The Great Millennial Sell Off

When you're following the herd, it's hard to tell when the herd's headed in the wrong direction.

Hi, I'm Rob West. Well, there's no doubt that Wall Street is a scary place these days. It's all the more reason to have a solid investing plan in place and sticking to it. But one group of investors is letting emotions triumph over planning. I'll talk about that today and then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. Okay, so which group am I talking about? Well, a recent survey by Ally Financial revealed that almost half of millennials, roughly aged 25 to 40, have sold investments during the past volatile year. The poll also showed that other age groups, for the most part, have stuck with their investing plans. There's an old joke that the best investment advice is buy low, sell high, but millennials don't seem to have gotten it. If you're following a long-range plan and the wisdom of that joke, now would be a good time to buy, not sell. Certainly there's been a lot of bad news this year to scare investors.

The highest inflation in 40 years, the Russian invasion of Ukraine and the Fed raising interest rates, seemingly on a collision course with a recession. Those bleak reports have apparently affected millennials the most as 49% of those surveyed in August said they'd sold stocks over the past 12 months. That's compared to just 21% of investors in the demographic we know as Gen X, age 42 to 57. Interestingly, still fewer investors outside those two groups, Gen Z, ages 18 to 25, and some baby boomers, ages 58 to 67, sold stocks in the past year. So why are millennials selling off to a greater extent than other age groups?

And remember, these are folks 25 to 40. Well, it could be that they're under more financial strain than others. This might include trying to buy a house and skyrocketing home values in the past year haven't helped there. Or they could be facing more expenses raising children or caring for elderly parents who may not have put away enough for retirement. But even if millennials are selling stocks for what might seem to be the right reasons, it's still the wrong time to sell if you're following a long term investing plan, looking ahead at least five years, if not 10.

For those folks, a bear market is a good thing. That's because of dollar cost averaging, and it's something that most investors should be doing. We've talked about the beauty of dollar cost averaging before, but it's worth going over again.

When you contribute a consistent amount each month to your retirement account, you're automatically dollar cost averaging. That could be in stocks, mutual funds or whatever. And you do this no matter what the market's doing.

This eliminates all the guesswork. You're not trying to figure out what the market is likely to do next month or next year. You've already made an investing decision based on a long range plan. And this is following one of God's financial principles found in Proverbs 21 five, steady plotting brings prosperity, hasty speculation brings poverty. Now, if this seems like a mindless way to invest, it isn't.

It's actually very smart. That's because by contributing a consistent amount each month, you're automatically buying fewer shares when prices are high and stocks are expensive. But then when stocks are down, like they've been this year, and you still invest the same amount each month, you're buying more shares.

So no matter what happens on Wall Street, you're always building maximum equity at minimum cost. The dollar cost averaging doesn't give you big wins overnight. It gives you long term gains. And if you stick with it and don't pull your money out when things look bleak, those gains can be substantial. Let's say a bear market last six months, a year or even longer. With dollar cost averaging, you're laying the foundation for significant gains down the road.

When the market recovers, all those extra shares you bought when prices were low will be worth more, greatly increasing the value of your portfolio. Most of us work pretty hard to save and invest. It's just human nature to have some emotional attachment to those dollars. But emotions are dangerous when it comes to investing.

They tend to crowd out logic and reason. Dollar cost averaging takes the emotion out of investing. It eliminates the possibility that you'll make a bad investment decision like selling when the market's down and locking in your losses or buying more when stock prices are high.

It forces you to think long term instead. So if you're a millennial investor or any investor for that matter, stick to your long range plan and don't let your emotions take over. All right, your calls are next at 800-525-7000. That's 800-525-7000. We'll be right back. Great to have you with us today on MoneyWise Live. I'm Rob Last year host. We're taking your calls and questions today on anything financial. We'd love to hear from you. 800-525-7000 is the number to call.

That's 800-525-7000 with lines open. Well, as we head to the phones here in just a moment, let me remind you here at the end of the month and yes, it's the last day of October. And in light of that, we would love for you to know that MoneyWise Media is in fact listener supported.

That's right. As we close out the month of October, we could sure use your assistance as you think and pray about giving to support this work. If you consider yourself a part of the MoneyWise family, you can do it quickly and easily on our website at MoneyWise.org. Just click the give button and whether you give one time or you become a monthly patron, we would just love your prayerful consideration of supporting the work we do here on the air and through our MoneyWise coaches and in the MoneyWise app. You can do it again quickly and easily on our website, MoneyWise.org. Just click give.

Thanks in advance. All right, let's head to the phones to Tamarack, Florida. I know it well. We'll head to Alberto first and you go right ahead, sir. Yeah, how are you doing, Rob?

Long time, long first time. Yeah, great. I'm glad to have you on the program.

Okay, my question is I just started with this University of Florida, Southeast University. Okay. And I started a 401k with them. They use TIAA.

Yes. And I have like 40% in bonds and 50% in equity. And then I had like 10% left. So I put that into a real estate annuity account. I understand you don't agree with annuities, so I was just wondering what you could tell me.

Yeah, so I'm very familiar with TIAA or TIAA. That's the Teachers Insurance and Annuity Association. They're huge and known for their pretty competitive products and investment options, lower than normal fees. And they've just got a massive amount of assets under management. In terms of the 401k, I would probably keep, you know, all of it in their investment options. You said real estate annuity, though.

That's confusing me a little bit. Is it a real estate investment trust, perhaps? It says annuity. Okay. All right. Real estate equity.

It says cash or yeah, it says cash in the 2017. Okay. Yeah, I'm not exactly sure what that would be. I'm not familiar with that option. But I think in general, the 401k is going to give you the tax shelter in the sense. So those funds that are going in pre-tax, meaning you're getting a deduction for your contributions, are then going to grow on a tax deferred basis. So, you know, putting an annuity inside of that is not really terribly helpful.

It's, you know, kind of like a retirement vehicle inside a retirement vehicle. And so I think really it comes down to what is your age, goals and objectives, and what investment mix is going to be best for you. Alberto, what is your age, if you don't mind me asking? I'm 62.

Okay. And how long do you plan on continuing to work at this point? Four or five more years. And then I may retire, but I may stay with them. You know, I'll be working like part time. Okay, very good.

And you would you still be eligible to contribute to the plan at that point? Oh, yeah. Yeah. Okay.

Yeah. So with you planning to continue to work even beyond full retirement, I think, you know, at your age, you know, we would typically say you'd want to be somewhere between 40 and 50 percent in equities, and then somewhere between 50 and 60 percent in bonds, depending on whether you want to be on the more conservative end, you'd be closer to 40 percent in equities, the more aggressive end, you'd be 50 percent in equities. That's just a general rule of thumb when you take 110 minus your age to be a little more aggressive or 100 minus your age. And that's the portion that would be left for stocks. If there's a potential to allocate a portion to a real estate holding like a real estate investment trust, I would certainly be on board with that with somewhere between 5 and 10 percent of the portfolio. But I think, you know, 50 percent in equities, 40 percent in bonds or 50-50. That probably makes, you know, good sense to me. I would need to know more about that annuity option to be able to weigh in on that because I'm just not familiar with it.

But I like this approach, Alberto, and I think if you just stay disciplined in your salary deferrals into this account, you'll have quite a nest egg there down the road when you're ready to tap into it. Okay. All right. Sounds good. Thank you. Okay, very good. We appreciate your call today.

To Cleveland, Ohio. Hey, Terry, thanks for calling. Go right ahead, sir. Yes, sir. I just opened a high-yield savings account through Marcus. Okay. And I noticed they have a high-yield CD as well that pays more.

Yeah. I was just wondering should I just keep it in the high-yield savings or should I put some in the CD? Yeah, it really comes down, Terry, to the purpose of this money. What is it earmarked for and what time horizon do you have with it? So the nice thing about high-yield savings, whether it's Marcus or one of the other online banks where you can earn competitive interest rates is that with complete liquidity at any time, you can get right now about 2.5% and that would continue to grow as interest rates climb. For another percentage point, 3.5% or 3.6%, I believe, you could, you know, if you'll lock it up for a year, you'll get another point. And then, you know, beyond that, you could, for instance, with two years, you could earn almost 4% and at that point, and at that point, it doesn't make sense to go any longer than that. So, you know, I think the question comes down to, you know, what is your time horizon on this money? How readily do you want to access it? And then is a CD the most effective place to put it given that you will lose access to it for at least a year or two, but in exchange for that, you can earn, you know, another point to a point and a half. So, help me understand kind of what this money is for.

I just got it set in there just to grow. Okay. It's got time. It's not money that I need. Okay. So, you have an emergency fund that's separate from this money? I do. Okay.

Yeah. So, I think you've got a couple of options. One would be, if you want to keep it in a secure product, you could use a CD to begin to maximize it. You'd have FDIC insurance. If you haven't taken advantage of the I bonds, that would be another option for up to 10,000 per person per year. Backed by the US government, you'd lose access to it for at least 12 months, but you could get about six and a half percent for the next six months and probably something close to that for the six months after. So, that would be another option where you'd get quite a bit more, you know, double what we're talking about here and still, you know, safety through the backing of the US government. Apart from that, we would start to look, you know, into some of the more risk-based assets where you can get your yield up, but whether it's bonds or stocks, even on the conservative end of that spectrum, you're going to have the risk of principal loss and volatility. So, you know, I think if this is money you want to keep totally safe, you'd probably want to stay in the CD or I bond camp, you know, if you were looking, you know, for something like that. Does that make sense?

It does. Now with the I bond, say if I had it for a year and then I wanted to get rid of it or do I have to keep it because I know it says they're like a 30-year bond. They are a 30-year bond, but you can redeem it anytime after 12 months. So, and then you'd have a small penalty of the last three months worth of interest you would give up if you're taking it out in any point less than five years. So, you only have to leave it in there for 12 months and then you could redeem it. The interest is credited minus the three-month penalty and then you'd get your money back.

You could transfer right back out to your checking or savings. Does that make sense? Okay. Very good. Well, Terry, we appreciate your call today, my friend.

God bless you as you think through this. This is MoneyWise Live. We'll be right back.

Stick around. Delighted to have you with us today on MoneyWise Live, where we apply God's wisdom to your financial decisions and choices. I'm Rob West. We're taking your calls and questions today. We'd love to hear from you.

What's on your mind? 800-525-7000. We've got some lines open. You can reach us today. Again, 800-525-7000.

Let's head back to the phones to Florida. Hey, Fay, how can I help you? Yes.

Good afternoon. I have a question about the I-Bonds. I actually have some extra money. So, now I can go into my IRS, IRA, to use my traditional. Is that wise? And can I actually get it tax-free by using my traditional?

No. You're not able to purchase the I-Bonds using retirement accounts. So, an IRA, a 401K, those bonds cannot be held inside that retirement vehicle. So, it would have to be cash outside of a retirement vehicle. So, think something in your checking or savings.

I would not use money that would be allocated toward emergency savings because you need quicker access to that. And with an I-Bond, you're going to have to lock it up for at least a year. Think in terms of cash outside of retirement where the time horizon is somewhere between one and five years. That's really the ideal money for these I-Bonds. They will be taxed when you pull the money out or what's called redeem the bond. Then the earnings are applied and then they're taxed at that point in the year of the redemption. So, it's not too late to buy them, although they did say in order to qualify for the rate that has been going on through today at 9.62%, the Treasury said you had to open the account by last Friday, October 28th, in order for there to be enough time for the account to open and be funded through an electronic transfer to be able to qualify for the current rate for the next six months.

So, if you did open an account, again, outside of a retirement vehicle, and I wouldn't pull money out of a retirement account to make the purchase because of the tax implications, but if you had funds to apply, you're going to get the new rate that comes out tomorrow, which is expected to be around six and a half percent for the next six months, and then you'll get the next rate that will be out next May for the six months after that. But does that all make sense, Faye? Yes, and each year I can get up to $10,000. That's the maximum per year. Is that correct?

Yes. Yeah, an individual can put in up to $10,000 per year, per calendar year, yes. So, if you were married, you could put in $20,000 as in single. As an individual person, $10,000. But keep in mind, I mean, we're seeing really attractive rates right now.

I suspect over the next year, certainly in the next two years, the rates are going to fall dramatically back down to where we normally see them, which is much lower than what you're experiencing today, just because of the unusually high inflation we're experiencing. Okay, well, thank you so much. Thank you for all you do on the program. God bless you. Have a great one. Thank you, Faye. That's very encouraging. I appreciate you calling today and call back anytime. To Indianapolis, we go, hey, Rich, thanks for calling to the program.

How can I help you, sir? Yeah, thanks for taking my call and giving me some advice. I'm getting married in January, and my fiancé and I are in our 50s, and we both own houses and residents. We're considering next year whether we sell both houses or one and combine into one residence. What's the tax implication on capital gains, because we both are going to have equity a lot in both houses?

How does that work when we combine and go into one? Yeah, so you can each take a $250,000 capital gains exclusion when you each sell your houses, and then when you marry, you can only have one primary residence. If you file jointly, then you could have a $500,000 capital gains exclusion as long as you both live in the house two out of the last five years. So it's really a wash. It's probably easiest to go ahead and sell them and take the $250,000 exclusion each, and then you'd buy this new property, and then after two years of living in that property, you'd be able to qualify for an additional $500,000 exclusion on the home sale of that property if it were to appreciate prior to sale.

Okay, I think I follow you. So $250,000 would be the combined for selling both houses or $250,000 each on each one of our houses. Yeah, you each get $250,000 capital gains exclusion. So she has a primary residence, you have a primary residence, you've both lived in those primary residences for two out of the last five years, so you're each entitled to $250,000 in capital gains exclusion.

That's the actual gain, not the selling price. And then you sell that, now all of a sudden you buy a house together, now you're married filing jointly, and then that new property, if you live in that two out of five years moving forward and sell it, then you could qualify again. But as a married couple, it's not $250,000, it's a half a million.

Awesome, perfect. Okay, thank you very much. Always a good idea though, Rich, when you're doing things like this, especially the timing of when you file the first time is merely filing jointly versus separately. Always good to get some tax counsel when you've got kind of big things going on, like sales of property and you're moving from a single filing status to a married filing status. So probably good to understand the implications of that with a tax professional before you make your final decisions, okay?

Okay, thanks for the direction, appreciate it. All right, Rich, absolutely. We appreciate your call today. Well, folks, covered a lot of ground, but still a lot more to come on the program. We've got some lines open, we'd love to hear from you.

800-525-7000, that's 800-525-7000. Also coming up on the broadcast today, I'm going to help you cut through the world's noise and hear God's voice as it relates to money and finances. You know, as we think about this noisy culture we live in, well, we're bombarded with messages about how to live and what to think and what to buy. And we want to counteract that with God's Word.

Well, God's Word has a lot to say about how we should not be fooled by the messages of this world and in fact replace that with God's truth. I'll weigh in on that in just a bit. And of course your questions. Again, 800-525-7000. We'll be right back with much more on Money Wise. Stick around.

Thanks for joining us today on Money Wise Live, biblical wisdom for your financial decisions. Looks like we have one line open, 800-525-7000. Let's head right back to the phones.

Tampa, Florida. Jose, thanks for calling. Go right ahead. Thank you, Rob. Thank you for your ministry. I'm learning tremendously from you.

I have two questions. My wife and I have a 401k, which we thought we were going to be investing it through Vitality. And we have a CD, which was transferred to Millennium from Capital One, a Nira CD. I guess they don't do that anymore.

And I was just wondering, we change our mind. We don't want to invest it in the market. And we thought that if it was possible for us, you just removed it and put in a regular CD, both the 401k and the Nira CD on a regular CD. Okay. So you want to pull it out of the retirement accounts?

No, sir. She is already retired. We transferred it directly from the retirement accounts that we had onto Vitality. And the other one, Nira, they transferred to Millennium. I think it's Millennium Trust. We don't want to invest it in the market. And we thought perhaps that if it was possible just to transfer both of them to a regular CD.

Yeah. But the first question is the type of account. And then the second question is, based on that type of account, what investments are inside it that the money is deployed in?

And that can be cash, could be a CD, could be stocks, could be bonds. So the retirement vehicles you had, it sounds like you had a 401k and some IRAs. Those were transferred out, you said, to a new institution, but were they put into new IRAs, individual retirement accounts, or were they put into taxable accounts, thereby creating a taxable distribution? No, they were just, I don't know how we said it, maybe a standby, because we didn't invest it. We didn't do anything with them. Yeah.

Okay. But what type of account did you move them into? Was it a new IRA? I guess, yeah, the IRA is true. The other one, it is just some kind of government fund, just standby type, you know, getting nothing pretty much out of it. Right. But the key is, did you leave it inside a tax-deferred environment?

So that's the part I'm a little confused on. But I think the bottom line is you want to try to keep it in the tax-deferred environment. You don't want to pull it out until you need to use it because you're going to create a taxable distribution.

Now you can change the investments inside of it and you can transfer it from one IRA or 401k into a new IRA and keep it inside a tax-deferred vehicle. If you want to get out of the market with that, then yeah, I would probably look at bank products. And at that point, you're looking at maybe a CD ladder if you want to eliminate the risk. Probably better than a money market inside that IRA.

So that's certainly possible, but I wouldn't take it out because it's all going to be treated as income in the year that you remove it. So you're going to want to leave it in the IRA as long as you can. And then if you want to eliminate the risk at that point, you'd probably want to look at CDs. The other option if you all are concerned about risk is to look at an insurance product like an annuity. I'm not a big fan of annuities because they're complicated and they tend to be expensive. But if you do want to transfer the risk away from yourself in the stock market and transfer that to an insurance company, then you could get a little bit better rate of return in a guaranteed annuity that could still be in a tax-deferred environment instead of maybe getting two, three percent, maybe you get four percent plus, maybe even five percent, and let that grow on a guaranteed basis with no potential for loss. And then at some point you could convert that to an income stream down the road to supplement your retirement.

So I think either the CDs or the annuity based on what I'm hearing is what you are looking for, but I would keep it inside that retirement vehicle, the IRA, just as long as you can so you don't create a taxable event. It sounds like the other thing I might suggest, Jose, is for you to connect with an advisor, somebody who can really understand exactly what you all have, what you're trying to accomplish, what your income needs are, and help marry all of those goals and objectives up with the right strategy for investing moving forward. And that doesn't mean you have to use stocks either, but just somebody from a professional level who can really help you think through all of this, I think would be in order. And if you'd like to find somebody to help you with that there in Tampa, just head to our website moneywise.org and click find a CKA. Is that helpful? Oh yes, very helpful. The only thing is that I tried to get in touch with one of those and they charged me something like $2,000.

I'm a little bit of a cheapie and I thought it was too much. Well, keep in mind, so they're all CKAs operate their own businesses. They've just earned the designation to demonstrate their experience and character and training in biblical financial wisdom. So just because one has a flat planning fee that probably is a lot more in exhausted planning than you need, doesn't mean you couldn't find somebody else that could do this for you as well. So I'd probably interview a couple of more and find the one that's the best fit.

Many of them will do hourly planning, although in some cases there will be a minimum engagement. So I think you need some counsel though. So I would find somebody to kind of weigh in on your situation before you make a final decision. Thanks for your kind remarks with Jose and for listening to the program. I appreciate it.

Let's stay in Florida. Chrissy, you're next on the program. Go right ahead. Hi, thanks for taking my call. I appreciate it.

Sure. So my husband and I, we just got married. No, we just moved and our mortgage went up a considerable amount. We have a little bit in student loan debt, about $14,000 after the student loan forgiveness and about $4,000 in savings. And so I'm just wondering, because we kind of suffer the lifestyle creep a little bit, what is the best thing to prioritize in our budgeting as we set something new up with our new mortgage? Yeah, so you moved and so the mortgage went up because the interest rate went up on the mortgage.

Is that right? Well, so we just bought a much nicer house. It's about 4%, so we got a rate lock.

It's not terrible. Okay, yeah. I mean, we're over seven today on a 30-year fix, so that's not a bad rate. So you're just wondering how to prioritize paying down debt versus saving for the future. Is that right?

Yeah. Should we invest more and save more? I mean, should we drain our savings and throw it at the debt?

What's smarter moving forward? Well, I think you've got to take it in priority order. So first is to understand exactly where you're at. So I'm glad you have a good feel for what the interest rates are and what the balances are.

We got to cap your lifestyle. So I think the key is to recognize that as your income goes up, you've got to fight against this urge to spend more because that margin is really the key to accomplishing your goals, both on the saving and growing your wealth, as well as reducing and dumping debt. I would say the first priority is to get that savings account up to three to six months expenses, so you've got an emergency fund that you can fall back on so when the unexpected comes, you don't have to rely on credit cards. Beyond that, do you have any other debt besides the student loans in the house? No, we use the house sale to pay off our car, so that's it. Okay, and are you saving for the long-term retirement? Yes, so I have a 401k. My husband works for the federal government.

He has a 401k match and that's kind of what we're doing right now, but we held off on investing in additional things because we wanted to have money for the down payment on the sale of the house. Yeah, which you've already done, right? Right. Yeah, so what do you think you're putting in percentage-wise of your income in your retirement total?

Probably 10%, maybe. Okay, yeah, so that's great. So I'd focus now on the student loans, the balance that you're going to have beyond the loan forgiveness. Once that's done, I'd bump it up to 15% and I'd try to make one extra mortgage payment a year.

I mean, that's just my opinion. You could certainly go any number of directions, but I think anything in that direction would pay for that over the long term. We'll be right back. Thanks for joining us today on MoneyWise Live.

I'm Rob West. We're taking your calls and questions today, but before we head back to the phones, it's Monday. Our good friend Bob Dahl joins us each Monday with his market analysis and commentary. Bob is Chief Investment Officer at Crossmark Global Investments, and you can learn more and sign up for his weekly commentary at CrossmarkGlobal.com. Bob, coming off another strong week last week, huh?

My goodness, it was. This Friday was the capstone and it was a big up day as people are getting a little more confident that earnings are good and maybe the Fed's not going to raise rates forever, Rob. We'll certainly see about that. As you just kind of think about where we find ourselves, I mean, obviously a challenging environment given the realities of the data and yet sentiment seems to be improving. As we said last time, the earnings are less bad perhaps than we expected, so we can take that with a grain of salt.

What are you feeling at this point moving forward? Yeah, so this is the third double digit percentage gain that we've seen since the bear market started and at some point it'll be for real. Because inflation is still higher than the Fed funds rate, my guess is we still have more testing to go. I said, and I think we said this on the on your show here, that the risk is becoming more about time than it is about price. And while I think there's some risk, we gained a lot in a short period of time, we gave some back today, but I think there's going to be a lot of, I use the phrase, to-ing and fro-ing that's going to frustrate both the bulls and the bears to get some more time behind us and see how far is the Fed going to have to go, when is inflation going to come down, and when it does, what the economy looked like at that point.

They're the unknowns. Yeah, no doubt about it. Bob, this certainly though does give us a signal that once this bad news has kind of flushed through the market, whether it's now or we've got another down leg and that's coming, that there is quite a bit of money on the sideline and we will head higher and perhaps head higher quickly.

Yeah, that's very possible. As you know, we've talked about it before, never has the market bottomed until the inflation rate was below the Fed funds rate. So either interest rates have to go up some more and we'll get some of that, or inflation has to come down some and we'll get some of that too, and the lines will cross and then we can begin to have a slightly more constructive attitude. But we're not there yet is the point, Rob. The Fed has more work to do.

Yeah, no doubt about it. Bob, obviously the election on the minds of most Americans right now, how does all of this play into the market sentiment and the economy? Yeah, great question. In fact, our dollars deliberation next week is going to be entirely about the election. It'll come out, of course, the day before the election. But among the reasons the market has rallied, sentiment has moved back toward the Republicans not only able to take the House, but the Senate as well. And therefore checking some of the, oh, I'll say anti-energy, some of the potential for taxes going up, a lot of those things now are held at bay and the market's standing up and cheering. Yeah, all right.

Well, we're certainly seeing it, although we took a slight reprieve today, a lot of strength in the market, but a lot more data still to come in the days and weeks ahead related to earnings, interest rates, and of course that all too important inflation number. Bob, always appreciate you stopping by, my friend. We'll talk to you next week. God bless. All right. Check out Bob's Dolls Deliberations at crossmarkglobal.com where you can sign up for your weekly email.

That was Bob Doll, Chief Investment Officer of Crossmark Global Investments. All right, back to the phones we go here in our final segment to Homewood, Illinois. Hey, Scott, you're next on the program.

Go right ahead. All right. Thanks, Rob.

Appreciate the call. I know there's been a lot of conversation around I-bonds and getting money freed up to invest in I-bonds, so obviously I don't want to pull away from our savings or anything like that, our emergency funds, but I do have a pension fund with a previous employer that has about $14,000 of it. From what I've been told, I have about four options with that pension fund.

One is leave it alone and it will not grow. One would be rolled into a 401k or a ROP IRA, and then the last option would be taking a lump sum. So I want to get your feedback on potentially taking some of these and actually taking the lump sum along with the tax implications and investing it into the I-bonds.

Yeah, I'm not a big fan of that one, Scott. So let me just correct one thing. You said one option would be to roll it out to a ROP IRA. It would have to be to a traditional IRA, and then you could convert it to a ROP, but you'd have to pay all the tax at that point. I think I'd prefer you to roll it to a traditional IRA, leave it in that tax-deferred environment, unless you can add it to an existing 401k and combine it with other retirement assets. But the idea would be to take advantage of what Bob Doll and I were just talking about, and that is that the market is going to take off and recover here.

We've seen a lot of strength over the last four weeks. The bottom is probably not in. Most economists expect that the market will have another down leg here, but at some point, either later this year or next year, the market will recover and I think move to higher ground. And that's where you want money that you don't need invested. So you can take advantage of those long-term growth trends, especially if it's in a tax-deferred environment. The idea that you would go ahead and realize this, pay all the tax on that $14,000 added to your taxable income for the year, only to turn around and stick it in an I-bond at six and a half percent because the 9.6% is gone, and that's for six months, and then it's going to be even lower than that for the next six-month period. And then it's probably going to revert to the mean of where it normally is down in the low twos or below that. That's just not a good long-term play, especially when you have to pay the tax on the money coming out.

So I think I'd much rather you keep it in that tax-deferred environment, either in the 401k or the traditional IRA, and get it invested, take a long-term view, and let's take advantage of this market recovery whenever it comes. That's just my perspective on it, though. Okay. Well, I appreciate it. Thank you. All right, Scott. Appreciate your call today, my friend.

To Westlake, Ohio. Hey, Cat. Thanks for calling. Go right ahead.

Hi there. Thank you for taking my call. So I'm just calling because I need some investing 101 advice. So I recently got married, and by the grace of God, you know, we don't have any debt other than our mortgage. And we have about 50,000 in our savings account, you know, combined. And I just feel like, you know, it's just sitting there, and as we know, it's not growing very much currently. And I just, I want to know, is this a good time to invest?

If so, if you can just give me some steps or some advice on what I can do. You know, my family, we're immigrants. So, you know, I was always taught to, you know, work hard, you know, be careful with your money, all of that. But my parents never invested. So I don't know, I don't have a lot of background knowledge on that.

Yeah, no problem. Well, you're in a great place here. You're young, you're married, you've got plenty of savings, and that's a good thing, $50,000. And I love that you're saying, where do I go from here?

One thing I'd like to do, Cat, when we're done here today, you stay on the line, I'm going to get your information, and we're going to send you a gift. It's a book called Master Your Money by our friend Ron Blue. And it will help to unpack a lot of these topics that I think you, you know, don't feel well versed in from a financial literacy standpoint in terms of, you know, compounding and the dangers of debt and the benefits of investing over the long haul and why you need to keep your lifestyle in check, all of these big ideas, but through a biblical lens.

And so I want you to read that perhaps you and your husband, maybe you take a chapter at a time and just kind of walk your way through it. In terms of where to go from here, you said you have $50,000 in savings. Do you all have any debt? No, other than the mortgage.

Okay, great. And what is your monthly expenses? What do you all spend on a monthly basis on average? Roughly? Including the mortgage?

Yeah. You know, I'll be honest, off the top of my head, I don't know. We don't spend a lot, we're more of the savers, but at the top of my head, I don't know. I would have to go back and look. Well, let's say it's $4,000 a month.

Okay. So if it was $4,000 a month, I'd love for you to have at least three months expenses in a savings account. So in my example, that would be $12,000. If you wanted six months and you spend $4,000 a month, you'd need $24,000. So somewhere between $12,000 and $24,000, if you're spending $4,000 a month, would probably be what you want to put aside. And if you're spending more than that, then just do the math.

The rest of it is available, I think, for other goals. So do you all have any other medium-term goals? Are you saving to buy a house or a car or any other big ticket items? Yeah, actually a car for him.

Okay. And what do you think you'll spend on that car? Probably looking at around, well, something that's newly used, probably $20,000, but, you know, down payment of, you know, probably $7,500 or so. Okay, great. So I would add that $7,500 to whatever, you know, you set aside for the emergency fund and the emergency fund you need to keep in a savings account where it's liquid and safe and you can get to it for the unexpected.

And then we moved $7,500 into a car savings fund, so now that's there. Are you all saving for retirement through work in any way? Yes. Okay. And is it a 401k or something else? I'm a teacher, so I have a pension. Okay. And what about your husband? And he has a 401k. Okay, great. And do you know what percent of his income he's putting in? I believe it's six.

Okay. So I'd probably bump that up if you can to 10%. And if he's putting away 10% and you have your teacher's retirement and you've got a fully funded emergency savings account and you've already got your $7,500 earmarked for the car, then the rest of it is either for additional giving or you could supplement retirement by funding two Roth IRAs. So you could each put in $6,000 in a Roth IRA and get that invested and starting to grow. The 401k is going to give you a tax deduction and it's going to grow tax deferred and then you pay tax when you pull it out in retirement. The Roth is after tax money, but it grows tax-free. So I think between the Roth, the emergency savings, the car savings fund, and bumping the 401k up to 10%, you guys are going to be well on your way.

So you read this book, see what it has to say for you. And then if we can answer any further questions, give us a call back. God bless you, Kat. Thanks for your call today.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. Thank you to Dan Anderson, Ryan Hansen, Amy Rios, and Jim Henry. Couldn't do it without them. Hope you'll come back and join us tomorrow. We'll look forward to seeing you then. Have a good afternoon. Bye-bye.