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More Inflation Fighters

MoneyWise / Rob West and Steve Moore
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August 24, 2022 5:30 pm

More Inflation Fighters

MoneyWise / Rob West and Steve Moore

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August 24, 2022 5:30 pm

With inflation so high, it’s more important than ever these days to stretch your budget further. But how do you get the most bang for your buck? On today's MoneyWise Live, host Rob West will share some inflation fighters that will give you both big and quick results. Then he’ll answer your calls on various financial topics. 

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It's more important than ever these days to stretch your budget further. But how do you get the most bang for your buck?

Hi, I'm Rob West. Saving a dollar here and there is great, don't get me wrong. But you may need inflation fighters that give bigger, quicker results. I've got a bunch of them for you, so we'll talk about that today. And then it's on to your calls at 800.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial journey. Inflation is attacking everyone's budget, so we're all in the same boat. In times like these, it's helpful to put things in perspective. We should always be looking for ways to save money and be faithful stewards of what God has given us. The Bible doesn't tell us to do that.

Only when times are tough. Proverbs is often our go-to book for wisdom on saving. Proverbs 21-20 reads, precious treasure and oil are in a wise man's dwelling, but a foolish man devours it.

And Proverbs 10-4 tells us a slack hand causes poverty, but the hand of the diligent makes rich. There are only so many hours in the day, so let's concentrate on a few money-saving ideas that will pay off the most. Proverbs 21 is no surprise, and it's probably the biggest thing you can do to save money. And that's to avoid debt. And if you're in debt, get out of it as quickly as you can. Stop using credit cards unless you pay off the balance each month. Pay down what you owe.

Use the snowball method that we've talked about so much before. Start with the smallest debt. When that's paid off, move on to the next.

And so on. If you're paying thousands of dollars a year in interest on credit cards, imagine how that could beef up your emergency fund or earn in a retirement account. Put your money to work for you rather than you working for it.

The next idea isn't new either, but a few of you haven't gotten around to it yet, and you know who you are. That is, automate your savings. Have part of every paycheck transferred automatically into savings. Do that first to build up your emergency fund. And then, when that's fully funded with 3-6 months living expenses, start putting that money into a qualified retirement plan like a 401k or IRA.

If you rely on yourself to do it manually, it probably won't happen. Now, this next one is a terrific money saving idea, but how many people actually do it? It's to put away something from any paycheck increases or tax refunds you get. Actually, I'd say bank at least half of your raises and all of your tax refund. And by the way, you really shouldn't be getting much of a refund at all. That's just giving Uncle Sam interest-free use of your money when you could be putting it to better use yourself. So adjust your withholdings to get as close to zero as possible.

Here's another money saving idea that's not so obvious, and a lot of folks may not even see the connection with money, but there is one. It's simply take care of yourself. Stay healthy. Eat a well-balanced diet. Exercise and get plenty of sleep. Watch your weight.

Why? Because healthcare is expensive. No matter what kind of plan you have, the less healthcare you use, the less you'll pay in deductibles and the more you save.

Studies show that if you're overweight and out of shape, on average, you'll spend more on healthcare in your later years. The next one is a guaranteed way to be able to save more. It's make more. Take a side job or put in extra hours at work, or think outside the box. Maybe you can drive for Uber or Lyft or rent out a room through Airbnb. If you just work 10 hours a week at $12 an hour, it adds up to more than $6,000 a year, more than wiping out the effects of inflation.

Now, for this next one, let me ask you, is your time worth $100 or maybe $200 an hour? Unless you're a brain surgeon, probably not, but that's what you can save by spending an hour or two on the phone every year with your monthly creditors like home, auto and health insurance companies and your smartphone, internet and cable providers, even your credit card companies. Go over your plans with a customer service rep to make sure you're paying as little as possible for the product or service you need. Do this especially if you have automatic renewal.

They may have added items you don't want or need. This last money saving idea is for those who haven't completed the first one yet. Get out of debt.

And it's a bit more difficult in times of rising interest rates, but an annual call to your credit card issuer to ask for a lower rate could result in saving hundreds of dollars a year. All right, I hope you found that helpful. Your calls are next, 800-525-7000. I'm Rob West and we'll be right back to help you apply God's wisdom to your finances.

Stick around. The line's open, although the phones are lighting up and the lines are filling up. So if you have a question, we'd love to hear from you.

800-525-7000. Let's go to the phones Wooster, Ohio, WCRF. Joel, you're our first caller. Go right ahead. Yes. Hi, Rob. First of all, just thank you for taking my call. I got a question. Yeah.

Yes, thank you. So I just recently got engaged to my now fiance and we're kind of just looking ahead, planning to get married about this time next year and want to know what your advice is both from a financial standpoint and how to prepare financially, but also how to prepare just kind of for handling our finances together and kind of to be as a team on that after marriage. Well, I'm delighted you're asking that, Joel, because this is often a missed step as an engaged couple prepares for marriage. You know, we go through the typical premarital counseling and that's critical, but is the financial side truly addressed? And if this is going to be potentially the largest source of conflict, it is for 70% of couples, then it seems like it'd be worthwhile to really lean into it. And obviously your question demonstrates that you have a desire to do that. I would say the first thing, Joel, is to really communicate with intentionality about this topic, looking both back at the present and in the future.

And here's what I mean by that. Looking back, I'd be wanting to talk about things like how was money handled growing up? You know, that's probably the largest driver of how we handle money today is watching our mom and dad do it. What kind of financial situation were we in?

Were we in a situation where we had an abundance or were we just scraping by? And kind of what was modeled for you and how has that really affected who you are today in terms of handling God's money? And then I would also want to look back just to say, how has God wired each of us? Are we more inclined to be spenders or savers? And it's not that one's right or wrong, good or bad.

It's really just how has God wired us? And let's just acknowledge that as we think about bringing our finances together. With regard to the present, I'd be talking about things like what kind of lifestyle do we want to lead? You know, if God were to continue to bless us financially, is there a limit to that?

What is that cap? And what do we feel like God's calling us to for a lifestyle standpoint? But also in our giving, where does that fit?

Does it come first? And how much do we want to do? Is it really about starting with the tithe or is it the tithe plus more?

Is that just the beginning point? And then as you look to the future, begin to think about as a married couple, as one flesh, where is God taking us? What are our values and priorities? And how does that then inform the goals that we'll set about the future? Is it really about accumulating more so we can save for specific things? Is there giving goals that you have?

What are those goals? Being debt-free potentially could be a goal, especially if you have student loan debt, that type of thing. So I think having that conversation, looking back, looking at the present, looking into the future would be important.

There's some mechanical parts to this as well. I think really sharing credit reports and having a proper understanding of where you all are at financially in terms of your balance sheet, assets and liabilities. Beginning to take a stab at that spending plan that you'll operate off of that accounts for all the income sources that you have and prioritizes your giving and your saving and your debt repayment and then that lifestyle that you're going to lead based on the income that you have. But where it's all been put together and you're starting to work through that. And then who is going to be the bookkeeper? You both need to be involved in all of the decisions, but the question is, is there one who's perhaps more detail oriented? Who wants to kind of be the one to manage the accounts and pay the bills, whether that's electronic or otherwise? And beginning to work on some of those more mechanical pieces, I think are really important as well. So I think if you were to do those things, Joel, you'd certainly be on a great trajectory. If you wanted to take it to the next level, one thing that I've seen some couples do, and I love this idea, is to have a mentor couple specifically related to this area of finance.

An older, perhaps more seasoned couple from your church who's willing to just kind of walk alongside you, maybe just for the first year, maybe meet once a quarter and just kind of talk about how you merge your financial life under the Lord, but now in marriage. And then the last thing I would say is do some reading on this. In fact, if you hold the line when we're done here, I'll send you, just as our gift to you, Howard Dayton's book called Money and Marriage God's Way.

And I think if you were to read that together, maybe a chapter at a time, talk about it, that'll give you some additional, I think, grounding in all of these ideas around money management, but from a biblical worldview. Is that helpful? Absolutely. Absolutely. Yes. Thank you very much.

I never thought of looking backward and seeing how differences were growing up. So that's very helpful. Thank you very much. Well, you'll be surprised at how that conversation goes. Not that it won't be positive. I think it will hopefully absolutely be positive, but a lot of people miss that.

And it really has so much to do with who we are today. And it'll be, I think, just an interesting discussion as you think through that and you evaluate how some of those experiences as children really inform how each of you handle money today and just being able to acknowledge that and then use that as a tool to perhaps drive toward even greater oneness as you think about handling money moving forward. So listen, all the best to you, Joel.

Congratulations on your upcoming marriage and hold the line. We'll get your information, get that book right out to you. Thanks for calling.

Chicago, Hilda, thank you for calling. Go right ahead. Hey, Rob, I have two questions. The first question is about I-bonds. If I purchase I-bonds for my nephews for their birthday the next couple of days, is there an implication for me in the long term in my taxes?

No. And you can purchase them for another individual. So you can actually buy them for yourself and then for your nephew. And you won't have any tax issues. The most you can purchase for yourself or another individual is $10,000 a year. And that's well below the gift tax exemption of $16,000.

Even if you went above it, you wouldn't have any taxes. Do you just have to report it? If they're minors, you'd have to set up what's called a custodial account for them at treasurydirect.gov. That'll be linked to your account there, but it really is a custodial account. So it's their asset.

It just doesn't become under their control until the age of majority, which is typically 18. So once you establish your account, you open theirs, link them to yours as the custodial accounts, then you can purchase the electronic bonds there at treasurydirect.gov. Thank you. And when you purchase it, it's not like it's open-ended where you could put more money in it. You have to do a whole other purchase.

No, no. You can add to it over time. You're just limited to $10,000 a year in electronic bonds per person per calendar year. Okay.

All right. And then my second question was I wanted to open an account or help my son, who's 18, open an account for his Roth IRA. And what are those limits? Like if I want to give him $6,000, put him right away in his Roth IRA, but is there a limit for that since he does work part-time?

Yes, there is. You can only put in up to the limit, but only up to the amount that he has earned income. So if he doesn't have earned income up to $6,000 for the year, then you would only be able to put in up to the amount of earned income he had. Now, if he's got more than $6,000, you would be capped at the $6,000 limit.

But if he doesn't have earned income up to that amount, you wouldn't be able to put in the full $6,000 in that custodial Roth IRA in his name. Okay. All right.

Thank you very much. Yeah. And check out not all custodians offer the custodial Roth IRA, which by the way, I love that idea. But I know Fidelity does and Charles Schwab does as well.

So you could look at either of those to open those accounts. But yeah, you are going to be limited to the amount of earned income that he has as a young man working part-time. Hopefully, he can get all the way to $6,000, but he may not be able to either. So thanks for your call. We'll be right back on MoneyWise Live. Stay with us. I'm so thankful you're joining us this afternoon for MoneyWise Live. This is where we gather together each afternoon to explore the scriptures and apply God's wisdom to your financial decisions and choices.

It's not my wisdom. We want to go back to God's Word and try to pull out the big themes and the principles and then apply those to the practical decisions and choices you're making every day as you establish your lifestyle and your spending plan and try to get out of debt once and for all and save for the future for the short term and the long term. And even think about your giving and where all that fits in. And by the way, hopefully it fits in first before we think about doing everything else. Well, this is the program where we help you do that. I've got just a couple of lines open.

So perhaps one spot for you. 800-525-7000. Let's head back to the phones.

Beautiful Bradenton, Florida. Earl, thank you for calling. Go right ahead. Hi, Rob.

Thank you for taking my phone call. So I got an inheritance a few months back and right now it's sitting in a growth part of my bank and it's not gaining any interest. So I was wondering, is there something that I can take a portion of that money, put it in so it can gain some interest, still be able to access it if I needed to for an emergency, but really like to keep it in there for a year, maybe two years? Okay. Yeah, but you did want that caveat. Even though the goal would be one to two years, you want to be able to have it liquid in potentially less than a year if you really needed it. Correct.

Yeah. So in that case, you really probably just want to look at a high-yield savings account and I would look at Marcus Capital One 360 or Ally Bank. They're paying about 1.5% right now.

That's not anything terribly exciting, although it's a lot better than what it was a year or two ago. And it would be completely liquid. You could link it to your checking account. You would earn a little bit of interest on it, not a whole lot but some, and it would be safe. It would be FDIC insured. Anything else is going to involve either some risk or probably locking the money up for a year and that violates this idea that you want complete liquidity or access to it in the event of an emergency. True, true.

What were the names of those? Yeah, so the three that I like would be Ally Bank, ALLY, Marcus, Marcus.com, that's the retail operation of Goldman Sachs, and Capital One 360. They're all online banks which are just as safe as brick and mortar banks. They have the same FDIC insurance but because they don't have the brick and mortar buildings and operations, they're able to pass that on in the form of no fees. So you'd open an account fee-free, a savings account, and they would give you a far better interest rate than you would get at a brick and mortar bank where as opposed to a fraction of 1%, you'd get 1.5%.

And as rates head up and the Fed has all but said they're going higher over the balance of this year, those high-yield savings rates will move up with the Fed funds rate. Great. Thank you, Rob. That was very, very helpful. All right, Earl, thanks for calling.

God bless you. To Millersburg, Ohio, Lori, thank you for calling. Go right ahead. Yeah, thanks for taking my call. I actually have three questions in regards to the student loan relief. I don't know, Lori, we usually limit it to two, but I might make an exception for you today, so go right ahead.

Thank you. The first one, is it an actual payoff or is it the owner of the note, is it going to just have to write it off? The second one question is, the people that take advantage of this, will it affect their credit rating any? And then the third question is, what does the Bible say about the folks that could afford to pay back this debt but then just choose to take advantage of this relief opportunity? So those are three questions.

Yeah, yeah, very good. Well, there is news out today and I haven't had a chance to review it. You know, they had been saying that today was the day that President Biden would talk about student loan forgiveness and what he was doing through executive order. That news is out and I haven't been able to examine it.

So there's a lot more information that you'll be able to find on this. Essentially, I believe, just from what I skimmed, is if you are making less than $125,000 a year for an individual or less than $250,000 a year for a married couple, they will forgive $10,000 in federal student loan debt. So they'll just essentially eliminate it and then they'll also cancel up to $20,000 for the Pell Grant recipients and that's tax-free forgiveness on up to $20,000.

So you wouldn't have any taxes due on that. So that would be, you know, what is available today in terms of, you know, whether you would take advantage of that. I mean, there's all kinds of folks on various sides of this issue that talk about whether this is a good idea or bad. I'll stay out of that at the moment and just say, you know, from a biblical standpoint, if this is offered to you, I don't have any problem with you taking it.

Even though I would perhaps, you know, as a different issue, question just the viability and wisdom in the direction that they're headed here. But in terms of it being available and you taking it, whether it's loan forgiveness through you working in, you know, the public service sector or through a nonprofit, that's been available for many years. Or whether it's this executive action loan forgiveness, I would say there's no reason why you wouldn't want to take it. There's lots of controversy about whether this is constitutional and that will ultimately be decided in the courts. But I don't think, biblically speaking, there's any problem with you taking it.

Now, does that tackle your questions? The people that take it, is it going to affect their credit rating? No, not at all.

You won't have any taxes due and it won't have any bearing on your credit rating. Okay, so all right. And so I guess I made it not understand what loan forgiveness is. So there's still a company out there that is expecting this money. Well, it was the federal government. It was the federal government. These are federal loans. It was the federal government that loaned it and essentially the federal government is going to erase it off their liabilities. And so the U.S. taxpayers are stuck with the bill is essentially what's happening. So it is canceled or forgiven as if it didn't exist. Okay, so if they went through a bank, they wouldn't get this forgiveness? No, no, not for a private student loan. This is federal student loans that we're talking about here. All right, very good.

Yes, that does answer my question. Thank you very much. All right, Laurie, thanks for your call today. Looks like all the lines are full with some great questions coming up, so don't go anywhere. This is MoneyWise Live.

I'm Rob West and we'll be right back. Thanks for joining us today on MoneyWise Live, biblical wisdom for your financial decisions. We'll have more to say on the student loan forgiveness plan in the days ahead. All this is just coming out, but apparently the Biden administration talking about their decision, whether or not it's constitutional remains to be seen their decision to essentially forgive loans for up to eight million borrowers to the tune of between. Well, capping at twenty thousand dollars, but for most folks, ten thousand dollars in federal student loans. So these are federal loans held by the education department that would be eligible, not private student loans up to twenty thousand.

If it's a Pell Grant, typically ten thousand, though, in relief, not taxable at a federal level. And there would be an application to apply for it. We'll talk more about the implications of this and a whole lot more in the days ahead.

But you certainly could read more about it as this is just coming out today. All right. Back to the phones we go.

Eight hundred five two five seven thousand Hastings, Nebraska. Dean, thank you for calling. Go right ahead.

Yes. What is your counsel for the elderly couple that will be selling their business and trying to avoid sending half of it into taxes? My counsel would be to call my friends at the National Christian Foundation before you sell.

And here's why. You know, with a business, just like you can with other appreciated assets like real estate or stocks and bonds or art, for that matter, with a business, you can actually give away a portion of the business prior to the sale. And that portion of the business would then, upon liquidation, avoid capital gains tax and go right into a donor advised fund that you could then give away. So if you're looking to be generous, there is absolutely a way to do it where you can avoid a lot of taxes and get a lot more ministry or a lot more money going right into ministry through a not for profit organization. And the reason I mention NCF, the National Christian Foundation, is they are the biggest, the largest, the oldest charity that does this type of thing, founded by not only the late Larry Burkett, but also Ron Blue and Terry Parker. They've given away. Well, they just crossed, I believe, the 15.

Well, I don't know that number. They're giving away billions a year, essentially. But it's money that's flowing through NCF. And here's where they really shine is their gift planning attorneys.

The team there at the National Christian Foundation is the best anywhere at helping you understand the most effective and efficient strategy to affect a gift like this and do it in a way that meets your needs and desires, but making sure that it all stands up to, you know, of course, the law and the IRS. So that's what I would do, Dean. But does that trigger any additional questions for you? Yes. Do you believe that your kingdom advisors would have more information about that?

Absolutely, yes. So you could reach out to a certified kingdom advisor and mention that you'd like to think about this as a part of the sale and mention the National Christian Foundation. And because of how closely we work with NCF here at MoneyWise and also at Kingdom Advisors, they would be very familiar. You could also just reach out directly, Dean, to NCF and then, of course, bring your advisor along to ncfgiving.com. They have local offices around the country or you could work with the national office out of Atlanta.

So either way, going through a CKA and mentioning that this is something you'd like to do or going directly and then getting your advisor involved in that conversation would work. The key is that you put all this together prior to the sale to make sure that you can do it most effectively. Excellent. Thank you. I appreciate it. Yeah, Dean, thanks for calling. God bless you, my friend. Let's head to Orlando. Becky, you're next on the program. Go ahead.

Hi. Thank you. I'm calling because I'm finally at a point where I've put money where it needs to go for savings and things like that. I'm looking at my investments with today's market and whatnot. I have an opportunity to put to up my 401K giving for the rest of the year to reach my max. And I didn't know whether that was the best place to put it right now, considering the market. And I'm about 40 for reference as far as retirement.

Yeah, well, I love that idea. Becky, the only thing I would ask is, do you have any consumer debt like high interest credit card debt? And secondly, do you also have an emergency fund? Yes, emergency fund. No debt. I just bought a house two years ago with very little interest.

So that's the only thing I have is the home. So I definitely would increase this, try to get it up to the max. I would do it systematically, like monthly.

So go ahead and up the percentage and your HR department or finance director, whoever you work for, could tell you what that amount is that would get you to the max. And then I would absolutely do that now. A lot of folks think, well, the market's volatile, it's down, now's not the time to do it.

It's actually the opposite of that. This is the best time to do it. You don't want to buy at the top.

You want to begin dollar cost averaging into the market, which just means systematic contributions over time, which is what you're doing through salary deferral into a 401K. You want to do that when the market's down. And the great thing is that we don't know where the market's going. It could be up 2,000 points between now and next month or it could be down 2,000. We don't know.

If somebody tells you they do know, they're not being truthful. So because we don't know where the market's going, except that the long-term trends, despite recessions and high inflation and oil embargoes, the long-term trend is up. It's the very best way to overcome inflation and build wealth over 10, 20, 30, 40 years. So for that reason, I would say just bump up your monthly contributions and get that money going right into that 401K. I think that's a great idea. Okay.

So if I can just put it into one of those managed accounts, you know, where they say like moderate risk or high-risk accounts and they kind of balance it out for me. You think that's okay or should I dive down into more of the details? Yeah. How much do you have in there currently?

Forty-five thousand maybe? Okay. Yeah. Yeah, you could do that.

I mean, they probably have what are called either target date or lifecycle funds in there that basically you give them your target retirement date and they automatically decide through that what percentage should be in stocks versus bonds and it gets more conservative automatically over time. That's probably the easiest way to do it in terms of, you know, making sure that, you know, it's being rebalanced with intentionality. But beyond that, you certainly could take a deeper dive either by doing the research yourself or by getting an advisor to weigh in on this and take a look at it for you. Okay. That's really helpful.

Thank you for the encouragement. All right. Yeah, you're very welcome. Yeah, sure. And thanks for calling and checking in with us today. We appreciate it. Hey, we've got a lot more questions coming up here.

We'll get to them just after the break. But let me mention quickly before we take our next break that the MoneyWise app could help you with today's inflation fighters that we started the program with. We talked about the effects of inflation and how that's really wreaking havoc on so many folks' family budgets. Well, the MoneyWise app can help you create a plan to pay your bills, pay off your debt, automate your savings and set other money goals. The app lets you choose actually from three different budgeting options, depending on your management style. And it's available on both desktop or mobile.

All of this conveniently located in one place. Plus, if you need biblical advice and who doesn't, it's right there in our community tab where you can post questions and get answers from other stewards on the journey and our MoneyWise coaches. But also our learn tab where you can find the best content in Christian finance, podcasts, articles and videos. It's all there in the MoneyWise app. You can get it wherever you get your apps. Just search for MoneyWise biblical finance. Download it today.

MoneyWise biblical finance. I think you'll be glad you did. Well, folks, we're going to take a quick break. When we come back, we're headed to Wisconsin and Oklahoma City and Lakeland and Central Florida.

Perhaps your question as well. 800-525-7000. We'll be right back. Thanks for tuning in to MoneyWise Live today. I'm Rob West. We're taking your calls and questions on anything financial.

Back to the phones we go to Wisconsin. Kevin, thanks for calling. Go right ahead.

Hi. My question basically is should I cash in my 401k and pay off the balance of our debt? Yeah, so give me a breakdown of what you've got, Kevin. How much is in your 401k? We have 187,000 in our 401k. We owe 215,000 on our house. I have about 40,000 cash on hand. And right now on our house, we're paying 3.25% interest on a 10-year loan, and that comes out currently at 20 bucks a day is the interest, so it's roughly $7,200 a year. And how far into that 10-year loan are you? We're three years in. Okay, so you have that paid off in seven years.

Are you adding anything to it currently on a monthly basis? No. Okay. And what is your age and proximity to retirement? Okay, well, I'm 63. I don't plan to retire anytime soon, mainly because I like what I'm doing.

I'm actually a pastor. Oh, cool. And we have other investments. We won't need the 401k in retirement.

You won't need it in retirement. Okay. All right. Well, yeah, a couple of thoughts.

I mean, that's an interesting piece. Most folks who are calling asking this question could use that 401k in retirement just as another source, another asset that could generate income to supplement Social Security or whatever else. But if you don't need it, that obviously puts it on the table. You know, what I would typically say in a situation like this is you've got a low interest rate, you're on your trajectory to at least have it paid off by retirement. And by the way, just so I can acknowledge it, I share your view on retirement.

I don't think we should take our cues from the world on this, that there's a kind of an expiration date that we have where we just moved to a life of leisure. I believe God's calling on our life is throughout the whole of our lives. And we were to be workers before the fall. And we were made in the image of a worker himself, God, who was a creator, and we're to take his creation and improve it. And, you know, there's just incredible opportunity in that whether we're in vocational ministry like you are or ministry in any other capacity in the marketplace or even at home as a stay at home mom or dad.

So I think, you know, I love that idea. But what I would typically say is at a minimum, let's line up the payoff with our home with our retirement where we might stop paid work and redirect to something else or part time work or something like that. And that takes that biggest expense off the table at that point so that you can take advantage of the compound growth in that retirement plan to maximize that asset so that it can be available to generate income in retirement. And then if we can do both, grow the assets and, you know, ultimately be debt free, including our house by retirement, then, you know, we're in pretty good shape. The caveat to that would be twofold. Number one, you just have an absolute conviction from the Lord to be debt free as soon as possible.

Then if you have that, I would say you need to follow the leading of the Lord and do that. Or two, and that's your case, which is again very rare, you don't have need for this 401k based on the planning and the other savings that you've done. And if that's the case, then the question is, okay, what's the wise way to do this in terms of from a tax situation? Because if you're still working, you're over 59 and a half, so you're not going to pay a penalty, but it is going to be taxable. So at the very least, you'd probably want to work with a CPA or accountant to determine what's the withdrawal rate that you want to follow on this 401k to not trigger higher taxes where you'd push a portion of this up into a higher bracket.

So you may decide rather than pulling the whole thing out in one year and all of a sudden your taxable income swells dramatically in one year, you may spread it out over two or three years just to keep those tranches smaller because they are going to be taxable. So that would be the counsel that I would give. Does that make sense? Yes, that makes perfect sense.

Thank you. I agree with the retirement. We don't retire, we refocus. Yeah, some say from retirement to rehirement, you know, I think it's the right idea that we refocus our energies, recognizing in that season of life, we have the most wisdom and experience to serve the Lord with. And my friend Mitch Anthony says we don't want to retire from something, we want to retire to something.

And so we need to always be thinking about what that next assignment is from the Lord. But Kevin, grateful for your call today, my friend. God bless you. Lakeland, Florida. Mike, you're next on the program.

Go ahead. Hi, thank you for taking my call. So I was talking to a friend just recently and he mentioned to me that he got involved with a money making adventure on Facebook. He said he put money in there, but then he asked when he wanted some money back, they told him that he would pay taxes on the entire amount, not just the growth, but the entire amount. He didn't have any email traffic because the person would only chat with him. The person would not talk to him on the phone, but only through a chat.

He said she had an accident. I was telling him, I think it's probably a scam. And I said, if you could see, can you get some money back? If you have to pay taxes, you pay taxes on it.

But again, I wanted to get your advice on that as well. Yeah, I'd run for the hills on that. I suspect he won't be able to. I'd try to get his money back as soon as possible, regardless of what tax implications there are. You're not going to pay 100% tax on anything. And the question is really not the return on his money at this point, given what you're describing.

The question is the return of his money. It's likely a scam. If you don't understand it, you shouldn't do it. Financial scams on Facebook and social media are rampant. What you need to look for typically in these situations is people asking you for money who you don't know in person, who you can't meet and put eyeballs on. People asking you for advance fees to receive a loan prize or other winnings. People asking you to move your conversation off Facebook, for instance, to a separate email address. Of course, if they're claiming to be a friend or relative in an emergency, that's a red flag.

Poor spelling and grammar errors because usually these folks are overseas trying to...English is not their first language and that becomes apparent. So, yeah, this is likely a scam. I would say it most definitely is. And he needs to try to get his money back as soon as he can. Okay, well, thank you very much. I give him a call now. All right, very good. Thanks for your call, Mike. Deontay in Oklahoma City, you're next on the program. Go ahead. Yeah, hi.

Thanks for taking my call. I'm 28 and my wife has recently went from working in the marketplace to being a stay-at-home mom. And she has very little in her 401k.

After tax, it's probably like $13,000, $14,000. And we have maybe a few thousand dollars in debt, but it's not like credit card debt or anything like that. Just trying to figure out what to do with it. We do want to kind of make money on it as it fits because we just don't want to put it in savings and nothing going on with it.

Just want to figure out what to do with that. Yeah, I would roll it to an IRA, Deontay, and you could either do that at Schwab or Fidelity and just put it into the broad market index ETF, so essentially where you're capturing the whole market. And you could do 100% of it in the stock index. Or you could do maybe 70, 30 stocks and bonds and just forget about it. The other approach is to use one of the robo-advisors.

You could open an IRA with Betterment or the Schwab Intelligent Portfolios. And that would take a little bit more. It's still an automated solution, but it would build the portfolio with a little more intentionality based on the algorithm that's in there.

And that would be driven off of questions that you answer, so her age, risk tolerance, goals and objectives. And then it would build a low-cost ETF portfolio that has a mix of large cap and small cap and international and domestic and also some bonds there as well. So I think that would be a great solution for you given the amount you have here. It's very low cost and you're just trying to capture the broad moves of the market over time. So that's Schwab Intelligent Portfolios.

The Schwab Intelligent Portfolios or Betterment would be the other one. We appreciate your call today, Deontay. Hey, let me finish today with an email from Naomi.

Naomi wrote to us over the weekend and said this. Naomi writes, my boyfriend was let go from work last year. He has credit card debt and college debt. I'm debt-free. I've been saving to buy a house. We may get married in the next year, May. Should I use the money that I've been saving for a house to pay off his debt or should I just keep paying as we go? And Naomi, don't pay off that credit card debt.

Sorry to be so emphatic about that, but here's why. You know, if the Lord allows you all to marry, great. When that happens, two become one, including your finances, but not before.

And here's the thing. It sounds like you're being very responsible in managing your money and saving for the future. And I'm not saying he's being irresponsible because he had a job situation. But what I'd like for him to do in preparation for potentially marrying you is do the hard work to get this paid off, not you just coming in and wiping it out. Because I really want you all to come together in terms of how you're going to handle money as a married couple if that's the way the Lord leads. And this would be a great way for him to develop that discipline of getting it paid off. So I would direct him to christiancreditcounselors.org. Let's let them get the interest rates down, get him on one fixed monthly payment and start making progress on that. In the meantime, you two come together and start talking about how you're going to handle money as a married couple if the Lord leads that way. But again, he's your boyfriend. He's not your husband.

You need to continue being a steward of your resources that God has entrusted to you until such time as you all are married. And we appreciate your writing to us today at questionsatmoneywise.org. God bless you. Well folks, that's going to do it for us today. Hey, let me say thanks to my amazing team today.

I couldn't do it without them. Managing our telephones today, Clara Segar. Producing for us today was Gabby T. and engineering Amy Rios. Providing me with great research today, as always, was Jim Henry.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. We're so thankful that you joined us today. And my invitation would be that you come back and join us tomorrow. We'll do it same time, same place. We'll see you then. Bye bye.
Whisper: medium.en / 2023-03-05 22:00:20 / 2023-03-05 22:17:35 / 17

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