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The Retirement Investing Challenge

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
October 19, 2020 8:03 am

The Retirement Investing Challenge

MoneyWise / Rob West and Steve Moore

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October 19, 2020 8:03 am

There are two kinds of people in this world—borrowers and savers. Right now, times are not good for the savers. Historically low interest rates are proving to be a problem for those with fixed return investments. On the next MoneyWise Live, hosts Rob West and Steve Moore talk with Mark Biller about strategies to protect your nest egg from inflation. It’s the retirement investing challenge on the next MoneyWise Live at 4pm Eastern/3pm Central on Moody Radio.

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Rob West and Steve Moore

There are two kinds of people in this world of those who like low interest rates, and those who don't put another way, borrowers versus sabers right now, terrible top for savers historically low interest rates are tough on return investments today host Rob West talks with some find the best things Mark Miller about strategies to protect your nest egg inflation will take your calls and questions on anything at 800-525-7000 down 800-525-7000 times more retirement investing challenge that's nice right here moneywise will rob our friend Mark Miller is the executive editor at SMI sound mind investing and they have a detailed article in their October newsletter about ways to keep inflation from eating away at your savings and of course Mark being Mark.

He's speaking to us today through his mask because Mark is always doing things the way he should. And I'm really excited about this topic, you know, our listeners need to check it out because Mark, as you know, a lot of people are concerned about these low interest rates and what that could mean for their retirement dollars. So, welcome back to the program will thanks go.

Obviously things you do before retiring have the most impact on your savings getting out of debt, maximizing contributions to your retirement plan. We talk a lot about having an emergency fund, but having done all that folks nearing or even in retirement still have to face a tough question and so I know that's at the heart of your article and not really at the core were to be talking about today so Phyllis and write. The question is which is a greater concern to you know, potentially losing some of your principal in the short run or losing your purchasing power to inflation over the course of your retirement lifetime and a lot of retirees historically have been very uncomfortable with the idea of ever dipping into their investment principal. They want to just live off the income of their investments in that mindset often will limit retirees to use savings type investment CDs, savings accounts, that type of thing and the issue really is that a generation ago. That type of approach might have made sense.

You know 20 years ago you could have a decent bond portfolio yielding 7 1/2%. But today with super low interest rates that just really doesn't get it done because interest rates are so close to zero and the fact that people are living longer now. That means that most retirees have got to continue investing at least some of their money a little bit more aggressively in order to maintain their purchasing power over 15, 20, 30 year retirement.

Such a key point will talk specifically about that portion of the portfolio that might remain in stocks to give us some growth factor. Even though were taking more risk again with that portion. But before we do.

Obviously, retirees Mark need to have some allocation if not the majority of their allocation to fixed income type investments even in a low interest rate environment. So what advice do you have for listeners. There yeah so at the heart of the Federal Reserve interest rate policy and that's been brutal over the last decade, for the most part it's been wonderful for borrowers who are borrowing at these low rates but brutal for savers and so you really for savers.

It's kind of a meager list of options.

Now, here are a few ideas. None of them are awesome because we just don't have great options right now but there are some things we can do and the first of those is to not settle for your local bank savings account or CD rates very important to compare your local rates to the higher rates that are available online, usually from online only banks now. That difference may only amount to maybe half a percent or so per year, but a lot of retirees carry large savings balances.

So even a small percentage difference can really add up in terms of dollars we typically direct our SMI readers to bank and also deposit as good reference places to look for those higher yields and that's really key because you want to get those yields and that would include not only savings accounts but of course he rates as well, which in this environment, may you may certainly pass on the long end of this state.

Certainly on the shorter end talk about much more related to this, and again that stock allocation as well. M phone number call now open lines available at 800-5257 money and life run on the same track. Unfortunately, sometimes it seems like your money is heading in a different direction from your goal, and never enough three keys to financial contentment. Author Ron blue helps you to break down all your financial options to a basic floor 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 moneywise live out of work for 30 years.

Sound mind investing has been helping Christians reach their financial goals. Step-by-step guidance for investors at every stage from those just getting started, those getting ready for retirement through scriptural principles and practical suggestions.

SMI offers financial wisdom. More information short via webinar on profit and peace of mind, no matter what's happening in is available at sound mind investing.sometimes life is just so easy returning one thing after another happens to most of us from time to time. The last few months of being just like that for me.

I believe Hardwick Prince pull up a from look at the wonderful world God's creative force mac & cheese.

He wants us to enjoy when I'm just so busy preparing programs with with the work piling up faster than I can do it sometimes I feel overwhelmed. So I everything inside me told me to have time to stop anyway. Sometimes I go for walk in the got the times on my cup of tea and sit down with the cat.

I love how God made the simple beautiful things for us to enjoy. And when we do somehow he shows up with the joy and the peace that we need to get up and keep going under any time that is robbing you of freedom and peace of mind. Christian credit counselors can help where a nationwide nonprofit counseling organization has helped over 3000 individuals in the last 27 years get out of credit card debt percent faster while honoring that that info to learn how Christian credit counselors can help you visit Christian credit Christian credit counselors not call 800-557-1985 with us today. It's moneywise live with your host Rob West Moore also joining us and we always look forward to having this guy, it's Mark Miller from sound mind were discussing an article in their current newsletter. In fact, I will have more information later but I'm pretty sure that if you visit their website today even though you may not be a subscriber.

This this a newsletter article will be open to all of our moneywise listeners so it's moneywise so it's a sound mind also taking your questions on investments, retirement, retirement allocation, finding that balance between growth and stability. If you're in your retirement years. All of that fair game at 800-525-7000 Mark before we dive back into this when we talk about this idea. Retirement. Clearly we want to look at it through a biblical lens, what thoughts might you offer to our listeners as believers as to how they should even think about this season of life that might be particularly related to their biblical worldview.

Yeah well that's topic in and of itself, Rob. But you know I think that biblically rather than looking at retirement as kinda like that, the coastal zone you know I made it and now I can just go back somewhere on a beach or a golf course and I think it's appropriate to look at retirement more at maybe our redirecting a different season but you were always from really from birth or at least when we become cognizant of the Lord's work in our lives until the end of our days were supposed to be looking for how the Lord wants to use us. Maybe our redirecting slowing down. Maybe a change of focus, but certainly not a enough time I'm over and I'm out to pasture. At this point that's not the approach that's exactly right.

It couldn't agree more. You know it so that season we had the most wisdom the most experience offering service to the Lord. So perhaps were thinking about retiring to something and not from something, but clearly your financial resources. God's resources are part of the equation so how you make them last for the rest of your life once you reach that season of life, especially in light of these lower interest rates that we currently find ourselves and we mentioned just before the break, Mark CDs and that's obviously a very common quickly thought of type of fixed income investment. When we talk about CDs we often talk about; the latter give us your perspective on how we should think about this portion of our portfolios yeah latter. The idea is that longer-term CDs yield more than shorter-term CDs so you want to. Most retirees want to have regular liquidity they don't want to lock up all of their money for long periods of time so that a lot of times will shy away from CDs of longer terms because they want to have access to their money sooner. The idea of the latter is to staggered different CDs of of different maturities so that you have regular access to the principal, but eventually you can set this up so your earning the longer CD rates, which yield more so an example of how you do this is you might start out by buying CDs say six months, 12 months, 18 months 24 months and by doing that every six months you're getting access to use some of your principal.

In case you need that the money that you don't need right away for your spending. You can then turn around and reinvest at a longer-term, so you take that six month CD money when it matures and you to reinvest that and say a new 24 month CD at the end of the latter your next CD is always just six months away, but eventually there all two year three or four year.

The longer-term CD rates. Now, as you mentioned right before the break Rob with with rates so low you don't really want to be locking up your money for really long periods like five years right now.

Eventually, as rates rise, maybe a five year would be a great goal for all of your CDs to be those longer-term rates, but right now probably wiser to keep it a little bit at the shorter end makes a lot of sense. Mark simply look at the fact that we're living longer. Therefore, many retirees could spend 20 or 30 years in retirement and then we factor in the low interest rates. We factor in inflation we factor in the rising cost of medical expenses. We really need to think about what you call a total return approach to our income needs.

So give us an example of what that might look like. Sure. So let's just consider two options.

One is a $100,000 bond portfolio that yielding 3%. The other is $100,000 combination stock and bond portfolio.

That's only yielding 2% not a glance that 3% bond yield might seem better because it's going to give you $3000 a year of income, whereas that combo portfolios only going to give you $2000 of income.

The key here is you need to look beyond that current income because that's only part of the picture. Historically, stocks attended to provide higher total return than bonds, so we need to look at the yield. The 2% or 3% plus the capital gains.

So if we just continue the example, if the stocks in that combination portfolio are growing at the same maybe 5% per year.

Now that combination portfolio is giving you the $2000 of yield of income plus it's growing another 5000 in capital gains. Now that the total return 7000 which is considerably more than the $3000 of income that the bond portfolio is getting in the key to making this work is you have to be willing to sell a little bit of your principal to make up the difference in income. That's where retirees sometimes are a little bit reticent that $2000 of income isn't enough, you can just sell a few of your shares from the bond and stock portfolio to make up the difference.

And even after doing that. Typically you come out ahead. Over time, now course, there's no such thing as a free lunch. So the downside is, there are going to be years when the stocks and that combine portfolio will lose some value, but you know you're taking this combination approach and recognizing this is a long term game that over most longer-term. Five years 10 years, and so on. Stocks are going to outperform bond is a great table in the article that kind of shows everything I just said I know it's hard to listen all these numbers but this table lays this out in black-and-white. So if this is something listeners are interested and I really encourage them to look at that in the article online.

That's good.

I will tobacco some more information in that regard.

First let's get the Carlene she's calling from Richmond, Minnesota, and what you question what your situation there currently find three working full time about $2000 credit union. We have an emergency thousand dollars. We do not have any data hard credit card anything like that. We do owe $27 retirement home that we live in an I wanted take my savings and pay that off.

But that would leave me with an emergency fund of $7000, a retirement security. I work full time security but I don't touch my retirement, which is only about maybe $25,000 okay and how long do you plan to continue working. Carlene well where my job but I do great. I don't want my husband okay so let me ask you, in terms of the budget that you have for your monthly expenses. When you put everything in the things you get a bill for the things that are purely discretionary, even those things that come up once or twice a year like insurance premiums.

Are you able to live on just the retirement income that you have or does it require your working income as well when they come due and we have money left over, and we do like. I think that's I got it because that's always been a priority and so are you continuing to say that of your income for retirement. I won my retirement fund because that was my job when I worked at the college and so I don't put any more into that I do I do put that back down. Like every paycheck away from my what I okay here's the bottom line.

I love the fact you have this emergency savings.

I would like for you have at least three months expenses prefer you to have six months expenses so I know you said you don't live on a budget. You just spend until the money is gone. I'd love for you to take the time to put it on paper. Just so you know what your monthly need is so that when we get to that point. Let's say you can't work at some point down the road you got a good feel for what is that gap if there is one between what you could generate from all income sources so security your retirement is retirement and and so you know what those numbers look like and what you're solving for in terms of paying off the mortgage. I love that because that's gonna keep the disc to bring the monthly need down even more, but I don't want you to be out of debt and have no emergency savings so I would say continue to save until you have 3 to 6 months expenses then take the rest of it.

Try to pay that house.

Currently, we appreciate that phone call. Thank you very much. 800-525-7000 year discussion with Mark Miller, the retirement investing challenge find it when you use them online. Sound mind investing a large, do you know if you have enough money house. Do you know how much is enough. If not, one blue can help with this book. Master your money a step-by-step plan for experiencing financial contentment and how to save and invest and give wisely create a long-term financial plan and how to get out of debt.

Find it all in master your money by Ron blue available when you click the start button moneywise live to work. Everything is cost lots of money almost completely despised last bullet point is not your actions can often prompt another sentence or Romans 12 here so don't understand me so fast that will hardly know what to pretend I'm God's desire for you. Let me remind you a couple of scriptures before I first John 319. You can jot down the address first John 318 for we are not allowed.

Indeed, to live with my with way to experience the online experience January 2021 the financial wealth you leave behind could be the best thing that ever happened to your loved ones or the worst in splitting hairs, 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 hairs will foster a real appreciation for the precious resources that God has entrusted to you, and it's available. Click the start button moneywise listening to moneywise live sound mind investing that they put out a fantastic based newsletter each month to mention the sound mind investing handbook that we've been high on giving.

We've given away thousands of them over the years, you might want will avail yourself of that, you'll find all the resources when you visit sound mind if you have an investing question that you like to post the market would like to put them to work for the money were paying this guidebook.

We want to put them to work so you can help us do that. Not least, master free 800-525-7000 12 Mark the other something called the rule of 100.

I know you're well familiar with it. We talked about here on the program is kind of a rule of thumb that many advisors used to kind of ballpark what your mix should be between stocks and bonds related to your age so describe what that is and whether or not that holds up with what you are describing earlier in this total return approach sure so very simply that rule of 100 is just you subtract your age from 100 and that the percentage of your portfolio that should be in stock and in over the last four decades or so. That's work pretty well because bonds have had pretty good returns as interest rates have been steadily declining from the 15% or so level of the mid 80s early 80s until today. The problem is that that's probably a little bit conservative. Given today's low yields and I wish that wasn't the case but the Federal Reserve and really central banks all around the world over the last dozen years since the financial crisis they've intentionally created this dynamic to push people out safer, fixed income and savings vehicles and kinda force them out. The risk curve into riskier investments and that you know this whole topic that were talking about today is really so important.

It's one that a lot of retirees don't fully understand, but over time the best predictor of what future bond returns will be has been what current bond yields are today. So, with bond yields so so low today that suggests that overall bond returns are going to be quite low over the next several years, and such can be very difficult to generate the types of returns that retirees have been used, to over the last few decades over the coming years. Now unfortunately it's not like stock valuations are screaming values either so it's not like there's an easy answer to this, but that's really why we put the time and focused on the available options through articles like the one that were discussing today but heard some suggest that the new number is not 100 hundred 10 which basically means instead of seven-year-old having 30% allocation to stocks they might now have 40 would something like that you think take us in the right direction. Yeah, I mean it's certainly going to be better and in a rule there there you have all as general guideposts. Of course, were always going to suggest that people try to dig in a little bit more to their specific situation.

You know that the thing that people have not really wrestled through is you know we've we've been dealing with lower and lower yields. Now for some time out what is just around the corner, potentially, is what if interest rates actually begin to rise over the next several years and bond returns. You know actually could be flat or even negative.

That really will throw a lot of these rules and kinda, for a loop because we had 40 years of one direction and were kinda looking like were towards the end of that pendulum swing and eventually things could swing back the other way while the bottom line here Mark is we need to perhaps consider what our retirement portfolio should look like, and perhaps in a different way. In light of the environment wherein what we see coming on the horizon.

This article is a great step in that direction. So go check it out. Sound mind investing for. Just keep in mind, God is our provider not our vestments. Thanks for stopping by my friend. Investing is more than just returns.

It's an expression of who you are and what you value is the way you invest your money like your identity as a Christian that eventide redesign 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 invest even Christian healthcare ministries enables believers to meet their healthcare costs affordably, biblically and compassionately.

It's not insurance but a voluntary cost-sharing ministry based on the biblical sample of Christians sharing each other's needs and members are defined under the law for not having health Christian healthcare ministries might be your health cost solution call 800-791-6225 or visit CH first of the week is found in Psalm 123499. He will deliver you from the pestilence covering under his wings you will find rest. Psalm 9190 radio first week. Things are always happening in radio God is at work in listeners all around the monthly online newsletter uplift is changed in order to bring more listener stories, program updates and more listening resources be among the first to know about radios ongoing out check out the old new newsletter subscribe right now my moody my booty radio. Do you know if you have enough money house. Do you know how much is enough. If not, one blue can help with this book. Master your money a step-by-step plan for experiencing financial contentment.

Learn how to save, invest, and give wisely create a long-term financial plan and how to get out of debt. Find it all in master your money by Ron blue available when you click the start button moneywise with answering news about Agnew in Washington doesn't jump the trumpet in Prescott Arizona for a make America great again at Raleigh the first of two for him today on his arrival on the tarmac. He addressed reporters questions, including about his disagreements with Dr. Anthony found he also sent stimulus talks are ongoing with house leadership. The president has a second rally scheduled for later this evening and it to some and the Democrats vice presidents Kennedy, Harris back on the campaign trail for the first time. After brief absence. When people connected with her campaign tested positive for the virus. Democratic ticket is largely foregoing traditional campaign rallies because of the risk of spreading the coronavirus at campaign event. Harris says all children need the right tools for online learning during the coronavirus shutdowns on Wall Street.

The Dow ended the day off by 410 points. This is answering new lies live questions and providing the last use of the financial challenges you might be facing some anything financial made by trading in a car paying off your house, going to college without yes she's me without incurring too much student loan debt anything along those lines. Or perhaps you are having throat issues as well. Let's talk medicine 800-525-7000 800-525-7000 always a pleasure to have Mark Miller with this from sound mind investing. He he he comes with a wealth of information and knowledge and research and kinda lays it out there in a way that anyone can understand. Well, it's right. And often times as you know, Steve. These topics can get so complicated and difficult to understand and that's why we appreciate Mark's plain speak, but always through a biblical perspective, which is what we're all about here. Amen. Right.

Delray Beach, Florida hi Mary, thanks for your patience and help one night during the process of retiring I have a small retirement doctor says I'm better live a long time.

I am in good health. When I was younger I had life insurance had invested money now. I don't know because of my age 75. If they want would be a good way of investing. You know, Mary, will you have accumulated that you would be looking to put into this insurance contract.

500 and something that I would hope that but just make sure I'm clear what would you say your investable assets are.

Let me tell you when you are uncomfortable with that.

That's fine.

I can talk generally just talk specifically about insurance contracts.

It really amount really doesn't matter if you have a nest egg you've accumulated over long period of time you have a couple of options with that number one you could hire and I would recommend this this be the way you approach your investments. I would hire an investment professional to manage it for you and essentially you would find that person that is a good fit for you experience temperament how they communicate their understanding of what God is doing in your life and where he's taking you. What are you trying to accomplish in this season of life and how much risk do you want to take. Albeit I recognize in this season of life.

It's about protecting what you have, more so than getting up a large return. Of course, but then taking all of that information in building a portfolio of investments. Now they don't have to be high risk. In fact, you would have a just as we talked about in the previous segment of a smaller allocation to any kind of stock exposure that would give it more of a growth component in a much larger allocation to things that are more sure and steady that are going to have what what's called a yield or think about it in terms of an interest rate CDs and perhaps some in high yield savings and then some bonds and even maybe some preferred stocks which would be kind of in the middle between the bond and the growth stock category and you put all of that together, and the goal is to have access to your money if you needed for major medical expense or something like that. But to see a return on it. Over time, and for that portion that's in stocks to be able to weather any storm along the way. So if we got into a period where the stock market was down for two years or three years.

You wouldn't touch it, you have other larger portion of your portfolios that's throwing off income that's more consistent and stable. That would be the typical approach I would take for somebody in your situation now where does life insurance come into that. Well, you know, when you look at an insurance contract from an insurance company. What you're essentially doing is transferring the risk away from your own investments that you are ultimately responsible for and saying I want you to assume that risk and they're going to do that by either providing you a guaranteed rate of return which will be fairly low or through variable insurance contract. You have some mix of stocks and some percentage of the upside available to you that the problem is that because there's a life insurance component to it and it's getting costlier as you age. It's going to be eroding some of what's in there and put a drag on the returns that you might see.

And it's also going to limit access to your funds because it's can be locked up with surrender penalties and not to mention the charges that are embedded in there so that's why my preference was, not to automatically default to an insurance type product for somebody in your season of life.

But it doesn't mean that there's not ever a place for it and in fact if you send me Rob, I just don't want to assume any risk rather transfer to the insurance company and have a guaranteed return every year that I could live with it may in fact be the very best thing for you to do, but I would want you to make that decision with a godly professional who can look at your whole situation. Look at what you're trying to accomplish and help you understand both options very very clearly. So if you don't already have somebody I'd encourage you to recommend recommend that you connect to somebody in your area that has the certified kingdom advisor designation and there you could do that on our website moneywise these are not people that work for us, but these are people who have tremendous experience and have taken this extra step of being trained to specialists and biblically wise financial advice doesn't make sense though. Yeah I'm doing on 089 fax and do something different now. Why not stay with that approach, so I would like to hire stocks and control my own and control my own stack wood, and say what I want this more conservative is not considered it like that somebody was paying for that yeah okay what sounds like you did quite well. So again, I know very little. Just hearing the bits and pieces of of what's happening in your life and it sounds like you were quite successful. So I would say you could continue without approach thing on the more conservative in butter, perhaps introducing a larger allocation toward fixed income. Or you could bring a professional and to help you do that with a more hands-on approach or than the third option is what you mentioned with an insurance contract were essentially you transfer that risk to an insurance company in return for some sort of guaranteed return or at least a percentage of the upside in the market with a downside protection like a floor so you can't lose money and I think that's really the consideration you need to make it out. All I'm saying is I think it would be best made alongside a professional who can help you evaluate all of these options so if you have somebody great if you don't, you can connect to somebody from our website and that we appreciate your call today will pray that the Lord give you some wisdom here as you make these decisions.

We do indeed marry God bless you, thank you very very much and I hate this reminder if you haven't visited our website, you might want to check that out its moneywise there you find lots of up-to-date information about who we are, what were doing a radio archives of past programs, budget templates, free resources, how to find a certified kingdom advisor in your local area how to connect with the budget coach at no charge and much much more. Now when we come back will speak with Joe in Lecanto, Florida.

He wants to know what investment options are biblical dawns on hold, wanting to help their six-month-old grandson get on get through cutoff each time there and see if we can help Joanne Don and you 800-525-7000. There's a great deal more about our money than most of us imagine Jesus is more about our use of money and possessions and about anything else, including both heaven and hell in managing God's money on the radio 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 in the store moneywise hi I'm very tired. I'm here to help you understand the urgency and how much fun it is to share your faith in the eyes of a layman, we have an election coming to be the most important election in our history. Christian voters using their Bibles as a voter guide can be the deciding factor of the critical mass to do that if we all hold the same way for the same issues and same candidates and there's no reason why we can't do that is not a personality contest is not a Democrat versus Republican issue is about restoring American be one nation under God indivisible with liberty and justice for all hearing government reprisal. Most of our photos of gone silent on political issues, leaving us without direction God is made as a godless society and we can easily change that requires that every Christian vote and only vote for issues and carry center in alignment with Scripture. There's nothing more exciting than knowing God is using you to move people closer join us in a trying to tell you something, and your emotions about what you really are. It's the way God wired us here, anger, anticipation, depression.

These are provoked by some issue in your life and your feelings on your response to that circumstance, as well as your interpretation of Moses taught this very thing. He said God was testing his people quote whether or not you keep his commands and God's people were wandering in the desert, discontent, angry and fearful about themselves than they were about the desert so friend today the hard work of trusting God up leaving God up facing what your emotions feeling about yourself want to say something to shoot you like your life to be confused with joy. Would you like to interject a kernel dimension in the most ordinary day on the radio says you can when you discover the treasure principle and a concise powerpack style is newly revised and updated book offers a six step plan to finding the pleasure and eternal treasure what you discover. Life will never look the same treasure principle is available when you click the store, but moneywise is today and really happy that you knowingly cancel Florida is with this. Julie received the award for a man of great patients try to get you on Friday that work but we got you today. How can we help what's the question hello Jeff, you were. I morning Michael, were glad my question. You often creating option trading is that biblical is that your question Joe. You yeah you know when it comes to investing you. I would say at its core. That's a biblical concept, we see the parable of the talent that were responsible for what God entrusted to us where the manager we should seek a return on what God has entrusted to us and so we should be wise managers putting to work the resources that we have now how do we do that well. Clearly there are some principles there in God's word that we should take a long time horizon that we should be steady plotters, meaning were not speculators are using high risk strategies that we should be diversified, meaning we don't have all of our eggs in one basket and when it comes to options you know this would be certainly an investment category that tends to be a little bit more risky. Does that mean it's automatically you need to to throw it out. I wouldn't say that I would just say when you're managing God's money, it causes you to kinda take perhaps an even greater level of responsibility toward what it is you're doing and so I would just say if you're going to use options you really need to have a proper understanding of how options work. If options are used appropriately. They can be very low risk and actually be used to add some return to the portfolio and I don't have time today could to kinda get into what they are, generally, though, Joe, for most novice investors. It's something that's a bit more complicated and requires more time in terms of monitoring the portfolio and being active in your trading then than the average investor would have time for.

And that's why we would generally recommend more of a broadly diversified portfolio. Or you can just buy and hold. You might update your allocations every quarter every six months based on your life situation or age risk tolerance. But apart from that, you just let the investments grow over time and as soon as you introduce options. That's a whole another level of responsibility and in management that's that's far more active and if you don't know what you're doing can be very high risk and so that's where I would just say generally speaking, I would leave that to the professionals. But of course there's probably plenty of people listening to my voice right now that have the time, the knowledge and the expertise to introduce options and if that's the case, then I don't think there's anything that would be counter to God's word in terms of using them. If that makes sense to locate all my money to options trading in the local plan B manage my money managers, but only a small portion well and I would just say make sure you you understand what you're getting into. And because we don't want to reduce this to something that's highly speculative work some form of gambling where we really don't understand what were doing the work and just take a small portion of God's money and kind of throw it in some options and hope we come out well. I think we need to go into it with the understanding that we have the knowledge we've done. Spent the time to understand what it is were doing because again it's God's money and where responsible and accountable for it. But if you understand what you're doing and again you're properly diversified meaning you're doing this only with a small portion then again I don't think there's a problem Rob can you explain just briefly what what options an option trading is all about. Sure, you know, I think that the key here.

Stephen terms of what were talking about is yeah it's a contract that gives you the right but not the obligation to buy or sell an underlying asset at a set price, or before a certain date so depends on whether you have a call or put a call gives you the right to buy a stock up.

What gives you the right to sell it and you're basically entering into this contract, believing, you would be able to buy or sell it. This various price, depending upon whether your have the caller the put but again it gets very complicated very quickly but essentially, can you be used to add value to the overall portfolio because you're leveraging the investments that you have through these contracts that are essentially what are called derivative securities will thank you for that. And speaking of calls. Let's take Don in Southington, Ohio. We appreciate you hanging on there you have a six-month-old grandson who who declines to work. So what you're wanting to know how you can get them in the college at least half start early, right. All right. And it is that specifically how to best save for college for this young man weak part and without analyte yeah Don, are you willing to say that this money is specifically earmarked for college, or do you want it more broadly available for your grandson. That the other portion that was for college or traits: 10 know how would that work. Yeah well you know if you want to specifically say it's for education.

So whether that's K to 12 private school or you know college or even beyond college graduate degree or something like that.

I love the 529 plan very easy to set up, you can put in up to 15,000 a year.

You may want to do a lot less than that, but you have that option.

You can allow that to grow essentially as high as it can go up to you $250-$300,000 typically and it's very low maintenance in the sense that once you pick the 529 plan, which should be attached to a particular state.

Then you would like a 401(k) just allocated into the investments that are inside the plan based on the child's age, so the younger he isn't course right now. Not even a year so you be on the more aggressive and usually be a higher allocation to stocks and that it would get more conservative over time, but again very easy to set up and contribute to and that it would be available for him it would not penalize him if he happen to qualify for financial aid because it would be treated as a parent asset which is factored in a much lower percentage than assets that are considered assets of the student.

Now if he doesn't go to college you be able to transfer it to somebody else polluting an adult who wants to use it for higher education or if you got a scholarship, it could be withdrawn on a pro rata basis based on the award that was received. But if you ended up taking it out for nonqualified expenses meaning for things unrelated to college and college related expenses there would be a penalty and some taxes due on the gains so that would be obviously something to consider. But it's a great way dawn for you to put away the sum of money that he would have available and it would grow like a Roth IRA. So it have for great tax-advantaged investments associated with Adia follow that the perfect okay good.

Here's where you go Don go to saving for and that will allow you to cut a run through scenario, including factoring in whether or not it makes sense for you to fight. Use the 529 plan there in Ohio. As you may get estate tax deduction versus another plan in another state that may have a better investment portfolio and it'll give you a recommendation on which plan to use based on what you're trying to accomplish and where you live, and I think you'll find that very very useful again saving for Don, thank you very much.

We wish you and your grandson the rest of your family all the best, West Palm Beach, Florida. Conchita, thank you very much your final collar of the day if we can make this a little in the brief side okay okay thank you I dollars right now and I want to pay it off as quickly as possible and I'm calling you. Should I refinance and interest of 3.375 or do I want to increase my principal payment only. Yeah, what was the original term on Cucina, 15 years okay and I want to be the payment on it. Seven and refinance a number of times it and start with who I am right now so been paying on it for quite some time.

Okay the current mortgage that you have, how long ago did you refinance I refinance that about two years ago and did you do a new 15 year term. Yes, it was 30. I changed it to 15 when I refinance it I see okay you know I don't think it's going to make sense to me potentially if you go with the new 10 year mortgage. I wouldn't want you to start over with a new 15. The let's say you went with a 10 year mortgage and you could get a rate around 2 1/2%. It may make some sense of the key is working I need to look at the difference between what your new rate is and that 3.375.

You have now, which is a fairly low rate even though they've gone lower and make sure hey that you can afford the 10 year payment in your budget with the 10 year term and that you're going to get enough savings in interest every month that you know within the next couple years you would offset the cost of the refinance and so you can have to really take a hard look at what's the total cost of the refinance. The fees and the expenses.

What are you saving every month in interest and as long as you don't lengthen that term meaning you go with the new 10 year instead of starting over. At 15, then I could get on board with that. Apart from that, I'd say just stick with what you got you got a great rate and just try to send as much as you can toward reducing the principal every month and Conchita will have to let you go here because time is getting the better of us, but thank you so much for your call and for your clarity as you explained all that to us and we trust that will help you as you go forward. Thank you very very much Rob, always a pleasure sure will come back and do it tomorrow starts to think I please don't forget that moneywise. Life is a partnership between Moody radio and moneywise media. If you enjoy the program. Please do us a favor tell a friend. You can also make a donation to support this ministry.

When you visit moneywise just click the donate tab at the top of the page of my thanks to Amy and Aaron and Jim Henry for their technical expertise. Jim considering a writing campaign for president this you think it's a little late doing this tomorrow

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