Ally Bank Ditches Overdraft Fees

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Not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. A question for you. What cost your bank only $1 but sets you back $35? If you guessed an overdraft, you are correct, but it doesn't have to be that way any longer.

Hi, I'm Rob West. It's no secret that banks have been gouging customers with overdraft charges for decades. Could that be coming to an end? We'll talk about that first today, and then we'll take your calls on any topic at 800-525-7000.

Call it 24-7, 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey. Okay, so obviously you never want to have an overdraft on your checking account, but anyone can make a mistake. For example, maybe a deposit you expected didn't come through, you forgot to check on it, some auto payments go out, and there you are overdrawn. That's irritating enough, but then you're hit with an overdraft fee, which these days averages around $35. This is a huge moneymaker for banks because it only costs a bank about a dollar to process an overdraft, but one bank has broken ranks. Ally, one of the largest online banks, has announced it will no longer charge overdraft fees to any of its customers. Ally had waived those fees temporarily last year due to COVID, but now they've made the change permanent. In a press release, Ally CEO Jeffrey Brown said, quoting now, 80% of overdraft fees are paid by consumers living paycheck to paycheck or with consistently low balances, precisely the people who need help stabilizing their finances, end quote.

Brown went on to say that eliminating those fees will help keep people from falling further behind and feeling penalized. A recent survey showed that 95% of the bank customers who paid an estimated $12.4 billion in overdraft fees last year were financially vulnerable and disproportionately black and Latino. Theoretically, banks charge fees to cover their expenses when you have an overdraft. They're covering the amount that you're short, but overdraft fees are wildly out of proportion to the true cost of covering overdrafts.

Banks are actually making about a 3,500% profit on them. Other banks have claimed they stopped charging overdraft fees, but in reality, they only stopped allowing overdrafts. So Ally announcing it will no longer charge customers for overdrafts is significant for the banking industry, and it's leading to speculation that the rest of the industry may have to follow suit.

As I mentioned, Ally is one of the bigger online banks with 2.3 million customers and 124 billion in deposits, and this latest move is sure to draw in more customers. As for other banks waving their overdraft fees, some analysts are pointing to a similar situation in the brokerage industry a few years ago. Robinhood started a trend by offering commission-free stock trades.

This was eventually followed by huge companies, including Fidelity, Schwab, and TD Ameritrade. Now, commission-free trades are the norm. Banking and stock trading are largely computer-driven these days with very little hands-on processing required. In other words, they're cheap to operate, but banks still have these dinosaur fees in place to cover costs they no longer have. Online banks with lower overhead like Ally and Marcus and Capital One 360 have been leading the way in scrapping minimum balance requirements and fees for maintenance, electronic transfers, and ATM withdrawals. But you know, that's not the only reason to switch to an online bank. Folks call us all the time wanting to find a better savings rate for their money. The easiest way to do that is to switch to an online bank where you will almost always find better savings rates than at a brick-and-mortar bank. But maybe you're thinking, switch banks? Sounds like a hassle. Well, it really isn't.

Let me talk you through it. First, choose an online bank with no minimum balance required and no annual fees. Look for the highest savings rate you can find. Make sure there are no fees for checking. Once you've decided on a bank, open a checking and the savings account there. Now, you want to go over your current checking and savings account. Look for direct deposits, auto payments, and any other accounts linked to yours. Take that list and begin contacting each of those entities, creditors, and depositors, and give them your new banking information. You'll have to monitor your old and new accounts for a couple of months to make sure that all of your transactions have switched over.

But when there's no longer any activity in your old account, go ahead and close it. Well, there you have it. Possibly some big changes coming to the banking industry and how you can take advantage of them. Keep in mind, we're stewards of God's money.

So we want to make sure we're stretching every dollar of the Lord's money for his purposes. All right, your calls are next, 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey.

We're so glad you've joined us for MoneyWise Live. I'm Rob West taking your calls and questions today. We've got some phone lines open.

Looking forward to hearing from you. Here's the number, 800-525-7000. That's 800-525-7000. Perhaps you've got some bills you've been trying to get on top of. Maybe that spending plan just isn't working for you and your spouse. Or you've got some debt. You're wondering the best way to pay it off. Should you get a consolidation loan? What about credit counseling? Or you've heard something about the debt snowball.

What is that? Well, we'd love to help you sort it out and get on God's plan using biblical principles to apply to today's financial decisions. That's what we do here at MoneyWise Live, and we'd love to hear from you. Again, the number 800-525-7000. We're going to begin today in Harrisburg, PA. Brock, thank you for calling.

How can I help you, sir? Thanks for taking my phone call, Rob. So last year I was looking to invest some money that I had came upon, and I was told to open a Roth IRA. So I put $6,000 into that, and it's been almost a year, and I've made 48 cents interest on that. Is there a way that I can close that and not take a penalty and invest it somewhere else, or should I just leave it there? You made 48 cents? Brock, next time I'm in Harrisburg, it sounds like you're buying coffee. I don't know if I can afford that.

Well, I'm sorry to hear that. You know, with a Roth IRA, and by the way, that was a good move. I'm a big fan of the Roth IRA to start putting away money for retirement, especially if you have time on your side.

That money is not going to give you any tax advantage on the deposit, but that money will grow tax-free between now and retirement. So if you could continue to fund that Roth IRA, that's actually a great idea. Now, there's a difference between the type of account and then the investments inside it.

Once you make that contribution to the Roth, you then have to choose the investments that will be deployed with whatever deposits are made. And it can be anything could sit in money market, and basically be like a cash account. It could be in a CD, or it could be in stocks and bonds and mutual funds and exchange traded funds. So after you made that contribution, do you think that the money just sat in cash? Or was it actually deployed in an investment of some kind?

I'm assuming it just sat there in cash, but he did tell me that he was going to put it in a diverse portfolio, but I guess it never happened. I see. So you have an advisor that you're working with? I do. Okay. And so where is that account? Who's the custodian?

It is Raymond James. Okay. And have you talked to that advisor periodically?

Well, he said he wanted to see me in like four months and the four months came and now it's been a year and I ain't talked to him since. So, no, I have not. Okay.

All right. Well, obviously, it's a small account and I suspect it got lost in the shuffle. The ideal situation would have been that as soon as that money went in, it was deployed because of the amount. I wouldn't have expected it to be in individual stocks, but probably a basket of stocks, like a good high quality growth mutual fund or even a low cost exchange traded fund that tracked market index, like the S&P 500 or something like that. Unfortunately, it sounds like it wasn't ever invested.

And I would, at the very least, just make the advisor aware of the fact that here's what was communicated to me. I'm disappointed to learn that it's just been sitting dormant. If for some reason I'm mistaken, let me know. But it seems like it was never invested. And at that point, you have to make a decision as to where you want to move the money. Now, with the Roth IRA, you can always take your original contributions back out without any penalty, because keep in mind, you didn't get any tax benefit when the money went in. And from the government standpoint, the fact that you're taking it out means it can't grow tax free in the future. And so they'll let you collect that money at any time without any tax consequences unless there was any gain. But in your case, that would only be the $0.48.

So you do have the ability to pull it out. Now, and I'm not encouraging you to do that, just because, you know, that's money that you put away for the long haul. I'd rather you get that repositioned and invested properly. Before we talk about perhaps where to move it and how to invest it, though, tell me about the rest of your retirement plans. Are you contributing to another account at work? Or were you planning to add money to this over time? Yeah, so I was actually going to put another $6,000 in in the next month or so.

But since I'm not seeing any gain, I'm really not really sure what to do. Yeah, yeah, very good. What is your age?

I'm 27. Okay, very good. Well, do you have a retirement plan at work that's available to you? I do not. Okay.

All right. So the Roth is a great option for you. And you can continue to put in 6000 a year, at least that's, again, the maximum contribution for this year if you're under age 50. So at the very least, because you're a young guy, you don't have a plan at work. I like the idea of you continuing to put 6000 a year. So you have something working for retirement, but it's key that we get that invested properly. So I think you have two choices. Number one is try to put this account back on track by calling the advisor, saying, you know, I'd like to get this invested, disappointed.

It didn't happen last year. But let's move forward. Talk to me about how you'd invest it this year, and then make sure you follow up and that it gets done. If you would rather move it out of there. I would certainly understand why you would want to do that.

And I think at that point, you've got one of two options. Number one is to use one of the robo advisors, where you would answer a series of questions based on your age, and your goals, risk tolerance, objectives, and then a portfolio would be built that's automated. And every time you deposit additional money, whether that's an annual contribution or monthly, that money would be reinvested for you in what's called an indexed portfolio.

So they would use exchange traded funds to buy stock market indexes that mirror the broad market, largely concentrated towards stocks, because you're so young, and you don't need really any allocation toward bonds, probably very little if any. And at that point, the money would automatically be invested. And you'd basically just capture the broad moves of the market over time. But one of the real benefits is it's very low cost.

You might pay 20 basis points a year or one fifth of 1%. So I think that's a great approach. And you could use Betterment or Schwab Intelligent Portfolios or Vanguard Advisor, any of those three offer this type of service. If however, Brock, you'd rather do the investing yourself and learn some things along the way, then you could use mutual funds. And I'd probably recommend you connect with our friends at soundmindinvesting.org. The Sound Mind Investing newsletter would give you plenty of mutual fund suggestions that you could pick from. And you could even monitor them and upgrade them over time as the market changed, which sounds like it'd be the best fit for you. Well, I mean, so I think I'd rather somebody else just go ahead and do it for me. But what kind of what kind of a gain should I be seeing on a $6,000 investment?

Like, yeah, from the last year? What kind of gain should I have seen? Yeah, I mean, if you were invested in a growth stock mutual fund, you should have, you should see between 20 and 30%, probably, in terms of returns, which leads me to believe that probably just was never invested, it was probably sitting in the cash account. Okay, so I just basically need to call him and tell him to go ahead and invest it and not let that there's a cash account then. That's correct, I would just want to understand exactly how he's going to do that and what he's going to charge you to do it. Because keep in mind, most investment professionals, their business models are not set up to work with portfolios at $6,000. You know, typically, in order to have an advisor managing an account for you, you would need to have 75 or $100,000. Now, he may be equipped to handle smaller accounts and have a process for doing that, I would just want to know exactly how he's going to get paid. What is the cost going to be as a percentage of the portfolio? And what types of investments is he going to use individual stocks or mutual funds or ETF? So perhaps you ought to start there and see if you can get some comfort with what that is, I wouldn't want you to pay more than one and a half percent a year if he's going to charge you a fee.

And I'd want to make sure that it was invested, consistent with your age, which means you should have largely a stock based portfolio, even though I would recommend mutual funds or ETFs. If that's not going to happen, then I think one of these robo advisors might be a great fit for you. So hopefully that gives you some information. If you are confused about what you're hearing, once you give him a call there at Edward Jones, don't hesitate to give us a call back. I'd love to chat with you some more. We appreciate your call today.

And by the way, I'm proud of you for getting started early as a 27 year old guy, getting money into a Roth IRA and doing that consistently will serve you well over the long haul, but we do need to get it invested. All right, lots of calls waiting and I'm ready to take them. Here's the number for the two lines that remain open 800-525-7000.

Stay with us. We're so delighted you're tuning into MoneyWise Live today. I'm Rob West taking your calls and questions. If you're getting a busy signal, it's because all our lines are full, but sit back and enjoy. We have some great calls coming up.

Marcy and Rachel, Eric and Maggie were coming your way, but first Fox Lake, Illinois. John, good afternoon to you, sir. Hey, Rob, I appreciate your call.

You're taking my call. My question is, for the last five years, I've been putting money into my 401. I have about $115,000 and two months ago I changed companies and my new 401 will be starting in about September 1st. My question is, should I leave the money in the 401 that it's currently at, which I've been very happy with the returns, or should I roll that over into my new company's 401, or should I put it into an IRA?

Yeah, well, you've identified the three options that you have, John, and I don't think you can make a mistake. I generally advise moving out of an old 401k, specifically because usually the fees will go up slightly when you're no longer employed there, and for simplicity's sake, we can end up with multiple accounts all over the investing universe, if you will, and it just leads to more upkeep and oversight because that's one more set of statements you're going to get, one more set of tax documents you're going to get, so anytime we can consolidate, I think that's better. Now, the only thing that's causing me any hesitation is that you're so pleased with the investment results, although it's been a great market, so I would suspect you're going to be happy if it's invested properly with just about anywhere that you'd be. I would recommend either rolling it into the new 401k because that's just, again, going to keep it very simple. It's going to have everything together so that as it's managed, it can be managed as one amount and you won't have duplication of investments unnecessarily as you select your new investment strategy. Again, it's also going to give you one less account to keep up with or roll that out to an IRA, but I would want to make sure that you had a plan for how you were going to invest it because the benefit of that rollover IRA is that you basically have now unlimited investment options, whereas with the 401k, you're limited to the investment universe inside the plan. The IRA takes those blinders off and gives you really full access to any stock, bond, mutual fund, or if we want to get complicated through self-directed IRA, you can even invest in other assets like real estate. So, I would want to make sure you had an advisor because that's a significant sum of money you've accumulated over $100,000, somebody who's going to deploy that money or invest it for you unless you feel like you have the time and the expertise to do that. So, that would then probably bring me back to if you don't have that in place, putting it into the new 401k, doing your research, perhaps getting some assistance from the plan administrator to actually select your new investments, have everything under one roof, and then move forward from there. React to that idea though and give me your thoughts on what sounds best to you.

I like the option of rolling over with the IRA because I guess I was confused on that. I guess if I can add another question. Sure. I've been managing and picking out my funds myself. I've averaged over the last say five years about 28 and a half percent. Great. Would you recommend that I stay picking the stocks and I typically look at my funds every six months to see if I should adjust anything?

I don't do it more frequent than that. Or should I let an investor? Do you think that an investor professional would give me a better return?

Obviously there's no guarantee. Sure. Well, it sounds like something you enjoyed doing and you've been able to put in the time to actually make the selections. Is that right? Yes. Okay. And you're not using individual stocks, right? These are mutual funds? They are. Yes.

Okay. And how are you picking them? I have a couple international.

Most of them have been aggressive. I'm doing my research. Three of the five funds I'm in are in Vanguard. I've always been a big fan of Vanguard, their funds. So I've been looking at that.

Just trying to do my research and rating on looking at the history and where the market's at. Very good. Well, I don't have any problem with that. I mean, it sounds like something you've done well. I like the fact that you're in mutual funds, meaning you have good diversification. I think the one thing you might want to consider is as your assets continue to grow because you're putting more and more away, perhaps you take a portion that you say you're going to manage yourself and then take another portion and turn it over to an advisor. So it could be that this is the time for you to consider building a relationship with an investment advisor for that 115,000.

You've already built up and then you take over the new 401k that you're just starting out and perhaps start that process over by selecting the mutual funds inside the new 401k. But if you said to me, Rob, no, I really would like to continue to do this. It's something I've enjoyed.

I've obviously done well. I'm putting in the time and I do like the fact that you're only looking at it a couple of times a year. I wouldn't have a problem with that. I just would throw out as another idea, perhaps think about as it grows, splitting it between a portion that you're doing and then a portion that's being handled for you. Does that make sense?

Oh, it does. I didn't even, you know, I really liked that idea. I didn't realize I could split portion, have somebody manage part of it and I manage part of it. Absolutely.

I do like that option. Very good. Well, if you want a suggestion for an advisor or two in your area, just go to our website, MoneyWiseLive.org, click find a CKA and I'd interview two or three, find the one that's the best fit, unless you already have somebody in mind. And John, all the best to you. We appreciate your call today.

You sound like a great guy who's doing a lot of things right, following God's principles and managing money. We appreciate your call. Much more to come on MoneyWiseLive just around the corner. We'll be talking to Maggie in Michigan and Eric in Muncie and Rachel's in Minnesota. That and your calls coming up.

Stay with us. Thank you for joining us on MoneyWiseLive today. I'm Rob West, taking your calls and questions. We've got three lines open, 800-525-7000.

That's 800-525-7000. Hey, have you joined the MoneyWiseLive family yet as a contributor? But we rely on your financial support to put this program on the air each day, bring you the MoneyWise app, our website, all of our content, our MoneyWise coaches.

We couldn't do it without you. If you'd consider a gift, we'd certainly be grateful. Any giving beyond the giving you do to your local church is all we would ask you to prayerfully consider.

Just head to our website, MoneyWiseLive.org, click the donate button you can give quickly and securely. Let's head back to the phones today. Maggie is waiting patiently in Michigan. Maggie, how can I assist you? Hi, thank you for having me.

Okay, I'm a little nervous, but thank you for having me. And this is about my credit card. I want to be able to help other people get out of debt, but I also need your expertise. Okay, I have a credit card and it's like $2,800 and I want to know the best way and the fastest way to pay this off. I can't pay it off in full, but I really don't want to because I want to learn how to do this. And so I know the minimum payment. It really doesn't really help it a lot because just say I paid $70 and $36 was in interest. My interest rate is like 14.90. What is your advice on paying off a credit card?

Yes. Well, Maggie, you're wise in what you just described, and that is you have the ability to pay it off and we certainly want to do that, but you want to do it the right way so you don't have this come back again in the future. And that's really smart because the one thing we've got to do when we're dealing with debt is solve the underlying issue.

What led to the debt in the first place? And for most of us, it's overspending without a plan or overspending with a plan that we're not following. And so we've got to start there because the last thing I'd want you to do would be to pull money out of savings, pay off that credit card, and then you call me back three months from now and you say, Rob, guess what?

The credit card debt's back and I need to get out from under it again. So we've got to live within our means, and that really is the starting point. Now, of course, there can be unexpected medical bills or things that result in credit card debt, and that's why we need that emergency fund. So let's talk about those two things first. Have you taken the time, Maggie, to journal all of your expenses over a given month's time to come up with an accurate spending plan?

Well, I have taken a look at it, and I agree with what you said. You know, we have to watch our spending. But when I talked to one of the ladies that was looking at my account, she wanted to know if I made these purchases. So I just basically closed the card out because it could have looked like somebody else could have been making purchases on it. So I closed it out, but now I just want to pay it off. I see. Okay, so that card isn't even active any longer.

No, it's not active any longer at all, and I am watching my spending. Okay, very good. Are you sure that those charges are yours? I did go back and look at them, and I requested copies going back maybe like a couple years that they would send them to me, and I did look at them. And I do think some of them were mine. I was a little careless at the time, but then to go back and to dig into all of that, I just said, okay, we're just going to cut it, you know, stop it.

Well, and if it was that long ago, you would have trouble getting that reversed anyway. All right, well, I think you're right in that we need to get this paid off, but it is important that you dial into that spending plan, and if you want some help with that, our Money Wise coaches would be happy to walk alongside you to get a plan to actually control the flow of money in and out every month. Now, what is the balance on the credit card? Right now, the balance on the credit card is 28.45.

Okay, very good. And what do you have in savings that you could use to pay this off? I mean, I have it, I can pay it off. I mean, I would have to, you know, take it out of my, I'm past retirement in my seventies, and I could take it out of my, you know, IRA, but I didn't want to do that.

Yeah, I would prefer you not do that. Do you have any liquid savings? I do have some, but it would kind of like, I have small accounts and I would probably have to condense those two. Okay, well, I'd like to start there because here's the thing, you know, we got to get to a place where you've got some liquid savings that is specifically for emergencies because the unexpected will come. I recommend you have three to six months expenses, but while we're waiting to get this credit card debt paid off, I'd like for you to try to accumulate $1,500 in emergency savings. Let's get that in a liquid savings account. Then I would say any additional money you have over and above your expenses, let's add that to the minimum payment and start trying to get that balance coming down every month. If you have multiple savings accounts or places where you've accumulated some money, I'd like to try to consolidate all of that into one place because ultimately we'd like to get to the $1,500 in emergency savings, then apply every bit of excess every month toward the credit cards. Once it's paid in full and you verify the account's been zeroed out, then we'll contribute any of that margin to your emergency savings to get it up to three to six months expenses. That's going to be really the reserve account that you'll want to have to fall back on when the unexpected comes, and it will, so you're not having to pull money out of the IRA whenever you need it. I think that's really the plan for you moving forward. Obviously, if you wanted to get paid it off sooner, you could pull some money out of the IRA. It would be taxable, so you'd need to set that portion aside, but I'd rather you do it out of excess cash flow on a monthly basis. Do the hard work of limiting your expending, getting that balance coming down. The good news is it's not a tremendously high balance, so I think you should have that paid off in just a matter of time. Does that sound like a good plan?

It sounds like a good one, and my husband is sitting here and he's looking at me. What about doubling up on payments? Like if I pay over the minimum when it's due, and then maybe the middle of the month pay another payment?

Yeah, and you don't need to separate it out. I think if you have the ability to send two payments, let's just go ahead and do that. You know, really anything you have over and above that minimum payment, you're going to satisfy the interest for that period, and then every bit you send over that is going to go right to principal, so that's the key.

As much as you can get going to that balance every month is going to get that balance declining. We'll have that paid off in no time, and then you guys can focus on building up that emergency savings. Maggie, you and your husband sound like wonderful people. All the best to you. If you have any other questions along the way, give us a call. We appreciate you checking in with us today. Well folks, we do have some lines open today, and looking forward to taking more of your calls between now and the end of the program. Here's the number 800-525-7000.

That's 800-525-7000. By the way, I mentioned our MoneyWise coaches. Let me just quickly mention, if you'd like to take advantage of one, we'd love to hear from you, and we can certainly get you connected. Just head over to our website moneywiselive.org and click connect with a coach.

Let's head to Minnesota. Rachel's been holding patiently. Rachel, how can I help you?

Yes, hi. Thanks so much for taking my call. I appreciate it, and I hope that my call will encourage others too with an option that I just decided to explore. So I had a 30-year mortgage. I've paid it down about seven years, and in the meantime I've acquired quite a bit of equity in my home just through some repairs and things. So now I'm looking at refinancing at a cheaper interest rate.

My original interest rate was 4.25 percent, and depending if I go with a 30-year loan, which I'm not interested in, or a 15-year loan. Did we lose you, Rachel? Yes, that's okay. Okay, no problem. Let's do this. We're going to have to hit a quick break, but I want to hear the rest of your story and be able to encourage folks who are listening today. So you hold the line, we're going to pause, and then we'll come right back and hear the rest of your story. This is MoneyWise Live.

I'm Rob West. Stay with us. We're grateful you've joined us for MoneyWise Live today, applying God's wisdom to your financial decisions. Just before the break, Rachel in Minnesota was telling us about her home loan. Rachel, I appreciate your patience as we had to hit a quick break there. I'd love for you to start over.

Tell us exactly what's going on in your life, and I'll see how we can help. All right, my original mortgage started about seven years ago, so I'm about seven years in, and at that time the interest rate was 4.25 percent. In the meantime, I've built quite a bit of equity in my home, and so now I have a couple of options, being that a loan officer have informed me that the interest rate could be much lower. So the two options that I have are refinancing for 15 years at 2.6 percent, and my payment would pretty much stay close to the same. Maybe she said $100 more a month, so obviously I would pay my loan off quite a lot more quickly, but she did give me a second option, and that's that I need some wise counsel, though I've never done this before. But she was asking if I needed any cash for anything, and the only thing that came to my mind was, of course, to add some more equity to my home, maybe with a construction project. So she said if I had done a cash out option, I could still get a loan at 15 years. My rate would be similar, 2.75 instead of 2.6, a little bit higher, and then my payment would only be about $200, $150 to $200 more a month, but I could take about $40,000 in cash. So I'm just wondering, is this a wise thing to do? Essentially, I'm spending a little bit more per month, but I can immediately do some projects on the home, or would it be better to just refinance? Yeah, very good. So it was a 30-year mortgage to begin with, so you've got 23 years remaining, is that right?

Yes. Okay, and what do you believe the value of the home is today, Rachel? Conservatively, I actually did have a market analysis done when we were thinking of selling an end. He had set about $375,000. Okay, and what is the principal balance on the first mortgage today, roughly? $130,000.

$130,000, okay. So you've got some good equity. As to whether or not it makes sense to cash out, I would always ask for what purpose, and I'd rather you not use it to pay down credit card debt or anything like that, but you're talking specifically for home improvement projects, is that right?

Exactly. Okay, so obviously the goal is to get the home paid off in full, so we'd like to be out of debt completely as soon as you can without interfering with other goals that I think from a priority standpoint come first. Ideally, at the very least, when you reach retirement, you want to be completely debt-free, which is going to keep your lifestyle at a minimum.

So do we want to add to the balance? Well, that's not the ideal situation, but if you have the ability to do some things that you can enjoy because you're going to stay in this home for a while, recognizing that you may not get the full amount back out of the debt, you may not get the full amount back out of them when you sell, but depending on what you do and how thoughtful you are about the projects that you take on, you should get at least a portion, depending on what kind of project we're talking about, whether it's an addition or new flooring or improving a bathroom or a kitchen, you know, all of those you'll get different percentages back of what you actually put into it, but if you plan to be in this home for quite some time, obviously the enjoyment factor is well. I think secondly, recognize this is an opportunity for you to take advantage of a very low interest rate environment.

I think you are in fact ripe for a refi because it sounds to me like you can lower the term, which is always the objective. In fact, you'll be lowering it significantly from 23 to 15 years, and with that significant reduction in interest rate, you're not really adding much to the payment. So I think the question ultimately is, can you afford to do these renovation projects, or is that going to hinder you from accomplishing other purposes? Would you rather take that other $200 a month and put it toward a fund that's going to be used to replace your car? Do you have any other debt you're trying to pay off? Are you saving for any other medium term purchases? And if really you don't have anything that you're really trying to focus on right now, and you feel like you have the money to do it, and you could get some enjoyment out of it and ultimately improve the value of your home, then there's nothing wrong with doing it this way. In fact, it's probably going to be the least expensive money that you can access given the environment that we're in from a rate standpoint.

So I think the only remaining question then would be, I like the terms. I like the interest rates. I think the only question would be, what are they going to charge you for this refinance? And I would use two to 3% of the loan value as your guide. So on 130,000, we'd be looking to spend no more than 2,600 to 3,000. Obviously, if you add 40,000 to it, you'd be talking now $170,000 loan. So we'd be talking 3,500 to 4,000. But you just want to make sure that even though they're giving you a good rate and terms that you like, that you're not spending too much, that's going to eat away at some of that interest savings because you're spending a lot for the cost of the refi. Does all that make sense, Rachel?

Yes. Do you have any quick tips on any negotiables on those closing costs? It's really just going to be shopping around. So I would go to bankrate.com and get at least three lenders, two of which I would want to be online banks that are competing for your business, and just compare them against each other. Let them know that you are shopping it around, and make sure that you get the very best rates, terms, and fees. And you can compare those truth and lending statements to understand exactly what's going on.

If you're buying down the rate, you're paying origination costs, those kinds of things. There are plenty of great programs out there right now. So just make sure you get enough bids to make sure you are, in fact, getting the very best one, okay? All right, awesome. Thank you so much.

That gives me a lot of confidence. Very good, Rachel. May the Lord bless you, and all the best in how you proceed moving forward. To Cadillac Michigan, Jim, thank you for your patience, sir.

How can I help you? Rob, thank you for taking my call. First off, and I'm going to tell you I'm a big fan of yours, and I believe in what you're doing, and the sound advice you give everybody, it makes me warm inside with a good feeling because it's like there's somebody talking the truth out there, whether it's about God and money or just what's happening. And I am just excited about that for us.

That's the first thing. Well, thank you, Jim. Let me just say how much I appreciate you saying that, sir. That means a lot.

You're welcome, sir. All right, so here's a scenario. I've got money in an IRA, a traditional IRA, and a Roth IRA also started. I am to the point where I'm almost retired, got one more year to go, and I'd like to start moving some money from my traditional IRA into my Roth. What's the best way to do that and not pay as much taxes, and if I'm going to pay taxes, where should that money come from or where can that money come from?

Yeah, Jim, why is it that you're wanting to get that money into the Roth? Are you just wanting to avoid the required minimum down the road, or what is the real driver behind it? I'd like to reduce my minimum down the road because I believe in paying the government, but I don't believe in paying them that much.

Okay, yeah, I think the only question I would have is whether that's going to make sense for you. I mean, obviously, we're in a low tax environment, and in all likelihood, based on what we're hearing coming out of Washington, and it remains to be seen what will happen, tax rates are headed higher. So I would expect that down the road, we could have tax rates higher than we have today.

At least that's probably the general direction. I wouldn't see them going any lower than they are now, and I could see them being considerably higher at some point. But apart from that, you know, there's not a real compelling reason in this stage of life to go ahead and pay the tax and get the money into the Roth. The real benefit of the Roth is when you have time on your side for that taxed free growth to really compound and do its its magic over time. But you you're not going to be invested in such a way during retirement that you can really maximize that. And depending on how much money we're talking about converting, you're going to be adding some significant tax burden to yourself in the near term as you try to convert all this money over.

So with the RMD not hitting until 72 now, I'm just not sure there's a compelling enough reason for you to go ahead and convert all of that money into the Roth IRA. But tell me your thoughts on that. Well, I would agree with that, for the most part, but here's my thought. Okay, so I've saved well through my years, and I've always managed our money. I hear you giving me advice to the individuals that are calling.

And I'm like, yep, I'm on cue with that on cue with that we're doing well. So when I look at my retirement, and I have my traditional IRA, and I know the government's going to tech tax that and I have my Roth IRA, I'm, I'm thinking, I'd like to move it into my Roth, because it's not going to be taxed. And I don't believe I'm going to need my Roth in my retirement. Yeah, yeah. Okay, but you understand all the money you convert to the Roth is going to be added to your taxable income in the year that you make the conversion.

So you will pay the tax, you're just going to do it now as opposed to doing it later when you have to take it out. Right. Right.

And I understand that. So it's more of a fact, like you said, the long term, being in the market, the long term for the Roth is what I was concerned about. It's like giving a monetary gift to my kids. I understand that if I put it in the Roth, I'm not going to use it. It's probably more for them. It's an inheritance.

And I'd like to see it tax free for them because they know what's going to happen if they come after the other stuff. I see. And what do you have in the traditional IRA that you would be looking to convert? Oh, over from, I'm going to retire, I'm 61, I'm going to retire at 62. I'm going to try and convert this money or my plan is converted through the next 10 years after that. Okay.

And how much do you have in that account? In about, conservatively right now, I've got, I'm doing well. Okay. I'm going to convert at least 200,000. Okay. Very good. Yeah. I think the key will be to spread it out.

I would connect with your CPA to develop a plan so that you don't pay any more tax than is absolutely necessary. Hey, you stay on the line. We'll talk a little bit more off the air. Unfortunately, we're out of time.

That's going to do it for us today. I'm Rob West on behalf of my team. Thanks for listening.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Come back and join us tomorrow. I'll be here. We'll do it all over again. God bless you.