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The I Bonds Have It—Inflation Protection

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
August 6, 2021 8:03 am

The I Bonds Have It—Inflation Protection

MoneyWise / Rob West and Steve Moore

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August 6, 2021 8:03 am

I Bonds may not be the most attractive choice among fixed income securities, but you may be surprised to find they have a feature that will make them more appealing in the near future. On the next MoneyWise Live, host Rob West will talk about I Bonds and how their built-in inflation protection is becoming increasingly important in today’s economy. Then he’ll answer your calls and questions on various financial topics. That’s MoneyWise Live—where biblical wisdom meets today’s finances, weekdays at 4pm Eastern/3pm Central on Moody Radio.


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Not licensed in Alaska, Hawaii, Georgia, Massachusetts, North Dakota, South Dakota, and Utah. The lonely I-Bond may be the Cinderella of fixed income securities, almost always left out when folks diversify their portfolios. But these days, the I-Bond could become the bell of the ball.

Hi, I'm Rob West. I-Bonds have a feature lacking in many other fixed income securities, built-in inflation protection, something that's becoming increasingly important. I'll talk about that first today, 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. Okay, so you'll never become the next Warren Buffett by buying I-Bonds, but they can help you hang on to what you already have, instead of letting it get slowly eaten away by inflation, which is starting to tick up.

In fact, it already has. The I in I-Bond stands for inflation. So what exactly is an I-Bond and how does it work? Well, by definition, it's an interest-bearing U.S. government savings security.

As such, it's backed by the full faith and credit of the United States government. I-Bonds have a 20-year initial maturity plus a 10-year extended period for a total of 30 years. After that, they stop bearing interest. And I know what you scoffers out there thinking, interest-bearing?

Ha, not much. And of course, you're right, but I-Bonds actually yield the exact amount of interest for a specific purpose, the previously mentioned hedge against inflation. And how do they do that? Well, I-Bonds actually have two separate interest rates, one fixed for the life of the bond and another that's variable and is pegged to inflation. That rate is readjusted every six months in May and November. Now, it probably won't surprise you that the fixed rate for an I-Bond sold today is a flat zero percent and that's where it'll stay for the life of the bond. However, the variable rate is now at 1.77 percent, which is adjusted or you might say compounded every six months. So the annual yield of an I-Bond right now is actually over three and a half percent. That's better than what you can get with a CD right now and way better than a savings account. Now, there are a few drawbacks to the I-Bond, especially if you're looking to rebalance a significant portion of your portfolio with them.

Here's the thing. You can only buy up to $10,000 worth of an I-Bond per person each year, but you can purchase another $5,000 worth each year with your tax refund. Another plus, you can buy an I-Bond for as little as $25 online. Now, you can't redeem an I-Bond until a full year after the purchase and there's an early withdrawal penalty, but it's not draconian. If you cash out at a bond before five years of ownership, you have to forfeit three months worth of interest. As such, you could even consider an I-Bond or two as sort of a long-range portion of your emergency fund.

It would keep up with inflation and if you had to cash one in, well, it wouldn't be the end of the world. Another drawback to I-Bonds is that you can't put them in a 401k or a traditional Roth IRA. That's because I-Bonds are bought with after-tax money. And while the interest on an I-Bond is tax deferred, you do pay regular income tax on that interest when you cash out the bond. If you want to put an inflation indexed government bond in a qualified retirement account, well, you can do that with something called TIPS, Treasury Inflation Protected Securities. These default-free securities are also a hedge against inflation and you can hold them in a traditional or a Roth IRA. Now, buying I-Bonds probably couldn't be easier. Just go to and look for the link, How Do I Buy Series I. The reason you probably haven't considered I-Bonds in the past is because their track record over the last 20 years or so.

It's been terrible because of the combined effects of the Federal Reserve's loose money policies and low inflation. That's kept both the fixed and variable interest rates of the I-Bond very low. But that's changed recently as inflation began to creep back up and the annual yield of the I-Bond went above 3.5%.

Now, they're quite the hot commodity in investing circles. But make no mistake, buying I-Bonds for your portfolio is not investing, which implies risk. And for that risk, you're given the potential, not the guarantee of a higher return.

An I-Bond essentially has zero risk, so the return is appropriately low. As we said, it's a hedge against inflation. You could compare it to buying gold, which some people do to fight inflation as well. The difference is with gold, you have no guarantee that your holdings will keep pace with inflation. And in fact, you can lose money. There's no chance of that with an I-Bond. But remember, sometimes we're not that interested in the return on our money, but the return of our money.

All right, so an I-Bond can help you save and hedge against inflation. Hey, your calls are next, 800-525-7000. Stay with us. Delighted to have you with us today on MoneyWise Live. Thanks for stopping by. Hey, we'd love to take your calls and questions today on anything financial. Eric is ready to receive your call and Amy will probably talk to you along the way and our team will take good care of you. But we want to address whatever's going on in your financial life and do it from a biblical perspective. That's what we do here on Moody Radio and that's what we'll do related to your finances today. Here's the number 800-525-7000.

800-525-7000. Before we take our first call today, let me just take a moment to say thank you. Thank you for so many of you in the MoneyWise Live family that were a part of our 48 hours of impact. The last two days we had the opportunity to pause our normal programming for a great cause, to raise money, to fund tuition-sponsored education at the Moody Bible Institute, preparing the next generation of Christian leaders and pastors and missionaries to go out without crippling debt and serve as the Lord leads after receiving a wonderfully biblically grounded education. And you helped us do that. In fact, we met our goals.

We went past some of our goals and we couldn't have done it without you. So from the bottom of our hearts on behalf of the entire team here at the Moody Bible Institute and Moody Radio, we just want to say thanks. All right, let's head to the phones today. Again, the number 800-525-7000. We have a few lines open.

We're going to begin right there in Chicagoland. Faye, thank you for calling. How can I help you?

Thank you. The question that I call about is how do I determine which credit card to close? I just did a sheet. I've got a total of 13 credit cards and I've already paid off six of them down to zero balances. I have two more with a 2,042 balance that I would like to add to the six so that would be eight of them that would be gone. I have a business account to two business. I did a stimulus loan. I needed two. Then I have a very small business card that I use for my business. Only 153 on it.

So the question is I want to get rid of all this junk credit card. I needed it. I got it when I need it. I don't need it.

I don't want it. 19.9% all the way up to 27% interest. I want all of those gone. I've been able to get, let me just say this, I've been able to get some better rates. I have a Capital One. I don't know if I should say names than a Discover and a Wells Fargo. Those I want to keep. Okay, so help me.

Well, a couple of things. Number one is I'd love for you to get out of the cycle of using the cards at all once they're paid off unless you're using them for budgeted items and you have the discipline to keep it to that and then pay them off in full every pay period or every cycle. Is that where you're headed or do you believe that you're... That's where I'm headed.

I'm headed there. That's why I want to get rid of all the initial six that I have zeroed out. I know I can't just dump six credit cards without it really killing my credit and I've been able to because I've paid all of these down like this. My credit score has rebound to like 770. Yes, well what's going to happen is the reason and that's a great credit score and you're going to see some minor impact but here's the thing.

If you're not out looking for new credit it's not a factor and even then we're not going to see any significant drops that is probably going to push you down into another tier that would prevent you from qualifying for probably close to or if not the very best rates and terms available. The reason that you saw a bump up when you paid the balances down is primarily related to something called credit utilization. In the aggregate all of the credit that's available to you across all of the cards and then when you compare that limit, the total, to what you owe across all the cards that's your credit utilization in the aggregate and that needs to be below 30 even better if it's below 10. Then there's the credit utilization by card so as you paid those balances down your credit utilization drops because you owe a smaller percentage of the total that's available to you.

The opposite is what's going to happen when you close them. Now I agree you should close them but let me explain why you might see a temporary and I think it will be temporary a temporary decline in the score is because as you pull those limits out of the equation then what's remaining on the other cards is now a higher percentage of the total available because once an account's closed that credit is no longer available to you but that's okay. I want you to get out from under those cards especially if they have an annual fee and to the extent they could be compromised and any of them can even though it's a zero balance you really should be watching those accounts every month to make sure there's not any fraudulent purchases so as soon as it's closed that's one less thing you have to do every month. So here's the way I'd approach it Faye I would do three every six months so I would pick the three right now I'd look for any that have an annual fee first if they do close those because there's no reason to pay that you're paying that for nothing. If none of them have an annual fee then I would close the three of the six that you're ready to close that are the newest because one other factor that plays into your credit score other than credit utilization is something called your credit history which has to do with how long you've had credit established so I'd close the newer accounts and keep those older accounts in the credit mix as it relates to your score.

Does that all make sense to you? It makes it makes very good sense so I'm on the right track I just didn't know how to do the timing of the closing every three months I mean three every six months so I do have two from the same company that has uh annual fees. Okay so I'd start with those and then pick one other perhaps one the one that's the newest let's close all those now make sure if you have any recurring charges set up that you cancel those doesn't sound like you do and give them a call you could also send something in writing you're going to want to get confirmation the account's been closed and then you'll want to pull a copy of your credit report 30 days after to make sure that shows that the accounts have been closed and once it does then you can you know keep those records for as long as you want but you don't have to continue to check on them and then six months from now I do that over again with the next three and six months later you'll be ready for three more and you're on your way Faye to perhaps being down to one or two cards that you can use only for budgeted items and pay them off at the end of the month.

Sound good? Okay okay so my goal is I have three cards that I would like to keep one or two for budgeted items and one just strictly I have a rental property so I need to have an emergency backup plan if I don't have the cash that's like three and those three at this time I'm working on a door project that's costing me about five thousand dollars but I got 18 months no interest and a 14 month no interest so I'm going through that process to you get that paid off. Yep that sounds good well I think you're on the right track I would get out of the cycle though of using that and let's save and I also want to make sure you prioritize an emergency fund of three to six months expenses but hey you keep up the good work and you'll be completely out of debt in no time and on your way to not having to think about paying anywhere near those interest rates on a monthly basis and we appreciate your call today very much. Well folks that's what it's all about applying God's truth to your financial life we're going to do that with a number of additional callers here Bob wants to talk about an annuity and Ted also wants to talk about a credit score Cassie wants to talk about buying a new car this is a challenging time to be shopping for an automobile we'll tee that one up as well we'd love to hear your question here's the number 800-525-7000 stay with us. Thanks for tuning in to Money Wise Line biblical wisdom for your financial decisions I'm Rob West we're delighted that you've joined us today we have a few lines open 800-525-7000 that's 800-525-7000 hey have you downloaded the Money Wise app yet if not it's in your app store we'd love for you to give it a try there's three major components to the Money Wise app which by the way is a free download there's our community where you can post questions and get answers from our Money Wise coaches and other people in the Money Wise community who would love to weigh in on whatever you're dealing with there's our discover tab with the best content in Christian finance podcasts videos articles all flowing into one place and there's our money management system where you can put together a digital envelope tracking system and manage your money right there in the app you can connect to 11,000 institutions with a pro subscription download your transactions automatically and securely and you can stay on top of God's money that way so we'd love for you to check it out it's in your app store whether it's google play or apple just type in Money Wise Biblical Finance and you'll find it today we look forward to you checking it out let us know what you think all right let's head back to the phones Ted is in Chicago Ted tell me what's going on with your credit score um day before yesterday I got I have something called Capital One Watch okay and it says your Experian FICO score dropped by 53 percent yes and this morning I tried to log on to Experian to get their free report I could not so I called they said it'll take five to ten days by mail the only thing I did was um maybe on Tuesday when I went to my bank my bank manager said hey I have a promotion for you um apply for this credit card and you get five hundred dollars bonus and you should pay off three thousand dollars you should charge three thousand dollars and pay off within three months okay other than that I did not do anything and I always pay my credit cards full right away yeah well I that's probably what it was let's talk about your credit score but then I also want to talk about this loan that you applied for or this card you know anytime you authorize an inquiry for a lender to go out and pull your credit that's called a hard inquiry which is different than a soft credit check which you would initiate just for your own knowledge and information but when you authorize a lender to do that for the purposes of evaluating whether or not they'll extend you credit that hard inquiry is going to drop your score just because as a part of the algorithm they know you're out there shopping for credit which increases your risk of default across the board and so a part of the scoring models factor in that inquiry so that's a temporary drop I'm not surprised to hear that it may have dropped by 50 points or so it'll probably bounce right back so I wouldn't worry about it in terms of checking your credit score Ted there's any number of places you can do that free you could go to Credit Karma you could look with your credit card so I believe Capital One has a service your bank I know mine does your bank may have a service offering free credit scores now you know many of them are doing that it's very common these days so before you have to wait around for it you may be able to get it through one of those providers the last thing though I would say is I don't like the sound of what you applied for how do you plan to use that credit that you applied for with that banker I really don't need it but then this guy my bank manager said hey why don't we get this 500 we are giving 500 for this card I see yeah and do you have to use it a certain number of times or months within within three months I should charge three thousand dollars okay yeah and if I pay off I get five hundred dollars yeah okay well here's the thing as long as you use those use that only for budgeted items you know the reason they're doing that is because folks like you will and I'm not saying you're going to do this but what they're counting on is that you're going to open this account you're going to start charging on it you're going to use that new newly available credit to go out and buy things that aren't budgeted and then you're not going to pay it off and that 500 that they're going to pay you pales in comparison to the interest they're going to earn on your charges you know in the coming years and so you know that's why they're doing it plus this is something you're going to have to keep up with and there may be an annual fee attached to it so in the future I wouldn't do that I mean I realize that bonus is nice but again it's just one more account you're going to have to keep up with there's going to be a temporary impact to your credit score and at some point in the future until it's closed if it's compromised you're going to have to continue to monitor it so what I would do is if you want to go ahead with it and again you're only going to charge budgeted items things that you already have in the budget and you're going to pay it off in full and then after the three months you're going to close it and not keep it and continue to charge on it then I'd say go for it enjoy that 500 but I wouldn't get in the habit of that because you're going to end up with a number of these accounts that you're just going to have to stay on top of and they will put a drag on your credit score over time so don't worry about those 50 points but stay on top of this and then let's get it closed when you're done all right Traverse Michigan Traverse City that is Cassie how can I help you hi I have a question two questions we are looking to buy a work truck and by that I mean strip down the most very basic truck you can get I have two questions for you the first is is there a particular time of year that is good to buy a new vehicle that's the first one yeah I'll answer that so the best time yeah I'll just go and weigh in on that it's it's the end of the model year clearly the end of the month is the best time to buy a new car just at any time but the very best time would be right there at the end of the model year the end of the month the end of the year where they are you know transitioning from one model year to the next and you could pick up you know the model year that's on its way out that they're trying to move hit some goals and you know you can usually do pretty well the other thing that you've got to deal with here is just what's going on in the car market right now this is a very challenging time to buy cars period just because of the inventories I saw some data that said used cars were 40% above pre-pandemic prices really high now we just got some good news in July that that's starting to come down and the reason is the inventories are increasing as we head toward the end of the year so as the new car inventories build and they need to then that's also going to have a ripple effect to use cars because one of the reason used cars are so high is because the inventories on the new cars were so challenging that folks who were looking to buy a new car and couldn't get them in a timely basis were going to use them that was pushing the prices up so I would say to answer your question if you can wait until the end of the year that would do you some good hey I know you had a part two we've got to hit a break so stay on the line we'll be right back and we'll tackle that just around the corner stay with us on MoneyWise Live. Thanks for joining us today on MoneyWise Live I'm Rob West your host this is the program where we recognize God owns it all you're a steward and I'm the steward of God's resources which by the way is a very high calling we're managing money for the creator of the universe and money then becomes a tool to accomplish God's purposes here's the question what's going on in your financial life and how can we dive into the 2350 verses in God's word to pull out the principles and best practices to apply to your financial situation we'll do our best to do that today let's head back to the phones Cassie thank you for your patience I know we dealt with the first part of your question about when to buy a car but you had a second question so go right ahead yes I'd like to know if you know of a resource that I can compare values between two vehicles and I'm one of them is going to be a brand new 2021 work truck okay I'm going to give you a hypothetical second one if I may sure okay so the second one is going to be 2012 work truck meaning stripped down and we're going to put that at 80,000 miles and we're going to put that at twenty thousand dollars the new truck we're going to put it thirty thousand dollars so which one of those is there a resource that can tell us which one would be the best value for our money yeah well it's a good question you know or is kind of my go-to and you know what that's going to do is give you both the the dealer and the private sale values of any car new or used and you know help you at least evaluate what you have and that would also give you a sense if you went and looked at you know where you know cars were at historically you could see how they've done so I'd probably start there are you just trying to determine you know is it worth the extra ten thousand to buy new you know based on what it might be worth five years from now and whether you could recoup that in the resale that's correct okay yeah and so I think you know what you could do would be to take that same truck and look at you know what it would be what it five years you know if you take that same model truck if it's available and look at one that's five years old and see what it's selling for today and then you could compare that to the one that you're looking to buy used and just see if in fact you know it's selling for more than the one that you're looking at used and is that difference enough to offset that ten thousand dollar premium how old is the the used truck 2012 2012 okay yeah so so if you compare let's say a 2016 of the same model on KBB and to your 2012 let's just see if there's a less than ten thousand dollar difference or more than ten thousand dollar difference and that would be at least a good starting point as to whether or not that premium makes sense the other thing to factor in is just the environment we're in right now where you know it used cars are a bit more attractive right now even than the news new cars because the new car prices are elevated especially as the inventories on the new cars start to take care of themselves and are replenished so it's a little bit of an unusual time right now whereas you know normally there's plenty of inventory and you know we're not seeing these kind of elevated prices that's just not the case today so i think it's really important now that you do this analysis just because we're in a bit of an unusual period but does the does the method i described make sense yes and i also appreciate your giving that 40 amount because i was wondering we've been looking for a used vehicle and i was wondering you know right now buying a used truck any used vehicle you know how much percentage are they up and i and i appreciate getting that information you said it was about 40 higher yeah and that's coming that's pre-pandemic year over year the last i saw according to edmunds was there about 21 higher uh you know from one year to the literally 12 months and that's the highest increase in average prices uh that edmunds has ever tracked so we really are kind of in unprecedented times and a lot of it if not the majority of it has to do with the pandemic and just the supply constraints but good news is that's working its way through the system so if you can wait i'd probably wait till the fall as we get closer to year end but go ahead and do your research now just to decide which makes the most sense the the used option from 2012 or the new car now that would be comparable to that you know 2012 car as a 2016 because you know we'd be looking at it five years later just to see what what it would be worth so appreciate you checking in with us cassie all the best to you as you explore this bob is in brazil indiana bob go right ahead yes thank you for taking my call um question is two years ago i had to leave a a job that had a 401k matching 401k and the job now that i have does not have a 401k so somebody told me that i ought to take and put my money over into an annuity which i got about 51 000 into it my question is um six getting ready turn 60 years old hopefully i'd like to retire and semi-retire in about 63. so one mortgage is 45 000 my second mortgage is 21. my question is should i take the money out of my annuity pay off my 45 000 first mortgage take the money that i was paying on them monthly payments double up and pay off my 21 000 which would be about two thousand dollars two years that'll give me two years still of working and put that money then back into my savings and then work part-time when i get my social security uh-huh interesting yeah i like the plan let me just ask though did you say in addition to the annuity you also have a 401k no that no the 401k ended and i put my money over into an annuity okay so you would deplete your retirement savings at this point in this process uh until you build it back up through the savings from the two mortgages is that right right well i would have still have six thousand if i take 45 out of the 51 to pay off the first mortgage i still have six thousand that i could either leave an annuity or move it over into a savings account into my regular savings account okay so i just didn't know so you're gonna use your plan is to use social security plus your part-time job income to cover your lifestyle well and my wife's still working so we've been figured in our budget and right now our highest thing out is our mortgages so if we could get those paid off i think yeah we could yeah we could with our budget we could make it what have you you know what kind of returns are you getting on the annuity is this a variable annuity yes it is okay and it's only been in there two years so okay it's only been in two years so i've not really had a chance to see what kind of performance we've had on it okay all right well i'm a little hesitant for you to pull it out just because the first thing you need to understand if you don't already is what are the tax implications and what are the surrender charges that you're going to have by pulling all this money out have you looked into either of those no not yet okay let's start there because that cost of both the taxes and the surrender charges that you'd pay to the insurance company are probably going to be cost prohibitive the key i think right now because you still have time on your side is just to pare back your lifestyle as much as you can i'd love to see you let this even though annuities aren't my favorite it's already in there i'd love that just to continue to grow and you get the double up on that payment or add a little bit hundred dollars a month whatever you can to the mortgage every month to try to get it paid off between now and retirement so that when you retire and move to part-time income at that point it's paid off it's going to take a little longer but that'll preserve this retirement account but start by checking the taxes and the surrender charges and then if you have other questions give us a call back and bob we appreciate your call more to come on money wise live biblical wisdom for your financial decisions stay with us thank you for joining us on money wise live today i'm rob west your host you know more than ever before the world needs biblically solid ministry minded christian leaders and moody bible institute is meeting that need and you are helping us do it a big thank you for the last two days and all that you gave to help us reach our goals to fund the next generation of christian leaders as they study with tuition sponsored education at the moody bible institute so be on behalf of the moody bible institute and moody radio we just want to say thank you let's head back to our phones today wilford is in fort myers florida hello sir hi good evening thank you so much for taking my call happy to do it right ahead yeah my question is um i want to go in the investment but um which is which is the market um but i do not know how to go about it but it's safe to take which of those um but i don't know if you call it institute mean like t.d america trade vanguard or stone mine investment which one is the best one for me to try and go into yeah so the first thing we want to talk about is just uh what you're trying how much you'd like to be able to contribute each year or each month uh and then secondly what type of account uh is going to be best is it a 401k if you have one available or a 403b or do you need to use an ira uh and then thirdly which institution and which strategy are you going to employ for investing the dollars that you put into that account so let's talk first about what you have available do you have an emergency fund and and have you paid off all of your credit card debt yeah i don't have any credit card debt okay all right do you have an emergency savings account emergency saving account um i'm not sure about that i have um like in my savings i have nine thousand dollars in my checking i think i have five thousand so i don't know okay so what does it take to run your household on a 30-day period what are your monthly expenses roughly um i would say um i would say the between 19 to 2 2 000 2 2 000 all right so uh you know let's say you're you're missing a few let's say it's 2 500 so three months expenses is 7 500 and you've got 9 000 that's great that's the money that you're going to fall back on if you have an unexpected expense and it sounds like your debt is under control so if you have an unexpected expense and it sounds like your debt is under control so yeah i agree you need to be putting something away for the future the good news is you've got perhaps 20 years or more to do that and you can put away a good bid if you can just be systematic in your contributions um do you have a 401k available at work um this company that i'm working from just yeah in with the two years now yes i have a 401k it's only um almost seven thousand dollars in it okay great uh do they do any matching of any kind they do matching but i have to be there um like um they match up to six six percent but i have to be there like at least um six to seven years before it complete for the six percent okay so you might be able to get a portion of that six percent by being there two or three years right right yeah okay i'd check on that and find out i'm going to suggest you use your 401k as the place that you're going to uh invest this money not opening another a new ira or something like that at tdameritrade or vanguard i'd just stay right there in your 401k because first of all we want to maximize the match because that's free money if they're going to match you dollar for dollar up to let's say three percent well that's a hundred percent return on your money as soon as you make a contribution you're not going to find that in the market so let's start there the good news on the 401k is you can put away quite a bit of money uh you know on a on an annual basis um in in that account so you know with a 401k this year you can put away nineteen thousand five hundred dollars um and you've got a menu of investment options inside the 401k everyone does that you can choose from and if you have questions you could connect with a plan administrator and ask for some advice but you could use one of the target date funds that's pegged to your retirement date that gets more conservative over time or you could uh you know choose any one of the investments apart from that inside the plan um in terms of how much you have to put away uh what uh surplus do you have that you could contribute on a monthly basis um um i would say maybe like um maybe five percent okay all right well i i'd start there i don't think i mean that's not a bad goal and then the key would be i'd love for you to get that up to 10 even to 15 of your pay as you're able to over time and maybe through salary increases or uh you know you paring back your lifestyle uh you can look for ways to free up more money but five percent's a great starting point but i'd use that 401k they can take it right out of your paycheck every month uh before you receive your paycheck and make that contribution directly in does that sound good okay no problem thank you okay well for thank you for your call today sir uh saint charles missouri is julie julie thank you for your patience how can i help you yeah thank you um i was calling because recently my workplace was bought out and we have a new owner and so they have offered to have us roll our 401k into their 401k and i didn't know if i should do that or if i should just take it out or um do an ira we're willing to do an ira yeah and either one would work uh how much do you have in that 401k julie i have 25 000 okay all right um you know i think it probably makes sense just to roll that right into that new 401k and keep contributing you're gonna have you're not gonna have an extra account that you're gonna have to keep up with and if you put it into an ira then you're gonna have to decide how to manage it meaning what investments to select and it's not quite enough to hire an investment advisor so you'd either have to use you know a robo advisor solution or you could you know use our friends at that would make uh you know through their monthly newsletter they would make recommendations on some high quality low-cost mutual funds but you'd be making the selections in the 401k you would just choose from the menu of options it's a little simpler to do and it just keeps everything nice and neat because everything's in one account and it's a little different from what you've already amassed but also new contributions going in you're planning to still contribute to the new 401k yes i'm only i'm 50 so i'll be working several more years so okay yeah so i would just roll it over into that new 401k and keep moving and if you have questions about the investments i'd check with the plan administrator somebody who could advise you or you could connect with a certified kingdom advisor in your area of finance or you could have a certified kingdom advisor in your area just to look over your options and then based on your age and goals and so forth you know make some recommendations on which funds to pick and then you know you just want to look at that every six months to a year all right well thank you so much for your help you're welcome julie thank you for listening and calling we appreciate it uh to north jackson ohio betsy is on hold and betsy how can i help you yes um i'm 63 and i'm 38 and i'm planning on probably changing the job for some for half the pay but the question is i only have 100 000 in my 401k i have a mortgage that is 99 000 um i have a credit card for 11 000 and i'm not sure how i can tweak it better um sometimes i wonder if i should just pull out half of the retirement and pay half the mortgage and i know i have to pay tax from it yeah so i'm not i'm not sure what i should do right now yeah well you know i think the key is um you know just really trying to stay really tightly focused in on your spending plan to free up as much margin as you can so that you can get the first of all the credit card paid off to zero and then you know take that amount that you had and assuming you have an emergency fund and savings then just roll that money that was going to that credit card over to the mortgage to just try to accelerate it because i agree you know you've you've got this hundred thousand i would rather you not take that out you know because as you said that's that's a lot of tax you're going to pay on that and that's money that's no longer growing for the future which you're going to need additional you know retirement funds to supplement social security down the road and because you're already planning on working for a you know a good bit longer i think if you could time the payoff of that mortgage to your retirement date you know that would be the best case scenario now you may get let's say five years from now you're saying okay now's the time and there's still 20 000 left well that might be the time to pull out of your 401k and just wipe it out so as you you know slow down get less income you know perhaps even leave the workforce all together your lifestyle is as low as possible i realize it's more than just financial but i would just caution you on you know taking a new job that's going to drop you down to a much lower salary because now's the time where you need as much you know surplus as possible to get the credit cards taken care of and pay off that mortgage and by reducing your income that's going to make that even more challenging now there may be other factors there that you know just require you to do that health wise or family or you know stress or whatever it might be but apart from that i'd probably try to keep this higher income in place and let's get some of these things taken care of does that make sense right so i should probably just wait till i pay off that credit card and eliminate everything eliminate everything huh that's what i would do and i'd roll the amount that you're paying on the credit card over to increased principal payments against the mortgage once you're able to do that and i think that is the best case for you you know i know it can feel overwhelming at times but just stay the course be found faithful with what god is providing and i'm confident you'll be able to get this debt paid off and you'll have something to show for it down the road with a significant retirement account that can be then converted into an income stream to supplement your social security so stay at it betsy you're doing a great job and i'm confident you'll get there we appreciate your call well folks that's going to do it for us today we've covered a lot of ground we've talked about paying down debt and how do you handle credit scores and saving for retirement and buying a car in the midst of these interesting times and we've done it all weighing it against the council of scripture which is what we do here on money wise live we appreciate you being along with us uh this week and that's been a lot of fun thanks again for all you did for the 48 hours of impact we are grateful while i'm saying thank you let me thank you my team eric tidwell dan anderson amy rios and jim henry couldn't do it without them we also couldn't do it without you so i hope you'll come back and join us again tomorrow i'll be here lord willing looking forward to taking your calls in the meantime may the lord bless you bye
Whisper: medium.en / 2023-09-17 06:09:36 / 2023-09-17 06:26:32 / 17

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