Downsizing for Retirement

Uncle Ryan is going to talk about how hot, hot, hot cash out refinances are. That sounds fun.

I sound like a broken record. I've been doing this for 18 years. I have never seen a market like this in my life. Home values have generally been skyrocketing the last couple of years.

And with interest rates being some low, I've actually seen refinances where people are able to cash out that newly found equity in their homes, do home improvements, whatever it may be, and still save money per month compared to what their prior mortgage payment was. So it's worth a shot just to give us a phone call. And one thing I can promise at United Faith Mortgage is we will not be pushy.

It's one of my biggest pet peeves. I can promise you we will not be that way. I like to see it as my job is to present you with a few different options. I step back, I let you decide, and I'll let you call me when you want to move forward.

We are United Faith Mortgage. Folks are always asking us, how much will I need to retire? And of course the answer is, it depends.

It depends on your needs, lifestyle, and one more important factor. Hi, I'm Rob West. The other important piece of the retirement puzzle is how much are you willing and able to cut from your budget? I'll talk about that first today. Then we'll take your calls and questions on any financial topic at 800-525-7000.

Call it 24 seven, 800-525-7000. This is Money Wise Live, biblical wisdom for your financial journey. Well, just about everybody will have less income during retirement. So it's a good thing that many expenses also drop in your so-called golden years. The experts will tell you that you'll need at least 70% of your working income when you retire.

Why is it less? Well, because your transportation, clothing, and dining out expenses, mostly for lunch, drop considerably when you're no longer working. That's all good, but the problem is studies show the average retirement budget is only about 60% of working income. So if you're working and making $50,000 a year, you'll need 70% or 35,000 in retirement. But if you're on track to generate only 60% of your working budget from Social Security and income generated by your investments, you'll be 5,000 a year or more than 400 a month short of your estimated living expenses. That means you'll have to work longer to generate more savings that generates more retirement income or continue to work part-time to make up that $400 difference unless you're able to cut your retirement expenses enough to close that $400 gap or at least make it smaller. Now, how do you do that?

Well, let's start with the one that's probably the most obvious. It's the big house you raised your family in but which is now largely empty because they've all moved on and have their own houses. Do you really need all that room?

Probably not. So now's a great time to downsize into something smaller. Besides lowering your maintenance costs, utility bills and taxes, downsizing should leave you with cash left over that you can convert to an income stream getting you closer to your retirement needs.

As long as you've lived in the home for two out of the last five years, you can exempt the first $250,000 in capital gains on the sale of your home or $500,000 for married couples. And if you're worried about having enough room when the grandkids visit, take some of that savings and get bunk beds or air mattresses. They have really nice ones with built-in air pumps.

We've got a couple of them. Now, the next biggest way to cut your retirement budget is with transportation. If neither you or your spouse is working, do you really need two vehicles? Probably not and you could sell one and pocket more cash. Plus, cutting repair costs, registration fees and insurance premiums. And if you and your spouse sometimes have to be away from home in two different places at the same time, consider using a ride-sharing service and leave the driving to someone else.

It might cost you two or three dollars a mile, but you can afford that occasional expense with all the money you're saving. Now, let's look at insurance next and specifically disability in life. First off, disability insurance is designed to replace lost income when you're recovering from an injury and illness and not able to work. Obviously, if you're retired and not working, you have no working income to replace and therefore you have no need for disability insurance.

Yet, some people still carry it. Drop it the day you retire. Now, what about life insurance in retirement?

If your children are now grown up and out of the house, providing for themselves and their families, they're no longer dependent on your income. So you can cut back on life insurance, which by the way gets increasingly expensive as we grow older. You may not want to get rid of life insurance entirely.

Total social security for the family decreases when one spouse dies. So you may want to have a smaller life insurance policy to make up that difference if your resources are very tight. Also, look at interest on a credit card balance or other consumer debt.

It's never good, but downright terrible when you're retired and trying to adjust to a smaller income. Take some of the cash you've freed up with the previous suggestions and pay off your credit cards as quickly as you can. Finally, carefully go through your monthly bills to see what else you can cut. Maybe you don't need 500 channels on cable, 497 of which you never watch. Are you one of the last people in North America to have a landline? Drop it and you're probably always FaceTiming with the grandkids on your smartphone anyway.

When you eat out, share an entree, they're too big anyway, and hit some of those specials along the way. One thing you may have plenty of in retirement is time, so consider giving more of it away to your church or your favorite ministry. All right, I hope this has been helpful. Your calls are next, 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey. Thanks for joining us today on MoneyWise Live. I'm Rob West, your host, taking your calls and questions on anything financial, applying biblical wisdom to what you're dealing with in your financial life as you seek to be found faithful as a steward of God's resources. Here's the number to call today. Again, lines are open, 800-525-7000.

Whatever your question is today on saving or giving, perhaps it's investing, credit scores, paying down debt, maybe giving more wisely. We'd love to hear from you. Again, 800-525-7000. Let's go to the phones and welcome Kim to the broadcast in Michigan. Kim, go right ahead. Hi, Rob. Thanks for taking my call.

Sure. My parents are 79, and they are having some financial difficulty, a little bit more debt than they want to be handling at this point. They're looking to downsize from their current condo to something more affordable, and I do have a sizable 401k that I could possibly use to help them get to the next place or help them pay off debt or something.

I wondered how I could best help them with the resources I have. Yeah, and Kim, did you have a thought to borrow from that 401k? Were you actually thinking about taking a withdrawal? What was your plan? Well, it's not in a plan with a company that I work for anymore, so I would have to actually withdraw it. So unfortunately, I would have tax consequences. Yeah, and what is your age? 49.

Okay. Yeah, so I think the key there is, I mean, this is going to be expensive money because this wouldn't be for one of the exclusions that would allow you to miss the 10% penalty for early withdrawal prior to 59 and a half. And so in addition to that 10% penalty, it would all be added to your taxable income for the year. So this could cost you 30% or more, not to mention the lost compounding that would occur in the years following where this money is no longer growing for the future. So yeah, I'm not a big fan of that approach unless it's just a real desperate situation. I would use that as an absolute last resort. So what I would look at a couple of things, Kim, I mean, the first thing to do and maybe you already have all this information would just be to get a complete financial statement, look at their income, their expenses, look at opportunities to cut back and where are their savings opportunities that might preclude you from helping them financially. If as the largest expense they have selling the condo is key, you know, that's fine. But could we come up with another solution that doesn't require you to come out of pocket? Could they sell it and, you know, move in with you or come up with some other temporary housing situation while you look for that place? Or if you're going to rent or buy something smaller, you know, could you time the sale and the purchase of that? Or if it's a rental, obviously that's even easier, such that we make one move and it doesn't require any money. That's always going to come down to though, what is the financial gap that exists? Does the change in the housing situation alone cover that or is there more to it? And that's why you were looking to step in financially.

So give me your thoughts on all that I've just shared. They actually were planning that they would sell the condo if they move into something smaller and they would pay me back what I give them to help them out of the situation. And I don't know the dollar amount that they're at. So I know they've cut back on expenditures in the last year, just trying to trim their budget a bit and they still feel like they need to sell to make up the difference. Sure, but I guess my question is if they're planning to pay you back, then it sounds like they're anticipating a temporary gap, which leads me to believe it's, you know, related to the sale and the purchase of whatever they would move into. Do you have some clarity on why this money from you is needed on a temporary basis? Just to cover the debt that they have. They're not able to completely cover the debts they have. I see.

Okay. So that doesn't sound like, you know, a remedy that is long term because, you know, unless they're saying, you know, we need a temporary solution to pay down the debt until, you know, or to cover the minimum payments until we lower our housing expense, and then we're planning on having enough. And I realize you want to help them, I guess the challenge is without you really going into it with a clear cut plan, you know, their best intentions may not play out as you expect. And it, you know, is potentially going to cost you quite a bit of money in, you know, for the reasons I mentioned, early withdrawal penalty taxes, not to mention the money that's no longer available to grow for your own retirement, you know, 20 plus years down the road, maybe.

So I think, or perhaps a little less than that. So I think in order for you to consider this as an option, you know, first of all, I'd love for you to do it outside of retirement accounts. Second of all, I'd want to make sure you have the ability to do it without putting your own financial situation in jeopardy. And third, as hard as this might be, I think you need to have a much clearer picture as to what's going on, whether that's you getting involved in looking at these numbers, again, the financial statement, the income, the expenses, or a third party, like one of our MoneyWise coaches that comes in and evaluates the situation, because otherwise, we're going to go into it without a lot of clarity, you perhaps have one set of expectations, they have another things may not play out the way they want or in the timing they want. And now, you know, they're not able to pay you back, which you may be okay with that.

But you know, that may put them in a spot where it creates a little bit of, you know, emotional toil for them, because they're not able to make good on perhaps what they said to you on the front end. So I think just to spare all that relational collateral damage. And just to be wise in how we go about this, I think really getting much deeper into what is the plan? Why is this money needed?

And where is it going to come from? And then finally, do you even have the financial means to do that, despite your desire to be of help? I think are all questions that need to be answered. Do you follow that, though?

Yes, I do. Thank you very much. All right.

You're very welcome. And let me just offer up our MoneyWise coaches. You can connect with a coach at MoneyWiseLive.org. And these are wonderful men and women, Kim, that, you know, are godly folks that would pray with your mom and dad and help you come alongside them, whether you're involved or not, to just get into the budget and perhaps be of help. Maybe they have some ideas that haven't been considered on ways to cut back, you know, other opportunities to provide some counsel. And perhaps you and the coach and them could come up with a plan you haven't even thought of. So before you just kind of jump into this, I'd at least consider that, just so you have a third objective party that can help to weigh in. And we'll certainly be praying for you.

I really appreciate your desire to honor your parents, help them financially. That's on the heart of God. We see that in Scripture.

So that's a good thing. I just want to do it in a wise way. And I don't want you to, you know, take resources perhaps you don't have or resources that shouldn't be used for this and expend them for this purpose if you don't have to. So thank you for your call today. Let's head to Newton, Mississippi. Mary, thank you for your call.

How can I help? Thank you, Rob, so much for taking my call. I have the question in my mind, what do you know about a trust and who should have a trust? I've been told that if you have a trust, that it can help keep the nursing home from gobbling up your retirement and savings.

And I wonder if that's true or I just don't know anything about a trust. Yeah, well, you know, typically a trust is used in a situation where you have a net worth of at least $100,000 and you have substantial assets in real estate, perhaps beyond even your personal residence, or you have specific instructions on how and when you want your estate to be distributed among your heirs after you die. You have certain triggering events that beyond your death would allow money to be distributed as heirs reach certain ages or if you have somebody who's a lifelong dependent, you know, as they reach certain milestones just to protect the money so it's not, you know, spent frivolously or given to somebody who just doesn't have the ability to handle it. It can help to minimize estate taxes, although these days with the estate tax being so high, it's just, you know, unless you have a massive estate, typically it's not necessary. It can protect your estate from lawsuits and creditors.

And so that's another consideration. And, you know, what you're talking about is perhaps an irrevocable trust. Whereas typically when we talk about trust, we're talking about a revocable trust, but if it's irrevocable, it's, you know, allows you to avoid spending assets in order to qualify for Medicare.

That's at least how some folks will use them. So I think you just need to perhaps visit with a godly estate planning attorney, go over your situation, and determine whether your situation warrants it. It's typically more expensive, perhaps three times as much as a simple will. So if you don't need it and you can just have a will that basically tells your executor how to pass your assets and personal effects at your death, you know, that'll cover it. But if there's a more complex situation or you have certain instructions, a lot of real estate, it can make some sense.

So just connect with an estate planning attorney to talk through that. Mary, we appreciate your call. More to come just around the corner. Stay with us. Thanks for joining us today on MoneyWise Live. I'm Rob West, your host.

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It's a free download today. Wherever you get your apps, just search for MoneyWise Biblical Finance. We'll head back to the phones. We do have a few lines open, 800-525-7000. In just a moment, we'll be talking to Austin and Arkansas. We'll be talking to Mike in Indiana, has a pension and a 401k, or his wife does, from a previous employer, wanting to talk about how to handle that. But first, Jim is in Grand Rapids, Michigan. And Jim, how can I help you? Hi, thank you for taking my call too.

And God bless you guys. I work 100 miles away right now from work. And I come in part time.

I work three days a week. And I'm looking at leaving the company and I got 115,000 in my 401k. And I'm wondering about, do I take that money and pay my house off? I owe 80,000 on my house. So I'm probably going to end up with a zero balance and maybe a little leftover. And then my Social Security is whatever, 2300. And, but I didn't know, I, you know, leave the job, keep the 401k, draw from that, and just get a part time job and, you know, manage the bills that way, or just pay the house off flat. So that's kind of my question.

Yeah. So obviously, I heard that you want to not commute as far. Are you also looking to slow down? Or could you replace your current job with something closer to home but continue to work full time with the goal of trying to preserve the 401k, but get that mortgage paid down a little quicker so that as you enter retirement, you've got whatever the 401k has grown to you've paid off the home, which gets your lifestyle expenses down.

And when you start to add in that Social Security gives you an opportunity to, you know, perhaps live within your means by drawing an income from the 401k, the Social Security, and, you know, hopefully for a lot less than you're spending now on a monthly basis. Talk to me about that option. Yeah, you know, it is I have to admit, I'm getting a little spoiled working three days a week. Yeah, yeah. So, you know, going working up, you know, north and full time job again.

Yes, that is a good possibility. And I really haven't looked into it that much. And, yeah. And what is your age, Jim? Yeah, I'll be 64 next month. Okay.

Yeah. So I think, you know, that perhaps is the opportunity because I'd also love, you know, if you're trying to work on modest means and stretch it as long as you can, I'd also love for you to wait until full retirement age to draw your Social Security. So I think if you were to perhaps prayerfully set a goal for the Lord to provide something full time, a little closer to home, so you take that stress off, maybe you're working a few more hours a week, but you have a goal in mind. And that is to get to full retirement age so you can maximize your Social Security check, take this additional funds you're bringing in by working a couple extra days a week and put that not toward additional lifestyle spending, but, you know, doubling up on that house payment so that when we reach this, we're retirement age, we're certainly much closer to paying it off, if not there. And then, you know, perhaps pulling a little bit out of the 401k to pay the rest of it off is not such a big proposition, less taxes and preserving more of the 401k that you could convert to income at that point. I think that would be my preferred option as to as opposed to trying to do this quicker, you know, eliminating the 401k because you've used it to pay off the house.

And now really, you're just left with Social Security in terms of, you know, supporting your lifestyle. Do you follow? I really do.

I really appreciate it very much. All right, Jim. Hey, listen, Lord bless you. And we appreciate you listening and calling.

Let's head to Indiana. Mike is up next. Mike, good afternoon. Hey, how you doing, Rob? Thank you very much. I love your show and listen nearly every day. Oh, I appreciate it.

I have maybe two questions. The first, my wife from a previous employer, she's got a 401k and she's got a pension. And we don't know if on that pension, should we take a lump sum and convert that with a 401k and put it into her new 401k or into a separate account? Is that a taxable event if we take that lump sum?

Yeah. Well, if you roll it into a new 401k or an IRA, it's not. If you do, if you just take it out, it will be a taxable event.

If you just take it out, it will be. So what I'd love for you to do, if your new 401k allows it, yeah, roll it right in. If not, roll it out to a new IRA with the 401k from the previous employer.

Now you've got it all in one place. And then I think at that point, I'd be looking for a certified kingdom advisor there in Indiana that you can hire to manage those resources so that between now and retirement, you're really maximizing it, not taking unnecessary risk, but having somebody oversee it. So that'd be where I'd go from here. Mike, you stay on the line. Let me see if you have any follow-up questions as we head into this break. Folks, we've got a few lines open today.

800-525-7000. Stay with us. Much more ahead. We're grateful you're tuning into Money Wise Live today. I'm Rob West, your host. Hey, Money Wise Live is listener supported.

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800-525-7000 to Arkansas. Austin, thank you for your patience, sir. How may I help you?

Oh, no problem. I'm a 15-hour paid employee, a father and a husband, my only income. Me and my wife, we're trying to look towards the future and wanting to save. I just want to know if you can give me some pointers or some help on an easy way to save with my income.

Yeah, yeah. Well, I appreciate the question and I know you want to provide for your family and save for the future. And it sounds like just by virtue of your calling, you want to be found faithful in all of that. And I know that can be challenged on limited means, especially with a little one at home.

Of course, you're married and so as a family of three expenses, especially in this environment where we've got some inflation, it seems like every time we go to the grocery store, things are a little more expensive and gas prices are up right now. It's a challenge. And so it really comes down to number one, recognizing God owns it all and he's your provider, not your employer, but God himself. So being found faithful and handling whatever passes through your hands. Number two, trying to maximize your income. You still want to be able to not take away from your family time, so we need to have a work-life balance. But to the extent you can take the gifts and abilities God's given you and try to use those to maximize the income you have coming in to take care of these needs that you have in the present, but also set something aside for the future and not to mention giving back to the Lord.

That's key. And then living well within your means, which means I have to be content with what God has provided. It doesn't mean I don't want to try to increase my income over time, but at any given time, whatever God provides, I want to live with contentment and joy.

And that means I need to keep life simple and live modestly. Austin, you mentioned you're working full time, making $15 an hour. I guess the first question I would have is, you know, longer term, can you get into another line of work that might pay a little bit more than your current job? Could you take on a few more hours in this season? You know, would you be willing to move to find higher paying employment?

And then I love that your wife has decided and you all decided together for her to stay at home with your little one. Is there some way to get creative there? Could she provide daycare for a working mom or two one day, you know, a couple of days a week? You know, something that would add a little bit of additional income for you all to use. And so I think as you prayerfully consider all of this, I would just look at what opportunities you have to both increase income as well as, you know, maintain your expenses or decrease them. And managing those is really key, especially when things are tight. You know, having a plan that's been, you know, thought through and prayed over, that balances is key. And, you know, our MoneyWise app could help with that. In fact, I'd love to give you a six month pro subscription just so you can kind of get that budget working and, you know, make sure that you stay on top of what you have available. So I think those are kind of the next steps for you.

But give me your thoughts on what I've shared, Austin. Yeah, I agree. I'm actually an apprentice electrician. So I'm looking towards getting my license and everything and moving up that way.

Yeah. Moving. It's kind of a difficult situation because my wife's family is all here and we occasionally use them to watch our son every now and then, whenever we need them to.

So it's nice to have that family there. And the hours, yes, I'm willing to take on more hours. I have been trying to take on more hours.

It seems like more hours take on, more things start to pop up. Yeah, yeah. Well, I certainly understand that. I think, you know, you're in a good field. You obviously have a very marketable skill as an electrician. Especially these days, there's more home renovation and building projects going on than ever. It seems like it's always hard to find a good quality person who's available because everybody just has so much work, they don't know what to do with it. So I think I would be, you know, continually looking for opportunities as you get more and more experience to, you know, get paid more. Perhaps, you know, during this short term season here until you can, you know, be hired on as a full-time electrician, moving out of an apprentice status. You know, I think the key is how do you manage expenses and what additional income opportunities can come your way, either through your wife or you being willing to take on some extra work.

And then, you know, perhaps continuing to look at other employers, you know, who might even be able to pay you more as you get more and more experience. So just make this a matter of prayer. Hold the wine. We'll get you that MoneyWise app subscription, but I'm confident the Lord will give you some wisdom here and you sound like somebody who really wants to honor the Lord and do the right thing to provide for your family and save for the future.

And that's what we should be thinking about at this point. So we appreciate your call today, Austin. God bless you. To Hollywood, Florida, Julette, thank you for calling today.

How can I help? Good afternoon. Thanks for taking my call. Listen, I want to find out if I'm 63 and I'm retired, and do I have to get a final expense? I already pay for my mausoleum, my husband, and my credential. So do I need a final expense? I'm short on all life, not sure.

No, I don't think so. You know, some folks like to prepay their funeral expenses. It gives them a little more peace of mind to know those decisions have been made in advance and funded. The challenge is those funds are tied up and you might need them for other things like medical expenses. Once you prepay a funeral, there's typically no getting that money back. If a funeral home goes out of business, and many of them have, then you could be out the money. Or if you change your mind, if you prepay for a funeral and move somewhere, those funds don't get you. So what some folks will advise you to do is set up a payable on death bank account and save the money there, which just means it's earmarked for that purpose.

It remains liquid and usable elsewhere if needed. Now, if you don't have the resources to cover that, when that time comes, then you could look at a small kind of rider or additional insurance policy. But I just don't know that that's a necessary expense because you probably have some savings and other assets that could be used for those final expenses. Just make sure your wishes are known. You've got an up-to-date will. And I think that's the most effective approach for most folks.

So does that make sense to you, though, Gillette? So you don't recommend me getting the final expense insurance because this agent is trying to get me to buy final expense and I don't think I need. I think I already have a life insurance with Omaha. Yeah, so I would make sure you understand what you have and that you have the right amount of life insurance to cover your loved ones, you know, if you predecease them. So if there's a loss of income or additional expenses that your husband would incur at your death, then you need life insurance. And if the opposite is true for you, or if it's just for this purpose only, you need to know what is the death benefit on that policy. But apart from that, you know, having an additional policy specifically for this purpose is typically unnecessary for most folks.

So I think you could probably pass. We appreciate your call today. Folks, you're listening to MoneyWise Live, biblical wisdom for your financial decisions. We're so glad you're along with us today, inviting us into your story as together, a community of believers trying to find God's heart as we manage our money. We've got a lot of great questions just around the corner. Stay with us. Much more to come on MoneyWise Live.

We'll be right back. This is MoneyWise Live on Moody Radio, where we recognize God owns it all and we're stewards and money is a tool to accomplish his purposes. What are your questions today? Well, good news, all the wines are full, so you can sit back, relax and enjoy some great questions like this one from Rosa in Washington, Illinois.

Rosa, how can I help you? Well, I just got a bill for the life insurance that I carry through work. And my company gives us life insurance, plus then we can get additional. So last year it was $34. This year it was $72. I'm informed that it's going up to $118 next year. So it's less than $50,000. So I'm wondering if I shouldn't take that $72 and then that $118 and put it in my IRA at the bank so that it can be invested. Yeah, well, I think the question really comes down to, Rosa, do you need life insurance at this point?

And here's the primary question. Do you still have dependents, children or others who depend on your income? Well, at this time, my oldest son does live with me because my husband passed away in January. And I still have a house payment and a second mortgage payment and a car payment. But if something was to happen to me, he wouldn't be able to stay in the house.

He would have nowhere to live. He works part time, but he has a few little health issues. So I see.

Okay. Yeah, so that would be a consideration. I mean, obviously, if he were to be the recipient of your estate, the question would be after the sale of the car and the home and whatever you have in savings and retirement accounts, would he have what he needs then, if that's how you're going to pass those assets, to get out on his own and rent an apartment and get a full time job and those kinds of things?

Is he at a place where he's going to be able to get a job? Is he going to be able to go to a place where you need to provide these assets paid for free and clear through life insurance? Or could that be handled some other way by him just liquidating everything that he receives through the estate and then moving on from there? If you decide you do need to be able to pay those off, then the question is, where is the most cost effective way for you to get a term policy? Probably a 10 year policy at your age. And would that fit into the budget? And for what face value?

What death benefit? Do you need $100,000 to pay all this off? And can you afford that?

So I think that is what I'm looking at. Not should I continue with this policy at work? But first, is it really needed life insurance? Is that something you need to provide for him, all of things paid for free and clear? Secondly, if it is, how much insurance is needed?

And then thirdly, where can you get it least expensive? And that's probably not through that policy at work. It might be somewhere else. Does that make sense, though? It does make sense. And if I retire, then that policy again goes up, and it's still just the $49,000. And that would not, at this point in time, pay the assets off or pay the bills that I have off to help him out. I mean, it would help him, but it wouldn't give things paid off at all. Yeah, and I think this really comes down to priorities, right? Is this the priority?

And does it fit into your budget? And what is it, because there's limited resources, when we're allocating money in one place, that means that's money that can't go elsewhere, as you already said, this could be redirected to your long term retirement savings. And that may be the better place for this right now, so that you have the ability to provide for yourself.

I mean, he's a younger guy. And it sounds like unless there's real health problems, just preventing him from working full time, he should be able to provide for himself. Again, I don't know the whole story. So I think you really just need to revisit this question in that order.

Is it necessary? How much? And then what fits in the budget?

And then what's the most cost effective way to get it? So we'll ask the Lord to give you some wisdom as you pray through that. We appreciate your call today. To Chicago, Illinois, Robert, thank you for calling today. What is your credit score question?

Yes, thank you for taking my call. Yes, I have a question in reference to paying my auto off. And someone said, or maybe I read it somewhere, I'm not sure that if I paid it off, my credit would take a hit.

Is that true? Yeah, it can drop a bit temporarily after you pay off a loan. And the reason is, Robert, that it changes what's called your credit mix, which is the different kinds of loans that you have outstanding that are open and active accounts. Your credit mix accounts for 10% of your score. Oddly enough, the more kinds of credit you have, and so we've got revolving accounts, you know, like credit cards, and then we've got installment accounts like car loans and mortgages, the more types of accounts you have, the more it helps your score. So by eliminating this particular one, the installment loan for the vehicle, it's going to change your credit mix, which again, could result in a temporary drop. That's not my primary concern, though, because it is temporary, it would be minor. My primary concern is you pay off that car, get out of debt. There's no reason for you to pay any one dime of interest beyond what you have to purely for your credit score.

So I would not let that be the driving force. Does that make sense? And did you have a follow up question?

Yes, I did. My follow up question is, in reference to my credit score, I have a Discover credit card. And the paper statement states that my credit, I don't know how true it is, my credit score is $699, I guess, based on FICO 8. And then another credit card, the paper statements, paper statement says, I have a credit score of $689, FICO 4. So I'm not sure what my critics, my true credit score is.

I know it's $680, $690. And I do have a credit monitoring service that I pay $26 a month for. So I'm not sure how can I find out my true credit score? Yeah, well, you really don't have a true credit score, to be honest. The reason is that, you know, different score providers use different methods for determining their version of your score. And it can pull from different bureaus, which may not all have the same information, because one credit account may report to one bureau and not the other two, or may report to two out of the three. So there's different scoring models and companies. So FICO is one, Vantage is another. And then within each of them, like FICO, as you said, you know, there's FICO 9, which is the newest and not widely used. There's FICO 8, which is the most common, you know, mortgage lenders typically use 2, 4 or 5, depending on whether they pull from Experian, TransUnion or Equifax. So they are going to vary, but that's okay.

I wouldn't get so fixated on that particular score right now, because they're all going to be in a similar range. And what you're looking for is, is there one major thing that's pulling you down? Is your credit utilization too high? Meaning your balances you're carrying are above 30% of your total limit. Do you have any delinquent accounts or have you paid past due?

You don't want to do that. What is your credit mix? Do you have lots of new inquiries?

As long as you're systematically moving toward being debt-free, using credit responsibly, it doesn't really matter which score you're looking at. You just want to check your score regularly. So if there's a major decline, you can go in and look and see what's going on. Did you miss a payment or did somebody open an account fraudulently in your name and then walk away? And those would all be things you'd want to know about if you didn't already. So I wouldn't pay that close of attention. Pick one and just follow that one, perhaps monthly, if it's free or quarterly.

And apart from that, you just follow God's principles of managing money and everything will work out okay. Robert, we appreciate your call. Our final call today for the broadcast is Emma in Austin, Texas. I have a daughter named Emma.

I love that name. How can I help? Thank you.

Hi. So I was calling to find out if my mother is on Social Security and she has no savings, she lives with me, what can I do in regards to get her to invest? Like which stocks or what would be the best way to go about to start getting some investments in for her since she's already 65?

Yeah. So I mean, I think the key is, I mean, it's challenging to save money out of a monthly Social Security benefit unless she has very low expenses. Perhaps she's living with you or something like that. Do you think she would want to pick up a part-time job just for something to get out of the house and do to enjoy, to make a little extra money? Or does she actually have some margin just based on the Social Security benefit?

No, she has no margin. She's on Social Security due to a disability. Okay. All right. Okay. And so how would then, where is the savings going to come from? From her Social Security check. She lives with me. Oh, okay.

So she really doesn't have a need for it or at least all of it. Right. Okay. All right.

Very good. Well, I think the key would be to start by just kind of building up an emergency fund. I'd love for you to get at least six months worth of expenses in an online savings account that's FDIC insured so that she's got something to fall back on or you do for her as unexpected expenses come.

And they're probably going to be medically related in this season of life for her, or especially as she gets a little older. And then beyond that, I'd be looking perhaps to put some money to work on a very conservative basis. And she could do that through the Schwab Intelligent Portfolios or Vanguard Advisor, where you basically just make an automatic contribution that would go into a very conservative index-based investment strategy that would capture the broad moves of the market and the bond index. So Schwab Intelligent Portfolios or Vanguard Advisor for their robo-advisor solution.

And I think that would be a great fit. Emma, thank you for your call today. I want to say thank you to my team, Gabby T answering phones today, Amy Rios Engineering, Deb Solomon is producing, and Mr. Jim Henry providing research today.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. So grateful to Moody for all that they do to bring you this broadcast every day. I want to say thank you to you as well for being here. I'll be back, Lord willing, tomorrow. I hope you will be as well. We'll see you then. And God bless you.