Share This Episode
MoneyWise Rob West and Steve Moore Logo

Understanding the Impact of Investments

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
December 16, 2021 5:26 pm

Understanding the Impact of Investments

MoneyWise / Rob West and Steve Moore

On-Demand Podcasts NEW!

This broadcaster has 903 podcast archives available on-demand.

Broadcaster's Links

Keep up-to-date with this broadcaster on social media and their website.


December 16, 2021 5:26 pm

As Christians, we want to know that our portfolios do more than just generate a financial return. We want them to make a real difference in the world. On today's MoneyWise Live, host Rob West will be joined by Mark Regier to help us find ways to understand the impact of our investments. Then Rob will answer your calls and various financial questions from a biblical perspective. 

See omnystudio.com/listener for privacy information.

YOU MIGHT ALSO LIKE
The Christian Worldview
David Wheaton
The Christian Worldview
David Wheaton
MoneyWise
Rob West and Steve Moore
JR Sports Brief
JR

Impact is a word on money wise Live biblical wisdom for your financial decisions.

Of course wanting our investments to make a difference and understanding how that impact can and should happen are often two very different things. Our guest today is a good friend Mark Regeer, Vice President for Stewardship Investing for Praxis Mutual Funds is an underwriter of this program. Praxis is a leading faith based family of mutual funds that seeks to deliver real world impact in all of their funds and Mark, it's a joy to have you back on the program.

It's great to be back, Rob. Mark, you're going to help us understand where real impact comes from and how we can look for impact in our investment options. What have you had with Praxis and how it came to focus on impact investing?

Sure. Well, I've always worked for the church and its institutions and I actually came over two decades ago directly from seminary to work for Everance as they were just beginning to roll out the Praxis Mutual Funds and our organization has a long history of investing. And as it started its mutual funds, Praxis, they asked a lot of questions about why we were doing this and how it was to be done and what values we were bringing to it, which had always been a very natural part of the investing that Everance has done for over 75 years. However, when we came to the organization with a vision for stewardship, that seemed to really fit what they were trying to do.

And that's how we came to where we are today. Well, it's really exciting work, Mark, and I know you're making an incredible impact and seeing God at work all over the globe through these investment opportunities. I'd love to sort out some terms because Praxis is right in the middle of a really exciting, growing space, but we hear these terms impact investing on the secular side. We hear the term ESG, environmental stewardship and governance investing, which is growing dramatically. And then we hear about faith based or faith driven investing as well.

So help us sort this out. Why do you think there's the sudden interest in these topics? Well, I think it's really important to think about the values to investments and asking questions beyond the simple financial bottom line goes back literally hundreds of years within the Christian community and other faith traditions. And it was important, I think, for us to root ourselves in that tradition as we moved forward. And of course, what we're seeing today is that the mainstream financial services field is also understanding that things like the environment, social issues and governance have a real impact on the financial environment and the environment. And it's really important to think about the importance of that. And I think that's the role that the faith community has played for so many years is not just asking what's material today, but what should be material, what could be material in the investments going forward and what will reflect the values of those we are seeking to invest in. Yes. And Mark, when we pursue these types of investments, we're essentially seeking a double bottom line, right? A financial return and a social or a kingdom impact.

Is that right? And that is absolutely true. And it's sort of why we've really migrated to focusing on impact from the very beginning. That's been a big concern at Praxis. How do we really deliver a real difference in impact? And that's why that term is so important to us is we want to make sure there's a real difference in the world.

It's such great work. Mark Regehr with us today from Praxis Mutual Funds. We're going to pause when we come back. Much more on this exciting space and what impact is actually occurring. We'll talk about that in your investments just around the corner.

This is MoneyWise Live. Stay with us. We'll be right back. Welcome back.

I'm Rob West. Joining me today is Mark Regehr with Praxis Mutual Funds where he serves as Vice President for Stewardship Investing. We're talking today about impact investing and it's an exciting and growing space in the investment landscape. And Mark, just before the break you were sharing how this originally, the original impact investing model was something that believers were a part of and it seems like the secular mainstream investing landscape really picked up on that and had been driving it forward as of late with something called environmental, social and governance investing. But the faith-based investing is now growing rapidly again alongside that and I know Praxis is one of the leaders in that. With all of that interest in impact investing, Mark, how can our listeners better understand what our investments are actually delivering? Well, Rob, I think the first thing that they can do is ask themselves what's important to them and sometimes it's easy to hit some personal passion issues, but I think when one reflects broader, one should list the array of concerns that they have and what they want to see happen in the world.

We at Praxis like to focus on the positive. What can we do to reflect kingdom values in the world and how can the investments we manage support that? Another way that investors can sort of take ownership of this is to check out a fund website. I mean, today, with all the interest in ESG and in sort of values-driven investing, these funds are putting out a lot of information, so check it out and find out what the funds that you're connected with are saying that they're doing in the world and does that feel like it's reflecting what you want to see happen. You should have a conversation with your advisor and obviously Kingdom Advisors are key partners in all of this great work because they know how to provide biblical advice to a retail investor and that's a great opportunity to have a conversation with someone who understands your values. Just asking the question, no matter who you work with, will tell you a lot about what they might be able to bring to the table. You can look at various sorts of websites that are out there, Morningstar.com, asuso.org, and many others.

Many of these sometimes have their own perspectives on things, so take that into account, but I think definitely do a little research and obviously the web offers us a lot of opportunities if we're smart about it. And finally, so do the funds issue an impact report? This is a report that details the social and environmental impact that the funds are having. We've just released our real impact report for 2021 and are excited at the response we're receiving and it goes into a fair amount of detail describing how we see our funds delivering real world impact for Kingdom Values. Well, that's the key to understand what impact is actually taking place and that's why I'm so excited about this annual report you put out about the real impact that's occurring so investors can actually see what's taking place on the ground. I know as a part of that, Mark, you're launching something you call the ImpactX framework. Tell us about that.

Yeah, this is really exciting. We often have people coming to us and asking us how can they know what kind of difference their funds are making in the world. And in fact, even today, we have the SEC being very critical about how various fund complexes across the investment arena are using, for instance, ES&G and wanting to know that it's real.

It's not just some sort of label they're throwing on there because it seems popular and it's getting a lot of attention. And so as we sat back and thought about it and we looked at our own history, I mean, one of the things we've been dedicated to for so many years here is trying to say, how can we really make a difference? And we call our impact report the real impact report because this isn't just about getting a score or looking pure in our holdings. We wanted to make sure that we could connect a real difference in the world to what we're doing. And so ImpactX is designed to sort of provide a framework for ourselves as well as for investors to take a look at and see what are the strategies that really can help us do that.

And we've really identified seven that really we feel can help make a real difference in the world. And they include things like values and ESG screening, where we bring together sort of our values concerns from a faith perspective, along with environmental, social and governance materiality concerns that a lot of folks are paying attention to today. The integration of environmental, social and governance data into the investment process, both for our equities in an index like structure, but also then for our actively managed fixed income portfolio. Company engagement, like sitting down, talking with company executives about those issues that are of concern to us.

How do we help the world come to a better place that is bringing good to all people? Positive impact investing. This is a place where my colleague Benjamin Bailey, who's our senior fixed income portfolio manager and vice president of investments, is really a industry leader in taking the sleepy corner of fixed income and turning it into a real powerhouse for making a difference in the world through targeted fixed income products that are available and can help with addressing issues of climate change, can help with helping refugees in various parts of the world. Addressing the needs of low income communities in Africa and Central America through World Bank bonds and other sorts of tools that really help us channel those products to in those investments to places where it really makes a difference.

And then values driven proxy voting is a way for us to communicate with companies. Community development investings probably is one of the most exciting areas where we can take one percent of our assets and channel those investments directly to play someplace that really needs assistance in low income communities on the margin. And we accept a occasionally below market rate, but we know that we're making a real difference where it's needed most. And finally, industry advocacy and education, where we're sort of speaking up for important issues that change the very fabric of the markets that we're working in. So these are the types of things we think any fund can do some do some of them. We are very pleased to be doing all of these things.

That's really exciting work, Mark. Let's finish today with an example. Can you give us an example of where Christians have put their money and how it changed people's lives for the better?

You bet. There certainly are so many of them. And we love telling these stories through our Web sites and other documents.

But one of the ones that is really touched, I think, our lives in a variety of different ways is particularly those of us who are travelers. Just work that we've done with Delta Airlines, who we've been engaged with over a number of years on issues around antislavery and human trafficking concerns. And they recently stepped forward and really outlined a comprehensive antislavery and anti-human trafficking statement. And it made a number of commitments to address concerns about their airlines being used for the trafficking of persons and particularly children. And they've done a number of things to really back this up, including establishing a cross divisional human trafficking advisory council. So they internally are meeting and talking about this. They have 80,000 Delta employees have already gone through their human trafficking training program so that their staff at all levels can be aware of what human trafficking looks like and how they can spot and report those incidents as needed.

And then they've become a really active supporter of anti-trafficking legislation and lobbying efforts. So it's a real great way to see our investments and our engagement making a difference in the world of the lives of those who are so vulnerable. Well, congratulations on all the great work you're doing. Mark Regier is with Praxis Mutual Funds.

That's P-R-A-X-I-S mutualfunds.com. Mark, thanks for being with us. It's been a great pleasure. Thanks so much, Rob. Your calls are next. 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey. Stay with us. Thanks for tuning into MoneyWise Live. I'm Rob West, your host.

This is biblical wisdom for your financial decisions, where we look to God's Word for principles that we can apply to what you're dealing with each day in your financial life, be it saving or giving, your lifestyle, or perhaps paying down debt. Whatever you're faced with today, we'd love to hear from you. We've got lines open, perhaps ones for you. Here's the number, 800-525-7000. Before we head to our first call today, let me remind you, MoneyWise Live is listener-supported. And here at Year End, we would really appreciate your consideration of a gift to the ministry.

You can do that quickly and easily online, moneywiselive.org. Just click the donate button as we try to close our gap for the year and prepare for ministry in 2022. Your gift would go a long way, as we are entirely listener-supported. Again, you can make your gift online, moneywiselive.org, before 12-31, and just click the donate button. You'll also find our physical mailing address and a toll-free number, if you'd like to talk to somebody and make a gift over the phone, and thanks in advance. Phone lines open for your calls and questions today on anything financial, 800-525-7000.

We'll begin today in Orlando, Florida. Hi, Beth. Thank you for holding. How can I help you?

Hi, good afternoon. I had a question regarding when purchasing a car, when does the car depreciate the most, and how long should you keep a new car if you're paying cash for it, and then you'll pay cash for your next car? Yes.

Right. Well, I think the key is, number one, in terms of the depreciation, a lot of folks will tell you that the car's value will decrease by 20-30% by the end of the first year. And then between years two and six, the depreciation ranges from 15-18% on average. In terms of how long to keep it, well, our former host of this program, my good friend Howard Dayton, coined the saying that you should drive the car until the wheels fall off, and his point there is that we should maximize the useful life of the vehicle. Consumer Reports, I saw, did a study not too long ago that said the average life expectancy of a new vehicle these days is around eight years or 150,000 miles, although some well-built vehicles maintained properly can go much further than that, almost doubled, 15 years and 300,000 miles. We got 250,000 out of the last vehicle we turned in. So I think the idea is to buy a good quality car that you can drive for a long, long time until you get to a place where the repair costs exceed the vehicle's value or one month's worth of monthly payments as you look at and compare the vehicle replacement costs and the repairs that are going into it.

So I think for that reason, the best idea is to buy it, hold it, and then if you can make payments to yourself, the idea, Beth, is that when you're ready, when the car no longer makes sense to keep because of the repair costs, then you've got cash to buy the next one. Does that make sense? Yes.

No, that makes perfect sense. I appreciate that. Thank you and have a blessed day. Thank you so very, very much.

I listen to you always. I'm not very smart yet about the money and everything. I need some advice. I have about $20,000 just in a regular savings account and I have about $43,000 or $44,000 cash in a home safe. I'm feeling kind of foolish.

I don't know what I should be doing with that. We are in our mid-50s, completely debt-free. We have Roth IRAs already. We have life insurance and stuff like that. So I just don't know what to be doing with this extra money. I don't know if I should apply it to the regular Roth that we have, which I think you can only put so much on a year extra, or if we should go with a totally different deal and I don't even know what to call it, like Eventide or one of those that I hear you talk about often.

Sure, yeah. Well, it's a great question to ask and I know there's multiple facets to this, so let's just kind of begin to make our way through it. You know, I think the first thing is that you have a spending plan and you know what's coming in each month and then what it takes to fund your lifestyle, what I would call the fixed expenses, those things you get a bill for, and your discretionary spending, the things that you spend every month but aren't necessarily going to be billed to you. It's trips to the grocery store, clothing, haircuts, things like that. Do you feel like you have a good handle on what it takes in terms of your monthly expenses? And secondly, do you have enough income such that you can cover all of your expenses and have something left over at the end of the month?

Yes. It's tight sometimes, but yes, everything's paid for at the end of the month. The credit cards are paid off and everything.

Great. And what do you think the total, roughly, monthly expenses are each month? Probably $2,200 in there somewhere.

Okay. That sounds low, but let's say it's $2,200. Let's say it's $2,500 a month. If that's the case, you know, six months would be $15,000 and that's what I would recommend you have in an emergency savings. That, though, I would have in a savings account with an online bank. Could be a physical bank. You'll just get more interest with an online bank. Both have FDIC insurance and I would link that to your checking account. So I would say a goal of $15,000 would be there. In terms of cash on hand at home and a fireproof safe, if you would like to have some cash at home, most folks recommend a rule of thumb of around $1,000 to $2,000. And the reason they would typically give for that, and this is a very remote situation, but if there was a national emergency, bank operations are shut down, you want to have enough cash to kind of cover three days worth of expenses and, you know, just things you would need to cover as at home cash, if you will.

So I think between those two, you know, that should really cover it. In terms of longer term, you do want to be saving for retirement. And I would recommend, Sally, that you have 10 to 15% of your pay going into retirement plans. You could use a company sponsored plan at work. You could use a Roth IRA. Over 50 you could put in $7,000 a year each. Under $56,000 and that would at least get you going in that direction. And I think between the emergency fund, the cash on hand, and then saving for retirement with the rest, you'll be building wealth for the future.

The only other thing would be medium-term and short-term savings goals that you might have. Stay on the line. We're going to pause and take a brief break. When we come back, we'll talk about where you can invest because I know you brought that up as well. This is MoneyWise Live. We'll be right back.

Stay with us. You may be. I was saying, Sally, if you think in terms of one to two thousand at home for, you know, if the banking operations were disrupted, a national emergency, some sort of major weather event, that would probably cover you. And then if you had $20,000, $15,000 to $20,000 max in your emergency fund in a savings account linked to your checking account, that would essentially give you $40,000 that you could invest unless you had short-term or medium-term savings goals that required that you needed to access the money in less than, certainly less than 10 years, but definitely less than five years. You'd want to keep that aside. So react to that before we talk about where you'd invest it. Okay, so, yeah, I could do that. I would, I don't know. Where to put it. And a savings account attached to a checking account, I don't think I understand that.

Sure, yeah. So the idea there would be at a bank, whether that's a local bank that you'd walk into or an online bank, which basically operate the same way, it's just the online banks instead of paying for all of the buildings, you know, everything's conducted online and then they're able to pass some of that savings on in the form of no fees and higher interest rates, things like that. But essentially with a checking account, that's probably what you have to pay your bills with every month, whether you do that with physical checks or online bill pay. And I would recommend, you know, your income be deposited in your checking account and then you use that to pay expenses as you are now based on your budget. I would, though, have a separate savings account that is where you keep your emergency reserve so it's not mixed with your checking where you're writing, you know, your bills every month. And that way it's there, it's earmarked for only the unexpected, but it's not tapped, you know, just for month to month spending. And the idea is that it's linked to your checking, which is done electronically, very simple to do so that if you ever needed money for an unexpected expense, you know, with a couple of clicks of a button, you could transfer money over to your checking.

And it's usually there through what's called the ACH system, which is the banking transaction system within two to three days and there wouldn't be any cost to do that. But I like a little bit of separation for your savings from your checking, your monthly kind of spending account, if you will. Does that make sense?

Yes, yes it does. And that's exactly what we have, the way we have it. Okay, great. So I would have your expenses going out of checking, but I think you could probably cap, unless there was some reason to have more, you could cap that savings at $15,000 to $20,000 and then only keep $1,000 to $2,000 at home. Now, when you identify the rest of it, as long as you are willing to earmark it for the long term, meaning 10 years plus, you know, really for a retirement account, we're looking, you know, toward that season of life, then you could invest it in a retirement vehicle. Now, do you all have, either you or your husband, have a retirement plan available at work? No, no, we're both self-employed. Okay, so a Roth IRA would be a great start. You could, what is your age?

We do have that on both of us. Okay, and what is your age? Yeah, 55 and 57. Okay, so you could each put in $7,000, you could do that for 2021 and then you could turn around and put in another $7,000 each for 2022. So you could put in $28,000, you know, $14,000 in each really quickly here between 2021 and 2022. Moving forward, you would typically want to have another type of retirement account that would allow you to put away a bit more and a great tool for somebody who's self-employed is something called a SEP, I-R-A-S-E-P, and that's going to allow you to put away more than you would with a Roth IRA.

With a SEP for 2022, you can put in 25% of compensation or $61,000, whichever is less, but that's going to allow you to put away more money if you have the ability to do so, and I would look at that. In terms of where to keep those, I'd probably, while you're still building this, probably look at the Schwab Intelligent Portfolios or Vanguard Advisor. You could read about those online, Schwab Intelligent Portfolios, Vanguard Advisor. Essentially, you would have a portfolio inside a Roth or a SEP that's pegged to the benchmarks, the major indexes in the country, stock indexes like the S&P 500, the bond indexes, things like that, and all this would be done for you in a basically very simple question-and-answer format. It's low-cost, you'd be well-diversified, so I think that might be the way to go. The other approach would be to connect with an advisor who could kind of walk you through all of this, do some planning, and help you get these investments set up. So I'd probably go in that direction, either the Schwab Intelligent Portfolios or the Vanguard Advisor, or contact a Certified Kingdom Advisor, which you can find on our website, MoneyWiseLive.org. Just click Find a CKA, and you could connect with a Certified Kingdom Advisor there in Kansas City to walk with you. So hopefully that at least gets you pointed in the right direction. Last thing I want to do is get you to stay on the line so we can get you a copy of the Sound Mind Investing Handbook.

It'll be our gift to you, and this will allow you and your husband to begin reading about investing, familiarizing yourself with a lot of the terms and concepts, but it'll be done from a biblical perspective. So stay on the line, we'll get that book out to you, and you have a Merry Christmas. To Sarasota, Florida, Gina is waiting patiently. Gina, how can I help you? Hey, thanks, Rob.

Yeah, just wanted to kind of figure out some things. I'm trying to get my debt paid down. I've been out of work quite a few times.

I'm in social services, and I'm 61, so I'm really, really behind. I know you're probably not the biggest fan of debt consolidation from listening to your show. I have about $14,000 in debt.

I've been chipping away, so I paid down a good amount. And I wanted to see what you thought about either I had spoken to a discover card about borrowing the $14,000, and they said without running a credit check, based on what I gave as a credit score, he said I was probably looking at $7.99 to $10.99 on that amount. Is the $14,000, Gina, all on credit cards?

It's credit. Two of them get three credit cards, and one is the student loan. There's still $3,000 on my student loan.

$3,000 on the student loan. Okay, I'm not a fan of credit consolidation, as you've heard in the past. And the reason is, we're replacing debt with debt.

A lot of times, although the interest rate comes down, the term gets extended, so we end up paying more. The other challenge is, it doesn't lead to solving the real problem, which is right-sizing our spending, living within our means, and so typically we replace the debt with another loan, we take the pressure off, and then only to find that the debt will return, because again, we're treating the symptom. So what I'd rather you do, Gina, with the $11,000 in credit card debt, is contact our friends at ChristianCreditCounselors.org. They will help you get on a credit counseling program. Through debt management, you'll get the interest rates lowered, you'll have one fixed monthly payment, and you'll pay it off 80% faster.

It's the best way to go, in my view. They'll help you build it right into your budget. And with that, those balances coming down even quicker than they are now, you'll see some real progress each month, and you'll be encouraged to keep going.

And then I just keep attacking the student loans on your own. Again, ChristianCreditCounselors.org is my recommendation. Thanks for your call. 800-525-7000.

Give us a call. Thanks for tuning in to MoneyWise Live, biblical wisdom for your financial decisions. Hey, if you haven't created a free MoneyWise account, we'd love for you to do that. Our MoneyWise Weekly Wisdom email went out today with a thought from me, our trending podcasts and articles, great information each week in the MoneyWise Weekly Wisdom.

There's no cost for it. Just head over to MoneyWiseLive.org and sign up for our newsletter. You'll be able to post to our community and you'll get our weekly email. We'd love for you to check it out.

Back to the phones today. David's in Tennessee. David, how can I help you? Yes, Rob. I listened to you just about every day, and you talked to one lady this week about I bonds, and I believe you said it was paying like 7%. And I was wondering what's the advantage or disadvantage of being in those. You said something about five years, too.

Yes, very good. Well, the I bonds are a great vehicle right now. They're pegged to interest rates, and because of that, they're paying 7.1% right now. In terms of what it is, it's a security that earns interest based on both a fixed rate and then a rate that's set twice a year pegged to inflation. The bond earns interest until it reaches 30 years or you cash it in whenever it comes first. So because interest rate has ticked up right now, we're at 7.1%, that inflation component is reset every six months.

So April of 2022, it'll happen again. You can buy 10,000 worth in electronic I bonds at treasurydirect.gov, and then you can get up to 5,000 in paper I bonds using your federal income tax return. So that means you could actually acquire up to 15,000 in a calendar year, and you can gift them as well, which you can do both with the paper and the electronic. It's backed by the full faith and credit of the United States government. You do have to keep it five years or you'll give up some of the interest. Not a lot, but there is some amount that you would have to give back, basically about three months' worth of interest that you would lose if you cashed it in in less than five years. It's a great tool right now, David. I wish we could put more in, but that's your limit. But there's no reason for something that has essentially no risk to get that kind of return on.

It's just unheard of. And you can go to treasurydirect.gov and find out how to do this. Yes, sir.

That's the Treasury's website for the US Treasury, treasurydirect.gov, and you'll see information there on I bonds and how you can buy them and get your electronic I bonds right through that website. Okay. Thanks a lot, Rob. Okay, David. Thank you for listening, sir. God bless you. Fort Lauderdale, Florida is where Elsa is located. Elsa, how can I help you? Yes, hi. Thank you for taking my call.

I'm 60 years old and I need some advice for my retirement. I have a RAD RA. I own my own home and I have an emergency for almost a year. Did you say you're self-employed, Elsa? Yes. Okay, very good. So you're still working and how long do you plan to do so? Do you have a plan for that?

Another five years, maybe. Okay. All right, very good. And you said you have some retirement accounts. What do you think is the total in all of your retirement accounts together?

Around $60,000. Okay. And do you have any other savings other than the $60,000 and the one year's worth of emergency funds? I have about another $60,000. Okay. So you've got a total of $60,000 in retirement accounts, another $60,000, and then on top of that, one year's worth of emergency savings.

Yeah. About 18 months of emergency savings. About 18 months. Okay, very good. And as you look at your monthly expenses, and I realize as somebody who owns your own business, this could fluctuate in terms of your income, but what do you have left over at the end of each month? Each month, about $1,000. Okay, so about $12,000 a year that you could put away. Mm-hmm.

Okay, very good. Well, you could continue to fund the IRA at $7,000 a year, but you have a bit more than that, so I might look at what's called the SEP IRA, SEP, which would allow you to put away a bit more than you can do in the Roth. And the key would be for you to put away as much as you can to try to kind of catch up in terms of your overall savings over the next five years. The great news is you have no debt, you have low expenses, you've got plenty of reserves. The key would be if you aren't going to be able to live on Social Security alone, you want to have enough saved so that you can supplement that Social Security income with an income stream that you would generate from the investment. So during your working years, it'll be important for you, at least in these next five or more years while you're working, for you to get as much going into those retirement accounts as possible. And if you find that you're maxing out your IRAs, then that's where I'd look, perhaps wherever your IRA is, see about opening a SEP IRA, which would allow you to put away a little bit more. And I think between your rental property, the money you're putting away in investments, your low expenses, your no debt, you're probably in pretty good shape. The key will just be how long do you want to keep working so that you can save, and that's really going to be driven by the amount of income you need on top of Social Security. If you would feel better about it, you could do some retirement planning with a financial planner that would actually look at all of this, do some projections on kind of what you're going to need to have, and give you a pretty specific roadmap, if you will, on how much you need to set aside each year so you have enough when you get there. And I would do that by just heading to our website, MoneyWiseLive.org, click Find a CKA, and see about just doing some hourly financial planning specifically for retirement.

That would probably give you added peace of mind to know, okay, here's my plan, this is what I need to do each year, and here's how long I need to work so that I've got what I need when I get there. We appreciate your call today. Thanks for checking in with us.

Let's head next to Chicago, Illinois. Hi, Vino, how can I help you? Hi, good afternoon. So I do have three questions.

I'll try to put them together in one question. I'm currently employed. I have this 401k with my employer. I now have about $185,000 in my 401 plan, and every year I get $63,000. My two cars are fully paid.

I'm just paying for the repairs. And then I have two rentals and one house. So my questions would be, would it be all right for me to retire early and will I be able to get my pension as soon as I retire? Let's say I'm 54, I want to retire at 60. The next question would be, would it be wise for me to get rid of the two old cars that I keep on repairing and then just buy a secondhand car in cash?

Okay, very good. What are you putting into the retirement accounts each month right now? Every pay period, every month I put $500.

Okay, $500 a month. All right. And you said you wanted to work another six years and then you asked about a pension. Are you calling the 401k a pension or do you have a pension on top of the 401k?

I'm calling the 401 with my pension. Okay, got it. All right.

Very good. Well, if you have essentially $185,000 and if you were to, over the next six years, you were to put away an additional, let's see, you said you would put away $500 a month. I think the key would just be what do you need each month in income over and above Social Security to be able to fund your lifestyle? Have you looked at what your retirement budget might be? No, I have not. Okay.

All right. Well, I think that's really the key for you is to be able to think about what your expenses will be in retirement. If you put away an additional $6,000 a year for the next six years and it grows at 8%, you'll have about $300,000 when you get to the end of this, when you're ready to retire. And the key would be whether that $300,000 will give you the income you need. That would generate about $12,000 a year.

On top of that, you'd have Social Security and then if you had some rental properties that were generating income at that point, that rental income until you're ready to sell it, the key would be is any rental income over and above your expenses in debt service plus $12,000 a year from the investments plus Social Security, is that enough to fund your lifestyle? If so, great. You're there essentially.

If not, really the key would be to reduce your expenses or work longer. Do you follow that line of thinking? Yes, I do. I'm just concerned about the uncertainty of these times. Sure. Yeah. In what respect? In respect of the stability of the government, like the market might crash so inflation is going up and then for health reasons, I'm 54 so I'm feeling the age, you know, my body is slowly giving away. Sure.

Yeah. And I think that's, you know, for those reasons, number one, we realize, you know, we want to be in service to the Lord forever but we can't work forever because there may come a day where we're physically unable to continue to work, which is why we save and set something aside for the future. As to the uncertainty of the government, the economy and the market, you know, with inflation going up, that's a reason why we don't want to go to cash. Because if you're in cash, you're certainly going to lose purchasing power. Yes, we have some headwinds but, you know, as I look across the rest of the world, the U.S. is in still in pretty good shape and the stock and bond market is going to be the very best place for you to grow your wealth, outpace inflation and have something down the road for you to count on.

So, I'd say if it were me, I'd stay the course but the next step is really to look closely at that retirement budget. We appreciate your call today. Well, that's going to do it for us, folks. Thanks for tuning in.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Thank you to my team today, Jim, Eric, Deb and Amy. Thank you for being here as well. I hope you'll come back and join us tomorrow. We'll look for you then. God bless you. Bye-bye.
Whisper: medium.en / 2023-07-08 13:15:21 / 2023-07-08 13:31:38 / 16

Get The Truth Mobile App and Listen to your Favorite Station Anytime