The Transformational Power of Fixed Income

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For all licensing information, go to nmlsconsumeraccess.org, corporate NMLS number 1330, equal housing lender, not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. Most investors know that bonds make up part of a well-diversified portfolio, but far fewer truly understand the important role bonds play in their financial future and the way they can impact the world. Hi, I'm Rob West. God calls us to be faithful stewards of all the resources He gives to us, and that means having a careful and intentional approach to our investments. I'll talk about that with Benjamin Bailey of Praxis Mutual Funds today.

Then take your calls at 800-525-7000, 800-525-7000. This is MoneyWise Live, where the Bible is our best financial advisor. So, I'm delighted to introduce Benjamin Bailey, who's joining us for the first time. Benjamin is Vice President of Investments for Praxis Mutual Funds, a leading faith-based family of mutual funds and an underwriter of this program. Benjamin, delighted to have you with us. Thanks, Rob. It's a real pleasure to be with you today.

Thank you. Well, Benjamin, I want to start today with the basics. I'd like for you, if you will, to help our listeners understand fixed income investments and the important role they can play in securing our financial future.

Yeah, certainly. Many people know about stocks, and they understand how a stockholder has a partial ownership stake in a company, really, no matter how small that is. Instead, a bondholder receives the bond or a promise to pay back from an issuer. Generally, bonds have a set coupon, also known as an interest payment.

It used to be more like 3-4%, but now that interest payment seems to be more in the 1-2% area. It also has a final maturity date, so a date in the future where you're going to get your money back. These two things add a level of safety and clarity. Stockholders get the potential for a big upside and also that big downside, so you get less safety, while bondholders get a steadier stream of income, and they're protected on the downside.

That's why you get more safety in your return. Plus, in that worst-case scenario where you'd have a bankruptcy, a stockholder isn't going to get anything back, while a bondholder is going to get something back. This downside protection and safety means that most investors will include some level of bonds or bond mutual funds, because they want that. Especially as an investor gets close to a liquidity need, like a retirement or paying for their kid's college fund, they're going to move a higher portion of their portfolios to bonds. Over the past 40 years, every time the S&P 500, which is the broad large-cap stock index, has had a negative return, bonds have moved in the opposite direction and had a positive return. Moving in that opposite direction, that's called negative correlation. That's a really important aspect of bonds.

You want things that move in an opposite direction, especially during times of extreme stress. Back in March 2020, as stock prices went lower, bond prices went higher as those investors rushed to safety. That's why bonds are such an important part of a portfolio. Yeah, that's key. We talk about bonds often, being that key part, as you said, of a portfolio, especially as you move toward a more conservative posture, moving toward, as you said, a liquidity need, where your portfolio then becomes really income-generating, or just to stabilize the returns overall. That's key. Now, at Praxis, though, other factors are involved in how you actually select bonds for your Praxis Impact bond fund portfolio, for example, as a part of your stewardship investing process.

We've got just about a minute before our first break. Begin by telling us about a few of these other factors that play in there at Praxis. Yeah. Going into the Bible, in 1 Timothy 6.18, Paul says, Tell them to use their money to do good, that they should be right in good works and generous to those in need. One aspect of using money to do good means paying attention to the impact of your investments. We're going to screen out certain companies that don't meet our clients' values. We also look at ESG.

That stands for environmental, social, and governance. We're going to screen out certain things like abortion, pornography, tobacco, but we're also going to screen out some of those companies that have poor environmental records or poor policies with their employees. After that, we're going to look at some of that ESG information, and we're going to try to bring more positive companies in there, and making sure that we don't have companies that are treating their employees poorly, but are really looking to boost their employees. The important thing that we've also been able to do over the last 10 years is we've brought positive impact bonds into the portfolio, where we're actually looking for bonds that have a positive impact on creation and on our communities. We've purchased affordable housing bonds, and also bonds that have helped with the COVID pandemic. Those are important things to have in a portfolio also.

I love it. Well, I want to continue to unpack this and talk about how they perform financially alongside the values and impact perspective. That plus much more with Benjamin Bailey today of Praxis Mutual Funds. Stay with us.

We'll be right back. Welcome back to MoneyWise Live. Joining us for this segment of the broadcast, Benjamin Bailey of Praxis Mutual Funds. Today we're talking about bonds and the part that they play in a well-diversified portfolio, but not only that, the impact that can be made through your bond selections. How do you express your values with all of your investments, your stock selections and your bond selections? Benjamin is helping us understand how the team at Praxis Mutual Funds goes about selecting bonds for their Praxis Impact Bond Fund portfolio. Just before the break, Benjamin, you were talking about the process where you apply values and actually screen out certain companies when making bond purchases because they conflict with Christian values, or where you intentionally select other companies because they're making a positive impact in the world.

And I love that. I mean, it's fascinating to hear how we can actually make a difference in people's lives through our investments, which, as you said, is ownership. But talk about the financial performance of that because it sounds incredible from an impact perspective, but we also want to know that it's going to perform financially.

How have they done over the years? Yeah, certainly. I mean, that's an important balance that each of the investments needs to bring into the portfolio equation. So these bonds, they need to meet the same criteria that we'd have for return versus risk that we would get with any of our other investments.

They have to be able to do that over the long term, and we've seen that, that they have been able to do that over the long term. So 15 years ago, when we're speaking just about these positive impact bonds, they were only 2% of our portfolio because there weren't a lot of options out there. 10 years ago, they were 7%, and now they're a third of our portfolio. So we continue to find interesting investments all the time, and we want to grow this portion of the portfolio, but we still need to make sure that we're outperforming the market. So one reason why we've been able to grow this is that the offerings in the market have continued to increase dramatically. This year so far, just in the first six months, over $500 billion of impact bonds have been issued across the world. That's a 230% increase from just last year. So these impact bonds, when we talk about impact bonds, we're generally thinking about green bonds, social bonds, sustainable bonds.

I talked about affordable housing earlier. And those have been growing very quickly. And other funds, and our experience, again, is that these bonds have performed very well and just as well as any other bonds that we have.

Yeah. So if we know we can get a great return on God's money and make an impact in the world, why would we not want to be educated and intentional about selecting these types of investments? As you know, Benjamin, a lot of investors equate bonds with boring. But you say that fixed income investing can actually be powerful and transformational. So as we, again, go back to this idea that we're stewards of God's money, and that includes our investments, help us understand this aspect of bond investing, fixed income investing, being powerful and transformational?

Yeah. So it starts with the recognition that God owns it all, right? So in Psalms 24, it says, the earth is the Lord's and everything in it, the world and all who live in it. So God owns it all, right?

And it isn't ours to mess up or to be foolish with. I sometimes think about this with my kids. Yes, they are my sons, but I don't own them. And God has entrusted me with overseeing their growth. And it's my job to make sure they're well-functioning adults that love others and don't just care about themselves.

Now, sometimes that is easier said than done, especially when you have teenagers that need to learn how to make their own choices. So similarly, we are entrusted with our investments and we are stewards. So that's why we call what we do stewardship investing. So we're stewards of the resources that God entrusts us with. And we can take some risk, right?

You need to take some, but we can't be foolish either. And we need some level of safety in our portfolio. And that's really what bonds offer. Also in Matthew 25, it talks about the parable of the talents and how we're supposed to be productive stewards of God's gifts. So the servant who received one talent and hid it in the ground was chastised by his master. And in verse 27, it says, the master said, instead of hiding it in the ground, you should have deposited my money with the bankers and on my return, I would have received it back with interest.

That's essentially like buying a bond, right? So we know that we need to be productive stewards in everything, but we also, also need to care for others. And that's, you know, the love your neighbor as yourself. So it just isn't about us getting a return. There's again, that balance of getting a return, but also thinking about our impact on the community and on creation. So understanding this, this balance of these things is really a transformational thing to an investor. And when an investor sees that a portion of the money that they need to save can go directly to make a positive impact on the world, then this necessary and safe portion of their portfolio becomes a way to transform the world, really.

Benjamin, that's a powerful idea. I want to drill down a bit more on that. Can you give us a more specific example of perhaps of what this real world transformational impact looks like? I know you talk generally about some ways that happens, but perhaps even more specific than that. Yeah.

So Jesus says what we do to one of the least of these, my brothers and sisters, you're doing it to me. So really, especially in the vesting that we're doing, we're thinking about the least of these in a lot of our investments. And one good example for that is we've invested millions of dollars in the African Development Bank over the years. And last year they borrowed $3 billion for their fight COVID program. And we were involved in that deal. So the African Development Bank then lent some of that money to many different places, including one of those places was they provided Morocco with over $400 million to strengthen their healthcare system. Some of that money went to buy 670 new intensive care beds and 30 new screening centers.

And this actually has helped Morocco to have one of the highest COVID recovery rates in the world. So another exciting example is an I-BOND. So that's E-Y-E, and that stands for Education, Youth and Employment. So an I-BOND. So that was a bond for the Inter-American Development Bank. And this bond invest in Latin America and in the Caribbean and really in the life cycle of kids from young age kids to young adults to make sure they get a good education and they have the skills necessary for a good job as they get older. And so we know where some of that money went because they ended up telling us where it went. So we know that 6.7 million of that went to Guatemala to improve education quality in the country. And Bolivia got $15.4 million for their Grow Well to Live Well program for early childhood development.

And Peru, they got $2.3 million to improve and expand their employment center services for formal job placement. So these are real projects with real impacts in our market rate bond portfolio. This is fabulous. Benjamin, we have just about a minute left today. I want you to finish today by drawing a contrast between the impact we can have through the bond market versus faith-driven investment strategy involving stocks.

What's the difference there? Yeah. So again, many people understand shareholders and that they are shareholders when they're buying stocks and they can invest in businesses. And some people know about shareholder engagement and the impact that you can have.

And we do this at Praxis with our equity funds also. But bondholders can engage companies in a different way because companies need to raise money. When they needed to raise money, lenders, especially when they get together with other lenders can push towards better practices and better policies. And if you can get enough of them together, then issuers are really going to listen. Maybe it's improving the depth of their impact bond or improving their level of transparency with people. Companies need to borrow and investors can have an impact.

And we've seen that with the issues that we've purchased. Incredible. Well, who knew that the sleepy fixed income corner of your retirement portfolio could generate such transformational returns for the kingdom? This has been fabulous. Benjamin, really appreciate you stopping by and we'll look forward to having you back real soon as we talk about glorifying God through our investments. Hey, I appreciate the opportunity to talk about this impact that can be had.

Absolutely. Benjamin Bailey of Praxis Mutual Funds has been our guest today. You can find out more at praxismutualfunds.com. That's P-R-A-X-I-S mutualfunds.com. Your calls are next, 800-525-7000. Stay with us.

We'll be right back. Thanks for joining us on MoneyWise Live. I'm Rob West, taking your calls and questions on anything financial.

We've got some lines up and we'd love to hear from you. 800-525-7000. That's 800-525-7000. We started today by talking about faith-based investing and in particular, faith-based investing in the bond space, an exciting developing space of investments where we can align our values with our company ownership in the form of stocks or bonds, as Benjamin Bailey pointed out today. If you'd like to know more about how you could perhaps have faith-based investments in your portfolio, you could connect with a certified kingdom advisor in your area on our website, moneywiselive.org.

Just click find a C-K-A. All right. Phone lines are open today. We're going to begin to take your calls in just a moment. Here's the number 800-525-7000, whether it's saving or investing, perhaps faith-based investing, or even preparing for retirement.

Maybe it's college savings and how to best put money away for your kids or grandkids. Whatever's on your mind today, we'd love to hear from you. Again, the number 800-525-7000.

We're going to begin today in St. Louis, Missouri. Winnie, thank you for your call today. How can I help you?

Thank you so much for your program and your guests for just due diligence to learn this whole area. And my question is, every time I get these packets of things from a company of stocks that I was given and were asked to vote, I just look at this and say, God, I don't know what to do with this, and how am I being good, Stuart? And every time I hear that scripture, I always think, oh, will you help me please do a good job? So I really appreciate this program and want to know, how can I learn when I don't know anything?

Yes. Well, Winnie, it's a great question, and there are ways to begin to step into this. You know, I think the first question is, what are your convictions? You know, it sounds like to me you want to have an alignment between your values and your investments, and one way to do that is to seek out an investment professional who could help you understand the faith-based investing landscape, somebody who can help you navigate it, because there's some wonderful fund families out there, mutual fund families, many of which are underwriters of this program, Eventide and Praxis and Inspire. You heard from Benjamin Bailey of Praxis Mutual Funds today, and these companies are doing incredible work building investment portfolios in the form of mutual funds that are God-honoring, both in the way that they screen out certain companies that may conflict with Christian values because of their primary business activities, or perhaps the way they use their corporate profits, or screening in other companies that are having an impact in the world, promoting human flourishing, even having a kingdom impact in the case of what Benjamin Bailey shared today.

So I think that would be a great way for you to begin to explore that. The other is related to proxy voting, and you mentioned that. We had a broadcast just a few days ago with Jerry Boyer, our good friend and economist. Jerry was talking about how you can participate in these shareholder meetings that happen every quarter, and now because of the pandemic, they're happening virtually. And as a shareholder, as an owner of a company, you're going to get a 16-digit code that allows you to log in and participate, and any shareholder, no matter how many shares you have, can ask a question. And what Jerry's been doing is participating in each of these meetings and raising questions where they may be supporting legislation that's anti-religious liberty or some other conflict according to Christian values based on what the company is doing. And just calling it out and saying, I just need you to know, as a shareholder, this is not something I agree with. Perhaps you don't understand fully the Equality Act or whatever it might be that you're raising. And they will answer it.

If they don't answer it on the call, they always answer every question in writing as a follow-up. And I think, excuse me, Christians have the opportunity to make their voices known and express their values as an owner of a particular company. So that would be another way you could, you know, be engaged as a believer and make a positive difference in the world.

Does that make sense though, Winnie? Oh, that's just huge. That just opened up. Yeah, totally. That's great. That's great. I wrote that down. Good. Well, listen to that broadcast with Jerry Boyer and see what Jerry was talking about.

It was recently. And then I would explore some of these other faith-based investing mutual fund families as perhaps additional investments to complement your portfolio. Or you could look for a Certified Kingdom advisor who has expertise in faith-based investing. But I'm delighted you're thinking about this. I know it honors the Lord when we think deeply about how our faith impacts everyday life.

And we want to live with a Christian worldview and be salt and light in the world. And certainly one way we can do that is through our investments. So I appreciate you calling today and asking the question. If you have other questions along the way, let us know.

On to Fort Lauderdale, Florida. Matthew, thank you for holding today. How can I help you? Yes, sir. I've got a quick question. I wanted to know.

I lost you for just a second. State that question over again. No, I have a large sum of money invested in dividend stocks. And I am looking at retiring within the next three years.

When I say large sum, it's around $850,000. But they're high yield dividend stocks that have a long history of paying that. Is that a better route for me to stay on that instead of going into mutual funds?

Yes. So you said you're going to retire in three years. You've got about $850,000. And all of that is fully invested in these dividend paying stocks? Yes, it is.

Let me take that back. I have about $15,000 stuck in mutual funds. But the rest of it is basically on dividend stocks. All right. And will you be relying on an income from this $850,000 to support yourself during retirement? Yes, off the dividends itself. Okay.

All right. Yeah, I would be looking to diversify away. Clearly, dividend paying equities, income stocks are generally more conservative. So I like the fact that you have a portfolio of high dividend yielding stocks versus, let's say, tech stocks. But it does sound like given your proximity to retirement, you're too highly concentrated in stocks in general. I'd have more in the fixed income space just because if we got into a recession, all of these stocks could see a decline and it could be a significant one, especially if you're relying on this for your income.

So I'd connect with an advisor who could diversify your portfolio a bit. We appreciate your call today very much. More to come on MoneyWise Live.

Stay with us. Here's the number, 800-525-7000. So glad you joined us today from MoneyWise Live, taking your calls and questions on anything financial, applying the truth of God's word to today's financial decisions. We'd love to hear from you. 800-525-7000. We've got several lines open today.

800-525-7000. Our call screeners are standing by. We'll get you on the air quickly and look forward to hearing from you.

Let's head back to, well actually to Cleveland, Ohio. Gwen has been waiting patiently. Hello, Gwen. How are you today? Hi. How are you? Thank you for taking my call. Absolutely. How can I help you?

Okay. I have about $4,000. I retired when I was in Florida, back in Cleveland, and I am working again. I have about $4,000 that I put into a money market account for the retirement system. However, every time I get my statement, I notice that they're taking like $6 a quarter, you know, $24 a year, which is not much, but I want to know if there's some place where I can put it where it bears interest. I'm not trying to invest it particularly. I just don't want to keep seeing it go down every time I get a statement.

I can certainly understand that, and I would concur wholeheartedly. I would use an online savings account with one of the online banks, Gwen. Here's the benefit of that. It is a bank, so you are going to get FDIC insurance, so given that you want this money protected, that would certainly be the case. They are going to allow you to do that without any fees, so there's not going to be any maintenance fees or anything that would cause you to have any kind of debit over a month or a quarter, and they're going to pay a little bit of interest. Right now, the online banks are typically paying around a half of 1%. It's not a lot, but it's something, and it's very easy to link it to your checking account online. They have great websites, and that way, if you ever needed any of that money, you could just transfer it through the ACH system, and with one to two days, the money would be right there in your checking account no matter where you bank.

So I would open one of those online savings accounts, and then you'd probably just want the current custodian to send you a check, and then you could deposit the funds. I would use either Capital One 360, Marcus, or Ally Bank. Those are the three that I like a lot, and all three of those would pay the interest I'm describing, and they wouldn't have any fees.

Does that sound like what you're looking for? That sounds like what I'm looking for, but I thought, because I got that with my bank right now with Chase, and I was just wondering if it was someplace else that would pay a little more. Okay, are they paying, what is the interest rate they're paying you? I think it's 0.01 percent.

Okay, all right. Well, these online banks that I'm describing would pay you about a half of one percent, so 0.05. So that would give you a little bit better interest rate, but I would compare them. If you'd like to do some comparison shopping on the online banks, you can do that at NerdWallet.com.

It sounds like a silly name, but they do a great job at rating the online banks, but if you want to just go directly to one of the banks to compare to Chase, again, I'd look at Marcus, Marcus.com, Capital One 360, or Ally Bank, but I think any one of those would give you what you're looking for, and you wouldn't have any fees. We appreciate your call today very much. Let's head to Illinois, and Benit, thank you for holding today. How can I help you? Hi, thanks so much for your service.

We do appreciate it. We are looking to start putting money away for our kids, each from five to seven, and want to know what would be your advice on the best investing or saving account to do. Yeah, so it's a great question, and I love the fact that you want to put money away. Benit, have you thought about the purpose of these funds? Do you want these funds available for any reason, for any purpose between now and when they are young adults, or would you like to allocate these funds specifically for something like college?

Yeah, for college would be the ideal. Okay, yeah, if it is for college, I would look at a 529 savings plan. The benefit of the 529 is it's going to act like a Roth IRA. You're not going to get a deduction when you put the money in, but the money is going to grow tax-free, and so as you invest it and all of the 529s have investment options inside them, similar to a 401k, the growth that occurs inside the account as you invest the dollars would be tax-free growth, so long as it's used for qualified educational expenses. One of the other benefits is if one of your children doesn't go to college, it could be transferred to another child.

If they got a scholarship or a grant, you could pull the money out on a pro-rata basis without any penalties. So there's a lot of flexibility there, but it does need to be used for qualified educational expenses. The way to find the best 529 plan for you is to go to a website, savingforcollege.com. There's a great tutorial there where you will answer a series of questions, and those questions will then result in a recommendation of the very best 529 plans for you. They will factor in a potential income, a state income tax deduction, by using the in-state plan in Illinois, and compare the Illinois 529 to other states where the performance of the investments might be better, and then give you a recommendation on what's best in your situation. So that website again is savingforcollege.com, and I think a 529 is what you're looking for. Does that make sense?

That makes sense. Thanks so much. Okay, Benit, thank you for your call, sir, and may the Lord bless you. We've got some phone lines open for you. We've got some phone lines open today, taking your calls and questions on anything financial. Here's the number 800-525-7000.

That's 800-525-7000. David is in Minnesota. David, how can I help you? Yeah, we're looking at maybe my wife losing her job sometime in the near future here. We're wondering if we should take out her retirement, their $50,000 out of retirement, and buy a piece of land just in case something happens, because if she loses her job, we lose the house. We're not sure what to do. All right, well, I'm sorry to hear about this situation.

David, tell me a bit more about that. When you say if she loses her job, we lose the house. Do you have some equity in the home? Could you go ahead and sell the home and buy something smaller that fits in your budget?

We could sell the house, but we just refinance it to pay to buy new windows in the house, so I don't think we're going to get any equity, and if we do sell, we'll break about being about even, maybe. Yeah, okay. And do you have any savings of any kind to put down on a new home? No, we don't. We lose paycheck to paycheck.

All right, all right. Well, it sounds like the best thing to do might be to rent for a while rather than trying to pull money out of a retirement plan to buy a piece of land. You know, I think what you all need to do right now is go into kind of a May Day budget situation where you look at what income sources you have. Lord willing, she won't lose her job, but if she does, let's take your income. Let's build a new spending plan around that, looking to cut every available discretionary expense that's possible. You know, we've got to start with housing, which would be a rent payment for maybe a town home or an apartment or maybe a small single-family home, and then food, and then you've got to have, you know, gas in the car to look for a new job, and then you've got to have utilities. And everything else is kind of on the table at that point, and we need to rebuild that spending plan around that. But I don't think given the uncertainty, the changes that are taking place, and the prospect of losing this house, we want to take a chance that this house could be foreclosed on because it's going to be a lot more expensive in the long run.

I'd rather see you sell it, get out from under it, satisfy the note completely so you don't have a deficiency when it's sold, perhaps at a discount, and then let's just pray and trust the Lord for additional income, perhaps a new job for her, and in the meantime, you all can rent, and that's going to be the least expensive way for you to go moving forward. I'd love for you to connect with one of our MoneyWise coaches on our website, MoneyWiseLive.org. They can help you put this plan together, and they can do it as our ministry to you, and we'll be praying for you. God bless you, David. We'll be right back.

Stay with us. We're so glad you've joined us today for MoneyWise Live. I'm Rob West, taking your calls and questions on anything financial. Ken is holding in Indianapolis. John is in Wayne, Illinois, and Leslie is in Ohio. Leslie, how can I help you today?

Yeah, I have a question. I have about 20, almost 26 years left on a 30-year mortgage. I pay 4% on $101,000 is what I have remaining. Is it worth paying $6,000 to drop it down to about 2.1% and then redo it at a 30-year rate, or do I just keep chugging along at the 4% for... I pay extra on my mortgage, so it wouldn't be the whole 26 years.

I just don't know. Is it worth $6,000 to drop like 1.9%? Yeah, you would be buying that rate down, which is why those closing costs are so expensive. What's the value of the mortgage right now, Leslie? I owe $101,000 on a $140,000 hole.

$101,000. Yeah, I would be looking to spend only about 2%, 3% at the most in closing costs, which would be about $2,000 to $3,000. So, you're spending quite a bit more than that. The other option I would consider is could you save a point, because that would be what I would be looking for, one percentage point at a minimum, so four down to three as opposed to 1.9%, and do it with a new 20-year mortgage, which the payment will be a little bit higher, but you're already sending more anyway. So, if you could drop the interest rate by a full point, actually decrease the term as opposed to increasing it back to a 30 year, and get those closing costs down to $2,000, $3,000 at the most, I could get on board with that approach, but I don't like you restarting this mortgage, because in the first five to eight years, the vast majority of that payment's going to interest, and you're kind of restarting that clock. Plus, that's quite a bit of money in closing costs that you would have to recoup before you even enjoy any of the savings from the lower interest rate, and especially if you're not planning to stay in this home for at least seven years, you may not even realize any of that savings. So, what do you think about looking for a new 20-year mortgage at 3%? See, what makes us nervous is, say, I pay about $800 a month, or my mortgage is about $800, I said $950, but my wife is a stay-at-home mom. We have four children, and it's a single income, and I like the flexibility where worse comes to worse, I could take off that little extra bit at a 30 year, and that's what's made us nervous about, you know, it's nice to have where if my hours at work get cut, worse comes to worse, I could pull back that 150 extra I pay a month, almost like a cushion with my wife being a stay-at-home mom. Yeah, well, what you would need to do is, I mean, you could look at a 25-year mortgage or a new 30, but you'd need to run the amortization schedule at that lower interest rate to determine exactly what the total interest that's going to be paid based on the extra $150 you're going to send per month, but I don't like you spending $6,000 just because it's going to take quite a bit of time to recoup that. So, let's take a look perhaps at a 25 or a new 30, but you'd have to be committed to really sending extra, otherwise I'd probably just stay with what you have. I certainly understand wanting that flexibility and not having the higher payment, if you need it.

So, I think it's just going to come down to what the total interest savings is, and once you get a loan targeting 2% for the closing costs at 3% in the interest rate, then they can tell you exactly what you'll pay over the life of the loan and interest, and you can just compare that to your current mortgage. We appreciate your call today, Leslie, very much. Let's head to Wayne, Illinois. John, thank you for holding.

How can I help you? Yes, we got some CDs come and do, and we're wondering if we could put some of that money in a five-year fixed index annuity. We were wondering what you thought of that.

Yeah, I'm not a huge fan. A fixed index annuity is basically an insurance contract that provides you with income in retirement, and your payments would be based on the returns of the either a stock market index like the S&P 500 or some other index, the Dow Jones Industrial Average. So, unlike direct investing in the market, you're generally protected against losses, but you only get a portion of the upside, and you have to pay additional fees. So, I think the key would be just the complexity, tying up your money where you wouldn't have access to the principal without paying surrender charges and the limited upside in exchange for the downside protection.

Is that really what you're looking for? So, I think at the end of the day, what you need to ask yourself is, are you willing to assume some risk with the investments that you take on, albeit perhaps a conservative amount of risk, or are you wanting to transfer that risk to an insurance company? And with the added fees and the complexity and the limited access to your funds, that's okay because you're doing that in exchange for not having to bear the risk of the investments because you know that the money can't go down in value. So, tell me just your thoughts on that and what you're ultimately looking to accomplish.

Well, we got some money. We got quite a few other CDs, so we were wondering if we'd use a portion of that for the indexes to get a better rate because we would go with a five-year one, which we think the economy probably, you think it'll improve within five years that they'll go beyond that? Because I think you'd be pretty close to what, one and a half or two percent, you would end up on those indexes, don't you think so?

Well, it's just, you know, it's hard to say. What is the amount of money we're talking about and how does that compare to your total portfolio? Well, it'd be, we have say about $800,000. We would use like say $50,000 to $80,000.

Okay. Are you using an investment advisor, John, or an investment professional to help you with any of this? No, we're just talking to some fellow that we met and he's telling us he runs a place that does financial advice and he says this is one of the good investments to get with if you want to guarantee not losing your money.

Yeah, yeah. And that's certainly true with a fixed index annuity in the sense that you would have that downside protection, but they tend to be very expensive and there's a lot of commissions that would likely be generated upon the sale of this insurance contract. So, I'd get a second or a third opinion just to look at your overall picture and we trust the certified kingdom advisor designation. So, what I would do is perhaps take a look at what you're being offered, but then visit with a CKA there in Illinois who could look over it, give you an objective opinion and perhaps even some other alternatives that wouldn't require you to tie up your money and perhaps would be less in the way of fees and expenses. You can find a CKA there in Illinois, just go to our website MoneyWiseLive.org and click find a CKA. We appreciate your call.

On to Indianapolis, Indiana. Ken, thank you for your patience. How can I help you, sir? Yes, I was just trying to get some ideas on how I could make some income off of the $300,000 I had just sitting in a bank and I don't have any other, I'm 70, I don't have any other way to make money right now. I get $1,500 from where I used to work and that's my question.

Good, Ken. What are you looking for in the way of income? How much would you need to make ends meet in addition to Social Security?

I don't know how to answer that, you know, I mean, whatever. Do you have a spending plan? Do you know what it takes to fund your expenses on a monthly basis? Well, like I said, I don't have any other expenses, really no house payment, no car payment, just utility bills and that sort of thing.

Okay, great. Well, that's good news because obviously you're living a modest lifestyle which means you wouldn't have to pull a whole lot out and you've saved quite a bit of money. What I would do, I mean, I think the key is, are you comfortable taking a modest amount of risk? Because what I would generally say is as a 70-year-old gentleman looking to draw some income off of a $300,000 portfolio, I'd encourage you to seek out an investment professional that could build you a portfolio that is income producing. It would be very conservative in nature, it would probably be the majority of it in fixed income type investments, a smaller portion in dividend paying stocks and other stocks, but where even if the market went down, let's say a year or two from now we got into a recession, you wouldn't touch that portion of it. You'd let that, you know, recover over time, but the goal would be that this portfolio could throw off as much as four percent a year, which you wouldn't have to pull that out, but at least it would be growing, and if you needed to start drawing an income, the goal would be that you'd never touch the principal.

So that's $12,000 a year or $1,000 a month, and it sounds like that's more than you need just based on the expenses that you have. Now, if you say to me, Rob, I don't want to take any risk, I don't, you know, want to ever open my portfolio and see that my $300,000, you know, has declined, well then that puts it in a different category and at that point we need to look at, you know, other lower yielding investments. The problem is that interest rates are very low right now, which makes that very challenging.

As you know, you're not getting much of anything to speak of, I assume, in your local bank. So I guess the question would be, would you entertain sitting with an advisor who could build the kind of portfolio that I described? Yeah, you know, I would talk to one.

Yeah, okay. Well, that would be my next step, Ken. I'd interview two or three, there's some wonderful Certified Kingdom Advisors there in Indianapolis, just go to our website, MoneyWiseLive.org, click find a CKA, put in your zip code and you'll find a list of CKAs there in Indy, and I'd schedule some meetings, find out who you have a good rapport with, who, you know, is a good match for you in terms of the way you communicate, their experience, and obviously the portfolio and strategy they would deploy on your behalf.

Again, MoneyWiseLive.org, just click find a CKA. We appreciate your call. That's going to do it for us today, folks.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. I want to say thank you to Eric and Dan and Amy and Jim. I couldn't do it without them. Thank you for being here. We'll be back on Monday to do it all over again. Have a wonderful weekend and may the Lord bless you. Bye-bye.