A Tennis Lesson for Investing

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I am Rob West. All too often an impatience can be costly, especially if you're trying to time the market. Investing expert Mark Biller joins us today to tell us how to win at that game without really trying. Then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. Well, Mark Biller is the executive editor at Soundmind Investing, where they've found an interesting analogy to investing in, of all places, competitive tennis. Mark, welcome back.

Well, it's great to be back with you, Rob. So let me guess, stock prices go up and down like a tennis ball going back and forth over the net, maybe something like that? Well, no, although I kind of like your analogy, actually. Now, what we're referring to here today, Rob, is investors trying to beat the market. And just like with tennis players, we could say that there are amateurs and there are professionals that are both trying to win at that game. But, you know, beating the market is really hard. And the inconvenient truth of professional investing is that most actively managed investments, and we're talking about most mutual funds, advisor portfolios, newsletter strategies, and so on, most of them fail to outperform the broad market over time. And so we have this setup where traditional money management is largely based on the assumption that professional managers can consistently beat the market through their research and risk taking and exploiting the mistakes of other investors and so on. And while some do for a season, at least, you know, this assumption has largely been debunked overall.

And so for many investors, then the secret to winning this money game may be in not trying to win. Interesting. And I suspect this is where we get a tennis lesson, right?

That's exactly right. So we have to go back to the 70s, where this electrical engineer wrote a book on tennis strategy for amateurs. It was called Extraordinary Tennis for the Ordinary Player. And in it, he talked about how amateur tennis is really a loser's game, which means that most of the points, about 80 percent of the points in amateur tennis, are actually won by the other player making a mistake. So for amateur players, he made a very strong argument that the key to winning isn't actually in trying to hit all these winning shots.

It's let your opponent beat himself by not making mistakes yourself and waiting for them to make a mistake. Now, he contrasted that kind of loser's game in amateur tennis with the very competitive winner's game of professional tennis. And whereas with the amateurs, 80 percent of the points were basically lost by the opponent, in professional tennis, about 80 percent of the points were won by one of the players making a particularly powerful or well-placed shot. So the experts win points, the amateurs lose points. Fascinating, because obviously we would think that anyone playing tennis would want to win points. But in the amateur category, that's clearly not what they found.

Yeah, that's exactly right. It was this wild symmetry, really, of about 80 percent losers on the amateur side, winners on the professional side. And so as we try to relate this to investing, we need to turn to another book, which is pretty famous, called Winning the Loser's Game by money manager Charles Ellis. So Ellis took this tennis work and applied it to the investing arena. He noticed that it was about 80 percent of the stock and bond managers were underperforming their respective markets. And so in their efforts to score points, if you will, for their shareholders, they were kind of doing the investing equivalent of hitting the ball out of bounds or into the net. And so to Ellis, it seemed clear that investing had actually become a loser's game.

Interesting. Well, just around the corner, we'll apply this to today's investment decisions. Should you be seeking active professional money management through mutual funds?

Should you go the passive index approach? We'll apply these tennis lessons and this fascinating research to the investment decisions you're making right now. Our guest today is Mark Biller. Mark is the executive editor at SoundMind Investing. Stay with us. Much more to come on MoneyWise Live.

Welcome back. Joining us in this segment of the broadcast, our good friend Mark Biller, executive editor at SoundMind Investing. Today we're talking tennis. Well, how investing relates to tennis. And Mark, I'd love for you to take what you shared just before the break about this fascinating research about amateur versus professional tennis and apply it to today's investing decisions, whether we choose active managers or passive indexed approaches, which seem to be gaining popularity.

Yeah, sure. So, you know, I think to kind of put a bow on what we were talking about earlier, one of the things that isn't necessarily obvious to today's investors is just how much the investing landscape has changed. And this is one of the things that Ellis was really getting to in his book, which was, you know, I think a lot of investors would think, well, if all this is true, then why are there all these active managers?

You know, how did this industry develop the way it has? And one of the things Ellis points out in his book is that a few decades ago, the industry is totally different. You know, the active investment manager at that point was competing with a totally different group of investors. There were a lot more amateur investors, a lot of cautious custodial type managers.

And so it was a much easier game for the professionals, quite honestly, because they were competing with lower competition, basically, it was easier to beat the market when that's just simply not the case anymore. You know, today's investing arena, you've got 1000s of professional investors, hedge funds, mutual funds, pension funds, that are in there all day, every day in an incredibly intense and competitive way. And so that's really the biggest reason why I think Ellis is saying that, especially for individuals trying to compete in that arena is super difficult. And the odds of an individual just actively kind of winging it and picking stocks and doing that kind of stuff. You just have to realize who you're competing against on the other side of those trades.

And it's a very difficult playing field. As a result of all that his his main argument is that investing for individuals has really become a loser's game like amateur tennis. So just like an amateur tennis, playing that loser's game means minimizing your mistakes and being patient, not trying to hit all these winning shots, not trying to figure out all of these, you know, clever investment ideas and strategies. You don't have to try to win points all the time as an investor. Instead, he's suggesting the the more amateur losers game approach for today's individual investor.

So Mark, what does that look like for the average amateur investor to play the losers game? Yeah, I think the obvious application there, Rob, is to rely primarily on low cost index funds. You know, those index funds offer a lot of distinct advantages, one of which is they're very easy to set up into a simple portfolio. Maintenance on that kind of a strategy is very easy, because usually all it needs is maybe once a year annual rebalancing of a few funds.

And you know, this type of basic approach has done really, really well over the last especially dozen years or so. And that's really the big reason why index funds have become so popular in 401ks and other retirement plans, anywhere really where individuals have to figure out their own investing path. Yes. We of course, though, don't want to throw the proverbial baby out with the bathwater. You're not saying, Mark, that all actively managed funds underperform, correct? Yeah, that's right. And you know, to be fair, sound mind investing relies primarily on active strategies.

So I'm kind of talking against my own book here. But you know, one thing that I think it's easy to forget, partly because indexing has performed so well in recent years, is there are periods where that flips and reverses, you know, the, the entire decade of the 2000s, the S&P 500 index provided negative total returns for that whole decade, you put money in at the beginning of the decade, you were down at the end of the decade. And that was a time when our active strategies did really, really well. So there are some cycles to this performance back and forth, even though indexing over time has outperformed as a whole active management. I guess, Rob, you know, we'd be more inclined to use this information to point out that there's a diversification benefit, at least potentially, to including more than one approach in your portfolio, you know, you might want to have some index funds and some actively managed strategies or funds. You know, again, though, I think the big takeaway for today is that individual amateur investors are just going to have a really difficult time trying to be active on their own, if you don't have a specific process that you have some reason to believe is going to provide an edge, then you just have to think about who's on the other side of this trade that I'm making right now. And chances are, it's a high powered institutional investor with all of the the research and that money can buy at his fingertips. And, you know, you're playing against professionals most of the time when you're trading in the market. Well, it also underscores the opportunity to have some professional expertise that's helping you navigate this. Talk for just a moment, Mark, about the work that you do at SoundMind Investing and actually being that screening to select those mutual funds.

Yeah. So our approaches tend to be mechanical. So we're trying to take a lot of the emotional decision making out of the process.

And we're looking for these small edges that have held up over time that we can implement in a mechanical way. We're not trying to hit the ball out of the ballpark. But if you can string together a lot of singles and doubles, you can do really well as a long term investor. Very different from a short term trading strategy.

That's not what we're talking about. And some people can do that well, but that's not a game that we try to play. But we do think there are places where individual investors can pick up an edge by applying a consistent discipline. And I would say that that discipline oftentimes, but really both the buy side, but also a sell side discipline to force yourself to get rid of investments when certain indicators say it's time. That can be a really big part of an investment process, both to protect an investor and just to keep the performance gains piling up consistently over time.

Very good. Well, Mark, this has been really helpful. And I think as folks think about taking a properly diversified long term view of investing, they need to recognize the investment landscape has changed. But there are more opportunities than ever to avail yourself of professional expertise to help you navigate this, because this is a high calling managing God's money.

We certainly want to follow biblical principles and handle his money in a way that seeks a return, but do it in a way that's wise as well. Mark, we appreciate you as always stopping by. And today has been fascinating as we compared tennis to investing. Appreciate you being here. Absolutely. Thanks for having me on, Rob. All right. Folks, if you want to learn more about Mark Biller at Soundmind Investing, you can read about today's topic and their investment strategies at soundmindinvesting.org.

The article is called The Loser's Game That Can Make You A Winner. We'll be right back. So delighted to have you along with us today on MoneyWise Live. I'm Rob West taking your calls and questions today as we turn the corner away from active versus passive management and tackle whatever's on your mind. We'll do it from a biblical perspective. That's what this program is all about, recognizing God owns it all.

We're stewards. And how can we accomplish what he has for us using his resources? Because here's the bottom line. Money is a tool to accomplish God's purposes. It's a means to an end. I would put forth that it's not an end in and of itself. And it's most effective when it's a means to an end. And that end is something other than us, when we use it to meet the needs of our family, but also when we're a pipeline into God's activity through our giving. But there's clear principles laid out in Scripture about how we should handle God's money. What does it look like to save it well and give it generously and use it prudently?

Live with contentment, and I would say hold it loosely as well. We want to explore all of these themes in the context of your financial questions. So give us a call today. We've got some lines open. Here's the number 800-525-7000. That's 800-525-7000. We've already got a number of calls lined up, but we have room for you as well. We're going to begin today in Iowa, and Kevin, welcome to the broadcast.

How can we help you? Hi, I have a small 401k account. It had, last year it had $21,000 in it, and when I just got the statement the other day, I lost about $3,000.

So I don't know much about investing, so I didn't know what I could do with it. Yes, very good. So this 401k is with a company that you no longer work for, is that right? Yeah, it was, I worked for a bank, and it's Bankers Trust, their retirement. I see. Okay, yeah, very good. And have you moved to a new company that also offers a 401k, Kevin? No, no, I'm disabled. I see.

I'm sorry to hear that. Yeah, you've got to, basically, I think the best option is for you to roll this out to an individual retirement account, an IRA, where you then would open up yourself to any number of investment options, any stock, bond, mutual fund, exchange-traded fund, essentially, that you'd like, and even other asset classes if you wanted to. So it gives you ultimate flexibility over what it's invested in and what you're going to pay to do that, depending on whether you do that yourself in a passive approach or choose an actively managed mutual fund, or even if you, depending on the asset level you have, you hired somebody to manage it for you, you have control over the fee structure and how you handle that moving forward. What is the balance, roughly, in this 401k?

It's 18,000. Okay, all right. And, you know, I think at this point, what I would be looking to do is perhaps one of two things. If you wanted to be a little bit more hands-on, but with a guided approach, our friends at soundmindinvesting.org would be delighted to help. Through the Soundmind Investing newsletter, you'd get plenty of recommendations based on your age and risk tolerance goals and objectives on some very high quality low-cost mutual funds that you could select, and you could purchase those once you rolled this out to an IRA, really at the custodian of your choosing. You could put it at a Vanguard or a Charles Schwab or a TD Ameritrade, really any of the low-cost brokerages. The other approach would be more passive, where you're basically deploying an investment strategy.

I've talked about this often on the broadcast. It's what is commonly referred to these days as the robo advisors. And for asset levels, I would say certainly less than 50,000, it allows you to get a very high quality, low-cost index fund approach. So indexes are basically tracking major market indexes.

So the S&P 500, the 500 largest companies in the US, the Russell 1000, the Dow Jones Industrial Average, these are all indexes and there's an index that tracks just about everything, including bonds and precious metals. Well, what would happen if you open an IRA at one of these robo advisors is you would answer a series of questions and then a very low-cost index approach to investing would be deployed for you with any money in there, and then it would be rebalanced regularly as well as if you ever add anything to it, but you certainly wouldn't have to. The great part is it's low cost, but you'd be very well diversified.

So you wouldn't be highly concentrated in one sector of the market or one industry. You'd get the broad moves of the market over time, but in an allocation that's appropriately diversified for your age and stage of life, meaning you're not taking any unnecessary risk as you move forward. And I think this would be a very effective approach for you. You could do that at probably, I would recommend either Betterment or the Charles Schwab Intelligent Portfolios.

Either of those two would work. You'd open the account first, the IRA at the institution of your choosing, and then once you did that, you'd get the surrender paperwork from your 401k plan administrator. You'd put on there the account number and title and location of the new IRA, and then they would just simply mail a check to that custodian.

It would be deposited as a non-taxable event, and then you could deploy those funds or they would do that for you based on the information you provided. So that would probably be what I would think would be a very simple approach that would give you an investment strategy that wouldn't rely on you to actually select the investments, but obviously you'd be the one putting the information in. Does that make sense though, Kevin? Yeah. I'm not sure. Do you have information where to get a hold of some of these or?

Yeah. I mean, you could just Google Schwab Intelligent Portfolios or Betterment. You could read reviews on both of them at Nerd Wallet. So go to nerdwallet.com, type in both of those Schwab Intelligent Portfolios, Betterment, and you could get a review on both of them. You'll see they're both highly rated for being very high quality, very customer service oriented, user-friendly, but very low cost as well.

And then once you make your decision, you just go directly to their websites, open that IRA account, and then request that rollover paperwork from your current 401k plan administrator. Check that out. If you have questions, once you do, give us a call back, but I think it'll be a very low cost passive investment strategy that will give you what you're looking for. Make sure this is growing without taking unnecessary risk. We appreciate your call today. Much more to come on MoneyWise Live.

Lines are open 800-525-7000. I hope you'll stay with us. We're back with much more just around the corner. Welcome back to MoneyWise Live. I'm Rob West. Biblical wisdom for your financial decisions.

That's what we do here on MoneyWise Live. We're delighted that you're along with us today. We've got some lines open 800-525-7000. We'd love to hear from you in just a minute.

We'll be going to Annette in Tampa, Susan in Chicago, Ryan's in Maryland. But first, Aiden is 14 years old. He's a high school freshman calling from Rome, Georgia. Aiden, we're glad to have you on the program today. How can I help you?

Oh, first of all, thanks for taking my call. Absolutely. So yeah, I'm a freshman and I got about a hundred dollars set aside to invest and I'm just wondering what's the best way to go about doing that.

I love that. Well, tell me, how did you accumulate this hundred dollars? Was it a gift? Are you working a little bit? What are you doing? Well, yeah, I had a birthday back in May and my grandparents gave me some money so I can invest it.

Great, excellent. All right, tell me about your interest in investing. Has this been something you've been interested in for a long time?

Is there somebody that's kind of guiding you? Tell me a little bit about your background. Yeah, well, I would say about two, three years ago, I learned what the stock market was. I thought it was kind of interesting and been doing some research on that.

I don't know too much about it. Somewhere I have a sound mind investing handbook. Awesome, yeah, that's great. Well, that's a great resource. It would have been the one I would have suggested you read because it's got great practical information, but it's also biblically based. And you know, the Bible has a lot to say about money, Aidan, so I want you not only to be financially literate, but I want you to know God's heart as it relates to money because it really is essential in terms of how we think about it. You know, you're being very wise in how you approach this because you've been given these resources, and you know, the first thing you want to do is say, what does God want me to do with this? And we see clearly in Scripture, I think, that we should be thinking about taking a portion of it and returning it to Him. And so I would, if you haven't already, consider perhaps what He might want you to give out of this amount. You could use a tithe, a tenth, or whatever amount the Lord led you to give as you talk it through with your parents. And then you might want to think about the portion that you'd want to spend right now, if any, not that you have to, and then obviously the remaining amount you would look at saving. So give, save, and spend. If this is what's left to save, then investing it as long as you don't plan to touch it for some time. You know, typically I like to say, you know, if you're going to invest this money, you should be thinking seven years or more.

The good news is you're going to get more money, you're going to have more birthdays, you may start a part-time job here in the next couple of years if that's something your parents want you to do and you have the opportunity. So there'll be additional resources even if you invest this, but I just want you to think in terms of the long term because investing is not about short-term wins in the market. We don't know where the market's going to go, the stock market, meaning those companies that make up the various markets out there today. So we don't try to jump in and jump out and make a quick return. That's what the Bible calls a get-rich-quick scheme.

We need to be thinking about what the Bible refers to as steady plotting, which is a long-term perspective. Now, where do you do that? Well, the good news is there's more options than ever, Aidan, for somebody who's just starting out like you with a small amount of money wanting to get it invested but doing it on a low-cost basis. You may or may not have heard of something called Acorns.

If not, I'd mention that to your parents as something to check out. Acorns doesn't require any minimum deposit. You have to have at least five dollars in your account to trade and they'll assess a monthly fee of usually one dollar to five dollars at the most per month. And I realize that's a lot with the amount you're talking about, but as it grows obviously it'll be a much smaller percentage. But that would be one option. Another would be Charles Schwab Intelligent Portfolios and Betterment.

Neither of them require a minimum deposit, but it's for their digital robo-advisor investment solutions. So I think as you look at that, it's not going to be a situation where you're going to go in and buy a company like Amazon or Disney or any one of those. What I would rather you do is follow the model of scripture, which is to be properly diversified. So you'd want to own a large number of companies and that way if one of them does bad and another does good and another one does good, you know, you're not trying to pick the winners and losers. You're just capturing the moves of the market over time. So those would be my three that I would look at if I were you.

Acorns, Schwab Intelligent Portfolios and Betterment. Have your mom and dad look at that. They're probably going to have to open what's called a custodial account, meaning it's their account until you reach the age of majority here in Georgia, which I believe is 18. And at that point that would be your money, but you could still, you know, be involved in it. Your name would be listed on it. And as you deposit this amount and any other funds that you're taking a long term perspective with, it would automatically be invested in a fairly aggressive portfolio just because of your age.

But I think it'd be something fun for you to watch and you'd learn a lot along the way. Does that make sense? Yes, it does. All right. Well, you check those out with your mom and dad and tell them what I've said. If you have any questions, once you guys do a little bit of research on those three that I mentioned, you don't hesitate to give us a call back. And listen, so proud of you, bud. I think this is going to be a great experience and you're going to be really well positioned as you enter into adulthood with some experience on how to handle God's money really well. And we'll certainly be praying that the Lord will give you some wisdom here and call back any time. We appreciate it, Aiden. Let's head to Marilyn next.

Ryan has been holding and Ryan, how can I assist you? Hi, I'm in the process of building my credit. Currently, I'm at 750. And when I was taking different tips on how to grow it, I had some telling me to try and increase my credit limit, which was only 3000. I tried to do that, but they said you don't use enough of the credit we've already given you. So I started to use a large portion of that for everyday items. And then they came back and said, you have used more than 30% of your credit.

And that doesn't look good either. So yeah, I'm trying to figure out what's the best next move? Do I get a different type of credit card? Do I just keep doing what I'm doing and paying it down every month? I have seen that work. Or do I do something different?

My end goal is to be approved for a sizable small business loan, or either a commercial property, or just traditional business loan. Got it. Yeah, I would continue doing what you're doing. I wouldn't run balances up above 30%. I realize you're only using it for budgeted items. But what's reflected on the credit report is probably the high balance, the balance at the end of the cycle prior to you coming in and paying it off. And so you want to, you know, see if you can get that limit up such that the regular budgeted spending you're doing on the card before you pay it off is below 30%. What would be even better than that if it was below 10% of that limit, which may require that you go ahead and open an additional card. Again, as long as you're using it for budgeted items, keeping those balances that are being reported below 10% of the limit, that's key. The other thing that's probably affecting you is the credit mix. If all you have is just a credit card, that's a revolving account without an installment account like a car loan. But I don't want you to go out and borrow a bunch of money just so you can improve your credit score because you're already at a 750. So if you just continue doing what you're doing and only borrow in a way that makes sense over time, the history that you have, the credit mix, and you know, the low balances below 10% I think will do everything you need. And you really should qualify for the top tier credit even where you are now.

And it's probably only going to go up. So I hope that helps you. Ryan, we appreciate your call today. Phone lines open 800-525-7000. This is MoneyWise, biblical wisdom for your financial decisions.

Stay with us. We're delighted to have you along with us today on MoneyWise Live, bringing biblical wisdom for your financial decisions. We'd love to hear from you.

We've got a few lines open today. Here's the number 800-525-7000. That's 800-525-7000. Whatever's on your mind, whether it's savings related, you want to get on top of that spending plan, maybe set up that budget you've been looking to put in place and trying to figure out how you control the flow of money.

Perhaps it's giving related or retirement, whatever it might be. We'd love to hear from you. Again, 800-525-7000. Let's go right back to our phones in Tampa, Florida is Annette. We're so glad you've called today, Annette. How can I help you? Yes, thank you for taking my call.

Good question. We have recently paid off our house and we have been contributing to our Ross IRAs, my husband and I, and an investment plan. Our financial advisor reached us and said that he probably thought a good idea would be to invest on a long-term care. We are in our late 50s and I was just wondering if you think that's a good idea or should we wait until we turn 60?

Yes, it's a great question. Are you or your husband still working? My husband is, yes. Okay, very good. And does he believe you're on track for retirement in terms of what you've already put away and what you plan to put away during your husband's remaining working years to have enough to supplement Social Security and maintain your lifestyle? Yes, he actually, my husband would like to retire earlier than 65 or 62 and he says we are right on time for that.

Okay, very good. Well, by the way, congratulations on all you've done, the planning, the saving. You've obviously limited your lifestyle in order to do all of that and the fact that you've already paid off the house is phenomenal, Annette.

That's really exciting. I do think that long-term care insurance would be a great next step. You know, the American Association for Long-Term Care Insurance says that really, you know, your mid-50s is the most cost-effective time to buy. I realize it seems early but keep in mind these policies only get more expensive as you get older and if you were to wait another five or ten years you could be diagnosed with an illness during that time that would make you uninsurable or make it more costly to secure the insurance in the first place. The key would just be whatever policy you pick up, you want to make sure that it carries inflation protection because, you know, a policy without that obviously is going to lose buying power over time if you don't have that inflation protection built in such that when you need it down the road, if you do, by the way, more than 70 percent of 65-year-olds and beyond will use long-term care at some point. If you need it at that point, you know, it may not cover, you know, what you were expecting it to just because the buying power would be so much less.

So I would look at that. You'll want to make sure that it fits well within the budget and that you have room for it to increase because although they can't increase your policy alone, they can increase all of the policies just based on, you know, industry trends, the cost of medical care, you know, as it increases over time and we have seen certainly some increases in these types of policies in the past. So what I would do as your next step, Annette, is perhaps you could, you know, have your financial professional recommend a policy. I'd also perhaps seek out an independent insurance agent who is a specialist in long-term care who can go out across all the companies and find the best policy for you. Depending on your medical condition and the medical underwriting that's done, one policy may be better than another, more cost effective just based on who you are, you know, everything from your height and weight and age but also to your medical history. Certain companies treat certain things differently which is why you don't want to ever just quote it with one company. So I think that's a great next step and you guys are really well positioned for the future. Does all that make sense? Yes. Is there one company in particular you recommend or?

You know, I don't because it really does depend. You want to be with somebody who's really committed to this space and, you know, we're down to just a handful of carriers that really are, you know, the best in long-term care insurance and that's why I'd find an independent agent who really specializes in this space. If you don't know of someone, you could connect with a Certified Kingdom Advisor in Tampa and ask for a referral and to do that you just go to our website MoneyWiseLive.org and click Find a CKA and we appreciate your call today very, very much.

Let's head to Chicago, Illinois. Susan, thank you for your patience. How can I help you?

Hi, how are you? Great, thanks. My husband passed away about 10 years ago and I have IRA beneficiary accounts. I have about 700-750,000 total in them.

I've been very cautious. I work with a really good financial advisor and most of it is tied up in annuity so we don't lose any of the principal. I have about 35,000 and a mutual fund and I'm looking to get a new car and I don't know if it's best for me to take the money out of the IRA. I wouldn't have any penalty but I know I'd be paying taxes or do I take an auto loan? Yeah, yeah, great question. Is this a car that you really need right now or could you wait to the fall even to to buy this? I pretty much need it now, yeah.

Okay, all right. The only reason I'm asking is you may have seen in the news that it's not a great time to buy a car. Both new cars and used cars are prices are up just because there's supply constraints on new cars so a lot of dealerships just have a severely limited inventory and it has a lot to do with chips that they can't get in the manufacturing process and then that supply constraint on the new car side has caused used cars to be really elevated in value. In fact, in the latest report I saw said that we're 40 percent higher across the board on used cars than we were pre-pandemic. Now, we've just started seeing indications that car prices are beginning to come down.

It was expected. We thought this was going to be a transitory meaning just limited in time and I think that's what we're already beginning to see and I think as we get into the fall they'll come down even more but the bottom line is if you need a car you need a car and as long as you do your homework and perhaps even be willing to travel to find the car you want once you've settled on the make and the model then do your research. You know, last car I purchased I flew to Ohio and spent the night in a hotel bought it and drove it home because I saved several thousand dollars by doing that so you just need to be willing to do your research. In terms of how to go about that, you know, you know, if you've got the margin in your monthly budget to take out a small loan you've got excess free cash flow that would allow you to pay it off quickly by perhaps even doubling up on the payments then I'd say go for it. If your monthly cash flow is constrained though because you have a sizable account, sounds like you live modestly, you know, I don't think there's any problem pulling it out.

I think the key is just which, you know, would give you a greater peace of mind. Do you have enough surplus in your monthly budget that you could, you know, pay that car loan off quickly or is your monthly income constrained? It's pretty close but, you know, while I am working, I'm 60, actually I'm going to be 61 in a few months, I could try to do it, make a car loan and maybe try to get it paid off at least in four years before I want to retire. Yeah, I think as long as you get that paid off by then that would be ideal because then that keeps your lifestyle as low as possible. You could do something in the middle where, you know, I see here you have $9,000 in savings. I don't want you to go down to zero because I want you to have an emergency fund there but perhaps, you know, if you're going to spend, well, how much do you plan to spend? Have you been shopping around?

Yeah, I've been shopping around. Well, personally I don't want to spend anything because, you know, I understand, really, but I know I get $10,000 for my trade-in of the car so that's good. So I'm hoping I wouldn't have to spend anything more than $15,000 to $20,000 extra.

Okay, and what do you have available? Okay, and is the $9,000 you have available earmarked for the car or is that the total of your reserve savings? That's it, total of my savings. Okay, all right, you know, so perhaps you split the difference and, you know, you get $10,000 for your trade-in, you pull $10,000 from the IRA and then you finance $10,000 and just focus on paying that off as quick as you can. That would keep your tax liability to a minimum but give you a small monthly payment that you could pay off quickly. I think something like that would make a lot of sense. I wouldn't want you to spend down that emergency fund.

I want you to hang on to that. So I would either go, you know, splitting the difference with $10,000, $10,000, or just pull the full amount that you need beyond the trade-in out of your IRA and because the amount that you have would keep you debt-free and, you know, keep you in a great position. But at a minimum, let's make sure you can pay it off by the time you retire. Okay, one question is when I do retire, I still have a $110,000 mortgage.

It's a very low rate but this is why I take all the money out of the IRA to pay off my mortgage when I actually do retire so I don't have a monthly payment. What do you think the balance will be on the mortgage when you get to that point? I would say probably $90,000. Okay, yeah, and have you run the numbers to see based on, you know, let's say you had $650,000.

Let's say it grows to $700,000 after you pull the $100,000 out for the house. Is that enough plus social security if you were to try to take around 4% a year to cover your expenses? Yes, I think it would be enough, yeah. Okay, I'd do some planning and just make sure of that but if so, I like that idea. You're probably going to want to spread it out over a couple of tax years so you don't push any portion of that up into a higher bracket but I think clearly if you can get that paid off by the time you retire or shortly after, that's going to be something that'll give you greater peace of mind, greater flexibility and allow you to keep your expenses as low as possible. Then it's just a matter of managing that portfolio on a conservative basis so you've got the income that you need plus social security and, you know, it sounds like you're in a great position. So I like that plan.

I would proceed with that. Carol in Chicago, I'm sorry we didn't get to you but if you stay on the line, we'll talk off the air and Susan, thank you for your call today. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. I'm Rob West on behalf of Dan Anderson, Amy Rios, Jim Henry and Gabby T. We're so glad you were along with us today. We look forward to having you back tomorrow. We'll do it all over again as we apply God's Word to your financial life. Come back and join us then. God bless you.