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Early Mortgage Payoff

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
November 23, 2021 5:17 pm

Early Mortgage Payoff

MoneyWise / Rob West and Steve Moore

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November 23, 2021 5:17 pm

What if there was a surefire way to put tens of thousands of dollars in your pocket, that’s completely legal, and not a get rich quick scheme—would you be interested? On today's MoneyWise Live, host Rob West will talk about the thousands you can pocket by paying off your mortgage early. Then he’ll address some questions on various financial topics. 

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Today's version of MoneyWise Live is pre-recorded, so our phone lines are not open. If I told you there's a surefire way to put tens of thousands of dollars in your pocket, it's completely legal, and just about anybody can do it, would you be interested? Hi, I'm Rob West, and no, this isn't a get rich quick pitch. It's more like get rich slowly with all the money you save by paying off your mortgage early. I'll talk about that first today.

Then we have some great calls lined up, but please don't call in today because we're pre-recorded. This is MoneyWise Live, where God's principles guide our financial decisions. So when you think about it, the amount of interest you pay over the life of a 30-year mortgage should be all the incentive you need to pay off that loan as soon as possible. Let's say you take out a $250,000 30-year mortgage at 4%. At the end of that term, you'll have paid almost $150,000 in interest, making the true cost of the home closer to $400,000. But let's say with 25 years to go, you decide to put an extra $200 a month against the principal. That will actually shave five years of payments off, and you'll own the home free and clear in just 20 more years. The potential payoff for getting rid of your mortgage early is huge, and it really needs to be a priority in your financial decision-making.

There are four steps to getting there that I want to unpack today. First, you need a spending plan, not just because it's a good idea and everyone should have one, which is true. You need a budget because you can't start the process of accelerating your mortgage payments without one. And setting up your spending plan is now easier than ever with the MoneyWise app. It uses the tried and true envelope system to make budgeting easy. It will track your spending and reveal things that you can cut out to free up more cash after paying your bills. The MoneyWise app is a free download, and you can download it anywhere you get your apps.

Just search for MoneyWise Biblical Finance. Now, the next step is to determine just how much of that extra cash you'll apply to your mortgage. You can even make it a budget category all by itself, or I might say an envelope. Remember that even $100 a month extra applied to the principal on your mortgage could shave off a couple of years' worth of payments. So you'll want to put as much as possible into that extra mortgage payments category. You may start to feel deprived because you've cut out a lot of your fund spending.

It helps to celebrate milestones along the way. So a special dinner out maybe whenever you've paid off another $1,000 in mortgage principal, just to keep celebrating within the budget. Now, the next step is something anyone can do, even if you've been thinking up to this point that you have no surplus cash to put on the mortgage. It's using money that comes your way outside of your normal paycheck. Some call it found money or mad money. Make a commitment to put that unexpected cash on your mortgage principal as well as the surplus money from your budget. Now, where does this extra money come from? Well, it could be just about anywhere, overtime pay or a work bonus, money from work you do on the side, perhaps a tax refund, gift money, cash you get from selling things. The trick is to apply that money to your mortgage principal as soon as you get it. Don't think of it as mad money that you can spend any way you like and don't let it sit around tempting you. If you haven't set up an online account with your lender, do that now.

Most lender websites make it easy to apply extra payments to the principal just by clicking a button or two. And by the way, while you're logged in, you'll be able to see the running balance of your principal. Keep track of it. Watch it go down as you make those extra payments. That'll help you stay motivated and again, celebrate your progress.

All right, just one more thing left to do and it's really something you can do at any step of the process. Cut the fat from your budget. You may think you don't have a dime left over at the end of the month, but you really don't know unless you've cut back everything you can. Let me give you a few suggestions and we've mentioned a few of these before. Cut your cable or satellite service and go with a streaming package. You perhaps can save 50 or $100 a month just doing that alone. Look for free entertainment in your community.

The library is a great source of information. Take a break from eating out. It's the rare family that can't save $100 a month by cooking more meals at home.

And here's a big one. Go a year without buying new clothes. That would probably save hundreds of dollars. You can probably come up with some great ideas yourself, if you're intentional about it, so you can save money that can be applied to that mortgage. And by the way, the sooner you start, the more money you'll save that can be put to better uses. Proverbs 21 five says it plainly, slow and steady plotting brings prosperity and that's what we're talking about here. Be diligent, be steady plotters and let's get that mortgage paid off. Hey, before we go to our break, let me remind you that we're not live today, but we do have lots of good information coming your way. So please stay tuned.

It's great to have you with us on MoneyWise Live today, but unfortunately, today we're not live. We're prerecorded and therefore won't be taking your calls. However, we've lined up some calls in advance that we think you'll find helpful.

So stay tuned and enjoy the rest of the program. We started today by talking about the early mortgage payoff. What can you do to add a bit to your mortgage payment every month? Keep in mind with an amortized loan, the interest is calculated on the outstanding principle at the beginning of every period. So for a mortgage that would be every month.

So as you pay down that principle, any amount you send over and above that mortgage payment is reducing the principal balance. So when that interest is calculated, it's going to be less and you do that over a long period of time, perhaps making one extra mortgage payment a year, even if you do it one twelfth a month or once a year when you get a bonus or a tax refund, you're going to take a 30 year mortgage and cut it down to around 25 years in many cases. Now the question that a lot of folks ask is, well, what about paying off my mortgage versus investing? And interestingly, I just read a study the other day looking at five year stock market returns and 10 year stock market returns going back to 1970, the S&P 500 compared to the average 30 year fixed rate. And depending upon the period, actually paying off your mortgage, the 30 year fixed rate won the majority of the time. Now, if you look at just those five and 10 year periods and miss some of those big up years, especially 2009 and beyond, obviously you're going to do better in the market, but don't discount the fact from a purely financial standpoint that paying off your mortgage is a big deal. Now, the other reason people often cite for keeping a mortgage is the tax benefit, but keep in mind after the Tax Cuts and Jobs Act of 2017, it really reduced the use of itemized deductions, including mortgage interest deductions, because so many people are using the standard deduction. In fact, 82% of homeowners have standard deductions large enough that the mortgage interest deduction isn't providing a tax benefit to them at all.

So you have to factor that in. And by the way, that's just on the financial side of the house. The real benefit is the joy of being unencumbered, having the peace of mind, the flexibility to respond to the leading of the Lord and the Holy Spirit as to where God wants to send you next. And just being debt free brings all kinds of benefits that are non-financial. So prayerfully consider what you might do to accelerate your payoff of your home mortgage, assuming you're giving and you're living within your means and you've paid off consumer debt and you've got that emergency fund.

I would be thinking about accelerating the mortgage payoff. All right, I hope that's helpful. Hey, we do have a few lines open still. 800-525-7000. In just a moment, we'll talk to Raphael in Chicago, Corey in Omaha, but we're going to begin today in Chattanooga, Tennessee. Teresa, thank you for your patience. How can I help you? Hi, thank you for taking my call.

This is a subject that's really important to me. So we have a 4% interest rate on our mortgage. We owe $110,000. The value on the home is around 230. We pay $400 extra a month on the principal and it's cut the 14 years that we owe down to eight years right now. The question that I have is we own two other properties. One we owe $17,000 on and it's at a 6% interest rate because it's just land property and the other one we owe $20,000 on and it's at a 5% interest rate. We are considering refinancing the home and getting the cash out to pay off these higher interest rates. But at the same time, we are 60 years old and our goal was to have the home paid for.

So I don't know. I'm trying to weigh this out. So should we try to pay the house off it or I'm really kind of at a I don't know what to do right now. Yeah, well, I can certainly appreciate that because as I said a moment ago, and just the example I was giving about saving or paying off your mortgage versus investing, I think the same applies here that there's the purely financial side of this equation, Teresa, as you calculate the total interest you're going to pay on your home mortgage, your domicile versus investment properties at a higher interest rate. And clearly, you know, you typically want to pay off those higher interest rates first. Now, here's the exception to that is, you know, I look at those investment properties in a sense as a business. I mean, it's a profit making endeavor versus your home, which should appreciate over time. And clearly, we've seen a rise in the housing market as of late. So just about every home is appreciating. But it's not truly an investment because it's where you live. I mean, the definition of an investment is when it accomplishes its purpose from an investment standpoint, you'd sell it, move on to the next one.

Well, that's just not how we approach our homes. We want to be wise about buying a home that we believe is going to appreciate over time. But it's not purely an investment, which these other properties are.

So I like the idea of you prioritizing the payoff of your home loan, even at the expense of perhaps some additional interest that would be paid because when you have this paid off free and clear, you own your home and you get the peace of mind and the security and the flexibility, if you will, of knowing that you have that home unencumbered. And then we can look at these other properties just as we would evaluating any other investment or business. Are they working from a cash flow standpoint? You know, after you service the debt on them, which is an expense you would associate with the running of the business, what kind of income are you pulling off of it? And then clearly you're building equity over time as you pay it down, whether they're income generating or not. So I like the idea of you paying off that home, feeling really good about that, and then taking that extra money and using that to pay down the rental properties or the other investment properties as a secondary goal. The only exception to that would be if you and your husband really think and pray through that and you just don't have a conviction about being debt free.

You're willing to take on a little bit more risk and it's more important to you just to save every possible dollar from a financial standpoint on the interest. But apart from that, if it were me, I would want to know my home was free and clear first. Does that make sense, though? Yes, it does, because that is where I'm having the struggle.

The piece of knowing that I have my home paid for is what my whole entire problem is over making this decision. So that helps a lot. It really is. Well, it's fair. You know, it's a fair point.

And I would actually align with that quite well. And we all bring to the marriage relationship different money personalities, different bents. Money was handled differently growing up. You know, some tend to be spenders, some tend to be savers. And a lot of that has to do with just how we've seen money handled and how God has wired us.

But I think together you all need to appreciate kind of each other's perspective. And I think prioritizing the whole mortgage, even at the expense of a bit more interest, is a pretty good idea. I can tell you this, Teresa, in all the years I've been doing this, I've never had anybody call and say, I paid off my mortgage last year and I've regretted it ever since.

I've just never gotten that phone call. I think you'll be delighted when you do that. Okay. Thank you. Thank you.

All right. Lord bless you and thank you for listening and calling today. We appreciate it. Well, folks, you know, this is where the rubber meets the road, because, you know, as we think about our role as stewards of God's money, it's not just about the money, right? It's about what is God leading us to? How can we take his resources and steward them in a way that honors him and allows us to experience everything he has for us?

Remember, money is a tool to accomplish God's purposes. And it says what we value. It says where we've placed our trust, how we handle it.

So we need to hold it loosely and we need to make sure we're following biblical principles. Hey, we'll be back with much more on MoneyWise Live. Stay with us. Welcome back to the program.

I'm Rob West. So glad you're along with us today. Today's program is prerecorded, so I would encourage you not to call in, but sit back and enjoy.

We've got some great questions coming up. Hey, before we talk to Raphael and Daniel and Corey and Peggy, let me mention MoneyWise Live is a ministry of MoneyWise Media and Moody Radio, and we can only do what we do through your generous support. So if you consider yourself a part of the MoneyWise family, would you consider a financial gift, certainly beyond the giving you're doing to your local church? And after prayerful consideration, if you decide you'd like to give to support our radio broadcasts and our MoneyWise coaches and our MoneyWise app and all the content we bring you on the web, we would certainly appreciate it. Just head over to, click the donate button, and we would certainly appreciate it, especially in these lean summer months as we try to meet our own budget month to month. We could certainly use your assistance.

Again,, just click the donate button. It's quick, easy, and secure, and we would be grateful. All right, back to the phones today. Michigan, Peggy is calling, and Peggy, I understand you have a question about, well, actually, it sounds like you paid off your mortgage, is that right?

Absolutely, yes. All right, tell us about that. I want to talk about, because to encourage people to do that, my husband and I got married in January of 86. We purchased a home at a price of $100,000 that was marked down $200,000 because of its high maintenance, yard-wise and stuff, 10% interest. So we had the 20% down, which meant we were mortgaging $80,000, that 10%.

It would have taken us 30 years. We paid our house off by paying on the principal. I've got the amortization schedule to prove it.

It's a trophy. We paid it off in a little under four years by taking every extra cent that we could save and put into it to do that. If we hadn't, my husband passed away four years ago.

If we hadn't done that, it only would have been paid off the year before he passed. And it was the best thing, and I'm still living here, and it's the greatest security in the whole wide world, and I would absolutely, especially with the low interest rates now, that would be easier to do. It's been incredible just knowing that we have the security of our home.

Yes. Well, Peggy, I so appreciate your testimony. I'm sorry to hear about your husband's passing, but I'm delighted to hear that by following biblical principles, it puts you in a position where after the Lord takes him home, you have the ability to continue to fund your lifestyle. And having this home paid off free and clear, I'm sure, has just been a huge blessing. How did you all do it? Did you just limit your lifestyle and take extra that you had each month and send it along with the payment?

Did you send a bonus check once a year? We really didn't need all that much in terms of furnishings and stuff because between him and me, we had everything. We did have to buy a dining room set and stuff, but we had one car. We worked different shifts, so we used my car, which was newer and good on gas mileage and stuff. So we did that, and he didn't like to go out to eat.

We didn't do that much, and we just didn't do the frills, and every extra cent went to that. Well, when we sacrifice in the short term for long-term benefits, because you all had a vision of being debt-free and unencumbered, which makes those short-term sacrifices just a bit easier, you reap the benefit, and you've been heeding the counsel of Scripture. These are the Lord's principles, and he gets the credit for it, and we appreciate you sharing a word of testimony today. I know, Peggy, it's been an encouragement to many who've been listening to what you've shared today.

Lord bless you. Thanks for listening and calling today. We appreciate it.

On to Chicago, Illinois. Rafael, thank you for holding. How can I help you, sir? Yes, sir. Thank you for taking my call.

I appreciate your program. My wife and I are 49 years old, and we paid off our home, and we also have a rental property that we have paid off, and we just wanted to know where do we go from here. We already have our six-month living expense set aside, and I wanted to see how we can invest going forward. I also wanted to mention I have my own company.

I work as a subcontractor, so I have a Corporation S, and I know from listening to your program, I know there's sometimes incentives to creating a retirement account through the company, so just pretty much that's my question. Well, I love that, Rafael, because you've obviously heeded the Council of Scripture here as well. You've been living modestly, you've been attacking debt, and now you've got a lot to show for it.

You are completely debt-free, and I love the fact that even those rental properties are debt-free, which is going to be a huge blessing down the road. As we think about this as stewards of God's resources, recognize, folks, we're all at different places. Some of you listening right now are really struggling financially, and others have a surplus. The key is to find God's heart and plan for us to manage whatever we have, however much or however little, for his glory and for his purposes. Rafael, as you look at the five uses of money, because there's only five things you can do with money, you can spend it on your lifestyle, you can pay taxes, you can pay down debt, you can save it, or you can give it.

You know, the great thing about what you're saying here is you've eliminated three of the buckets. I mean, you're not paying any more debt, that's gone. Five uses of money are down to four.

It doesn't sound like you want to increase your lifestyle, and that one's gone. The taxes get even better once we begin to give more, but you're not going to pay any more taxes, so really it comes down to just two uses of money is all that you have left. Do I want to give more or do I want to save more or both?

And then how do I decide where and when to do that? And, you know, that's the beauty of being able to manage God's money this way, is to be able to say, Lord, what would you have me to do? And I like the idea, Rafael, of setting a financial finish line, saying, you know what, there's a point at which we've accumulated enough or we're on track to accumulate enough. So I would say do some planning with a certified kingdom advisor there in Chicago, particularly around retirement and any other savings goals you have to determine how much is enough, and then set up that retirement plan like a SEP IRA or a SIMPLE or an individual K to get that done, and then save and perhaps take a bit more money and put it away so you're on track. But the rest, you can cap your lifestyle, you can cap your balance sheet and begin to give hilariously. And that's the real joy that we have when we get to this point.

So I do some planning, particularly around retirement and then make that decision on how much to save moving forward. We appreciate your call. Stay with us, folks. More to come just after this.

This is MoneyWise Live with Rob West. Hey, if you hear a phone number mentioned today, please ignore that number and don't call us, because today's broadcast is a reprise edition. But we think the upcoming information will help you and make you a wise steward of what God's given you. So please stay tuned. So delighted to hear from so many of you today.

All the lines full, but upcoming is Joseph asking about getting rid of PMI, Melissa wanting to know when to pay off those student loans, Daniel's debt-free looking to build a home, wanting to know where to put the cash he's saving. But we're going to go next to Zoraida, if I said that correctly, in Cleveland. We appreciate your call today.

How can I help you? Zoraida, are you with us? All right.

Looks like we may have lost her momentarily. So let's move along. Daniel in Chattanooga, Tennessee. Daniel, thank you for your patience. How can I help you, sir? Yes, sir. Thanks for taking my call.

Kind of a similar situation to the last two callers. We're debt-free and we're just stocking cash away. And right now we've just got in a savings account.

And I've just been thinking, would it be better to put that money in mutual funds and CDs or just leave it in savings? Yeah. So did you say you're looking to build a home? Is that right? Daniel, are you still with us?

All right. I believe we've lost Daniel. Just based on what he shared in the notes here from my producer, debt-free and saving to build a home. I like the fact that you've got that in a savings account, Daniel.

That's the place for it to be. Keep in mind, with money we're looking to deploy, I would say in less than 10 years, certainly in less than five years, we don't want to have that invested because there's just too much risk there. Your focus with money that has that kind of time horizon is all about the return of capital, not the return on capital. So you want to make sure the money is there when you need it so you can build that home based on the right timing for your family and construction prices and when you're ready to dive into that when you've got enough saved. So I would just simply say, even though you're not making a whole lot in the way of interest, Daniel, I really like the idea of you parking that money in savings, assuming you're looking at a time horizon of, I'm going to say less than seven years.

If that's the case, leave it right there. I like Ally Bank or Marcus or Capital One 360. You'll get about a half a percent right now.

I expect that will go up over time. The good thing is no fees, FDIC insurance up to a quarter of a million dollars per account holder and type of account. And you can link it right up to your checking account. And when you're ready, you'll know that it's there.

And if we're in a recession a couple of years from now, not that I know we will be, but markets and economies are cyclical, you won't have to worry about that money being down quite a bit and then feeling like you can't pull it out at that point. I hope that helps. And we appreciate your call today.

Let's go to Illinois next. Melissa, thank you for your call. How can I help you?

Hi. So I have one year left of grad school, and I'm working part time, mostly self employed. So my income is a little unpredictable.

But I don't currently have my expenses are super low because I'm living at home with no rent. So I have $19,000 in subsidized federal student loans, and then $30,000 just like sitting in a savings account with like very inconsequential interest rate. So my question is, with my loans on hold, should I just go ahead and pay them off now, not really knowing what they're doing in terms of loan forgiveness, and also not knowing what I'm going to do after graduation next year? Yes.

Very good. So give me a rundown on the balances again, Melissa, both of the student loans and the savings. So the total for my loans is $19,000. And then my total savings, which is also like spending, it's just all lumped in one account is $30,000.

Is $30,000. Okay. And how much do you think you'll take on an additional debt between now and graduation? None.

Okay, great. And what are your plans after you get out of grad school? And, you know, would you expect to be able to find work?

And if so, what kind of range from an income standpoint would you expect? I'm a private music studio teacher. So it's a little unpredictable with how many students I could find. I'm looking elsewhere too, but I can't give a good estimate of that. Okay. Yeah, no, that's fine.

Well, here's the good thing. I mean, you've, you've capped it at 19,000. You're going to be all the way through grad school. The average student is graduating from undergraduate four year college with over $30,000 in debt.

You're getting through grad school with 19. And even if you don't expect to be at the upper, you know, wage earning bracket, you know, with what you're seeking to do, you know, I don't have any reason to believe you shouldn't be able to pay this off in 10 years, which would be the goal 10 years or less, given that it's deferred right now, I wouldn't be focused on paying it down. But given that you've had 30, you've got 30,000 in savings, I would make sure you have at least six to 12 months expenses in the bank, just given some of the uncertainty. And then at that point, I think you could feel free to begin to start to chip away at this so that, you know, perhaps, you know, let's say you were to take as much as 10,000 and put it against this to get it down to 9,000.

I mean, you'd have a much more manageable situation. You could even, you know, pay it down to 10,000, which is what's being floated at forgiveness, at least one of the scenarios. So that, you know, you've started into, you know, getting this paid off completely, but you've still got a good bit available for you to be able to, you know, get launched and cover your expenses, especially as you move out on your own and look to get a job. So I wouldn't be focused on paying it all off right now, especially since it's deferred.

But I think going ahead and systematically paying it down as you're able to, but making sure you leave yourself with at least six to 12 months expenses makes some sense, gives you plenty of flexibility and is going to put you in a situation where you're not having to rely on any kind of credit cards if, you know, something unexpected comes or you need to buy a car or something like that. Does that make sense? Yeah, thank you. Okay, Melissa, God bless you. We appreciate your call today and great job at saving up a good bit of money and getting through grad school with minimal debt.

That's quite an accomplishment. Quickly to Cleveland. Zoraida, I believe you're back with us. How can I help you? Hi.

Thank you so much for taking my call. I would like your opinion. I just retired and I want to make a purchase. So my question is, would it be better to make the purchase and pay it off on a deferred payment like they allow me to do because I'm buying it on the store credit card? Or would it be best to just take the money off my savings and just pay it off? I mean, just make the purchase. Yeah, the problem with that is, you know, so many of these big box stores, including the one that my notes say you're going to be shopping at, offer six months interest free financing for home improvement projects over a certain amount, which sounds like a good deal.

The challenge is after six months, if you haven't paid it off, you get hit with interest for the entire period, which could range from 18 to 27%. And if you don't have the money available today, there's a decent likelihood you won't have it available then. So what I would prefer you to do Zoraida is really just to limit your lifestyle, go back to that spending plan, try to, you know, really look at every spending category, see where you can cut back and try to create as much margin as possible so you can start putting that into a savings account so that once you've built it up, you can pay for these items with cash and you're not looking to, you know, get back into a situation where you're borrowing, hoping to pay it off, but if you don't, you get hit with huge interest bills. So I'm going to ask you to delay if you can, and then let's see what the Lord does as you are diligent in your saving. We appreciate your call today. Well, folks, much more to come just around the corner.

This is MoneyWiseLive, where God's word intersects with your financial life. Some great calls coming up just around the corner. Stay with us. We'll be right back. This is our final segment of a broadcast we previously recorded. Thanks so much for being with us today, and we hope you'll stick around and enjoy the rest of today's program. Hey, we haven't taken any emails today.

Let me try to knock out too quickly. By the way, if you want to send us an email, we try to get to as many of them each week as we can on the air. You can do that by emailing us at questions at, questions at

Here's the first one from Sally and Jim. We're looking to buy our first home. We know the housing market is incredibly high right now. Is this the wrong time to buy?

And boy, I can really appreciate your concern there. Clearly, the housing market is a bit red hot right now. Interestingly, the latest data says that nationally housing prices are about five and a half percent overvalued.

Now, you might say, really, only five and a half percent. And that really is the national average in terms of how overpriced they are primarily because this rise in housing prices is driven by low interest rates, historically low and real demand. You know, as the millennials look to buy their homes as they reach their 30s and they're having kids, coupled with many people now working remotely and having the ability to move out of small apartments to single family homes, combined with the fact that there's just not enough inventory, there's millions of homes less on the market than there is real demand for them. And that's been pushing housing prices up. Now, given the incredible rise, we do expect we'll have a cooling of the housing market, probably not any kind of crash. I mean, there's not any systemic problems like we had in 2008, 2009 with the housing crisis, but it's certainly a cooling off, perhaps even a dip.

So what does that mean? Well, it means that we certainly need to follow the principles we typically follow, which is don't buy your home unless you've got a 20 percent down payment, I would say at a minimum. And then secondly, make sure that principal interest taxes and insurance payment is no more than 25 percent of your take home pay to start with. But that doesn't replace really running it through your budget to make sure that it actually fits.

Now, I'm going to add a third one to that in light of the housing market, which is just simply make sure that if you're buying this home, you plan to stay not just five years, like we would typically say most experts are saying because of the housing increase, the rise in prices is probably a good idea to think in terms of staying for 10 years, just because if we see the housing market cool off, take a dip. You certainly don't want to find yourself in a position where you're losing money or it's upside down. So appreciate your call or excuse me, your email. I hope that helps. And again, if you'd like to send us an email, you can do so at questions at All right. To Lutes, Florida. Amanda, thank you for your patience.

How can I help you? Yes, sir. So my husband and I, we both have raw fire rays. We have about $42,000 in each of them. And we go through a broker with American funds. And I've heard you talk about Charles Schwab a lot. And so we've been looking into Charles Schwab stock market and stuff, but I didn't know that your raw fire ray, you could put other things in it other than just stock market purchases, like you can buy gold and silver in it and you can put cash in it. Yeah, well, you certainly can put cash because that's how you make the contribution. And with gold and silver, you know, you would typically buy that through what's called a tracking stock, an exchange traded fund, which just tracks the price of the underlying precious metal and rises and falls with the movement of gold.

You know, there are ways to put other asset classes in IRAs, namely through what's called a self-directed IRA, where you have to have a particular custodian, but then you could even buy real estate inside your IRA. But I think, you know, as you guys are looking to build wealth for the long term, you've got a great start. Sounds like you've got a young family. I heard that sweet little one in the background. Forty two thousand and a pair of Roth IRAs.

That's great. What you should be looking for is just good long term performance with high quality investments. American Funds is a great fund family and you could find some great funds there. I mention often Charles Schwab Intelligent Portfolios or Betterment or the Vanguard Advisor just for those folks who are getting started and looking for a low cost, diversified approach to investing where they're not trying to pick a particular mutual fund.

And, you know, they're kind of counting on the success of one manager. But instead they're saying we just want to capture the broad moves of the market, which is what indexed ETFs do. And we want to pay as little in fees as possible. And that's where these robo advisors for folks, you know, I would say with investment of investable assets of less than one hundred thousand really can shine and do quite well for you. So if you want to check that out as a comparison, again, Schwab Intelligent Portfolios, Betterment, Wealthfront, Vanguard Advisor, they'd all use index ETFs to give you a good cross section of the market, international, domestic, small cap, mid cap, large cap, even some bond exposure, but probably very little at what I believe is your young age. And then you would just kind of capture the long term moves of the market and you wouldn't be counting on a fund or even an individual stock, which would make you too highly concentrated. Does that make sense, though, Amanda?

Yes, sir. I've seen the Charles Schwab Intelligence Portfolio. I kind of huddled around with it, but maybe that's also a good opportunity to because I know that you can also have two IRAs, but you can only contribute up to the certain amount between all of them. That's exactly right. You're not limited to the number of IRAs or accounts you have as long as you don't in any one year exceed the annual contribution limit.

So you could move a portion of you could open a separate one and move a portion over. Or, you know, as I said, American Funds, there's nothing wrong with that. So if you pick a good high quality stock mutual fund from American Funds, I think you could do quite well. The last resource I'll give you is And they have a great strategy on investing through mutual funds. That's real simple and it's biblically based

I think you'd be real happy in looking at that as well. We appreciate your call today. All the best to you guys as you continue to save for the future. To Miami, Florida, we're going to head south just a bit. Linda, thank you for your call.

How can I help you? Yes, I am not at the stage for retirement. Right because I'm 65. And right now, I have 457 deferred comp.

And right now it's about 15,000 in there. And I also have the retirement fund I'm looking at, which is about maybe a little over 600,000 and that or so whatever. And I'm in a point where these two points where I should take the money out from the 457, pay off the condo mortgage, which is now sitting at just below the 60,000. And then also for the retirement fund, where I was talking to someone which I'm acceptable, but then that person will be handling my retirement fund that he was talking about.

But I want to just set my retirement fund where I could just get a monthly set rate coming in every month. Sure. Yeah. Well, that makes sense. How far off are you from retirement, Linda? Well, I'm really looking at December, January. And if I had to, no more than July of next year, God's will. Okay, very good. Well, here's the thing. I mean, you've obviously prioritized saving for the future.

You've been disciplined in that. I love the fact that you build up quite a bit of money between the 457 deferred comp and the other retirement account that you have. And I love you entering retirement debt free, including your home. You've only got 60,000 left, which is less than 10 percent of the investable assets you have for retirement. So what might make some sense is for you to go ahead and pull that out over two tax years, perhaps, you know, one half of it in 2021, one half in 2022, it would be added to your taxable income.

So make sure you plan for that. But the benefit is that you would be completely debt free, which reduces your lifestyle need, the monthly expenses that you have, which means you need less. So you'd be pulling less out of these accounts moving forward on a monthly basis because, as you said, you want to create an income stream from these accounts and let the investments replenish what you're taking out.

I think that would be great. The key is to do your budget and see what you need. Ideally, you'd only need about four percent of these accounts each year. But if you have, let's say, seven hundred and fifteen thousand and we take out sixty thousand over the next two years, you'll still have six hundred and fifty five thousand, if I heard you correctly, which would throw off about twenty six thousand a year. And you should be able to replenish that with a focus on an income portfolio.

So if that plus your Social Security meets your expenses without the mortgage, then you're in really good shape and you'd still have access to the money if you ever needed it for, let's say, long term care or medical expenses, something like that. As far as an investment advisor goes, I would be not necessarily looking at buying an insurance product like an annuity for this. I'd be looking for somebody to manage this money with a focus on income and capital preservation. And I would look for a certified kingdom advisor there in your area there in South Florida.

Just go to our website,, and click Find a CKA. And I hope after you interview two or three, you'll find one that's a great fit. But it sounds like you're on the right track. I'm excited for what God has for you in this next season of life. Linda, be prayerful about where the Lord may reassign you as you transition out of paid work. Because remember, our calling doesn't have an expiration date on it.

So we want to be in service to the Lord throughout the whole of our life. But that's going to change and look differently over time. And so your job is to figure out what that's going to look like in this next season. And I can't wait to hear what that is. Thanks for your call today.

Well, folks, I think that's going to do it for us. It's been a lot of fun today. You know, we started today by talking about the benefits of paying down your home mortgage and how you can do that, what it looks like to systematically add some money to the principal. We talked about paying down student loan debt. We talked about giving.

We talked about just a whole host of issues. And here's the great part is that in those 2600 verses we find in God's word, we find principles that we can apply to our financial lives that are always right, always relevant, and they're never going to change. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Let me say thank you to my amazing team today, Dan Anderson. I want to say thank you to Deb Solomon producing today and Mr. Jim Henry providing research. Thanks to you for listening. Come back and join us tomorrow, will you? We'll be here with another edition of MoneyWise Live. Bye-bye.
Whisper: medium.en / 2023-07-18 13:46:31 / 2023-07-18 14:03:40 / 17

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