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Talking Trusts

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
May 10, 2022 5:00 pm

Talking Trusts

MoneyWise / Rob West and Steve Moore

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May 10, 2022 5:00 pm

Navigating the legal definitions and requirements for leaving assets to your heirs is a complicated business. On today's MoneyWise Live, Rob West will explain about trusts and try to clear up some of the confusion about when you need to have one in place. Then he’ll answer your calls and questions on various financial topics. 

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Rob West and Steve Moore
Rob West and Steve Moore

There are wills and trusts, living wills and living trusts, and even something called a testamentary trust will. Confused yet?

I am Rob West. No wonder we need lawyers navigating the legal definitions and requirements for leaving assets to your heirs is a complicated business. I'll try to clear up some of the confusion today and then we'll take your calls at 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. So let's start with some definitions. I'm sure you already know that a will is a legal document that details how you want your assets distributed and possibly your minor children cared for upon your death. Wills have to be processed through your local probate court and if you die without one, that court will distribute your assets according to state law and quite probably not the way you want. So at the very least, you need a will. A living will is completely different and in fact has nothing to do with the distribution of your assets. Instead, it's a legal document that specifies medical treatments you would and wouldn't want to keep you alive should you become incapacitated.

It might also spell out your wishes for other medical decisions like pain management and organ donation. A testamentary trust will takes us back to the distribution of assets upon your death. Think of it as a mini trust within your will or in a separate document that specifies how your assets are to be managed, usually to protect them from minor children. It only goes into effect upon your death. A living trust, sometimes called a revocable trust, goes into effect while you're still alive. It allows you to manage and benefit from your assets during your lifetime and it's called living or revocable because you can change it whenever you want. So it's different from an irrevocable trust which also takes effect while you're living but cannot be changed.

So you have to be very careful with that one. Since we get so many questions about living or revocable trusts, let's look at that one more closely. Typically with a living trust you would designate yourself as the trustee. Technically you're changing legal ownership of your assets from yourself to the trustee which of course is still you. And again that happens while you're alive and it's the big difference between a living trust and a will. With a will nothing legal happens until you die. Then upon your death the assets and the living trust are transferred to the beneficiaries you've named and that's done by the person you designate as your successor trustee. So with a living will you're really not giving up control of your assets. You're still free to manage your assets as you like but ownership has been legally transferred to the trust and as the name implies you can revoke this type of trust as well whenever you want and it's easy to do. Now who needs a living trust?

Well not everyone for sure. In most cases with simple estates a regular old will works just fine but the more complicated your estate becomes the more likely you are to benefit from a living trust. For one thing they allow you to distribute your assets to heirs without going through probate which is why a lot of folks like them. During probate which is a public process the court first determines if your will is genuine.

It then makes sure creditors are paid and your heirs receive whatever assets you've specified in the will. That can take time and if there's a problem your heirs won't have access to those funds until it's resolved. But with a living trust your successor trustee takes care of all of that privately and usually much faster. You'll have to do a little homework to determine if a living trust is right for you.

It may not be. State laws vary and many states have streamlined the probate process possibly making a will the better choice. Some have made probate less costly too for smaller estates. Also some assets can be distributed without a will or a trust. These would be retirement accounts with named beneficiaries, joint accounts with survivorship rights, pay on death accounts and life insurance. A living trust can solve a lot of problems like naming someone to manage your assets to benefit your heirs. If you own a business not having to go through probate means your heirs could have immediate access to funds needed to keep the business operating. But there are also a few downsides to a living trust.

More paperwork for one thing. You'll have to transfer all of your assets out of your name as the direct owner and into your name as the trustee. That would be things like the deed to your house and your bank and investment accounts. Also you need to plan for the cost. A will might cost you $500.

A living trust more like $1,500 if you use an estate attorney to prepare the documents which I strongly recommend. I hope that clears up some of the confusion. Your calls are next. 800-525-7000. Stick around. Welcome to MoneyWise Live. I'm Rob West, your host. We're delighted you're along with us today. Taking your calls and questions here in just a moment.

The number to call is 800-525-7000. As you think about applying God's wisdom to your living expenses, that is your budget, your spending plan, your debt repayment, your consumer debt, even your mortgage or student loans, your growing account, your savings, that which you're saving for the short term like an emergency fund or the longer term like retirement or college savings. And even your giving. Yes, your giving I would say should come first above all else and that is how are you approaching your giving? Are you giving systematically or spontaneously? Are you giving with a plan or are you just giving as the Lord leads? And understanding that you're never going to give to the maximum unless you have relationships that are encouraging it, that you're grounded in scripture, that you have a vision for your giving and that you have a plan to do it.

Well, any of those are in play for today. So if you have a question related to living or giving, owing or growing, we'd love to hear from you. The number to call again is 800-525-7000. We've got some lines open today. 800-525-7000. Let's begin today in Chicago, Illinois, WMBI. Sharon, thank you for calling.

Go right ahead. Yes, my family has opened up family emergency files for people in the family that need help with bills or anything like that. And we want to start investing part of that fund. And I was wondering, do we need to open up a taxpayer ID number for the family instead of having it report under one individual?

Yeah. Well, you've got a couple of options there. And I would talk to an attorney about the best way to structure this in terms of legally and then you also want to have the tax considerations as well. And I would connect with a CPA.

But essentially, you've got a couple of options. The most common and simple way to do this would be through what's called joint tenancy, which refers to a legal arrangement in which two or more people own property together. Usually we see that with real estate, but it doesn't have to be.

It could be even a bank account. You could have, you know, multiple either couples or business partners that take titles to each other's accounts, brokerage accounts, real estate, personal property, and their joint tenants. So equal ownership, but with right of survivorship so that it passes outside of probate upon someone's death. And that would be a great way and simple way to go with regard to something like this. Now, if you decided from a legal structure standpoint, both to limit liability or for tax purposes, that you wanted this inside a legal entity, like you wanted to form an LLC, a limited liability corporation, then you will need an EIN or a tax ID number assigned to you.

And that's fairly easy to get. So that's obviously going to take a little more work legally to establish it as well as to do the appropriate filings to get that number assigned. Whereas something like a joint tenancy account could be a very simple way to go about sharing the ownership of the account and making sure that each has right of survivorship. So it, you know, again, passes outside of probate if one party passes away.

So I would get some professional counsel just to make sure that you're accomplishing what you want to do on both sides of that with regard to ownership and liability, as well as the tax side. Does that make sense? Oh, yes, it does. And thank you very much. All right, Sharon. Thank you for calling today. We appreciate you being a part of the program. 800-525-7000 is the number to call.

Let's head to Tennessee. Gail, thank you for calling. How can we help? Yes, I was wondering, my husband is on paperwork with my brother-in-law and he is the oldest, my brother-in-law is, over his mom's estate, her house. But if anything happened to my brother-in-law, would my husband be responsible because if, say, if all her money is gone and he has left bills behind, would he be responsible? Yeah, the power of attorney is basically just allowing that person to act on another's behalf. It has nothing to do with legal responsibility for debts. So with regard to debt, if somebody passes away and they have not, no one else has taken responsibility for that debt.

So there's not another joint owner of the account, somebody that has co-signed and taken legal responsibility. If it's in their name only, it would only be settled by their estate. So the person that passed away, the assets in their estate would be then available to satisfy any obligations. And to the extent there wasn't enough assets, then that debt would go unpaid. The only exception to that would be if in a state where a marital party was seen as community property and the spouse, even though they weren't a party to the debt, it's treated as theirs. Or if somebody else has also assumed responsibility for a particular debt. But apart from that, just because your husband's brother has power of attorney doesn't mean he's taken on legal responsibility to pay debts beyond what your brother's estate could satisfy.

He just simply has the power to act on his behalf if he is unable to do so. Does that make sense? Yes.

Yes. Thank you. Okay, very good, Gail. Thank you for your call today. 800-525-7000. We've got a few lines open today. We'd love to hear from you.

Let's head to Hermitage, Tennessee. Marcus, thank you for calling. Go right ahead. Thank you for your call. Hey, how are you doing? Doing great. It's good to see you.

Thank you so very much for your show. It does bless me a lot. It gives me a lot of insight. Yes, sir. I'm glad to hear that. Yes, sir.

I was curious. I would like to bless my church with about $90,000 for a building project they were making. We already own the land.

We want to build the building. And so I was going to give this $90,000 over three years. So $30,000 a year. $30,000 a year. But to do so, I would need to have a secondary job, just like a part-time kind of a deal, just about less than 30 hours a week. That being said, currently I make around $45,000 to $55,000 a year.

So I understand that will put me in another bracket, of course. So with me making close to $90,000 a year, what would possibly be a wise decision for me to make on this? Yeah, and what was the final part of the question?

What would be a wise decision related to what? Yes, sir. On me having this secondary job, or is there another way that I could definitely bless my church with these funds? I just don't know. If I could just say, just get a second job, or there's another way I could do this.

Yeah. Well, first of all, Marcus, let me just say I'm incredibly impressed and even challenged by what you're describing here. Here you are making $45,000 to $55,000 a year, and you're wanting to find a way to give what obviously the Lord has prompted you to do, which is to give $90,000 to your church over a three-year period of time.

That's incredible, and I'm excited for you to go on this journey to see what God does in your own spiritual walk, just as you lean into this and say, God, I believe this is from you. I don't know how it's going to happen, but I'm willing to put in the work, and as you provide, I'm going to make these gifts. I think a couple of thoughts. Number one is you want to look at whether there's other ways to give apart from just cash. Ninety percent of giving, Marcus, is done in the form of cash, meaning we get paid, we have cash in a bank account or a checking account, and we make a gift. Well, the problem is only 10 percent of our wealth, on average, is held in the form of cash. So our biggest opportunity for giving is on our balance sheet, other assets, real property, real estate, stocks and bonds, other things that have value that we could make a gift of, and in doing so, even pay less taxes because we may be missing a capital gain on an appreciated stock or piece of real estate that we would be able to give to the church. So I guess that would be my first question, is there an asset that you could liquidate in a way that's efficient from a tax standpoint to help you make this gift, or if not, does this really need to come from your income, which would then lead you to the possibility of a second job? Well, I do have my Roth that I have some funds in, but I'm pretty sure that if I went with the draw from that, it's liquidating the taxes on that are going to be fairly high. I made that mistake once before.

Yeah. Well, it's got to be in there for five years, and then if you take out anything beyond your original contributions, which you can get out at any time, you are going to have a penalty and pay some, you know, have some taxes that would be due. So I think the key would be, you know, are you in a situation where, you know, you're willing to take this on and do some extra work, which would allow you to preserve your long term savings unless the Lord leads you to give away your retirement savings. I think the opportunity you have is to, you know, like you said, be willing to add a second job and use that to make this gift. Here's the thing, though, you mentioned putting you in a higher tax bracket.

You'll be able to deduct a major portion of this in all likelihood, you'd be able to deduct up to 60 percent of what's called your adjusted gross income, 60 percent of your adjusted gross income, which is basically the income that you earn minus a few adjustments that are made. So you're going to be able to get a tax deduction for these gifts to your church as that money comes in. Let's talk more off the air and we'll be right back on Money Wise Live.

Thanks for joining us today on Money Wise Live, biblical wisdom for your financial decisions. Let's head right back to the phones today. By the way, a few lines open, 800-525-7000.

Jackie, you're next up in Cleveland, Ohio. Go right ahead. Yes.

Hello. I was wondering, I'm going through a divorce and my husband and I have revocable trucks set up and I was wondering if there's a way to when we revise those to set up wording so that the assets we currently own can go directly to my children if something were to happen to him if he were to get remarried. Do you know the answer to that question? Well, I'm not an attorney so I think it's always best for you to visit with an estate attorney just to talk through exactly the way things should be structured. But I will say that with a revocable trust, you can obviously make an amendment or an adjustment to it.

If it's been done by both of you, you would both have to agree to that. But you could create a new trust and assign a trustee with certain provisions to ensure that upon certain situations including remarrying, assets that are yours would pass a certain way. But that's going to require a trust amendment that you both agree to. You may have to handle it through your will with assets that are outside of a trust based on the divorce decree.

So I think there's a number of ways to go. The bottom line is you're going to need some legal counsel just to make sure that this is structured properly. But I'm confident that based on how the assets are divided that you'll be able to set this up in a way to honor your wishes with the assets that are yours. But it is likely going to involve some changes to the way the estate is currently structured.

Okay, so when you say the assets that are mine, since we each get half, I would like to arrange mine. I obviously have control over my wording but do you know if I would have control over the way his would pass along being that right now those assets are both ours or do you not know that? Yeah, I would check with your attorney but I would just say he's going to have responsibility to set up and construct his estate plan with the portion that is his based on his wishes. So that will likely change and you wouldn't be able to have control over that necessarily with regard to how he chooses. Often if he were to decide to remarry that would be done through a prenuptial agreement where he would decide upon remarrying that he wants the assets that were accumulated prior to that marriage to pass directly to his kids but that would of course be his decision with the assets that are deemed to be his as a part of the divorce proceedings.

So I think your best option from here Jackie is to spend some time to visit with a godly estate planning attorney once the court has made a decision on how assets are going to be divided and at that point you know you can make sure that with what's in your control at least that your estate plan is constructed according to your wishes. I know this is a difficult season so we'll ask the Lord to give you some wisdom as you navigate this not only financially but with the kids as well. We appreciate you weighing in today and calling. God bless you. Let's head to Chicago, WNBI. Tammy, thank you for calling. Go right ahead. Hi, yes my question is with so many different finance companies for automobile refinancing how do you find the right company?

I've just gotten so many different ones I'm not comfortable. Yeah well the key here is you know you just want to find the very best rates and terms for your credit score. You know it's very possible to refinance your auto loan. You could start with your current lender. It would be even easier than filling out an application with a new lender assuming they're willing to give you a competitive rate. If not I'd check or Either of those Tammy would I think be a good solution where you can say specifically that you're looking for an auto loan specifically for a refinance. They'll give you a list of banks. You'll see the rating of those banks but you'll also see what's most important and that is the terms that they're offering and depending on how much money they have to lend at any given time some lenders will offer more competitive rates than others and that's always changing.

So there's no way to know who's the best one right now apart from doing that research but I think if you can improve your situation without extending the term out of the amount then this could make some sense especially if you had poor credit, a poor credit score and that's improved and so you could find yourself in a better position because if not rates are heading higher and it's probably you're going to find that unless you've had a dramatic improvement in your credit score you're probably not going to find a more favorable loan right now unless there was some reason that you had an above market rate loan. So check out and I hope that helps you.

Hey more of your questions just around the corner. 800-525-7000. This is MoneyWise Live. We'll be right back. We're delighted you joined us today for MoneyWise Live where we apply God's wisdom to your financial decisions. What are you dealing with today in your financial life? We'd love to hear from you. We have one line open.

800-525-7000. Hey let me remind you MoneyWise Live and MoneyWise Media is listener supported. That means we do what we do each day as a direct result of your financial support and gifts. Would you consider a gift to the ministry?

We'd certainly be grateful. You can head to our website Click the donate button. That's and click donate. You'll find a mailing address to send a physical check. You'll find a phone number to connect with our team toll-free or you can give online safely and securely. Would you consider becoming a patron that is a monthly supporter or even making a one-time gift? We'd certainly be grateful.

Again and click donate and thanks in advance. All right let's head back to the phones. 800-525-7000. Coconut Creek, Florida. I know it very well. Autagracia. Thank you for calling. Go right ahead.

Yes, hi. My question is, is it better to pay the mortgage on your home on your own or is it better to pay with an escrow account? Yeah, I actually prefer you paying with an escrow account and here's why Autagracia. Lenders will usually offer buyers lower interest rates if you pay this way. It protects them because they can monitor whether these payments are being made and it avoids you kind of delaying putting that money aside, hoping you'll have money available when the bill comes in and then getting caught with a big tax bill, either a property tax bill or a homeowner's insurance policy that you don't have the money for and then you get into a real predicament and so the escrow account is going to ensure because the lender will make sure that it happens that the funds are there and dispersed on a timely basis. The only downside is you just have to keep track of it because mortgage companies can make mistakes and so you're going to want to monitor that account just to make sure everything's being applied properly and they're often going to want you to have a certain percentage of a buffer in there so they don't ever get into a situation where there's not enough money to make the payment and sometimes that involves estimates which may mean from time to time you have a little bit more in there than is needed and so that can frustrate some folks but apart from that I really like paying through escrow for the reasons I mentioned.

It's just going to make sure you don't get surprised with a bill that you don't have the money for and making sure your taxes, your property taxes are paid and your homeowner's insurance is paid is pretty important. Does all that make sense though? Yes, yes. Thank you so much. You're very welcome Alta Grazie. We appreciate you checking in with us.

To Houston, Texas. Charles, thanks for calling. Go right ahead sir.

Yeah, thanks for taking my call. What I'm considering now, I've got a property that's estimated at about $2 million. I've got a loan of $315,000 still on it and we'd like to stay on the property.

I'm considering a reverse mortgage I can get like a million dollars out of the equity and I'm trying to say if I do that and I pay the loan off and I end up with about maybe $600,000, $700,000. How do I figure out a cost basis for tithing? Yeah, well you know really you haven't liquidated the property so in a sense you don't have an increase yet. You're just borrowing against the asset but theoretically you haven't realized anything even though you're pulling money out until you sell it and then you could clearly establish the cost basis for the asset which would be the same for tax purposes as well as for tithing. If you wanted to give a tithe that is a tenth of the increase, you would have to determine what is my selling price minus my original purchase price minus any transaction costs or improvements that remain with the property. You'd come up with your net profit and that would be your increase and then you could give a gift of a tithe but in this case you're not realizing the sale of an asset. You're just borrowing against it so there really is no increase that's been realized at that point. Does that make sense?

Yes, it does. How do you feel about reverse mortgages? You know I'm not a big fan. I mean I'm not one of those that says no, never but they're costly. You know there's quite a bit of fees in them. You know you don't have the ability to deduct interest although 80% of folks don't do that anymore because of the standard deduction. You need to make sure that you keep all the other things paid so that you know you don't get foreclosed on and you've got to have the money to pay the property taxes and maintain the homeowner's insurance and that kind of thing and then you've got to just understand the implication for your heirs that if you wanted them to be able to keep the property in the family let's say obviously that loan is going to have to be repaid when that asset transfers which means they would likely have to sell it. But apart from that if this is the home you want to be in and you can't solve a gap on you know income that's needed to support your lifestyle another way by downsizing you know being able to do that without using debt then obviously you're sitting on a major asset that could be either through a lump sum or a monthly check converted into an income stream for the rest of your life that could help you meet your obligations and cover your expenses and stay right there in the home you love. So I think for that reason there is a there is some merit in it even though there are some downsides from an estate planning standpoint as well as just you know the the cost of it so to speak.

Does that make sense? Yeah well I'm thinking because the interest rates are high but I'm looking at getting enough money out to where I can use the money that I get out to invest for the heirs. You know I'm since we like staying here you know you stay here you won't have a payment and you know you can accumulate some extra money from not having to make a payment but I was going to use the money to invest.

Yeah do you own the home free and clear today? Yes except for that $315,000 loan. Oh so you have a $315,000 mortgage?

Right. Yeah I don't like the idea of borrowing against it to invest. I mean you're presuming upon the future you know you're going to have to especially as interest rates head up and they're going to be even a little higher through a reverse mortgage than conventional loan rates.

You're going to have to outpace that after taxes and so the idea that you you know not you're not using it to fund lifestyle and your cost of living you're using it to try to invest and outpace the mortgage interest rate to grow the money quicker means you're going to have to take a good bit of risk which means you could lose money on that and then you know if you did and you know you'd have the mortgage to boot. So I'm not a big fan of that approach Charles I think I would try to move toward getting this mortgage paid off and enjoying the freedom of letting this asset continue to appreciate so that it could be a nice inheritance for the kids if that's what you're wanting to do or give a portion of it to ministry but the quicker you can get that paid off the quicker you bring your lifestyle expenses down even lower I would prefer you go that way as opposed to using the debt of the home the equity of the home to invest in that's just me you think about it pray about it but that's my best advice today sir we appreciate you checking in with us. You know folks as we think about applying God's wisdom to our financial decisions each day it really comes down to first surrendering to the Lord and recognizing that money issues are heart issues and that the way we handle our money is really the training ground of the heart. What is God trying to teach us he wants our hearts he wants us to grow in our relationship with him and often money can be a stumbling block to that well what if we hold it loosely and live simply and give generously and say Lord what would you have me to do I think that's the starting point for all of our money decisions and then we can live within our provision and we can give it away and we can have some margin and the freedom to live or die give or go as the Lord leads. Hey more MoneyWise Live just around the corner we're going to take a short break but we'll be right back. Stick around. We're thrilled to have you along with us today on MoneyWise Live as we apply God's wisdom to your financial decisions.

Back to the phones we go. Indiana is where Christine's located waiting patiently. Christine you go right ahead. Yes thank you so much Rob this is exciting being able to ask this question like this okay I was mainly wanting to know if was a good place to get some credit and I did hear you say on a prior call the answer is yes I'm just really hoping I can get a credit card for 12 months with no interest for around $29,000.

Do you think that's kind of dreaming do you think that's a possibility? Well yeah I mean it's possible it scares me a lot Christine so tell me more why are you borrowing $29,000 on the credit card? Okay first of all I make good money I'll be 70 in August I start collecting social security in September and it's a nice size social security. I will have my home paid off December 1 so I'll have that mortgage too so I'll have all and still I'm still working full time and will continue to work full time until June 30 of next year 2023.

I want to get new siding on my home every winter it gets worse and it actually can affect the integrity of the home it really needs to be replaced. I've been wanting to do this for a number of years and I'm now financially at a place I can do it but I hate paying interest if I don't have to so I just thought I would try to get that much money. I can easily pay it off in 12 months with that extra social security with no mortgage and as I said I make good money so yeah that's my answer.

I got it well that makes sense I mean at least I mean I'm pleased to hear that you've thought through it and like you say you have a good income you're on track to pay off your home that's going to take your biggest expense out of the equation you're going to have this additional income that you've been delaying so you've got a pretty healthy social security check now that you're 70 and you'll begin collecting in September and you're working until next year and I assume you've thought through your budget and you'll be in pretty good shape at that point. I guess the question is yeah credit card no you're gonna have you're gonna have trouble Christine getting that kind of limit right out of the gate do you have a good credit score do you have other accounts? My credit score is 847. Oh okay wow that's incredible you're three points away you're in the top one percent of all Americans just so you know. I know it says your rank higher than 99 percent of U.S. consumers.

I put it on my refrigerator. Yeah that's great I guess you know they I mean you certainly could do a portion of this I mean I would typically never encourage somebody to do this on a credit card I mean I hear what you're saying and you're just looking at where can I get this and spend you know the least amount of money and if I can do this with using somebody else's money on a zero percent kind of basis then you know I'd love to do that. You know typically you would see that with a balance transfer offer but not usually 30 grand.

You may find an introductory offer for a new credit card but typically they're going to start with a much lower balance even though you've got a phenomenal credit score. So you could look at this I think the other option is you could look you know at a home equity loan you could talk to your bank about a personal loan on this. Is there you know a reason to start taking social security early or delaying this renovation until next fall and just trying to do it out of cash flow. I mean I think those would be other options or you could do a combination of the two where you take out a new introductory credit card they give you ten thousand and you do it that way but trying to you know open three cards and bundling them all together and that kind of thing I think that's just going to you know be problematic so you're probably going to have to piece this together in a couple of ways maybe delaying it as long as you can and then maybe you know talking to your bank personal loan and or a portion of it on a credit card for a very small amount of time. Okay because I guess if I delay it till fall I still won't have that $29,000 so I mean yeah I'll have that social security coming in about eight weeks after that no more mortgage that's why it'll be easy to pay it off in 12 months but I think I hear you saying nobody likes to give you free money for 12 months at that dollar amount. That's right that's a lot of money yeah so that's going to be really problematic so I think you're going to have to get creative and figure out how you can do this perhaps even the you know is there an option with the person that you'd be doing the work with will they finance it for a period of time I think you could look at that as well. So I would do your homework I do like NerdWallet a lot so you could start you know talking around talk to your bank.

You're obviously a very low credit risk because of how good that score is so I suspect there'll be a lot of people wanting to work with you Christine just make sure you and I hear this in your voice but I just want to encourage you stay laser focused on getting this paid off just as quick as you can no matter which way you go. Thank you. All right god bless you Christine. Let's stay in Indiana. Pamela thanks for calling go right ahead.

Hi thank you for taking my call. I will be 70 this year and I did take early retirement due to some extenuating circumstances so I am currently receiving social security so is my husband but my 401k is in vanguard and due to stocks and everything it is losing a little bit of money. It's not a lot of money it's about 21,000 but I thought maybe I should start taking distributions however I was wondering if there was a way I could put it into something else which would still delay the tax on it. I understand I cannot get an IRA because I do not have working income but you know.

Yes I do. What is your age Pamela? I'm 69 currently. Okay all right so you're not taking required minimum distributions left why are you wanting to pull the money out? Simply because it is losing some money due to the stock market I don't know what it is exactly they have it invested in and so I thought maybe I should just pull some.

Yeah I wouldn't do that I think the first question is are you invested in the right things given your age and what you're trying to accomplish. Is this money you don't need to fund your expenses on a monthly basis and therefore you can continue to allow it to grow unless something unforeseen happens down the road? That is correct however it's not growing Vanguard it's in there the retirement part of their investments and I mean I've lost over a thousand dollars since last October. And how much is in it? Right now just over 21,000. Okay all right well that's not surprising just given what's going on in the market but I don't know that the answer is to pull it out I think you could take a look at what are the right investments and does it need to be moved but unless you just are losing sleep over it and you lack peace of mind you know here's the thing you know at 69 years old if the Lord tarries and you're in good health this money you know is money that you may not need to touch for 20 years or more because you don't you've got your bills covered and you know this money can continue to grow so if your time horizon is less than five years I'd say well yeah maybe you need to think about doing something different just to protect what you've got but if we've got a much longer time horizon and you know the way people are living longer these days you likely do I mean nobody knows whether we have our next breath except the Lord but apart from him calling you home this is money that can grow for a long period of time and you know we have these major pullbacks in the market you know every 12 years or so we were due for one but usually they're very temporary and then the market moves to higher highs I mean that's just what's happened there's never been a 20-year period ever in the last hundred years where the market's been down so I think the opportunity is to reposition these assets so they're invested right and then just let it grow because with inflation if you pull it out you're not going to pay a penalty but you'll pay tax on it and then it's just going to sit in a savings account potentially and it's losing money every month because with inflation you're losing purchasing power whereas at least in the stock market you know it those stocks even though they're declining on a temporary basis it has the ability over time to grow and outpace inflation so that you know 10 years down the road let's say you need this money for something unexpected and it's a good bit higher than it is today because it has the growth component attached to it so I'm not telling you what to do if you just are uncomfortable being invested then by all means you can pull it out and to your question there really isn't a way to pull it out tax-free you can roll it to an IRA you don't have to have earned income to do an IRA rollover you do to contribute to an IRA but not to do a rollover so you can roll it to an IRA but then you'd have to decide what to invest it in and if you just leave it in cash it's going to lose value but you do have that option what what can I reposition it in I mean do I reposition within vanguard or what what do you mean yeah I mean vanguard has plenty of investment options so I'd probably contact you know through what's called the vanguard advisor they can help you build a very low-cost portfolio using vanguard index funds that get this invested in a way that's consistent with your age typically the 70 roughly 70 year old person you might have you know 30 to 40 percent in stocks and you know 60 to 70 percent in fixed income type investments and yes they're going to lose value in a down market both on the stocks and the bonds but you'd be looking long term for this to grow over time if you pull it out now you could roll it over and leave it in cash there's no taxes but again with inflation you're losing purchasing power and if you pull it out of the tax deferred environment either the 401k or the IRA you're going to have taxes on top of that so I would probably reposition the assets and then just let it go and then you know check on it you know every six months or so but that's just my you know best advice for you Pamela I think you need to pray about it you're the steward of these assets so we want you to make this final decision and ask the Lord to give you some wisdom but vanguard the advisors there at the vanguard company should be able to help you reposition this in a way that's consistent that you feel good about that fits with what you're trying to accomplish we appreciate your call today I pray the Lord give you some wisdom in this god bless you well that's going to do it for us today folks we really appreciate you joining us as we explore the scriptures and apply God's truth to the decisions and choices you're making financially each day MoneyWise Live is a partnership between Moody Radio and MoneyWise Media thank you to Robert Sutherland, Dan Anderson, thank you to Amy Rios as well and we're looking for you again tomorrow on another edition of MoneyWise Live come back and join us then we'll see you bye-bye
Whisper: medium.en / 2023-04-20 11:03:54 / 2023-04-20 11:20:13 / 16

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