Should You Set Up a Legacy IRA?

This Faith in Finance Live is actually prerecorded, so please don't call in. You've heard of the traditional IRA and the Roth IRA, but have you heard of the Legacy IRA?

Hi, I'm Rob West. If you're not familiar with the latest variation of the individual retirement account, it wouldn't be surprising. It's only gone into effect this year. We'll talk about the Legacy IRA today, and we have some great calls lined up, but we won't be taking your live calls today because we're prerecorded. This is Faith in Finance Live, biblical wisdom for your financial journey. Okay, so first we should point out that the Legacy IRA is really a traditional IRA, the difference really being in how each is used. Obviously, the traditional IRA provides income directly to retirees as they take distributions. A Legacy IRA also provides income to a retiree, but indirectly through the use of a charitable gift annuity, or CGA.

Now, we've talked about those before, but here's a quick refresher. A CGA is an agreement between a donor and a non-profit organization. The donor gives assets to the non-profit. The non-profit then gives the donor regular payments for life based on the value of the assets donated. When the donor dies, the non-profit keeps the assets. So the CGA is a form of planned giving that's actually been around for more than a century and has greatly benefited churches, ministries, and missions over the years.

It gives donors the assurance that their gifts are used in ways that align with their Christian values while still providing income while they live. Now, the charitable gift annuity has always offered tax deductions for the donor, both on the lump sum gift and the regular annuity payments, but with one huge limitation. They could only be made with after-tax dollars before the donor's death.

And here's where the IRA comes back into the picture. If you had a qualified retirement account, such as an IRA or 401k that you funded with pre-tax dollars, you could not use those funds to set up a qualified charitable annuity. That cut out many believers who would have liked to set up a CGA with their favorite ministry, but their assets were all tied up in a traditional IRA. They would have to withdraw those funds and pay taxes on them before they could contribute to a CGA. Well, that all changed with the SECURE 2.0 act passed in December. It created what is now called the legacy IRA and the ability for folks over age 70 and a half with a traditional IRA to take advantage of the charitable gift annuity. So here's how it works.

And I apologize for the alphabet soup because we now have to add one more ingredient. The legacy IRA is really more of an amount than a separate retirement account. Under the new law, folks, 70 and a half can take up to $50,000 from a traditional IRA and make a one-time qualified charitable distribution, meaning the money comes out untaxed and set up a charitable gift annuity.

So IRA to QCD to CGA. If you want to do this, but all of your funds are still in a 401k, you simply have to roll them over to an IRA and that would then become your legacy IRA. But again, you can do this only once in your lifetime and the limit is $50,000. The law requires that the annual payout from the charitable gift annuity be at least 5%. Now, there are many potential benefits with using IRA funds to set up a charitable gift annuity. It allows donors to increase their giving and ensure their future giving matches their values. It lowers the donors tax liability in the year the CGA is funded by excluding the amount of the gift from taxable income.

It could satisfy all or part of a required minimum distribution. It sets up steady lifetime payments to the donor or donor and spouse. The minimum 5% return in annual payments is competitive with historic CD rates and government bonds. There is typically no cost to the donor to set up and administer the CGA. The nonprofit holding the funds will do all of that. So just who's using these new legacy IRA provisions to set up CGAs? Well, folks over 70 and a half with appreciated stock or mutual fund shares who want to reinvest some of those assets to generate more income without paying capital gains taxes. Also those who want fixed lifetime payments unaffected by the markets and those who want to ensure continued payments to a loved one without going through probate.

In the past the inability to use pre-tax dollars to set up a charitable gift annuity was a major obstacle to small donors. That obstacle is now removed. I hope that's an encouragement to you today. Well, folks, before we take our first break, let me also remind you there's a great wealth of resources waiting for you at faithfi.com.

That's faithfi.com. Stick around, much more to come just around the corner. Welcome back to Faith and Finance Live. I'm Rob West. Hey, just a quick reminder, we're not here today. Our team is away from the studio, so don't call in, but we lined up some great questions in advance.

We'll get to those in just a moment, but first an email. This one comes to us from John. He writes, if I have a large inheritance and tithe on it and the tithe is close to or larger than my income, will I be audited? The inheritance tax has already been paid. Yes, John, a situation like this will make an audit more likely, although not guaranteed by any means. You don't have to declare the inheritance as income, so the IRS won't see it. They will see that your charitable giving is far outside what would be normal for your income, which is more likely to trigger an audit. So just be prepared to show documentation that you received the windfall as an inheritance with taxes already paid by the estate if any were owed. They likely weren't, and you'll have a receipt from your church for your giving, and that should sail right through an audit.

So no need to be concerned there. This one comes from Andy. He writes, family members will be giving $15,000 each to my wife and her daughter. How will this affect our taxes or my stepdaughters? It's not from the sale of a house. Can you point me in the right direction?

Andy, this one's real simple. Recipients of gifts don't pay gift taxes. Gift givers pay them, but on rare occasions. Now the amount here is under the annual federal gift tax exclusion limit, so the givers in this case won't even have to file the federal gift tax form. So it's a non-event as far as the IRS is concerned. By the way, that amount that you can give without having to disclose it to the IRS to any individual, and you can do this to as many individuals as you want.

For this year, 2023 is $17,000, so these gifts to your wife and to her daughter, each being $15,000, is under that limit. All right, let's head to the phones. We'll head to our first caller today in Missouri. It's Aaron. Go ahead.

Hey Rob, this is Aaron. Thank you guys so much for taking my call. I've been following your program for a couple years, and I'm a huge fan. Great, well thank you.

I appreciate that. My question today revolves around savings. I've got a couple funds. I've got a general fund of about $5,000 and then like an emergency fund of $10,000.

I actually heard a program of yours a little bit ago about online banks with high yield, so I moved the $5,000 over and put in an awesome bank with about 5% APY, so I'm really happy about that. My question is, can I go ahead and do that with the $10,000 emergency fund? Obviously, I'm really excited by the idea of my emergency fund growing with me and growing with inflation, but I'm also worried about being able to access it instantly and quickly.

Yeah, I love that. Well, by definition, the emergency fund is for the unexpected, so we don't know when we're going to need it, but hopefully you don't need it within, you know, hours and you can have, you know, wait a day or two, which is what you're typically going to be needing to wait with the ACH transfer. So what I typically recommend is you have your main checking account that's your operating account, if you will. That's where you're paying your bills out of. You may have your salary or wages direct deposited in there and you're operating on a budget, and then you have a separate savings account, maybe a couple of them. One earmarked for your emergency savings. Once that's fully funded, maybe you have another one for a car replacement or a vacation fund. The great thing is these savings accounts with the online banks not only offer these compelling yields, you mentioned nearly five percent for some of them, but they don't have any fees. So you could have multiple accounts if that helps you just separate funds and watch them grow so you can achieve certain goals, but linking those to your operating account, your primary checking account, probably at another institution, maybe a brick and mortar institution that you can access locally, allows you to go in and electronically transfer funds.

And usually that'll show up within 24 hours, two days at the most. So I think that's a great plan. I'd put all of your emergency funds there. Hopefully you've built up a little bit of a cushion and you're not living right down to the wire on that which is being deposited to your operating account. If you are, you may want to have just a little extra there in case of a timing issue or something that is more immediate.

But I think having 100% of your emergency fund and other short-term savings in that online bank earning some compelling interest I think makes a lot of sense. All right, Rob. I appreciate that.

Thank you very much. Absolutely, Joseph. Hey, congrats on getting that emergency fund in place.

I know that must feel good to have that fully funded. We're delighted to have you on the program today. And if we can help further along the way, don't hesitate to reach out.

God bless you, buddy. Let's head to Montana. Hi, Craig. Go ahead, sir. Hello, Rob. Hi there.

How can I help? So my question is, I've got some cash. My wife and I have some cash that we, that are sitting in a bank earning no interest or anything. And I've looked around and I get these notices that there's some high-yield savings opportunities out there. And I don't know how you pick a bank. And you know, there's banks that I see online that are, I don't know anything about them. But I just wondered about your counsel as to how to get some value out of the, or some return on a high-yield savings as opposed to maybe a CD. Yes.

Yeah, I like that a lot. I mean, I think the first thing to do is really to think about the cash reserves that you have and putting that money into buckets. You know, so the first bucket is what I would call that emergency savings. We generally use a three to six months worth of expenses as a guideline there. It doesn't mean that's a hard and fast rule. Ultimately, you need to make the call on how much you want in your emergency savings. But that's for the unexpected.

It needs to remain liquid. And therefore, a high-yield savings account with FDIC insurance is perfect, Craig, because as I said to the previous caller, you've got access to it, you're getting a decent interest rate, but it's just a transfer away, a free electronic transfer of 24 to 48 hours. When you get beyond that, though, once that's fully funded at whatever number of months worth of expenses you're most comfortable with, then we have more flexibility. Now, if you want to take the amount beyond that and still not put it at the risk of, let's say, the stock market, you want more of a guaranteed return, well, that's where CDs, I think, can be really helpful. Whereas right now, the typical online bank with a high-yield savings might be paying 4.1, 4.2 worth of interest.

A CD of 12 months might get you five and a half. So you could get another percent to a percent and a half on a CD if you're willing to lock it up. I just wouldn't do that for your emergency savings because by definition, you want to be able to get to that money a little quicker. So I would start by defining how much is enough for that emergency fund and keep that in the high-yield savings. In order to pick that bank, unless you've already keyed in on one, I might go to bankrate.com. Bankrate.com will allow you to search and sort by those that offer the best rates right now, and it does change. And then they have a five-star rating system just on the strength of the institution, the customer service, that type of thing. So bankrate.com might be a great place for you to go to find that bank, both for a high-yield savings and CDs. And then I would just apply that thinking that I mentioned earlier about what is your emergency fund and what's beyond your emergency fund as you make the decision on what goes in savings versus what goes in a CD.

Does that make sense? Yeah, no, I like that idea and we're comfortable coming up with that. You know, what, how much we need for an emergency fund. But it's the other cash sitting around in the bank doing nothing that I have concerns about.

Yeah. Well, are you wanting to take a little bit of risk with it and try to get a little better return or are you looking for something that's guaranteed? I'm looking for low risk.

Okay. What are you thinking of when you think of more risk? Well, low risk, I would say, you know, putting a bond portfolio together.

I mean, bonds have been out of favor, but right now is a great opportunity to get into a diversified bond portfolio just because as rates come down, the bond prices will go up and you'll be able to take advantage of these higher yields, probably government and corporate bonds. I'd use an advisor. We recommend the CKA designation. You can find one at faithfi.com.

Just click find the CKA. Thanks for your call, Craig. We're so thankful to have you with us today on Faith and Finance Live. I'm Rob West, your host, and our team is taking some time off today. So don't call in, but we lined up some great questions in advance. We'll get to those in just a bit. You know, this idea of being faithful stewards of God's resources is central to our role in managing his money.

That's right. He owns it all and we're stewards and we're charged with understanding the heart of the master and then being faithful. That is consistent, obedient in the same direction over a long period of time so we can hear, well done, good and faithful servant, applying the wisdom from God's word to the practical decisions and choices we're making every day. That's the big idea and I hope this program is an encouragement to you to do just that. Let's head right back to the phones. Leonard will be coming your way in a moment, but first Richard in Alabama. Go ahead, sir. First of all, thank you for taking my call.

This is my first time calling, but long time listening and I'm grateful for you. Okay, anyway, with that being said, I'm 67 years old. I have accumulated, my house is paid for, which is about like $300 to $325 and all my bills and everything is paid off.

I don't owe nobody nothing. I have a business that's producing about $100 to $150,000 a year in income. My wife is retired and she has social security in retirement and I'm a pastor and I got social security coming in. The question that I got is that I'm a little disgruntled with the government and I don't want to give nothing to the government. What I'm doing is I'm thinking about, I want to disperse the money to my children and stuff while I'm still living.

Also, I got about $150,000 sitting up in a bank that I'm only getting like 0.10 interest rate on, so I'm looking for some advice on that. Yeah, very good. I'd be happy to, Richard. I appreciate your kind remarks about the program and I appreciate the background on your situation and I can certainly understand your desire to, as one of my mentors Ron Blue likes to say, do your giving while you're living so you're knowing where it's going. I think that's a good mantra to live by. I think the key for you is to define how much is enough for both lifestyle and accumulation. Lifestyle meaning how much are we going to spend on a monthly basis and once we cap that, then we know how much we need to cover our bills for the rest of our lives and we can match that up to the income sources that we have. Some may be guaranteed like social security that will continue, others like the income you're generating from your work as a pastor and anything else you're doing, you know, may go away over time and we need to know how much do we need to accumulate in assets that we can offset that income when you're no longer working. Now you, I suspect, are looking at retirement through a biblical lens and saying, you understand that your calling doesn't have an expiration date. This idea that we retire at 65 with a gold watch and a pension check and sit on the front porch is a relatively modern idea and it's not a biblical one at that. So, you know, we look at that season of life to take our experience and wisdom and service to the Lord and say, until he calls us home, Lord, what would you have me to do? That may or may not involve paid work, but it most certainly includes our service to him throughout the whole of our life. But it also does, as a prudent steward and planner, require that we define enough for our accumulation. The nice thing is once you've defined and capped your lifestyle and you know how much you need in retirement, and that's a constant conversation between you and your wife and the Lord, then you're free to do some hilarious giving and begin to accelerate that the giving that you'd like to do. With regard to the two questions you asked, number one is related to where do you put those assets and anything that's not invested that you want to keep safe, meaning you don't want to take any risk with it, I would keep either in a combination of a high-yield savings account with FDIC insurance, meaning it's backed by the full faith and credit of the United States government, plus probably some CDs, and you're going to get between those two four to five and a half percent interest right now.

That'll probably be coming down next year. And then obviously anything that you have at least a five-year time horizon on, you could then invest it. With regard to giving money away to the kids, there's two thoughts there. One is you can just give them straight cash. The great news is whether you give it to them now or you give it to them as an inheritance, at least the way the current laws are, you're not going to pay any tax on that and they're not either.

You can give them essentially as much as you want. You can give them $17,000 a year or you and your wife could give them $34,000 a year each and not even tell the IRS about it. There's an annual gift exclusion of $17,000 per person. If you go beyond $34,000 in any one year, you just fill out a gift tax form.

There's not any taxes due. It would just eat away at your lifetime gift exclusion of over $12,000,000. So you got a long way to go there. With regard to anything else, it's really up to you as to whether you want to give them straight cash or perhaps you put some of it in a donor advised fund and then you help the kids give it away.

And that would be a great way to model any generosity values that you want to transfer to the kids, but also be active in dispersing what God has entrusted to you for his purposes. But I've thrown a lot at you there, Richard, so give me your thoughts on all that. Thank you. You know, I've come to a place of what is enough, so my motivation to get more is not there no more, you know.

It's just the survival now. I got three grand that I was going to take this year here, a cash lump and put into a, probably going to get you to run a CD or something by me, a company that I can use to do that with them. Then after that, I was going to go ahead on and start dispersing these $5,000 increments to the children along the way because God never had to say it and never gave me nothing. Yeah. Let's do this. I've got to take a quick break. Richard, if you don't mind holding the line, we can pick up this conversation just on the other side and make some decisions about where you go from here.

Leonard, coming your way as well. We'll be right back. So glad to have you with us today on Faith and Finance Live.

Our team is away today, so don't call in, but we lined up some great questions in advance and we'll be going to those here in just a moment. Let me also remind you that the advice that I give each day on this program is general in nature. We offer principles and ideas that apply at a high level.

They are not personalized, so that's why you should always seek professional financial advice. If you'd like to find a professional who shares your values, we of course here at Faith and Finance Live recommend the Certified Kingdom Advisor designation. These are men and women who've met high standards and they've been trained to bring a biblical worldview of financial decision-making.

You can find one at faithfi.com. Okay, back to the phones we go. Leonard, we'll be coming your way in just a moment. Richard, before the break we were talking about your desire to do some giving while you're living and dispersing funds to your kids and grandkids while you're alive. You've defined enough. God's blessed you with means and you've got a good income. You're not trying to increase your lifestyle, so you'd like to accelerate your giving.

I think that's great. I think with regard to kids and grandkids, first decision is do we want to earmark anything for college? If so, I'd use a 529 education savings plan, but if you don't want to, if you're ready to give it to them now, you just make the gift.

If you want to wait, then I'd probably put the money not in a custodial account, but in a separate account in your name or jointly held with your wife, and then earmark it for them, make those gifts each year as you want to, and then you would choose the time and place of the actual gift where they would take control of the funds so you can make sure they've reached the level of spiritual and financial maturity you want, that type of thing. I would do that with a high-yield savings account. If you want to invest it, you certainly could do that or you could keep it more safe and liquid.

But give me your follow-up questions on all we've talked about so far. Well, the follow-up question was, who do you, or do you have a recommendation for, like, savings, this $150,000 that I got in savings that I can submit. Now, I do have an IHRA account, but I don't put nothing in it. It's just open with a thousand bucks.

Got it. Yeah, what I would do, Richard, is I would go to bankrate.com. That's bankrate.com. Just click on the CD or the high-yield savings tab, and it'll give you a listing of those that have the best rates right now, and then you can also see the five-star rating system just to get the ratings on each of them.

But that'll give you everything you need, and then you can decide which one you're most comfortable with to open an online account, or several of them link them up to your checking, and then you just transfer the money in, and you'll be getting a much better rate than you are right now. Okay, good, man. Thank you for that. You're welcome, Richard. God bless you, my friend. We appreciate you being on the program, and thanks for your kind remarks. Let's stay in Alabama. Leonard, you've been very patient. Go ahead, sir. Hi, Rob.

Thank you for taking my call. So my question is, every day I receive two or three emails regarding the federal government's plans to issue central bank digital currency, and freezing our bank accounts, and so on and so forth. I don't know whether that's legitimate or not, and I wanted to see what you know about it, and what we should do to prepare for that.

Yeah, it's a great question. The Federal Reserve has made no decision on issuing a central bank digital currency, and really can't without the issuance of an authorizing law that has to come from Congress is the bottom line. The idea of a CBDC, which is basically a digital version of whatever central bank digital currency we might be talking about, the euro, the yen, obviously the dollar, these are rolled out by central banks across the world, and what's interesting is 114 countries are exploring central bank digital currencies, and their collective economies represent more than 95% of the world's GDP.

So this is not a new idea. It's actively being looked at, and that exploration includes the United States, although we're a good bit behind many of the others. You know, President Biden asked a number of agencies to review it.

They've come back with their findings, but basically this exists as a series of white papers at this point, Leonard. So nothing is imminent, and the bottom line is, and the Fed Chairman Powell has acknowledged this, they can't act alone. This has to come through Congress, and Congress is going to make this a matter of much debate before it would ever see the light of day, just because so many congressional leaders, and I would certainly be in this camp, are concerned about the controls and the privacy issues with every transaction finding its origination at the Federal Reserve, and that kind of social control that could be imposed, and that kind of loss of privacy to the US government is not something that folks are fond of. So you're going to see a lot of debate on this in the months and years ahead. Some of the states have actually gotten ahead of this.

For instance, Florida. The governor there, DeSantis, has tried to get ahead of it by saying that any central bank digital currency that may be issued would not comply with Florida's Uniform Commercial Code, UCC, and therefore he's trying to preempt it, and a lot of other states are following suit. So this is something we should watch carefully. This is something we need to speak up about, but it's not here, and it's not coming anytime soon.

It's still very early, and China has been in a beta for years on this thing, and they were probably five years ahead of us on it. So I don't think there's anything to do at this point other than just continue to watch and show up and and vote for those folks who understand the role of government and, you know, the privacy that we all should retain when it comes to our financial transactions. Does that make sense? Absolutely. I appreciate the advice. That's very reassuring. Good. Well, I appreciate your call, Leonard. Thanks for your kind remarks. If we can serve you in any way along the way, don't hesitate to reach out again.

God bless you. Let's head to Ohio. Hi, Ellen. Go right ahead.

Hi. I have a question. My husband died recently, and he was a purchaser over probably the last 20 years of silver. My family and I wonder, what now should we be doing with it?

Yeah. What would you say? And first of all, I'm sorry to hear about your husband's passing, Ellen. What would you say the silver represents in your total investable assets? What percentage? He was very quiet about it, and I really do not know. Okay. All right. Do you have an advisor, somebody that is helping you just get an understanding of where you all are at financially and what you have and what your plan is moving forward?

We have a trust, but he never divulged that to them, and we have somebody from a well-known financial institution that we also deal with. Okay. All right.

And have you been to see that person since his passing? Yes. Okay.

But again, I never made any mention of it because he never wanted it disclosed. Yeah. Yeah. I understand. Would you mind sharing approximately how much you have or do you even know? No.

I don't know the total value. Okay. All right.

Yeah. I mean, I really think you ought to have an advisor who's helping you think through this. I mean, I can understand where your husband was coming from, and yet now it's time to make sure that we look at all of your assets and have them properly positioned so that you have what you need to cover your income into the future and to access if you need it down the road.

It doesn't mean you have to automatically sell everything, but you need to have a plan and we need somebody looking at that and speaking into it with the full lay of the land. I've got to take a quick break, Alan. Let's finish up on the other side. We'll be right back. Hey, great to have you with us today on Faith and Finance Live. I'm Rob West, your host.

Our team is away from the studio today, so don't call in, but coming up a little later, we'll have more of your questions right here on the program. Hey, let me take a moment to mention the Faith Fi app. We'd love for you to download it. Just head to your app store, wherever you download apps and search for Faith Fi. That's Faith Fi.

You can manage your money. You can access the best content in biblical finance, podcasts, articles, and videos. You can also participate in our Faith Fi community where you can post questions and get answers from others on their stewardship journey. You'll find it in your app store or on our Facebook page at faithfi.com.

That's faithfi.com, and you'll see the app right there on the home page. Just before the break, we were talking to Ellen in Ohio. Her husband passed away this past spring, and he had accumulated silver for 20 years. He was very tight-lipped about what he was accumulated, didn't tell his advisor what he was going to do, and he was very excited about what he was going to do, and he was very excited about what he was accumulated, didn't tell his advisor. She's not even aware fully of what's there and how much it's worth, and she's just wondering where she goes from here in terms of how to approach this. And Ellen, ultimately you are the steward, and I suspect there's an emotional connection to this because it was something your husband accumulated for so long.

And yet, my recommendation, but again, you need to think and pray through this recommendation, would be to first of all find out what this is worth, how much do you actually have, and that would mean you'd need to get an appraiser to take a look at what your husband has accumulated and then look at that in light of your overall portfolio. Now, that doesn't mean you automatically need to sell it, but it does mean you may be overweighted in silver. Now, here's the reality on silver. It's generally seen as a safe investment, but its value ebbs and flows even more than gold does. Listen to this, in the last year silver prices have gone as low as $17 an ounce to nearly $26 an ounce. If we go back even further, let's look at the last decade.

Silver has gone from its lowest price under $14 an ounce while it was almost $28 an ounce at its peak. So that is a peak to trough difference of over a hundred percent in just a 10-year period. That's a lot of volatility and that's more volatility than you'd get in stocks and bonds and even more than you would get in gold. And so for that reason, it's probably worth looking at whether in light of your financial plan, meaning how much income do you need, what assets do you have that are generating it, are your bills covered, are you going to need to tap into this at some point, you know, into your assets to be able to fund your long-term care if you need that.

You know, 70% of Americans 65 and older will need some form of long-term care for probably between 18 months and three years and that can run $10,000 a month depending on what type of care you need. So, you know, we just want to have a plan and somebody that you can look to that says, here's how we're investing your assets, here's how we're protecting what God has given to you and your husband that you're now the steward of, and here's how it's being invested. And that, you know, may involve someone recommending that you reduce your exposure to silver because it is more volatile and it doesn't generate income. But that would require that you be open to allowing an advisor to bring, you know, that silver asset that you have under their advisement and ultimately perhaps even their management. But give me your thoughts on all that. I appreciate that very much.

As I'm not into silver at all, he didn't ask me about purchasing it and I don't even know how or why he got started maybe other than I think a friend of his did some and so, you know, one thing leads to another. Yes ma'am. So I think, you know, we must find out, first of all, it sounds like what right now the value would be of it. That's right. And go from there.

I think that's exactly right. And then you'd have a good lay of the land to know what assets do you actually have between cash and silver and stocks and bonds, retirement accounts, whatever you have, and then develop a plan to manage that in light of your overall goals and objectives and whatever you believe God has for you in this next season. That may be your current advisor. If you don't feel absolutely comfortable, maybe you need to interview one or two more and find the one that's the best fit. If you wanted to entertain interviewing some other advisors to perhaps look at your whole financial picture, we recommend the Certified Kingdom Advisor designation and you could find a CKA there in Ohio. There's some wonderful Certified Kingdom Advisors there and you just go to our website faithfi.com. That's faithfi.com. Click find a CKA at the top of the page and you could do a zip code search and interview a few.

But whether it's your current advisor or a new one, that would be my recommendation is to engage that person, let them know what's there, they can help you get a value on it, and then you create a plan. Okay? Okay and again if it's I go to the website it's faithfi.com. Yes ma'am and right there at the top of the page you'll see a button that says find a CKA that stands for Certified Kingdom Advisor and you can put in your city and state or your zip code and you'll find a list of Certified Kingdom Advisors in your area. God bless you Ellen. Thanks for calling. If we can serve you along the way with anything else, don't hesitate to reach out. To Pennsylvania, hi Laverne. Thanks for calling. Go ahead.

Hello. When I was 18 and 20 years old my parents were looking for a safe place to keep a small investment. I was making approximately 10,000 in each amount and we started annuities. And now I'm 30, I'm buying into my dad's dairy business and I'm seeing that the interest rate on the one annuity is now 2.8 percent. Is that the best place for it or should I be investing it or if I keep it long term is that the best place?

Yeah I just don't think so. I mean for a 30 year old guy, I mean you're in the prime of your income generating years. I love that you're buying into your dad's business and that's going to give you an asset that ultimately you could sell to another family member or somebody outside. But in terms of your investment dollars, an annuity with a guaranteed interest rate down at three percent just doesn't make sense to me. If it were me, I would look at pulling that money out. I'd make sure you have the proper amount of insurance coverage and I would do that through a term life insurance policy of at least 10 to 12 times your income if you're married and or you have kids to make sure that they could replace your income if you were to pass away. And then I would take that money and that plus whatever you're continuing to put away for the long term in a Roth IRA or if you're a self-employed person maybe a SEP IRA. But I would do your investing by taking more risk but giving yourself much more upside potential than you're ever going to see in one of these fixed annuities.

Sure. I had been treating it somewhat as an emergency fund if I ever absolutely needed it. I realized until I'm 59 it'll still only be $18,000 in each one. Yeah, the challenge with that is I mean even at three percent I mean you could get four percent plus right now in a high yield savings account with no fees. The problem with the annuity is it's just complex.

You know you've got surrender charges. You're probably beyond that at this point but just to use it as a savings vehicle I think you could do a lot better having it outside of an insurance product. Okay. Will I be paying tax on the interest I earned? It just depends, yes. It depends on whether that money went in pre-tax or not and so it may be that you'd pay tax on the whole thing as it comes out.

You may just pay tax on the gains but if this would be the year if you do pull it out to use a CPA if you don't already and they can help you calculate the tax that would be owed. Okay, so you get better invested elsewhere. I do. I'd go outside of it. You're young.

You've got time on your side. I'd get this in a properly diversified stock and bond portfolio. Let this thing grow. Now your emergency savings of three to six months expenses I wouldn't encourage you to invest that. Let's put that just in a high yield savings account with one of the online banks and let that earn some good interest but have it safe and readily available.

But anything beyond your emergency fund as you're throwing off cash I'd try to get as much of it into a retirement vehicle as possible like a Roth IRA or a SEP IRA or both and get that invested as opposed to using an insurance contract. Okay. All right. I appreciate it.

Absolutely Laverne. God bless you my friend. We appreciate your call today.

Well folks we've covered a lot of ground today. Hey, some news for you today regarding used cars. You know we recommend buying a newer used car whenever in the car market. Now doesn't mean there's not ever a place for a new car. In fact if nobody bought new cars we wouldn't have any used cars eventually.

So as long as it fits into your budget and hopefully you're not having to borrow or if you are you can pay it off quickly. But for those who are just looking to you know try to manage money wisely and you know money is tight trying to save for the future and balance all of our competing priorities buying a used car can often make some sense where we miss that depreciation and we buy a good quality car with you know good performance ratings and reliability with low mileage and we drive it as Howard Dayton the former host of faith and finance used to say until the wheels fall off. Well used car prices have been really elevated just because through the pandemic we had supply train constraints we had shortages on chips that are critical to car manufacturing and so our inventories were lower on new cars which pushed up the used car prices in fact they were both elevated. Well we've started to see these prices begin to come down used car prices are finally dropping nearly all makes have seen a price decline in their models. You know we've had across the board used cars are down about 10 percent since last year which is great and then some are down a bit more than that Tesla for instance down about 30 percent. Honda, Kia, Nissan have seen more significant declines as well but take a look at whether this is the time if you've been waiting to go ahead and make that used car purchase I would find the make and model you want and then scour the internet. The last used car I bought we bought three states away but I saved about three grand I flew up there spent the night grabbed the car and drove it home but you if you're willing to be patient and you're willing to travel a little bit you can usually do much better on a car but some welcome news as we see car prices finally starting to fall. Hey folks thanks for being along with us today I'm so thankful to be able to share God's wisdom from the Bible related to your financial decisions and choices on behalf of my team today Amy, Dan, Jim and Gabby T couldn't do it without them. Thank you for being along with us as well so thankful for your questions have a great rest of your day and we'll see you next time on Faith and Finance Live.