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Deducting Your Home Office

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
March 4, 2021 7:03 am

Deducting Your Home Office

MoneyWise / Rob West and Steve Moore

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March 4, 2021 7:03 am

In 2020, millions of people found themselves working from home for the first time, and maybe you’re one of them.  But does that qualify you for a home office deduction on your taxes? On the next MoneyWise Live, hosts Rob West and Steve Moore have some ways to determine if you qualify for the deduction which could help you save on your 2020 tax bill. Then they’ll take your calls and questions on any financial topic. Deducting your home office on the next MoneyWise Live at 4pm Eastern/3pm Central on Moody Radio. 

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Rob West and Steve Moore
Rob West and Steve Moore
Rob West and Steve Moore
Rob West and Steve Moore

This is Doug Hastings, Vice President of Moody Radio, and we're thankful for support from our listeners and businesses like United Faith Mortgage. My grandma loves iced tea. It's her thing. So I go to hang with grandma for a bit, and I see she's holding her big plastic cup with her tea, but the cup is literally sitting inside one of grandpa's sports socks. And I'm not making this up.

No one can make this up. Uh, grandma, you okay? Of course, dear.

The sock soaks up the sweat and keeps the tea colder. Hey, it's Ryan from United Faith Mortgage. And as I thought about it later, I thought that's the kind of mortgage team I want us to be. The kind that's willing to take any step needed to get the job done on your new home purchase, refinance or cash out refinance. And can we help everyone? No, obviously we can't.

But if you know we're willing to use grandpa's sock to keep a drink cold, you'll know we're willing to do whatever it takes to make sure you're taken care of. We are United Faith Mortgage. 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 NMLS consumer access dot org corporate NMLS number 1330 equal housing lender not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota and Utah. Millions of people found themselves working from home for the first time in 2020.

Maybe you're one of them. But does that qualify you for a home office deduction? The answer is it depends.

But if you do qualify, it could save you hundreds of dollars or more on your 2020 tax bill. Hi, I'm Rob Last, President of Kingdom Advisor Steve Moore is off today. In a bit, I'll take your calls and questions at 800-525-7000. That's 800-525-7000. But first, deducting your home office.

That's next right here on MoneyWise Live. All right, I guess I should get this out of the way first. I'm not a tax guy. So I want to encourage you to talk to a professional before claiming a home office deduction.

But let me give you the high points today so you can decide whether it's worth pursuing. Now, you may want to grab a pencil and paper if you think you qualify because it does get a bit complicated. You see, there are two levels of qualifications for deducting a home office. In addition to working from home for the first time in 2020, some folks may have had their employment status changed from a regular W-2 employee to a 1099 or what we call a contract worker.

If that happened to you, good news. You only have to meet the first level of qualifications to deduct your home office expenses. Now, what might those be? Well, the most obvious one is you use a part of your home regularly. And here's the key, exclusively for work. Let's say you've converted the guest room into your office. Well, you can no longer use it as a guest room. So, desks and filing cabinets okay, bunk beds, a couch, a big screen TV, not okay. And since the deduction is based on square footage, the larger the space devoted exclusively to work, the bigger the deduction. Okay, now that you're using the space for business only, you must also meet one of the following three requirements. First, your home office is your principal place of business. That's pretty easy to meet if you do all or most of your work there. Next, if you work in more than one location, as long as your home office is where you perform your most important work that directly generates your income, well, it still qualifies for the deduction.

Here's an example. Let's say you're in sales and you do most of your calls or Zoom meetings from home, but occasionally meet with a client in person. You can still claim the deduction.

Now, if you missed on the first two, you still have one more shot at this. You could qualify if you use the space to conduct administrative or management activities for your company and the company provides no other space for that work. That would be things like billing, bookkeeping, ordering supplies, perhaps setting up appointments and even writing reports. But again, the majority of that work must be done at home. So if you're a 1099 worker and you use the space exclusively for business and you also meet one of those other three criteria, well, then you can claim the deduction. Now, if you're a W-2 employee, this is where things get a bit tougher. For you to qualify for the home office deduction as an employee, working in your exclusive office space and meeting one of the other three requirements I mentioned, you must also pass what's called the convenience of employer test.

Well, what is that, you ask? Well, it simply means that no other space is provided for you. It must also be necessary for the business to function properly.

And finally, the space must be necessary for you to perform your duties. And that's a pretty high bar to reach for most regular W-2 employees, especially those who found themselves working from home at times during the COVID shutdowns. That's because in most cases, employers still provided workspace for their employees. Some folks may have worked from home a couple of days a week and then went into the regular office for the rest. Employers were rotating staff in and out in many cases to keep personal contact to a minimum while still having the brick and mortar office manned. But there's still one more way you could qualify for the home office deduction as a W-2 employee. And that's if your employer required you to perform work during off hours when your regular office was closed.

That could qualify. So granted, as I said at the very beginning, it gets pretty complicated. If you couldn't take notes, there's more information in IRS Tax Tip 2020-98. That's at We'll put a link to that in today's show notes.

I'd also recommend, as always, consulting with a tax pro before taking a home office deduction, especially if you're a W-2 employee. All right, your calls are next. Here's the number 800-525-7000.

800-525-7000. This is MoneyWise Live. Welcome back to MoneyWise Live. I'm Rob West.

Steve Moore has the day off today. This is the program where the 2300 verses on money and possessions found in God's Word intersects with today's financial decisions and choices. And we'd love to help you process whatever's on your mind and heart related to your finances today, looking at your issues and questions through the lens of Scripture.

That's what we do here on this program. The number to call, we do have a few lines open. 800-525-7000.

That's 800-525-7000. You know, at the open of the program today, I was talking about the home office deduction related to taxes. And again, a high bar.

If you want to go back over it, you can listen to the replay of this broadcast. We'll also have a link in our show notes to the details at You know, it does always make me reminded, though, the fact that so often, myself included, we get to a place where we resent our taxes. We shrug our shoulders when we think about tax season. And yet, I have to remind myself and I'll remind you, you know, taxes are symptomatic of God's provision.

That's the reality. If we don't have income, we don't pay taxes. So what if we went into this tax season, turning our paradigm upside down and realizing that our ability to pay taxes is really representative of God's provision and direction in our lives through the resources that he has provided.

Maybe that'll cause all of us to approach it ever so differently this year. Again, the number to call today to get in on the conversation, 800-525-7000. Let's go to Laura on the Big Island of Hawaii. Laura, welcome to MoneyWise Live. Thank you.

Aloha. My question is, you were talking about the home exemption. I am a 1099 real estate agent and I go into the office maybe once every 10 days. The rest of the time I work at home. Can I claim the home exemption?

Yeah. You know, there's a number of hurdles there. Now, given that you're a contract employee, Laura, it's going to make things a bit easier because, you know, as a W-2 employee, you don't have to get by that hurdle of a desk being provided for you. But again, if you go back through each of the requirements that I mentioned, first would be you have to be able to say that the piece of your home that you're using is used exclusively for work.

So I guess that would be the first question. Where you're working, is it a part of the home that's used for other personal activities or do you use it for home exclusively? It's my home office.

One room is dedicated to that. But also, I forgot to mention, I also pay a desk fee to belong to the company, more or less. So I don't know if that has anything to do with it either. Yeah.

Not necessarily. So your principal place of business, though, is your home. And if you, in fact, have a place dedicated for work exclusively, that would obviously be key. You know, I think what you need to do is just contact a tax professional, go over the specifics of your situation going through kind of all of these requirements to make sure that you can, in fact, meet them one at a time. Before you think about claiming this, if you've never done it before, you know, I recommend any kind of change to your tax situation be processed through the lens of a professional first to make sure, number one, that you're taking full advantage of the law with anything that's due to you, but that you're not taking anything beyond what's permissible. So it sounds like you certainly have a good case given that you're a contract worker as a real estate professional using a place in your home that's dedicated exclusively to this type of work.

But again, I would want you to go through each of those requirements first. Thanks so much for calling today, though. We appreciate it very much. Let's move on to Central Maine and welcome Ross to the broadcast.

Ross, you're on MoneyWise Live. Hi, thank you for taking my call. I appreciate it.

Yeah. And God bless for everything that you guys do. You guys are definitely a blessing. I appreciate you.

The reason for the call is I'm a little confused. The Lord blessed me with the finances to purchase a house outright here in Central Maine. I'm a transplant from Long Island.

It was getting too expensive out there. So my wife and I have been looking at houses because coming up to retirement soon, I mean, I'm 57, but we're playing in the head and I'm looking to get a house down in Florida. But I don't know if I should, you know, if I should get a mortgage down in Florida and then make payments on that. Or once we get established, then sell the house.

But I don't want to upset God's blessing. So I'm asking for your direction here. You know, I appreciate that, Ross. And first of all, congratulations for having your primary residence paid off. Did you say you're anticipating relocating there eventually and making that your primary residence? Or do you plan for this to continue to be a second home indefinitely? It was it was going to be a second home we were planning on that and the coming up for the summertime and then going back down in the wintertime.

We kind of like snowbirds. Yeah, yeah. Okay. Very good.

Well, you know, here's my thoughts. I like the idea, even though this isn't an investment property necessarily, this is really just a second home. I like the idea of you getting the mortgage on that second property, not on your primary residence. Now, keep in mind that if it's not your primary residence, you're going to play pay a slightly higher interest rate should be less than a half a point higher.

If it was a true investment property, it would typically be somewhere between a half a point and three quarters of a point higher. But because it's just a second home, probably less than a half a point. Why would you do that and not just put it on your primary residence? Well, primarily because I like to keep your primary home just that and not put it at risk in the event something unforeseen happened and you were unable to make that payment. I wouldn't want your primary residence to be at risk. I'd rather it be only related to the second property if for some reason in a desperate and dire situation, you had to let it go. So for me, keeping those two things separate, keeping your primary residence free and clear is worth paying just a little bit more in the way of interest. Some may disagree and say no, it's not worth paying that extra money. I just like to keep things separate.

I think the only other option would be is if you were looking to downsize with your home there in Maine, and you could then take part of the money that you would pull out of that property prior to buying something new and use that to either buy the home in Florida outright or at least further reduce the mortgage that you would be assuming or taking on to make that purchase. That would be the only other consideration. But if you've worked it into the budget, you feel like you've got a plan to be able to cover that mortgage and stay in your current residence. I think that's the key that it's not disrupting any other plans that you have and have been working toward. Does that make sense?

Yeah, no, it sounds perfect. Actually, that's kind of like what I was hoping to hear. It's confirmation, you know, because I wanted to keep it, you know, like I said, go up a bit, something happens, you know, down in Florida gets wiped out by a hurricane or something like that. We still have a place to live. Yeah, that's exactly right. And you've worked long and hard to make sure you're in that position.

I wouldn't want to disrupt that for any reason. Hey, thanks for listening and for calling today. We appreciate it very, very much.

And we've got room for a few more calls. 800-525-7000. Before we take our first break, let me remind you, we have a brand new app out that we'd love for you to take advantage of. You can find it in your app store when you visit and search for MoneyWise Biblical Finance. It's a digital envelope system, a community, and even the best content in biblical finance all in one place.

Check it out today. Again, just head over to your app store, Google Play or Apple and search for MoneyWise Biblical Finance. Much more to come right around the corner on MoneyWise Live with your questions. Welcome back to MoneyWise Live.

I'm Rob West. Steve Moore has the day off. So glad you've decided to join us today. Have you been watching the stock market? We've been seeing some sell offs the last several days. Today was primarily because we had a chance to hear from Federal Reserve Chairman Powell and market didn't like what he had to say. Essentially, he's more focused on the economy getting going and keeping people working, which are very important things than he is the potential inflation concerns that are out there. And so the investors were looking for him to signal that he might be willing to raise rates a bit quicker than the Fed has said they will.

He gave no such indication. And consequently, we continued our sell offs. Good news, though, we are not focused on the short term, are we? We're really when we talk about our investing and focused on the principles we find in God's word, which just simply say we should have a long time horizon that we should be seeking a return on God's money, but we should do so in a diversified manner, not trying to ride the ebbs and flows of the market day to day or month to month.

But if we're invested for the right reasons with God's money, and we have the right perspective, we've got a good plan, we've got the right time horizon, then we're in it for the long haul and the daily moves of the market really are not of concern to us. So I think that's a good place to be reminded, especially after a few days of sell offs in the stock market. Hey, back to your phones. We've got one line open 800-525-7000.

Let's go to Michigan. Denise, you're on MoneyWise Live. Go ahead.

Yes, thank you for taking my call. First, I want to share something that I learned many years ago at a financial seminar, and I wanted to share it. We were so deep in debt, it was just crazy. And the gentleman that was leading the seminar said the reason for getting out of debt isn't to have more money to spend, it's to have more money to give.

And that just changed our perspective so much. But now, so many years later, and I'm a widow, I'm 92. And what is my question is, all of these things that come in the mail for giving charities, there's so many of them. And they all have so many good reasons to give. And I don't know, should I pick out a few and give a little bit of money to each of them?

Or should I just pick out one and continue to just give? We do have things that we've been supporting for years. This is different than that.

This is just something that I want to give extra every month. Well, it makes sense, Denise. Let me just first comment on what you were sharing just a moment ago, and that is, I couldn't agree more. You know, part of the reason that God blesses us is so we can be a blessing to others, meeting the needs of those around us, both locally and even to the ends of the earth. We realize that we should be a conduit of God's activity, not a bucket where God's provision stops with us, but a pipeline directing a flow of God's activity into where he is at work.

So I couldn't agree more. And I love that you have a passion to give. I think the key as it relates to the where of giving really begins with your plan. So there's the financial side in terms of what you're going to pre-commit in the way of giving dollars, perhaps at the beginning of the year or a couple of times during the year.

Now, that doesn't mean we don't leave room for the Holy Spirit to move and you to give beyond that as the Lord leads. But there should be a predetermined amount that I would look at at least annually to say, this is what I want to give. And I would look both out of income, that which is coming into you from whatever sources, as well as assets, your balance sheet. Are there appreciated stocks that I could give in a way that's tax efficient to bless a ministry? I have a piece of real estate that I no longer need, and I want to put it to work in God's economy and give it away. So looking at that annually is going to give you a dollar amount and then again, leave room for the Holy Spirit to move if for some reason you want to change that throughout the year. But once that's been determined, then I think it's a matter of deciding where you want to give. Now, clearly, you've already got things on your heart. There's things that really are important to you. I would look at the things that break your heart, the things that really pain you in the name of Christ, things that are going on around the world, whether it's injustice or people who need physical needs met. Of course, spiritual needs to be met. I take real inventory of the things that God has really placed on your heart uniquely. Those could be things here in your local community, here domestically or even abroad. Really think about the giving that you're doing and aligning that with God's heart from Scripture and your passions and where those two things meet with the resources you've decided to allocate to giving.

I think that really should be the primary focus. Now, does that mean that you don't give to other things along the way as the need is made known through the mail or any number of other ways? No, you certainly could do that, but I wouldn't feel bad about passing on some of those. Just because somebody asks doesn't mean it's the right thing for you. You may be deciding to allocate your resources to something else that's on your heart, and that's okay.

I don't think you need to feel guilty about that. I think it's all about, again, deciding prayerfully how much and then where and then allowing the Lord to let those plans change over time. Does that all make sense to you, Denise?

Well, it does, but it brings up another question. There are so many, such as giving to God's chosen people. There are so many organizations out there that are doing that ministry, both for their physical and their spiritual help. You know, I get all of these things and then I wonder, okay, now which one should I give to?

Yeah, yeah. Well, that's a good point. And that's where I would be looking at. Where do they have a good track record of the work that they're doing?

Are they accountable? You could even use a website like or the National Christian Foundation at to look at and evaluate these ministries, because not only do we want to give to what's on our heart, we want to give to the places where God is working and where they have demonstrated excellence in the work that they're doing in Jesus' name. So take advantage of those resources, and we appreciate your call today. Hey, much more to come on MoneyWise Live just around the corner. We'll be right back. Stay with us. Welcome back to MoneyWise Live, where biblical wisdom meets today's financial decisions. Let's go right back to our phones.

We go to Minnesota next. Mark, welcome to the broadcast. Go right ahead. Yeah, thank you.

I appreciate you taking my call. I have a question on, I had a 401k at a previous employer and I left it there when I left about three years ago. And now I'm going to roll it over, or actually did roll it over into a annuity and wondering if that was a good move. It's an annuity with the guaranteed money plus the death benefit and the 5% interest up for the first until I start growing out of it. However, that cost 2.6% to get all of that. What I'm trying to do is get a steady income in retirement. I'm 61 or will be this fall.

Very good. First of all, in terms of rolling a 401k into an annuity, you don't get the tax advantage that often people are looking for with an annuity because 401ks, of course, are already tax deferred. It could have remained tax deferred into an IRA. So there's not any tax advantage to be gained by rolling the funds over into an annuity.

But clearly the reason you did it, Mark, is because you want the fixed income option. You like the guarantees and you're looking to convert that to an income stream that's going to supplement your retirement income in that season of life. Have you looked at, I know you said there's a 5% guarantee, I guess, while it's still growing and then when you annuitize, have you already determined what that monthly income stream will be? Right around $15,000. Okay, annually? I'm sorry, that's annually, not monthly.

It'll probably be more like, you know, probably after taxes, $1100 maybe. And does that sync up with what your need is when you add that to other income sources, including Social Security? Yeah, with Social Security and that, we'll be in a pretty good range. I think it's not, it'll keep us comfortable.

My wife has a Roth IRA as well and she's going to start drawing her Social Security this fall and we'll put that right into her Roth because we won't need it until I retire. Yeah, yeah, okay. Well, you know, it's not a bad thing. I mean, annuities are typically not my first choice just because, as you mentioned, they come with a host of fees and charges that may reduce what you have available to you. It does limit your options because, as you said, you know, you can convert it to an income stream and that's great, but you no longer have access to the principal if you were to need it to, you know, for a major expense like long-term care or something like that that might come up along the way.

Also, just from an inheritance standpoint, they can be challenging also. Now, what is the upside? It's not all negative. The upside is you are looking for peace of mind. And so, if there's a gap between the income you expect and the budget that you've created for that retirement season and you can solve that gap with the income stream from the annuity, you know what it is, and that gives you peace of mind to know that you don't have to worry about the ebbs and flows of the stock market or the bond market or anything else.

You've transferred that risk from yourself to the insurance company. And there's a lot of folks that like to be in that position and know that they've got something guaranteed every month they can count on and they can order their lifestyle accordingly and, you know, that'll last for the rest of their lives. So, I think, you know, that's the key. So, I wouldn't feel bad about doing that. And I think, again, if it's going to put you in a position where you have what you need for that season in terms of covering your expenses, that's a good thing.

And so, from that standpoint, I don't know that there's any changes that are necessary other than just making sure exactly what the provisions are, making sure you understand what happens beyond your life with regard to your wife's ability to continue to collect that payout and then the tax implications as well. So, hopefully, that's helpful to you, Mark. We appreciate your call very much today.

Let's go down south to Alabama and welcome Tom to the broadcast. Go right ahead. Thank you very much. This concerns a question about an IRA. This is actually for my 30-year-old daughter. Her employer is beginning a new retirement program where they're going to match at 0.25 percent up to a 6 percent.

My question, I guess, for someone in her situation, do you recommend Roth or traditional or is there an easy answer? Yeah. So, she has both the Roth 401k as well as the traditional 401k available at work? Yes. Okay.

Yeah. You know, I like the Roth option for somebody who's young and certainly she is. She's got time on her side. She's probably in the early part of her earning potential, which means she's not in the highest tax brackets by any means. So, although she's giving up a deduction in the current year, it's probably less than it will be down the road when she's earning more money and she's going to enjoy that tax-free growth between now and retirement, which, you know, we're talking three plus decades down the road. So, I think all things being equal, I would probably choose in her situation the Roth 401k. The only thing to consider might be either now or in the future splitting it between the traditional and the Roth. There is something to be said in that retirement season depending upon what the tax code looks like and, you know, what her needs are in terms of income and so forth. You know, having her choice as to pick from the tax-deferred or the tax-free environment given so many of those variables that we just don't know what they'll look like 35 years from now. So, that would be the only other option.

But if she's going to choose one, I'd probably go with the Roth. Does that make sense? Yes, it does. Thank you very much. All right, Tom. Yes, sir. We appreciate your call today very much. Let's go quickly to Canton, Ohio. Renee, we've got just a couple of minutes before our next break. How can we help? Hi. I am not sure I need to know the beginnings of Alzheimer's disease.

I should find out either tomorrow or on Monday. And I believe that that still works miracles and I'm hoping that he can do that and that I don't have this disease. But in case that I do, I had always wanted to go to the, you know, I've only been retired for like a year and I've always wanted to go to the ocean and I wanted to give a girlfriend that has a green house some money and I wanted to leave some money to my grandkids. And then I have CMNA Church and we have a lot of conditionaries and so I wanted to give some to them. But I don't know how to do this.

How do I plan this? Because I have no idea what my longevity could be. Well, Renee, let me just say, first of all, we're going to join you in praying that the Lord would intervene here. You know, nothing is out of his control. He is your creator. He knows every cell in your body.

And so we're going to just ask that he would bring his healing touch to your body, regardless of what the diagnosis is. Secondly, we should be all well planned because we don't know if we have one more breath or 30 more years. And so in terms of making that last stewardship decision, we will all make you and me and everyone listening. We need to have a will in place to govern who will be the next steward of our assets and resources. And in your case, you also may want to look at a living will to specify how you want to be treated in certain medical situations. I would give somebody a power of attorney. I have one for me.

I would also say the Alzheimer's Association is a great publication with more information as well. Listen, you stay on the line. We'll talk a bit more off the air. This is MoneyWise Live, and we'll be right back. Welcome back to MoneyWise Live. I'm Rob West.

Steve Moore has the day off today. We're so glad you've decided to join us. Hey, if you have a question you haven't been able to get through on the program, you can always email it in. We love to hear from you. Let's take an emailed question now. This one actually came in last night, and it comes from Heather.

Here's what Heather writes. My husband and I are expecting an extra cash payment of $19,000. After taxes and tithe, we expect to have about $10,000. We have a car loan of $21,000 and three to four months of emergency funds. The question is, would you recommend that we put the full $10,000 toward the car loan or only a portion toward the car loan and keep the rest as a cash reserve?

Heather, we appreciate your emailed questions so much. My approach would be this, and by the way, let me just say I don't think there's a right or wrong answer here, but I would probably build that emergency fund up to six months expenses with the money you received. If there's anything left, put that against the car note. Then I'd focus sending any margin each month to the extra principal reductions on the car. And when that balance on the car gets low enough that you can pay it off completely out of emergency savings and still be left with, I'd say, one to two months expenses in savings, then do it. Pay it off.

Here's the thing. At that point, you're no longer going to have a car payment, which would allow you to take 100% of that car payment plus any margin you were putting toward principal and rebuild that emergency fund. So preserve your cash. Let's focus on getting the car down.

But when we can pay it off, pay it off and then use the excess to build the emergency fund back up. If you have a question, you can reach us at questions at Let's go back to the phones and welcome Joe to the broadcast calling from Spokane, Washington. Joe, you're on MoneyWise Live. Hi, good afternoon. Thank you for taking my call. Yes, sir.

A couple of two-part question here real quick. My wife is getting ready to retire after about 37, 38 years with a company and they've given her early retirement. We're both 58 years old and a little early for her, but we've planned for retirement very well most of our lives since we've been working in our 20s. And so the question is, I left the company two years back and I found a very good investor that we took my money, rolled it into an IRA. I've got a Roth and a normal IRA through them. And then the question is, I hear people say it's not always wise to invest in the same company. My wife's been investing for a long time with that company. Is it wise, do you think, that we take that money and invest it in the one company that we trusted? Or should we find somebody else that is capable of doing that just to say per se have it in multiple baskets in case something did go wrong?

Yeah. And let me ask this, Joe, when you talk about investing in one company, are you talking about one brokerage firm or actually investing all of your dollars in a single investment, which is one publicly traded company? No, I'm talking about one investment firm because we've had that conversation with the company I'm with and the way they explain it is we invest in many different markets and stocks. So you're actually not in one basket. But I've had other hired people that have done very well say, yeah, we have ours in different places, different investment firms because we want to be safe with it.

Yeah, very good. I'm tracking with you. I just wanted to be sure you weren't talking about a single investment because clearly, I wouldn't advocate for that. We want to be properly diversified. Now, when it comes to an investment firm, a single investment professional, I have no problem with you having everything in one place.

In fact, there's a good case for doing just that. Number one, the more you have in investable assets, the more attractive pricing you're typically going to get in terms of the fees that are charged for the management of those assets. Typically, you reach certain breakpoints as the total assets under management, even across multiple accounts, grows.

That's number one. Number two, you avoid unnecessary and even unhealthy duplication of investments because oftentimes, if you're in multiple investment advisors, they probably are not coordinating the investments among themselves. And so it may cause you not to be as strategically invested from a diversification or even a tax efficiency standpoint as opposed to having everything at one place. I think the third thing is just the simplicity in terms of what you have to keep up with. You only have one meeting every quarter or semi-annually as opposed to two. That's one conversation that you're having each time you have a question or you need to make a change. You cut the number of statements you're receiving in half. So from my standpoint, as long as this is somebody that has a good track record, you've built a good relationship with, you're happy with the communication, obviously the track record in terms of the performance on the investments that you've had to this point, and preferably somebody who aligns with your values as a believer and understands biblical principles of managing money and can help you lean into God's best for you.

If all those things are in place, then I would say having everything with one firm, I don't have any problem with. In fact, I'd encourage it. Awesome. Awesome. That's good news. And I appreciate that. The second portion of that is the retirements coming up very quickly for her. I'm capable of, you know, she's worked her entire life. And so I've asked her to relax, take your time, retire, enjoy.

We're just fine. The other portion of that is the ERA, the early retirement portion of that is up and above what she has saved through the long term of that career. I think I know what you'll say here, but, you know, we owe a low sum on a house that's worth quite a bit with property, and we thought that ERA portion of that would be enough to pay the home off. So our thought was, I wanted to ask, we will take the normal 401k and roll it over to that investment that we have. And we've picked the other portion of that money. There's an opportunity that we can leave it where it is in the company. And because she's taken early retirement, the company's offering that at fifty nine and a half. She can start pulling from that money and all she would have to pay is the tax on that money.

No penalties at all. Is that a good idea? Or should we just take that money and also invest that and work towards? Obviously, that money is going to earn a lot more if the market continues to do well. But, you know, with the covid-19 pandemic going on, different markets and jobs aren't doing so well right now. Mine has been shaken up.

I have a very good job. But at the end of the day, in the next year, there's really no guarantees that things don't pick up. So should we pay the house off or should we just leave it and and continue working till I'm sixty five to retire? Yeah.

Yeah. Well, you know, I think, again, there's probably not a right or wrong answer here. I like the idea of you becoming completely debt free. And if you can sync that, Joe, up with the time that you're moving into retirement, it's going to pull the monthly expenses down, obviously, as low as possible because you're out of debt. And, you know, right now you should be in a fairly conservative posture anyway, given your age and where you are in terms of proximity to retirement.

So as long as you do that in a way that makes sense from a tax standpoint, not pulling it all out in a single year, but you do it over time and preferably sync it up with the payoff of the house as you're moving into full retirement for both of you. I think that makes a lot of sense. You'll have a lot of peace of mind and flexibility. Hey, Joe, hopefully that's that's helpful to you. We appreciate your call very much today. Let's go quickly to Joliet, Illinois, and welcome Linda to the broadcast. Hi, Linda.

Hi. Thanks for taking my call. My question is, I would like to refinance a rental house. I actually bought a house for my daughter and her children and they rent from me. And our current mortgage, when we originally bought the house, I thought my daughter was going to assume it, but it's working out better for me to keep owning it while we fix it up because I can take advantage of the the write offs from fixing up the property. Our current mortgage is three point nine nine. And I would like to refinance it at the bank where my daughter works, but they're only giving us like a three point three seven five because it's a rental property. So is that enough of a difference?

Yeah. So three point three seven five is a little higher than I would have expected. I mean, a rental property can be as much as three quarters of a point higher, but rates right now should be only around two point six, two point seven five percent, depending on how long you're looking at. So tell me you're looking to refinance your primary residence as a part of this? No, no, no, just the house. The house is appreciated a lot in value since we bought it a couple of years ago. And we originally got it at a 30 year fixed.

And I would like to knock it down to a 15 year. Got it. Okay. Yeah. And so you plan on staying in it a while, I assume, is that right? Yeah.

My daughter is going to rent it from me. And when it's paid off and it's all fixed up, my plan is to put the title in her name. Got it. Okay.

Yeah. That's just not enough of a savings, Linda, to justify this. So I'd probably just get the call them and ask them get to give you an amortization schedule based on paying it off in 15 years.

So you know what you need to send in order to accomplish that. But I think the cost that you're going to pay to refinance it for that nominal savings on interest is just not going to make any sense unless you can get a more attractive rate. So perhaps the other option is to go to Let's look at some online lenders, get two or three more good faith estimates and see if you can get that rate down. I'd want you to save at least three quarters of a point before it would probably make sense for you to spend anywhere from up to 2% of the value of the mortgage in closing costs.

Otherwise, again, just get them to run the amortization schedule based on a 15 year payoff and you can accomplish the same thing with your current mortgage. Hopefully that's helpful to you. We appreciate your call today very, very much. And that's going to do it for us today. We appreciate you tuning into the broadcast today. Steve Moore, as I mentioned, has the day off today.

He'll be back tomorrow. But so thankful for each of your calls today. You know, we recovered a lot of ground talking about retirement, talking about debt, talking about giving all from a biblical perspective. And that's what we do here on MoneyWise Live. MoneyWise Live is, in fact, a partnership between Moody Radio and MoneyWise Media. I want to say thank you to my amazing team today, Deb Solomon producing, Amy Rios engineering, Jim Henry providing research and Gabby T taking your calls today. I'm Rob West. And for Steve Moore, we'll be back tomorrow for another edition of MoneyWise Live.
Whisper: medium.en / 2023-12-15 01:31:44 / 2023-12-15 01:48:47 / 17

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