Hi, this is Doug Hastings, Vice President here at Moody Radio, and we have a unique sponsor for this podcast. It's United Faith Mortgage, the faith-focused mortgage team with a very specific advantage that can save families money.
Here are two things you need to know. Number one, United Faith Mortgage was started by a dad and his son and his wife, and they've grown into a team helping families all across the U.S. And number two, they have a unique advantage. Their company is an arm of a bigger company, which is a direct lender, meaning there's no middleman. Their company uses its own money and makes its own lending decisions within its own walls.
Again, no middleman. And often, this allows them to get you a better rate on a new home purchase, refinance, or cash-out refinance, which could save you money over a lifetime. Check out the faith and family mortgage team at UnitedFaithMortgage.com. United Faith Mortgage is a DBA of United Mortgage Corp., 25 Melville Park Road, Melville, New York, licensed mortgage banker. For all licensing information, go to NMLSConsumerAccess.org, corporate NMLS number 1330, equal housing lender.
Not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. In 1899, U.S. Patent Commissioner Charles Dooles said, everything that can be invented has been invented. So much for predictions.
But that doesn't mean we don't like making them. The trick is getting them right. Today, host Rob West talks with someone who usually does get it right, investing expert Bob Doll. Then it's your questions, 800-525-7000. Call now, 800-525-7000. I'm Steve Moore.
Ten predictions for 2021. That's next here on MoneyWise Live. Rob, our guest today is Bob Doll. He's a senior portfolio manager and the chief equity strategist at Nuveen Asset Management, where he manages $4 billion worth of assets. And he really does have his finger on the pulse of the stock market and the economy in general.
Well, that he does, Steve. And every year, Bob makes a list of things we're likely to see over the next 12 months. And he's been gracious with his time to stop by and hopefully unpack a few of these today for us and even take some of your questions. Bob, welcome back to MoneyWise Live. Thank you, Rob. And thank you, Steve. Well, it's a delight to have you here. Hey, before we get into what 2021 is likely to hold for us, Bob, set the stage and give us a recap of 2020, a year that, as you know, many folks are saying good riddance to.
Yes, no question about it. So if you were Rip Van Winkle, went to sleep on January 1st, were awakened on December 31st, and you saw the returns in your portfolio, you'd say another good year. Another good year. I guess it was kind of quiet. I guess it was kind of quiet. Stocks went up a little.
Bonds went up a little. Everything's good. But of course, we know it wasn't the tumult in the middle of the year was amazing. I mean, for the first time in our lifetimes, Rob, we saw what happens when the economy gets turned off. And then when it gets turned back on again, there were two experiments that had amazing impacts on so many things, including policymakers. Well, there's no question about it, Bob.
And as you alluded to in your commentary around the world, global GDP declined by $10 trillion. Incredible. I mean, it's the fastest move from bearable to bear market ever, right? No question about it.
I mean, you've heard me say this before. I think that what I'll never forget, as long as God gives me time on this earth, is how the change in the consensus for global GDP, the broadest measure of the output of this planet, went from plus three to minus three and six weeks from early March to mid-April. That swing has never happened before over any time frame, let alone six weeks.
The unanticipated coronavirus crisis changed absolutely everything. What was fascinating, though, was that really very few people saw the stock market bottoming as quickly as it did. March 23rd, I think your investment commentary happened to note technical factors suggest stocks are actually bottoming. And that's exactly what we saw, wasn't it?
Yes, it was. I've learned over my career bottoms are a lot easier to call than tops. Bottoms tend to be V's and tops tend to be long saucers. And often at that bottom, you see technical divergences that say it's time. Back up the truck. Yeah, yeah, absolutely. Well, what other big developments did we see in 2020 that we need to take note of? As I recall, there was a small election in 2020. And the lead up to that, of course, and the aftermath was, oh my goodness, a redivided country in so, so many ways. And the election showed that yet again. And only God knows how he's going to bring us back to himself and to each other in the process, Rob. Yes.
Well, there's no doubt about that. Also, incredible global monetary responses that we saw last year as well in the midst of the pandemic. Yeah, with the I call it the beginning of reflation.
Reflation is like when you have a tire that's flat and you pump it full of air, it reflates. Well, the central banks of the world, including the U.S. central bank, the Fed, kind of the day after we turned off the economy, said we better come to the rescue. And so we saw unprecedented contributions of monetary and fiscal stimulus. Ten trillion dollars in the U.S. alone and nearly 40 trillion globally. Incredible. Well, now what will 2021 hold?
Have we already borrowed some of the returns from last year? We'll find out that and much more right around the corner. That's right. You're listening to MoneyWise Live. Your host is Rob West. I'm Steve Moore. We're pleased to have a good friend and brother in Christ, Bob Dahl, with us today.
Much more. Stick around. We'll be right back. Great to have you back with us today. It's MoneyWise Live with Rob West.
We'll be taking your phone calls a bit later in the program, 800-525-7000. Our guest is our good friend Bob Dahl with Nuveen Asset Management, where he oversees four billion dollars worth of other people's money. And today he helps us take a view at just what's where we've been and what's coming up perhaps in 2021. Educated guesses.
Some may call them predictions. I mean, is this a good time to looking ahead to maybe get out completely out of the stock market? What about global moves that are already being seen? What about the national debt? How big an issue is that going to be really? And well, these kinds of things, if we can help you in regard to, well, even what the White House has been up to just in the few short weeks that our new president's been there.
What more moves might we see from him and how will that impact the way all of us live on a daily basis? What about the price of gasoline? I had somebody asking me that about today. I don't know. And what about the Super Bowl? Well, we have a guy with us today who makes predictions and maybe we'll even hear one from Bob Dahl.
Very good. He's a renowned portfolio manager. He's also outspoken about his faith up and down Wall Street.
Bob Dahl. Bob, tell us the funds that you manage specifically. So I manage a large cap core fund that's plain vanilla. I manage an equity market neutral fund, which is curious, about 100 stocks long and 100 stocks short. It's really enhanced cash return. And then a tweener, if you will, equity long short.
And then we have some separately managed accounts that are specific to value and growth and we have one called stable growth. So that's the product list. I love it. If you have time, punch into Google Bob Dahl investment commentary and then don't miss it. It comes out every week.
It's something I rely on. And Bob, before we get into the 10 predictions for 2021, Mahomes or Brady, are you going to take a position here? You know, Brady's had it so many times. I'll take a repeat from Kansas City about that. OK. All right.
I didn't have to stretch far to see how that could happen. All right. Let's dive in. So we we talked about the backdrop coming out of 2020. And we'd love to know your 10 predictions for 2021, starting with what's going to happen with gross domestic product here in the U.S. Economic growth in the U.S. is going to be strong. We think that the economy and earnings will be great this year and the stock market will be good. It is likely the U.S. economy will have its fastest growth rate in 36 years since 1984. Growth this year could be five or six percent. Remember, consumers have one and a half trillion dollars of excess savings just from last year on the back of government checks. Money they wouldn't spend, they couldn't spend because whatever they want to do was closed.
And other people, money they didn't spend because they weren't afraid to and they stayed at home. Yeah. Yeah.
No question about it. Fascinating that it could be that fast in terms of growth. What about inflation? A lot of folks concern that the monetary stimulus is going to result in high inflation.
Where do you think we'll land there? So higher inflation? Yes. High?
I don't think so. You know, inflation has been running not too far from zero. We we think it'll approach two percent this year, which would be the highest in some time. Remember, the central bank, the Fed wants inflation average two percent. So if it's one for a while, it's got to be three to average two. So inflation, I think, will tick up and it'll get some of our attention, but not become a particular problem.
All right. Now, you mentioned the economy is going to grow at a great pace. You mentioned stocks good. What does that mean for the year on stocks? Yeah, we think stocks will go up about half the amount of earnings. So earnings growth this year is likely to be above 20 percent.
It might be 25, could be closer to 30. The stocks can keep up with that halfway. And the reason, of course, Rob, is the stock market is a function of earnings and the valuation we put on those earnings. And if we get modestly higher inflation and interest rates, those price earnings ratio, those P.E. ratios probably get challenged a little bit. And that's why we think stocks are good.
But the economy earnings are great. Yeah. Interesting.
All right. Now, there's a lot of folks that are in cash positions because maybe they're in retirement or they're just trying to preserve what they have. Talk to us about stocks versus cash versus Treasury bonds. You know, we think this will be the first year in eight that the order of finish is stocks first, cash second, bonds third.
Stocks, because of the strong earnings, we've already talked about that. Cash is returning not far from zero, sadly, for those who hold it. And if interest rates move up a little bit, as inflation moves up a little bit, there'll be a lot of bonds that have negative returns this year, especially Treasury bonds.
The closer you are to the government Treasury curve or sovereign curves around the world, the more challenged things will be as interest rates creep up. So what does that mean then, Bob, for a retiree who has a portfolio? They're trying to generate an income off of that portfolio. Maybe their target is 4 percent a year. And with interest rates so low and you're talking about falling bond prices, where does that leave them and where do they do with their money? Yeah, it leaves them between a rock and a hard place.
No question about it. Look, a lot of financial advisors are counseling maximize the return of the portfolio and take the 4 percent you need out of the total return rather than making sure the current return meets the objective. It's going to be hard to do that and not put up with principal losses in a year like this. Do you think that that begins to change as we move forward? Do you see the day if we get the kind of growth you're predicting that interest rates could begin to tick up?
Yes, we do. The 10-year Treasury came into the year just under 1 percent. We think by the end of this year, it's likely be about 1.5 percent. And, you know, if you own a 10-year Treasury and the yield goes from 93 basis points to 150, you're losing some money, Rob.
It's not a whole lot of fun. Yeah, yeah. Bob, we're getting a lot of calls from folks that are just really concerned about the U.S. federal debt. Talk to us about the levels we're likely to see this year and what the implications are of that debt.
Yeah, that's a great question. A lot of people ask, I've been getting that question now, it seems like forever, and my consistent answer has been this does not yet, capital YET, matter. And the reason is that interest rates have come down faster than the debt has gone up. And as a result, interest expense, which is the product of those two things, debt times the interest rate, interest expense on the debt, has actually fallen as a percentage of our economy. And that's why people aren't talking about, yes, we're borrowing from the future.
I'm not trying to sweep the problem under the rug, but I'm trying to argue why it has not yet mattered. It will matter when the debt accumulates at a fast pace and interest rates go up, not so much just one and a half percent, but if we get to a point where they're going up faster than that. So we are borrowing from the future. There is no free lunch, but it has not mattered to the economy or to investment markets yet, and I don't think it will this year. Bob, your thoughts, your predictions on the upcoming year, are they based on COVID doing anything one way or the other, being completely decimated and gone forever or something in between?
Yeah, great, great question. Our assumption is that the vaccines will continue to be rolled out and we're now at the point where vaccinations are going up faster than the cases. In a lot of places, the cases are coming back down. So our assumption is by the middle of this year, most people that want to be vaccinated will be and will have a shot at herd immunity. And that will open up our economy again and we should have a strong second half.
Doesn't mean coronavirus disappears, but it means it's contained, it's managed and people feel safe again. Bob, let's finish today with the landscape politically. What does that mean for the economy, the markets, and what might we already know about where a Biden administration is going from a policy standpoint and the effect that will have? Oh my, how many hours do we have to answer this one, Rob? It's so complicated, isn't it?
Let me make it simple. I think that the Biden administration as it relates to economics and the investment markets will have two bites at the apple. The first will be an attempt to get another stimulus package here in the next month or two. I think there's a good chance they will get, not the trillion point nine that Biden is asking for, but something closer to half that. Then in the back part of the year, I think they'll come back and try to do a bigger bill. Some infrastructure spending, some clean energy, some tax increases on big corporations that have very low tax rates, as well as high income and high wealth Americans. Getting that one through is going to be a lot tougher, but that will be sort of the guts of the Biden administration economic policy.
Interesting. Well, Bob, we're always so thankful for your outlook and your encouragement. I'd love for you to finish today by just reminding us what is really important, and that's an eternal perspective. Ground us, if you will, in God's word. Yeah, so there's so many principles, as Rob, you know better than I, but it starts with recognizing that God owns it all. None of the money we're talking about is ours. He just lends it to us. We're stewards of it, and so we have a high calling to get it right because it's His in the first place, and we're accountable. I think it's also to remember that we're just passing through.
Life is short on this planet. Our citizenship is in heaven, and if we really believe that, we need to give our money away to people who need it and causes that need it, and so those two encouragements, I hope, help our listeners. I love it. Well, Bob, we're always so grateful for your time and your friendship and your leadership on Wall Street. Thanks for stopping by, my friend.
My privilege. That's the voice of Bob Dahl. He's the chief equity strategist at Nuveen Asset Management. You can sign up for his free weekly market commentaries at Nuveen.com, N-U-V-E-E-N, Nuveen.com, and we'll have a link to that in today's show notes at MoneyWiseLive.org.
Your call's next, right after this. Really nice to have you with us today on MoneyWise Live. Rob West is your host, taking your calls on anything financial at 800-525-7000. I'm Steve Moore, and again, we love to hear from you, whether it's buying, selling, investing, you name it, let's chat about it.
800-525-7000. And Rob, always enjoy talking with guests like Bob Dahl, who knows so much about the stock market and where they've been and where we're heading and sold out, committed to Jesus Christ as Lord. But, you know, whether we're able to call these things or not, or whether these predictions come true or not, or to what extent, if we're placed well financially and we're well thought out and well versed in our approach to investing, it shouldn't matter all that much, should it?
No, I think you're exactly right. I mean, it's, I think, helpful to understand, just for our own education as we manage God's money, what's going on around us, what market forces are at work. And to the extent we're adhering to biblical principles, I think we recognize that, and to the extent perhaps we're violating them as a nation or, you know, in terms of how we're handling money on the macro level, it's just really interesting. But again, to your point, Steve, if you're managing your money properly, you have a long time horizon, you're not highly concentrated, meaning you're properly diversified, you have the right investment mix, you're on the same page as husband and wife, you're not using leverage or debt for your investing. You've got a solid financial foundation under you. Then you just kind of allow this thing to play out over a long period of time, and the ebbs and flows, even in a given year, shouldn't really matter. But at the same time, I think it's just encouraging to know there are men and women like Bob Doll up and down Wall Street that are having an incredible influence and love the name and serve the name of Jesus Christ.
It's just encouraging to me. Amen. All right, let's go to our phones.
Let's see, Mundelein, Illinois. Hi, Louis, thanks for your patience. How can we help you? Well, I'm 88 years old, almost 89, and my husband died a few years ago, and I just want to get information to talk to somebody about how to set up a budget and to, you know, my house is paid for and I have enough to get along.
And I just want to be able to know how much I can give to the Lord, you know, and not feel nervous about it. I love that. Go ahead, sorry to meet you.
I just need somebody to talk to about it. Yeah, yeah. Well, you've come to the right place. Let me offer some thoughts here before we hit our next break.
You know, Lois, first of all, I'm sorry to hear about your husband's passing. I'm really encouraged, though, by what you're saying, because, you know, to your point, when we know where we stand, we know what we have, how much of God's money we're managing, and we have organized accounting of that. And we have a budget that balances and that budget reflects what's important to us, our values and our priorities. And we know that our bills are paid and we know where income sources are going to come from in our in the future to the best of our ability. Doesn't mean we're not dependent upon the Lord.
We are. But when we have that information, then we're freed up to do even more giving because there's not all these question marks about where am I going and what am I doing and how much do I really have and what does it take to fund my lifestyle? So you getting to that place, I think, is going to give you incredible peace of mind and free you up to give even more, which is clearly on your heart. What I would say is this connect with one of our Money Wise coaches. These are men and women who've been trained to walk alongside you to help you put together a spending plan. That's going to be key, help you get your affairs in order and help you determine how much you can give. I also heard you say you're interested in a 529 plan or I see the notes you're interested in a 529 plan for your grandson. I think that's a wonderful tool to save for college.
Lois, the best website, if you are comfortable on the computer for that to learn more, is savingforcollege.com or ask the Money Wise coaches about a 529 plan as well. Lois, thank you very much for your phone call today. We wish you the very best.
When we come back, we'll say hi to John in Tennessee, Ron in Miami, and maybe you. This is Money Wise Live. We are Money Wise Live, taking your questions and providing biblical answers to the challenges, financial challenges you're facing. We'd love to hear from you today. If we can help you with something, give us a call. Something Financial, 800-525-7000. Rockwood, Tennessee. Hello, John.
How can we help? Good afternoon. Thanks for this opportunity. My question concerns managing the tax impact during retirement. I'm 71.
I've been retired about eight years. My pensions and Social Security more than cover my monthly expenses and I have a considerable amount in IRAs, regular, traditional IRAs. I am aware that at 70 and a half that I can start moving funds directly to charitable causes without touching it. But I'm also concerned about helping my children before I pass. I know if they become heir to it when I pass, they pay my tax and their taxes on top of it, of their income, which is something I'd like not to happen. So I'm interested in direction on, I think, moving money out of my IRA, which is considerable in ways to minimize taxes pretty much. Yeah, yeah. Well, thanks, John, for that. I mean, I would encourage you to spend some time with a competent tax preparer or accountant who can help you walk through this based on your specific situation. But in general, a couple of thoughts.
Number one would be, you know, when time comes, I'd love for you to consider the qualified charitable distribution. Are you familiar with that tool? Not very much. I'm just aware that I can I can have something sent directly to the charitable organizations where I don't touch it. Exactly.
Yeah. And satisfies the RMD, the required minimum at the same time. It's money you don't recognize as income. The charity doesn't pay any tax on it when it's sold.
So everybody wins. You get a nice deduction. Well, in this case, you would just wouldn't recognize the income. They get the full value of the transfer and you don't have to take the money out and pay taxes on it. So that would be a great way to offset money you were going to give us cash or in addition to that, if you want to give even more. IRA beneficiaries typically are going to be required to take ongoing RMDs, which would generally be a taxable event, not double taxation, but where they have to pay their own portion.
A non spousal beneficiary will typically have to withdraw all the funds inherited in the IRA within 10 years of the owner's death. But the key there would be to try to spread that out as much as you can to just lessen the chance of going up into a higher tax bracket in any given year as that money comes out. So I think, you know, being generous with those funds is really one of the most effective tools, you know, in terms of lessening the tax burden on money that's ultimately not needed by you. But beyond that, I think, you know, as you pass it on, they're just going to take it out and pay taxes on it as income. Great news is you've obviously got plenty there if you had a major expense down the road or needed it for long term care or something like that. And I'm delighted to hear you've kept your lifestyle in check such that the pension and Social Security and any other income sources you have is covering your expenses. So I think you're right managing this well to preserve what you have, to give it away, to be generous, to ultimately pass it on as an inheritance and, you know, allow them to recognize whatever tax burden is due at that point is just about the best way to proceed from here.
But beyond that, specifically related to your situation, I think it'd be well worth your time to connect with a godly tax preparer who can advise you on the specifics. John, we appreciate that call and that question today. We wish you the best.
Thanks very much. Miami, Florida. Hello, Ron. What's on your mind, sir? I've talked probably a couple times before.
Let me try to give this to you quickly. I'm going to be 69 this year. My wife is 64. We were in a foreign country until 2005 when we moved here to the States and basically I began my financial life here in the States at that point.
So I do get Social Security, but it's very small. And we were poised to we have our own business and our income was increasing year over year. But then COVID hit right when I was poised to pay off, really make an attack to to set up our financial house better to pay off some debts that we have and to maybe look at some investing. Then COVID hit. My wife has been unemployed since then. It really knocked our income back.
But I do have to say that God has been faithful every step of the way to take care of us. We've lacked for nothing, but I'm thinking a lot about investing for the future because we are getting older. And and I just don't know how to start because there's so little money available. And I wanted to ask you guys, do you think it's a good idea for us to be trying to find a way to invest, even if it's only very little? Or do we have to wait until our income goes up a bit?
Yeah, yeah. Well, I'm sorry to hear about the changes, but I'm glad to hear that you had some surplus. So you were in a position where even with an income reduction, you've still been able to get by.
And obviously the Lord has provided and you've given testimony to that. You know, I think, Ron, as you look at the resources that are available, it all comes down to what do you have coming in and then what is the priority use of that? You know, for some folks, they're looking at what we call a May Day budget where they have to keep the big four paid and everything else is discretionary.
And by big four, I mean food on the table, the house or mortgage paid, the utilities on and the car in working order and with gasoline so we can get to and from work. Everything else is kind of, you know, available to be cut or eliminated if at all possible. And then you kind of move beyond that to say, you know, in a time where income is cut, we want to preserve cash. So it's probably not a time to be making a lot of accelerated debt payments.
That's during the good times. In the lean times, we just want to keep the minimums paid in terms of your ability to put money away for the long term. I love that, but not at the expense of continuing to give proportionately, continuing to fund your emergency fund. If you're not yet at three to six months expenses or you had to dip into that, or if you have any credit card debt or other high interest consumer debt, I'd rather you focus on those even at the expense of saving for the long term. But if you paid off your credit card debt, you've got it, you know, at least three months worth of expenses in the bank as an emergency fund and you're making ends meet, then yeah, being able to continue to systematically put money away for the longer term while you're continuing to work, while you're waiting for your small business to rebound is a good idea.
I just wouldn't do it at the expense of other things, meaning having reserves to be able to take care of the unexpected or when you're paying high interest consumer debt. Does that make sense to you? Very helpful. Thank you so much. God bless you.
All right, Ron. Bless you. Thanks for your call. Rob, before we take another call and before the clock gets the better of us, I want to quickly mention the new MoneyWise app. It's something we've been working on for a very long time.
I shouldn't include myself in that, but the wonderful staff you put together. You came up with a lot of thoughts and ideas, things you wanted an app to do that all the apps you were playing with over the last couple of years just didn't do. So tell us about the MoneyWise app and why everyone listening should get a copy. Well, Steve, we're so proud and excited of the app that we've been able to develop. We have a team of world-class developers that have been working on this since late last year.
What we've come up with, I think, is just absolutely incredible. At its core, it's a digital envelope system where you can either manually track your expenses in envelopes or by electronically connecting and downloading all of your transactions from your institutions. It's a great way to manage your money, but also the Community and the Discover tab allow you to connect with others also on this journey. And you can find out more about it when you visit app.moneywise.org. We'll be right back after this. You're listening to MoneyWise Live.
Yes, that's the name of the program, MoneyWise Live. I've got it figured out. And a pleasure to have you with us today, Alex, Danae, and Carla. And, Alex, you're up next, sir. What's your question? Hey, thank you for taking my call.
Yes, sir. Yes, my wife actually worked for a financial institution for the last 20 years. She liked to retire, at least from the corporate world, in the next 10 years. So she currently has a 401k. In the meantime, we are paying a lot to our principal in our mortgage, so we are blessed to probably pay off our mortgage in a year and a half from now. So after that, we're going to have a lot of disposable income. So my question is, is it wise to use all that income toward my wife's 401k or just open a Roth IRA, but the Roth IRA only give me $6,000 a year maximum contribution. But the 401k of my wife's workplace only matched 5% of her salary, dollar for dollar.
Yeah, yeah, very good. Let me ask you, what is your age, Alex, you and your wife? We're both 45.
Okay, 45. And in terms of your long-term retirement savings between what she has in her 401k and what you've been able to put away for retirement, do you have a sense of whether you're on track ahead or behind of ultimately what you'd like to be able to accumulate between now and a retirement season? I think we, I feel good. We kind of, we like a simple life, so I don't see it, but I'd really like to. My wife, I never had a retirement plan to my employer, so I just save money on the regular savings account. I have some money, some stocks, some little things there, but not that much. So, but, you know, after we pay off the home, all that disposable income was planning to do with the raw IRA, but it's only $6,000 a year. I don't know if I can, you know, it was wise to put all, probably almost like 80% of my income through my wife's 401k.
Sure, sure. So I don't know if it's wise to do that or not. Do you know what percent of her income she's putting in right now? Right now, she only put 5% because the company matched 5% dollar per dollar. All right, and you're not putting anything in a retirement account, is that right? No, I'm not putting anything. Every single disposable income that we do right now, we send them to a mortgage. That's where we have only a year and a half. Got it, okay. Well, a couple of things. Number one is we don't want to just accumulate for accumulation's sake.
We want to know where we are today and where we're going because if we don't know where we're going, we don't know how to get there, right? So I'd love for you all to spend some time with a financial planner, just probably a couple of hours to do some retirement planning to determine what is your lifestyle now and what might you expect it to be in a retirement season and what is it going to take to get there? How much do you need to put away annually at a reasonable growth rate to accomplish that? She's putting in 5%, but that's only 5% on her income. So if you add your income and let's say you're making the same amount and who knows whether it's higher or lower, you'd only be putting 2.5% away of your total income.
I'd rather you be up 10% plus. And so I think this is a good idea. I like that you're going to be debt-free, including your home, and obviously you all have a conviction about that and that's great.
You're going to be unencumbered. There'll be a lot of peace of mind that comes along with that, so congratulations. But I think, yeah, redirecting the disposable income, assuming you have an emergency fund and you don't have any high-interest consumer debt, redirecting that to a Roth, but you're right, you're going to fill that up pretty quickly with that $6,000 max for you and her, $12,000 total, then putting the difference into higher contributions to the 401k once both of your Roth IRAs are maxed out for the year, I think makes a lot of sense. And then spending some time really quantifying what your ultimate objective is so you can determine whether you are in fact on track, given this additional money that will be going toward retirement through increased contributions to the 401k and the two Roth IRAs, I think makes a lot of sense. Do you follow what I'm saying? So you think it's wise to tell my wife after we pay off the mortgage to actually say increase your contribution to 10% of your 401k?
Well, I would fully fund the Roths first because that would give you both the tax deferred and the tax-free growth vehicles working for you, but to the extent you want to be able to put away more than $12,000 a year, then I think that's when she would start increasing beyond the matching portion of the 401k in her account. Alex, thanks for calling in today. We appreciate that.
So you're out to Montana, where they probably have at least a little bit of snow on the ground. Danae, thanks for holding. What's your question for Rob West? Oh, I just have one quick question. All right. Do you think all of the changes that we have had going on are going to affect annuities?
Because that's what I live on. Yeah. Danae, you probably have a stated guaranteed return on those annuities unless you're in a variable annuity that's going to be a function of the stock market returns, perhaps a portion of the upside, limited downside. Do you have a sense of what kind of return has been promised to you inside those annuities you already have? I don't.
OK, so I think you need to do a bit of due diligence. I mean, I wouldn't expect to see much impact, you know, specifically related to the change in the presidential administration on annuities specifically. The question is, where is the economy going? Where are interest rates going? And how is the stock market going to perform?
And earlier in the broadcast, we had Bob Doll on, a well-known economist and mutual fund manager on Wall Street for decades. He's expecting the fastest growth in the U.S. GDP in 36 years. He's expecting nice gains on the stock market, but he is also expecting, you know, near zero percent interest rates, which means cash is not going to do well and bond prices may actually fall. That's just a function of what's going on in the economy with the pandemic and the monetary policy and a whole bunch of other things. But the bottom line is you need to understand what annuities do you have? They tend to be complicated. So I would have a professional kind of read the fine print and explain it to you, because there's either guaranteed fixed annuities that pay a fixed return each year based on the contract, or there's variable annuities, which typically allow you to have a portion of the upside of the stock market in any given year with a floor, meaning it can't fall below your original deposits.
And I think depending on what you have will tell you how you can expect those to perform this year. So I'd recommend you connect with a certified kingdom adviser there in Montana to get some counsel on your situation. And you can do that, Danae, by visiting our website MoneyWiseLive.org.
Click find a CKA and you can search by city and state or zip code. Danae, thank you very much. God bless you.
Frankfort, Indiana. Carla, how can we help you today? Hi, I'm calling because my husband and I are wondering about doing a mortgage recast and not sure if that's a good idea for us.
Yeah. Tell me about your situation. What is it you're trying to accomplish? Getting that darn mortgage paid off. So what happened is my husband lost his job this last year.
And with what he had, what job he had, I had this plan. We're going to get this mortgage paid off in a couple of years. It's actually not due to be paid off till 2027. But we've been paying extra money every month towards the principal to get it paid down quickly. And he's getting ready to retire.
I mean, he's working now, but not anything near what we had before. So I'm really trying to push to get this mortgage paid off because I just don't want to have that payment in our budget any longer. If we did this mortgage recast, we would cut our payment down by $180 a month. And my plan was, whatever we've been paying right now on it, to add that extra $180 so it pays down faster. And I don't know if that's exactly how it would work or not.
Yeah, yeah. Well, I think the thing you need to understand is with a mortgage recast, typically what you're talking about is where the borrower is going to pay a large sum toward the principal. And then the mortgage is going to be recalculated based on the newer, lower outstanding balance, which is going to reduce that monthly payment, but not necessarily help you to pay that off quicker. Because you're going to have the same interest rate and potentially you're sending less money each month. So I think the key for you is the fastest way to pay this off is how much you can send toward principal over and above that monthly payment and what is the interest rate.
So I think the key here is, does it make sense to refinance to reduce the interest rate or because you just have six or seven years left, is it better just to stay right where you are? And then, you know, continue sending over and above the monthly payment. I would have the mortgage company run two amortization schedules. One is based on the current mortgage amortization and what you're sending every month, how quickly you'll pay it off. And then based on the recast, if you don't send the lower amount but you continue sending exactly what you are, is that going to help you pay it off any quicker? And at the end of the day, as long as they'll do that without any cost, you just want to go with the option that's going to allow you to eradicate that mortgage just as quickly as possible.
Carlo, thank you very much. Going to have to let you go almost out of time. And Rob, speaking of out of time, no more time for calls today, but we did have a person who wanted to know about a credit report stop. Does placing a fraud alert on their credit report stop someone from committing further fraud?
Any thoughts in that regard? Well, a fraud alert is a notice that you place on your credit report that alerts the credit card companies that may extend credit that you've been the victim of fraud, including identity theft. Think of it as a big red flag to potential lenders and creditors to let them know that this has been a part of your past, and it encourages these lenders to take extra steps to verify your identity.
It's going to last for seven years. It doesn't prevent thieves from using existing accounts. It's just going to hopefully slow down the lenders who may be thinking about extending credit based on somebody who's impersonating your identity.
I'd rather you add to that, though, a freeze on your credit. All right. Thanks, Rob. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Thanks so much for tuning in. Join us again tomorrow.
Whisper: medium.en / 2023-12-30 23:36:52 / 2023-12-30 23:54:05 / 17