Teaching from Christmas Past

Today's version of BunnyWise Live is prerecorded so our phone lines are not open. And the angels said unto them, Fear not, for behold, I bring you good tidings of great joy which shall be to all people. I am Rob West wishing you and yours a blessed Christmas Eve.

As Christians living in a materialistic society, we must remember to celebrate for the right reason, the birth of our Savior. Howard Dayton joins us to talk about that, and we have some great calls lined up, but we won't be taking your live calls today because we're prerecorded. This is BunnyWise Live, biblical wisdom for your financial journey. Our good friend Howard Dayton is the former host of this program and founder of Compass Finances God's Way. Howard's raised two incredible children who are now parents of their own, and along the way, he learned some things about keeping Christ in Christmas. Howard, welcome back. Great to be with you, Rob, on Christmas Eve.

And to you as well. Howard, our opening verse is in fact from Luke 2, and it goes on to say, For unto you is born this day in the city of David a Savior, which is Christ the Lord. And this shall be a sign unto you.

Ye shall find the babe wrapped in swaddling cloths and lying in a manger. And suddenly there was with the angel a multitude of the heavenly host praising God and saying, Glory to God in the highest, and on earth peace, good will toward men. Howard, I don't know about you, but there's nothing more beautiful than the Christmas story in the King James Version, isn't there?

I totally agree. I was fortunate, Rob, to grow up in a family that celebrated that passage of Scripture, and it just brings a flood of great memories of my childhood with my mom and dad and sisters. And it's something we wanted to pass on to our children as well. Speaking of Matthew and Danielle, did you read that passage to them as they were growing up?

We did. We'd read it together as a family on Christmas morning just before opening the presents. And we wanted the kids to realize that the real reason we were celebrating Christmas was the miracle of Jesus, the creator of the world coming to earth. I'd read a few verses that Bev would read, and when the kids got old enough, they'd read. And, you know, sometimes a little hard to keep them from being distracted with the presents, you know, just screaming open the corner and under the tree, but it was a tradition that they loved. I know it was. Howard, how big a role did giving and instilling generosity play at this time of year with your family? It was big, Rob.

I'll tell you the most memorable experience. I was in the office development business, and we hired a wonderful African-American man named Raymond. He'd been introduced to Christ while he was in prison, where he became, I mean, deeply committed to Jesus.

He was the best employee I ever had, but he was struggling financially. So we encouraged our daughter Danielle to give his daughter a particular doll that she had, and Danielle didn't want to, but we took the doll with us and visited their home. It was a fixer-upper that our family had actually given Raymond. Practically no furniture, and when Danielle met his sweet daughter, she realized that she wasn't going to have any presents. She totally changed her mind, and Danielle was delighted to give her that doll, and it was life-changing for Danielle and really encouraging to our whole family.

Well, I know that was an experience she never forgot. What advice, Howard, would you give parents today about teaching the real reason for the season? Rob, I think it's more important today than any time during my lifetime, because so many in our culture have rejected Christ, so we need to be intentional in teaching our kids and grandkids. The real reason that we celebrate Christmas is that we're honoring the Lord Jesus for leaving heaven, coming down to earth to die for us so that we can have eternal life and spend all eternity with him if we know the Lord. Well, you're exactly right, Howard, and we've got to do that with intentionality.

If not, we'll get swept up in the culture and focus on the wrong things, right? Absolutely, Rob. It's really a priceless opportunity that we have as parents and grandparents.

Yeah, that's exactly right. And generosity is right at the center of all of it, because we're experiencing God's ultimate generosity and the ultimate gift that he's given us, Jesus Christ, his son, our Savior, born on Christmas Day. Well, Howard, Merry Christmas to you and yours. Thank you for stopping by. Loved it, Rob, and Merry Christmas to you as well. Thank you. Howard Dayton has been our guest on this Christmas Eve.

You can find more about him and his great ministry at CompassOne.org. Today's program is prerecorded, so keep that in mind when you hear phone numbers. We're going to pause for a brief break now, but Rob West will be back in a moment with more MoneyWise Live!

Delighted to have you along with us today on MoneyWise Live. Hey, our team is taking some time off. We're not in the studio. This is prerecorded, so don't call in. But we've got some great questions lined up, so let's head right back to the phones.

In Merrillville, Indiana is Lola, and Lola, thank you for your patience. How can I help you? Good evening, sir. Thank you so very much for taking my call, and I really appreciate your program. Very, very dedicated. Very helpful.

Thank you, sir. My daughter just graduated as a naturopathic physician, and she just got her first job to work in a facility as an independent contractor. This is her very first job, and we don't have any clue as to what she needs to put together as far as the financial aspect of an independent contractor is concerned. We don't have any clue, and we'll appreciate that if you can just give us some advice of what she needs to do to run that kind of job.

Very good. Well, I'm delighted to hear that she's got this job. I'm sure she's grateful that she does. And you're right to ask how to approach this, because as an independent contractor, Lola, there are a few things she needs to be aware of. The most important thing is that she should probably be setting aside about 30% of her salary into a separate savings account for taxes specifically. So as an independent contractor, her employer, even though she's not an employee, but person who pays her bills or pays her, won't withhold taxes for her. So she'll need to file and pay what are called quarterly estimated taxes to the IRS on what's the form 1040ES. And it may behoove her to get a CPA or accountant if she's typically done her own taxes or if she's not had to in the past, at least for this first year, just to get everything set up and make sure she's filing appropriately. But she doesn't want to wait and just pay the taxes when she files her return.

The IRS is going to expect an estimated tax payment every quarter. And if she automatically has that 30% just moved over every time she gets paid to the savings account, the money will be available when she makes her taxes. And that may be more than she needs to put aside.

You'll learn that in the first year. She may get a refund and perhaps you could back that down a little bit in year two. Just beyond that, I mean, good wise money management would say she should save up an emergency fund of at least three months expenses. Once she's done that, I would encourage her at this young age to open a Roth, R-O-T-H, a Roth IRA, and start putting in the maximum annual contribution of $6,000 a year since she doesn't have a retirement plan available to her. If she does that Roth every year and fully funds it for as young as she is, she's going to have a whole bunch of money saved up that will be tax free in retirement and she could open that with one of the robo-advisors, Better Mentor, the Schwab Intelligent Portfolios, something like that. And then of course, and this shouldn't be the last thing, it should actually be the first thing, even though I'll mention it last, I would encourage her to be generous to her church and start to learn what it means to give systematically, to give at a minimum the tithe, a tenth, of what she earns or increase to the Lord out of a recognition and grateful heart for his provision and to recognize his authority. And ultimately it's an act of worship and she can give cheerfully. But if she does those things, she'll put herself in a position not only to honor the Lord and to have the money to pay her taxes, but to really have a strong financial foundation under her for her future. Does all that make sense?

Yes, sir, please. Did you say 1040 ES, quarterly estimates, taxes? Yes, 1040 E as in Edward, S as in Sam. Yeah, 1040 ES. Okay, so she should file this quarterly.

That's right, yep. And that will be the estimated payments, the estimated tax, one-fourth of what she expects to be able to need to pay annually toward her taxes. And then when she files, she'll just list the amount she's already paid in as quarterly estimated payments. And that'll go against the total amount that she owes for the year. Okay, so as you said, for the first year she should get a CPA to kind of set her paperwork? I would, just to make sure that everything's been being done properly and that her taxes are filed. And as an independent contractor, she's going to have a bit more ability to deduct certain expenses that may be related to her work.

And that advice could come from the CPA to make sure that every available opportunity to deduct anything is fully maximized to the full extent of the law. So, Lola, you tell her we're excited for her. And thank you for calling into the program today. We appreciate it. Let's head from Maryville, Indiana to Georgia and welcome John.

Good afternoon. I'm going to be retiring, I guess. I've got five more years I can work. I've got, let's see, about two more years to pay on this big truck I'm driving.

Only five more years left on the house. And I've probably got more money in my short-term savings than I do in my Roth IRA. In my Roth IRA, I only have $1,000 and I'm 63. I tried all over the place over the last 25 years to do the right things and save and invest, but all of it just got wiped out, stolen, taken away.

I'm wiped out. All I have is $1,000 in my retirement account and I haven't been able to contribute to that for the last five years. So, why in the world do they say you can only put $6,000 a year?

I finally landed a really good job. I've only got five more years. So, I mean, why did they say you can only put $6,000 at a Roth IRA? Yeah, well, they're recognizing that for most folks, they have access to another type of retirement account that allows them to put in more. So, for instance, with a 401k, I mean, the contribution limit is up at 19,500 for this year.

It's going to bump up to 20,500 next year. If you're self-employed, you could open a SEP IRA, which will also have higher contribution limits. With a SEP, you can put in 25% of your compensation or $58,000 for 2021, whichever is less.

So, you've got plenty of ability to contribute on a tax-deferred basis and then with a traditional or Roth IRA, usually that's supplemental because it's in addition to and can absolutely be invested additionally. So, I think the question is, what's the best opportunity for you? I'm assuming you are considered self-employed.

Is that right, John? Yeah, I am. I am.

Okay. And so, it may be a great opportunity for you to look at a SEP IRA, which would allow you to put in quite a bit more than you have for this year and you could do a Roth on top of that. So, I would check with your tax preparer or connect with an investment professional, but this is going to give you the ability to sock some money away. I think the key for you is to maximize these five years. I'm delighted to hear that you'll be completely debt-free by the time you approach retirement, the trucks paid off, the houses paid off. That's going to get your lifestyle expenses down as low as possible. Then work up that retirement budget to see what income sources you'll have, perhaps Social Security if you can work until full retirement age and then figure out what your gap is, which because you paid off all your debt, it's going to be as low as it possibly can be. And then figure out how much you need to save in order to make up that gap and then let's really maximize these next five years with this good job to sock away as much as you can.

At the end of the day, trust the Lord and be a good steward of his resources. We'll be right back. Stay with us. We're grateful to have you along with us today on MoneyWise Live. I'm Rob West, your host. Hey, our team is taking some time off today. We are not in the studio. This is prerecorded, so don't call in, but we've got some great questions lined up. Let's head right back to the phones. Samuel is in Colorado Springs, Colorado. Samuel, how can I help you today?

Yes, Rob. Thanks for taking my call. My reason for calling is I wanted to know, I have a 401k with Venga, my company 401k, which I'm contributing about 15%. When I was looking, the thing that I chose was a targeted form 2030 because I was born in 54, so I'm in 57. But what concerned me when I look at the investment was that the 3% of my 401k investment is in cash and bonds, and 57% is in stocks. I have little concern because I was just thinking about the thing where you said you take 110 of your age and whatsoever you get, that should be your stock. I just feel that my investment has invested mostly in stock at this point, I'm 57, whether that is okay or not.

Yeah, very good. So you said how much is in stocks? Is it 70% of the portfolio? 67. 57.

And so you have the rest 43% in bonds? No, no, 67. 67. 67. Okay.

And so 33% in cash and bonds. Yes. Okay. And tell me how are you doing in terms of the portfolio? Do you feel like you're on track to have what you need to be able to supplement your retirement income when you retire? Are you ahead or do you think you're behind a little bit in your savings?

I think I'm behind a little bit. Yeah. Okay. Because I just started late, even though at this point I'm up about, I mean, $360 some more in there. Okay.

But I don't know. How much do you have in the portfolio roughly? $353,000 in there now. Okay.

$353,000. All right. And do you think you're going to retire around 65 or what are your plans? Probably the full retirement, which will be 67 or more. 67. Okay.

So you've got another 10 years or so before you would retire? That's right. Okay. Very good.

Yeah. I'm comfortable with this allocation actually. I mean, unless you're, you know, you have a particular concern about the market, you're feeling like you need to be, you know, much more conservative. I think, you know, being in a 2030 target portfolio with 67% in cash, I mean, excuse me, 67% in stocks, 10 years out from retirement is about right because that's going to give you a good growth engine. You've got time on your side. And I think, you know, given that you're going to wait until full retirement age, you know, unless again, you felt like you just wanted to be extra conservative.

I think this portfolio is just fine. So I would be comfortable with you proceeding, you know, unless you had a concern otherwise. Does that make sense? Yeah. Okay.

Yeah. And this will automatically, you know, rebalance each year and get more conservative over time. So, you know, I would just let this money continue to grow. And, you know, I think it sounds like you're in a good place that the only other thing I would do is, you know, as you get closer and closer to retirement, you're going to want to start to think about, you know, what your budget looks like in retirement.

You know, what do you need each month to cover your expenses? I mean, hopefully, if you're not already debt-free, you will be by then. And, you know, hopefully your expenses come down because you're no longer putting money into retirement savings and maybe you drop your life insurance because you no longer need it. But once you settle into that retirement budget, then we need to compare that to the Social Security income you'll have and then figure out how much you need to draw off of this account, you know, every year. And, you know, let's say this grows to half a million dollars. You know, I think if you could plan to not pull more than 20,000 a year out of this, then you should be in a good spot where, you know, you're not going to impact the principal. We could have somebody invested for you in such a way that it protects what you have but throws off, you know, a decent income and then you'd have a small growth component to it that would provide a little extra return over time. And if between that 20,000 roughly and, you know, what you would bring in from other sources including Social Security, hopefully that would cover your lifestyle. So I'd love for you to do some planning as soon as you're ready to begin to look at that and that will let you know what your ultimate target for this account is.

But I think this target date fun you're in and the allocation you've referenced sounds like it's a good fit. We appreciate your call today, Samuel. Hey, before we take our next break, let me check in and take an email here. We do hear from a lot of you who send us emails and you want your question right on the air and you can do so at questions at MoneyWise.org. All right, this next one comes from Larry and Larry says, My aunt has run up a ton of credit card debt. He wants to consolidate it or we want to consolidate it and get it paid off.

How can I help her without just giving her money to pay her bills? And I think perhaps, Larry, the best way to go would be credit counseling. Essentially, what would happen is if it's enrolled in a credit counseling program, the account would be closed. There would be a single monthly payment that would be determined based on the amount of credit card debt that's owed. But the kicker is it would be at a much lower interest rate, which would get a larger portion of that payment every month going to principal reduction. And the cool thing is that you could actually pay them directly for that amount. So you would ensure not only that is it going to get paid, but you'd be doing it in such a way that you know that the money is going directly to getting this paid down. So check in with our friends at ChristianCreditCounselors.org.

They'll get it all set up for you, and I think you'll be glad you did it. This is Money Wise Live. We'll be right back. Stay with us. We're grateful you've joined us today for Money Wise Live, biblical wisdom for your financial decisions. I'm Rob West, your host, and our team is not here today. We're actually taking some time off. This is prerecorded, so don't call in. We've got some great questions that we lined up in advance, like this one from Donna.

And Donna, I understand you're in Texas and you actually have a testimony to share. Is that right? Yes. Go right ahead.

I do. I just wanted to thank you for the wisdom and guidance. I struggle to make ends meet from paycheck to paycheck.

And I realized that there's things that I've been trying to quit that aren't healthy for me. And this really helped to think of, you know, how does the Lord see how I'm spending my money? And if I wasn't spending it on that, I'd have some to put up for savings.

One of my daughters is getting ready to go to college and I have to find a way to help her with that, too. Very good. Well, Donna, I appreciate you saying that, you know, and this is a question we all should be asking ourselves and be willing to make changes as the Lord leads. You know, if we think about our money in terms of it being a reflection of what we value, of what's most important to us, the way we handle God's money says where our priorities are. And the question we all have to ask is, if this is telling a story about what's most important to me, is it consistent with the story I want to tell?

And if not, what changes do I need to make? And that doesn't mean we can't enjoy God's money. In fact, in 1 Timothy, a part of the reason that God entrusted to us is for our enjoyment. But we should do that in the context of a plan that allows us to live within our means. We should be content. We should be giving generously. And I think that we need to think about our values, what's most important to us, and make sure that our money is really aligned well with that. And, you know, your check register, whether that's online or physical, it tells really what your priorities are. And I think we always need to be evaluating whether or not we like the story it's telling.

And if not, then we need to make some changes. So you're in good company, Donna, and I appreciate you sharing your thoughts today and encouraging our other listeners. And we'll certainly pray that the Lord will give you wisdom as you make decisions moving forward.

God bless you. Next up is Pepsi. And Pepsi actually called, didn't want to be on the air, but had a great question. So let me ask Pepsi's question, which was simply, she says, I want to start small with my investments. I'm looking for a place to invest $25 to $30.

Are there any resources you can suggest? And Pepsi, it's a great question because, you know, here's the thing. When it comes to investing, once we paid off our credit card debt and once we have that emergency fund of three months expenses, we should be looking to set something away for the future, recognizing we shouldn't consume all that God entrusts to us today. We should save a portion of it. In addition to paying our lifestyle expenses and giving, we should be saving a portion for the future. And when we think about retirement, it's not just about the mindless accumulation of wealth, but it is a recognition that there will come a day where we perhaps can't work and we want to be able to support ourselves and a spouse in some cases.

And we do that by setting something aside on a systematic basis and we all have to start somewhere. So if you have $20 or $35, then I would say, let's get started. Here's what I would look at. In the FinTech age, and that just stands for financial technology, there's some wonderful low cost investment solutions that allow you to start with no minimum.

And one of those is called Betterment, B-E-T-T-E-R-M-E-N-T, Betterment. You'll find it at betterment.com or you can download the smartphone app by the same name. That would allow you to set up an investment account, contribute your $25, perhaps you'd transfer it right there from your checking account. You can set that up on a systematic basis or just start with that amount.

And by answering a series of questions, they're going to build a portfolio for you that's called an indexed portfolio, which is just a fancy way of saying you're going to mirror the broad moves of the market using a very low cost investment strategy. So I would check that out, betterment.com, and I think that could be exactly what you're looking for and we appreciate your call today. Randy is in Palm Beach Gardens. Randy, how can I help you, sir?

Thank you so much. I listen to you so daily as I drive from my office to my home. I am a pastor and I have been in full-time vocational ministry since 1999. I don't have any debt outside of my mortgage. I don't have a lot of retirement savings because we've been raising our children and paying cash for things and staying out of debt.

So here's my question. I can pay off my mortgage rapidly in the next six years. I've sat down and figured the amortization out and all that.

I owe $340,000 on my home. Should I try to do that and not put 15% of my income in an investment because I can't do both? If I do the savings of 15%, then I can't attack my mortgage. I would just have to keep it on a regular payoff.

What would you recommend I do? Sure. Let me ask you a couple of questions and I can certainly appreciate, as somebody who's serving as a pastor, not earning a ton of money with a family, trying to honor God's principles of managing your money, staying out of debt. It's challenging to do everything.

But kudos to you for doing what you've done and I love the idea that you're weighing these two options of saving for retirement and paying off your mortgage. I heard you say you're 49. So would you expect that you'd be working for at least 15 years or more? Yes, I would. I would expect probably at least 20.

I would hope. Okay. All right.

Very good. And on your current trajectory, when would you have the mortgage paid off if you didn't do anything different than what you're doing right now each month? Literally in six years and two months. But that's with adding this extra, correct? That is correct.

Yeah. But if you were to prioritize the retirement contributions, then when would you have it paid off? We set it up on a 30-year mortgage a few years ago. So I should have looked that up before I called you. But I think about 24 years, I believe it would be. Okay.

All right. You know, I think one other option, because I like the idea that you would, you know, since you haven't saved a whole lot, that you'd start to take full advantage of the tax-deferred retirement account, get that money growing for you on a tax-deferred basis, which, you know, is a really powerful force. And, you know, even though you consider yourself a little behind in your retirement savings, you still got, as you said, a couple of decades for this money to grow.

And so I wouldn't want you to miss these next six years. Perhaps go back to your mortgage company or you can do this yourself online and get an amortization schedule that tells you how much you need to add every month so that you can sync up your payoff with your anticipated retirement date and then put the rest into retirement so that the idea would be you can save as much as you can for the next 20 years. But when you hit that point, you know that the mortgage is paid off. So now your expenses are as low as possible.

That might be a middle ground to consider that would allow you to do both things, take advantage of the compounding and the tax-deferred growth and make sure you still don't have that mortgage payment when you get into retirement. So that's at least my best advice. I think you could go either way and certainly it wouldn't be a bad decision. Stay on the line. We'll talk a bit more off the air. And hey, before we go to our break, let me take an opportunity to invite you to be a financial supporter of MoneyWise Media. We are entirely listener supported and your gift would go a long way toward helping us finish the year strong and prepare for our ministry activities next year. If you count yourself among our MoneyWise family, we would invite you to give. You can do that quickly and easily on our website. Just head to MoneyWiseLive.org and click the donate button. That's MoneyWiseLive.org and click donate. You can give there online securely and quickly, or you can find our mailing address or phone number if you'd prefer to give that way.

And thanks in advance for your gift before December 31st. We'll be right back. Thanks for tuning into MoneyWise Live! Biblical wisdom for your financial decisions. We're glad you're here today, but we're not.

Here's what I mean by that. This segment is free recorded. We're taking some time off, so don't call in, but we've got some great questions lined up in advance. Let's head right back to the phone.

Chicago, Illinois. Hi, Tom. How can I help you, sir? Yeah.

Hi, Rob. Thanks very much for taking my call. I appreciate it.

Love your show. Even though a lot of handling money fills me with fear, to be quite honest. Yeah. I haven't always been a good steward, and I'm trying to do that. I have an old 401K through a former employer or a head that I recently converted to an IRA.

I've got a friend who is not a believer. Ultimately, I would like to get an advisor, one of the certified Kingdom Advisors. Just some advice he had given me as far as investing this IRA was to keep it right now in a Fidelity government money market fund and then funnel 30% of it into a US Treasury fund, 10% into a municipal bond. He suggested a couple of them.

I was wondering what your thoughts on that was. His feeling is based on the current market to be very conservative with that. Also, I work for a city college, so I invest in a pension.

I have a pension through my current employer. Okay. Very good. Well, I think the starting point is to recognize God's Word has a lot to say about handling money, and we can apply that to our lives very practically. But at the end of the day, we need to trust that He is our provider and just try to be found faithful as we manage what passes through our hands, recognizing it's His. Therefore, we're tasked with being a steward. He certainly doesn't want us to live in fear. I think part of that we can overcome by making sure trust is in the right place, making sure we realize that money is not our goal.

It's a tool to accomplish God's purposes and to educate ourselves in His way of handling money, His principles and how we can apply those practically. So I'm thankful that you listened to the program, and let's see if over time we can't move you from fear to ultimately having some confidence in managing money God's way. I'm delighted to hear what you said about you've got some money that you've built up.

I am questioning a little bit just this strategy, because if I understood correctly, a hundred percent of this would be in income, you know, 60 percent in government securities, 30 in U.S. treasuries and 10 in munis, which isn't going to give you a whole lot in the way of return. Tell me kind of where you're at in terms of how long you plan to work and how much you've saved at this point. I'm actually part, you know, and, you know, I do not want to approach this from a fear standpoint. I'm 60, 59, just about 60. I feel like, you know, I'm pretty healthy. I have about 10 or more good years of work in me. And, yeah, was that your?

Yeah, no, that's great. And you said how much have you saved up that's in this IRA? The IRA just has about 40,000. My pensions got about 95. So some of my concern, I don't even want to use the word fear anymore because I hear you, but you know, is that I haven't always been a great steward and, you know, I don't have a big retirement fund.

Sure. Now, do you have control over the pension or is that just kind of churning in the background and eventually that'll be a monthly check to you? It's actually a traditional fund, which is guaranteed for four and a half percent. Okay, so we don't have to worry about, you know, how that's allocated. That's just going to happen automatically. So really what you're talking about is this IRA.

And are you adding to that each year or not? That was my part B of my question is my understanding is, is it true that I cannot, while I'm a part of this pension, I cannot contribute to that IRA? I don't think that is going to be a problem, but we can check on that for you. You should be able to do that even though you're in the pension.

So that shouldn't be an issue. But I think the question then is, you know, how to invest this. I mean, you've still got time on your side. We're talking 10 years and even then, you know, if you're in good health and the Lord tarries, I mean, you're going to need that money to last, you know, a couple of decades or more after retirement. So I guess that would be my question is, you know, is this the portfolio he's recommended driven by your concerns over the market or his? Because what I would say is that, you know, as a, you know, a guy who's 60 planning to work 10 more years, I'd probably have at least half of that portfolio in stocks, just so you have the ability to have it grow a bit, you know, while you're continuing to work, especially because you're trying to make up some ground, don't want to throw caution to the wind and be too aggressive, I would totally concur with that. But that's why I'm saying, you know, maybe half of it would be in more fixed income type investments, and then the other half, you know, where it has some growth component. And the good news is that, you know, let's say two years from now, we hit a recession, and it lasts 18 months or two years.

Well, you know, you're only four years in, you've got another six years of what would likely be a, you know, a bull market and a recovering economy that would, you know, cause that thing to bounce back and move to higher ground. And that stock portion of the portfolio would provide a bit of a growth engine for you along the way. So, you know, that would be the approach that, you know, I would take and to your point, yes, you can contribute to a Roth IRA and a traditional even if you have a pension. And I think, you know, that's probably in your best interest to have all of these accounts working for you, you know, especially as you reduce any potential risk associated with a pension, you know, failing or something like that.

I mean, that's very unlikely, but it could happen. And so having multiple accounts of different types, you know, is just proper diversification. So what I would say is, keep contributing to the IRA every year, diligently limit your lifestyle. And then I would choose an investment strategy for the IRA, probably using one of the robo-advisors with about a 50-50 blend between stocks and bonds.

You could also visit with our friends at soundmindinvesting.org, and they would give you some great advice on which mutual funds to pick based on your age and what you're trying to accomplish. Does all that make sense? It does.

It does. Yeah. Prior, I had it in a Vanguard 2035, which was pretty aggressive. So the change to be so conservative, kind of, yeah. Yeah, I think that's about right. And I would, you know, even a 2035, I mean, given, you know, that that's quite a bit further off than even when you plan to retire, given that it's only 2021 and you're planning to retire in 10 years, that's probably about the right mix. So I would say, you know, you could go back to that 2035, or if you want to take a more customized approach, you know, again, one of the robos could serve you well there. But I think you're heading in the right direction.

I would just continue to be diligent in your savings, you know, keep your lifestyle at a minimum. And I think you can make up a lot of ground over these next 10 years. So all the best to you, Tom. We appreciate your call. Let's head next to Sarasota, Florida, and welcome Kylie to the broadcast. Hi there.

Hi. So I had a question regarding kind of kind of two in one, basically setting aside money is the big theme. So my husband, I've been talking and we want to set up some sort of retirement plan for ourselves. And then on the other and the other question is, we also want to kind of set up like a nest egg for our son.

And our son is a year old. But we we want to be well prepared. Sure, sure. Okay. Well, with regard to your retirement options, Kylie, do you all have either of you a retirement plan available at work?

Yes, my husband does that work for me. I don't I don't have those benefits. But he is he has a 401k. I think he's had one for about five years now.

Okay, great. So you could put in quite a bit, you know, there I mean, 19,500 for this year, and you know, that goes up by 1000 next year to 20,500. So that's, you know, quite a bit now that would need to happen on a salary deferral basis, which means if you haven't started yet, there's only so much you can do for this year, because it's got to come out of his remaining paychecks beyond that, I'd perhaps look at fully funding a traditional or a Roth IRA. If you guys are young, you know, I would say let's go and do the Roth IRA for both of you 6000 a piece. So that'd be another 12,000 you could put away for retirement.

And you can do that anytime up to when you file your 2021 tax return. So I think both of those options would be great for you to get started. And you could choose from the investment options, maybe a target date fund or something like that in his 401k. And if you use like a robo advisor for the the Roth IRAs, that would give you a broad index based ETF portfolio where there's a lot of fancy terms. But basically, you're just capturing the broad moves of the market over time in an index fund that mirrors some of the big market indexes. So I think that would be a great approach.

You could look at Schwab Intelligent Portfolios or Betterment or Vanguard Advisor, any one of those three I'd be comfortable with for you to open the two Roth IRAs. And then let's have him go ahead and start contributing to the 401k at least up to any matching. But beyond that, let's try to get a total of 10 to 15% of your combined income going into retirement accounts. With regard to your son, would you be comfortable kind of making the decision that this money is going to be used for college or do you want it available broader than that? The intention is basically we want to raise him to, you know, start being mindful of money, kind of help him out, teach him just general money conservation, just general budgeting. And then once he makes moves to either put a down payment on a house or go to college, basically once he figures out what he wants to do and stays up for that, we kind of want to drop the bomb and say, okay, well, since you figured it out, by the way, here's a ton of money for whatever you've been putting it to and then, or he can do whatever he wants with it.

Okay. Well, the key is to do whatever he wants with it. So I just open a taxable account in both your and your husband's name. You'll know it's earmarked for him, but then just go ahead and start systematically investing in that every month.

And I would do that with the same company that you open the Roth IRAs with and use the same robo solution to invest that over time. And then when he's ready, you'll be able to say, here it is, but not until then. Stay on the line. We'll talk about the mechanics of that off the air. That's going to do it for us today.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Thank you to my team and thank you for being here as well. We'll see you next time. Bye-bye.