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Empty Nest Finances, Part 2

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
May 20, 2022 5:00 pm

Empty Nest Finances, Part 2

MoneyWise / Rob West and Steve Moore

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May 20, 2022 5:00 pm

Couples in their fifties face a time of life that’s full of new challenges. But beyond navigating the empty nest, what other issues do couples in this stage of life face? On today's MoneyWise Live, host Rob West will welcome Jim Burns to talk about facing these challenges head on and managing your empty nest finances. Then he’ll answer your calls and questions on various financial topics. 

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How do you forgive a dead man, particularly when he's your grandfather? I'm Brian Dolan and in a brand new podcast called The Grandfather Effect, I hope to find out. Visit our profile and follow The Grandfather Effect podcast today. I'm Rob West, and the question is, what issues face couples in their 50s?

It's a time of life when new challenges present themselves. I'll talk about how to face them head on today with Jim Burns. Then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. Well, Jim Burns joins us again today. He's the author of Find Joy in the Empty Nest, Discover Purpose and Passion in the Next Stage of Life. And Jim, delighted to have you back with us.

Great to be back. Jim, when you were with us several weeks ago, we talked about the changes that take place when our grown up children leave the nest. Listeners, by the way, may want to check out that April 26th episode in our archives at But today we'll tackle some of the other issues that confront us in our 50s and how to deal with them. And let's start with the question of aging parents. Jim, what challenges might we see as our parents get older and possibly look to us for help?

Well, they do look to us for many times. And we found as we started doing focus groups with the Finding Joy project that this was one of the major issues. Our kids are leaving the house. And yet at the same time, our parents are needing us more. And frankly, a lot of the people begin to take over the finances of the parents or they actually have to help out.

We had to help out with my mother-in-law. And this took us by surprise. We'd never talked about it.

We didn't think about it. They were going to live forever. They were going to be healthy forever.

And that didn't happen. And, you know, the average empty nest, you leave, what, at 48.9 years, you become an empty nester. And that's right at an age when your parents are in need in a different way than probably ever before.

Yeah. And these two things can collide if we're not ready for them. Jim, let's touch on the financial aspect of this. Obviously, finances with aging parents can be tricky. How do we know when and how much to help if it's needed? I think it's important to communicate ahead of time, not in the heat of the battle, not in the emergency. Sometimes you obviously have to. But I think whenever possible, you sit down and you have those conversations with your parents. And sometimes you have to almost force that upon them.

They don't want to talk about it. But I think you do it ahead of time. So then, you know, my dad was really good at that. I sat with my dad. I said, Dad, I know you don't need me now, but if you need me, how are we going to handle this thing?

I was the executor of his will. And so long before that, we had to start talking about finances and bills and things like that. And you know what? It was smooth. He helped me because he talked to me. But you know what?

I started the process because I went and had the meeting. And at first that was real tough for him, but it got easier. That's where we went a lot. Yes.

Yeah, that's really helpful. Jim, obviously the pandemic has shown us that sometimes the empty nest isn't so empty as adult children may have to return home for a season if they're facing financial difficulties. How do we handle that aspect of being parents of adult children? Well, they left as teens. You're going to experience that pretty soon here. They leave at teens, but they do come back as adults. Their lifestyle is different. And so you have to renegotiate what it's like. What we found with our three daughters is that when they did and they all boomeranged at times that they came back and then kind of moved back into the teen process. And what we had to do was say, no, here's some expectations.

And also, what are your expectations? And when it came to finances, we had to kind of discuss that because as soon as they moved back in, they thought, well, mom and dad are going to take care of everything. And so we had to say, look, here's what we were thrilled you're here. And we know it's a season and it's a tough season for all. But here's what we can do. And here's what we're expecting you to do. And that makes it easier.

It still is bumpy because there's a high cost to talking about money and dealing with money. But it's in the process and the preparation where that really can help. And then also, your job is to help them become responsible adults. Well, if you're paying for everything, then obviously they're not going to become financially responsible.

And they're really not, I think, full-fledged adults until they become financially responsible. And so that's part of our job to help them do that. Sometimes that's with a word.

No, we can't do that. Even if he has the capacity or the money, sometimes we just say, no, that's not our plan. Yeah, that's really helpful. And I imagine clear expectations, open communication and guardrails are the key there, huh? And that is the key.

To be clear is to be kind. And you're going to help your kids in a big way when you have those expectations in front of them, in front of you. Yeah, that's great.

Well, Jim, you've given us a lot to think about. Thanks for stopping by to help us prepare for this next stage in life. Thanks so much. And great job what you do. Thank you.

That's Jim Burns, author of Finding Joy in the Empty Nest. You can get a copy today with a gift of $25 or more to MoneyWise. Just go to and click donate. We'll be back with your questions just after this. Stick around. We're thrilled to have you with us today on MoneyWise Live. I'm Rob West, your host. Hey, we've got some phone lines open today. We'd love to hear from you. Do you have a financial question? Would you like to run something by us?

Perhaps you and your spouse are not quite on the same page and you'd like another perspective, whatever it might be, we'd love to hear from you. We apply God's wisdom to the financial decisions and choices you make every day. And we do it together here each afternoon on MoneyWise Live. So if you'd like to get in on the conversation, the number to call is 800-525-7000. You're already standing by to take your phone calls today and then you'll probably talk to Amy and we'll get you right on the air. 800-525-7000. We look forward to hearing from you. All right, let's dive in. We're going to go to the phones beginning today in Indianapolis, Indiana. May, thank you for calling.

Go right ahead. Yes, my husband is 70 years old and he lost $8,000 in his 401k in the past three months. So he has a guy that's come here to the house to talk him to put him into a movie for three years. So what do you think about that? The whole retirement? And how much have you all built up in that 401k, May? Well, he was also in the union, so he has a pension, but he has $110,000 in his 401k. That would be the amount he'd be moving. I need to know whether he would lose anything on that. Yeah, well, and you said that money has lost about $8,000 recently, so about 7% of that.

Yeah, and that's not unexpected given what's going on in the market. Talk to me about this 401k as it relates to your overall retirement plan. Are you all living off of the pension plus Social Security and intending this money just to continue to grow? Or are you funding your lifestyle and living expenses some other way?

Well, we haven't touched his 401k. I'm still working because I'm younger. Okay. So I'm still working and putting into a 401k. Okay. Go ahead.

And he's retired for two years. He hasn't touched the 401k, but I feel scared about moving it because I don't want to lose anything on it. Sure. And your expenses are covered through your income, plus he's drawing the pension and Social Security himself? Yes. All right. And at the end of the month, do you all have a good bit of margin or excess each month? Yeah, we have enough to live off of for right now.

Okay. But if you were to retire, would you all have to start taking an income from either your 401k or his or both? Or is the pension and Social Security plus ultimately your Social Security enough to cover your living expenses? Well, we've got our house paid off, so we only owe like the electric bill and stuff. Yeah.

I'm just thinking with him being 70, if he should move it or not. Yeah. It's a three-year annuity at 3% interest. Sure.

Well, let's talk about that. You know, annuities aren't my favorite tool. They tend to be a bit expensive in the sense that there are fees and commissions associated with them, and you lose access to the money without surrender charges, at least in the early period of the contract.

What are the benefits? Well, for somebody who wants to transfer risk away from themselves, meaning you're bearing the full risk of the investment performance as the stock market ebbs and flows depending upon how those assets are allocated, you're bearing that risk now, but you have access to the money. If he needed to tap or you did tap into any portion of that for an unexpected expense, medically or otherwise, you have access to the funds. You could take a withdrawal, there'd be a tax consequence, but you have access to the money.

The annuity takes that risk and transfers it away from you to the insurance company in exchange for a guaranteed rate of return, as you said, 3% a year, but you lose access to the funds in the sense that if you wanted to get that money back, you're going to pay, at least in the early part of the contract, some pretty hefty surrender charges. So the question would be, can you all accomplish your objectives with the investment strategy you have or with some tweaks to the investment strategy and ride out this volatility in the market? We've had a 12-plus year bull market run, just simply meaning the economy's been very strong, the stock market has been very strong, we've seen great performance from equities, that is stocks, across the board for a long, long time. And the market and the economy is cyclical. It looks like we could be heading for a recession.

We're certainly seeing the possibility of that play out in the market through incredible volatility. But if you have a long-term perspective, even at age 70, if the Lord tarries and he's in good health and you're younger, you all need this money to last potentially a couple of decades. So if you're invested properly, you would go into this saying, we believe in the investment allocation we have, we don't need this money, so even though we're down 7% or so right now and we could be down another 7% or even more, we're not going to move anything because we know this is money that we're looking 10 years plus down the road, either as an inheritance or money that we might need to tap into for long-term care, something like that, and so we're going to let it grow. But you have to be able to sleep at night and have the peace of mind to know that you have other assets, meaning the pension, you've got your Social Security, you've got your income, ultimately your Social Security, both of these 401Ks, and so you're okay taking a little bit more risk because you want a better rate of return over the long haul than the 3% you're going to get with the insurance company. But if you said, no, I'd rather have the peace of mind to know that I can't lose anything, then I don't think there's any problem, May, with you taking this, rolling it over to an IRA annuity, so it stays within that tax-deferred vehicle, goes into an insurance contract, they will take it and invest it, they'll give you the guaranteed 3% return, and as long as you continue to hold on to that contract and get past any surrender charges, you could make some changes down the road, and that may be exactly what you're looking for, it's just not my first choice because of the reasons that I mentioned.

But give me your questions and thoughts. Okay, what would be your first choice to do? I would say because your income is covering your expenses through Social Security, his pension, and your job, you would say, you know what, we're debt-free, we have limited expenses, we're living modestly, our bills are covered, and so therefore we can let my 401K, meaning yours, and his continue to grow. Yes, we're down 7% right now, but that's just because we're in an unusual period of time. Even if we hit a full-blown recession, on average, that's going to last somewhere between 11 months and two years at the back end, just historically speaking, and so we're just going to ride that out as long as the allocation is okay, meaning that you're not too heavily concentrated in stocks for his age and risk tolerance. But if it is, you'd say those are just temporary paper losses, and until we sell something, we haven't actually realized a loss. And so we're going to just ride this out, knowing that we have the prospect of making more money down the road, especially as the market recovers, and we're looking longer term and hoping for a better rate of return than 3%. So his 401, he's not putting into it anymore because he's not working.

Right. So you're saying you would leave it in the 401K. Yeah, it's not really about the 401K. That's just his tax-deferred vehicle, the same as an IRA and an IRA annuity.

That's just the tax treatment. The question is, what are the investments? And so inside the 401K, you have investment options, sub-accounts, that are typically mutual funds. So the question is, what investments are you in? Are they stocks? Are they bonds? Are they a mix of stocks and bonds?

Are you too aggressive for his age? Probably not. If you're only down 7%, given what we've seen in the market, the last couple of months, you're probably about right.

But I would take a look at that. The question is, is the investments of an insurance company, a guaranteed 3%, a better option for you right now than what you're currently invested in? For me, it's not a matter of whether it's an annuity or an IRA or a 401K.

It's a matter of how much risk are we taking for what return, what expected return, and is that appropriate given our age and goals and objectives where God is taking us and the assets that he's given us. Does that make sense? Yes. I'm against it, but it's his money. And he just met the guy last week, and he's coming out again Wednesday.

And I told him that I was going to call you guys. Yeah. Well, annuities are typically sold, not bought. And here's what I mean by that. Somebody will sell them to us, convince us that this is the best option. And that, again, is not something that says insurance, annuity salesmen are doing anything wrong. It just means that oftentimes, because they're complicated, because they tend to be expensive, they're often sold by people that believe that's the best option for you.

At the very least, May, what I would say is get a couple of other opinions. But again, my first choice would be that as long as the investments are allocated properly, meaning that you're in the right investments according to his age, risk tolerance, goals and objectives, then you'd stick it out, stay where you are, and know that even though there could be more downside, probably will be, that we're in it for the long haul, that life expectancy is longer and longer. We need this money to last probably to age 95 or 99. Obviously, the Lord could choose to take us home in the next breath.

But we plan and try to get the money to last as long as we can, so you can accomplish what God has for you in this season. And I think that's best done in a properly diversified stock and bond portfolio, especially where your bills are covered, you all are living modestly, you're debt-free, and you're not necessarily moving this into an insurance contract. So I'd probably stay right where you are, but perhaps to give him a little more peace of mind, maybe you connect with a couple of advisors just to get a few other opinions. That's never a bad decision.

This is called a binary trap. And what that means is we'd say, well, should I buy the annuity or stay where I am? Well, what about the other alternatives? Maybe it's stay where you are and change the investments. Let's consider all the alternatives before we make a decision. Right now, we're just looking at this or that, and there's probably lots of other options. So I'd head to our website,, and find a couple of certified kingdom advisors there in Indy to look at the whole portfolio, all the assets, and give you their perspective.

Maybe they'll give you an idea you haven't considered. Thanks for calling today. We're going to pause and be right back with much more MoneyWise Live. Stay with us. Thanks for taking the time to be with us today on MoneyWise Live. I'm Rob West. We've got some phone lines open. We'd love to hear from you.

What's on your mind today? 800-525-7000 is the number to call. It's 800-525-7000, whether it's your budget or paying down debt.

Maybe it's that credit score or saving for the future. Perhaps it's your giving plan. Do you have a plan for your giving? You know, we're never going to be able to give to the maximum of our ability if we don't plan for it.

Yeah, there's a place for spontaneous giving, but really thinking through your giving strategy, kind of like you would your investment strategy, I think will make a world of difference. Well, whatever's on your mind today, give us a call. 800-525-7000. Back to the phones we go, the Tri-Cities, Tennessee. Alex, thanks for calling. Go right ahead, sir.

Thank you for taking my call. I had a question about tithing and about savings. As of right now, I don't have six months' worth of emergency funds. I'm very low in that department. But I have been tithing regularly, and to give you some perspective, it's not a true tithe.

It's not 10%. It's just what I put into my savings, I give half of that as a contribution. And I'm wondering, should I lower that or stop that in order to get my emergency funds up, or should I keep doing that and just try to stay as lean as I can? I honestly don't want to stop tithing, but I figured in a situation like this, it's best to seek wise counsel.

Sure, yeah. Well, I appreciate the question. Obviously, you want to honor the Lord in your giving. You also want to have some margin, something to fall back on, which I think is a biblical principle as well. And so I think the question is, how can you step back from all of this and say, what does it look like to order my finances in such a way that accomplishes these simultaneous objectives?

Because financial management is not sequential, it's simultaneous. So we're trying to do all of these things, handle all of these priorities at once. And really, it comes down to, I think, starting on our knees and say, Lord, what have you called me to do, beginning with the question, not how much do you want me to give, but how much do you want me to keep, which kind of flips that idea upside down. Alex, I wouldn't encourage you to change your giving at all. I think it's one of the things that really breaks the grip of money over our lives. It's an incredible blessing the Lord gives us to be participating in his activity through our taking of his provision, his resources, because it all belongs to him and allowing us to get some of that going into his kingdom activity.

And so the ability to do that is something we should be looking to increase over time. Now, I understand there's this other priority that you have about having enough emergency reserves, and I think that's a good idea. How many months' worth of expenses do you have today, would you say? Zero. I have about $50. All right.

Very good. And have you done some hard work on that budget to say, where could I cut back without changing my giving one bit if I wanted to free up more margin? Are there some areas you could make changes in?

There are, and I'm endeavoring to put it in a different perspective. As of right now, I have an electronic checkbook, and I plan ahead, but I've got a physical planner I'm planning on putting everything down in. That way I can try to use the snowball method, but I'm not to the point where I have that all collected as of yet. I have saved money in the past, but I've ended up using it, and I'm still paying myself back on that. Yeah.

Got it. And do you have credit card debt? Is that what you're looking to snowball or some other type of debt? I have some credit card debt. I have a small amount of medical debt, and then I have my mortgage, and I have a car payment.

All right. And how much do you have in credit card debt? I have approximately $3,500 spread across.

Yeah. So I think if it was over $4,000, and you're pretty close, I'd say look at a debt management program. Our friends at could help.

But at $3,500, I think snowballing is the best. Let's make this an adventure with God, Alex. Let's not change your giving one bit, and let's go back to your budget and see what you can do to get that snowball going, get the debt covered, but look for other areas to cut back, and just trust God for this, and see how He provides, and see if you can add even $50 a month to that emergency savings. Stay on the line. We'll talk a little bit more right off the air, and we'll be right back on MoneyWise Live. Give us a call. We're grateful you've chosen to spend some time with us this afternoon on MoneyWise Live. I'm Rob West. This is where we apply God's wisdom to your financial decisions. We've got some lines open today. We'd love to hear from you.

800-525-7000 is the number to call. Just before the break, we were talking to Alex in Tennessee. Alex shared that he's been giving. He's got not a whole lot of margin left over every month after his giving, and the bills are paid, and the debts are covered, and he doesn't have an emergency fund. So his question was, even though I don't want to, should I cut back my giving so I have a little bit more margin to get that emergency fund up?

And here is my advice to Alex. You know, when we think about our giving, I don't think, number one, we can outgive God. Number two, we were created in the image of God. He's the ultimate giver. So I like to say we're most like him when we're giving. So let's start by not asking the question, should we cut our giving or can we cut our giving, but what can we do to continue giving as the Lord leads us and accomplish the other priorities? And so, Alex, my thoughts are we keep that giving right where it is. You said you don't want to cut it.

I'd love for you to continue to do it. And let's look for other ways to cut back, which means, and this isn't going to be easy, going back to that spending plan, looking for areas we can dial back. You mentioned you have about $3,500 in credit card debt plus medical debts and basically an emergency fund at about $50. So what I would say is let's try to get that through any cutbacks you can make in your current spending plan. Let's try to get that up over the next several months to $1,000, maybe $1,500. But once you reach that point, let's cap the emergency fund for now so that we can focus back in on those credit cards. Let's snowball the credit cards, stay laser focused on getting those paid off as quick as you can.

Once they're paid off, now we've got a little bit more to go back to the emergency fund to try to get it up from $1,000, $1,500 to maybe three months expenses. Once you do that, you'll be in a much different situation where you can focus on the medical debt and other priorities the Lord gives you. But let's try not to touch the giving. And give me your thoughts on that.

How does that feel? Yeah, I really appreciate that answer, and honestly, it's what I wanted to hear. A while back, after I got saved, I really had some conviction about starting to contribute to my church. And I thought a lot about it, I prayed a lot about it, and I started giving out of my savings when I was setting aside each month. And while it may not be a full 10%, it's really changed my priorities and thoughts on money and on God's kingdom in general. And as He promises in the Bible to open the windows of heaven, He really has in my life. I mean, even though times are hard, I haven't really wanted for anything.

I'm always provided for. I originally started giving about 33% of what I was saving for myself, and honestly, He blessed me so much that I increased to half or more of what I set aside for myself. And I don't regret that a bit.

Wow. Well, thank you for that testimony. I know that you're honoring the Lord with what you're saying today about His provision in your life, and I think that's the right answer. I would hate to see you take all that you've been able to give and all that you're excited about giving and change one bit of that, except to increase it as the Lord allows you to do so, which I'm confident you will in the future.

So listen, all the best to you. I want to send you a book that will be an encouragement to you. In fact, I'd love to send you the Stewardship Bible. This is a beautiful Bible that was put together by the American Bible Society, and every passage related to money is highlighted in green.

And perhaps as you meditate on God's Word and just study the Scriptures and especially these passages around God's heart related to our money, I think it'll be an encouragement to you. And I think it's just a matter of time, Alex, before you call back and say, Guess what the Lord's allowed me to give now? And I know He will continue to bless you. So listen, thanks for calling today. God bless you, sir, and we'll look forward to hearing from you again soon.

800-525-7000 is the number to call. Let's head to St. Petersburg, Florida. Kathleen, thank you for calling. Go right ahead.

Kathleen, are you with us? Yes. Great. Go right ahead.

You're on MoneyWise Live. Hi. I guess so. I'm like 70 to be 76 soon, and I said I had homeschooled 20 years and really only worked probably in the 70s, and you don't get 4Ks in the 70s. I don't have any really retirement, you know, like, fine time to start thinking about it. I'm still, I'm working. I did have a healing of COPD. I was, I had that for seven years. And then I was healed, and so I've been able to work, like, for five years and doing well.

I'm not sure, you know, what's going to happen. Yeah, and so you're wondering, Kathleen, kind of in light of this, given where the Lord has had you, and by the way, that's incredible. I understand you were a missionary. As you said, you've been homeschooling some kids. It sounds like, from what my producer said, you actually just returned from Poland, where you were ministering to some Ukrainian refugees, and the Lord is using you in incredible ways. But to your financial question, you're wondering, kind of, how should you think about the future in terms of the lack of savings that you have and what that might look like?

Is that right? Well, yeah, I don't have any 401Ks or, you know, I don't have anything at this point. Sure, sure. Well, here's the thing, you know, God is our provider, and he will not abdicate that responsibility to anyone or anything else.

And so the opportunity you have right now is really just to say, what can I do to keep my lifestyle as lean as possible and trust the Lord for his provision? Have you worked long enough to be eligible for Social Security, and are you currently drawing that? Yes, I am, because I'm a widow, like 30 years, so I was getting that when I was 60. So I have Social Security, but that's being taken up to pay bills. Yes, sure. And in terms of any gap you have between your monthly bills, both fixed and what I call discretionary, and your Social Security income, is there a shortfall every month? No, I'm doing pretty well because I'm making really good money working, but then, you know, there might be a time when, you know, I don't know when I would be able to retire to have some kind of plan to put a certain amount away.

Sure, sure. Well, let's be grateful that the Lord has given you health and the ability to work, and I think the key right now, Kathleen, is just to, number one, continue to work as long as you can. I think the extent to which you can keep your lifestyle modest, which clearly you have been, that allows you to take any excess that you're earning beyond what your bills are.

After Social Security is used to pay your bills and your income, if you have anything left over, just starting to save that and building up as much as you can over time. Here's what I'm confident in. The Lord will honor your service to him and hard work in providing for you.

The Bible tells us if he's going to provide for the birds of the air, how much more would he not provide for us, his children? And so we can trust his promises, and you've seen that displayed in your life over a long period of time. And so I think the key for you right now is just to continue to work as long as you're able.

Try to set aside as much as you can for the future. And let's just trust that as you move forward, the Lord will continue to provide, perhaps in unexpected ways, that would allow us to only point to his provision and nothing else as to how he is taking care of you. We appreciate you calling in today and sharing your life with us for a few minutes. Thanks for all that you've done to serve our Lord. And God bless you, Kathleen. We're going to pause for a brief break. When we come back, we've got some great questions lined up, perhaps one spot open for you.

800-525-7000 is another call. You know, folks, as we mind the Scriptures, we understand what is on God's heart. And it's not about the money. Remember, money is a tool to accomplish his purposes, not an end. It's a means to an end. The question is, what is that end?

And we each have to ask that prayerfully on our knees. We'll be right back. Stick around. Thanks for joining us today on MoneyWise Live. Let's head right back to the phones. Jerome'sville, Ohio. Janet, thank you for calling. Go right ahead.

Hi, I'm a first time caller, but I've been a very long time listener. We're debt free. My husband is 74 and I'm 69. We do have a financial planner. And my question is, I had wanted to start a little fund for my two grandchildren and he suggested mutual funds because I don't think my grandchildren will be going to college and whatnot. And I'm just wondering, you know, the way the market's been, I think I've made $17 on my thousand and he kind of was wanting me to put more in. And I'm just wondering, my grandchildren are aged six and eleven. And I'm thinking, would those I bonds be more effective over the next few years?

Yeah. I bonds are great. So for the benefit of our listeners, I bonds stand for inflation bonds.

They're issued by the U.S. Treasury, so backed by the full faith and credit of the United States government. And right now, because of the inflationary environment we're in, currently paying over 9.6% annualized with, again, basically zero risk because they're backed by the U.S. government. The downside is you can only put in $10,000. You have to hold it for at least a year. If you pull it out with less than five years, you'll give up three months' worth of interest.

So it's a great option. Obviously, that number, in terms of what it's paying, will change every six months. The next reset will come in November and it's going to be pegged to CPI, the consumer price index.

But given that we don't expect the inflationary environment we're in at an elevated level to go away anytime soon, I think these rates will continue to be attractive, although they will, I think, over time revert back because the Federal Reserve is committed to really fighting inflation and will continue to raise rates until we see that number come down. So there's a limited window of time. I think the other thing to consider here, Janet, is that number one, we need to define our time horizon and the way for you to buy I bonds for your grandchild would be through a linked account at, which you can do, but it would be a custodial account, which just simply means at the age of majority of your grandkids, the money would be theirs to do with whatever they choose with a custodial account.

That's one of the challenges. So if they're not making good decisions or not mature enough to handle this money, going to take the money and buy a sports car, you would have no control over that or their parents because as a custodial account, again, when they reach the age majority in their state, it's their money. So the way around that would be either A, to put it in a 529 plan, but that would be earmarked for college or if you want to keep it outside of college related expenses and to have it be used for any purpose, then you could just open an account in your name or if you're married joint with you and your husband, but separated and earmarked for their purposes, so that you could invest it, see it grow over time. And then at the time of your choosing down the road and through your will, if you were to pass away, you would have the ability to give them this gift of this money that you've been setting aside when you feel like they're ready for it. And that's the difference with a custodial account.

Now, if you do that under your name only, though, you're going to be limited to $10,000 where if you put it in a custodial account for the kids with the I bonds, you could do 10,000 per child. But given that they're pretty young, I think, you know, I would be looking longer term. So I guess that's my next question is, when would you ideally envision turning this money over to them? Would it be to get their first apartment, buy their first car, you know, sometime in the next 10 years?

Or do you have a different time horizon in mind? Like when they're 21 or even 25. Okay, great. And how old are they today?

Six and 11. Okay. And so I think, you know, given that we're talking somewhere between 10 and, you know, 15, maybe even 20 years from now, I even though we're in a difficult period right now in terms of volatility, I actually think Janet, this is a great time for you not to be buying I bonds because I think the rates that we're seeing that are so attractive to you and I agree they are, that's very temporary. I'd be looking longer term and I think this is actually an incredible buying opportunity for you right now to be buying into the market. You know, if the market was just continuing to do what it's done the last, you know, 12 years, you'd be buying in, you know, 5,000 points higher on the Dow Jones than you are today. Now, does that mean the market's not going to have additional down leg here before it recovers and goes to higher highs? No, not at all.

It absolutely could. I mean, we could hit a full blown recession here in the next year, but you're not looking one or even two or three years out. You're looking 10 or 20 years out. And I think for that reason, I would be a buyer of stocks for the long term. I do that, as your advisor said, through mutual funds and I wouldn't worry about short term volatility over six months or a year. I'd be looking at it saying every pullback where I continue to invest new money, let's say you're putting in a certain amount every month and reinvesting it. Every decline in the stock market gives you an opportunity to buy more shares of those investments for the same number of dollars. And that's a good thing because as the market recovers, and it will on the other side of this economic, you know, event we're experiencing right now, it's going to move to new highs. And you'll have a lot of gains to show for it. So I think given everything I've heard, unless you want it in a custodial account where they can get it at the age of majority, but I'm not hearing that.

I think you want to keep it in an account either in your name or with you and your husband. I think you want to be a buyer of good high quality mutual funds. And I think you want to be a long term investor. And I think you ought to see any pullback or decline in the stock market as a great buying opportunity for you to continue to invest. Does that all make sense?

Well, yes. So what I hear you saying is to go ahead and add money to the mutual funds that that will be okay and just hang in there because it's the long term I'm looking at. That's exactly right. And through what's called dollar cost averaging, which means, you know, every new deposit into that account or accounts earmarked for the kids is an opportunity to buy more shares of the same mutual funds. But perhaps if the market is declining, buy those more shares with the same amount. So let's say you're putting in two hundred fifty dollars a month. Well, you're going to buy a certain number of shares at two hundred fifty dollars today. But if the market's down the next time you put in two fifty, you're actually going to buy more shares of that mutual fund for the same two hundred fifty dollars. So as the market recovers and as that mutual fund moves up, you're actually going to be rewarded for that. So I think that's the right approach, given everything you've described, the time horizon, the objectives and the control that you'd like to have over the funds. And the financial director or planner is the one who makes these decisions because I've never made any decisions about stock buying and things like that.

Yeah, I mean, you've got a couple of options. Of course, you can do it yourself, but you'd have to do the research or find one of the solutions that essentially kind of automate this through computer algorithms. They're often called these days robo advisors, where essentially you're just capturing the broad moves of the market through indexes or you could have an advisor make these decisions for you. So if you all have a financial planner who's an investment advisor, if he or she knows what you're trying to accomplish, they could select those high quality mutual funds.

And essentially, all you'd have to do is just decide how much you want to put in each month. So I think you're on the right track. I'd go with what he or she is describing because it makes sense to me. We appreciate your call today to Elgin Indy. Excuse me, Illinois. Rosemary, thank you for calling. Go right ahead. Hi. Thank you for taking my calling for everything that you do, Rob.

Two questions. Do you have any opinion or experience with companies that will pay a person's bills if they are incapacitated? So are you talking about like an insurance policy or something else?

No, no. A company that is specifically set up, I talked to an attorney and explained the situation and she connected me to a company that could pay my mortgage and pay my association fee, pay my utilities while I'm in the hospital or if I'm at end of life. And I'm just wondering if these companies are legitimate or do you have any opinion about them?

I don't have a lot of experience. You're talking about probably an advocacy group. I'm vaguely familiar with them but have not done a lot of due diligence. So I think, I mean, obviously, some of these are reputable.

Many of them are. This would be a group that would provide a range of services for a disabled senior, whether that's guardianship or care management, that type of thing. I think the key here, Rosemary, is just to do a lot of research, get reviews online, talk to people who use their services, see if they're satisfied. I wouldn't move into this quickly. I would really take my time about any decision that you're going to make in that regard because I don't have a whole lot of experience to be able to say this one is better than that one or anything like that.

Okay. And then my second question is my financial person at my bank suggested a single premium deferred individual annuity where you put so much money into an annuity. It's not one of those where you get so much money per month or per year. It's something where it's got a term of two or three years and at the end of it, you are able to take the whole sum out without any penalty.

Yeah. I mean, so this is called a SPD or a single premium deferred annuity. Usually, these are best suited, Rosemary, for people who are planning their retirement and they're worried they may run out of retirement savings and they've got enough cash on hand that they can fully fund the upfront premium payment through that one payment and then they're going to convert that to an income stream for life. If that's not your situation and you're just trying to save for the future, I would say an annuity, certainly a single premium deferred annuity, is not the best way to go.

I'd rather you have a long-term investment strategy that makes sense and keeps you able to access your funds as needed. I hope that helps you. We appreciate your call today. God bless you. That's going to do it for us today, folks.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Thank you to Jim, Amy, Dan, and Melody. And thank you for all of your calls today. Come back and join us next time and we'll see you then. Bye-bye.
Whisper: medium.en / 2023-04-14 09:47:23 / 2023-04-14 10:04:53 / 18

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