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Inflation Fears and Market Realities

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
May 24, 2021 8:03 am

Inflation Fears and Market Realities

MoneyWise / Rob West and Steve Moore

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May 24, 2021 8:03 am

With the Fed increasing the money supply and massive government stimulus spending, the economy is showing signs of inflation. Investors are rightly concerned about it, but is their fear really warranted? On the next MoneyWise Live, host Rob West welcomes investing expert Mark Biller to talk about inflation fears. Then Rob will take your calls and questions on the financial matters you’d like to discuss. That’s MoneyWise Live—where biblical wisdom meets today’s financial decisions, weekdays at 4pm Eastern/3pm Central on Moody Radio.

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Let's call it the couch cushion dash. This is the moment when you need a tip for the pizza man, a few bucks for your kid's lunch, or you can't say no to the sweet eight-year-old and her Thin Mints. But you've got no cash and no other options but to tear apart the house searching for hidden money. It's Ryan from United Faith Mortgage, and it's funny how we can usually find a way to scrounge together a few bucks hidden around our house. Shame on you if it's from your kid's piggy banks. For many listeners though, there's enough money sitting inside your home to buy a swimming pool full of Thin Mints. Home values have gone up across the country the last few years, leaving many of us with a good chunk of equity tucked inside our homes that we could cash out to use for life.

If you'd like us to help, we are United Faith Mortgage. With the Fed increasing the money supply and massive government stimulus spending, the economy is showing signs of inflation. Investors are rightly concerned about it, but is the fear really warranted?

Hi, I'm Rob West. There are many reasons to be wary of inflation, but there's at least one factor that should keep investors from hitting the panic button. Investing expert Mark Biller joins us today to talk about that. Then it's your calls at 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, where biblical principles guide our financial decisions. Well, our good friend Mark Biller is the executive editor at Soundmind Investing, where his able crew has been keeping a sharp eye on inflation, and he has much to report. Mark, welcome back. Hey, Rob. Good to be with you.

Great to have you. You wrote a deep dive into inflation as the cover article of the May issue of Soundmind Investing, Mark. Why are people so concerned about inflation right now? Yeah, well, there are really two things that are driving this inflation concern, Rob. You know, the first is that any time the government does anything new that looks or smells like money printing, you know, people get rightly concerned. And over the last year, we've seen unprecedented borrowing, plenty of new programs where the government's been sending multiple checks directly to people, and all that sort of thing.

So people are rightfully, you know, paying attention, a little bit concerned. And then you've got the fact that the Federal Reserve has been literally creating more money. Last year, the money supply increased a whopping 24%, which was the largest increase ever in the 150 years that we have data on that money growth series. So we've got a couple of powerful things that we can check the box for on the theoretical side of potential higher inflation. Then you just add in the practical, what people are seeing every day all around them in terms of higher prices.

You've got food increasing, these lumber stories we all keep hearing about, used cars. There are just a lot of prices that have been rising that are kind of in everybody's face, and there's really no debate about whether prices are rising right now. Just a couple weeks ago, we got the first really big official inflation number. We got an inflation report that said that inflation was up 4.2% over a year ago. Now, 4.2% may not sound like that much to people, but that was the highest level that we've had since 2008.

So that's a long time, and this is a big number. So a lot of inflation fear out there right now. And where the rubber really hits the road in terms of this program and our investing, if we have entered a new inflationary regime, there are really significant implications for the way investors should construct their portfolios. Well, that really is the big question, isn't it, Mark? The Fed calls this transitory, which means they think it's going to be short-lived.

What say you? Have we entered into a new inflationary regime? Yeah, you know, it's a good question. It's a tricky question, and frankly, right now, it feels a little bit like tilting against the wind because when you have the types of inflation numbers coming in that we're getting right now that we'll probably see next month, maybe the month after that, just because of these year-over-year increases from where we were a year ago, you know, it's hard to tell people, yeah, but just wait a little while, and a lot of this is going to go away. But I would just say, you know, if you think back to where we were a year ago, we had several months there in a row where we had some of the most massive deflationary numbers that we've ever seen as everything was shutting down. And in the same way that back then there were a lot of us, you know, telling people, look, this isn't going to last forever, we're not in a permanent new deflationary regime, we would just caution people a little bit right now as we're seeing these big inflation numbers to maybe just hit the pause button a little bit and think about, is it really guaranteed that this is going to just continue indefinitely into the future? After all, you know, we really were not in a big inflation push when COVID hit a year ago, so we have to think carefully about this. Yeah.

Well, great point. We'll continue to unpack this just around the corner. Is there inflation?

Is it going to be a lasting problem? And what should you do in your portfolio? Joining us today, Mark Biller, executive editor at Soundmind Investing. Then your call is 800-525-7000. Thanks so much for joining us today on MoneyWise Live.

I'm Rob West. Joining me today for this segment, Mark Biller, executive editor at Soundmind Investing, where they've been keeping an eye on inflation. In fact, the newest cover article of the May issue of Soundmind Investing really dealt with this exact topic. Should we be concerned about inflation right now?

Before we get back to our conversation with Mark, let me just mention phone lines are open this portion of the broadcast. We'd love to hear from you if you have investing related questions. Maybe you're wondering about inflation and what you should do about it, or how should you position your portfolio? What about planning for retirement in this period where interest rates are low, and as they head higher, bond prices will be falling? Whatever's on your mind related to investments and looking at those investments through the lens of God's word, we'd love to hear from you.

Here's the number, 800-525-7000. Questions for Mark Biller today, 800-525-7000. Mark, just before the break we were talking about inflation, whether or not we've entered into a new inflationary regime. We talked about the incredible monetary stimulus that took place during this self-induced recession brought on by a pandemic. But this idea of money printing leading to inflation is something we've heard before, perhaps maybe during the global financial crisis, is that right? Yeah, that's exactly right, Rob, and that's one of the cautions that we've been looking at real closely, and why we're trying to take a measured approach to this and not just jumping with both feet like a lot of people are into the, oh, inflation is back camp. Coming out of the global financial crisis, like you mentioned, there were a lot of voices calling for much higher inflation and, in fact, hyperinflation. And we, as investors, we actually saw a lot of the downside of that.

This kind of speaks to the why does this matter so much. We saw a lot of investors that were coming to us for a few years after those calls were being made saying those expectations of hyperinflation and so forth scared me out of the market. And here I am three or four years after the great financial crisis, and I've been sitting on the sidelines this whole time.

What do I do? So these issues that we're talking about today have really big implications for people, and that's why we want to try to take a real balanced view. You know, back then, everyone was afraid of the Fed's new quantitative easing policies. They were just sure that was going to create all this new inflation. We had a new democratic presidential regime with a new big policy with national healthcare and lots of new spending, but we never got those sustained big rises in inflation.

We had a short-lived spike in commodity prices, just like we're seeing today, but then things settled down pretty quickly into a decade, really, of fairly low growth and low inflation. So it's a little bit of a reach to say that just because we're seeing, you know, the borrowing and this emergency response that we've seen over the last year, that this is going to be persistent into the future and cause sustained new inflation. That's really the crux of the issue. There are a couple of schools of thought about this issue, aren't there? Yeah, there really are, and so one is obviously that we are in the beginning of a new higher inflation regime, and this camp rightfully is pointing to things like the new child credits that are about to be paid out and some of the other stimulus measures and saying, look, the government now, in addition to the Federal Reserve, is giving people money directly. They're pumping it right into the economy, and that's going to have a big impact, and that could be true.

You know, we haven't seen that lately in the way that we're seeing it now, and so really the question there is how sustainable is that? Is the government, is Congress specifically in a position where they are going to just keep rubber stamping more and more stimulus? Now, just in the last week or two, we've seen a lot of the so-called red states kind of pushing back now and saying, you know what, we're going to actually put our foot down on some of this additional federal government spending.

We've had Joe Manchin, probably the most conservative Democratic senator, saying, I'm not so sure about more stimulus. So it's not really a guarantee here that even if the president and his cabinet want to keep the spending pedal pushed all the way to the floor, that they're going to get everything they want. The other side of this argument, Rob, is, you know, nobody's arguing that we're not seeing inflation right now, but the question is, the other side of this is, is this mostly due to the after effects of last year's shutdowns and the disruptions that those have had on supply chains and on the supply of goods, which we all are seeing stories about how car companies can't get the semiconductors they need to run their assembly lines full throttle and things like that. But I think as we think carefully about a lot of those issues, you know, most of us would say those issues probably aren't going to last forever as the economies reopen, a lot of these disruptions in supply will probably smooth out. And the question is, when that happens, are the factors that have been keeping inflation low for the past, really the better part of the last 40 years, are those factors going to reassert themselves? And those three big deflationary factors that are working against this inflation argument are the really high levels of global debt, the aging demographics around the world, really, and the continual increase in more and better technology. All three of those factors are very deflationary. And so it's really an uphill battle, given that none of those three factors have materially changed to build the case that we're going to just see inflation as far as the eye can see.

Interesting. Well, clearly, it may be premature to assume inflation is going to turn into a lasting problem today. Just around the corner, we'll be taking your questions from Mark Biller today, the number 800-525-7000. Mark Matthew called in, he didn't want to be on the air, but asked, what about the possibility that inflation would have an impact on gold and silver? How do you see that playing out?

Yeah, that's a great question. And I want to be clear that we're not sitting here saying you'd be foolish to do anything about the possibility of future inflation. We have made a number of changes this year in our SMI portfolios, which we can talk about a little bit later, to prepare and to take advantage of this inflationary impulse. As far as gold and silver specifically, it's been kind of surprising. Those have been some of the assets that actually haven't responded as strongly to this inflationary pulse over the last, say, six months as a lot of other commodities have. So you look at things like copper and lumber and a lot of the other agricultural commodities, those have soared higher. Many commodities are up 50% or more over the last several months. Gold and silver have actually lagged. Now, I tend to believe that they are probably going to catch up to some degree if this inflationary pulse continues. But I would just note that they have not been the automatic go-to that a lot of people would naturally assume they would be in this specific inflationary pulse that we've had lately.

Interesting. Well, we'll continue to unpack this around the corner and consider even the fact that the Fed and the government actually want higher inflation. Mark will talk to us about that.

What about your portfolios and how you react to an inflationary environment? And then we'll take your calls, 800-525-7000. Just ahead, we'll talk to Rose and Kyle Texas and perhaps you. Again, the number, phone lines open, 800-525-7000. This is MoneyWise Live. We'll be right back. We're grateful you've decided to tune in to MoneyWise Live today.

I'm Rob West. Joining me in this segment, Mark Biller, executive editor at soundmindinvesting.org, a great partner and an underwriter of MoneyWise Live. We're so thankful for the team at SMI keeping us on top of not only investing, but really just understanding how do we handle God's money from his perspective.

And if you want to check out more, including this article we're talking about today related to inflation, which was the cover article for the May newsletter, Soundmind Investing newsletter, you can find it at soundmindinvesting.org. We have some phone lines open, 800-525-7000. In this segment, questions for Mark Biller on investing and Rose and Kyle Texas is up first today. Thank you for your patience, Rose.

How can we help you? Yes. My question is, I've been retired for about a year and a half. And so when I left my government job, I had about 80,000 in my 457. And I've just kind of let it sit there. But now with the market, I'm just getting kind of afraid that I might lose it. I'm just wondering if there's something else I should be doing with it, about perhaps purchasing some, some land.

I just I'm not sure what to do. Yeah. Do you know what your investment allocation looks like right now inside that 457? Well, I've got about 80 percent over like in what they call safe investments.

And then I've got the rest of it in kind of like mid aggressive. OK. I know. I know.

I know those are in Vanguard. The others are just a mixture of whatever they decide to do. OK. So, Mark, your thoughts.

She's retired. Eighty thousand dollars sounds like perhaps 80 percent leaning toward fixed income type mutual funds, maybe the rest in a balanced approach. What are your thoughts?

Yeah, I'm not 100 percent sure of what those 457 designations are as far as safe. But assuming, like you say, Rob, that the lion's share of that is in bonds. You know, I think that this inflation discussion is very relevant to this because bonds are the place that we would expect if we do have a lot of inflation, we would expect bonds to struggle with that. Now, there are ways to moderate that by being in shorter term bonds that shouldn't get hit as much if interest rates do rise. You know, there are always a lot of options, Rose, buying some land. You know, real estate can be a good investment for a lot of people, but it's a much more difficult investment for most people.

If you're trying to rent that or somehow get an income from that, that can be very difficult. So that is the big advantage of having a more conventional asset allocation mix like you have right now where those bonds can continue to provide some income. As long as those are on the shorter term side, shorter term bonds, I wouldn't be particularly concerned right now about those being hit. Even if the stock market were to go down, we wouldn't expect those bonds to decline in value. The 20% or so that you might have that's exposed more to the stock market, you know, the reality is that if we have sustained inflation of any type, you really need some of that stock market exposure to help your portfolio keep up with the decline in purchasing power, which is really what we're talking about when we talk about inflation.

You know, another way of talking about that 4.2% rise in inflation over the last year is to say that your purchasing power declined by 4.2%. And that's why financial advisors typically will say even retirees need to have at least a little bit of stock market exposure to try to keep their portfolio purchasing power growing through what can be, you know, a couple decades of retirement. And so, you know, I think really to me, that allocation sounds pretty reasonable. Rob, what are your thoughts? Yeah, I think you're right in the sense that, you know, if we think about migrating over to real property, especially land where we've got to think about, you know, is it going to be built out the way we expected and what about the access to roads and utilities and, you know, land is not income generating because there's not any improvements that we can lease out. And as you said, Mark, it's more of an active investment where we've got some work to keep up with it, pay the property taxes, all of that versus passive investing in the stock market.

I think the key, Rose, is to get some competent counsel. I think Mark made some great points about the allocations you should be looking at and how you should be thinking about your investments in this season of life and having a competent financial advisor, whether it's the team at soundmindinvesting.org or a certified kingdom advisor in your area, which you could find at MoneyWiseLive.org. Somebody who can help you navigate this, build the right portfolio that has some element that's going to grow for the future and that's going to generate income while we see how this is all going to play out.

This is not a new cycle. These happen and we work our way through them and the good news is if the Lord tarries and you have good health, this money needs to last for decades, even once you reach retirement. And having a properly diversified stock and bond portfolio can help you do that with wise counsel. So hopefully that helps you today, Rose. We appreciate your call. Let's quickly go to Karen in Florida, your next on MoneyWiseLive. Go ahead.

Hi, thank you for taking my call. I know you don't have much time. I'm a federal employee, so I'm in the TSP and we also are able to, with my job, be a part of T. Rowe Price. And I'm eligible to retire next year.

I might say four years longer, but I'm not sure. And I have like 75% in the C Fund and the rest in the G and the F Fund for TSP. And for T. Rowe Price, I have a lot of new horizons, which I know is ridiculous, but it's so high. I mean, the returns have been so high.

So I was just wondering, what do you think is the appropriate allocation? Okay, if you hold the line, we're going to take a quick break. We're going to pause and we'll be back and Mark will give you his thoughts.

And then more of your calls, 800-525-7000. This is MoneyWiseLive. Stay with us.

More to come just after this. Thanks for being with us today on MoneyWiseLive. We're talking today about your investments. We're talking about inflation, the higher prices we're seeing all around us.

Is that going to be short lived or is this a new inflationary regime? Mark Biller, executive editor of SoundMind Investing, joining us today, talking about the cover article for the May issue of SoundMind Investing, the newsletter, all about inflation. And Mark pointed out some really great insights about how we should think about this and how can we draw from history to know how this might play itself out and what can you do in your portfolio.

Just before the break, we were talking to Karen. Karen is four years out, potentially from retirement. She's thinking about continuing to work, even though she can retire next year. Mark, 900,000 in a TSP plan, Thrift Savings, 400,000 in T. Rowe Price. Probably 75% plus of that is in not only stocks but concentrated toward technology.

So given where she's at, how would you counsel her? Yeah, I think Karen, especially given that you're concerned about a market pullback, given the timing of your retirement plans. You know, the simplest thing that you could do to reduce risk right now would be to cut the technology exposure that you have. Technology, you know, has been a wonderful sector for many years, and last year it was certainly the shining star coming out of the bear market a year ago. However, we have seen a pretty steady stair-stepping, if you will, of the most volatile, riskiest areas of the market kind of getting thumped a little bit one by one as we've moved through 2021.

And while broader technology stocks have not yet taken a big hit, if this pattern does continue, it's not unreasonable to think that technology stocks may suffer more than the broader stock market. So that would be an easy step to reduce the T. Rowe Price small company and specifically technology stock exposure and to just even maybe move some of that, not necessarily even taking it out of the stock market, but maybe just spreading that around a little bit so you have more of a mix with some value stocks in there. Maybe even a T. Rowe Price value-oriented mutual fund might do the trick for some of that. The second really easy step to reduce risk would be to look at that overall stock bond balance, and if it is somewhere in that 75-25 neighborhood, you know, you could pull that back to 70-30 or 60-40 and add to the bond side, which would give you downside protection.

And of course, these are not necessarily moves that have to be permanent. You know, if you pulled back to a 60-40 type allocation at this point and then you were right and you did see some kind of a stock market correction, there's nothing that says you can't take a little bit of that bond money and then re-enter the stock market at that lower point. Now, I'm not trying to advocate some kind of an active market timing strategy for the average person, but again, when you're close to retirement, you have specific concerns about a market pullback.

These are just some easy ways to get a little bit more diversified, reduce some of your risk exposure, and of course, you can dig in for a lot more detail by looking at some of the portfolio ideas that we have over at SMI, soundmineinvesting.org, if you want to dig a little more into some other options on how you can diversify further. Rob, any other thoughts on that? Well, it's great counsel, Mark, and the only thing I would add, Karen, is just this idea that you should really be thinking about answering the question, how much is enough, and drawing that financial finish line such that beyond that, you would drastically reduce the level of risk because there's no need to take risk unnecessarily, and two, once you reach enough, whatever that is between you and the Lord, both income-wise as well as balance sheet-wise from an asset accumulation standpoint, you can dramatically increase your giving, and I think that's one of the opportunities we have. We hear from people on this program who are in a desperate financial situation trying to find God's heart, and those who have been diligent and followed biblical principles, and they have way more than they need, and we're all just trying to be faithful stewards along that journey wherever God has us, and if you could use some assistance in that, Karen, I'd encourage you to connect with a certified Kingdom Advisor there in Florida, just go to MoneyWiseLive.org, we appreciate your call. Quickly to Bobbi in Chicago, go ahead. Hi, my husband and I just received a partial payout on an inheritance of $100,000, and I'm petrified of investing right now with the way the market is and under this administration. We just put the money right now into our money market temporarily, but I don't know, that's probably not the wisest thing to do, I just don't know what to do with this $100,000.

Sure. Bobbi, tell us just quickly about the rest of your financial life. Are you all actively working, you or your husband? Yes, my husband and I are 66, we are working right now in just savings, we have about $130,000, and then in retirement we have about $135,000 jointly, and we have no debt. And the $130,000 in savings is in addition to this new inheritance money?

That is correct. Okay, so you have about $365,000 in potentially investable assets, including your savings. Yeah, and we probably will be getting another $60,000 at the final, whenever the state is completely settled. Okay, and are you all planning to work for a bit longer? I don't want to work, my husband and I would like to work until he's 70. Okay, all right, very good, and as you look at your lifestyle and what it's going to take to fund that, and you look at perhaps Social Security, how much do you think you're going to need to generate a month in income just to make ends meet?

Well, since we have absolutely no debt, I would imagine maybe $2,000. Okay, all right, Mark, what are your thoughts as they think about the next 5 to 10 years? Yeah, I love the way you always approach these, Rob, with the questions that you ask, because you really do want to approach what do I invest in through the lens of how much risk do I need to take to meet my goals? And that's something we often remind our SMI members about, that you don't want to take more risk than you have to, because sometimes people feel a little funny when they kind of downshift on risk if they're not taking the amount of stock market allocation that they think is normal for their age or whatever. But we always want to encourage people, don't take more risk than you need to, and the way that you figure that out is by starting with the types of questions that Rob was leading with. How much do you need to sustain your expenses in retirement?

So if that answer is relatively little, if you're close to meeting those goals, then I would recommend focusing on relatively safer investments, shorter-term bonds, that type of thing, and only throttle up from there if you need to. Very good. Bobby, thank you for your call today.

If you need someone to walk alongside you with godly investment advice, go to MoneyWiseLive.org and search for a CKA. Mark Biller, thanks for being with us, my friend. Thanks, Rob.

Always good to be with you. Learn more about Soundmind Investing at SoundmindInvesting.org, where you'll find the article we were talking about today. Stay with us. More to come on MoneyWise Live. We'll be right back. It's an investing theme on MoneyWise Live today.

Thanks for being along with us. We've been talking to Mark Biller of Soundmind Investing about inflation, which was really the focus of the cover article in the May Soundmind Investing newsletter. You can check it out at SoundmindInvesting.org. Before we get back to the phones, this is Monday, which means it's time for our MoneyWise market commentary. Our good friend and resident market analyst Bob Dahl joins us. Bob is an industry veteran.

He's on the board of directors at Kingdom Advisors and just a great friend of the ministry. Bob, you've been writing your investment commentary now weekly. For how long has it been? Over 30 years, Rob.

A long time. Yeah. Well, I know so many, including myself, count on this analysis that you bring, Bob, that's just so rich based on your history and understanding of the markets and the economy. We count on this every week, and I appreciate you turning that written commentary into an audio expression. Let's do that today. As you look out, Bob, you were writing this weekend about really this increased volatility we've seen in the equity markets as investors are really trying to sort out what you call a tug of war between a strong economy and earnings, right?

Yep. On the one hand, we've got that strong economy and earnings, which everybody, including the market, knows about. And on the other hand, the prospect of higher inflation and higher interest rates on the other. And that's the tug of war, Rob, that I think has kept the market kind of bouncing and going nowhere. Last Friday, the market was basically unchanged. Last week, it was unchanged, trailing 30 days. S&P 500 unchanged. The NASDAQ for the last 90 days basically unchanged. So we're bouncing around until we can figure out who's going to win this tug of war.

And we're not going to find out any time soon. Well, it's just been so interesting. You know, the market, as you know better than me, is a leading indicator. And so it really is telling us where we're going to be six months plus down the road. The market has been convinced for a long time, post-pandemic, since probably April, May last year, that things are going to improve rapidly. When the economy opens, it's going to come roaring back. All that has happened. But it seems like we've gotten into a period where the market, i.e. investors, really can't figure out what's next. Is that right?

I think that's right. To repeat, everybody's digested this great economy and great earnings. The question is, we've had a few worse than expected inflation readings, Rob.

And what observers are trying to figure out, is this just transitory? The Fed would believe that. Or has inflation bottom is going to move up some?

And I'm kind of in that camp. I don't think we have big inflation. Let me say it this way. The end of the 0-2% inflation world, which seems like existed forever, is probably in the rearview mirror. And that's not great for interest rates, not great, therefore, for the bond market, and provide some valuation headwinds to earnings. I don't think enough to take the equity market down a lot, but this back and forth, I think, is going to get frustrating to people.

Last question, Bob. What do you see on the horizon that really could promote a prolonged bull market moving forward? Perhaps a bull market that we've already gotten back into that has some legs, or a new bull market? Well, needless to say, we need a continuation of this good economy and good earnings. And I think as the economy opens up, people get more confidence because of the vaccinations. That's kind of in the bank, as it were. And the question is, and for the continued bull market, is can we contain the pace of interest rate increases, which is depending on inflation not getting too far out of hand, which comes back to there's so much money out there, Rob, too much money chasing too few goods is one definition of inflation, and the government's sure thrown a lot of money out there, people.

Yeah, no question about it. Well, we'll continue to watch, read the data, and recognize that at the end of the day, we want to place our trust in the Lord, not our things, right, Bob? Amen, amen, amen, exclamation point. We'll talk to you next week. All the best, my friend. Thanks for joining us. You too.

Let's head to Las Cruces, New Mexico. Mary, thank you for your patience today. How can I help you? Hi, thank you for taking my call.

My husband is 71, and I understand that the required minimum distribution was now changed to, I think, 72. Can we start doing it now? And my other question is, what I want to do is take it out directly and send it to the church for my church tithes and for other ministries. And what I understood is that it is tax exempt doing it that way. And I just want to clarify that and see what the procedure is. Yes, very good, Mary.

I appreciate that question very much. You're right. You absolutely can take it out. It was moved to 72, and you're required to take it by January 31st each year to send the, well, excuse me, the notices go out by January 31st each year, an RMD notice for the amount that needs to be taken for that year that you reach age 52. So any time after that, you could absolutely make that contribution or that distribution, I should say. What you're describing in terms of making that as a gift to your church is called a qualified charitable distribution. And it's a wonderful tool whereby you can satisfy that required minimum each year and not have to realize that amount of money is income because you'd give that amount directly to, in this case, your church by contacting your custodian, telling them that you want to do a qualified charitable distribution, filling out the paperwork, alerting your church that it's coming. And then they'll make the gift directly to the church in the amount or with the number of shares that you want. When it's liquidated, then the church benefits from the full amount of the gift.

You get the full tax deduction, not taking out any taxes that would be paid because there are none, and you satisfy your RMD at the same time and you can do up to $100,000. So it's a wonderful tool. And again, you would just call your custodian of your IRA and let them know that you want to do a qualified charitable distribution.

They'll tell you exactly how to do that. And I think that's a fabulous idea. So appreciate your generosity and we appreciate you calling today. To Warsaw, Indiana, Elaine and Floyd, how can we assist you?

Yes. My husband and I plan to sell our current house. Probably we'll get around $200,000 for it. We will be moving to a more expensive area because we have family there.

We are looking at probably spending at least $500,000. So we would qualify for a reverse mortgage. We are both over 62.

I'm 64 and he's 63. And we would be able to put 40% down. We're just wondering, like we've read pros and cons, and it seems like reverse mortgages can have hidden fees. So we're just wondering what your overall general opinion is about reverse mortgages or buying a home, a new home.

Yeah. Well, yeah, as long as it's the one you actually live in, that would be the key because you can't get a reverse mortgage on a second home. But you'd mentioned that you plan to move into it. So it sounds like that would be covered. And then basically, what you're doing is converting the equity that you have into an income stream.

They're not my favorite tool. I would see them as a last resort. If you absolutely need it as a source of income, there are high fees to secure the loan. You obviously have to remain in the home. It becomes more difficult to pass it on to heirs.

You have to, of course, maintain the property taxes and maintain the property itself. So my preference would be that rather than funding your lifestyle using essentially debt, the equity in your home, I'd love to see you all downsize and get that budget to balance using other assets. And perhaps you could seek out some professional financial advice to assist you in that.

Again, with the imputed interest rate, with the fees that are embedded inside of these products, again, they're very expensive, and I just think there are better ways to do it. So I would encourage you, Elaine, that you and Floyd sit down with a financial planner just to look at the landscape of what you have. What assets do you have? What does your budget look like? What is your housing situation now?

Where are you headed? And see if you can't come up with a plan that allows all of this to work together for you to own something free and clear. Perhaps it's a bit smaller and not try to use the debt to fund that. Because I think for most folks, they can find a way to do that.

If you have the option, you have the equity that would have been in the home and can convert that to income while still owning the property outright. So connect with a certified kingdom advisor there in Warsaw. Just go to our website, MoneyWiseLive.org, click find a CKA, and perhaps see about doing some planning before you make this decision, which is a big one.

And again, it's not an automatic no for me, but it's just not my first choice because of the reasons that I mentioned. So we appreciate your call today. Thanks for checking in with us. Well, folks, we've covered a lot of ground today, as I mentioned, really an investing theme starting today covering inflation and talking about what's happening all around us with rising prices, how we should view that, how that impacts our portfolios.

That was with Mark Biller of Sound Mind Investing and then Bob Doll joining us just a moment ago. Here's the key. You know, as we think about all that God has entrusted to us, however little or however much, we need to start with the idea that God owns it all and that we're a steward and that we're to manage his resources. And that includes taking a portion of what we have if we are giving and we've met our providing for our families and we're saving for the future, taking the excess and perhaps putting it to work as a steward. I think modeling the parable of the talents and doing that according to biblical principles, properly diversified with a long time horizon where we have spousal unity, where we're not taking unnecessary risk and we're steady plotters, not speculators that are hasty. You know, when we do that, we put ourselves in a position to experience God's best. Doesn't mean we're always going to have everything we need.

We're going to be in seasons of want and struggle, and we need to seek God and trust him in every situation. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Let me say thank you to my team today, Dan Anderson, Amy Rios. I want to say thank you to Jim Henry. And I want to say thank you to you for listening and tuning in today. Hope you'll come back and join us tomorrow. We'll be here on MoneyWise Live where God's word intersects with your financial life. God bless you. Bye bye.
Whisper: medium.en / 2023-11-14 14:40:30 / 2023-11-14 14:56:18 / 16

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