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Escape the Auto Debt Trap

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
August 9, 2023 2:19 pm

Escape the Auto Debt Trap

MoneyWise / Rob West and Steve Moore

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August 9, 2023 2:19 pm

Often, taking the easy way out when we’re making a major purchase, can trap us into hopeless debt situations—especially when it involves car loans. On today's MoneyWise Live, host Rob West will talk with Howard Dayton about the auto debt trap and how to avoid it. Then Rob will answer your calls on various financial topics. 

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Evangelical Pastor Judah Smith says, Difficult situations and wrong choices conspire to trap us in hopelessness.

I'm Rob West. Put another way, often taking the easy way out can trap us into hopeless debt, especially when it involves car loans. I'll talk about the auto debt trap today with Howard Dayton, and it's on to your calls at 800-500.

That's 800-525-7000. This is MoneyWise Live, biblical wisdom for your financial decisions. Well, our guest, Howard Dayton, is the founder of Compass Finances God's Way and the former host of this program.

But once a month or so, he drops by to share some of the wisdom he's gained as a financial teacher and author. Howard, absolutely delighted to have you back with us. It's so good to be with you, Rob.

I always enjoy our time together. And Howard, as you know, in your book Free and Clear, God's Roadmap to Debt-Free Living, you have a great chapter called The Auto Debt Trap. Most people have to finance their cars these days, and boy, now more than ever given what's going on with auto prices. So why is auto debt a trap in your view?

Rob, it just seems like everybody does it. After home mortgages, car loans are the largest debts most people carry, and most people have them. There's a joke that the only reason why banks have drive-in windows is so cars can see their owners. You know, one time before my wife Bev went home to be with the Lord, we were purchasing a car, and the salesman started to discuss how they could finance it. He almost went into shock when we said, we'll pay cash.

I bet. And there's something to be aware of, and that is that many auto dealers discourage paying by cash because they'll lose the income if you don't borrow it through their finance companies. Yeah, so we've got to really be on our guard against that one. But usually, Howard, as you know, when we find ourselves in a trap, we work to get out of it and we learn our lesson, perhaps not repeating that in the future. That doesn't seem to be the case with auto debt, does it? No, it doesn't, Rob.

And let me be blunt. Car debt is one of the biggest roadblocks for most people on their journey to getting out of debt. It's especially dangerous because most people never get out of it. Just when they get to the point of paying off a car, they trade it in and purchase the newer one with credit. Yeah, so why this cycle, Howard?

In your view, why do so many people fall into this trap over and over again? Rob, I think there are several factors. First, car prices always seem to be rising faster than inflation, especially these days. New car and used car prices are just going through the roof. And you won't believe this, Rob, but I'm old enough to remember paying $2,000 for a brand new VW Bug.

I mean, that wouldn't get you a set of upgraded rims these days. And second, the advertisers have done just a masterful job of marketing an expensive image. Rather than selling a car as affordable, reliable transportation, their ads promise status and a carefree life. Well, until the first car payment's due, that is.

And finally, the cost of financing has risen significantly. Car loans now have longer terms, and the average monthly payment now are more than $700, making it really difficult, really challenging to get out of the auto debt trap. Well, Howard, let's turn the corner and talk about how we get out of the auto debt trap. And I understand you have a story about a $100 truck that allowed you to do just that?

Yes, I got a $100 truck that looked like it was a $100 truck. So I could save what I would have been paying in car payments for a few years so I could pay cash for a nicer car, and it worked. So here's what you need to do to get permanently out of auto debt. First, decide to keep your car at least three years longer than your car loan. Second, pay off your car loan. And third, after your last payment, keep making the payments but make them to yourself. Put those into an account that you'll be able to use on the next car purchase. And fourth, buy your next car with cash. The cash saved plus the trade-in value should be enough to buy the car without credit.

Then keep on making those payments to yourself so you'll never have to borrow for a car again. I love it. Well, Howard, we know that as we use debt sparingly and only for appreciating assets and always with unity with our spouse and making sure that we don't deny God an opportunity to work, this puts us in a position to experience God's best, and that's your heart for our listeners, isn't it? It sure is, Rob. All right. Well, so glad to have you with us, my friend.

I hope you'll come back real soon. God bless you, Howard. Thank you, Rob. Great to be with you. Howard Dayton was our guest today.

You can read his classic book, Free Clear, God's Roadmap to Debt-Free Living, wherever you get books. Your calls are next, 800-525-7000. We'll be right back. Thanks for joining us today on MoneyWise Live.

I'm Rob West, your host. Hey, we're going to turn our attention to your calls and questions here in just a moment. The number to call is 800-525-7000.

That's 800-525-7000. We've got some lines open. Always great to have our friend Howard Dayton along with us talking about auto loans. Hey, some good news out last month. Used car prices are finally starting to head lower, saw on average down 4%, which that's significant if you think about that over a 12-month period. We're still quite a bit higher than we were pre-pandemic, so not a good time yet to rush out and buy a new or used car as supply chain issues remain and chip shortages. We're going to see elevated car prices here for some time. However, signs that especially in light of the softening economy and higher interest rates, we think car prices will be headed down.

If you can hold off another year and continue to drive what you've already got, you should be well positioned to buy cars new and used at more reasonable levels. Also news out today, the Federal Reserve raising rates by another three-quarters of a percentage point, and the Fed was quick to pledge more hikes to fight inflation. As a result of that news, the market's selling off again today.

The Dow Jones, the S&P 500, and the NASDAQ all down about 1.7%. That's 500 points on the Dow. So, more market pressure, more volatility. It all points to the need to stay long-term in our focus. The only good news, perhaps a silver lining, is that as rates head up, we're going to get more attractive savings rates.

But now, more than ever, we need to be dumping debt, especially high-interest, variable credit card debt, because those rates are going to continue to climb. All right, we've got some lines open today for your calls and questions. 800-525-7000 will begin in Indiana. Rico, thank you for calling. Go right ahead.

Good afternoon, and thank you for your ministry, and Lord bless you and your team who continue to do his work. My quick question is, my job offers matching the 401k, and they have where you can take the taxes out before and after. Which is an advantage?

Or we could both of them. We could take out the deductions before and after. Which is an advantage? Yeah, so essentially you have a traditional 401k and a Roth 401k option, correct? No, a regular 401k. The regular Vanguard 401k.

Okay. Yeah, the thing, though, is that a traditional 401k is always going to go in pre-tax, so that money will be taken out pre-tax, meaning that will be excluded from your adjusted gross income for the year. The benefit of that is, of course, then you are not paying tax on that. That grows tax deferred, and so the taxes are not weighing on the gains, but then when you take it out in retirement, you will have the option to, well, you would have to pay tax on it as income. The other type of 401k is a Roth 401k, and that acts just like a Roth IRA, where the money would go in after tax.

You go ahead and pay the tax, and then through salary deferral, it goes into the Roth 401k, and then that grows tax-free so that you can pull it out in retirement without any tax implications. Do you think that's what you have the option to do there? Yes.

Okay, very good. Yeah, and so what is your age, Rico? I'm 53.

Alright, 53. And have you been contributing to the 401k up to this point? Yes. Okay, and have you been using the pre-tax version? Yes.

Okay, yeah. So I like the idea of having both options working for you in the future. The key question is, what are tax rates going to do? Are you going to be either earning more income in retirement than you are now? And or are tax rates headed higher?

We think they probably are. This is probably the lowest tax environment we'll see for the foreseeable future. So even though you may be earning less in retirement, if tax rates are higher, you could be paying more down the road, which would cause you to want to put the money into the Roth version. Go ahead and pay the tax now.

Let it grow tax-free. The other benefit is that has no required minimum distributions, meaning if you don't need that money, you could let it continue to grow in retirement. The other option is if you believe your income will be lower in retirement and tax rates are going to stay level, which they're probably not, but let's say they are and your income is lower, well then you could make a case that it would be better for you to pay the tax down the road in retirement because you're earning less, therefore you're in a lower bracket and you could take advantage of it then. We don't know the answers to those questions and so there is a strong case to say, well let's get both of them working for us.

So perhaps if you've been focused on the pre-tax version of your 401k, perhaps for this next season make the contributions to the Roth version and then you'll be able to take advantage of whichever is more advantageous to you as you begin drawing out in retirement. So I kind of like both of these buckets working simultaneously. Does that make sense? Yes, it does. Thank you very much. All right. You are very welcome. We appreciate you checking in with us today.

800-525-7000 is the number to call. We've got some lines open. Let's head to Davenport, Iowa. Kathy, you're next up.

Go right ahead. Hi. Thank you for taking my call. My husband died some months ago. He had earned a good salary but was in a car accident and ended up dying from a massive head injury. So we called Social Security and got a number on what they said his payments would be but I'm wondering if there's a chance, I don't even know if they allow this, but if I could talk to someone there and I would like to know if you had an idea of what title that person would have because as you know, sometimes the people you get on the phone don't really know a lot. But I was wondering if there is a way to call Social Security and find out if they could up his monthly payments to me because I'm having a tough time making it.

Yeah, I'm so sorry to hear that. Kathy, unfortunately, Social Security benefits are based on one's work record or relationship to someone with a work record, not based on need. Have you filed for survivors benefits? They would be equal to your husband's benefits in this case.

No, I have not. I just have started to receive his benefits. Okay, so you probably are receiving those survivors benefits but it'd be worth a call just to double check. Do you have the ability to claim your own benefits? No, no longer because when he passed away, they were quite small to begin with but then I lost those benefits and I just started to receive his benefits.

His benefits, okay. So yeah, likely that process has already taken place and because that benefit amount is based on the work record and not based on need, I think what you're going to find is there's really not any opportunity to get that up. So I think at this point, you might want to look for assistance from other government agencies. There's the SNAP program for food purchases if you qualify.

Iowa has a low-income home energy assistance program to meet the partial cost of home heating. Those would probably be your best options. I mean, it never hurts to call SSA,, schedule a meeting to go see them or connect with someone over the phone. But I don't think there's going to be any additional assistance there based on need, unfortunately. I appreciate your call today.

This might be an opportunity to look to your church for some help or perhaps some part-time work. And Kathy, God bless you. We'll be right back.

Stay with us. Delighted to have you with us today on MoneyWise Live. I'm Rob West, your host, taking your calls and questions today on anything financial. We have a few lines open. 800-525-7000 is the number to call. Let's head right back to the phones.

Homer, Alaska. Hey, Jimmy, thanks for calling. Go right ahead. Thank you for taking my call. You're a popular guy to try to get a hold of, and I appreciate the ministry.

You can do everybody. So I mean, it's a lot to get on here. I appreciate it. A couple questions. A two-part question here. A while back, you were talking about, you know, when someone buys a vehicle, you know, what to watch for so they're not either upside down or, you know, go into a bad investment.

And you were talking about values. So my question is, how do you or what do you recommend, I guess, when someone's buying a car and they're looking at all the options like undercarriage spraying or things like that? So they know what they're buying is not going to be a bad investment if they're planning on keeping it more than a couple of years. And the other part of that question is if someone already has an auto loan, they kind of had an idea what they're buying or already have, how do they transfer that from a personal auto loan to put under their business name and it still being a loan under the business?

And how does that benefit you? Yeah, yeah, very good. Well, a couple of things there. So just in terms of figuring out if a car is worth the purchase price and the quality of it, I mean, starting with the price, there's a lot of great resources on the web where you can determine both the trade value and the private sale value of an automobile based on the condition, the make, the model and the, you know, the miles that are on the car. I'd look to or to establish that value. That would be a great starting place. Just recognize we're in an unusual season right now where cars are a bit more expensive just because of the pandemic and supply chain issues.

But that'd be a great starting place. In terms of finding out whether something is in good working condition, I would have a mechanic or two that's independent that you select based on a referral from somebody that's a trusted source who's perhaps used them for a long time. Give the car a real once over just to give you a good understanding of the condition of the metal and underneath and all of the working parts. I mean, these days, cars can be hooked up to a computer to determine really kind of what the status of the car is and whether there's any major concerns that you need to be aware of.

But I would absolutely, if you're buying from a private sale where you don't have any kind of warranty, get that type of inspection done with an independent mechanic that's trusted. In terms of buying it as a business auto loan, you can certainly have it refinanced in the name of the business. A commercial auto loan is essentially where perhaps if you're looking to get out from a personal guarantee, you can do that. The idea there is that they have the car or truck as collateral and so that reduces their risk, oftentimes allowing you not to sign personally. They generally carry lower interest rates than unsecured business loans because of the built-in collateral. You will have to provide some documentation, first showing that you own the company, so business license and registration, EIN, and then probably bank statements, tax returns, profit and loss statement, that type of thing.

You may also have to show personal information as well depending upon whether you're guaranteeing it personally and then obviously they have the recourse of repossessing. In terms of the benefit to you for doing that is obviously you could make that an expense of the business if it's legitimately used for business purposes, which then reduces the amount perhaps that you're paying to yourself that's taxable because that becomes an expense of the business. I would talk to your CPA or accountant about that just to make sure you understand the implications of that and that that's going to prove worthwhile for you financially before you go through the hassle of trying to get it refinanced in the name of the business and all that will come with doing that. Does that make sense?

Yes and no, but I think maybe kind of my question because I didn't know you could refinance from a personal end to the business and doing it that way and I have an LLC, so I'm a sole proprietor. And then the other part was when you're looking at a vehicle and evaluating it, I think a while back you had instructed maybe it's not a good idea to have undercarriage spray or buying add-ons from a dealer. How do you know like some of those are not a good option to take just to kind of save what you've spent essentially because I mean a car is not a really good investment, but if you can get the most for your spending, wouldn't it benefit to have? Yeah, I would love to have that coded so it lasts an extra two years or increases the value of the car or helps the business bottom line that yes, now I've got a vehicle that's worth $60,000 that's going to still be worth $60,000 or $70,000 after the couple of years because it's been taken so well care of or it's got these extra add-ons.

You know what I mean? Yeah, I think the key is just are the add-ons worth the cost and I think that's where if you go to Consumer Reports, you'll see that a lot of times the extra add-on cost especially from the dealer just doesn't pay for itself. These days, cars are made in such a way that if they're maintained properly, you don't necessarily need those extra add-ons that can be quite costly when you're buying them from the dealership. So I think depending upon what it is, I would just do your research and make sure that you're really getting the value out of it before you do it yourself. Also, a lot of times you can do things on your own. So for instance, a popular add-on at a dealership is scotch guarding the interior.

Well, that's something you can do with a can of scotch guard. So it's not necessarily always best to go through the dealership when you can do certain things yourself. So I would just make each of these, do your legwork, do your research before you make a decision on a costly add-on and make sure what you're getting makes sense.

It could be that depending on the part of the country you're in and obviously in Alaska there, you've got some heavy winners. It could be that based on the longevity of what you're hoping to get out of this automobile that it does in fact make sense for you. So I think that's where you need to do your research and just do a cost-benefit analysis before you make the final decision. Jimmy, I hope that's helpful to you. Thanks for taking the time to be a part of the program today. We appreciate it very much.

Folks, we're going to take a quick break and we come back. A whole line of great questions here as we apply God's wisdom from the Bible to your financial decisions and choices. Thanks for being a part of MoneyWise Live.

We'll be right back. Great to have you with us today on MoneyWise Live where we apply God's wisdom to your financial decisions and choices. Hey, we decided to extend our special offer a few days to give you an opportunity to get the three-book Young Reader series called The Secret Slide Money Club from our friend Art Rayner. It's a fun read for ages 8 to 12.

Art uses humor and adventure to teach children the foundational principles of financial health, give, save, and live. If you'd like to access this three-book series, you can head to, click the Give button at the top of the page, and request your copies with a gift of $25 or more. Sending this resource to you is just our way of saying thanks for your generous support as MoneyWise Media is a not-for-profit ministry and we rely on listener support to do what we do and bring you this broadcast each day.

Again, and just click Give and thanks in advance. All right, back to the phones we go. Just a couple of lines open at 800-525-7000 to Noblesville, Indiana. Hey, Sheila, thanks for calling. Go right ahead. Thanks for taking my call.

I appreciate your time. Just have a couple quick questions. One of them is, I was thinking about combining my credit cards with the Christian counseling and turning it over to them so that I would be getting them paid off quicker. If I have them, I use them. I'm kind of a bad person. If I have them, I use them. So I thought if I did that, that would cut the interest and pay them off quicker, but I'm trying to get my credit score built and I wondered how much of a negative effect that would have on my credit. Yeah, it should be minimal, Sheila.

First of all, you're not a bad person. There's a lot of folks who really struggle with credit cards. I think recognizing that temptation is something that has been derailing your financial situation is really key and just acknowledging that that's the case and moving into a program like this I think would really help you for a couple of reasons.

Number one, the accounts would be closed so we wouldn't use them anymore. Number two, the interest rates will come down, which means more of your payment every month is going to principal reduction. That's key and it's going to be a level payment. It's not going to decline as the balances decline. You put all that together and you should be able to pay these off 80% faster. As to the credit score, I understand that you want to build that over time.

That's not a bad thing. I think the primary objective should be to get out of debt. Now with regard to the implications with credit counseling and debt management regardless of which nonprofit you use, there is a minimal impact in the sense that the fact that you're in credit counseling is not a part of the credit scoring algorithms. Where it could affect you is in the closing of the accounts. So as these accounts are closed, then that limit comes out of the equation which then changes your credit mix, it changes your credit utilization ratio and so that could have a minor impact on the credit score. But here's the thing, the reality is if you get these paid off, get these balances coming down as quickly as you will with debt management, your credit score is going to take care of itself over time. And if you're not out shopping for new loans, that's the least of my concerns. So if you're not planning to buy a new house or a new car that's going to require you to qualify for debt, any kind of temporary decline I think is going to be minimal.

And long term, you being out of debt with regard to these credit card accounts and continuing to be an on-time payer, which you will be, is ultimately going to dramatically improve your credit score. So keeping the big picture in mind, I would say go for it and is the trusted resource that we turn to. I have one more question if you have time.

Yes, ma'am. It's about a car that I just purchased and it turned out to be a lemon. I've had it since the end of July. And there's been, I've made the first payment in September and I've got, or August rather, and I've got the second payment coming due in a couple of days and I've tried to get out of the car. It's nothing but a lemon and it's used and the dealer that I bought it at is taking care of everything, but it's just the fact that it's just one thing after another, after another, after another. And I just feel like I prayed about it and prayed about it and thought I was making a good decision.

Turns out I didn't make a good decision. I feel like I got took and now I've got a car to pay for and their comeback to me is we're taking care of everything. By the time it gets all fixed, you'll have a brand new car and it's got a two-year, 24,000-mile warranty that comes along with it, but I'm over it.

Yeah, I totally understand. Well, you know, despite our best efforts to make sure we're buying a reliable car that fits within our budget, these things happen. The good news is Indiana, according to what my team is telling me, has a very generous lemon law for cars and it makes no distinction between new and used cars. So you need to report the problem within 18 months of the ownership of the vehicle and you take your vehicle to an authorized dealer for repair.

It sounds like you've done that. Allow them a reasonable number of attempts to repair it and a reasonable number means your vehicle is subject to at least four repair attempts or is out of service for at least 30 days and the problem still exists. And if that's the case, then the lemon laws could be put into place in your situation. So I think you need to keep good documentation of all these repairs and if you get to four attempts and the problem persists, then I think at that point you should look at perhaps pursuing the lemon law for this particular vehicle. It just seems like it's one new thing after another, so that may not qualify as the lemon law.

It may not. The good news is, as you said, you've got the warranty and the dealership is willing to continue to repair it. I understand that's frustrating and it's out of service, which is an additional hassle. But I would certainly keep good records and perhaps do some research on the lemon law yourself and perhaps even be talking to the original manufacturer to see if they can provide any assistance for your situation given this ongoing issue. Hopefully it's just a series of events that you're going to get beyond and then you'll have a good car in working order. Glad to hear you're not coming out of pocket for these things at the very least.

That would certainly be more difficult. But as long as you keep fixing it, you have to keep bringing it to them and then keep that documentation. But we appreciate your call today, Sheila. You keep us posted on this situation and I hope it improves. Let's head to Indianapolis. Kendra, you're next on the program. Go ahead. Hey, Kendra, are you there? Hello?

Yes, you're on MoneyWise Live. Go right ahead. Yes, hi. I don't know if you can hear me well.

My phone's being funny. Yeah, I can. Go ahead. Good.

Okay. So I'm calling because I'm kind of in the situation where I could have the option to rent a place to live or possibly to buy. I'm just wondering if it's a better decision to find some place to rent. That's the hard part, though. It's hard to find an economical place to rent. The prices of rent are pretty high. Absolutely.

Which is why I'm also thinking of buying. Yeah. The thing is, to avoid PMI, I have excellent credit. My credit's over $800. But if I want to put a good down payment to avoid PMI, I'll probably consider taking money maybe out of my retirement fund because it's not doing that good there anyway.

Yeah. I would caution you against pulling it out of your retirement account and I would love for you to build up that down payment. Let's do this.

I've got to hit a quick break. When we come back, I'll talk about the implications of pulling that money out of your 401k, both in terms of what's going on in the stock market right now as well as the tax implications of that. And then we'll talk about kind of how you think about preparing to purchase a home and positioning yourself to do that in a way that makes sense financially for you.

If you'll just hold the line, Kendra, we'll tackle this just around the corner. This is MoneyWise Live, biblical wisdom for your financial decisions. We'll be right back. Great to have you with us today on MoneyWise Live, where we apply God's wisdom from the Bible to your financial decisions and choices. I'm Rob West, your host.

Thanks for being along with us. Just before the break, we were talking with Kendra in Indianapolis. She's in her 40s. She's looking to buy a house or rent, trying to determine what the best approach is for her. She doesn't have a down payment and so she would be looking to avoid PMI by pulling the money out of her 401k and wondering with the market not doing well. Is that a good idea? Kendra, let me ask, is this your first home purchase? Would you be a first time home buyer?

No, actually. The downside here is I'm not a big fan of pulling out of a 401k. It's just expensive money. There is an exclusion on the penalty if you're a first time home buyer up to $10,000, but if that's not the case, you'd have the 10% penalty if you're under $59.5. Plus it would all be added to your taxable income, which could push a portion of this up into a higher tax bracket. Not to mention those unrealized losses that you've experienced, like everybody else with the market under so much pressure right now, will be locked in.

They'll be realized. So you'd no longer have the ability for that money to recover over time and I believe it absolutely will. Even though we're under a lot of pressure right now and the headwinds continue with inflation being a hot topic because it's real. The Fed was talking about it today.

We've got another three quarters of a point interest rate hike today with more to come just because the Fed is so focused on fighting inflation that plus a number of other issues are going to weigh on this economy for the foreseeable future and the market will struggle. Now the market will eventually recover and it will recover probably six months or so before the actual economy recovers because the market tends to look out six months or more. And we'll start to see signs that the economy is going to recover and the market will take off. And when it does, I think all those losses you've experienced will recover and we could very likely enter into another bull market like we had for the last dozen years before this one.

And with you being in your 40s, you've got time on your side. You've got a minimum of a 20-year runway I would say until you're thinking about using this money in retirement. So you have the opportunity for this to rebound and then grow for the future.

And so locking in those losses and adding to the tax bite with the penalty plus making all this taxable income for the year I don't think makes sense. So what do you do in the wake of that? Well, there's not a great option because as you said, rental prices are high but that doesn't I think provide an excuse for buying a home before you're ready. I would even with these high rental prices still rather see you rent and do the best you can to save as much as you can so you can actually go in with that 20% down payment.

And I would make sure that your principal interest taxes and insurance payment on the mortgage that you get after you put 20% down is no more than 25% of your take-home pay. And I think that's going to be challenging but if you do that, it's going to ensure that you have enough left over for everything else and to have some margin to accomplish your goals. But that probably means you're going to have to push this home purchase down the road quite a bit. Give me your thoughts on all that though. Yeah, I think that sounds wise. Yeah, I think so. I'm just trying to find a good price on rent.

Well, and I realize that's certainly challenging. Now, the housing market is changing. We're starting to see it cooling a bit on home purchases which is going to eventually trickle down into the rental market especially as the economy continues on this course. If we slip into a recession and we start to see not as good of labor numbers, unemployment creeps up, I mean all these things are going to cause the housing market to soften not to mention what's going on with mortgage interest rates right now. So it could be that you get into a 12-month lease and it's a whole new ballgame 12 months from now.

I think the key is positioning yourself to live well within your means so you have money left over to save and do that diligently and see if you can build up enough for that down payment perhaps a couple of years down the road. So I realize that's probably not what you were looking for but I think you'll be glad that you did rather than maybe pushing ahead a little prematurely and perhaps regretting that you did so. I appreciate your call today. Thanks for being a part of the program.

Tampa, Florida. Greg, you're next up, sir. Go ahead. Hey, how you doing? I'm well, thank you.

Good. Yes, I had a question concerning my situation. My wife passed away last year, August.

So it's just been a little over a year. We had life insurance, which I thank God I had that, but she had a 401K with her job and she also had the life insurance policy through her job. So I've received that. But I'm just trying to figure out for myself right now because I have, I don't have a 401K with my job, we have no benefits. The only thing my job offers me is insurance. And that's it. And vacation. That's it. So I'm trying to find out what's the best way to invest the money that I have received. It's not much.

18,000 from the 401K and another, I think it was 20,000 from the life insurance policy that the job gave. Sure, sure. Yeah. And what is your age, Greg? I'll be 60 in December. Okay.

All right. And are you planning to work for some time or do you have kind of a target date for retirement? I'm currently working right now at my job. I've been there 28 years, come the 25th of this month. And I was hoping to be able to work another two years to give them even 30. But because there is no benefits and a lot of things are changing that we have coming under new management, it's a family-run business, but things are just changing and the atmosphere is not the same as it was when I was able to, you know, be there in better conditions.

And the vibe is getting bad, the tension there is bad, it's stressful. Yeah. Greg, what assets would you be looking to fund your retirement? I mean, you've got this 20,000 life insurance proceeds, the 18,000 in the 401K. Are there any other assets that you would have access to in retirement? Well, the only thing I have is the life insurance policy that we had and thank God we had taken that out. I mean, it was literally like two years prior to her passing that we- What are the proceeds from that?

It was 250 and they put 127 in for my- that went into the White House, the insurance agent that I had. And this is all just- I mean, I'm not literate at all when it comes to investing. Okay. Yeah, let me suggest you do this, Greg, because I think there's a lot of moving pieces here. And obviously, you need to be well-planned and I think that's where you need to start. Before anybody takes over investing this money, I think you need to do some planning with a trusted advisor. I'd recommend you go to our website at, click find a CKA, look for, I would say, two to three certified Kingdom Advisors there in Tampa to visit with. Start with some planning to look at what are the assets that you have, the life insurance proceeds plus this 401k. Look at how that needs to be managed in light of when you're looking to retire. They'll want to do some cash flow planning and budget planning to determine what will your expenses be in retirement.

And if you're looking to retire prior to when it makes sense for you to start collecting Social Security, then I think the key is you have to determine whether the assets you have will support that or perhaps if you retire from this current job, you need to be looking to going back to work somewhere else so that you can cover your bills, let this life insurance proceeds continue to grow, let the 401k continue to grow and until such point where it makes sense for you to begin collecting Social Security on your own work record. But all that requires planning and then based on that plan, an investment strategy that will come out of it. But it would be premature for me to try to recommend what that should look like without understanding all the pieces that you have going on here. I think, Greg, that will give you a lot more peace of mind to know that you've got somebody that could be helping you look at all of this.

So head to our website and click Find a CKA and let's start there. And if we can help further along the way, let us know. So sorry to hear about your wife's passing, my friend, and thanks for calling today. God bless you.

Quickly to Florida. Ed, thank you for calling. I've got just about a minute left. Go ahead.

Thank you for taking my call, Rob. So I have two questions, but I'm going to ask one. So it's about life insurance. I would like to set up a life insurance that includes cash value, but I'm not sure. I know there's a different type of life insurance. I am 37 now, so thank God I have no medical issues. So I would like to get your opinion regarding which life insurance I should get.

Or yes, any advice. And why are you thinking you'd want to add a savings component to the life insurance? Because I'm thinking like I do a little reading regarding life insurance, like if I need to borrow from it in the future, there's of the cash value. So I'm not really sure how that works.

So that's why. Yeah, I'm going to offer you an alternative to that. I would prefer you to go with term insurance. That's pure insurance, which you're going to get very inexpensive as a healthy 37-year-old. It'll allow you to get enough insurance, which would probably be 10 to 15 times your salary, payable to your wife, if that's who would be left with a hardship if you passed. And then do your savings through a company-sponsored retirement plan, your 401k, or an IRA, as opposed to trying to mix your savings and your insurance. That's just going to be my preferred option for you, Ed, especially as a healthy young man. We appreciate your call.

MoneyWise Live is a partnership between Mooney Radio and MoneyWise Media. Thanks for being along with us. We'll see you tomorrow. Bye bye.
Whisper: medium.en / 2023-08-09 20:09:47 / 2023-08-09 20:26:04 / 16

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