If you're like me, watching little kids do an Easter egg hunt is a pretty beautiful thing. But I always feel bad for the littlest of the pack.
It always seems so traumatizing to see that little one run for an egg she has her eye on, only to have a bigger kid sweep in and steal it at the last second. Hi, it's Doug Hastings with Moody Radio, and unfortunately this same kind of situation has become a traumatizing reality for families all across the country. Families are out searching and finding their dream home, only to have it pulled away by another hunter at the last second. Which is why I'd really like you to meet my friends at United Faith Mortgage. Unfortunately, this faith-focused mortgage team can't scare off the other hunters, but they can very quickly get you pre-approved and make it look as good as possible to sellers. They've specifically made a commitment to this podcast and our listeners to do all they can to help you. You can find the entire United Faith Mortgage story and especially read how their direct lender advantage can often save your family monthly and lifelong money at unitedfaithmortgage.com.
Today's version of MoneyWise Live is pre-recorded, so our phone lines are not open. Proverbs 21 5 tells us steady plotting brings prosperity. Hasty speculation brings poverty. But if you have a really big financial goal in mind, how do you know if you're plotting enough? I'm Rob West. Whether you're saving to buy a house for your child's education or for the day you retire, a simple formula can help you determine if you're on track.
Then we have some great calls lined up, but we won't be taking your live calls today because we're pre-recorded. This is Money Wise Live, where the Bible is our best financial advisor. Sometimes you'll hear that the journey is half the fun of arriving at your destination, but that's not the case when we set financial goals, is it?
We want to get there as quickly as we can. If you think you're on a five-year savings plan, say to buy a home, and you find that it'll actually take you seven or eight years, you'd probably step up your efforts. Knowing how much you're actually saving and how much you're spending could help you funnel more money into your savings plan and speed up the process. And you can find that out by figuring out your savings rate, that is the percentage of your income that you're hanging on to each month versus how much is slipping through your fingers, perhaps keeping you from reaching your goal. The exercise will reveal how much of your income is left after meeting all of your expenses.
It's the money that could be going into your savings plan and getting you closer to achieving your goal. So to figure out your savings rate, you have to first determine your total monthly take-home pay from all sources. That includes your full-time job and any part-time or side work that you do.
If taxes aren't automatically withheld, multiply that income by 0.8 to get a rough after-tax figure, add it all up to get your average monthly take-home pay. Now, you have to figure the other side of the ledger, how much you're spending each month. For now, don't count things that are automatically taken out of your paycheck.
By looking at your checking account statements for the last few months, you'll get a pretty good idea of where your money's going. First, add up all your non-discretionary monthly expenses. This would be things like your rent or mortgage, utilities, car insurance, and any loan or credit card payments. Basically, anything that you have to pay every month. Add all that up and hang on to the total.
We'll get back to that in a moment. Now, add up everything else, all of your discretionary spending. This includes things like groceries and eating out and maybe even gasoline because you can spend far more than necessary in those categories. And of course, include entertainment like your cable bill or streaming services. Total it all up and now you have your monthly discretionary spending. Add that to your non-discretionary spending and now you have your total monthly expenses.
As an aside, if you want some help in doing all of this, the MoneyWise app in your app store would be a great resource. All right, now it's time for the formula, but don't worry, you've already done the hard part. First, subtract your expenses from the income figure you came up with earlier. Next, divide that number by your income.
I know that seems like a weird thing to do, but it actually works. You should get a very small number, less than one. Don't worry about the decimal point. Now, you want to take that number and multiply it by 100.
So, let me use an example to illustrate this. Let's say your total monthly take-home pay is $4,500 and let's say your monthly expenses are $4,000. That's the discretionary plus the non-discretionary expenses. Subtract $4,000 from $4,500 and you get $500. When you divide $500 by $4,500, you get 0.11. You multiply that by 100 and you get 11.1.
Let's just round that down to 11 for simplicity. That's your savings rate. Eleven percent of your income is what you're saving each month.
Of course, this formula doesn't take into account contributions to a qualified retirement plan or any employer matching funds. You would add those numbers back into your monthly income to get a more accurate retirement savings rate. Now, knowing your current savings rate will help you determine if you're on track to meet your goal in the time you have remaining. You can estimate how much you'll have tucked away based on your savings rate. If that's not enough to meet your goal, you'll have a pretty good idea of how much you'll have to increase your savings rate to get there.
And how do you do that? Well, this is why we separated discretionary and non-discretionary spending. To increase your savings rate, you'll have to go back to your discretionary spending to see where you can make cuts. If you're saving at 11 percent, knowing you actually need 15 percent, for example, will help you decide what you can live without. All you have to do is make cuts and keep redoing the formula until you reach that 15 percent savings rate. All right, I hope this lesson has been helpful to you.
Make sure you use it to reach your savings goals. I'm Rob West. So glad you're along with us today. Today's program is pre-recorded, but I will tell you we have some wonderful calls all lined up in advance. Stay with us. Much more to come just around the corner.
Welcome back to MoneyWise Live, where God's Word intersects with your financial life. We appreciate you being along with us today. Our team is not here today. We're enjoying a day off, so don't call in. There'll be no one to answer that call, but we've got some great questions lined up in advance. One of those comes from Swanee, Tennessee, and it's from LaShwanda, and we appreciate your call today.
How can we help you? I am a stay-at-home mom, and it has taken me some time to be able to come up with some money, but I've ended up with $4,500 because I keep packing away a little bit, and I have set it aside for my 12 and my 9-year-old because, you know, they're going to be turning 16 soon, and they're going to be needing vehicles, and I wanted to be able to help them, at least with, you know, half of that. And I'm wondering, would it be wiser for me to invest in, like what you have been saying, the betterment than for it to be sitting in just a regular savings account? No, I don't think so, just based on what I'm hearing. I mean, how far off is this that you would want to be able to tap this money? Right, it would be like in six years, so I would really have to, it would have to be 10 years or later, is that correct?
Is that what I'm? Yeah, I mean, that's not hard and fast. I mean, you know, anything over five years, I mean, you arguably could invest it. I'm just thinking that given where we are in the investment cycle, you know, the economy is raging back now that the pandemic, you know, is beginning to wane, and the economy's reopening, and we're going to have the strongest GDP we've had in 20 years, but we've got a lot of headwinds, inflation, and the debt we have in this country, and the fact that the market is a bit ahead of itself, even though corporate earnings have been strong. So what I would not want for you, LaShawanda, is for you to head, you know, start plowing this money into the market, even broadly diversified through index funds, and, you know, a year from now the market begins to take a downturn, and let's say we were to get into a recession that lasted a couple of years, and, you know, all of a sudden this 4,500 that you've really worked hard to save, you know, is worth 3,000, and, you know, you'd be really discouraged, especially if that was happening right about the time that they needed the money. So I'd probably just go ahead and keep this, you know, in a savings account. I know it's frustrating to see that it's not earning anything, but at least you're protecting what you have, and it's going to be there when you need to use it, and, you know, we're, you know, most of the economists I talk to think that just based on how far this market has come, even if we don't see a downturn anytime soon, we're just not going to see the kind of growth rates we've seen, you know, in the last decade anytime soon.
So I'd probably just put it in a high yield savings at Ally Bank or Marcus and just earn that half a point, and as the interest rates head higher, and they will over time, then, you know, you'll get higher rates. You're not going to get anything significant, but at least you'll be protecting what you have. Does that make sense to you? Yes, it does, and I sure do appreciate you giving me that advice, and it was worth the wait. Thank you. All right, well, absolutely.
Let me just encourage you, LaShawanda. You know, you're a stay-at-home mom. Did you say you're a single parent? No, no. Okay.
Praise the Lord. Okay, so you and your husband obviously are, you know, prioritizing, you know, taking care of these kids, providing for them, I'm sure, you know, with limited resources like we all have. It's about priorities, and you've said, you know what, despite everything else, we want to sock some money away for the kids, and that's not always easy to do, especially on one income with all the competing priorities. So way to go for putting that money away, and I know you guys will be glad to be able to help them with that car purchase when that time comes. So hey, thanks for listening, for your encouragement today, and we appreciate your call. God bless you. 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 it.
You're welcome. 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 planning ahead, 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 going to be a second home we were planning on that, and then coming up for the summertime, and then going back down in the wintertime.
We kind of looked 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 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, you know, the only other consideration. But if you've worked it into the budget, you feel like, you know, you've got a plan to be able to cover that mortgage and stay in your current residence. I mean, 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. All right. Very good. It's confirmation, you know, because I wanted to keep it, you know, like you said, go off 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 before we take our 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 and Google Play or Apple and search for MoneyWise Biblical Finance. Hey, we're going to pause for a brief break. We'll be back with much more.
Stay with us. Welcome back to MoneyWise Live, where we apply God's truth to your financial life. You know, as we mind the scriptures, we understand that God is the owner and we're the managers and money is a tool to accomplish God's purposes. And the good news, there's 2300 verses in the Bible that tell us how we should manage money, the principles that the Lord lays out for us that we can apply to every financial situation. And you know what?
They're simple. You know, if we live within our means, if we avoid the use of debt, if we give generously and have some margin or some savings in our financial life, and then we set long-term goals, we'll be well on our way to experiencing God's best in this area. Doesn't mean we won't still struggle from time to time, or we may find ourselves where we have an abundance at some points. Regardless, it's about being found faithful as a manager of what God has entrusted to us today. And that's what we want to do here on this program is celebrate God's provision in our life and then talk together about how we can be found faithful in that. Hey, before we take some more calls today, let me remind you the MoneyWise app is available in your app store as a free download. It's available when you search for MoneyWise Biblical Finance. You'll find our Discover tab with the best podcasts, articles, and videos in Christian finance. You'll find our community where you can post a question and get feedback from others on the journey as well as our MoneyWise coaches. You'll also find our digital envelope system where you can organize your spending, download your transactions from your institutions automatically, have them categorized, and then know in every envelope where you stand throughout the month. That's going to be key to living within your means. So go download it today.
You'll find it in your app store. Just search for MoneyWise Biblical Finance. That's MoneyWise Biblical Finance. Let's go right back to our phones.
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.
Yes. 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 our 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? Do 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, you know, the things that really, you know, pain you in the name of Christ, things that are going on around the world, whether it's injustice or people who need, you know, 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. And 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. And, 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 ministrywatch.org or the National Christian Foundation at ncfgiving.org 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. It's great to have you with us on MoneyWise Live today, but unfortunately today we're not live. We're prerecorded and therefore won't be taking your calls. However, we've lined up some calls in advance that we think you'll find helpful. So stay tuned and enjoy the rest of the program. 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 I'm wondering if that was a good move. It's an annuity with the guaranteed money plus the death benefit and the five percent interest up for the first until I start growing out of it. However, that cost 2.6 percent to get all of that. What I'm trying to do is get a steady income, you know, in retirement. I'm 61 or will be this fall.
Okay, very good. Yeah, you know, I mean, first of all, in terms of rolling a 401k into an annuity, you know, 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 five percent 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? Or not, I'm sorry, that's annually, not monthly. It'll probably be more like, you know, probably after taxes, $1,100, maybe.
Yeah. 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'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 were 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, you know, 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. And 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% up to a 6%. 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 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 feelings of Alzheimer's disease. I should find out either tomorrow or on Monday and I believe that God 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 then we have a lot of missionaries 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. This is our final segment of a broadcast we previously recorded. Thanks so much for being with us today and we hope you'll stick around and enjoy the rest of today's program. Welcome back to MoneyWise Live.
I'm Rob West. We're so glad you've decided to join us. Hey, do 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. You know, 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 access to build the emergency fund back up. If you have a question, you can reach us at questions at MoneyWise.org. 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. 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. 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 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 and bonds, 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. No, 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, you know, 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 retirement's 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, you know, 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 we have, she has saved through the long term of that career. I think I know what you'll say here, but you know, if 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 59 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 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 continue working until I'm 65 to retire? Well, 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 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 helpful to you. We appreciate your call very much today. Let's go quickly to Joliette, 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 write-offs from fixing up the property. Our current mortgage is 3.99 and I would like to refinance it at the bank where my daughter works, but they're only giving us like a 3.375 because it's a rental property. So is that enough of a difference?
Yeah, so 3.375 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 2.6, 2.75 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, 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's 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 call them and ask them 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 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 bankrate.com. 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 two percent 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 and we appreciate your call very much. Well, folks, that's going to do it for us today. Thank you for joining us. We're so grateful when you stop by and participate in the program. We're all a big community here just sharing our ideas and thoughts, asking questions, and journeying together as stewards of God's resources.
When we do that together, it's such an encouragement. Hey, MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Let me say thank you to my team today, Amy, Deb, Rich, and Gabby T., and we appreciate you being here. We'll be back again next time with another edition of MoneyWise Live where God's word intersects with your financial life. Come back and join us. God bless you.
Whisper: medium.en / 2023-09-24 17:29:44 / 2023-09-24 17:47:15 / 18