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Don’t Forget Beneficiary Designations

MoneyWise / Rob West and Steve Moore
The Truth Network Radio
January 15, 2024 5:15 pm

Don’t Forget Beneficiary Designations

MoneyWise / Rob West and Steve Moore

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January 15, 2024 5:15 pm

A will is the usual tool for passing assets on to your heirs when you die. But for some things, you don’t need a will at all because there’s a way you can ensure that certain assets go straight to your heirs without passing through probate. On today's Faith & Finance Live, host Rob West will be joined by Valerie Hogan, who’ll give us a crash course on beneficiary designations and why you want to you use them. Then he’ll answer your calls and various financial questions. 

See omnystudio.com/listener for privacy information.

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Today's version of Faith in Finance Live is prerecorded so our phone lines are not open. Well, our guest Valerie Hogan is an attorney, a certified financial planner, and a member of Kingdom Advisors, so she has all the bases covered. Valerie, great to have you back. Thanks so much for having me, Rob. Absolutely.

Valerie, let's just dive right in. Why are beneficiary designations important? Right. Well, very few things in estate planning are quick, easy, and free, so this is one of the very few that we can actually say that about. Using a beneficiary designation, believe it or not, is an easy way to transfer accounts and assets and even insurance benefits when you pass, but they're important to keep up to date and they take priority over or transfer before or outside of estate planning documents like a will and a trust. They do skip probate, but they do also remain private like a trust would.

Yeah, and that's a really important distinction. Now what are some of the keys to remember about designating beneficiaries? I think the first one is where you look to do these things. You're going to look at all kinds of accounts like your checking account, savings account, maybe IRA-type assets, 401Ks, 403Bs, and even life insurance policies, so you'll want to make sure you look at all these types of accounts that allow making a beneficiary designation. Many times you'll find them by being able to log into that account and look for, can I make a beneficiary designation, and many times you'll even be able to change that or add it online. So you're going to want to name primary and contingent beneficiaries, and you're going to want to keep these things updated whenever there's a birth, death, marriages, divorces. You'll want to read the fine print.

Don't just fill in names. You're going to want to see if you're making a primary beneficiary designation or a contingent beneficiary designation in that slot. Then you want to coordinate that with your will or trust. You want to beware of naming individual beneficiaries for particular assets because those accounts could grow unevenly. You don't want to name your estate necessarily as the beneficiary. That could require the account to go through probate.

You're going to want to check on that. Many times it's efficient to name it as a successor beneficiary or contingent beneficiary, and you're going to want to consult your attorney or CPA before naming that trust as beneficiary. You want to understand what's going to happen with the tax implications. Now, Valerie, you mentioned that assets may grow disproportionately, and that's a key point here because if we name a beneficiary and one asset grows quicker than another, we may no longer be honoring our wishes as to how we want our estate distributed. Is that right? Yes. For example, if you had that designated, you have, for example, three children and you named one-third, one-third, one-third, or maybe a fourth to charity and one-fourth to each of the rest of the children, but you start naming this account for one, and as of this time they're all even, those could grow very differently if one has, let's say, a public stock in it versus maybe bonds or is more like a savings type account.

One could grow a whole lot bigger, and so if your wishes were to divide that up evenly, that may not end up that way in the end. Yeah, which is why to coordinate with your overall estate plan as well as to keep those updated. Now, is there ever a reason, Valerie, not to designate beneficiaries?

I just did a simple answer, no. I don't believe there ever is a good reason to do that because that's going to leave this open-to-interpretation, and it could be a bit confusing, and it's going to let someone else decide. Sometimes that would be the courts. At the very least, you would want to point that toward your documents.

Ideally, you'd like to name a person. Well, that makes a lot of sense, and I expect the biggest mistake here is just setting it and forget it, so maybe one more time we'll mention keep these updated. Valerie, this was so helpful. Thanks for that crash course on beneficiary designations. We appreciate your time. Thank you for having me.

It's Valerie Hogan, attorney, CFP, and member of Kingdom Advisors. Well, folks, we're going to head to a break, but let me remind you, we're out of the studio today. Our team is not here, so don't call in, but much more to come just around the corner on Faith and Finance Live. Stick around. 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. And 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. And hey, before we dive in today, you know, in a new year, one of the top New Year's resolutions is always to get on track with your finances. Build a stronger financial foundation, and you know, that always begins with spending less than you earn. You see, once you understand that God owns it all and that you're a steward and money is a tool, living within your means is the key to every financial success, and you can't do that without a plan, which means this is the time for you to put that budget in place, that spending plan. Go ahead and figure out what you have coming in, especially in light of inflation, which by the way, is cumulative. Remember, even as it comes down, we're still building on top of last year's inflation, and that's on top of the year before, which by the way, was over 9%. So things are more expensive now.

Even if inflation was at zero, we'd still be paying higher prices, which means we need to revisit that spending plan. Well, the best way to do that is right there inside the FaithFi app. It's why we built it.

It's why we have a team of developers improving it all the time. You can download it today at faithfi.com. Just click app, that's faithfi.com, click app, or head to your app store and search for FaithFi, FaithFI in the Apple App Store or Google Play Store. You'll find a beautiful interface, simple to use.

There's three money management approaches and one I'm confident will fit your personality and approach. So check it out today. Download FaithFi in your app store. All right, let's dive in. We're going to begin today in Alabama. Hi Kay, you're our first caller.

Go right ahead. Hi there. How are you today? I'm great.

Thanks for calling. I was actually wondering because I've been through over a decade of financial abuse and research shows that it's one of the hardest unseen abuses to overcome. So I'm kind of in a position where I'm starting off or having to reestablish with a low income. And I was wondering if there's any type of investment opportunities with just a smaller amount that I can be able to receive returns to keep some, but then reinvest the other.

And then also maybe any other ideas that you have for someone with low income. Yeah, I appreciate that Kay. And I'm so sorry to hear about what you've experienced in the past.

Do you feel like, without getting into the details, that you're beyond the issues that have caused you financial harm in the past? For the most part. Okay. Yeah. So even though you don't have a lot, at least we're building from a healthy place, hopefully financially and you have control over the income that you have coming into you. Is that right? Yes, sir. Okay, very good.

You know, first things first, I love investing, but I also want to make sure that you have some of those key building blocks in place, starting with a good understanding of your income and your expenses. Do you have a written budget or have you taken time to really get all of that into a spending plan? Yes, sir. Okay.

And are you able to balance your monthly expenses, including those things you don't get a bill for, and perhaps even some of the non-recurring charges like a quarterly insurance payment? Is all that in the plan? Yes, but every once in a while I will come short a little bit for it. Sure. Yeah. No, I certainly understand that. Great. So that's a great first step. Do you then secondly have any savings, anything that's liquid, that's beyond just what you're spending day to day that's set aside?

It's very small. Okay. Yes, sir.

Yeah. So that's really the place to begin, even before we think about investing. I'd love for you to get, and I know this is probably going to sound overwhelming, but I'd love for you to get to a place where you have three to six months worth of expenses in that emergency fund before you start thinking about investing, because that's really going to be the key to you being able to cover those unexpected expenses that come along the way. So we're not having to pull money out of investments, perhaps at a loss because they've only been in there a short time, and the market's down, or worse, taking on debt to cover unplanned expenses. So even if it's $25 a month, I'd love for you to just set up a separate savings account either with your bank or maybe with an online bank where you can get some interest, connect it or link it electronically to your checking account, and let's try to set up some automatic savings going in there and make some progress toward building that up.

That's really going to be key. Now once that's in place, let me just ask, do you have any debt whatsoever today? Just some medical and some student loans. Okay. And are you current on both of those? Are you actively paying toward them? No, sir.

I've kept in touch with them though. Okay. So are your student loans out of deferral and you are supposed to be paying on them or are you still in a deferral status?

In a deferral status. Okay. Will that continue for some time? Yes, sir. Okay. Very good. And then the medical debts, what is the status of those?

I have not been paying on them and someone told me that I may be able to receive some financial assistance for them. Okay. All right.

But they're not extreme costs. Yeah. Okay. Great. Well, at some point it'd be good once you're able to go ahead and establish communication with them, they'll likely be very willing to work with you either on a reduced payback or at least on a monthly payment, but it'd be great if you could start making some progress there when you're ready. Beyond that, do you have access to a company sponsored retirement plan or anything that would allow you to save for the longterm on a tax deferred basis?

Not at the moment, but I do plan to work somewhere soon that I believe I will be receiving those benefits. Okay, great. Yeah. So that would be good. But right now, because of that emergency fund in particular, we need to really get that in place at least get one month's expenses and then on your way to three to six. And I'd love for you to start making some progress toward the medical debt. But once you've got the emergency fund at a minimum in place, then I think that's the time hopefully if you have a company sponsored plan available, especially if there's some matching involved where you'd get some sort of 50 cents to a dollar for dollar match of up to a certain amount, you're going to want to take advantage of that because that's a 50 or 100% return immediately.

You're not going to get that anywhere else. So that would be a great opportunity for you, but I don't think we're quite there yet. Apart from that, you could do what's called a Roth IRA, which you'd probably want to open it a Fidelity or Schwab. You could put it into a faith based investing fund or you could use a robo advisor at Schwab. They call it the Schwab intelligent portfolios and it would just give you some indexed exchange traded funds. This is just a basket of stocks that mirror the broad market indexes. So you just capture the broad moves of the market and over time you'll do well. I was just looking this morning at the last dozen years of S&P 500 returns. So the S&P 500 is one of those most well known indexes.

It's a basket of the 500 largest companies here in the United States. And if we look over the last 12 years, nine of those 12 years have been positive. In some cases, more than 20% positive.

Only three of them have been negative. And so that's the idea is that if we're investing over the long haul, properly diversified, but we're taking a long term perspective, we'll do well. Whether it's in an index fund or an actively managed fund or a faith based investing fund. But I think your key right now is to get that emergency fund in place and if you want, I'd be happy to connect you with a certified Christian financial counselor at our expense to help you review your budget, make sure you're on track with the plan and set up a process to control the flow of money in and out. So stay on the line, we'll get your information and get you connected with a CERT CFC. We'll be right back. Great to have you with us today on Faith and Finance live. By the way, we're not live today. We're away from the studio, so don't call in.

But we have some great questions that we lined up in advance. By the way, this ministry is entirely listener supported. That means we rely on your financial gifts and support to do what we do on the air every day. If you consider a gift, we'd certainly be grateful.

Just head to our website, faithfi.com, that's faithfi.com and click the give button, thanks in advance. All right, let's head back to the phones. Coming up in just a few moments, we'll talk to Paul in New York. He wants to find out how to get out of credit card debt.

Also Hank in Illinois has a challenge with a life insurance policy, wants to know where to turn. But first, let's go to New York. Michelle, you'll be our next caller. How can I help? Thank you for taking my call.

Sure. My husband recently retired from the military with over 20 years of service. He receives a small VA pension in his retirement. I work full time and were able to live off of debt.

He was lucky enough to find employment in his field. We're excited and so he'll be getting that income. Right now, we have $47,807 on our mortgages at 2.5.

I recently completed my doctorate and to do that I had to take out three student loans and their interest rates vary from 5.2, 6.6, and 6.0. And I owe $45,032. So our question is, where do we start? The income that he'll be getting from his employment, we're hoping to just kind of put it in one area. Okay, yeah.

So this would really be surplus because your bills are covered before even considering this income he'll be receiving. Is that right? Yes, sir. Okay, great.

And what is the interest rate on the mortgage? 2.5. Okay.

Yeah. So you have a great rate there obviously and it looks even better now that rates are quite a bit higher. But in any environment, 2.5% is phenomenal. You know, I like the idea of you all attacking that student loan debt. I mean, obviously the interest rates are at least double, if not in a little bit more than that in the case of a couple of these loans. And you know, you get that knocked out, you're going to save from a financial standpoint, you will save money, and then it would give you the ability to snowball this where you take what you were sending, you know, to the student loans and you just roll that right into the mortgage and accelerate that payoff. But just given the ability, you know, to eradicate these student loans at a significantly higher interest rate makes a lot of sense to me. I mean, I love the idea of you all being completely debt-free, including your home and knowing that you have it free and clear. But I suspect you've got quite a bit of equity there, which is great. And given that low interest rate, I think, you know, for me, going after the student loans makes a lot of sense. But give me your thoughts on that and what have you and your husband talked about in light of this? So my husband and I, what we talked about, that's what I was thinking. But he was saying that if we attack the mortgage and by the way, I called the rep at the mortgage company and they laugh, why would you want to pay this off?

You have a great rate. And I don't know how to respond. So he is thinking that if we attack the mortgage, the income that we receive from the mortgage could then be could help us with the three student loans. Yeah.

No, I certainly understand that. I think, though, the key here, I mean, there's not a right or wrong decision here. Whenever you're paying down debt or paying off debt, that's a good thing. And to answer the question of the mortgage servicer, I mean, I think at the end of the day, there's the financial side of this and then there's the non-financial side. The financial side is just the dollars and cents of, OK, you're paying two and a half percent. So what could you do with that money elsewhere? And he would probably say, well, you could go out and invest it. And even if you did only six or eight percent, you're still doing quite a bit better than the mortgage. You've got the money there. You could pay it off at any time, but you could get a better long term rate of return. And that's true.

You know, if we look historically, you know, that would be a an appropriate way to look at this. But then there's the non-financial side, which he's not considering or she in that is that there's just a lot of peace of mind that comes from knowing you're unencumbered, that you own your home, and that, you know, if you look at scripture, although borrowing is not a sin, there's a lot of warnings about debt. And I think we should pursue the idea of being debt free over time. So when you factor both of those in, I think it's perfectly appropriate to say we're going to get out of debt, including paying off this low interest rate mortgage, just because we want to be out of debt. Now, somebody else who says, no, I like that two and a half percent rate, I'm going to take that money and put it to work for me, I wouldn't argue with that either.

It's really a personal conviction. But at the end of the day, you know, you're, when you pay off either of these loans, you're going to have more money available because not only will you have your husband's income, but you'll have what you would have been sending to service those loans at a minimum. So in the case of the mortgage, that's your mortgage payment based on the amortization schedule, but the student loans, that's the monthly payment that you're going to have. In either case, you'll be able to add those minimum amounts to his surplus income to go after the other debt.

So again, there's not a right or wrong here, but I think just given that the interest rates are at least double on the student loans, that's where I would probably prioritize my attention. Thank you. Do you have time for another question?

Yeah, go right ahead. We have two children, I'm six years old, and then we have two foster children who are free for adoption and we're considering adoption. Our children have a savings account and a CV in their name. We're wondering how to financially plan for all four children. Yeah.

And are you thinking specifically for college, Michelle, or just generally? Just generally right now. They're all very young. Okay. Well, you know, a couple of thoughts. Number one is your ability to just be financially sound for you and your husband is the best thing you can do for your kids. And so making sure you're out of debt, you're following the Lord's leading and you're giving, you know, you're saving for the long term. I mean, all of those things are really key. Now, in terms of your ability to set something aside for the kids, you know, if you wanted it more generally available, rather than putting it in a custodial account where it automatically becomes their money at the age of majority, usually 18, where they might not be and they, let's pray they are, but they may not be spiritually or financially mature enough to handle it.

I just like the idea of you guys setting aside a separate joint account for each of the kids in your name, but just earmark it for the kids and then just set up an automatic transfer into that and then invest it in some index funds, like through the Schwab Intelligent portfolios, or you could buy some faith-based investing funds and you could find a list of those at our website, faithfi.com. But I think that'd be the approach that I'd take, Michelle. Hey, thanks for calling today. Back with more questions right after this.

Stay with us. We're Faith and Finance Live, and we talk about our telephone number often because we usually are live. But today the program is prerecorded, so if you hear a mention of the phone number, please don't call us, but you can find us online at faithfi.com. What an opportunity we have to be found faithful as we turn to God's word to navigate every facet of our lives, including our role as managers of God's money. Well, the good news, there's all kinds of principles, in fact, 2300 verses that deal with money and possessions. So when we look at the big themes of scripture, our goal, our aim is to live rich toward God.

That's right. 12, the parable of the rich fool, where we're to value our eternity, to value God over everything else. He is our abundance, not just the access to our abundance. He is our abundance, and now money is not our aim.

It's not an end. It's a means to an end, to glorify God, to provide for our families, to meet the need of others. Well, that's the opportunity we have and what we want to encourage you in each day on this broadcast as we gather together to mind the scriptures and apply God's principles and wisdom to your daily financial choices. By the way, if you want to check out more on Faithfi, our ministry here that's listener supported, you can do so at faithfi.com.

All kinds of resources. You can jump into the community, post a question, answer someone else's question, provide encouragement, and check out our Faithfi app. It's all at faithfi.com. All right, let's head back to the phones today, awaiting patiently in New York is Paul. Paul, how can I assist you, sir? Hi, Paul. You with us? All right, let's check that line and we'll see if we can get Paul on next.

Hank in Illinois. Go ahead, sir. God is good. You know what? Yes, sir. Rob, I like your show.

I've listened to you, started listening to you about three months ago. Here's what I've got. I'm 69 years old and I bought a life insurance 20-year term 20 years ago and I had the cash surrender value option and the 20 years is up. I've got a check for $16,945 from the life insurance company, but when I saw what they were doing, I should have been getting $17,600. So I called them up and I said, hey, where's the rest of the money at? And they said that I automatically went into a extended term insurance when mine canceled out.

But I docked my I's and crossed my T's and I stopped. I called them a month before this term insurance was canceling and stopped the check so they couldn't get the money out of the account anymore. And I also told them to cancel this policy as of the date, which would have been November 4th, 2023. And then they still got the $514.22 for the extended term. They went through that.

Have you heard that before? You know, I'm not, but I'm not surprised to be an obviously, you know, this is unfortunately your word against theirs. Do you have any documentation? I mean, obviously you went in and pulled the ability for them to continue to draw out the premium. But do you have any documentation on your notice that you gave to them at that point?

I do. And then they just sent me a surrender cash value letter maybe about three weeks ago. And after I talked to them for an hour and they sent me and it said $17,600. But when I got the check from them, it was $16,945. So they did get the premium.

Okay. Well, what I would do is try to escalate this to another department, just see if you can, you know, make sure you've got all your documentation in one place so you can, you know, talk them through what transpired. Hopefully it's just a clerical error and somebody with some authority to override what the computer screen says can, you know, make a decision in your favor to give you the full amount. Obviously if you need to go beyond that, the place you would file a complaint would be with the Department of Financial Services there in the state of New York who oversees the insurance companies. And you know, you would go to their website, dfs.ny.gov slash complaint, and you could file a consumer complaint at that point and you could do the letter of authorization and basically share your concern and then somebody will follow up with you.

But I'd probably try to avoid that and at least take one more step to see if you can escalate this to somebody who'd be willing to take another look at it and see if you can get the full amount. Okay. The bottom line is, is I just got another 20-year term from the same company. Okay. Does that help me any?

Does that... Well, sure. I mean, I think the fact that you're an existing customer, I mean, you know, you've already done, you've already put the policy in force, so they're not going to benefit further, but the fact that you're an existing customer never hurts with your, you know, making the case that they should, you know, award you this full amount and find, you know, take your word for it and hopefully make good on it. So, yeah, I think you've done all the right things. Now it's just a matter of finding the person that can help you. And if you can't, let's hope it doesn't come to that, then I think your next step is to file a complaint with the DFS there in New York. So all the best to you, Hank.

I hope this works out, but I'm confident if you stay at it, you'll probably get them to take some action for you. Thanks for being on the program, sir, and for your kind remarks about the program. Let's head to New York, actually, and talk to Paul. Thanks for calling, sir. Go ahead. Thank you for taking my call.

I have some family members who they're kind of in over their head a little bit and they were just wondering if there's a credit financial agency that you would recommend. Yeah, Paul. So is this credit card debt? Yeah, most of it. Okay. Yeah.

Yeah, there is. So what we generally recommend and this, you know, there's not any kind of magic number, but just in our experience, kind of the number there is around 4000. If you've got less than 4000 in credit card or consumer debt, you know, usually just snowballing it yourself is the best way to go and that's just a term that simply means you start with your spending plan or your budget, you eliminate all opportunities for unnecessary spending to free up margin, you pay the minimums on all the accounts, but you focus on the one with the smallest balance, not the highest interest rate, the smallest balance, and you take all that surplus you freed up and you apply it to that smallest balance and the reason is that the studies show that the plan that you'll complete is the one that you'll actually continue to make progress on without giving up along the way and that snowball approach where you focus on the smallest balance allows you to see some early wins by paying one off in full, which gives you the motivation to keep going. If you've got more than 4000 in total credit card or consumer debt, our friends at Christian Credit Counselors would be the place that I would recommend you go. You'll find them on the web at christiancreditcounselors.org. What will happen is through a debt management program, the debts won't be paid off and replaced with a new debt. That's debt consolidation. They'll stay right where they are and then through the credit counseling agency, in this case Christian Credit Counselors, each of these creditors have a credit counseling rate that's lower than their prevailing rate.

Let's say it's 22% today and it comes down to 8% or 10%. In many cases, cut these interest rates in half and then you'll pay one monthly payment through Christian Credit Counselors, they'll then send it on to each of the creditors and the combination of that level payment plus the reduction in interest rate will allow you to pay this off on average 80% faster. We've got hundreds and hundreds of listeners that have used them very successfully and I have complete confidence in the team there at Christian Credit Counselors. Check them out online, christiancreditcounselors.org and Paul, we appreciate you being on the program.

Jim in Arkansas coming your way next, we'll be right back. Thanks for joining us today on Faith and Finance Live here in our final segment of the broadcast today. Let me remind you, our team is not here so don't call in but we lined up some great questions in advance. We'll get to those in just a moment. Before we do, let me remind you if you haven't downloaded the Faithfi app, we'd love for you to check it out. It's got three sections in it. The first is the money management system based on Larry Burkett's digital envelope system and helps you manage God's money in a way where you know exactly what's left in each envelope at any point during the month. There's also our learn tab where you can access the best content and biblical finance to grow in your understanding of God's way of handling money. And our community where you can post questions, get comments and ideas from other stewards on the journey. So download it today on our website, faithfi.com. Just click app. All right, back to the phones we go. Let's head out to Arkansas, Jim. Thanks for your call, sir.

How can I help? Thank you. God bless. I'm 62 and a half years old and good health. I have no mortgage, no debt, no credit card debt. And I recently took the four stocks that I had in my Fidelity account and put them entirely in Fidelity cash and which is about $211,000. And one is rightfully concerned about the economic collapse and concerns and the Middle East. And do you have it? Should I just keep it safe and sound in Fidelity cash for a while or should I take a chunk of it, maybe put it in a CD?

And if everything goes, is a CD even safe, there's a chance of losing that. Yeah. Well, I appreciate that, Jim, and obviously I share your concerns just about the direction we're headed on a lot of fronts, and that would include fiscally here in the United States, just with our mounting debt, which, by the way, the interest on that debt is about to be our largest federal expenditure, even eclipsing the defense spending that we do. And that's concerning. You know, I think the rule of thumb typically is when you get north of 13 percent of your federal budget, you know, that's where you have some cause for concern.

We're at 14 and it's headed higher now. I don't think, you know, we're not in a situation where it's beyond repair. We just need wise decision making in Washington. And that's why every election is important. This next one is certainly important because we need leaders that will be fiscally responsible and understand that God's word and the principles there around economics and wealth creation and apply to nations as well as individuals.

In fact, a lot of the verses that we read in scripture around money were written to nations at that time. So we need to heed that counsel. Now what does that mean for us? Well, you have to put that alongside the idea that despite the challenges, you know, that I just mentioned and others, including a shrinking workforce because of our population size shrinking, we're having less kids and a whole host of other issues, we still are the largest and strongest nation in the world.

Our economy is the biggest. And you know, because of that and because there is no rival for the U.S. dollar right now that's legitimate, you know, I don't think that we're going anywhere anytime soon. And for that reason, you know, the very best way for you to overcome the effects of inflation, which is eroding your purchasing power, you know, every month, although you're enjoying probably a decent interest rate in that Fidelity money market, the effects of inflation are best offset through, you know, stock and bond investing or real estate, hard assets, even an allocation to gold.

So I think a properly diversified portfolio is still the very best way for you to grow what God has entrusted to you. You know, you have to look at the worst case scenario. I mean, so even if we played this out and you were to say, well, what if the U.S. economy comes crumbling down? Well, if it did, everybody would be in the same situation, you know, and you're not necessarily any better off with that, you know, money under your mattress than you are with it invested. So you know, I would say that, you know, you could take the most conservative approach, which would be to go ahead and put it in maybe a CD ladder, and you asked about the soundness of that approach. Well, you'd be backed by the full faith and credit of the United States government.

You say, well, what's that worth? Well, again, if we're grading on a curve against every other nation on the planet, it's still the biggest and strongest. And so I think from that standpoint, I would be comfortable, even though the idea of a debt credit crisis is plausible.

I think we're still decades away from that. And again, hopefully we'll course correct along the way. So that would be, you know, as close to risk free as you can get. And then you move beyond that as you add risk, you have the potential for a greater return. For me, you know, I mean, at your age, I love the fact that you're debt free.

I love the fact that you've got some liquidity. But if the Lord tarries and you're in good health, you need this money potentially to last for three decades or more. So you have the ability, even at 62, to take a long term approach, which is what you would need to do in order to, you know, make the decision to invest.

So what would I do? I'd probably build a properly diversified portfolio, you know, at 62, where maybe half of it is in high quality corporate and government bonds, 50% of it, maybe 40% in stocks, high quality equities. I'd probably use some of the faith based investing mutual funds that invest in companies that would be aligned with your values for that 40%. And then I'd put 10% in gold and, you know, take a long term approach to it and just, you know, try to grow it appropriately that way. But if you said, listen, I'm just not comfortable taking that level of risk, then I think your next option is probably to look to safer investments. There's nothing risk free, but safer.

And I would say that would be either government bonds like treasuries, or a CD ladder, you know, where you ladder it over, you know, six months, a year, two years, five years, and try to get, you know, 5% plus across all of it for the next, you know, five to 10 years. Does that make sense? It does. Great. I appreciate you very much. Okay, thanks for your call, Jim. We appreciate you checking in with us.

Let's head to Tennessee. Hi, Casey. Go ahead. Hi. I have a question.

I'm not sure what to do. I'm thinking of retiring so I can get my money out of the company that I work for now and take the money and I don't know how much the government takes because I'm not 65 yet. Is there a cut off where they don't take anything or... So is this a 401k, Casey? Yeah. Okay. Yeah. So if you pulled the money out, you're not going to pay any penalty at your age because you're over 59 and a half. So there's no penalty. So the only taxes that would be due would be whatever you pull out would be added to your taxable income for the year and then you'd pay taxes on it just like it was income from your employer. Oh, okay. Yeah.

But... That sounds good. Now, with that said, let me just push back for a second and just ask is that the best approach because, you know, how much do you have in the 401k today? 20,000. Not enough.

All right. 20,000. And what would you use the money for if you pulled it out? I would pay off. I have two credit cards.

I want them gone. Okay. And I'm still going to work hard times. Okay.

And would this... Let me ask you this way. Have you corrected the problem that got you into the credit card debt in the first place? I mean, are you confident that if you paid this off, you wouldn't call me back in six months and say, guess what?

The credit card debt's back. Yeah. I'm getting a divorce. Okay. All right. So that was the primary cause as you look back on, you know, why the credit card debt's here. Do you feel like you can balance your budget and live within your means moving forward?

I did fine before I got married. Okay. All right. That's fair. I had extra money when I was by myself.

Okay. Well, I think that's the key is, you know, I just talked to so many folks and, you know, I'm not saying that you're going to go back into debt, but I just hear from so many folks that they take the pressure off by, you know, pulling money out of a 401k or something like that to pay off debt. And they're like, oh, take a big sigh of relief. And then the pattern of overspending continues. And then the credit card debt comes right back, except now they have another loan to boot or, you know, a 401k that's been eliminated, something like that. I certainly understand what you're saying about there's a change that's happening here that is going to give you more control over the money and you're confident you can handle it appropriately. The only other approach would be to say, okay, what if I leave the 20,000 there, let it continue to work for me so that, you know, maybe down the road, it's not 20, but it's 30 or 40. And you know, you get yourself on a debt management program which would get the interest rates down. But at the end of the day, if you say, listen, Rob, I just want to be out of debt and I heard you say that, and that's the most important thing for me, then, you know, I think the key is just make sure that you understand a couple of things. Number one is you don't want to let the tax bill catch you by surprise. So let's say you're in a 25%, you know, effective tax rate. You know, if you take 20,000 and you owe 25% to Uncle Sam, you need to set aside 5,000 so that doesn't catch you by surprise and you have that money to, you know, pay in when you file your taxes. And then that would allow you to pay off 15, not 20,000 of the credit card debt. So that's number one. And then number two, let's just really dial in your spending, live on that spending plan and try to continue to save for the future so you've got something to fall back on, you know, when the unexpected comes.

But apart from that, there won't be any penalties, you'll just have that tax bill at the end of the year. Okay? Okay.

Sounds great. Thank you so much, sir. All right. Have a great day. And you too, Casey.

I appreciate your help. Thank you so much. I appreciate you calling. Well, folks, that's going to do it for us. We covered a lot of ground today. I'm so thankful for the opportunity to come alongside you, to talk about our role as stewards, to look to God's word, to encourage one another and realize that as we see God as our ultimate and true treasure, well, money changes its entire focus.

It becomes a means to an end to accomplish God's purposes and that's what we want to encourage you in as we gather together on this program each day. By the way, this ministry is entirely listener supported. That means we rely on your financial gifts and support to do what we do on the air every day. If you'd consider a gift, we'd certainly be grateful. Just head to our website, faithfi.com. That's faithfi.com and click the Give button.

Thanks in advance. Hey, Faith in Finance Live is a ministry of Faithfi and Moody Radio thanks to my team today and we'll see you tomorrow. Come back and join us then. We'll be right back.
Whisper: medium.en / 2024-01-15 20:08:12 / 2024-01-15 20:26:04 / 18

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