The Retirement Investing Challenge

There are two kinds of people in this world, those who like low interest rates and those who don't. Put another way, borrowers versus savers. And right now, times are a little tough for savers.

Today's historically low interest rates are tough on folks with fixed return investments. So today, host Rob West talks with Soundwind Investing's Mark Biller about strategies to protect your nest egg from inflation. Then we'll take your calls and questions on anything at 800-525-7000. Jot that down.

800-525-7000. I'm Steve Moore, the Retirement Investing Challenge. That's next right here on MoneyWise Live.

Well, Rob, our friend Mark Biller is the executive editor at SMI, Soundmind 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. That's right.

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. Well, thanks, guys.

It's good to be with you. Hey, obviously, things you do before retiring have the most impact on your saving, 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 really at the core of what we're going to be talking about today.

So fill us in. Yeah, that's right, Rob. You know, the question is, which is of greater concern to you, 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? You know, a lot of retirees historically have been very uncomfortable with the idea of ever dipping into their investment principle. They want to just live off the income of their investments. And that mindset often will limit retirees to savings type investments, CDs, savings accounts, that type of thing. You know, 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 seven and a half percent. 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, you know, 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 a 15, 20, 30 year retirement.

Yeah, it's such a key point. And we'll talk specifically about that portion of the portfolio that might remain in stocks to give us some growth factor, even though we're 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 our listeners there? Yeah, so at the heart of this, you know, is the Federal Reserve's 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 know, 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 banks' savings accounts 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 bankrate.com and also depositaccounts.com as good reference places to look for those higher yields.

Yeah, and that's really key because you want to get those yields up, and that would include not only savings accounts, but of course, CD rates as well, which in this environment you may certainly pass on the long end of the CDs and stay certainly on the shorter end. We'll talk about much more related to this, and again, that stock allocation as well right around the corner. And again, that phone number call now.

Open lines available at 800-525-7000. Money and life run on the same track, but unfortunately, sometimes it seems like your money is heading in a different direction from your goals. In Never Enough, Three Keys to Financial Contentment, author Ron Blue helps you to break down all your financial options to a basic four, and then shows you how to keep it all chugging along in the right direction on the same track. Never Enough, Three Keys to Financial Contentment, available when you click the store button at MoneyWiseLive.org. 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. Some days, life is just so busy. You know the routine. One thing after another. It happens to most of us from time to time.

The last few months have been just like that for me. I believe in hard work, but let's pull up here for a minute. Look at the wonderful world that God's created for us.

My hunch is, He wants us to enjoy it. When I'm just so busy preparing programs, with the work piling up faster than I can do it, sometimes I feel overwhelmed. So I stop.

Everything inside me tells me I don't have time. But I stop anyway. Sometimes I go for a walk in the garden. Other times I'll make a cup of tea and sit down with a cat. I love how God's made these 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.

I'm Bernie Diamond. If the heavy burden of debt is robbing you of freedom and peace of mind, Christian Credit Counsellors can help. We're a nationwide non-profit credit counselling organisation that has helped over 300,000 individuals in the last 27 years get out of credit card debt 80% faster, while honouring that debt in full. To learn how Christian Credit Counsellors can help you, visit christiancreditcounsellors.org.

That's christiancreditcounsellors.org, or call 800-557-1985. It's really great to have you with us today. It's MoneyWise Live with your host, Rob West. I'm Steve Moore, also joining us, and we always look forward to having this guy. It's Mark Biller from soundmindinvesting.org. We're discussing an article in their current newsletter. In fact, we'll 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 newsletter article will be open to all of our MoneyWise listeners.

So it's soundmindinvesting.org. 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. You know, Mark, before we dive back into this, when we talk about this idea of 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 a deep topic in and of itself, Rob. But you know, I think that biblically, rather than looking at retirement as kind of like the coast zone, you know, I've made it past the finish line, and now I can just go kick back somewhere on a beach or a golf course. You know, I think it's appropriate to look at retirement more as maybe a redirecting, a different season. But you know, we're always really from birth, or at least when we become cognizant of the Lord's work in our lives until the end of our days, we're supposed to be looking for how the Lord wants to use us. So maybe a redirecting, a slowing down, maybe a change of focus, but certainly not a, you know, I'm over and I'm out to pasture at this point. That's not the right approach. That's exactly right.

I couldn't agree more. You know, it's that season where you have the most wisdom, the most experience to offer in service to the Lord. So perhaps we're thinking about retiring to something and not from something.

But clearly your financial resources, God's resources are a part of the equation. So how do 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 in? 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 something called a ladder. Give us your perspective on how we should think about this portion of our portfolios.

Yeah. So a CD savings ladder, 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 a long periods of time. So a lot of times they'll shy away from CDs of longer terms because they want to have access to their money sooner. The idea of the ladder is to stagger different CDs of different maturities so that you have regular access to the principal, but eventually you can set this up so you're earning the longer CD rates which yield more. So an example of how you would do this is you might start out by buying CDs of say six months, 12 months, 18 months, 24 months.

And by doing that, every six months, you're getting access to 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'd take that six month CD money when it matures and you'd reinvest that in say a new 24 month CD at the end of the ladder. So your next CD is always just six months away, but eventually they're all two year, three year, four year, the longer term CD rates. Now, as you mentioned right before the break, Rob, 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. Yeah, makes a lot of sense.

All right, Mark. So if we 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 costs 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's yielding 3%. The other is $100,000 combination stock and bond portfolio that's only yielding 2%. Now, at a glance, that 3% bond yield might seem better because it's going to give you $3,000 a year of income, whereas that combo portfolio is only going to give you $2,000 of income.

The key here is you need to look beyond that current income, because that's only part of the picture. Historically, stocks have tended to provide higher total returns 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, say, maybe 5% per year, now that combination portfolio is giving you the $2,000 of yield of income, plus it's growing another $5,000 in capital gains. Now, that's a total return of $7,000, which is considerably more than the $3,000 of income that the bond portfolio is giving us. And 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. If that $2,000 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, of course, there's no such thing as a free lunch. So the downside is there are going to be years when the stocks in that combined 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 periods, five years, ten years, and so on, stocks are going to outperform bonds. Now, there's a great table in the article that kind of shows everything I just said. I know it's hard to listen to all these numbers, but this table lays this out in black and white. So if this is something listeners are interested in, I really encourage them to look at that in the article online. That's good. And we'll come back with some more information in that regard. First, let's get to Carleen. She's calling from Richmond, Minnesota.

And what's your question? What's your situation there, Carleen? My question is, I just explained to somebody, my husband's 81. I'm 73.

He's retired, slightly handicapped. I'm still working full-time. We have savings of about $32,000 at our credit union. We have an emergency fund of $7,000. We do not have any debt as far as cars, credit cards, anything like that. We do owe $27,000 on our retirement home that we live in. And I want to take my savings and pay that off, but that would leave me with an emergency fund of $7,000. My husband draws a retirement fund and Social Security. I work full-time, draw Social Security, but I don't touch my retirement fund, which is only about maybe $25,000, maybe. Okay. And how long do you plan to continue working, Carleen?

Well, forever. I only drive four miles to work. I only work Monday through Friday. I work an office job. I like what I do.

I don't want to sit home like my husband does. 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, and 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?

I think it would require a little bit, maybe not. We don't honestly live on a budget. We just pay our bills as they come due and we're done. And we have money left over and we do our tithing first.

And I think that's why God has been good to us, because that's always been a priority. And are you continuing to save out of your income for retirement? Yes. Yes. Well, nothing goes into my retirement fund because that was my job when I worked at the college. And so I don't put any more into that. But I do put $200 every paycheck away from what I make. Yeah. Okay.

Well, I think here's the bottom line. I love the fact that you have this emergency savings. I would like for you to 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's 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've got a good feel for what is that gap if there is one between what you could generate from all income sources, Social Security, your retirement, his retirement, 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 going 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 three to six months expenses, then take the rest of it and try to pay that house off. Carlene, we appreciate that phone call. Thank you very much. 800-525-7000. The article we're discussing with Mark Biller, The Retirement Investing Challenge.

You'll find it when you visit them online, soundmindinvesting.org. We'll be right back. Do you know if you have enough? Enough money? Enough house?

Do you know how much is enough? If not, Ron Blue can help with his book, Master Your Money, a step-by-step plan for experiencing financial contentment. Learn how to save, invest, and give wisely, how to create a long-term financial plan, and how to get out of debt.

You'll find it all in Master Your Money by Ron Blue, available when you click the Store button at MoneyWiseLive.org. People's 412 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. One of the biggest miracles he'll ever do is cause us to be able to love somebody that we know in our natural man, that we've almost come to a place that we despise. Does anybody understand what I'm saying to you?

That last bullet point is this. Love gets easier when we realize that your actions can often prompt emotions. In other words, now remember, now back in Romans 12, 9 says, Love must be sincere. So don't misunderstand me. This doesn't mean that we act out of insincerity. And we're like, I don't know. Listen, if we walk in the Spirit, God will check us so fast that we'll hardly know what hit us.

We'll know when we're being insincere. This is a sincere desire to act out love, not as a pretense, not as an actor, but as a demonstration of God's own desire for you. Let me remind you of a couple of scriptures before I do. 1 John 3.18, you can jot down that address. 1 John 3.18 says that we are not to love in word alone, but indeed. In other words, in action, to love with action. Don't just say we love so and so. We don't show them that we love them. Oh, just talk a big talk.

Demonstrate it. The other one I was reminded of, Revelation 2, 4 and 5. Revelation 2, 4 and 5. You remember what He says? But I have this one thing against you. You have left your first love. You've forsaken your first love. And He says, Return to the first things.

Return to the first works. You've been listening to Beth Moore with today's quick word. We have two ways to experience now that faith has come, a study of Galatians. The online experience is now available at Beth Moore.org.

The workbook edition will release in January 2021. Either way, Beth would love to have you in Bible study. See you next time for another quick word with Beth Moore. The financial wealth you leave behind could be the best thing that ever happened to your loved ones, or the worst. In Splitting Heirs, giving your money and things to your children without ruining their lives, Ron Blue explains why it's important to make these decisions now instead of forcing your heirs to do it later.

Splitting Heirs will foster a real appreciation for the precious resources that God has entrusted to you. And it's available when you click the store button at MoneyWiseLive.org. You're listening to MoneyWise Live. Our guest today on the program is Mark Biller from SoundMindInvesting.org. They put out a fantastic biblically-based newsletter each month, not to mention the Sound Mind Investing Handbook that we've been high on, and we've given away thousands of them over the years. You might want to avail yourself of that. You'll find all the resources when you visit SoundMindInvesting.org. Now, if you have an investing question that you'd like to pose to Mark, and we'd like to put him to work for the money we're paying this guy to appear today, we want to put him to work, so you can help us do that.

No, he's doing this for free. 800-525-7000, Ron. Well, Mark, there's something called the Rule of 100.

I know you're well familiar with it. We've talked about it here on the program as kind of a rule of thumb that many advisors use 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 were 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's the percentage of your portfolio that should be in stocks. And, you know, over the last four decades or so, that's worked 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. You know, 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 of safer fixed income and savings vehicles and kind of force them out the risk curve and to risk your investments. And that, you know, this whole topic that we're talking about today is really so important and 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 so it's going to 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 focus on the available options through articles like the one that we're discussing today.

Well, I've heard some suggest that that new number is not 100, but 110, which basically means instead of 70 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 you know, rules of thumb, they're useful as general guideposts. Of course, we're always going to suggest that people try to dig in a little bit more to their specific situation. You know, the thing that people have not really wrestled through is, you know, we've been dealing with lower and lower yields now for some time. But 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 of thumb kind of for a loop because we've had 40 years of one direction.

And we're kind of looking like we're towards the end of that pendulum swing and eventually things could swing back the other way. Well, 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 we're in and what we see coming on the horizon. This article is a great step in that direction. So go check it out at soundmindinvesting.org. And just keep in mind, God is our provider, not our investments. So that's where our trust should be. Thanks for stopping by, my friend. Always a pleasure, Rod.

Thanks. 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.

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Go to mymoodyradio.org, mymoodyradio.org. Do you know if you have enough? Enough money? Enough house?

Do you know how much is enough? If not, Ron Blue can help with his book, Master Your Money, a step-by-step plan for experiencing financial contentment. Learn how to save, invest, and give wisely, how to create a long-term financial plan, and how to get out of debt.

You'll find it all in Master Your Money by Ron Blue, available when you click the store button at moneywiselive.org. With SRN News, I'm Bob Agnew in Washington. President Trump in Prescott, Arizona, for a Make America Great Again rally, the first of two for him today. Upon his arrival on the tarmac, he addressed reporters' questions, including about his disagreements with Dr. Anthony Fauci. He also said stimulus talks are ongoing with House leadership. The president has a second rally scheduled for later this evening in Tucson. And the Democrats' vice president's candidate, Kamala Harris, back on the campaign trail for the first time after a brief absence when people connected with her campaign tested positive for the virus. A Democratic ticket is largely forgoing traditional campaign rallies because of the risk of spreading the coronavirus. At the campaign event, Harris says that 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 SRN News. It's MoneyWise Live, taking your questions and providing biblical answers to the financial challenges you might be facing.

So anything financial, maybe it's buying a car, trading in a car, paying off your house, going to college without, yes, excuse me, without incurring too much student loan debt, anything along those lines, or perhaps you're having throat issues as well. Let's talk medicine, 800-525-7000, 800-525-7000. Always a pleasure to have Mark Biller with us from Soundmind Investing. He, you know, he comes with a wealth of information and knowledge and research and kind of lays it out there in a way that anyone can understand it, right? Well, that's right. And oftentimes, 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. All right.

Delaware Beach, Florida. Hi, Mary. Thanks for your patience. Oh, you're very welcome. I appreciate your ministry.

It's helped me a lot. I was one that listened to you and saved money for an emergency. So during this COVID, I had money to do my budget.

Praise the Lord. Anyways, my question is, I'm in the process of retiring. I have a small retirement. The doctor says I'm going to live a long time. I'm in good health. When I was younger, I had a life insurance that invested money. Now, I don't know if they'll take me or not, because of my age.

I'm 75. But if they would, would that be a good way of investing? You know, Mary, what do you have accumulated that you would be looking to put into this insurance contract? I don't know if I want to put in much. Well, the bank was saying, well, maybe I could do 500 and something, you know. But I wasn't going to do the whole bit. But let me just make sure I'm clear.

What did you say your investable assets are? You want me to tell you the whole thing? Well, just roughly. If you're uncomfortable with that, that's fine.

I can talk generally. Let me just talk specifically about insurance contracts. The amount really doesn't matter. You know, if you have a nest egg that you've accumulated over a long period of time, you have a couple of options with that. Number one, you could hire and I would recommend 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's 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 a large return, of course. But then taking all of that information and building a portfolio of investments. Now, they don't have to be high risk. In fact, you know, you would have a just as we talked about in the previous segment, a smaller allocation to any kind of stock exposure that would give it more of a growth component and 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 need it for a 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'd have other a 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 a variable insurance contract, you'll have some mix of stocks and some percentage of the upside available to you. 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 going to 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 said to me, Rob, I just don't want to assume any risk. I'd 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 that you connect with somebody in your area that has the Certified Kingdom Advisor designation. And Mary, you could do that on our website at MoneyWiseLive.org. 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 as specialists in biblically wise financial advice. Does that make sense though?

To some extent. When I was in stocks, I had what you suggested because of my age, stocks that were very safe, that didn't make a lot of money. So I wasn't affected during 2008 and 2009 when everybody was affected with their stocks. And so, you know, and I'm not, you should do something different now. Why not stay with that approach?

With my money. So I wouldn't want to adventure out, like you said, into higher stocks. And I controlled my own, I controlled my own stocks in that I would call and say, well, I want this more conservative, this not quite as conservative and like that.

I didn't have some somebody I was paying for it to do that. Yeah. OK, well, it sounds like you did quite well at that. And so, again, I know very little just hearing bits and pieces of what's happening in your life.

And it sounds like you were quite successful. So I would say you could continue with that approach, staying on the more conservative end, but perhaps introducing a larger allocation toward fixed income. Or you could bring a professional in to help you do that with a more hands on approach. Or then the third option is what you've mentioned with an insurance contract, where 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. And all I'm saying is I think that 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 with somebody from our website. And we appreciate your call today.

We'll pray that the Lord will give you some wisdom here as you make these decisions. We do indeed. Mary, God bless you. Thank you very, very much. And hey, this reminder, if you haven't visited our website, you might want to check that out. It's MoneyWiseLive.org. There you'll find lots of up-to-date information about who we are, what we're doing, radio archives of past programs, budget templates, free resources, how to find a certified Kingdom advisor in your local area, how to connect with a budget coach at no charge, and much, much more. Now, when we come back, we'll speak with Joe in Lakanto, Florida. He wants to know what investment options are biblical. Dawn's on hold wanting to help their six-month-old grandson get through college. I think he's got a little bit of time there. We'll see if we can help Joe and Dawn and you, 800-525-7000.

And we'll be right back. 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.

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The Treasure Principle is available when you click the Store button at MoneyWiseLive.org. Happy you're with us today and really happy that Joe in Lakanto, Florida is with us. Joe, you received the award for a man of great patience. We tried to get you on Friday. That didn't work, but we've got you today.

How can we help? What's the question? Hello Joe. Hi.

Oh, hey, Joe. I wasn't sure, yeah. I wasn't sure that you were talking to me. Thanks for making my call. We're glad.

Thank you. My question is this. Is option trading biblical or not?

Option trading. Is that biblical? Is that your question, Joe? Yes.

Yeah, yeah. You know, when it comes to investing, you know, I would say at its core, that's a biblical concept. We see the parable of the talent, that we're responsible for what God entrusts to us. We're the manager, and we should seek a return on what God has entrust 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 we're 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 throw it out?

I wouldn't say that. I would just say when you're managing God's money, it causes you to kind of 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 to kind of 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 than the average investor would have time for. And that's why we would generally recommend more of a broadly diversified portfolio where you can just buy and hold.

You might update your allocations every quarter or every six months based on your life situation, your age and 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 other level of responsibility and 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 you. Yes. Yes. I mean, I'm not going to allocate all my money to options trading. You know, most of my money would be managed by money managers, but only a small portion.

Yeah. OK. 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 or some form of gambling where we really don't understand what we're doing, but we're going to 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 spent the time to understand what it is we're doing, because, again, it's God's money and we're 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. Yeah. Rob, can you explain just briefly what options and option trading is all about?

Sure. You know, I think the key here, Steve, in terms of what we're talking about is 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 it depends on whether you have a call or a put. A call gives you the right to buy a stock. A put gives you the right to sell it. And you're basically entering into this contract believing you would be able to buy or sell at this various price, depending upon whether you have the call or the put. But again, it gets very complicated very quickly.

But essentially, it can 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. All right. Well, thank you for that. And speaking of calls, let's take one.

Dawn in Southington, Ohio, we appreciate you hanging on there. You have a six month old grandson who declines to work. So you're wanting to know how you can get him into college at least, huh?

Yes, we got to start early, right? All right. And is that specifically how to best save for college for this young man? Well, how to invest for him.

What is the best thing that we can use our monies for to invest for him without us being penalized for tax? Sure. Yeah. Dawn, are you willing to say that this money is specifically earmarked for college or do you want it more broadly available for your grandson? He will be encouraged to go. And that's the other portion that was on our minds was if we set this up for college or trade school and then he doesn't attend, you 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, you know, a graduate degree or something like that, you know, I love the 529 plan.

Very easy to set up. You can put in up to fifteen thousand a year. You may want to do a lot less than that, but you'd have that option. You can allow that to grow essentially as high as it can go up to, you know, two hundred fifty to three hundred thousand dollars typically. And it's very low maintenance in the sense that once you pick the 529 plan, which would be attached to a particular state, then you would like a 401K just allocated into the investments that are inside the plan based on the child's age. So the younger he is and of course right now, not even a year.

So you'd be on the more aggressive end. You know, it'd be a higher allocation of stocks and then it would get more conservative over time. But again, very easy to set up and contribute to and then it would be available for him. It would not penalize him if he happened to qualify for financial aid because it would be treated as a parent asset, which is factored in at a much lower percentage than assets that are considered assets of the student. Now, if he doesn't go to college, you'd be able to transfer it to somebody else, including an adult who wants to use it for higher education. Or if he 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 non qualified 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, Don for you to put away a sum of money that he would have available. And it would grow like a Roth IRA.

So it'd have great tax advantaged investments associated with it. Do you follow all that though? Oh, yes, I do. Perfect. That sounds great.

Good. Here's where you go, Don, go to saving for college.com. And that will allow you to kind of run through a scenario, including factoring in whether or not it makes sense for you to use the 529 plan there in Ohio, because you may get a state 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 college.com. 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. You're a final caller of the day.

If we can make this a little on the brief side. Okay. Okay. I will try to do that.

Thank you. I have a mortgage of $78,000 right now and I want to pay it off as quickly as possible. So my question that I'm calling to ask you, should I refinance?

I have an interest of 3.375 or do I want to increase my principal payments only? Yeah. What is the, what was the original term on it?

Conchita and how much is left? The original term was 15 years. Okay. And how long have you been paying on it? I've been paying on it for 17, but it has been refinanced a number of times.

I didn't start with where I am right now. So I've been paying on it for quite some time. Okay. The current mortgage that you have, how long ago did you refinance that? I refinanced that about two years ago. All right. And did you do a new 15 year term? Yes. I, originally it was 30. I changed it to 15 when I refinanced it. I see. Okay.

You know, I don't think it's going to make sense. I mean, potentially if you go with a new 10 year mortgage, I wouldn't want you to start over with a new 15, but let's say you went with a 10 year mortgage and you could get a rate around two and a half percent, it may make some sense. The key is we're going to 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 A, 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 and interest every month that, you know, within the next couple of years you would offset the cost of the refinance. And so you're going to 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 a 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've got. You've got a great rate and just try to send as much as you can toward reducing the principal every month. And Conchita, we're going to 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'll help you as you go forward. Thank you very, very much. Rob, always a pleasure, sir. We'll come back and do it tomorrow. Okay. All right, Steve, thanks.

All right. Please don't forget that MoneyWise Live 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 MoneyWiseLive.org. Just click the donate tab at the top of the page. My thanks to Amy, Dan, Aaron, and Jim Henry for their technical expertise. Jim, considering a writing campaign for president this year, we think it's a little late. Join us tomorrow.