CD Alternatives

Hey, did you hear the one about the guy who took all of his money out of the bank and put it into a boomerang business? Well, it turns out he wasn't getting a very good return on his savings.

That's actually true for most of us, not the boomerang part, but the rest of it, especially in the case of CDs, where your money's tied up for several years. Today's host, Rob West, has a few ideas to improve your return. Then it's your calls on anything at 800-525-7000. Anything financial, that is.

800-525-7000. I'm Steve Moore. CD alternatives next on MoneyWise Live. Okay, Rob, for years, certificates of deposit, or CDs, have been the go-to place to park your money with very little or no risk, but lots of folks aren't happy with today's low interest rates on their CDs.

Well, that's certainly true, Steve, and we hear from them more and more. One of the main reasons is the Federal Reserve's actions to cope with the coronavirus pandemic, keeping interest rates historically low. With a CD, you agree with a bank or credit union to keep your money deposited for a set amount of time, anywhere from six months to maybe even five years. And for doing that, you get a fixed rate of return. Now, naturally, the longer the term, the higher the interest rate. Right now, the best you'll do on a five-year CD is around one and a half percent, and that's a long time to keep your money tied up.

It sure is. But we want to talk about some alternatives to doing that, tying up your money in a CD. So where can we start today? Yeah, let's think of these as alternative actions that you want to make sure you're taking before you consider putting your money into CDs. So the first thing you want to make sure you're doing is have your three to six month emergency fund in place. And you want to do that not at a brick and mortar bank and certainly not in CDs, but with a higher yield account at an online bank.

We mentioned these often. My three favorite currently are Ally, Marcus and Capital One 360. True, their interest rates are variable and will fluctuate over time, but right now you can get yields comparable to and in some cases even better than you'll get with a multi-year CD. And while it's true that rates at online banks have also been dropping, you at least have the potential to earn more because you're not locked into a fixed rate for the entire length of the CD. Also, your money is not tied up for a set number of years.

You can get in, in a hurry if you have an emergency and access your funds. Alright, so I don't work with a brick and mortar bank, not the guys on, you know, Don, I'm on the corner of the block in my neighborhood. I contact an online bank, but if I'm not asking to put my money in a CD with them, what am I asking for? Well, in terms of what you're looking for with an online bank, you would be asking for a savings account that's going to allow you to put that money to work for you with a higher rate of return. Okay, so just a savings account. Alright, and is my money perfectly safe with an online bank? Oh, absolutely. It's backed by the full faith and credit of the United States government and is FDIC insured just like the brick and mortar banks.

Okay. Alright, well what's our next alternative action before investing in a CD? Well, this next one is always true, but especially now with low interest rates on savings, one area where interest rates have remained high is what you have to pay on credit card debt. It'll wipe out any CD savings 15 or 20 times over, so you'll have to pay off all credit card debt as quickly as possible once you have your emergency fund in place. If you don't have the three to six months living expenses saved up, again, in a high yield online account, divide your discretionary income in half, put half into savings, use the other half to pay down your credit card debt that's above your minimum payments. And this is where you get a huge bang for the buck. You see, if you're paying 18% interest on a credit card, paying it off gives you the equivalent of an 18% return on your money. This strategy is especially important, Steve, these days where there's less job security than usual. The last thing you want is to lose income and have no savings, but still be stuck with credit card debt to repay. Okay, yeah, that's good.

All right. What's our last alternative to CDs? Well, it's understandable why CDs have traditionally been attractive to folks who fear losing their money. Your principal and interest rate are guaranteed. But what you have to understand is there's still risk involved. That's where there's the risk of losing buying power to inflation and not having enough income when you retire. Frankly, the only way to avoid that is by investing for the future in a 401k or IRA with some of your portfolio invested in stocks or mutual funds. Obviously, you want to have a long-term investment horizon of at least five years, 10 is better. But even if you're closer to retirement, you still have a need to have some of your money in the market or inflation will eat up the lower returns you get with CDs.

Okay, great alternative strategies to saving with CDs, and we'll be right back. Buying a home is the largest, most nerve-wracking purchase most of us ever make. It doesn't help that you're entering a maze of unfamiliar words and confusing options that can leave you intimidated, frustrated, and afraid you've been taken advantage of. Navigating the Mortgage Maze by Dale Vermilion helps you clear up the confusion, unrack your nerves, and make the best mortgage decisions possible with confidence. Navigating the Mortgage Maze, available when you click the store button at MoneyWiseLive.org. If you're investing for retirement or any other goal, you may be wondering if it's possible to enjoy both profit and peace of mind no matter what's happening in the market. SoundMind Investing has a short video webinar on that topic at SoundMindInvesting.org. SMI has helped tens of thousands of Christians learn to be wise and faithful stewards in the area of investing.

Profit and peace of mind no matter what's happening in the market at SoundMindInvesting.org. Late one night, Dwight L. Moody was settled in bed when it occurred to him that he had not spoken to a single soul about accepting Christ that day. That's no good getting up now, he said to himself.

No one will be on the street at this hour of the night. Even so, he decided to get up and as he looked out the door saw that it was pouring rain. He looked at the empty streets and thought, nah, no one will be walking around in this weather. Just then, he heard the footsteps of a man as he came down the street holding an umbrella over his head. Mr. Moody darted out the door, rushed up to the man and asked, may I share the shelter of your umbrella?

Well, certainly, the man replied. And Mr. Moody went on to tell this man about Jesus. You know, it's so easy to shrug off an opportunity to tell people about Jesus, but one of the things that 2 Timothy 4 and 5 tells us is that we should all be doing the work of an evangelist.

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That guy there, he's Rob West. I'm Steve Moore, and we'd love to chat with you today if you have a question or a comment about anything financial. Maybe it is about CDs, which is what we've been talking about here for just a couple of minutes.

Well, give us a call, 800-525-7000. Rob, one last question about CDs. You know, we were talking about being able to only buy a five-year CD these days at barely one and a half percent.

Who would do that? But, you know, given all the craziness of 2020, do we know where we're headed in the next five years? I mean, is there a chance that maybe things, maybe CDs will start moving back up to normal rates sometime in the next three or four years? Yeah, well, certainly as the economy improves, I think we'll see higher rates down the road.

Although the Fed has said clearly and Fed Chairman Powell has been very outspoken in saying they're not even thinking about, thinking about raising interest rates at this point. So I think we're going to be in this low interest rate environment for quite some time. But obviously the prospect for higher rates is real. And in the coming years, I think we could see rates higher, especially as if we were to see some inflation begin to creep in. So that'll be something the Fed will monitor. At that point, it may make sense to go back into CDs. I think the key right now is in this very low interest rate environment, you don't want to be locking your money up for three, four or five years.

Because if rates head higher, you want to be able to take advantage of those. Yeah. And even though we continue to focus on the newscasts every night at 6pm in the White House and elections and COVID and all the rest in reality, these kinds of things have been with us forever. You know, maybe not those specific areas. But what about 1928 and 29 in the Great Depression? What about World War One?

What about World War Two? I mean, ups and downs have always been with us and we should just plan on that. Some of them may take on a unique identity, but nonetheless, ups and downs. And that's why we say for the short term, we also say for the long term and put our trust in God for the rest.

That's exactly right. You know, economic uncertainty is certain. And if you go back historically, Steve, and look at literally every decade, every 10 year period, the 2000s, the 90s, the 80s, the 70s, you know, they all have their crisis financially speaking and economically speaking.

You know, any number of things happen. But what we always know is that when we take the long view, we follow God's principles, we live within our means, we live with contentment, we give generously. And we're living on a spending plan with prayerful goals. And we have the right time horizon with that long term perspective. We're going to do well. We'll at least put ourselves in a position to experience God's best. And I think that includes our investments.

But the only way we can do that is if we keep our lifestyle in check. Okay. Well, we have, here's the good news. We have four lines all busy and blinking at us right now. But the bad news is we have 10 lines available. So there's plenty of space for you and your phone call today. Get in right now by calling 800-525-7000.

Philadelphia, Pennsylvania. Hello, Brian. Thanks for your patience, sir. And what's your question? Hello.

You're welcome. Well, on behalf of my wife, and she has a hair salon that the rent is, or the lease is up at the end of the year. And we've been looking at a building to buy a building. So she wants to transition into that building. And so there's a lot of details in buying that building. And I wonder, I'm trying to wanting to get advice on that.

Yeah. Well, I'll tell you, you know, this is a great idea, Brian, as long as the finances of the building, excuse me, of the business can support it. You know, buying a building is a great way to build equity in the business.

But the key is you just have to be prepared. So, you know, just like with your personal finances, you got to draw up an estimated budget if she hasn't already, hopefully showing that the payment on that with any borrowing that occurs to acquire that building will be equal to or less than the rent if it's more, obviously still well within your ability to pay it. You've got to factor in the maintenance which will be a factor that probably wasn't in the prior situation because you'll no longer be able to call the landlord if something needs to be repaired. You probably need to have a commensurate additional amount of emergency reserves available for the unexpected now that you own this building. And obviously, just like with your personal finances, you want to make the largest down payment the building can support, excuse me, the business can support without depleting it of really necessary reserves.

But I think the key here is that this can be a great opportunity for you. You obviously want to get multiple quotes from lenders, not just the first one that you're offered. And obviously, the business loans are slightly different than personal loans. But I think at the end of the day, this could be a great move for the business as long as it doesn't leave you cash strapped and doesn't push you outside the bounds of what is feasible in terms of the cash flow of the business itself.

Brian, the notes I'm looking at here say that the building is $500,000 and you're going to need $100,000 down. Do you have any of that $100,000 at this point? Well, there are others. We have a portion of that but I know you're not a fan of the taken out of the retirement. But that's what we are planning on doing. But the other details to the building would be there's a rental space that's already ready to be moved into and it's separate from the work area.

So that can help with our paying for the building. But to answer your question, it would come from retirement and money that we have saved about $25,000. Yeah.

Well, yeah, I'm not a big fan of that. Would you be borrowing it from retirement or would you just be taking a withdrawal? Taking a withdrawal. Yeah, yeah.

And what is your age? It's 49. Okay. So you're going to have a penalty on top of this being taxable. So the reason I'm not a big fan of this approach is it becomes fairly expensive money to access because of the penalty, because of the tax burden that you'll add. And in the case of $100,000 down payment, if you're pulling $75,000 out, that's going to be added to your taxable income plus a $7,500 penalty likely in that scenario. And so I think what I'd rather see you do is continue to save perhaps, delay this purchase until down the road. The other issue is this money is no longer working for you.

Now, obviously, the building has the ability to appreciate but is it going to appreciate as much as a diversified stock and bond portfolio, especially in a tax deferred environment like a retirement account. So all things to consider. You may want to get some outside counsel from either a financial planner or perhaps your tax or accounting professional that you work with just to make sure you've thought through all the angles before you proceed with this. Brian, we're going to have to leave you there because we have to hit a break. But we trust that this will work out for you and your wife. Thanks very, very much. If you're just tuning in, this is MoneyWise Live. Rob West is here taking your calls and questions and comments on anything financial today. Now's a great time to call. Open lines available at 800-525-7000. When we come back, we'll say hello to Bostwick, Renee, and Rod, and perhaps you as well.

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Why? He never wanted Joshua to forget because he already knew. He already had his eyes on Joshua. He knew Joshua was going to be the one coming up in behind Moses. So he's already given him all this experience because Joshua is going to lead the conquest into Canaan. And so he's saying to him, you never let him forget who brings the victory. Never let him forget what happened here today.

Never let him forget all the elements that work together so that that army could be victorious. Then go further with me as we're told then in verse 15, he says, and I will completely blot out the memory of Amalek from under heaven. And then verse 15 is the introduction of the name that we're studying today.

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See you next time for another quick word with Beth Moore. 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. Hey, if you'd like to check us out online, that's pretty easy to do. It's MoneyWiseLive.org, MoneyWiseLive.org. And there you'll find a number of free resources. You'll find our store where there are some resources you can purchase, past radio programs, radio archives, an easy way to find a certified kingdom advisor in your area in a number of different disciplines, and also how to connect with a budget coach. All of that and more when you visit MoneyWiseLive.org.

Let's see, Whiting, Indiana. Hello, Debra. How can we help you? Yes, sir. Thank you so much for taking my call. I absolutely love your ministry that you guys have.

You do so much for people. I have a question concerning life insurance. I have life insurance. And so one day I approached my husband and I asked him if he had enough and he goes, I don't have any. And I was joking. So I asked him again. He said, no, I'm not worried about it. That falls on your shoulders.

I didn't. Yeah, I was really upset about that. What are my options? Because I tried speaking to him about it and it's a very uncomfortable situation that he doesn't like to talk about it.

So what are my options that I have? Yeah. Let me ask, Debra, when you think through kind of the conversation that you had, what do you feel like the perhaps the issue is? Is it that he just doesn't want to talk about his own mortality?

Is it that he doesn't want to think about adding something else into the budget? I mean, do you feel like you have a sense of where the pushback is coming from? I think it's a combination of both.

I think it's a combination of both. But yeah, I told him this was a really serious subject and he doesn't want to discuss it. So what are my options that I have? Because I told him, I said, this is something we need to talk about and he doesn't want to go that route. Yeah, I get that. Do you all handle your finances separately or is everything combined and kind of managed on a family joint basis? Well, we manage them separately because that's the way he, you know, we were married. He said he wanted to do it because he's been, he's old school.

He's like, he's 12 years older than I am. So he's a lot more set in his ways. So that's the way he would like to do it.

So yeah, that's what he does that way. Well, I mean, obviously the larger issue here, you know, money is symptomatic of heart level issues. It really reveals where we place our trust. It reveals what we value. You know, as we spend God's money, it is a pretty clear indicator.

Larry Burkett used to say the clearest indicator into what's going on in our lives spiritually. And so the bigger issue here, and we'll get to this specific question in just a moment, is that God wants oneness in your marriage. The idea of two becoming one includes your finances. And so the best case scenario would be the two of you coming together and really seeing this as God's money for you as a couple, one flesh, and then really playing, praying through where God is taking you as a couple and how these resources are a tool to accomplish God's purposes and really, you know, allowing this to bring you even closer together. I realize, you know, that may not happen anytime soon and certainly not apart from God's intervention there. And so we can certainly be praying to that end.

I think with this specific issue, though, in the current environment where everything's separate, although not ideal, it's the reality of the current situation. One way to approach this would be to go to him and say, listen, you know, this is critical for me because right now, until we get to a point in the future where we have enough assets build up that if something were to happen to me, you're provided for and something were to happen to you, I'm provided for because we've saved and we have retirement assets and Social Security and so forth. Until that point, I have a real challenge if the Lord were to take you home because the loss of your income would have a real detrimental impact on me during our working and savings years. And so it's really essential for me in my well-being to know that I have that risk offset and that that financial hardship that would be created by the loss of your income has been accommodated through life insurance.

Term life insurance, Deborah, would be the most effective and cost effective way to do this because you're buying pure insurance. You could get the amount that you need, which as a rule of thumb would probably be 10 to 12 times his income that you're counting on. And you could do it at a reasonable cost. And what you could say was, you know, I'm willing to include that in my expenses. You would be the owner of the policy. It would be on his life and you would be the beneficiary. He'd have to go along with it because he'd have to go through medical underwriting and so forth. But it would be a policy that you own, you paid for. And again, attached to his life where you're the beneficiary and receiving the death benefit.

So apart from him being willing to do it and going through the the medical underwriting, you could take care of it and cover the cost on a monthly basis or quarterly moving forward. Does that make sense? Yes, it does. I appreciate that so much. I really do because I felt kind of like a stalemate and I didn't know what else to do.

My other options were what else to do. So I appreciate that so much. That's very informative. I really do. Okay, Deborah, God bless you. And we'll certainly ask our MoneyWise Live community to be praying for you as you have that conversation. You know, Rob, it is possible that maybe her husband just doesn't see this as a necessity and maybe it's something that only rich people do or he doesn't want to give up control of his money to an entity he's not familiar with. So maybe a third party, even if it's a life insurance salesman or a financial planner, maybe a third party could help in a situation like this if he wouldn't feel put upon.

Does that make sense? Oh, absolutely, Steve. I think that's a great idea because oftentimes, you know, it's one person's perspective versus another and having an outside kind of quote unquote expert who can weigh in on this and, you know, bring that additional thinking to the table could perhaps break through any reservations he might be having about why this is necessary.

So I think, yeah, involving a third party, if he's willing, would be a great idea. OK, let's see. Let's check our emails today, Rob.

I think we yeah, we have one from Debbie. She writes, Dear Rob and Steve, I'm 62 years old and will retire at 67. I have two retirement accounts with around twenty five thousand dollars in each. My son is my beneficiary. Do I need a separate life insurance policy for him?

I have one now that's whole life. If I cancel it out, I'll receive enough to pay off my last credit card and then be debt free. Should I do this? Yeah, I think the question would be, what is the purpose of the insurance? You know, if you were seeing this as an inheritance that you could pass along to your son, you know, perhaps, you know, that's something to consider. I think the issue here, though, is, you know, there are better ways to go about that.

And if, in fact, you could take this policy that's frankly not necessary because something happened to you wouldn't create a hardship necessarily for an adult son and you could pull the cash value out to take care of all your debts, then you'd have more margin to build savings and assets over time, which could ultimately be passed on to him without you incurring this large expense along the way. OK. Debbie, we're glad that you sent in that email. We trust you were out there to hear Rob's answer.

Thanks very much. If you'd like to send Rob a brief email, here's the address. Questions at MoneyWise.org. Questions at MoneyWise.org.

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

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You'll find it all in Master Your Money by Ron Blue, available when you click the store button at Monday. With SRN News, I'm John Scott. Federal health officials have reached an agreement with pharmacies across the U.S. to distribute free coronavirus vaccines after they're approved and become available to the public. The goal eventually is to make them readily available like the flu shot. California reaching an unwelcome coronavirus milestone, its one million confirmed vaccine. The nation's most populous state will be the second to pass that mark that Texas reached earlier this week.

The U.S. is now more than 10 million confirmed cases. A new report from Southwest Airlines indicates that the rise in COVID-19 cases around the country is cutting into travel bookings. Bad news for the airlines just before the important Thanksgiving holiday. Stocks ending lower on Wall Street today. The Dow dropped 317 points. The Nasdaq was off 76, and the S&P 500 down 35.

This is SRN News. Hey, here's a verse that applies to a number of different areas in our lives. All things are lawful to me, but not all things are profitable. That's 1 Corinthians 6-12. And yes, I can see how that would apply to my money, my finances, also my job, my relationships.

Again, all things are lawful to me, but not all things are profitable. God, what is your will for me? Okay, let's go to Grand Rapids, Michigan. Josiah, what's your situation?

Hey, good to talk to you guys again. Thanks. I just had a question, kind of following up on my question for Tuesday, which was kind of specifically about how to get out on my own. So I have, like I mentioned, 17,000 saved, but I don't really know what steps to take.

I took Dave Ramsey's class. I would like to set aside some, three months maybe for an emergency fund. But I'm looking at the possibility of renting versus buying. Right now, I can't find any places at any kind of decent rate to rent.

I mean, the lowest is 700 a month. I was wondering, is it ever wise to buy a home and mortgage if you don't think you're going to stay there long term, if it's a cheaper per month rate? Yeah, Josiah, a couple of thoughts there. And first of all, I appreciate your thoughtfulness just in terms of being well planned and really considering what God might have for you in this exciting season of life as you're getting started. I'm thrilled to hear you've got some savings, you're thinking about home ownership. These are all good things.

I think there's really two things that come to mind. Number one is I don't want you to incur major liability until you're ready. Yes, you are kind of quote unquote throwing money away when you're renting, although you're getting something pretty significant in return each month, that is the ability to have a roof over your head. But at the same time, going into a home and taking on the added expense of keeping up with the maintenance and obviously the property taxes and just all the unexpected that come along with home ownership before you're ready can be problematic. And I think by, you know, an evidence of when you're ready to do that would be a that you have a 20% down payment, which I realize can take some time to accumulate.

But I think it's an important sign that you've been able to put some money aside and you've got the rest of your financial life in order, which allows you to do that. And then secondly, keeps you out of a position where the home perhaps may lose value for a period of time and and you might be upside down in terms of equity. I think the other issue as you're considering this is just to look at, you know, the cost of the transaction. So you asked about, you know, perhaps getting into a home that you don't think you're going to be at very long. And you just have to look at, you know, there's costs going in in terms of the actual buying of the property, the closing costs, and then there's cost to sell it, you've got the realtor fees, and you've got taxes, and you've just got a whole host of expenses that you will incur, that's going to erode any equity you would have built up or in a short period of time, if you just buy it and sell it at the same price, you're going to end up coming out lower than where you started just because of all the expenses associated with buying and selling a piece of real estate. So I think, you know, given the time horizon, given where you're at just starting out, given that you've got this 17,000, but you want to keep three months minimum in reserves, which I would concur with, I think as much as you'd like to get into that home, delaying that for a period of time continuing to rent is just really going to put you in a stronger position long term, where you can save a bit more.

And then perhaps when you do make that purchase, at least plan to stay for five to seven years so you can get some appreciation before you go to sell that for your next place. So we're, we're happy you called in and got through again today. And we're happy to hear a young guy like yourself being forward thinking about this and serious about where your life is heading.

We're sure that if you put all this in God's hands and listen to wise people around you that ultimately you'll be in the right position. We pray for that for you as well. And we're glad that you call. Thank you very much. 800-525-7000. Illinois and Renee, what's on your mind, sir? Thanks for having me on and blessings to all of you.

Thank you. I worked at a local community college. I've been 10 years in what is called the State University Retirement System. There has been some strong conversations that there's a possibility that Illinois may go into a junk bond rating. And there's a lot of concerns with individuals who are in the SIRS program that what will happen if when we reach to that retirement age and will those monies be available? There's another option where the state advised us that we can pull those monies out early. And maybe there's a possibility that we can reinvest those monies elsewhere. I'm just not too sure. And we're just very concerned about that. Yeah.

And I could understand, Renee, why you would be. Obviously, you've got a lot riding on the strength and viability of the retirement system. You know, I've not seen anything that would indicate that with the SIRS program that you're talking about that you have the ability to pull the money out apart from borrowing it. However, there may be special provisions being made given what you're describing here.

I'm just not aware of it. So I think the key at this point would be getting a bit more information about what your options are if in fact they're giving you the ability to, let's say, take the value of what you've accumulated and roll it out to a qualified account elsewhere. Given what you're describing with the state of things, it may make some sense because then you could have a little bit more confidence that, you know, you'd have this growing in an environment where there's not these risks that you're describing today. And, you know, you would have a little bit more confidence in the long-term viability of it. Again, I think it's just the key here is to consider what are the implications of that. You certainly don't want to incur any penalties as a result of the withdrawal. You would want to only exercise a provision to do somewhat of a rollover if that's going to be permitted to another qualified account. So I think at this point you need to get all the documentation you can and then I'd probably contact a Certified Kingdom advisor there in Illinois to review that with you and help you consider all of your options.

If you don't have a financial planner, an investment professional that you've been walking with, I'd encourage you to go to our website at MoneyWiseLive.org, MoneyWiseLive.org and just click Find a CKA. Renee, we wish you the best with that. Sounds like a, well, let's say an interesting situation at the very least. But if you can't find the information you're looking for, ultimately don't be afraid to give us a call back. We're glad you got through today. Thank you.

Tampa, Florida. Elizabeth, what's your situation? Hi. Thank you for letting me ask this question.

Sure. The question I have is my husband and I both have retirement plans. My husband has a 401, I have a 403b that we've been putting money in. I have a friend that has an IRA as well and she was saying that we should also get an IRA so that when we retire we have money that we don't need to pay taxes on. And there has been a rumor that I've heard from a couple of people that right now when you retire, the taxes that you pay is lower than say what we're paying now working, but that that is going to change.

And eventually we may end up paying even more taxes when you retire than you do now. Yeah. Yeah. Well, I think, I mean, these are all considerations.

Yeah. There's obviously a likelihood that taxes are headed up from here, especially given what's just taken place politically and what we know about the current administration and their plans for taxes. I think the key is to have options because nobody knows for sure. So having both the tax deferred and the tax free environment working for you is key. I like the idea of having both. Stay on the line.

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Never Enough, Three Keys to Financial Contentment, available when you click the store button at moneywiselive.org. Just before the break, we were speaking with Elizabeth, who's concerned about her retirement and just where the rates are going and what the new person in the White House might be doing. He says one thing. He might do that.

He might not. We don't really know. And can you sum that up for us, Rob?

Well, yeah. And really, it's not a factor of what's going on today. What we're talking about is how do we approach retirement 20 years down the road? Who knows what the tax environment will be? It could be higher than right now. It could be lower.

We're in a very low environment right now. So prospects are that it is higher. And so Elizabeth was saying she has a friend encouraging her in addition to a tax deferred 403b where the withdrawals would be taxable in retirement. She's encouraging her to have a Roth option available where you pay the tax now and you pull it out tax free in retirement. Here's the bottom line.

We don't know. So the idea that you could have both working for you is a great option. If you have both the traditional and a Roth 401k or 403b at work, perhaps you split it 50-50. If you don't, maybe you open a Roth IRA and you contribute to that at the same time you're contributing to your 401k and 403b. The idea being you've got both of these assets growing.

And when you get to retirement, then depending on what the environment is tax wise and your income, you could decide which one to pull from according to which one is most advantaged for you. And I think that's a great idea. And Elizabeth, again, we're glad you called today and trust that that information Rob gave you off air will help. Let's go out to Talmadge, Ohio. Hello, Rod.

What's your situation there that we can help you with today? Yeah, I'm going to be 72 in April. And last year, the required minimum distribution from my retirement was not necessary. And we did not need the money. So we left it in. And I was wondering if you've caught anything in the wind about whether the required minimum distributions will be waived again for 2021?

Yeah, it's a great question, Rod. And for the benefit of our audience, if you weren't aware, the CARES Act that was passed as a result of the COVID-19 pandemic did push the pause button for all required minimum distributions for everyone, no matter what your age is for the year 2020. No RMDs required. Rod, there's not been any conversation that I'm aware of about 2021. So the way it stands today is required minimum distributions will return in 2021. So since retirees will be a year older than the last time they took their RMDs, it'll be a slightly higher percentage from their retirement plan. So I would say you should plan for it. Now, we don't know what we don't know, right in terms of how will the pandemic play out? Will there be further action next year because of continued hardship on not only American families, but on the economy as a result of the pandemic? Could that result in additional legislation that would again waive the RMD? It's all within the realm of possibility. It's just not being considered at this point.

So at this point, I would be planning for it. Rod, thank you very much. Great question. Let's go out to Kansas. Bostwick, I know you've been there for a while and we appreciate your patience. You've been hacked in some way.

What's going on there? Okay. I want to thank you for taking my call. And you were talking earlier about online accounts being safe and secured.

And I just wanted to relate the story. I had an account with Green Dot Corporation. I had it about five months and I got a phone call that said someone had tried to use my card and wanted to verify it was me. So they sent me a confirmation card number and I sent that back to them, telling them and they said they would issue me a new card within a couple of days.

Well, that card never came. But the next day I received an email that said my account balance had been transferred into a Yahoo account. So I called them after going through their automated service center and getting about 15 different operators. I finally got someone who took my information and said that they would issue me a paper check to replace the balance. It never came. So I contacted the corporation and went through a lot of stuff, finally contacted Better Business Bureau and finally went to the FBI scam and have never received so much as a letter or a payment back from them that they apologized for taking my money. I've never seen it, don't know where it went, but it had to be an inside job of some kind because after that I could never get my password or account information to work. They always said does not match our information. So I did a I forgot my password note and the numbers they sent me the last four digits were not mine. So someone on the inside had to change not only my balance to zero, but had to change my contact information so that I could never contact them again.

Well, Botswick, I'm so sorry to hear about the experience you have you've had. You know, I think the key is a couple of issues. Number one is we need to separate the safety of the institution with regard to the backing of it by the FDC from the customer service and the services of the bank itself, be it brick and mortar or online. I think the key is if you're with a bank that's a member of the FDIC, then you know that your deposit is backed by the full faith and credit of the United States government.

That's giving you peace of mind. It's what most people are looking for with their bank. Then we have to look at, okay, what about the service, the rating, the longevity, the strength of the institution that we're looking at? And there are online banks that are backed by major corporations.

So for instance, Marcus would be a great one. That's the online retail bank of Goldman Sachs. Goldman Sachs happens to be a major financial institution with a lot of strength, a lot of longevity, and yet they have an online expression that's an FDIC insured bank called Marcus. I'm not endorsing that particular one. I'm just saying, you know, I think in addition to finding an FDIC insured bank, we also need to look at the reviews. How is it rated? What kind of customer service do they have?

How long have they been around? And so obviously with your situation, I would press into this because they are highly regulated as banking institutions by not only the U.S. government, but by the state in which you live in terms of the finance department. So I would absolutely lean back into this, make sure they resolve this and make it right. And then perhaps it's time to consider another alternative.

But I wouldn't kind of throw this whole thing out in terms of not using an online bank moving forward because there are a lot of benefits, including lower or no fees and much higher interest rates. Bostwick, we appreciate you sharing that with us today. And I know it must be frustrating to have to follow through with this. But if you decide to do that, we'd like to know ultimately how it works out. It will benefit us.

And I'm sure our listeners as well. Feel free to give us a call back. Thanks very much. Cleveland, Tennessee. Hello, Carol. What's your situation there? Well, thank you. Thank you for taking my call.

Just a simple question. I have a 16 year old grandson who desperately needs some guidance on using money. And I just wanted to know which of your books I should get for him.

Yeah, that's great. Well, Carol, I'm delighted to hear that you're thinking about your grandson beginning to learn God's way of handling money. Well, I'd like to send you a book for you to pass along to him. It's called Master Your Money. I read it at about that age, at age 16. It's written by my good friend and mentor Ron Blue. And it's going to give him a great overview not only of God's principles, beginning with God owns it all, and right down from there, but also the real practical side of financial planning, both debt, investments, the need for a spending plan, contentment, staying away from comparison, the whole nine yards. So if you stay on the line, Carol, we'll send you a copy of the book, Master Your Money by Ron Blue, and you tell him it's our gift to him. You weren't reading Master Your Money when you were 16 years old.

I was playing video games or something. Come on. My dad was 30 years as an investment advisor, loved this area of finance, but he loved the intersection of faith with it as well. And so, yep, he passed it along to me at the ripe old age of 16.

That's a classic book, that's for sure. Okay. Let's take another one here.

Shelbyville, Indiana. Hello, Jim. What's your scenario? What's your situation? How can we help you? I'm older than dirt to start with, and thank you for what you do.

I appreciate what you do. And financially, we're in fairly decent shape right now. I would say in good shape. However, I'm concerned about possible socialism and inflation, and I wondered if you would recommend gold for an investment, and if so, where would you keep it?

Yeah. You know, I am not a huge fan of taking possession of physical gold. I like the idea of having an allocation to gold, but I would say no more than 5%. Gold is a store of value. It tends to be a hedge against a falling dollar and a very volatile stock market, especially given what we've been through this year and periods like this, although they all come in different shapes and forms. And so that's why you'd want to have an allocation of gold.

But going beyond 5%, certainly beyond 10%, I would stay away from just because it tends to be more volatile and doesn't perform as well over time. The downside in my view, and a lot of people would disagree with this downside in my view to taking possession of physical gold is number one, you've got to buy it and sell it. And that usually involves a dealer, which means there may be a markup of some kind.

Number two is you've got to store it and you've got to do that safely. And it just tends to be a bit cumbersome in terms of how you buy it, sell it and secure it. So for that reason, I like the idea of taking an allocation using perhaps a tracking ETF like GLD or something like that, that's going to follow the price of gold, giving you that allocation to your portfolio, but without you having to take physical possession and everything that comes with that. Again, that's just my perspective. You may disagree in terms of wanting to have actually the physical gold for other reasons.

But I think the key is not to get overweighted, stay properly diversified and just recognize, I think over time with a properly diversified stock and bond portfolio, you're going to have less volatility and better performance over the long haul. Jim, we thank you for contacting us today and hope that information helps so much. Jim mentioned he's older than rope. I doubt that. I used to have a friend who told me that he was older than dirt. I think it was Jim who said older than dirt. My friend mentioned older than rope. I hope I'm not heading in that direction at all. Our thanks to you for joining us today MoneyWise Live as a partnership.