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Things You May Not Know About an IRA

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
April 25, 2023 5:47 pm

Things You May Not Know About an IRA

MoneyWise / Rob West and Steve Moore

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April 25, 2023 5:47 pm

Whether you already have an Individual Retirement Account—more commonly known as an IRA—or you’re thinking about opening one, there are several things you should know about them. On today's Faith & Finance Live, host Rob West will explain some facts you may not know about IRAs. Then he’ll answer your calls on various financial topics. 

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So you think you know everything about your IRA? Well, get ready for a pop quiz. I am Rob West.

Whether you already have an IRA or you're thinking about opening one, there are several things you should know. And what better way to measure the depth of your knowledge than a little test? We'll take one today, and then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is Faith and Finance Live, biblical wisdom for your financial decisions. Okay, first, a little inspiration.

Proverbs 18, 15 reads, An intelligent heart acquires knowledge, and the ear of the wise seeks knowledge. So let's seek some knowledge about IRAs. Here's our little quiz.

And don't worry, this won't count toward your final grade. Alright, just to make this easy, these will all be true or false questions. Number one, you can't open an individual retirement account if you already have a qualified retirement plan with your employer. True or false?

It's actually false. An IRA can be a great way to supplement your retirement savings even if you have a 401k or 403b with your employer. In 2023, you can contribute up to $6500 to a traditional or Roth IRA, or $7500 if you're 50 years or older. You can even have a traditional and Roth IRA, but the combined contributions must not exceed those limits. Alright, question number two, you can invest in anything in an IRA. True or false?

That one is false. Your IRA isn't an investment in itself. It's more like a bucket that holds your investments which are managed by the accounts custodian. That custodian will offer you a wide variety of investing options like bonds, money market funds, stocks and mutual funds. But there are limits you can't invest in things like whole life insurance policies or physical precious metals. The latter requires a different animal, a self-directed IRA, which is a topic for another time.

Okay, question number three. If you should die, your IRA must go through probate and be distributed to your heirs according to your will. True or false?

That one, fortunately, is also false. Like many financial accounts, your IRA allows you to name one or more beneficiaries to receive those funds in the event of your untimely death. The beneficiary designation supersedes anything specified in a will and prevents the IRA from going through the sometimes lengthy probate process. You do, however, have to keep the beneficiary designation up to date if you go through a major life change like the death of a spouse.

The custodian can't read your mind, so making your intentions known with a new beneficiary designation is vital. Question number four. At some point you have to take money out of your IRA. True or false?

Unfortunately, that one's true. Traditional IRAs come with required minimum distributions, or RMDs. When you retire, you may not need the income generated by your IRA, and you'd be perfectly content to just let the assets accumulate. Uncle Sam, however, sees it differently.

He wants his cut and is only willing to wait so long. That means you'll have to start taking money out of your traditional IRA by April 1st of the year after the year you turn 73 and a half. In 2033, the age for RMDs will be extended to 75.

Now, if you're worried that you'll need a calculator and calendar to figure all that out, don't worry. IRA custodians are required to send you an RMD notice by January 31st each year. You really want to pay attention to those notices by the way, because if you fail to take an RMD on time, the penalty is a whopping 25% of every dollar you failed to withdraw. Here's where a Roth IRA is a better alternative, since it's funded with after tax dollars and has no required minimum distributions.

Okay, question number five. You can't borrow from your traditional IRA. True or false?

That one is also true. While you may be allowed to borrow from a 401k or 403b, not advisable by the way, you can't borrow from an IRA even for a good cause like buying a house or sending your kid to college. If you withdraw funds from your traditional IRA, the money will be added to your adjusted gross income and taxed at your income tax rate. And it's possible that the withdrawal could push some of your income into an even higher tax rate. So you don't want to do that.

Okay, so those are some of the things you may not have known about an IRA. I hope you did well on our pop quiz and I hope you had a little fun in the process. All right, your calls are next. The number 800-525-7000.

That's 800-525-7000. I'm Rob West and this is Faith and Finance Live. We'll be right back. Thanks for tuning in today to Faith and Finance Live. I'm Rob West, your host.

All right, it's time to turn the corner. Take your calls on anything financial. The number to call is 800-525-7000.

That's 800-525-7000. We'd love to hear from you with whatever is on your mind financially speaking today. Hey, before we head back to the phones, though, let me remind you, Faith and Finance Live is listener supported. And here as we round out the month of April, I'd love to invite you to be a supporter of this ministry. As a listener supported ministry, everything we do as a result of your financial assistance and we just invite you to be, whether it's a one-time or monthly giver, to be a part of our community that's supporting this effort. Again, you can head to our website, That's When you get there, just click the give button and you'll find a way to give securely online. You can give through the mail or over the phone. It's all there at Again, just click the button that says give. What you'll find there is that this month in particular, for a gift of any amount, we'd love to send you our brand new Faithfi phone wallet. That's right, you can attach it to the back of your phone.

Pretty much any phone will do. And it can hold up to three cards, IDs, hotel keys, and even cash. It'll be a great reminder to integrate your faith and finances. Just our way of saying thanks when you give to support the ministry. Again,

Just click give and thanks in advance. All right, let's head back to the phones. We're going to head to Pennsylvania. Joy, you'll be next on the program. Go ahead.

Yes, hi. I'm calling. Hi, I'm calling because I made a, took $120,000 out of my 401k. It's everything that was in there and I spent it over the last four or five years.

And I'm not of retirement age. Okay. Yeah. So you pulled it all out in one year.

Is that right, Joy? No, no, I did it over a span of a couple years. Okay. All right.

And so you've been paying the tax on that each year as you filed your taxes. Is that right? Yes. Okay. All right. And is that 120,000 is gone.

It's all been spent at this point. Correct. Okay.

All right. And so how can I help you? What's your main question at this point? How can I redeem this situation?

Is there any way I can get back on track or where do I begin again? Yeah, well, it's a great question. Listen, we've all made financial mistakes and we can look back and realize that perhaps we should have done things differently. And you're no different than myself or anybody else listening to this program today. So don't be too hard on yourself. I think the key is from this point forward saying that, okay, I'm a steward of God's money. I want to take and leverage my role as a manager of God's resources seriously. And I want to make wise decisions and be faithful in my management of God's funds moving forward.

And that includes both meeting my needs, covering my expenses, blessing others through my giving, and also saving for the future in an appropriate way. It sounds like you still have time on your side. How old are you if you don't mind me asking? 37.

Okay. So you're 37 years old. I mean, let's say for all intents and purposes, you're going to work for the next 30 years, right? So you got a lot of years for compounding to work in your favor. The key is to replenish that money that you took out and continue to build beyond that and take advantage of the years, the working years that you have ahead of you. The good news is, as you get started in that right now, the market's down. So as you begin to dollar cost average into the market, that is a systematic investment into the stock market. You're at a good starting point. And again, if we're looking with a long time horizon, you should do really well.

But there's a few things we need to address first. I guess my first question would be, do you have any consumer debt? Are you carrying balances on credit cards?

Anything like that? I was, but I declared bankruptcy for that. Okay. All right. And so that's all been discharged, correct?

Correct. Okay. And what about your spending plan? Do you have a budget right now that kind of a written list of expenses, both fixed and discretionary, those things you don't get a bill for that happen every month?

Not yet, but I need to start there. Yeah. Okay.

Well, as a starting point, do you have anything left over in a typical month or do you spend right up to the edge? No, not really. I just changed careers, so I took a significant pay cut.

All right. So yeah, you don't have a whole lot left over. Do you have access at your new employer to a company-sponsored retirement plan? Not yet. I'm only working part-time.

When I left my other job, I had to leave for emotional purposes. Got it. Okay.

And do you have any liquid savings? No. Okay.

All right. So I think the next step is, well, three things come to mind. Number one is we've got to work on that spending plan.

So especially given that you've taken this pay cut, hopefully you're in a place that meets your needs and leverages your skill set and is going to be something that will be productive for you moving forward and not create emotional or physical hardship on you. But we need to right size your spending and make sure that you're living within your means. And that includes not only covering your bills, and that may mean that we've got to dial some things back and make some changes, but you have something left over at the end of the month, because that's going to be key to first, before you think about replenishing a dollar of that 401k that you took out, first you need an emergency fund. So we need to start building up some money toward our ultimate goal of three to six months expenses. If you're not giving, I'd love for you to start somewhere. That's between you and the Lord, but just that act of giving, that act of worship is going to break the grip of money over your life and just allow you to be connected to something bigger than you.

And so I think it's important to establish that rhythm as well. Well, both of those you're giving and having some margin to fund a savings account, which by the way, I'd, I'd move out of your checking account, I'd have that in an online savings account separate, that's maybe linked to your checking, but where you can set up an automatic transfer into that savings account every month. So you can start building up that emergency fund. Once we get that up to ideally three months expenses, then we can start looking at, okay, what's now available for you to start putting something away either for another more medium term goal, like I need to replace a car or I need to buy a house, something like that. Or if you don't have either of those, then starting to put some money aside for the future so you can make an effort toward rebuilding that 120,000. And that apart from a company sponsored plan, a good starting place would be a Roth IRA. So you could put in $6,500 this year or up to that as long as you have earned income at least equivalent to that.

And that would be just a good beginning point. Now we're going to ultimately want to get that up to 10 to 15% of your pay. And that means that you may end up running into that cap on what you can put into the Roth IRA. And that's where hopefully either you'll be fully employed full time so you have access to a 401k or we'd need to look at some other options at that point. But I think those are really the key pieces starting with the budget, you know, beginning to save because you've dialed back your spending.

So now you have margin beginning to give if you're not already doing that. And then eventually starting to fund retirement through a Roth IRA. What I'd love to do is two things, Joy, I'd love to send you a copy of Howard Dayton's book, Your Money Counts. I want you to read that. That's just going to help you understand God's way of handling money and I think it'll be an encouragement to you, but it'll take you back to God's Word.

The other thing I want to do is connect you at our cost and no cost to you with a certified Christian financial counselor, because I want somebody to walk alongside you as you put all of this in place, set up that budget, begin to think about how you need to rein in your spending, get the savings account set up and then eventually start thinking for the future. So if you stay on the line, we'll get your information. I'll send you the book and then we'll get a CERT CFC to connect with you and begin to walk alongside you in this process. You stay right there and we're going to get your information. Thanks for your call today. You got this. We'll be right back.

Stay with us. Great to have you with us today on Faith and Finance Live. I'm Rob West. We're taking your calls and questions. We've got a few lines open, 800-525-7000. We'd love to hear from you today.

Back to the phones to Indianapolis we go. Hi Debbie. How can I help you? Hi Rob. Thank you so much for taking my call.

You're welcome. My question is this. I was contacted by my lender for our mortgage and advised about taking a cash out option. Well, my concern is this. Number one, I don't even know that that's even biblical. Second, with us being close to retirement, I don't know that I feel comfortable having another 30-year mortgage in addition to the consumer debt that we're trying to pay off. I just don't feel comfortable. Yeah.

I would agree with you Debbie, but let's unpack this a little bit more. So give me a rundown on the debts that you have starting with the mortgage. How much do you owe on it? About $300,000. All right. And what's the house worth do you think roughly? Latest was $402,000.

All right. And what is the interest rate? $2.375. Wow. That's a great rate. And how long do you have left?

20 years? About that, yes. Okay. And what other debts do you have? Some consumer debt which would be about, it would be a car, my husband's truck, another consumer loan, and a camper. Okay, what's the second one other than the car and the camper? Oh, the consumer one?

Discover a credit card. Okay. And what's the balance on that?

$11,000. Okay. And then is that it? So you just have the camper, the car, and then the one credit card?

The camper, the car, the truck, and the one credit card. Yes, sir. Got it. Okay, great. And are you guys in retirement or still heading that direction? Heading in that direction. Okay. How far out is that? I've got, let me see, well, we're 61 and 63 respectively.

So I think our retirement age according to Social Security is 60, I'm 66 and a half and his is 67. Yeah. Okay. And do you think just based on everything you know today, that's about the timing of when you'd want to move to whatever God has for you next?

Exactly, yes. All right. And do you envision working beyond that point for pay or no? I'm thinking about it but not on the, not, probably not full-time. I'll probably work part-time and then my husband, he's going to continue working to like about 68. Okay. Just a few more questions about your income. So with your current income, once the bills are paid, the car, the truck, the camper, you pay the minimums on the, you know, Discover and the mortgage, do you all typically have something left over at the end of the month?

Yes, we do. And I put that in savings. All right. About how much do you have typically on a monthly basis?

Right now about $13,000 and yes, we do tithe. Okay. And you've built up about $13,000 in savings?

Uh-huh, yes. Okay. And how much do you typically have in a normal month extra? About $900. Okay.

About $900 a month. All right. And why haven't you been sending that as extra to the credit card or have you?

I've been doing that, yes. Okay. All right.

I'm doing it where I'm paying the highest off first and then taking that money that I was paying and then moving it to the next one. Okay. So you've eliminated some cards and you're just down to the Discover?

Yes, yes, absolutely. Great. And with the $900 a month surplus that you can put in savings, is that all that's available to pay beyond the minimum payment or are you counting in your budget sending extra to the Discover card before the $900?

Before the $900, yes. I work it into our budget, absolutely. Okay. About how much are you sending per month? Oh my, it's pretty nominal. I go about $10, $20 over what the minimum is. I see.

I know that's not much but it's something. No, that's true. Sure.

No, that makes sense. And then last question is tell me how you're doing toward retirement. What retirement assets do you have? We have two IRAs and a Roth and my husband's retirement.

Okay. What is the total of all those retirement accounts? Not counting his company retirement but the IRAs? Oh, how much we have right now? Yeah.

Probably about $400,000. Okay. And based on what he'll get in retirement plus Social Security, do you have a good sense of whether that would cover your bills in retirement or would you need to pull from the $400,000 as well? And that's what I don't want to do is have to pull from those.

My plan, our plan was to try to have as much paid off as possible and not carry that into retirement with the exception of the mortgage because that's a 30-year mortgage. So I don't think either of us are going to be here in 30 years. Yeah. Okay, very good. Well, that's all I need to know. That was really helpful. Great background information.

So I completely concur with you, Debbie. I would absolutely not cash out, refinance. That's going to do a couple of things. That would be very expensive. A new mortgage has fees and is associated with it three, four, maybe 5% of the mortgage value just in cost. Number two, that phenomenal mortgage interest rate you have at 2.375 would go up north of 6%.

It'd be a dramatic increase. And then you'd pull the money out to pay off the cars and the credit card, but then you'd string it out over 30 years. So all that savings you're getting by bringing the interest rate down ever so slightly on the mortgage would be you'd offset that by this long payback period.

So that doesn't make any sense. So I'd leave those right where they are, but I'd start attacking that discover card. So I'd take that 900 that you're putting in savings and I'd send all that to discover. So let's make sure we get out from under that in the next 12 months at the most.

And then we can start working on the cars. At that point, I think once you're debt-free, the key is just managing your expenses, living within your means. Beyond that, I'd probably do some retirement planning with a certified kingdom advisor that you could find on our website at

Click find a CKA, just so you know whether you're on track ahead or behind with your retirement savings by looking at all of your income sources so you're well planned, but don't touch that cash out refi and let's go after that discover card with the surplus. Stay on the line. We'll talk a bit more off the air and we'll be right back.

Great to have you with us today on Faith and Finance Live. I'm Rob West. All right, it's time to head back to the phones. Let's go to Courtland, Ohio. Jeffrey, you're on the program. Go ahead. Hello, sir. Nice to be talking with you.

I have a question. I have about two years left until retirement and I have been contributing to a thrift savings plan. Most of those funds are in the G fund category, so I just want to know, should I keep them there or do I need to start diversifying so I can maximize that output? Yeah, so you said you're two years out from retirement. Tell me what your plans are when you get to that point. Will you stop working for pay and kind of shift to whatever God has for you next or what are your plans? That's my plans right now, but you know, the Lord says that we don't know his way, so you might have something different than I'm planning on doing.

I like that approach, Jeffrey. Sounds good. All right. Well, let's say you were to live on 80 percent of your pre-retirement income in retirement. Let's talk about whether you'd be able to get to that with the income sources you'll have. So what will be your income sources in retirement? Right now, it'll be my retirement from the military, which is usually about 50 percent of our base pay, and then my disability, which right now sits at 40 percent.

Okay. So do you think those two should cover your expenses and therefore the TSP would just be extra that would be available? I believe we will not, obviously, we'll have to change our lifestyle because I won't be making nowhere near what I'm making now. So I guess I may work just to, one, give me something to do, but two, bring in income. But are you planning on drawing an income from the TSP or are you trying to just leave that alone?

I would like to leave that alone as much as possible. Okay. And how much have you built up in that account? Currently, I just checked about just over $60,000. You got about $60,000 in there.

All right. Well, I think the approach here, Jeffrey, is to think about the right allocation of the assets that are in there based on your age and objectives. So you're two years out from retirement.

Let's call it 65. You know, typically a 65 year old, we would say, you know, you'd probably want to have 45, somewhere between 40 and 45 percent of your portfolio in the stock fund or stock type investments, equities and the balance. Let's call it 60 percent or 55 percent in bonds. And, you know, this is an opportunity this season to begin to move into those investments, if that's what you wanted to do, because the stock market's down. And even though I think we'll retest the lows once we get into the recession, we will recover probably sometime late this year, early next year. And the bond market, although it's gotten beat up over the last year because of the dramatic increase in interest rates, it's now priced more attractively. Bond prices, bonds overall will do well as interest rates decline later this year and next year.

And as these yields continue to be very attractive. So I think what I would say to you is moving out of the G fund into whatever that allocation is that you're comfortable with, whether that's 30 equities, 70 bonds, 40 equities, 60 bonds, whatever it is, you could begin to move in over the next, let's say, three months into those investments using the TSP options. You could either use a lifecycle fund, the L fund, which would do that for you, or you could do it yourself. You'd maybe take the let's say you decided you're going to put 40 percent in stocks. You could put mix, you know, a third of it in the C fund, a third of it in the S fund and a third of it in the I fund.

Those are all stock funds, common stock, small cap and international. And then the balance, if it was 60 percent, was your goal. You'd put that in the F fund. And that would allow you to grow this over the next couple of years with an eye toward eventually rolling it out to an IRA and continuing to keep it invested. Because remember, once you reach retirement, if the Lord tarries and you're in good health, you need this money to last for decades. And so that's where having a growth component to it, somewhere around 30 to 40 percent in stocks plus a more stable component, the fixed income, the bonds is going to give you the ability to offset inflation, eventually draw an income from it if you need to, hopefully not, but also grow it for the future. Now, if you said to me, Rob, I'm just not comfortable taking any risk with it, well, then you'd want to stay right there in the G fund. But, you know, typically in somebody in your situation, we think about the allocation of a smaller amount in stocks, a larger amount in bonds, and that would help you grow it for the future.

But give me your thoughts. I think that's good advice. I know quite a few years ago, I took a big hit on my investments, but I think that's probably wise to start thinking that way.

Okay, sounds good. Well, I would head in that direction. Obviously, this never our few minutes here together never replaces the wisdom of getting some wise counsel.

And so getting a certified kingdom advisor to help you with your overall financial planning, retirement planning and investment management is always a good idea. But generally speaking, I like the direction of what we're talking about here today. Thanks for your call, sir. And thank you for your service to our country.

We're grateful to Sioux City, Iowa. Hi, John. Go ahead, sir. Hi, Rob. How's it going? Doing great. Thanks for your call. Great.

Great. I took my father to the nursing home this week. And I mean, I knew things were going to be expensive, but just really had sticker shock on what our long term financial obligations are going to be with this. I'm 58. I'm retired on a pension, but really haven't started doing any savings for long term care nursing home type things. And I'm just curious, what do you suggest? How do I get started?

Where do I look for things? And what do you think ideas? Yeah, you know, this is incredibly expensive. I mean, you're looking at upwards of, you know, one hundred and ten thousand plus for a private room in a nursing home annually. And obviously, you know, depending on what you need, whether it's assisted living or in-home care, you know, adult daycare, things like that, it's very costly and it's going up.

And I realize that can create a good bit of sticker shock. You know, often the best way to offset that risk is through long term care insurance, which is not inexpensive either. You know, that's can, you know, can be pretty pricey. So you've got to make sure that it fits into your budget. But that is something that could offset this significant expense for you.

And I like you looking at that, you know, between fifty five and sixty five. Now, that could run at, you know, sixty five years, fifty two hundred dollars a year at fifty five. It could be twenty two hundred a year.

So somewhere between two and five thousand dollars a year is what you would likely expect for that. And then you have to account for those annual premium increases, which have to happen in the aggregate, not in the individual policyholder. But that's going to at least give you some daily benefit if you can't perform these activities of daily living, especially if you had an inflation rider that would kick in and either cover or offset this major expense.

It's got to be able to fit into your budget. You want to be with a company that's committed to this space. But I think that would be probably the best way to offset what is likely, John, your biggest risk in this season of life in terms of eroding your assets. If you have investable assets between about two hundred and fifty thousand and two million, that's where a long term care insurance policy can work well. If you can fit it into the budget below two hundred fifty thousand, you're relying on government assistance above two million. You're self-insured at that point. But the bulk of us are right in that middle ground.

And that's where long term care insurance is. So I get a competent agent to help you quote some policies. Stay with us. We'll be right back. Glad to have you with us today on Faith and Finance live here in our final segment of the broadcast. We'll get to as many questions as we can.

We call this our lightning round, I guess. Let's head to Michigan. Hi, Karen. Thanks for being on the program today. Go ahead.

OK, thank you. My husband bought a house in September. He and I got married in October and he passed away in March. I have now a house and I have no idea even what to do about starting a budget.

I've never had to worry about one. I am semi-retired because I'm on disability and I also have a part time job. So I'm trying to figure out, can I afford to stay at this house? Do I sell it and cut losses? I think we have about thirty thousand in equity in it already because we did improvements. We bought it right, et cetera.

So any ideas? Karen, I'm so sorry to hear about what's going on here. I know that's a lot. And you've got a lot of weight on you here, both financially and otherwise, clearly.

So, yeah, we need to take a step back. Do you have somebody that's kind of walking through all of this with you, a friend or a family member? No. OK, so let's just talk about the immediate. Do you have a sense of what all the bills are? Do you have access to all of your financial accounts? Are the bills getting paid?

Kind of what's the state of things today? I'm I'm finding my way through because everything was on his laptop and I didn't have his password for the laptop. So I have been contacting the utilities and so forth. And I've got that what was passed due because of his illness and stuff.

Whatever was passed due, I've made payment arrangements and I'm working through those. There was a little life insurance policy, which I have about half of it still in the bank as I've been covering all the bills. And there is another life insurance policy. It's only seventy thousand.

But the life insurance company is fighting me on it because it was too new a policy because he bought it after we got married and it was only a couple of months before he passed. So I'm having some fun with that. So I am digging my way through kind of like, you know, going through the forest. Yeah.

Yeah. Well, we'd love to help you with that. So I'm going to connect you with a certified Christian financial counselor.

This will be somebody that can come alongside you, Karen. The next step is to just try to get a current while you're keeping everything current the best you can. We need to try to get a proper understanding of what is that budget. So what fixed expenses are there every month? Let's get those on paper. Let's figure out the status of them.

What is that? What are those discretionary items that you're currently spending? And then what obligations do you have? What outstanding debt is there? You know, can you log into those accounts?

Is everything current? We probably need to pull a copy of your credit report to kind of figure out what accounts are open and active right now so we can chase those down and figure out, you know, how we keep those current. And then we need to get a proper accounting of your assets and liabilities. And then from that point, we'll know the kind of the income and spending side, your spending plan, we'll know your assets and liabilities. And then we can begin to craft a plan going forward from here that just says, okay, what decisions need to be made if we need to right size your spending in line with your income because eventually, you know, that surplus, you know, will get eaten up if you're spending beyond your means in terms of the life insurance proceeds.

So we need to right size that budget. So we've got something that's sustainable. And then once all of that's working well, then we can start thinking about the future. Where do we go from here?

Do we need to sell the house? You know, what are you going to live on down the road? You know, and what do we need to be doing to put something aside for the future? So let's do this. I'm going to have you hold on the line. We're going to get your information.

We'll have a certified Christian financial counselor get in touch with you. And we'll cover the cost of them working with you and helping you navigate this process just as our gift to you. Okay. That's wonderful. Thank you.

Well, we're delighted to do it. Let me pray for you, Karen. Father, we just ask that you'd be in the midst of this. Lord, you're near to the broken hearted.

Lord, you know every detail. And we just ask that the Holy Spirit would just descend upon Karen. You'd give her wisdom and strength and guidance and a vision for what you have for her in this next season of life. We know she's going through the valley right now, Lord, but you're there in that with us.

And thank you that you can identify with every aspect of what she's going through right now. And we just ask that you'd be present. We thank you that you're trustworthy and on the throne. And we're thankful for the hope of heaven where she'll be reunited with her husband someday. And so we just trust you in that. And we ask all this in Jesus name.

Amen. Karen, thank you for calling today. And you hold on the line to Cleveland, Ohio.

Hi, Kathy, how can I help? Hi, thank you for taking my call. I'm in the habit of calling my 401k company like once a year, it happens to be Fidelity. And both times I've called the last two years, they've said, you're probably at a point where it would be helpful to have a financial advisor.

And so I looked today before I left work just to double check where everything is. And I see 97% of my retirement is in Fidelity Freedom 2030. So I guess that's aiming for my retirement date of 2030. Yes. And then the rest of it, less than 3% is in a 500 index fund.

Okay. So what's the benefit? What will they do for me that's not happening now with these two funds?

Yeah, well, a couple of things. Number one is, you know, we would recommend you seek a certified kingdom advisor, which is somebody who can understand your values and priorities as a believer and help you align both your financial decisions, your giving, your spending and your investments with your values and priorities as a Christian. I think secondly, the planning side is another piece that an advisor could bring somebody who can help you look at what are what is your current lifestyle look like? What would we anticipate your needs to be financially in retirement? And are you on track for that? Based on your current trajectory of the assets that you'll have?

You know, are you going to have enough to fund your lifestyle for the rest of your life? And then at the same time, asking a lot of questions just to make sure you're properly insured and you're offsetting any risks that exist that you're well planned for wealth transfer that last stewardship decision you'll made to make to transfer God's resources to the next steward is that person chosen and prepared. So really just a sounding board to look at your overall financial life and make sure you're positioned properly from a planning standpoint, as well as an investing standpoint, and then looking for ways to improve any of that and be more efficient, including on the tax side of the equation to make sure that you're fully leveraging any opportunity to reduce taxes that are unnecessary. So I don't know that there's anything necessarily wrong with your approach to the investments. These lifecycle or target date funds are very attractive for the reason that you mentioned, you can kind of set it and forget it, because you'll know that it's getting automatically more conservative as you approach retirement.

And a lot of people like that. An advisor could take a more active approach than what you're doing right now, which is a more passive index based approach to seek returns that might outperform the indexes, especially in a market like we're in right now. That's very choppy and tends to be very concentrated in terms of the stocks that are performing well versus those that aren't. So I think it really comes down to having somebody who can ask you hard questions, help hold you accountable, do the planning and bring a more hands on approach to the investment management. Is it absolutely essential?

No, you can do all of that yourself. But I think, you know, just like having a third party wise counsel, which the Bible talks a lot about in any area of your life, this would be somebody focused specifically on the financial side. Does that make sense? Okay. It makes sense.

And it makes sense to be working with somebody who is like minded. But what would you expect the cost for something like this to be? When I was talking to Fidelity, they were saying something like 0.06% of my current value is the amount that you're charged for something like this based on the account balance. Well, that's if they're doing active management of the investments. So in your case, is this a 401k or an IRA?

What is it? Yeah, this is a 401k. But if I would go with a kingdom advisor, how how do they go about charging?

Yeah, so it just depends on what you need. So for a financial planning engagement, it would typically be a flat fee, and then maybe a smaller flat fee per year just to kind of get together and update your situation. That's for retirement planning, insurance planning, tax planning, those types of things. If somebody is actually managing the money, that's where it's typically, as you said, a percentage of the assets under management. If they had full discretion over the money, meaning they could invest in any stock, bond or mutual fund, you know, you would probably look at fees of one to one and a half percent a year for them to do that.

In your case, with a limited universe inside a 401k, it's often less, it might be that 60 basis points or, you know, six tenths of 1%, you know, that that you described could be very appropriate. It really just depends on the scope of the purposes. Okay, that makes sense. Thank you.

All right. If you want to find a CK in your area, I'd interview two or three before you made that decision. And you can find those folks on our website at That's

Just click Find a CKA. Kathy, we appreciate your call today. Well, folks, we are about out of time.

So appreciate you being along with us today. You know, we've covered a lot of ground and, you know, as we talk about managing money God's way, you know, it really starts with this understanding that we've been placed in a pretty significant position and that is we're money managers for the King of Kings. So we want to be found faithful in managing those resources. We do that by going back to God's Word to find those principles that we can apply to the decisions we're making every day.

But here's where it begins. It begins by recognizing our identity in Christ and not falling into the trap of the world's way of handling money, which is built on greed and materialism and covetousness. It attaches our self-worth to our net worth. We need to reject all of that and pursue a biblical worldview of money management.

That's what leads ultimately to freedom and generosity and the ability to see God's heart with an eternal perspective as we manage our money. We are so appreciate you being along with us today. Hey, on behalf of my team, Dan Anderson, Amy Rios, Gabby T, and Robert Sutherland, I'm Rob West.

Faith and Finance Live is a partnership between Moody Radio and Faith Phi. Hope you have a great rest of your day and come back and join us tomorrow. We'll see you then. Bye-bye.
Whisper: medium.en / 2023-04-25 18:26:50 / 2023-04-25 18:43:28 / 17

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