The Cost of Raising a Child

Psalm 127 reads, Children are a heritage from the Lord.

Like arrows in the hand of a warrior are the children of one's youth. Hi, I'm Rob West. God's Word also tells believers to be fruitful and multiply and fill the earth. But it seems that economics is making that ever more difficult. I'll talk about it with Chad Clark 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 journey. Well, our guest today, Chad Clark, leads the team here as Executive Director of MoneyWise Media.

He's also a keen observer of financial trends. So he's going to join us today to talk about the rising cost of raising a child. Chad, great to have you back on the program.

Happy to be here. Chad, today's topic obviously hits close to home for you and for me, the West family. We have four kids.

Our twin girls are 13, all the way up to my senior in high school, Colby, who's 17. And I know you have two boys, four and six, so this is a pretty important topic, isn't it? Oh yeah, I'm looking forward to getting some parenting wisdom from you today. Well, we should have had Julie on the program for that, but that's okay.

I'll try to do my best. Well, you've come across some interesting statistics about what it costs to be a parent these days, perhaps more expensive than ever. Fill us in. Yeah, so according to the Brookings Institute, a married couple with two children will spend upwards of $310,000 to raise both children through age 17. That's through high school. So it seems like you're pretty close to getting the first one out of there and off the books, right? I don't know about off the books because it's only just beginning when he goes off to school, although he is a pretty good student.

There you go. Yeah, so through age 17, what that comes out to is about $18,000 a year to raise these two children. And again, this is based on some data from children that are born in 2015 through age 17.

Okay, interesting. Yeah, so that's perhaps for some of our listeners a little staggering. Maybe they're thinking about their budgets and needing to reorient some things. Where do you think these numbers are coming from? Well, these numbers come from the USDA and they're based on an inflation adjusted calculation based on 2017 numbers. So pre-pandemic numbers that have been inflation adjusted to show what it would cost in today's dollars to raise a child. These costs range from everything from housing to food, clothing, healthcare, childcare. If you've got young ones, diapers are a huge expense. Thankfully, we're beyond that in our household, but diapers are a big expense. Haircuts, sporting equipment, activities, dance lessons. I mean, you can go on and on and on about the costs to raise a child. And that's basically what they're factoring into this $18,000 a year figure. Interesting.

Now, I know in the Clark household, JL does all the haircuts, right? So you don't have that expense. Oh, absolutely.

It saves us a lot of money, which is why when you see me come in the office and I'm missing a chunk of hair, we had a little bit of a scuffle while we were doing that. Now, one thing I didn't see on this list that here in North Atlanta is the budget buster of all, and that is travel sports. It just boggles my mind what people spend on their kids' sporting events and teams. Yeah, absolutely. Activities are a huge expense. And depending on what your kids are looking to do and you want to see them be successful and invest in them, it can be a substantial investment on the part of the parents.

Yeah. Often, it's not just getting on that travel team, but then you've got the private coach on the off days that's training your child. And by the way, most of them are not going to play professional sports.

I mean, maybe the Clark kids are the exception, I guess. Well, I'm just hoping I don't have to pay for college. So if they can get a college scholarship for sports or academics, we'd be extremely grateful. That's certainly my plan.

All right. Do you think this trend is going to continue in terms of these elevated costs? Well, personally speaking, I think I'm not expecting my boys to get any cheaper over time. In the short term, inflation is going to continue to play a substantial role. Food prices obviously are a big one. That's when our household has really felt the most. At-home food prices, which are the grocery store costs, are up 13.1% July 2022 versus the previous July.

13.1%. It's a big number. And our boys are eating quite a bit as they get older. So we're really feeling the pressure in that area.

So I think as inflation continues to put pressure on us, we're going to continue to see this cost increase over time. I know food is a killer in our house. We go through a gallon of milk probably every two days. And with two teenage boys, food is always scarce around our home. All right. When we come back, more with Chad Clark. What are some ways you can manage the costs of raising your kids?

And are there tools to help with that? Well, we'll share that and much more. We'll be right back.

Inbox. Delighted to have you with us today on MoneyWise Live. Joining me today in this segment of the broadcast, Chad Clark, Executive Director here at MoneyWise Media.

He leads our team as we serve God's people to help them be wise stewards of the money God has entrusted to them. And today we're talking about the cost of raising a child. Chad said some data he recently saw that indicated a married couple with two children will spend upwards of $310,000 to raise both children through age 17. And with inflation running rampant, it's important that we think about how to do that wisely to both educate our kids about money management from God's heart, but also to manage our spending and our costs so we can live within God's provision. Chad, what are some things you all have found as you and Jael have worked to manage expenses and particularly related to having two kids? Yeah, there's really four things I think that we've found help us manage these expenses for our children. The first one, no surprise to you, is going to be have a spending plan.

This has been so substantial in the Clark household. When Jael and I first got married, we didn't have a spending plan. I've got a background in finance.

I went to school for it. I had my Excel spreadsheet, but I didn't really have a spending plan. And we definitely was not a plan that Jael and I talked about or reviewed or really planned out together. And so having a spending plan I think is just absolutely critical. And then when you introduce children into the equation, there's a lot of variables that come into play having children, like we talked about before, just the activities in school and everything that goes along with children is just requires some additional planning. And if you have a spending plan, you can mitigate some of the anxiety and the unknowns that may come up financially by just sitting down, putting together a spending plan and being really intentional. I think that's the key word when it comes to spending plan is intentionality, being intentional about how you're going to use the resources God has given you to raise up your family and to glorify him with what he's given you. Yeah, obviously, a spending plan is so key because it allows you to give every dollar a name and manage your monthly expenses. But it's also key, Chad, as you know, to make sure that you have margin, because if you're living within your means, that margin is then the ability to think longer term, right, about everything from putting money aside to fund that education that you'll want your kids to have, perhaps in some cases, private school, recognizing there's going to be weddings and cars that are needed down the road without a spending plan, really difficult to save for those items. Yeah, I mean, the spending plan, again, it's not just short term, like you said, it's long term, it's planning and setting some money aside for those future expenditures and you got two girls. So I know that those wedding expenses you're already saving up for, I'm sure. Yeah, they're twins, so I'm just hoping maybe double wedding here or something. Oh, that's a good idea. Yeah. I'm not sure they're going to go for that, but at least... You can always hope, right? Yes, exactly.

Wishful thinking there. So yeah, having a spending plan is absolutely critical. And obviously, one of the tools that my wife and I use is the MoneyWise app. It's been a really useful tool for us.

We are in it every single day, adjusting our plan, talking about it, and really just reviewing how we're performing. So having a spending plan is important. And what we do in the MoneyWise app is we have a single envelope or category for both of our children. And we just put some money aside in that envelope each month and then we spend from it. But we've talked with other families and they like having itemized records for each of their children. So they'll create a group for one of their children and then break out the clothes for that child and the activities for the child. The great thing is that the MoneyWise app will allow you to either do it at a high level, like my wife and I do, where we just have a single envelope where we manage both of our children, or go into really detailed envelope categories to actually manage those expenses for your children.

Yeah. And that's really key because it gives you the visibility into those expenditures across the board, but specifically related to today's topic for your kids, and then allows you to see when you're out of money. And so perhaps you delay certain things to the next month because you know what's going on.

Yeah, that's exactly what it does. It helps you make better decisions. That's ultimately what the spending plan is there to do. All right, so we want to have a spending plan. And the second thing is to track your expenditures. And that's where the MoneyWise app can be helpful in both areas. What's the third thing that you and JL have found to be helpful? Yeah, I think that the communication is so critical and having a spending plan and tracking our expenses to that spending plan.

I want to touch on that one just real quick here. The tracking is sometimes gets overlooked. So we have a spending plan, we have it on Excel spreadsheet, we have it on a sheet of paper.

But if we're not regularly tracking those expenditures, we don't know how we're actually performing relative to the plan. And that's where communicating with our spouse really, the rubber meets the road because we're looking at our expenditures relative to the plan. And when you're communicating with your spouse about how you're doing and how you need to make adjustments, it makes a world of difference in being able to really be a good steward of the resources God has entrusted to you.

Yeah. Well, that communication is obviously so critical. Our friend Shanti Feldhahn found that when 70% of married couples have conflict over money, the two big things that help to alleviate that, one is having margin in your finances, but the second is communication.

You've got to be talking. And especially when things get a bit more complicated and when you add kids into the mix, they certainly do. Having that check in, whether that's weekly or certainly monthly, can really go a long way.

Yeah, absolutely. Communicating with your spouse. And again, using a tool we recommend the MoneyWise app is a great way.

You can have it on both of your devices and you can check in on it periodically and then come together and have some discussions. Again, for my life and I personally, it's been a tremendous blessing to have this tool to help us communicate better about money. All right. So have a spending plan, track your expenditures, communicate with your spouse, and what's number four?

The last one. This is a big one. It's communicate with your children. What an amazing opportunity for us to teach our kids how to be good stewards. One, they see how we are handling money, but sometimes we don't want to involve them in those communications.

We don't want them involved or necessarily being aware of the financial state that we're in. But I think it's important to involve your children in the communication process. Now, I'm speaking from a dad who has a four and a six year old, so a little bit different life stage for my children. But when they ask for something or they have a desire to purchase something, we bring them into that conversation. We let them know, hey, this is what this costs and this is what we have set aside. And our kids get a little bit of an allowance. And so we really try to encourage them to use their resources for some of those different things that they want to purchase. But communicating with your children about money is really important. Not just telling them, no, you can't do that or you can't have that, but really helping them understand why and what it means to be a good steward where you have to make these trade off decisions is really important.

Well, it's so key. Even if it's something as simple as teaching, give, save, spend, or just beginning to introduce this idea that God owns it all and that resources are limited and that hard work is a part of God's plan. We can teach those big concepts at the earliest of ages, but then as they get older, we can allow them to move into more difficult things. I think I've shared with you, Chad, there was one point where we turned our eating out portion of the budget over to our kids for a month and we let them sit around the table in the kitchen and it was hilarious just to watch them negotiate where we were going to eat that month and, all right, I'll give up lunch out after church if we can do pizza Friday night. And it was really fun for them to see that this money just isn't unending. It does have a limit and it can be really helpful. Well, Chad, just about 30 seconds left. Leave us with any final thoughts you have.

Yeah. So like we said, having a spending plan, tracking your expenses and communication with your spouse and your children is critically important. And we encourage you to check out the MoneyWise app. It's an incredible tool to help you do all of those things really well. We've got MoneyWise coaches who are standing by to help you set up your app if you're intimidated in setting that up. We'd be delighted to help you.

All right. MoneyWise.org. Just click app or search for MoneyWise biblical finance in your app store. Chad, thanks for being here. Thanks so much.

We'll be right back. Great to have you with us today on MoneyWise Live, biblical wisdom for your financial decisions. I'm Rob West, your host. We're taking your calls and questions today on anything financial 800-525-7000. That's 800-525-7000. We'd love to hear from you. Let's begin today in Cleveland, Ohio, WCRF. Gail, thanks for calling. Go right ahead. Hi. I have a 401k that I have to take $484 out for the first time.

And I don't know whether to leave it there or where to put it or to take it all out. I'm retired and I have no debt. Yes. Okay, very good. So your required minimum distribution is around $400, is that right?

$484, something like that, yeah. Okay. And you're 72 now or about to be?

Yes, I'm 72. Very good. Are you familiar with something called the qualified charitable distribution? No.

Okay. So there is an option, rather than just taking it out, if you don't need the money, which would add to your taxable income and then you'd have to just put it in savings or some other type of account, there is an option to actually do what's called a qualified charitable distribution where you're actually just going to send the money in the amount of the required minimum directly to your church or a ministry or charity that your passions align with and that will satisfy your required minimum and it won't be added to your taxable income for the year and you could do that and replace giving you were already planning to do, if you'd like, out of cash. So let's say you give a tithe or you have an annual amount you give to a favorite ministry or charity. Instead of giving that out of cash, you could replace perhaps all or a portion of that with your required minimum through a qualified charitable distribution.

Does that make sense? Yeah, but I don't really have an emergency fund and banks. They don't give you any interest to put in a savings account. What's the best banks to use for that? Yeah, so for an emergency fund, I would use a savings account. I'd use one of the online savings accounts because they're going to at least pay you a little bit of interest. Right now, the online savings accounts, they've been ticking up with interest rates. They'll keep going as interest rates rise. Right now, you can earn nearly 2% with FDIC insurance through either Marcus or Capital One or Ally Bank.

Those would be the three that I would look at. The only difference scale with the online banks is there's not going to be a brick and mortar bank that you can branch that you can walk into, but they're all federally insured through the FDIC just like a brick and mortar bank. Essentially, what I encourage folks to do is to set up an account which is free to do. There's no maintenance fees or minimums. You link it to your checking account electronically and then you transfer the money in as you're able to. If you ever need it, it's just two or three days away through an electronic transfer back to your checking account and it's all free. There's no expenses associated with it. Given that they're paying nearly 2% versus the maybe 0.1% or 0.2% you might get at a brick and mortar bank, I like that option a lot. Tell me your questions if you have any. What about annuity?

Is that a good thing to do? I'm not a big fan of annuities. They have a place, but they're not my first choice by any means.

They're complicated. They tend to be somewhat expensive. Using an insurance product to save is usually not my preferred approach. I'd rather you just take the money that you have, build up that emergency fund in liquid savings with a high-yield online savings account and then the balance that you have, if you have other assets, I would invest those in a way that's appropriate for your age and risk tolerance, perhaps with an advisor's help. But outside of an insurance product where you still have access to your money without surrender charges and penalties, you're not transferring the risk to the insurance company like you would be with an annuity, but you have full access to your money without the complications that come through those somewhat complex insurance products. What about I bonds?

Just quickly, and then I'll need to get to another question, but I bonds I like a lot. Now keep in mind, you've got to leave the money there for a year, but as long as it's money that you can be without for 12 months, there's basically no risk because they're backed by the U.S. government, where historically they might have been paying 2% because of what's happening with inflation right now, they're paying 9.62%. That's going to be good through November. It'll adjust at that point based on the consumer price index, CPI, which by the way just ticked up this morning when the latest number came out for August and that's what caused the market to sell off today, 1,200 points on the Dow. Inflation's not going anywhere and because of that, Gail, the I bonds are going to continue to be a very attractive investment. You can only put in 10,000 a year per person.

You'll buy these bonds electronically direct from the U.S. Treasury at treasurydirect.gov and as long as you can leave the money there for at least 12 months, I think they're a wonderful option right now. Okay. All right. Is that helpful? Yeah, very helpful. Thank you. Okay. Thanks for your call today. God bless you very much. 800-525-7000 is the number to call.

That's 800-525-7000. A quick email that came in from Lee. By the way, if you have a question for us, you can send it to questions at moneywise.org.

We'll try to read as many of those on the air as we can. Lee asked, what are the pros and cons of investing in gold? And Lee, the pros would simply be it's a store of value. It's a way to bring diversification with another asset class to your portfolio.

I like the simplicity. It's also a hedge against a disaster. Some call it a fear trade. The downside of gold is it doesn't have as good a long-term performance as a stock and bond portfolio. There's premiums, dealer markups on buying and selling if you take physical possession and it's not a passive income asset. It doesn't generate any income for you.

So how do I approach it? Well, I like it as a part of an overall portfolio where you would have maybe a 5% allocation. I wouldn't overweight in the precious metals and I'd probably buy an exchange traded fund that tracks the price of gold.

That way you don't have the dealer markups and you don't have to store it. Thanks for your email. We'll be right back on MoneyWise Live. Throw the heavy with us today on MoneyWise Live where we apply God's wisdom to your financial decisions.

800-525-7000 is the number to call. We've got two lines open. Let's head right back to the phones and welcome Lisa to the broadcast from Sandusky, Ohio.

Lisa, go right ahead. Yeah, what's the best way to start a budget? I've struggled with this for a long time. Yeah.

Well, a couple of ways. Number one is it really depends on how you want to go about it whether you're looking for more of a manual paper system or you want to use a smartphone app. I'd love for you to try the MoneyWise app.

We could give you a six-month pro subscription as our gift to you. One of the great things is we have volunteer MoneyWise coaches that would be delighted to walk alongside you in that process of getting it set up, getting you into the app, connecting all of your accounts which would download your transactions automatically. You'd establish your budget inside the app which then allows you to track against it either to see just how you're performing or if you want to use the digital envelope system, you can actually see to the penny what's left in each of your digital envelopes at any point during the month.

But the great thing is there's three systems in one. So if you want to be really hands-off and just kind of see a high level of how your money, your spending is breaking down by category, you can do that all the way to the digital envelope system where you're literally tracking every envelope and seeing what's left throughout the month. And then having somebody to walk alongside you in that process of getting it set up I think would be great.

So that would be probably the easiest way in my view to do it. The other approach is to take more of an analog approach if you will where you'd simply start cataloging all of the spending that you do perhaps for a 30-day or better yet a 60-day period where you're trying to capture all of your fixed expenses, those things that you get a bill for, your discretionary spending like eating out and clothes and entertainment that you don't get a bill for, and then any non-recurring expenses as well that might come semi-annually or quarterly. The idea is to get all of that into a budget on paper so that you know what you're spending each month and then you can compare that to your income sources to figure out how you're doing and where you need to cut back if at all so that you've got margin which is the key to funding your other goals.

Perhaps building your emergency fund or saving for the long term or those types of things. Which approach sounds like it'd be more what you're looking for, Lisa? The digital version. Yeah, great. Definitely.

Awesome. So what we'll do is, if you don't mind, stay on the line. We'll get your information. We'll reach out to you to make sure that you get a six-month pro subscription to the MoneyWise app just as our gift to you. And then we'll get you set up with one of our MoneyWise coaches who can help you get it all set up and get it to where you're able to track it. And then that way, whenever you have a question as to how you're doing, once it's set up as those transactions come in, the system will actually know which envelope they go in. And so as you open it and those transactions download, you'll be reconciled back to your checking or savings account or both and know exactly what you have left in each area.

And that's going to give you the information, Lisa, to be able to say, now, wait a minute. I'm kind of out here for the eating out budget this month. So either I'm going to cut it off or I'm going to transfer some surplus from another envelope in. But it gives you the information you need to really make those decisions and stay on budget, which the whole big idea behind that is to make sure that you're really controlling the flow of money, giving every dollar a name just not allowing it to slip out of your hands, which is really the key to funding those longer term goals.

So you stay on the line. We'll get your information and get that right out to you. Okay. Thank you. All right. We appreciate your call today.

God bless you. Let's head to Pennsylvania. Brad, you're next on the program. Go ahead.

Hi, Rob. Yeah, I've got a question is we found a CD through Edward Jones that pays three percent. And we're just wondering, is that a good buy? I mean, will it be hitting hidden fees and surcharges on top of that?

I mean, it sounds too good to be true. Yeah. What was the duration on that? Did you say 12 months? Yes. Yeah, that's a great rate.

Yeah. I mean, more most of the online banks right now, even the best ones, I think, are paying around two point seven for a year. So I think, you know, that would be better than, you know, what I'm seeing with some of the best rates. But I would go back to what we've talked about recently, which is the I bonds. You know, if you're looking for a 12 month duration, are you familiar with the inflation bonds? No, I'm not. Okay.

This could be a great option for you. So these are issued by the U.S. government, by the U.S. Treasury, and they've got a 20 year duration with a 10 year extension. But you only have to leave the money in for 12 months. And what's going on right now is because inflation is elevated, these I bonds are paying nine point 62 percent.

Now, that's only good. That's an annualized yield, but it's only good through the end of October. It'll reset in November, but it's going to reset based on the consumer price index, CPI, which is all over the news today because it's what's driving the market down because CPI, although we thought it might tick down for August, it actually ticked up even though gas prices and oil prices have been declining, which means inflation is going to be with us for a while.

In fact, maybe it's not quite as going in the in the right direction as quickly as we hoped it might be. As a result, these inflation bonds are going to be very attractive. Even when they reset in November, they'll be way ahead of anything you might get in the CD. And you have ultimate safety because they're backed by the U.S. government and issued by the U.S. government. So you can only buy up to $10,000 per person per year. And you have to buy the electronic bonds through the Treasury's website at TreasuryDirect.gov. But given that kind of rate, you know, that could be a great option for you as well. Okay, yeah, I'll check into that.

Very good. But I like the 3%. If you had money beyond the 10,000, which is what you could put in the I bonds per person, you know, that is a very attractive rate.

As long as it's a bank that's FDIC insured, I wouldn't have any problem with that. But again, to learn more about the inflation bonds, you do that at TreasuryDirect.gov. We appreciate your call today. Kathy, it sounds like you have a question about I bonds as well. Go right ahead.

I sure do. So my question is, I'm retiring next year. And I wonder if that makes sense to take $10,000 out of my 401k to put into an I bond? Or would there be a penalty?

Or, you know, would that be a good idea? Yeah, as much as I like the I bonds, and that rate is just so phenomenal right now, I don't like pulling out of a retirement account, you would have to take a distribution from that 401k. And if you're over 59 and a half, you wouldn't have any penalties. The downside, though, is that now all of a sudden, that's taxable to you.

So you've created a taxable event. And then secondly, you know, these I bonds, although they're paying great rates right now, they'll revert back to the mean as we get, you know, on top of this inflation, the Fed has made it very clear, they're going to continue to raise rates until we see inflation curbed. Now, we may not go right back to the 2% target we normally have. But, you know, we certainly will be I think, around three or 4%, which means these I bonds, although they're great right now will come down. And so I think I would be looking longer term with that 401k money. And even though you're in retirement starting next year, if the Lord tarries and you're in good health, you need that money to last a long, long time.

And I'd rather have it in the tax deferred environment of the 401k and some good high quality investments, as opposed to, you know, having an outside of that retirement account in the I bond, which a couple of years from now may not be paying anywhere near what they are today. Does that make sense? Absolutely. Thanks so much. You're welcome. I appreciate your call. We're going to take a quick break. More to come on Money Wise Live just around the corner. Stay with us. Thanks for tuning in to Money Wise Live as we apply God's wisdom to your financial decisions and choices. Let's head back to the phones today.

Claremont, Florida. Carlos, thank you for your patience. Go right ahead. Yes. Hi, thank you for taking my call.

Sure. I just retired back in December of 2021 from the Department of Justice and I got a TSP account that has 345,000. And I have a home mortgage that I still owe 188,000.

So I'm trying to figure out it was a good idea to move that money over to the mortgage and pay it off. Yeah, very good. Tell me a little bit about more about your situation. So are you currently in retirement?

Yes. Okay. And what are your income sources, Carlos? Well, if I count my VA disability is 5,400 a month for myself.

All right. And is that enough to cover your expenses? Well, my wife works, so she brings in another 3,000.

So yeah, with that, we're pretty good. And then is she planning to retire anytime soon? No. Okay. And are you all taking Social Security yet?

No, I'm only 57 right now and she's 55. Got it. Okay.

Yeah. So I like the idea of you all paying off this mortgage at some point. If you were to take that Thrift Savings Account money out, it would do a couple of things.

Number one is before 59 and a half, you would have a penalty on that and it would all be taxable, which I don't like. So I think the question is, what could you do between now and let's say full retirement where you're both retired to get this paid off? And I'd love for you to be able to hang on to this Thrift Savings Account, especially if it's down with the market, and I suspect that it is, to give it time to recover. Sounds like you have plenty of income to keep servicing this mortgage and assuming it has a low rate and apart from a real conviction from the Lord just to be completely debt-free, including your home, I like the idea of you continuing to let that Thrift Savings either there in the TSP or rolled out to an IRA. I like the idea of you letting that continue to grow to recover with the market, getting beyond age 59 and a half, and then maybe look at perhaps supplementing you paying down this mortgage out of current cash flow over a number of years so you're not taking a huge lump sum in any single year that's going to push your taxable income up into a higher tax bracket or at least a portion of it. So if you've got a good bit of margin left over with your wife working and your disability and the other retirement sources you have, you could prepay this mortgage out of current cash flow and let that Thrift Savings continue to grow. That'd probably be my first choice unless the two of you came together and said, you know what, we just really love to be debt-free as soon as possible and if you were going to do that, then I'd probably do it over several years, maybe two or three years, three tranches. Okay. All right.

Does that make sense? Would it make a difference if I waited till I'm 60? It would because then you'd miss that 10% penalty. But again, if you're pulling nearly $200,000 or by then maybe 150 or so out, that's all going to be taxable in a single year. So you're going to have to add 150,000 to your taxable income for the year, which is going to make that up into a higher bracket likely. And so you're going to be paying a good bit of tax on that, not to mention you're going to give up the additional years of compounding that if you could keep that money working for you.

So as much as I love to have the mortgage paid off, I think if you could look at when your wife is planning to retire, let's say that's five or eight or 10 years from now, and what if you made a plan to get the mortgage paid off by then so that as her income comes out of the equation, now all of a sudden we own our home and that biggest expense is out of the picture, but not try to do it a lot sooner than that because of the tax implications and just the loss of the potential earnings on that retirement account. Okay. All right.

But ultimately you guys need to make this call, Carlos. I love being debt-free and so I think that's a great thing. I don't want to discourage you from that.

I just want you to do it in a way that makes sense. And I think ultimately it comes down to on paper it probably makes sense for you to wait because of the taxes and because of the losses you've probably got unrealized in your investments and that would give you some time to let that recover and let that asset continue to grow so you'll have it down the road if you need it for long-term care or a major medical expense, something like that. And then focus on getting that mortgage paid off through surplus that you have right now. So don't just send the monthly payment, send extra as much as you can to prepay it. And let's really make a dent in it with a plan to have it paid off by the time your wife retires. I think that would be my first choice but if you guys would rather approach it a different way, I'd certainly understand. We appreciate your call today. To Chicago, Cheryl, you're next on the program. Go ahead.

Hi. So my mom passed away in December of 2021 and I have an inherited beneficiary, Ross Ira and Ira. And I was told that I need to start withdrawing from these accounts so that within 10 years I guess they would be exhausted. And I'm not sure why I need to do that and if we do, are we taxed on that?

My accountant didn't seem to have an answer for me. Hmm. Yeah.

So the funds do need to come out within 10 years. So what is the status of this right now? What's happened? Has it been transferred into an inherited IRA? Yes. Okay. Yes.

Both accounts are an inherited Ross Ira and Ira. Okay. All right.

Yeah. So the withdrawal should be tax-free and you do have to withdraw all the money from the account. So that needs to happen over a 10-year period based on a parent or a non-spouse who died in 2020 or later. So I would talk to your CPA about that just to make sure you're doing that effectively. And depending on your beneficiary category, there are some nuances to that.

So I think you just need to check and make sure based on your situation you understand exactly what's required of you. But the distributions should not be taxed and as long as the money had been in there for that five-year holding period that is required. But you do have to get it out of there.

You can't just let it grow tax-free indefinitely. Okay. All right.

I appreciate your help. Thanks so much. You're very welcome, Cheryl. Thanks for your call today. We appreciate you.

To Fort Lauderdale, Denise, you're next on the program. Go ahead. Hi. Good afternoon.

Thank you so much for taking my call. I have monies that had been in a 401k where I used to work with a company and I did a self-directed thing, which then I invested those monies into real estate. I sold the real estate within the last year and I have the monies actually just sitting in a bank earning nothing. I've been speaking with Fisher Investment, which is a fiduciary investment company. And my concern is the following. The way that they take the monies, you don't own a portion of a stock or a portion.

I'm not too familiar with this. I'm new to the financial situation. So it's let's say just to take an example, a medical company like Merck, then you would own Merck. So my concern is that I wouldn't be diversified and or would you suggest I speak with someone else that's in a fiduciary plan? It's about $400,000.

Yeah. Well, essentially, what you're probably talking about is, you know, a fiduciary is just a term that means that they have a responsibility to act in your best interest to putting your client's interests ahead of their own. And they have a duty to do that as a fiduciary. And so as a registered investment advisor, they would be a fiduciary to be able to make these buying and selling decisions for you. And then the question is, what investments are they selecting on your behalf, given your goals and objectives? And they could use individual equities buying individual stocks, they could use mutual funds, exchange traded funds, even other types of investments or marketable securities. But essentially, you're delegating that responsibility to somebody who is a professional who's got training and a track record and so forth, but who's going to act on your behalf and put your best interests first, which is what the fiduciary means.

And you'll pay them for that service, generally a percentage of the assets under management. Does that sound like what was described to you? Or is it something different? Yes. No, it is something like that. And I'm not sure how do I know if I'm being overcharged or if it is am I going to be paying out a lot more versus if I use someone else?

Yeah. Well, I would always get a couple of opinions. Generally, if you're paying a fee for the assets under management on $400,000, you'd probably pay somewhere between one and one and a half percent a year. So that's somewhere between four and $6,000 a year on a $400,000 portfolio. And the idea is that although that's going to be taken out of your account, that their expertise in managing this should overcome that and give you peace of mind to know that this is a lot of money, you've spent a lot of time building it up, and somebody is now taking responsibility for it to manage it.

But I would always get a couple of other opinions. We recommend the Certified Kingdom Advisor designation. These are men and women who've not only met character and experience and ethics requirements, but they've been specially trained to bring biblically wise financial advice as investment professionals. And so they really understand your values as a believer. So I'd get at least a couple of CKAs to weigh in on this as well and ask about their experience. They should take a lot of time to get to know you, not sell you on something, but also compare the fee schedules to the group you've been talking to plus these others. You can find a CKA or two there in Fort Lauderdale on our website at moneywise.org.

Just click Find a CKA. Denise, we appreciate your call. Folks, that's going to do it for us.

MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. I want to say thank you to Dan and Amy and Robert helping me out today. We appreciate them very much. Thank you for being here as well. Come back and join us tomorrow. We'll see you then. Bye bye.