you click the store button at MoneyWiseLive.org. HeBlues412 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. Love gets easier when? Loving gets easier when you can love people who are very unlike you.

When we mature to the point to where somebody does not have to be and I'm not just talking about opposites attract, that's still working for you to some degree. I'm talking about people that you just originally thought that is the most bizarre person I've ever met in my life. I'm talking about how many of you could say in Christ that you have come to a place to absolutely head over heels love somebody that originally, I'm telling you, you almost could not stand. I've been giving that some thought because I want to suggest to you that Christianity gives the opportunity to love people unlike us. And I may love them a ton.

I'm not just talking about loving a stranger on the other side of the world. I'm talking about people, I started thinking if you just took Democrats and Republicans, we could say Democrats are a lot alike in a lot of ways. We could say Republicans are a lot alike in a lot of ways. We could say that sports fans are a lot alike in a lot of ways. We could say that artsy folks are a lot alike in a lot of ways.

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The workbook edition will release in January 2021. Either way, Beth would love to have you in Bible study. And thanks for listening to A Quick Word with Beth Moore. Most couples can't talk about money, yet most money books expect them to. But how can you create a budget or pay down debt if you can't even talk about spending or saving with your mate? If you get tense about money or just plain avoid money conversations altogether, Thriving in Love and Money by Shanti and Jeff Feldhahn is for you. And it's yours free when you donate $25 or more to MoneyWiseLive.org.

Thriving in Love and Money for a better relationship, not just a better budget. Well hello, hello, and thank you for joining us today on MoneyWise Live. I'm Rich Roslin for Steve Moore today and Rob West, our host with the most, is standing by to take your calls at 800-525-7000. And Rob, a few minutes ago we were talking to our caller about Medicare supplements and we've got Jeff on the line now from Indianapolis, Indiana. And Jeff has some personal experience in elder care and wanted to offer some additional perspectives. So Jeff, welcome to MoneyWise Live and fill us in.

Where might we have gone wrong? Well, I was filling you in from my perspective, which is a treatment perspective. And whenever you consider insurance with Medicare otherwise, I guess there's an out-of-pocket aspect to certainly be concerned about. But there's also a services or treatment perspective to also I think balance with that. What's the cost of that?

What am I giving up potentially there? And just a quick note that I'm a psychologist working in nursing homes, long-term care hospitals, for the past 20 years. And one of the things that I unfortunately have seen time and time again is when people switch over from what I would call traditional Medicare to the Medicare quote advantage plans unquote, services get restricted. People are getting pushed off of the rehab services that they're receiving in the nursing homes. Literally the day they switch to Medicare, I see some of them getting kicked off by these other plans. And then some of them are able to get back their Medicare have been able to get back into rehab.

Also, I work in a rehab hospital. And I see instead of a lot of staff and doctors being able to spend all the time and ether with patients are spending a lot of time trying to interact with these the reps from the managed Medicare plans and basically trying to convince them to allow the patients to stay in the hospital for additional rehab because these are the rehab hospitals, not acute care hospitals. And whether they go home or whether they go into the nursing home really depends on whether they get the rehab services that they need. When they have traditional Medicare, they come into the hospital, they're given a certain amount of days and they just work those days to completion. The other plans, like I said, they're constantly trying to kind of shorten the stay. And unless they're on the phone daily with these hospitals, these people are getting sent out back to either home or the nursing home. And I just see that there's so much again, there's as far as the monetary side of it, there's a reason that Medicare is paying these Medicare Advantage plans. The reason that they're paying them and the reason is because they can save Medicare money and the way they're saving Medicare money is restricting services. And so people need to be aware that even though they might be saving $180 on a supplemental fee or deductible that they may have to pay for traditional Medicare, they might be losing thousands of dollars worth of treatment services that Medicare would be paying for. Yeah.

Well, that's helpful, Jeff. And obviously the treatment side is something that definitely needs to be considered. So I appreciate you offering that perspective. I think that kind of the other piece of it, though, is that perhaps the supplement insurance plans may pay for deductibles and even coinsurance or other out-of-pocket costs that aren't covered by original Medicare. And so you've got to kind of weigh all of these as you're looking at what care is needed now, what might be needed in the future. Certainly you don't want to be left without critical care or be encouraged to shorten a stay or a treatment plan because an insurance company is pushing you to do that. And yet you also don't want to have gaps in your coverage, which traditional Medicare, you know, many of the gaps are substantial. You can have expensive deductibles.

And, you know, for instance, outpatient coverage, you could have as much as 20 percent that you have to cover yourself, which is where a Medigap plan kicks in. So I appreciate you calling, Jeff, and offering that other perspective. You've certainly been on the ground.

You've seen it. And so we appreciate you weighing in today. Another consideration for somebody looking into these issues. Yeah. Jeff, thanks very much for your call.

I do appreciate it. And, Rob, this is something, you know, we often talk to people about even staying off of what we would call traditional insurance and going with a program like Christian Healthcare Ministries, for example, or some of the others. The problem with that, though, is that that doesn't carry on at the time when one would normally be going on to Medicare. So you're really looking at a whole new animal by the time you turn 65, aren't you?

Yeah, that's right. And it's a learning curve there than just like our previous caller in the last segment, who's just trying to get his hands around all of this. And so you've got to do quite a bit of learning and education for yourself so you understand what am I giving up?

What am I getting? And there are great aspects to it where everything, you know, if you have the right policies can just be covered. But you've got to understand some of those loopholes as well. And clearly our system has a few of those built in, Rich.

That's right. Well, we may have to do some programs in the future where we go through more of these details and see what we can do to unpack it ourselves, because unfortunately, some of us are getting closer to that age than others. And it may be soon. Let me give our phone number one more time. We are going to be taking some more calls in the next segment. But go ahead and call in now 1-800-525-7000. Also emails are always welcome.

And I regret that we don't get to those as frequently as we might. But questions at MoneyWise.org. Of course, you can also join us on Facebook. We have a Facebook Question of the Day. You can join in the conversation and be part of the Facebook community at Facebook and look for MoneyWise Media. This is MoneyWise Live. I'm Rich Rozzle sitting in for Steve Moore. We will be back with more, including your calls in just a moment.

Stay with us. 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 the 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.

That's investeventide.com. Christian Healthcare Ministries enables believers to show love for one another by sharing each other's health costs. Through CHM's voluntary health cost-sharing programs, members uplift each other spiritually and financially. CHM is an eligible option under the Affordable Care Act and a Better Business Bureau accredited charity.

Interested? Learn more by calling 800-791-6225 or online at chministries.org. Hi, my name is Ryan Anderson, a Children and Family Ministry major at the Moody Bible Foundation. The Moody Radio Verse of the Week is found in 2 Corinthians 4, 7-9. But we have this treasure in jars of clay to show that this all-surpassing power is from God and not from us. We are hard pressed on every side, but not crushed, perplexed, but not in despair, persecuted, but not abandoned, struck down, but not destroyed.

That's 2 Corinthians 4, 7-9, the Moody Radio Verse of the Week. If you're about to throw in the towel on homeschooling, it's time to leave the second-guessing behind and quiet the voices of not good enough. Step courageously into guilt-free homeschooling by reading Home School Bravely. In this book, Jamie Erickson teaches you to see homeschooling as a calling. She helps you overthrow the tyranny of impossible expectations and guides you through many of the common bumps in the road. Get your copy of Home School Bravely today.

Home School Bravely is available now at moodypublishers.com. Many people are experiencing financial challenges, such as credit card debt, downsizing, dead-end jobs, and depleted savings. In fact, more than half of all divorces are the result of financial pressures at home. But there's hope. In Your Money Counts, biblical financial expert Howard Dayton shows that the Bible is a veritable blueprint for managing your finances and you'll discover the profound impact it has on your relationship with God.

Your Money Counts is available when you click the store button at moneywiselive.org. With SRN News, I'm John Scott. Supreme Court nominee Amy Coney Barrett says an article she wrote criticizing Chief Justice John Roberts' 2012 opinion saving the Affordable Care Act does not reflect any hostility toward the law. Barrett was answering questions from Democratic Senator Chris Coons of Delaware, who brought up the article she wrote in 2017 before she became a judge. Day two of the Supreme Court hearings are continuing. Senate Majority Leader Mitch McConnell says that he's scheduling a procedural vote on a GOP COVID-19 relief bill for next week. He says aid to hard-hit businesses shouldn't be held up by gridlock involving other aid proposals.

The Senate will take a test vote on October 19. Stock's ending lower as Wall Street takes a pause after a four-day winning streak. The Dow gave up 157 points.

The Nasdaq was down a dozen. This is SRN News. You're listening to MoneyWise Live on Moody Radio. So glad to have you along with us. Steve Moore is out today. Should be back tomorrow. I'm Rich Rozzle sitting in his chair and keeping it warm while our host Rob West does all of the heavy lifting. And Rob, we're going to head back to the phones now. Carol is calling us from Cleveland, Ohio. And Carol, I understand you have a question about moving money from a traditional IRA into a Roth. So what's going on with you?

Yes, that's right. I've been a longtime listener since Larry Burkett, and so I've got a lot of information under my belt. But we rolled a traditional IRA into a Roth just this week. And as I did it, it was like there was a lot of questions that I have. It's been about double our income.

We can afford the taxes because the taxes are so low right now. And we understand that in moving that, that it changes the climate of a Roth IRA rather than a traditional. And my question was, as I began to read, there were some places where I read that you have to hold that money for five years with the Roth. And I was just wondering if that was just a company issue or if that was a federal issue. A lot of questions. Anything you could fill me in on now that I've done this. Yeah, well, you know, I think the key there, Carol, you already alluded to it is obviously any amount that was converted is going to be added to your taxable income.

It sounds like you're prepared for that. You obviously wouldn't want to take the withdrawal to cover that because that would be, you know, taxable as well. And if you're under 59 and a half, it would add a 10% penalty to it. There is this five year rule and this is an IRS rule. It's not a company specific rule, essentially, that just says, you know, each conversion has a five year period where you can't take out any of the gains. You can take out the original contribution at any time, but any gains you can't take out for five years. And every conversion has its own new five year rule.

And there's some stipulations as to, you know, how these various conversions are ordered and so forth. But the bottom line is you want to leave this in there for five years, let it continue to grow so that you don't withdraw, you know, these converted assets. But I think that, you know, the bottom line is that once you paid the tax, then all the gains that you have on this now and into the future, and hopefully if you don't have to touch it, you can let it continue to grow, you'll get the benefit from the tax free growth, where when you pull it out at the appropriate time, you are not adding that to your taxable income and you don't have the required minimum distribution with a Roth. So theoretically, this money could continue to grow. If you don't need it, you have other income sources. So you could pass it on to heirs or use it for additional giving down the road, whatever it might be. But you are correct that there will be that five year rule on the amount that was converted and you'll need to abide by that. Carol, I had a quick question. Right when you first started asking this question, you said something about you're converting it from a traditional to a Roth and that's going to double your income.

Explain what have you done here? Did you find the miracle investment or how is that going to double your income? Well, we don't make a ton of money. So it's going to we we probably have about fifty thousand a year and we this rollover will be about another fifty thousand on top. So it's going to increase our income significantly. But I know the taxes are way lower.

My our tax lady said that would not be a problem. But yeah, we rolled over a significant amount. And of course, I don't have five hundred thousand or anything, but I thought, let's just do this. And then I thought, hmm, I wonder what I did that I thank you for the answer on that. My misunderstanding, too, I thought you were talking about doubling the income off of the investment. You were saying that this would double your taxable income for this year in which you rolled it over.

So that makes a lot more sense. I was going to contact you on the side and see if you could give me a quick tip on investing, but we'll pass. Carol, thanks so much for your call. We really appreciate it. On to Nashville, Tennessee. Michael, you're next on Money Wise Live. How can we help? Hello, fellas.

I really appreciate the show and all you do. And I have a question about them. I belong to a credit union and they have started a money market checking account and they are offering and I have about forty five thousand dollars worth of liquid cash. And if they put in, well, they have a graduated system, but one of the one of those steps says that if I put twenty five thousand in, I'll make twenty percent annual percentage yield of dividends paid on a monthly basis. And I was wondering if you thought that was a good way to to go or what your thoughts, insight?

Yeah, I'm not sure I followed you there. So tell me what it is they're promising. Well, they have graduated steps of deposit. So if you deposit anywhere from five thousand to ten thousand dollars, you start out at ten percent annual percentage yield and then the next step is ten to twenty five thousand, which stays at ten percent. And then they have if you if you deposit twenty five thousand up to fifty thousand, it bumps up to twenty percent and so on. Yeah, I'm a little confused by that. I can't imagine that they would give you a ten percent interest rate on the deposit or even as much as twenty percent for fifty thousand.

Something's not quite right there. Am I missing something or is that your understanding of what they're actually offering? Well, that's my understanding. I'm looking at the Web site right now and do this.

Yeah, I'll certainly check it out. If you'll send a link to that questions at MoneyWise.org, we'll take a peek. But something's not right there, Michael. And nobody's offering money markets or even a bonus, which they do to attract business from time to time. They'll throw in a kind of a bonus even above prevailing rates, even some of the online rates. But that might be one or two percent at the most, never 10 or 20 percent. So something something is awry. But let's take a look at it.

So questions at MoneyWise.org and we'll take a peek. And we appreciate your call today. Thank you, Michael. Appreciate that. And I think we can squeeze in one more real quick before the break.

Philip from Greenwood, Indiana. Just a couple of minutes, sir. How can we help? Yes, as a lender mortgage lender, I'm curious as to why you always talk about having to save 20 percent down for a purchase of a home, which implies you have something against FHA or private mortgage insurance. And I'm kind of curious as to why you can buy a house with five or 10 percent down and with eight to 10 percent appreciation that we've seen the last several years, you're going to be able to get rid of it and still own a home.

You know, that's true, Philip. I think a couple of things there. Number one is just because somebody will give you a mortgage doesn't necessarily mean it's the right mortgage. You know, we we saw zero percent financing, which led in part to the, you know, 08, 09 debacle where housing prices had rapid declines and we had a lot of people underwater there. So I think there's a couple of things that happen with the 20 percent down.

Certainly it's not required. There are plenty of mortgage programs that would allow you to do a lot less than that. I think one of the benefits is that it really forces you to have a solid financial foundation under you because you have the ability to save to make a purchase. Number two, it'll keep that payment lower because we're not financing as much. And so it gives folks a better position to fit it into their budget.

We use a typical guideline there of 25 percent of take-home pay for PITI, principal interest taxes and insurance. It's going to get rid of that PMI, which does nothing for you because it's only for the benefit of the lender. So it's just an added expense that you're paying that's of no value. And so we get rid of that and it's going to perhaps earn you a lower mortgage interest rate because lenders are going to give a more competitive rate if you have that 20 percent down. In most cases, certainly not everyone, and they'll be more likely to compete for your business just because there's that extra equity which gives them added safety. So I just like it for those reasons.

Doesn't mean it's absolutely essential. But why don't you stay on the line? We'll talk more offline.

We'll be right back. Many people adopt an attitude toward marriage and finances that it'll all work out somehow. But sadly, it often doesn't. Financial woes can devastate a marriage, but there is a better way. God's Way. Money and Marriage God's Way by Howard Dayton will help you discover God's approach to growing your finances, strengthening your relationship with your mate, and cultivating Godly joy. Money and Marriage God's Way is available when you click the Store button at MoneyWiseLive.org.

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Hi, I'm Bernie Dymett. Clayton's has become part of our language. A Clayton's drink looks as though it's alcoholic, but really it isn't. A Clayton's anything is something that looks real, but isn't. Question, is it possible to have a Clayton's person?

You know, a person who's not really a person. A baby in its mother's womb, is that a Clayton's person? Or maybe the street people we walk around on the footpath.

They're almost always smelly. Are they Clayton's people? Or maybe those workers in the factories across Asia who make the toys our kids play with and the clothes we wear, all for a few cents an hour. Are they Clayton's people? Jesus said, I've come to bring good news to the poor and to set the captives free. I wonder when He looks around, whether He sees any Clayton's people on this earth.

I wonder. Many people adopt an attitude toward marriage and finances that it'll all work out somehow, but sadly it often doesn't. Financial woes can devastate a marriage, but there is a better way. God's Way. Money and Marriage God's Way by Howard Dayton will help you discover God's approach to growing your finances, strengthening your relationship with your mate, and cultivating Godly joy.

Money and Marriage God's Way is available when you click the store button at MoneyWiseLive.org. 1-800-525-7000. I'll give you the number again, because we do have a couple of lines open, and perhaps time for your call. 800-525-7000 on MoneyWiseLive.

Next to Griffith, Indiana. Jim, welcome to the program. How can we be of service, sir?

Hi, thanks for taking my call. My wife and I are both retired. I have a pension from where I worked, and then we're also both on Social Security work, over 70, and we have some money in our IRAs, and then I have a 401K from work, and I was just wondering if there would be any benefit for us to take some of that money out every year and just convert it over to a Roth IRA. We don't foresee us needing this money for a long period of time.

Yeah, yeah. You know, Jim, the benefit would be—there certainly could be some benefit, and obviously one of the big ones is that if you do that prior to having to take it out as a required minimum distribution, it could continue to grow if you don't intend to take it out. So that could be one of the better options that you have. I think the downside is usually when we're looking at contributing to a Roth or even converting to a Roth, the most effective opportunity for that is early on when you're still in your working years, you have a lot of time on your side, you're in a more aggressive investing posture because you're not anywhere near retirement, and so you have a much larger stock allocation, and so the potential for gains is a lot higher, and you're in a higher tax bracket because perhaps you're into your working years, maybe even some of the peak working years where you have a lot of taxable income. And so when you're looking at the opportunity to take this out in retirement down, perhaps—I know you're in retirement now, but if you were to take it out down the road, you're in a low tax bracket at that time. So I don't think there's a tremendous benefit there apart from this idea that the money could continue to grow in this tax-free growth environment without you having to take it out based on the IRS schedule.

So I'd probably pass on it if I were you, but I don't think there's anything wrong with it, certainly. And again, if you plan to leave it there, that would be one benefit in the favor of making the conversion. Yeah, well, see, my pension is guaranteed for my life, and then it's guaranteed for my wife until she's over—around 80. And so, like I said, the money is not needed. We have savings. So the money really is just an investment.

We haven't changed any of our investment strategy from before I retired till now. I mean, it's still a little bit aggressive. I see. OK. Yeah, and because you don't have a need for it right now, you've had the ability to have a more aggressive investment posture.

And so it'd certainly be something to look at. Perhaps you could even do half over toward the Roth and leave half there with the intention of maybe doing some of your giving out of the traditional IRA through a qualified charitable distribution to maximize that opportunity and not pay any taxes on the amount that you're giving. So you could use that to offset giving your doing out of cash after tax and do it on a pre-tax basis from the traditional. And perhaps that portion that you don't ever intend to touch, maybe you systematically convert that over time. But I'd work with your tax preparer to make sure you're not inadvertently pushing yourself up into a higher tax bracket.

Just figure out how much to do per year and have that professional help you back into that calculation. Rob, I don't want to linger on it long, but you just mentioned the charitable contribution or charitable gift contribution. Can you explain that real briefly? Because that's, I think, something that a lot of people overlook when they've got some investments of a new way to give. Can you explain that briefly?

Yeah, absolutely. So there's something called a qualified charitable distribution that basically allows you to make a charitable contribution directly from a traditional IRA to a charity, a not-for-profit organization, which could also be your church of up to $100,000. And it will go against your required minimum distribution.

There's not one this year because of the CARES Act, but in a typical year, it would offset that. And the nice thing is that you're not realizing that amount as a distribution first, and therefore it's not taxable. So the full amount of the transfer goes to the ministry or charity.

They would sell the investment and have full value of that amount, and no one would ever pay any tax on it. So a benefit to you because you're perhaps dialing back and offsetting that, the amount of giving you would have already been doing with after-tax dollars and then just transferring directly from your IRA. Wow, that is fabulous.

I know my mom in her last few years did that, and it actually made all the difference in her case of her finances working versus not working. Oh, wow. Yeah, it's really good to know because, you know, she was a regular giver, a tither, but she was able to change it over so that that came out of investments and worked real well. Well, thank you. That's great. Sure. Let's see, we can take another call here, 800-525-7000, Miami, Florida. And Jeanette, I appreciate your holding. How can we be of service today?

Thank you. I have a question in that I'm 66, close to 67 years old. I just got laid off from a job. I have a home that I own for $400,000. I have $100,000 in conservative investments. I have $800 in Social Security because I was married most of my adult life. I do not have any credit card debt. I pay my credit cards off monthly.

I listen to you faithfully. I pay tithes on any income that I get. I'm afraid. I'm concerned because according to the 83 lifespan, I literally have two or three more years that I can afford right now. If I were to sell my house, my children say that a two bedroom rental would be more money than my taxes and insurance right now in my home. I am going to look for another job.

I know at my age in life, I probably can look at a maximum of $30,000 if I'm lucky in this day and age. I'm concerned. Yeah.

Yeah. Jeanette, as you look at your finances, I assume, and I'm so sorry to hear you've been laid off until you find additional work. What is the gap between your monthly expenses and the Social Security income that you have coming in? I only have $800 coming in. The gap is probably close to $3,000. Okay.

And are you planning to start pulling that from the $100,000 in investments or do you have other places? That's it. Okay.

So there's not. Yeah. Okay.

Very good. And obviously, as we look forward, we're going to have to consider the assets that you have and the ability for you to continue to work as long as you can. One opportunity would be for you to take this home and convert it into an income stream that would be through a reverse mortgage. That's not typically my first approach, especially if it doesn't meet the need in terms of the total amount you need to bring in on a monthly basis and it wouldn't with the need there being around $3,000. But I also recognize that if you were to sell this, even though you have the $400,000 and roughly the $100,000 that goes with it, we would typically look at a 4% rate of return, which on a half a million dollars would be about $20,000 a year.

And so the $20,000 a year that you would get before tax plus the $800 when you factor in what you're going to have to be paying for rent is probably still not going to cover it. And that means that you're going to just have to eat into the principle there. So I think the key right now is to trust the Lord, recognize he's your provider. You've been faithful, it sounds like, to be a giver and to manage your money wisely. I'm delighted to hear you don't have a lot of debt. And yet what we need to do is to find work that's going to allow you not only to cover your expenses, but to save as much as you can between now and that season where, for whatever reason, the Lord redirects you or you're unable to work. And at that point, the good news is you've got, you know, half a million dollars in assets. And so at that point, we'd have to figure out that plus what you're able to accumulate between now and then, assuming you find work relatively soon, you know, how to position that to be able to provide the income that you need on top of the social security you're receiving at that point. I'd love for you to connect with one of our MoneyWise coaches, Jeanette. They love to help you and there's no charge for that. Perhaps walk through the numbers in a little bit more detail, give you some thoughts, certainly pray with you and see what we can uncover as to the best path forward.

Rob, I'm curious about this. Jeanette, if she sells her house, as you were saying, she's looking at about $500,000. And as you said, that wouldn't be enough without digging into principal to cover rent. But how important is it for us to maintain principal over the long haul? I mean, $500,000 bucks, she could take $25,000 out a year and it would last 20 years if it didn't earn a dime.

So does she really need to be concerned or is it okay to eat up that principal? Well, you know, certainly if you have the ability, Rich, to keep your lifestyle at such a level where you don't have to eat into principal, then that's going to ensure, especially with the inflation, where your purchasing power is declining, that's going to ensure that you can allow this money to last the rest of your life if the Lord tarries and you were to live a long, long time. But that's just not an option for many folks where they have to go ahead and eat into that principal because the returns are just simply not enough to meet the need that they have for their expenses. And that's where changes have to be made to the extent that they can. Homes have to be sold and decisions have to be made as to how do we maximize and stretch these dollars out just as long as we can. Right. And of course, you know, we often talk about our desire to leave an inheritance for our children. That's both a financial inheritance and a spiritual inheritance. But sometimes you can only do it, well, always you can only do what you can do.

And we've got to remember God is certainly in charge of all of this. Jeanette, thanks so much. We hope this information has helped.

And please do get back in touch if we can be of further help to you. Rob, we're about out of time today, but it's been a pleasure to be with you. And Steve tells me he's coming back tomorrow.

We'll look forward to it. Great to have you along this week, Rich. We appreciate you sitting in. Well, thank you very much. Our thanks to our crack technical team today. Amy, Dan, Clara and Jim. A reminder that Money Wise Live is a partnership between Moody Radio and Money Wise Media. Hope to join us again tomorrow.