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Applying God’s Word in the Home

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
May 23, 2023 5:25 pm

Applying God’s Word in the Home

MoneyWise / Rob West and Steve Moore

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May 23, 2023 5:25 pm

Putting God’s Word into practice may present a few challenges for families, but the practice also comes with some wonderful opportunities. On today's Faith & Finance Live, host Rob West will welcome Brandon Sieben to talk about ways to apply God’s Word in your home. Then Rob will answer your calls and financial questions. 

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James 1-22 encourages us to be on the program today after an extensive career in the manufacturing and financial sectors.

He's now president and CEO of Compass. Finance is God's way. And Brandon, it's great to have you with us. Hey Rob, thanks for having me. Such an encouragement to see the work you and faith and finance are doing so important to God's people.

Well, thank you, and we share the sentiment about Compass. I want to talk today about really handling money God's way as a family. I know you and your wife, Deb, began applying biblical principles to money management early in your marriage. What motivated you to become doers and not just hearers of the Word?

Well, we both grew up Christian, so we had a decent baseline, but God motivated us to action through a couple forcing functions. First, we got married right out of college. My first job paid $25,000 a year and Deb was still looking. Big hopes and dreams, of course, but not a lot of money, so we knew we needed to get on the same page with a plan, and so that led to our first budget. And then, practically, the day after our wedding, Deb's dad stopped by and handed me an envelope, and in it was Deb's car loan, with nine grand still due on it. And he just said, good luck, and walked away. So, you know, we had to confront debt day one in our marriage and make a real choice.

Are we going to go out this week and our pay down the car? You know, God and money take one kind of thing. Oh, wow, yeah, that becomes real in a hurry. Well, now, I know you and Deb have been blessed with some amazing daughters, Kay, Nina, and Georgia. You've had a ton of conversations with them about handling money God's way. What did you find most important to talk about with your girls? Well, a lot, and admittedly, we're still learning as we go. You probably are, too, and it's a hard topic to deal with, you know, with your kids, but some of the things that have been key for us first, we talk about money and are super transparent with it, so nothing's off limits in our family, and what we found is every question or challenge they give us gives us an opportunity to point them to the Word and then, ultimately, to the Lord for the answer.

And the rest has really been to try to get them anchored on the biblical fundamentals, so for us, maybe there are five. You know, one is God owns it all, and that's been huge for alignment, getting them and the family all in agreement that it's God's money and our responsibility to be good managers, and then from there, we've just decided, you know, we're going to be a generous family. We can meet a need.

We're going to do it. We're going to live simply and pay as we go, so, you know, do with less and no debt. We're going to be steady potters, so work hard, save, be intentional, no free lunches kind of a thing, and then with the rest, we're going to prioritize, and for us, it's to invest in our family and experiences, so no more golf for me and, you know, no more sodas at the gas station, but we're going to go to the beach this summer for a vacation and have a lot of fun.

Oh, I love that. Money is a tool, and what a great way to use it to build relationships. Any practical ways just bubble up to the surface that you can think of where you taught your girls to be doers of the word with regard to money?

Well, practically, you know, I came across a study in business that talked about how people learn, and they concluded it's 10% training, 20% mentoring, and 70% through experience, so practically speaking, we've really just followed the numbers. I mean, first, we try our best to model finances God's way in our home, and it's really amazing what the girls have picked up, you know, and who they're becoming just watching mom and dad do it, both the good and the bad, and second, we practically have given them very generous allowances and huge latitude to make their own financial decisions and learn through experience, and that process for us has given the opportunity to mold them while they're under our roof affirming the good decision and then also coaching the bad ones, and we sort of try to emulate what Jesus said, you know, when he sent out the disciples and then sort of brought them back for a poured-out and coaching session. Brandon, what an encouragement today.

We've only scratched the surface, so we're going to have to have you back real soon, but this has been really practical and I know motivating to our listeners to be intentional about how you manage money because more is caught than taught as we pass this on to our kids. Thanks for being with us today. Thanks again for having me.

All right. Brandon Sieben's been our guest today. He's president and CEO of Compass Finances God's Way.

You can find more at compassone.org. Your calls are next, 800-525-7000. We'll be right back.

Glad to have you with us today on Faith and Finance Live. I'm Rob West, your host. All right, it's time to take your calls and questions today. The calls are beginning to come in. But we've got some lines open, so we'd love to hear from you at 800-525-7000. Again, that's 800-525-7000. Let's begin today in, let's see, Montana. Mark, how can we help you?

Good afternoon. I have a question about life insurance. My wife and I are 29 and 31, and we have a life insurance policy that we bought just a few years ago or took out.

It's very expensive. It was marketed as somewhat of an investment in addition to life insurance. And I'm curious if you're familiar with this type of policy. It's $165 a month for her and $175 a month for me, so a lot more than your typical straight life insurance policy. But the idea was that by the time we retire, it's worth a million bucks or something like that, and we can cash it out and go on vacation.

Yeah, got it. All right, yeah, I'm not a fan of that approach for saving and investing. You know, you're always going to give up something in that respect. So what I'd prefer you all do is get the appropriate amount of death benefit to truly protect you from the risk that exists if the Lord were to take one of you and the others left here without that income, and that would create a hardship. So we want to figure out exactly how much life insurance you need. At a minimum, you probably need 10 to 12 times the income that would need to be replaced.

And you could use that as a starting point. You could go beyond that and say, well, let's cover that income. Plus, let's pay off the house. Plus, let's cover educational expenses and, you know, make sure that we've really set that person up to be able to maintain their lifestyle. And the most cost effective way to offset that risk is through a term life insurance policy. So you might get a 20 or a 30 year level term policy with the appropriate amount of coverage. You know, pay a fraction of what you're paying right now.

If you guys are young and healthy, it should be very cost effective to get the amount of coverage you need, which may be a million or $2 million or more. And then, you know, over time, you might replace that policy and, you know, get a new 20 year policy because you're probably going to want to have this policy in force until you reach retirement where you're no longer accumulating. Your income is being covered by Social Security and your retirement nest egg. And so you eliminate that expense by dropping it, which, by the way, in that season of life, that death benefit would continue to get more and more expensive.

But we've eliminated the need for it at that point. And then you do your investing outside of that in a company sponsored retirement plan or a Roth IRA or both. And, you know, get 100 percent of the upside with that tax deferral through those vehicles as opposed to trying to mix that with your life insurance policy. That would be my preferred approach, though. Does that make sense? It does. Are they are these type of life insurance policies typically not so good on the return as opposed to the traditional way of investing for retirement with a term policy?

There is no return. So you're you're basically just paying the mortality expense that some actuary came up based on your age and health risk factors and the amount of coverage you need. And so you're paying that pure expense in the same way that you would with a property and casualty policy.

So you get protection on your car. If you have an accident, they're going to make you a hole or fix your car. But you're not looking to get any kind of return on that.

The same would be true here. The idea is that you never have to collect on that policy. You've offset the risk that exists during your working years, but you're not going to ever get anything back. That premium is lost, but you're paying that premium now. It's just that you're paying over and above that to do this additional investment. So in this case, we'd be separating the two. You're not going to get any kind of return for that term policy.

At some point you're going to drop it. All that premium is lost, but you were paying for the coverage that, Lord willing, you didn't need to collect on. And then your investments are separate. Okay, thank you.

Yeah. So what I would do is the next step, Mark. I mean, you could go online to Policygenius or select quote, or you could find an independent life insurance agent who can shop the various companies for you and find a really strong company that's, you know, highly rated from a invest, but also gives you a really effective cost effective premium and just get the coverage you need for either 20 or 30 years. And you know that that now is covered. And then, you know, really focus on your investing.

I would say look at maybe a goal of 10 to 15% of your pre-retirement income. If you did that, you know, in a company sponsored retirement plan for the next 35 years, you guys would be in really good shape. Thanks for your call today, Mark. We appreciate it.

To Coeur d'Alene. Hey, Clay, go right ahead. Hi, Rob. First off, thanks for taking my call.

Sure. So I had a question on tithing. I'm 22 years old.

I have a small business and excavation. And I'm just curious, am I supposed to be tithing on my personal income or also my business income? I don't want to short God in any way. And so I just, I don't know.

I'm trying to find the answer to that. Well, I appreciate that. I mean, we're under the law of Christ, not under the law of Moses. And so you could say tithing is an Old Testament concept and you would be correct. Nevertheless, I think Jesus raises the bar in every situation and that would include our giving. To whom much is given, much is required. And he celebrated the generosity of an unknown giver.

We don't know her name, but we know she was a widow who gave out of her poverty. So we clearly should be givers. I mean, that big idea jumps off the page in the Old and the New Testament. We were created in the image of the ultimate giver, God himself. So I love the idea of our giving. And when we get to the how of our giving, well, first of all, it needs to be with the right heart posture.

We're doing it as an act of worship and to be obedient, but also to demonstrate our trust in God by saying, God, I believe you as my provider are going to continue to provide for me. And so I don't have to hold what you give me with a clenched fist. I can take a portion of it and demonstrate my trust in you by giving it back. And I get the joy and the blessing of being connected to where you're at work, participating in your activity.

And that's a privilege. Now, how do we go about that? Well, I think applying the principle of the tithe is a great starting point. It's what my friend Randy Alcorn, the author, calls the training wheels of giving. And so being able to say, OK, God, I want to give you a tenth of my increase.

And by the way, maybe that's just a starting point. I love a progressive giving approach where maybe you raise that by a percentage point each year. But let's say you just said we're going to do a tenth on the increase and then we're going to give sacrificially beyond that. OK, well, how do we define our increase? Well, our increase is all that God provides to us. Now, that's easy to calculate when it comes to your income. So you would say whatever income I receive, whatever gifts I receive, whatever inheritance I receive, that's clearly a part of God's increase. And so I would turn right around and say, God, I'm going to systematically give a tenth of this increase back to you.

Well, that's very simple to calculate. Now, if you own a business, you have the ability to say, God, part of my increase is not only paid out to me as salary and wages, but it's being retained inside my business. And so I'm going to, after expenses, and that's the key, you can't tithe on the grossed amount, depending on what kind of business it is, you'd go out of business. But after all the salaries are paid, including your own and the overhead and all the expenses and the marketing, let's say once a year, you said, what is the profit that I'm keeping in this business? I'm not paying it out to myself yet as income. It's staying in the business. Well, you could take that in a predetermined interval, calculate that true profit or increase, and then say, I'm going to make an additional gift out of the business. That would be the way that you would go about that. Does that make sense?

Yes, it does. Hey, I really appreciate your time. All right, Clay, thanks for calling. We're going to take a quick break back with much more right around the corner. Stay with us. Hey, great to have you with us today on Faith and Finance Live.

I'm Rob West. We've got a few lines open, 800-525-7000 is the number to call. Hey, as we head toward our fiscal year end, which is June the 30th here at FaithFi, we could absolutely use your financial assistance. If you're a part of this community, you listen to this program regularly and you'd like to be a supporter of our work, we'd certainly be grateful. As a not-for-profit, listener-supported ministry, we rely on your financial assistance to do all that we do here at FaithFi.

A gift of any amount would be greatly appreciated before June the 30th. You can do that on our website at faithfi.com. That's faithfi.com. Just click the Give button. You can give online through the mail or over the phone. Again, faithfi.com. Just click Give.

Thanks in advance. All right, back to the phones. We go to Higginsville, Missouri. Hi, Duane. Go ahead, sir. Yeah. First, thanks for taking my call, Rob. Sure.

I had a question. I got a small business. It's a farm, and I've heard that I can pay the kids so much a year and have their own bank account, and then we can take some of that money and then start a Roth IRA for them, and I didn't know if that was I heard correctly or not.

You can, yeah. So they have to have earned income. They can be employed by you, even though you are their father, but that needs to be legitimate work. So there are some dos and don'ts with regard to hiring your child. They have to do real work. You have to follow child labor laws. You have to give them real wages.

Those wages have to be reasonable. You've got to withhold and remit taxes and keep payroll records and help your child file a tax return if necessary. So all of that has to be kind of above board and in compliance, but if you can meet those criteria and you may want to check with your CPA or tax preparer just as you're getting this set up to make sure you've kind of checked all the boxes, then absolutely, this is a great opportunity for you to allow them to be able to start early and funding what I think is one of the most ingenious savings and investing tools that's ever been created. And that is what Senator Roth helped us to come to know as the Roth IRA, where you put in after tax dollars, it grows tax free.

And if your 10 year old is able to do reasonable and meaningful work and comply with all of those things that I mentioned, imagine he or she doing that and that money compounding for the next 55 or 60 years. That's amazing and could be a real benefit to them down the road. Does that make sense though? Yeah, that's that's what I was hoping to hear.

I wasn't sure how it all worked. Yeah. So just make sure they're a real employee and that you do that in a way that is appropriate from the IRS standpoint.

But, you know, given that you've got to suspect plenty of things that they could be doing around the farm and you could pay them for that, I think that would set them up for a real opportunity. Dwayne, all the best to you, my friend. Thanks for calling today. God bless you. By the way, before I move on, head to our website, faithfi.com. You do a search.

We actually have an article on this hiring your kids from Art Rainer that I think might be helpful to you. But you're certainly on the right track, my friend. To Tampa Bay, Florida. Hi, Bill.

Go ahead, sir. Hi, my question is like I have rental properties and I have one rental is always a problem and renters moving out of the property and thinking of selling it. And I just don't know how the capital gains work, you know, because I bought it for one hundred thousand dollars before, like five years, six years ago, and now it's worth three hundred thousand.

So is there a calculation of the capital? It's I have a mortgage for one hundred thousand, but I refinanced it like three years ago and for one to one seventy five. So I took seventy five to buy another property, basically. Yeah.

The mortgage doesn't affect the capital gains calculation. It really all has to do with the profit bill. So what do you think the property is worth worth roughly today? It's three hundred thousand. OK, that's what you would sell it for.

Yes. OK. And what did you buy it for? One seventy five, one seventy two thousand. Yeah, but it's not the mortgage really doesn't affect this. It's your original purchase. What did you pay for it?

Original purchase price one hundred thousand. OK, so you've got about two hundred thousand in profit. Is that right? Yes. Yeah.

All right. Did you put some price? Did you put some money into the property? Do you have improvements that you put into it? Yes. Yes. I did some plumbing, water and so we're plumbing on the on the property and.

OK. Yeah. So you're going to want to check with your tax preparer on that to determine what of those improvements can be used against your capital gains. But essentially what what you would do is you'd take your selling price. Let's say you get three hundred thousand and you'd subtract one hundred thousand your original purchase price and then you'd subtract any improvements that you're able to count towards your cost basis. Let's say you put fifty thousand in it and you'd be left with one hundred and fifty thousand in profit.

In my example, three hundred minus one hundred minus the fifty thousand in improvements. And then you'd pay capital long term capital gains rates on that one hundred and fifty thousand in profit. The way the capital gains tax works is it's not added to your taxable income. It's a separate capital gains rate.

And as long as you held the property for more than a year, you would likely pay 15 percent as a capital gains rate on that gain of, in my example, one hundred and fifty thousand. But let's confirm that. Are you married? Yes, I'm married. OK. And if you're married filing jointly, do you make over do you make more than eighty nine thousand dollars in per year? Yes, more than. Yeah.

OK. So that's where if you fall between eighty nine thousand and this is income, not we're not talking about the gain. Now, if your taxable income adjusted gross income is between eighty nine thousand and five hundred and fifty thousand, then your capital gain rate on any capital gains that are long term is 15 percent.

So you would pay 15 percent on that total capital gain. Does that make sense? Yes. Can I have the last question? Real quick.

I just got a few seconds. Instead of going to all IRS, how much can I give to church? You know, I don't want to give like thirty or forty thousand to IRS. How much can I give?

Do you mean out of this, out of the sale of the property? All right, let's do this. I've got to take a quick break.

That's a great question. If you stay right there, we'll tackle it just after this break. We'll be right back. Stay with us. It's great to have you with us today on Faith and Finance Live. I'm Rob West. All right. We're heading back to the phones for your calls and questions.

Eight hundred five to five seven thousand. Just before the break, we were talking to our friend Bill in Tampa Bay. Bill has several rental properties, one of which that hasn't been performing as of late. He's looking at selling it and just wanting to understand the tax implications. We were talking about the capital gains tax that he would owe on the property.

But Bill, as a follow up to that, you were curious about how you might be able to do some charitable giving and reduce that tax liability. Essentially, you're going to owe the capital gains if you sell the property. The way to avoid a portion of that or all of it, depending on what you'd like to do, is to give the property away prior to the sale. Now, you don't have to give 100 percent of the property.

You could give whatever portion you want. The best and most effective tool to do this is called a donor advised fund. And essentially, let's say just for nice round numbers, you gave twenty five percent of the property to your donor advised fund. Well, if you had a hundred thousand dollar capital gain when you sold the property, you would actually only have seventy five thousand that would be subject to capital gains because twenty five percent of the property or twenty five thousand would be in your donor advised fund. And so the donor advised fund doesn't pay any capital gains because you've given it away. So that would be a way that you could actually fund a vehicle for generosity.

Your donor advised fund and reduce your overall capital gains tax. Does that make sense? Yeah, that makes sense. Yeah.

Yeah. So that would be the way to go about that. I mean, the other way you could do it is you sell the whole thing. You go ahead and pay the capital gains. So it's 15 percent on let's say you had a hundred thousand in gains. You'd have fifteen thousand that you owe in taxes. You could then turn around and take a portion of that money, give it away. And as long as you itemize on your taxes, you could take that gift as a deduction. But it wouldn't go against your capital gains.

You would have that no matter what. It would go against your taxable income that you would get the tax benefit for the deduction. The only way to actually, you know, either eliminate or minimize the capital gain itself is to give all or a portion of the property away, in my case, to a donor advised fund prior to the sale.

OK, OK. It will not affect the sale of the property if it's some portion of it is donated to. It doesn't. No, it's really just where the proceeds are paid from the sale. So when you give a portion of that property away, then you show up at the closing table.

The closing agent would just cut. In my example, if you gave 25 percent of the property to your donor advised fund, they would take 75 percent of the proceeds and write a check to you. And they take 25 percent and write a check to your donor advised fund. So you never receive it.

It goes into your fund and then you can recommend grants to charitable causes or nonprofit organizations out of that fund. OK, that's good. That's good.

Yeah. So if you want to learn more about that, the place to go is National Christian Foundation. You can learn more at ncfgiving.com. That's ncfgiving.com. Ask them about opening a giving fund, which is their name for a donor advised fund, and tell them that you're interested in gifting a portion of a piece of real estate to your donor advised fund.

They can tell you exactly how it works. Again, that's ncfgiving.com. And by the way, National Christian Foundation was founded by Ron Blue, Larry Burkett and an attorney named Terry Parker. And so you can feel really good about working with those folks. Thanks for your call, Bill.

To Illinois. Hi, Bea. Go right ahead. Oh, hi. Thank you for taking my call.

Yes. I was wondering when you take money and pay like a large amount of money. I'm trying to pay off my mortgage. Does that have to be reported to the government by the mortgage company that we gave a lot a large amount?

Not the mortgage company, but the bank. So when you take a withdrawal of 10,000 or more from your bank account, federal law requires, according to the Bank Secrecy Act, that they report that to the IRS. And the purpose of that is to prevent money laundering and tax evasion.

So they're automatically going to have to fill out a form and they're trained to spot folks who are trying to get around that. So, for instance, if you were to pull out nine thousand nine hundred ninety nine to try to stay under that ten thousand dollars, that's going to trigger them to take another look at it. But the bottom line is you you're not doing anything fraudulent. You're not trying to launder money or avoid taxes.

And so the fact that they're reporting it probably you're never going to hear another thing about it. And if they wanted to look into it further, they'd see that it's your money you're taking out. You're paying off your mortgage.

So I wouldn't think twice about it. But it's not your mortgage company. It's your bank. OK, well, then I don't need to take like five thousand and keep giving them five thousand. I can give them the whole twenty thousand. Yes, I wouldn't be concerned at all about that requirement for reporting.

I would just pull the money out that you need and or write the check and pay off that mortgage. OK, and another question, do you know anything about IUL? I do. Yeah. So it's a universal life policy. What is that you're thinking about there?

Is that something good to have? You know, I'm not a big fan of index universal life. I mean, why folks buy it, you know, is typically because they want the life insurance combined with the higher return potential. So inside that policy are sub accounts, which are basically mutual funds that are invested. And so it's a way to get, you know, tax free capital gains. And along with the insurance, you know, to have the higher return plus the death benefit.

The reason I don't like them be is they're complicated. They're expensive. So there's a slew of fees and other costs.

You've got the premium expense charge, the administration expense, the riders, the fees, the commissions. And then if you want to get your money back, there's a surrender charge. On top of that, there's a cap on the returns. So what happens is they often set a maximum what they call participation rate of less than one hundred percent. And it can be as low as twenty five percent in some cases. So in exchange for the downside protection in those years where the market is doing well, you're not going to get one hundred percent of the upside. So it limits your actual rate of return that's credited toward the account, regardless of how well the policies underlying indexes are performing.

And so for those reasons, the cost, the cap on the upside and just the loss of your capital, I'd rather you buy life insurance if you need it as pure insurance and then do your investing outside of an insurance product. OK, thank you very much for helping. OK, B, thank you for your call today.

Eight hundred five to five, seven thousand is the number to call. We've got some some additional questions we'll tackle just on the other side of this break. Before we head, though, to the break, let me tackle an email or two. This one comes to us from DJ. He writes, Robin, listen to your show all the time.

Greatly appreciate the content. My wife and I are 30 years old with two young sons who my wife worked full time. She had a 401k with about fifteen thousand. Are there any options for the funds in the 401k to be moved to a college savings for our boys? Or can I roll it over into my plan? Actually, it'd be best to roll your wife's 401k to a traditional IRA in her name and then you could convert it to a Roth. You'd pay the tax now. But because you guys are young, you'd get thirty five years of tax free compounded growth. There is no way, DJ, to get it into a college fund without creating a taxable event first.

And you can't roll it into your 401k because those 401ks are individual and has to stay in your wife's name. Thanks for writing to us. We'll be right back on Faith and Finance Live. Great to have you with us today on Faith and Finance Live.

I'm Rob West. We're going to get to as many questions as we can. Sometimes Amy asked me to do a lightning round. We'll see if we can get through at least four questions here. Chicago, Storm, go right ahead. Hi, Storm, are you with us?

All right, we'll try to get Storm back on the line to Tampa. Lorena, thank you for calling. Go ahead. Yes. Hi. Thank you for taking my call.

I have a little bit of a situation. Not quite sure where to start, but the basic logistics of it is my husband is 61. We have not been able to put back for retirement because of having a handicapped daughter. Not able to have two incomes in the household.

We now do. We have some expendable income, some extra income in the household, and I'm looking for the best way to prepare for retirement. My husband is not going to be able to go to 72.

He's a diesel mechanic, and so his work is such that the physical demands will be doing well if he can make it to 62 and stretching it to 65. We only have about 30,000 in our 401k. We're putting back 20% of his income. We have a mortgage of 185,000. It's worth about twice that, actually more than twice that, and we have some credit cards, card loan, and a little bit of unsecured debt, but that's kind of where we're at. Yeah, so is your concern just not having enough when you get to retirement?

Absolutely not. We only have 30,000 put back. Okay, and your ages are what, Lorena?

56 and 61. Okay, and you believe he'll only be able to work for another couple of years? Maximum, yeah. Yeah, okay.

Yeah. Well, listen, you know, you can only do what you can do, and the key is to be found faithful with what passes through your hands, and you've been caring for that sweet daughter of yours that has special needs, and I realize that requires a lot of time and attention, and I'm thrilled to hear that you were able to do that, and you guys are now feeling behind, and I get that, and that can feel somewhat overwhelming, and yet God is your provider, right? And we know that, and so I think the key is at this point just to limit your lifestyle as much as you can.

Let's trust God for your ability and your husband's ability to continue to work, perhaps even beyond what you can see today, and we can ask him to intervene there, and we know that at the end of the day, he is your provider, not the government, not your employer, not anyone else, and so he said that he will provide for our needs. So I think at this point we try to just maximize whatever you can put away in the years that you have left while you're still working. Given that you're over 50, you could put away $30,000 in a 401k.

If you have two of them you could double that, but you can put away quite a bit of money. The question is just your ability to do so, and that's going to come down to just maximizing these years while you have this double income for as long as they last. Let's try to build up that nest egg. Let's work as long as we can to delay taking Social Security, because every year you wait, we're going to push that check that you get up by 8% a year, and if we can limit your lifestyle and live modestly and, you know, get some Social Security coming in down the road and try to save as much as you can in the meantime, then we're going to trust God for the rest, and I think that's all we can do.

But give me your thoughts on that. Well, the other, I did want to ask a question about the $30,000 annually for the 401k. Now, I am self-employed.

I clean houses is what I do for a living, so my business is doing very well. I'm currently making close to $80,000 a year cleaning houses, so how would I initiate a 401k as a self-employed person? How do I do that? Yes, so you wouldn't be able to as a self-employed person. I mean, you can do something called an individual k, but what's probably better is for you to open what's called a SEP IRA, and it allows you to put in for 2023, you can put in 25% of your compensation or $66,000, the lesser of the two, and that would allow you to put away quite a bit of money, and the combination of that SEP, plus if your husband has a 401k, I think that would set you up really well.

You could open that SEP IRA at Fidelity or Schwab, and then you could put that money in as you're able to, and then take a tax deduction on it. It's like the same tax treatment as contributing to a traditional IRA or 401k. You get that as a current year tax deduction. Okay, and that amount that I put in, would that come off of our overall income to lower our tax bracket if we're falling within the question of the 15% or the 22% tax rate?

It would, yeah. So you would get a deduction for the amount that goes into the SEP IRA for the year. Okay, because that's our concern too, is with my income coming in as high as it is now, we're going to be going into the 22% tax rate this year, and I'm trying to find ways to reduce that. Yes, and so that would be a way to do that.

And so you would get the tax deduction as that money goes in. Okay. Okay, that's great information because that's exactly what I needed, was just a direction. So thank you very much for that. Well you're welcome, Lena. And listen, you all hang in there, don't be discouraged.

God will provide, and I think we just need to take advantage of these years that you have some extra income to do as much as you can in saving and try to catch up a bit. We can help further along the way, let us know. To Port Charlotte. Hi, George. Go ahead, sir. Yes, sir, how are you?

I'm doing well, thanks. Okay, my question is, what are your thoughts on this digital income? You're talking about a digital, this great reset. Yeah, are you talking about a digital currency? I guess that's what would be considered.

My understanding is, listening to some other programs, you kind of have a digital card and the government kind of controls what you can use and what you can't use. I think you need to be careful there. I mean, there's a lot of conspiracy theories, a lot of fear kind of running rampant. And now there is some reason, I think, for us to be concerned about a central bank digital currency. But we just need to not take that too far. And here's what I mean by that. It's still a long way off.

It's in a research phase. You know, is it a good idea? No, I think the potential for government to know who has money to impose rules and even to limit transactions is a real cause for concern. But keep in mind, the Federal Reserve can't put this in power. The Fed Chairman Powell has said so much, you know, himself.

It does require an act of Congress, which is responsible for coinage. And if we were to get this through Congress, which would be very difficult with divided government, you know, we would have to see how they approach it with regard to privacy. And that's the real concern here. But it's a long way off. China is still in a beta phase on theirs.

And they started back in 2016. And we're just now finishing the beginning phase of the research on this. So I think the bottom line is, yes, we should stay mindful of what's going on, continue to watch and listen, we need to show up and vote for folks that respect the privacy and, and, you know, aren't in favor of government overreach into our private lives, including with regard to financial transactions, which with a central bank digital currency, all of those transactions, 100% of them would be at the very least known to the government. And the idea that they could limit transactions based on social criteria is a real possibility.

But it's a long way off. And it would require Congress and the President to be on board, which I just have a difficult time believing we will get there. And you've even had some states like the state of Florida was right out in front saying that a central bank digital currency does not comply with the Florida Uniform Commercial Code, the UCC. And so they basically already gone out in front and saying, this is not going to work in the state of Florida.

And you're seeing other treasurers and states across the country follow suit. So it's something to keep an eye on. It's not something that's imminent.

And, you know, I think we need to be careful about getting kind of swept up in some of the fear mongering that's going on. But it's a great question, George, and we'll continue to keep you updated as things progress. And we appreciate you checking in with us quickly to Chicago Storm. Are you with us? Yes, I am. Thanks, Rob, for taking your call. Yes, ma'am. I love your show, by the way.

Thank you very much. I'm calling because I want to know I have I'm getting a late start with my 401k. My job just started a 401k and I'm getting a late start.

I'm 48 years old. I was told to put 15% of my savings I mean, 15% of my income into 401k. But I'm a little confused because usually I see one option. But this 401k has two options. It has a pre-tax option and it has a 401k Roth option. So I'm just confused about how much of that 15% should go on which one.

Yeah. So I think the key is that you just make that contribution as to the one that would be most effective. A lot of times when we're getting closer to retirement that the traditional 401k is the better option. So you actually get the deduction on the money as it goes in. Later in your working life there's often a greater benefit to you getting a tax deduction today while your earnings are higher because you're in the kind of twilight of your earnings years versus you putting in after-tax money and then being able to take it out tax-free later. You're just not going to get the benefit as much of that tax-free compounded growth with the after-tax 401k. So I think the pre-tax 401k with the current year deduction is probably going to be a greater benefit for you.

If you wanted to run the calculations and know for sure I would check with my CPA on that but I suspect just given your age and kind of where you're at the pre-tax option is better. Does that make sense? Yes, that makes a lot of sense. Thanks a lot Rob.

All right Storm thanks for calling today. Steven I see your question in Albany about whether I expect a recession this year. I wouldn't take my word for it. Ninety percent of economists are saying we will have some sort of recession.

Most think it'll be fairly shallow. I think the key is that we're ready with our own financial lives living according to biblical principles. Faith and Finance Live is a partnership between Moody Radio and Faith Five. Thank you to Lynn, Gabby, Amy, Tahira, Chris and Robert. God bless you. We'll see you tomorrow. Bye bye.
Whisper: medium.en / 2023-05-23 18:06:44 / 2023-05-23 18:23:48 / 17

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