October 7, 2025 • 42 mins
2 Timothy 1:7 says, “For God gave us a spirit not of fear but of power and love and self-control.” When it comes to investing, wisdom means keeping emotions in check. Fear, greed, overconfidence, and regret can all derail sound decisions. On the next Faith & Finance Live, Rob West and Dr. Art Rainer share four ways emotions ruin smart investing. Discover how you can avoid those traps. Then, it’s your financial questions. That’s Faith & Finance Live, where biblical wisdom meets today’s finances—weekdays at 4pm Eastern/3pm Central on Moody Radio.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
S1 (00:08):
For God gave us a spirit not of fear, but
of power and love and self control. Second Timothy one seven. Hi,
I'm Rob West. When it comes to investing, wisdom means
keeping emotions in check. Fear, greed, overconfidence, and regret can
all derail sound decisions. Doctor Art Rayner joins us today
to share four ways emotions ruin smart investing, and how
(00:31):
you can avoid those traps. Then it's on to your
calls at 800 525 7000. That's 800 525 7000. This
is faith in finance. Live biblical wisdom for your financial decisions. Well,
it's always a pleasure to have my friend doctor Art
Rayner on the program. Art is the author of several
(00:52):
books on biblical finance, and the director of the Institute
for Christian Financial Health, which certifies Christian financial counselors are
welcome back.
S2 (01:02):
Rob. It is always an honor to join you.
S1 (01:04):
All right. We're talking about the ways emotions can derail
wise investing. And it's really critical that people are aware
of these. Wouldn't you agree?
S2 (01:14):
Oh, absolutely. Over and over I've heard comments like the
market is on fire. I'm putting more money in or
the market is tanking. So I'm going to take all
the money out. People make reactionary decisions as a response
to momentary gains or losses in the stock market, and
they are rarely smart decisions when it comes to investing.
(01:34):
Emotions are your enemy. Allowing emotions to guide your investment
decisions will most likely lead you to buy high and
sell low, never creating the gains necessary to build a
solid retirement fund.
S1 (01:46):
Yeah, and no doubt you want to buy low and
sell high. So that would be the opposite of what
you want to do. So let's look at four ways
you've identified that emotions ruin smart investing so folks don't
fall into the emotional trap. What's first?
S2 (02:03):
Yeah, first. Emotions are often focused on the present, not
the future. Now the now the present matters. But usually
we are so consumed with the day to day market
volatility that we miss the big picture. We're not investing
for today. We're investing for the future. When you keep
your eyes on the future, bumps in the market seem,
you know, less dramatic. So limit emotional decision making by
(02:25):
focusing on the future.
S1 (02:28):
Yeah, that's great advice. And perhaps turning down the noise
of the world through the 24 hour news cycle might help.
What's the second way that emotions ruin smart investing?
S2 (02:37):
Yeah, that would be allowing fear to take over. Usually
during a down market when the market heads south, we
are sometimes suddenly filled with fear. But making fear motivated
investment decisions rarely results in a sound, thoughtful decision. We
saw this in 2008 as the market plummeted. Individuals pulled
out of the market, swearing that they would never invest again.
(03:00):
Of course, most of those people probably would now agree
that their decision was not the best. During a down market,
fear is often your worst enemy.
S1 (03:09):
That's right, and as you well know, your steady contributions
actually buy more shares when the market's down. So who
wants to buy at the top all the time. All right.
What's next.
S2 (03:20):
Next we can be overconfident during an up market. Whereas
fear can hurt you during down markets. Overconfidence does the
same during up markets. We saw this right before the.com
bubble burst in 2000. We could look back on 2020
and point out something similar. Markets moving upwards can lead
people to view the market as free money. Individual investors
(03:43):
who have no idea what they are doing start purchasing
riskier investments. Those who were never in the market before
suddenly jump in, not wanting to miss out on making
an extra buck. Overconfidence fills the market and creates the
opposite effect of fear. However, the result can be just
as devastating.
S1 (04:02):
Yeah, that makes sense. All right, we have time for
one more way emotions can ruin smart investing.
S2 (04:07):
Yes. Feeling regret when you look back on past investment decisions.
While regret can help us make better investment decisions moving forward,
we must be careful not to overcorrect. But regret can
lead us to do just that.
S1 (04:20):
Yeah, no doubt about it. The Bible says that saving
is wise, so we need to be wise and invest
for the future, but not let emotions determine our investment decisions.
All right, all right. We've got just a few seconds left.
Tell us about the certified Christian financial counselor.
S2 (04:35):
So the certified Christian financial counselor helps individuals and couples
get out of debt, create a budget, start saving for
the future. And they can be found by going to
Christian Financial Health. Com. And then right up at the
top you'll see a tab that says search cert CFC.
If you click on that, you'll be able to find
(04:56):
one in your area or find one that you can
meet via video.
S1 (04:59):
Folks, I can't encourage you enough to reach out to
a certified Christian financial counselor. Again, you can do that
at Christian Financial health.com. All right. Great to have you
with us.
S2 (05:11):
Thanks for having me.
S1 (05:12):
That's doctor Art Rayner, director of the Institute for Christian
Financial Health. Again, check them out at Christian Financial Health comm.
Back with your questions after this. Stick around.
S3 (05:33):
The opinions offered during this program represent the personal or
professional opinions of the participants, given for informational purposes only.
Any information provided is not intended to replace advice from
a financial, medical, legal, or other professional who understands your
specific situation.
S4 (05:57):
Great to have you with us today on faith and finance.
S1 (06:01):
We're thrilled you're along today. I'm really looking forward to
taking your calls and questions today. That number to get
in on the conversation today. 800 525 7000. Again, that's
800 525 7000. Whatever you're wrestling with in your financial life,
looking forward to tackling that today and see if we
can help you move forward with confidence as you think
(06:23):
through what it looks like to be a wise and
faithful steward. Great to have doctor Art Rayner here today,
really appreciate his work and just some great reminders. You know,
anytime we get into a market like the one we're
in now where we're bumping up against new highs, it
seems like every day we have to be very careful
that we don't, um, you know, violate time tested principles
(06:45):
that we know are really wise. Uh, you know, we
can overweight in certain categories. I mean, gold prices keep rising.
I mean, we went right past $4,000 an ounce. For context,
just two years ago, we were at $2,600 an ounce.
So gold has continued to rise. Well, what does that mean? Well,
a lot of times folks will, you know, move out
(07:06):
of a typical weighting for gold prices and, you know,
move into, you know, instead of the 5 to 10,
they might go 20% or more. Well, you know, typically
they're doing it at a time when gold has, you know,
reached an all time high or has had a big
run up. Uh, you just need to be careful there.
Doesn't mean it's it's a bad idea, but in many cases,
(07:28):
it is because we're, you know, we're moving out of
a diversified posture and highly concentrated. You know, a lot
of people have done that with these AI stocks and
with the Mega-cap tech stocks. So you've just got to
be careful there. The market moves in cycles. And there's
a reason that we read the wisdom of Ecclesiastes that
we should, uh, you know, have things in seven or
(07:48):
even eight. You know, we don't have all of our
eggs in one basket, and that helps us to make
sure that, you know, when when certain sectors of the
market are performing better than, than others. Well, that's great,
but that doesn't last forever. And it will shift over time.
And if we get into the trap of trying to
chase these returns, oftentimes we will end up losing in
(08:09):
the long run. So have a disciplined, rules based approach
and then stay the course. Now it can be modified
over time, but certainly, you know, not with the whims
of the market. And that I think, underscores why you
want an advisor alongside you, somebody who's not emotionally connected
to these decisions and can really make them with sound judgment,
(08:29):
not reacting to the emotions of the day. I hope
that helps. And some great counsel from our trainer today.
All right. We're ready to dive into your questions if
you have something on your mind. Financially, the lines are
filling up, but we've got room for you at the moment.
Call right now. 800 525 7000. Let's begin today in Connecticut. Uh, Sandra.
Go right ahead.
S5 (08:49):
Hi, I'm Sandra from Connecticut, and, um, I recently lost
my husband, and I'm, you know, have this old house,
and I got an accident in Georgia. And so, um,
I've been making repairs, so I have some, um, debt, um,
unsecured loans that I got to fix the house, and.
(09:14):
But yet there's still more that's needed. So I got
$20,000 for the, um, settlement. And, um, when I got
I got the settlement, I, I was seeing so many
homeless people in Georgia, and they were suffering so much.
And I just thought, that's where I want to like,
(09:37):
instead of spending it on me or lowering my debt
because I listen to you every day. Unless you have
a budget and you learn from your mistakes, you're not
going to fix it overnight. I just need to learn
money management.
S1 (09:52):
That's right.
S5 (09:53):
And so because you just wind up getting in debt again. Yes.
So I'm working on it, you know. Um, you know, um,
money management. And I just thought just having this money,
I could use it for a bigger cause, like a vision,
you know, of people helping, um, that want to help
(10:17):
people that are homeless. And there's this pastor that, um,
on the radio. He was talking about it. He's saw
the homeless people and the the Hartford, and he is
talking about trying to help them and having a fundraiser.
S1 (10:34):
Um.
S5 (10:34):
So I just thought, like. Or I looked up, um,
like how they build, like little houses. Yes. Um, there
is a place in Georgia. And I texted them, you know,
they have like they're trying to help the homeless building
the little houses, but they didn't text me back. Okay.
(10:55):
So I don't know.
S1 (10:56):
Well, I love your generous heart, and I love that
the Lord is pricking your heart around needs that exist.
And clearly your desire to help the homeless and to
be able to support those in need. That's fabulous. That's
on the heart of God. We see that clearly reinforced
in Scripture. But I would also submit that your ability
to get your financial foundation in place and have a
(11:18):
healthy relationship with money, and have a plan to manage
money with an emergency fund to fall back on when
the unexpected comes, and a balanced budget with some margin
and the ability to fund your current obligations, including any
critical needs that you might have or essential needs related
to home repairs, gives you the foundation to give beyond
(11:40):
just the here and now. Because if you give right
now out of this unexpected windfall, because of the settlement,
which is again, great, but you don't shore up your
financial foundation. That's going to be a one time gift.
But I would submit that your ability to perhaps give
maybe a small amount now as the Lord leads and
you could decide, maybe I'm going to take 10% of
(12:01):
this settlement and just give it right away. Um, but
I think taking the bulk of it or all of
it to shore up your financial foundation to do the
hard work on your budget to make sure you're living
within God's provision, even below it. So you have a
little margin, something left over every month fully funding your
emergency fund, any critical or essential home repairs. You get
(12:22):
those done. That's going to set you up for a
lifestyle of generosity. That's going to be an overflow of
you managing God's money well. And I would prefer you
to be in that position and give a, you know,
a smaller amount monthly out of a well thought out
and disciplined plan than for you to give a lump
(12:45):
sum now, but not have your house in order, and
then find yourself in a situation a few months from
now where you're underwater and you're having to take on debt.
Does that make sense, though?
S5 (12:56):
Yeah, yeah. I just wanted your opinion because, um, I
know I listen to you every day.
S4 (13:03):
Yeah, well, I appreciate that.
S5 (13:04):
And you said that you have to find, you know,
you have to be accountable for what you spend. And
a lot of times when you get out of debt,
you just go right back into debt. Yes. So you
have to find out. You have to have control over
your spending.
S1 (13:18):
Yeah, that's exactly right. And you know, your spending tells
a story about what's most important to you. And the
same is true for me. You know, Larry Burkett used
to say that, uh, one of the clearest indicators into
somebody's values and priorities and spiritual condition is how they
spend God's money. Because it's that tangible demonstration every day
(13:39):
of what do I value now? That's not meant to
be a guilt trip. That doesn't mean you can't enjoy it.
In fact, I would submit that the God who is
the author of delight and joy created money to impart
be something that we enjoy. You know, to build memories
with family and friends and enjoy a good meal together. And,
you know, those are, you know, take a vacation with
people we love. Those are good uses of money, but
(14:02):
so is giving. The key is, how do I live
within God's provision? Because what we know is he's not
intended us to live beyond his provision, because that means
we have to take on debt. And even though the
culture allows it, it's not according to God's plan. So
I would say get your financial house in order. Emergency
fund debt paid off, critical house obligations taken care of,
(14:23):
and then give thanks for your call. We'll be right back. Hey,
thanks for joining us today on Faith and Finance Live
here on Moody Radio. I'm Rob West. We're taking your
calls and questions. The line's nearly full, but a few open.
If you have a question today, call right now. 800
(14:44):
525 7000. Here's our goal each day to help you
live as a wise and faithful steward of God's money.
You see, we recognize that stewardship, the recognition that you
and I don't own anything. But we have responsibility as
managers of God's resources has real implications. It means we
manage money according to the master's wishes, not our own.
(15:07):
Because we're the manager, we're not the owner. It means
that we should be faithful in small things. It means
that we should hold it loosely and understand that it's
not ours. It means that we should operate with absolute
integrity as we manage the resources of the master. It
means we should use them for productive purposes. And as
we lean into this understanding of of stewardship and wise
(15:31):
money management faithfulness over a long period of time, we
look to God's Word and we pull out those principles
that we can apply to our daily money management decisions.
We're giving generously to break the grip of money over
our lives. We're spending less than we earn because that's
the key to every financial success. We need some margin,
something left over at the end of the month. And
by the way, studies say that's one of the keys
(15:53):
to overcoming conflict in marriage around money. It's not a
matter of how much money you make. The data says
it's fact. The fact that whatever you're making, you're living
below it. That leads to a more healthy relationship with money.
In marriage, we need to set long term goals because
the longer term your perspective, the better your decision today.
But I would circle back to where I started. We
(16:14):
need to give generously. I would say that one of
the primary reasons God entrust to us what he does is, yes,
for our enjoyment. But perhaps even more than that, it's
to be a pipeline into God's activity as you meet
the needs of others and love them well. Through the
giving of resources being connected into the activities of God,
(16:34):
joining him where he's at work. And here's what the
Bible says. Your heart will actually follow your money when
you give as well. These are the big ideas that
we wrestle with each day on this program. But we
also take your very specific questions and let's do that
right now. We'll head to Minnesota. Theresa, go right ahead.
S6 (16:52):
Yes. Thank you for taking my call. Of course. So
my my husband and I have had a business for
many years, and we are planning ahead and working on
our exit strategy for our business. We found a Kingdom
advisor near us, and one of the suggestions he came
up with to increase capital in our business was to
(17:14):
transfer the the current debt in the business over to
our home. Um, to, uh, to get a better interest rate. Yeah.
And I'm, I guess I'm just not sure that that's
a wise decision.
S1 (17:32):
Yeah, yeah, yeah, I'm not a big fan of that approach.
I mean, I think the key ideas here are, number one,
when you move business debt to your home, it means
you're converting what's likely unsecured or business backed debt into
debt secured by your home. Now it lowers the interest
rate and that can save you a little bit of money.
But it raises the risk because if things go wrong
(17:55):
with the business, your home is now on the line.
If the business is stable, the plan is clear. The
goal is short term restructuring to save interest and pay
it off quickly. Maybe. But I would say, you know,
if cash flow is tight or the business is uncertain
or just even generally, I would say it can be
(18:15):
a big red flag. In stewardship terms, I think clarity matters.
And so mixing business and personal finances, it blurs accountability
and it really can create, I think, both financial and
spiritual pressure. And so, you know, I would say I
would approach the advisor about that and just say, hey,
(18:36):
can we talk about this? I'm feeling uneasy about it.
Can you explain the risks and the alternatives? For instance,
can we look at negotiating business debt terms instead of
collateralizing the house? Because I'd really like the business to
be self-contained, meaning it should stand or fall on its
own economics, not the roof over your head, which is
(18:59):
basically what we've done here. Does that make sense?
S6 (19:01):
Yeah, it sure does.
S1 (19:02):
Yeah. So so that would be that would be my approach. Um,
so I would engage in that conversation and I suspect
that this advisor would be very welcoming, you know, in
terms of hearing you out on that and talking through alternatives.
S6 (19:17):
Great. Okay. Well, thank you for your advice.
S1 (19:20):
Absolutely. Happy to do it. Thank you for your call, Theresa.
Call anytime. 800 525 7000. Let's go to Lansing, Illinois. Hi, Deb.
Go ahead.
S7 (19:29):
Hi. Thanks for taking my call. Of course. Um, my
husband and I will be turning 65 next spring. I
worked in a school office for 25 years. Um, private
school office. I stopped working now the end of May.
My husband still works. Um, the question I have for
you is on annuities. We have a financial advisor we've
(19:52):
met with just a few times. Hadn't talked to him
for a few months. And suddenly last Friday, we got
a call from him talking about how we should really
sign up for annuities. Because next week, Tuesday, the rates
are going to drop. And by Monday afternoon, you need
to make this decision that you should sign up for annuities.
S3 (20:10):
Mhm.
S7 (20:11):
So yeah a lot of pressure. Um rates used to
be really good I know in annuities and I know
they're coming down. But if we have enough money, which
I think we do in our savings and retirement plans
and IRAs and stuff, is it really important to get
an annuity just to have that security of payments every
(20:33):
month or can you. You know, fund your own so-called annuity? Yes.
With your own money.
S1 (20:41):
Yeah. The answer is absolutely. You can. Is an annuity necessary? No.
Do I like you having to respond to something, you know,
in an urgent request? No I don't. Um, but does
that mean that annuity is never a good idea? No,
I wouldn't say that either. Um, you know, basically, you know,
as you think about an annuity, um, at the end
(21:04):
of the day, it's it's guaranteed income for life or
perhaps a guaranteed return with a guaranteed fixed annuity. But
they're complex and they don't fit everyone. So what I'd
like to do is kind of walk you through what
they are. And then let's talk about your specific situation.
Because if I hear you right, and you've essentially got
the income side covered with the various retirement accounts and
(21:27):
Social Security that you have, and this is really just
kind of that surplus. You know, keeping it outside of
an insurance product gives you more access to it, more flexibility, yes,
more risk. But you may be willing to take a
little bit more risk and manage that through a properly
diversified strategy and have access to the money if you
needed it for long term care or something like that,
(21:49):
and have a little bit more upside potential. So let's
talk about that after the break. Deb, stay right there.
We'll be right back on Faith and finance Live. Hey,
thanks for joining us today on Faith and Finance Live.
I'm Rob West. We're taking your calls and questions today.
(22:09):
We've got looks like three of our 12 lines open
800 525 7000. Uh, before the break, we were talking
to Deb in Lansing, Illinois. She's wondering about an annuity. Uh,
her advisor called and said, hey, we need to get
into an annuity kind of quick here because rates are
going down and you might want to lock in. And
we talked about how we don't love reacting to something
(22:32):
with urgency here, especially when it involves a major financial
decision like this one. But Deb's also feeling like they
have really their ducks in a row in terms of
retirement income and just wondering if an annuity is the
right thing for them. So, Deb, talk to me just
about those retirement income sources you're going to have. And
then this money that would go into the annuity. Where
(22:55):
is that position currently?
S7 (22:58):
Um, it would come from IRAs that we have put
money into from 401 S over the years. Um, my
husband does have a pension with his company. It's decent,
but not like huge because as with most companies, the
pension went away a few years ago. Yeah. Um, but
he would take that as a lump sum when it
(23:21):
comes time to payout. Um, when he retires. Um, we've
been advised to do that so we can invest it ourselves. Okay.
S1 (23:30):
And do you know how much he'll get at that point?
S7 (23:32):
Um, I'm not sure. I think it's like 250,000, maybe.
S1 (23:36):
Okay. All right. And then what else are you going
to have in terms of retirement income?
S7 (23:42):
Um, it's from our IRAs. Savings. Um, I have a
very small pension from the school I worked at. Enough
to maybe buy groceries for a week or something. Um,
so not much from there. Okay. But, um. Yeah, I
feel like we have.
S1 (24:00):
Yeah. Sorry to interrupt you. So you have the 250,000.
What would be the other retirement assets? The lump sums?
S7 (24:06):
Um, I don't know if I want to say it
on the radio.
S1 (24:10):
Okay.
S7 (24:11):
But I feel we have enough. Okay, great. We've got
plenty of of IRAs and different funds. We can do it.
Our advisor had said since we wouldn't get the pension
yet by this Monday because he's still working. He's like,
just take one of your IRAs, you can put it
in this annuity. And then when you get your pension,
you can, you know, switch things around or whatever. Yeah. Um,
(24:35):
but you know, we were looking at okay, so do
you do an annuity between 300,000 and $500,000. So you
have a certain amount of income along with your Social
Security each month, or I think just from our own
investing that we've done that there's enough income coming from that,
that I don't know if we have to do the
(24:55):
annuities because, you know, he said it was at like 5.5%,
I believe, was the rate he quoted. And it was
going to go down to like 4.75. Yeah. But then
you look at he said the fee then was going
to be like I think 0.95. So like almost 1%. Yeah.
And it's like, well by the time you get that
all taken out is it is it worth is it
(25:16):
that great of a return. It's not like they used
to be maybe eight, 9% you know.
S1 (25:20):
Yeah. Yeah. You're right. I mean, I think the key
here is what are you trying to solve for? So,
you know, the benefit of the annuity is guaranteed income
that provides peace of mind and retirement and longevity protection
because you can't outlive the payments and then you get
the tax deferral. So this would be a qualified annuity
that you would roll that IRA money into. So that
(25:42):
all sounds good, especially if it's for a portion of
your retirement nest egg where you say, okay, between Social Security,
your small pension that buys a week worth of groceries,
and if you can shore up enough in the annuity,
that's income for the rest of your life, at least
you'll know. Okay, we've got the bulk of our monthly
income covered. Nothing changes that. And then we've still got
(26:03):
plenty of other assets that we can invest outside of
the annuity. That's going to give us money to tap
if we need it. Long term care. We wanted to
take a major trip or, you know, something outside of
the monthly norm. So that's one approach. What's the downside? Well,
to your point they come with high fees. They come
with surrender charges. They're complex. They have limited flexibility. They're
(26:24):
taxed as ordinary income, not capital gains. You know when
you take them out. And so you just need to
understand that going into it. And you may say listen
we don't need that kind of peace of mind. We'd
rather invest the whole thing. Manage the risk through the
diversification and the use of multiple asset classes, have access
to 100% of the money without the added fees and
(26:46):
the kind of the surrender charges. And we're comfortable with that.
And there's not a right or wrong approach. It's really
just what is going to give you the added peace
of mind. And if the guarantee from the annuity with
those few trade offs that I mentioned is going to
give that to you, well, then it's something to entertain.
But I wouldn't rush into it and I don't think
you need it. You know, at the end of the day,
(27:08):
if if that's not your primary concern, it sounds like
you have plenty of assets that an annuity product is
not necessary. And for the vast majority of retirees, they
don't use annuities at all.
S7 (27:19):
Yeah, okay. That's good to know because I kind of
felt like, you know, from the research we were doing
to sometimes it's like, who's getting the biggest benefit out
of it, us or the financial advisor and everybody else
from their fees, you know. Yeah. Um, I do like
it would be great with a nice, you know, income
coming in. We aren't sure when we're going to start
(27:40):
taking our Social Security. That's the other question. Like, do
you wait till you're 65, 69, 70? Everybody's got their
thoughts on that too. Um, yeah. So yeah. Yeah.
S1 (27:50):
Well, I think it's something to consider. I will say
most annuities are bought not sold, not bought. And basically
what I mean by that is, you know, it's an
advisor selling it to someone, not somebody coming asking for it.
And are there healthy commissions built into these products? Yes.
Does that mean every advisor sells an annuity? Is doing
it just to line their own pockets because it's not
(28:12):
in the best interest of the client? Absolutely not. They
have a place. But you do have to ask the question,
you know, is this the right thing for me? Because
you all aren't totally aligned in terms of your purposes,
because the advisor stands to make a lot of money
through the sale.
S7 (28:29):
Right, right. Okay.
S1 (28:31):
So just make sure it's the right thing for you.
And again, I would come back to if shoring up
the guaranteed income that you need to cover your budget
at a minimum is, is something you all would value,
then it's worth looking at. If that's not something you
feel is necessary because of the assets you have, I
would kind of prefer you to keep it outside at
the end of the day.
S7 (28:52):
Okay. I really appreciate that.
S1 (28:54):
Absolutely. Deb, thanks for your call. Lord bless you. 800
525 7000. Let's see. Um, we're going to head back
to the phones here. We've, uh, all the lines are
about full, but, uh, we'll get to as many as
we can. Uh, Juliet, thanks for calling in Minnesota. Go ahead.
S8 (29:12):
Hi. I think you're wanting to talk to.
S1 (29:15):
Yes, it sure is. How can I serve you today?
S8 (29:18):
Oh, hi, Rob. It's great to. Thanks for taking my call.
Of course. So I, um, have a. I'll try and
make it quick. I have a lake home that my
husband built, uh, 47 years ago. And for his parents. And, uh,
17 years ago, we ended up buying it. And we
(29:40):
are still own it, and I'm. My husband passed away
three years ago.
S3 (29:45):
Mhm.
S8 (29:46):
Um, so I'm on my own with it, but I'm
questioning whether or not I'm struggling, making payments and making
all the things happen. Um, I just realized last or
I found out last summer, I have M.S. as well. Um.
My kid, we don't want to sell. I have three children.
(30:07):
We don't want to get rid of the cabin. They
want to own it forever. I put them on a transfer. Uh, no.
What is that transfer upon GST.
S1 (30:17):
Todd?
S8 (30:18):
Yes, ma'am. Yeah, but what I'm questioning or wondering is, um,
can I. There's one of the children that couldn't go
on the mortgage. If I were to say, let's all
split this house and put them on the mortgage as
well as high. Um, that's a possibility. But I know
(30:39):
the interest rate is high, and I have it at 3.75.
The other question I was thinking was.
S1 (30:46):
Let's do this. I hate to interrupt you, but I
want to give you a chance to fully explain this
and then give you my full answer. And I'm up
against a break. So I've got the first part. Stay
right there and we'll pick it up from there. Great
(31:07):
to have you with us today on Faith and Finance live.
I'm Rob West. We're taking your calls and questions today. Uh,
before the break, we were talking to Into a jet
in Minnesota. Her husband, who passed away, built a lake
house that she currently resides in. It's her primary residence.
It's worth, she believes, about $700,000. She still owes about
(31:28):
375,000 on it. Um. Or excuse me, 325,000 at a
very attractive interest rate of 3.75. The challenge is she's
on a fixed income, she's having trouble making ends meet,
and she's just wondering, you know, what are her options
to retain that residence in order to be able to
(31:49):
keep it in the family, but deal with, uh, you know,
the issues that she's having. And I think you've got
a few options here. Um, because I recognize you want
to hang on to the house. Um, so number one
is you could go ahead and sell the house to
the kids. So if they could qualify, they could buy
the home from you and then allow you to stay
(32:09):
there as a renter or a co-owner. Um, you could
use the sale proceeds to pay off the mortgage and
then invest the rest for income. They keep the home
in the family, but the ownership is clear and sustainable,
and you know that provides financial relief to you immediately.
You could consider a reverse mortgage if you live there
(32:30):
full time as your primary residence, you or at least
62 and you have at least 50% equity. That would
eliminate your monthly payment. Now the interest rate would would
go up quite a bit because instead of that 3.75
that you have now would be, you know, right at
maybe even slightly higher than the prevailing rates, which today
are up near 7%. Now, as rates come down, that
(32:53):
rate will come down, but you'd retain ownership. You could
live there as long as you are alive or until
you sell it. And the balance that was paid off
by the reverse mortgage on the forward mortgage would never
require a payment, and it would just grow over time. Now,
when you passed, the loan would have to be repaid,
(33:13):
and if they didn't want to sell it, they're going
to have to pay it off or take out a
conventional mortgage to pay off the reverse mortgage and whatever
that balance has grown to, because if the reverse comes
in and pays 325,000 to pay off the forward mortgage,
then depending on how long you live that you know
interest rate is going to be accruing and fees, you know,
(33:36):
each year, um, you know, at the end of the day,
you know, selling and moving to a smaller home or
apartment could free up resources. But, you know, if that's
not what you and the kids are wanting to do, then,
you know, that would be difficult. Um, so, I mean,
I think those are probably the, the clearest options. Um,
(33:56):
you know, you you wouldn't probably put them on the
mortgage without them being, you know, involved in the home.
And one of the downsides of them receiving it from
you now, as, let's say, a gift would be that
they miss that step up in basis. And so if
we can find a way where they could inherit the home,
then they get the step up in basis. So it's
(34:18):
no longer, you know, what it cost your husband to
build it years ago. All of a sudden their cost
basis would be the market value as of the date
of death. You know, which is going to be north
of of where it is today. But that also means
that you're going to have to have a, a plan,
you know, to cover it. And maybe that's the reverse
mortgage option where you preserve them receiving it as an
(34:41):
inheritance with a step up in basis, but you get
rid of the the mortgage payment. They would just have
to be on board and understand that whatever that balance
grows to, they're going to have to cover it at
that time because it's going to need to be paid off.
Does that make sense?
S9 (34:56):
Sure. It makes total sense. Yeah.
S1 (34:59):
So I would probably sit down with them, talk through
the options, maybe get a real estate attorney involved and
a and a financial advisor and see where you go
from here. If you decided you wanted to do a reverse,
you could talk to the team at Movement Mortgage Movement.
They're the best in the business. They're believers. And our
team here could even have somebody call you and talk
(35:20):
you through it.
S9 (35:21):
I would love that. All right. Appreciate it. And I
thank you for the all the blessings that you give
to us every day and all the information. And I
appreciate that. And I'd appreciate prayers from from you all
as well. So.
S1 (35:34):
Well, we certainly do that. Uh, thank you for for
that those kind remarks. And we will be praying for you,
by the way. Harlan Accola, our go to guy on
for movement mortgage on reverse mortgages is going to be
on the broadcast next Wednesday taking phone calls. So perhaps
wait and call back in and chat with Harlan directly. Um,
but just know that that's we're going to dedicate the
(35:56):
entire program to that next week. So thank you for
your call today. Lord bless you. Uh. Let's see. 800
525 7000. We're taking your phone calls today. Uh, Carrie
is in Florida. Carrie. Go ahead.
S10 (36:09):
Hi. Thank you for taking my call. Of course. Um, um,
we have my parents back in 2010. Did a life
estate warranty deed on their house. And my four of
us and my parents are on the warranty deed, and
they had a life estate where they could live in it, obviously. Yes. Um, now,
(36:32):
my mom passed away eight years ago in, um, 2018,
and then my dad just passed away in December 2020
for 96 years old. Had a wonderful life. So we're not, uh,
we're rejoicing in his life, but, um, we're looking to
sell the house. And, um, the question for me would
(36:54):
be is for all of us is, you know, I'm
hearing that there's a life expectancy table I need to
look at for what we would use as the value
of the house when we sell it for capital gains,
or if there's any losses based on what we're going
to sell it for, and trying to understand that part.
S1 (37:13):
Yes. Good question. So you said it was given. It
wasn't given to you, but it was through a life estate, correct?
S10 (37:21):
Yes. We're all tenants in common. Yes.
S1 (37:25):
Okay. Yeah, yeah. So you are going to need to
visit with an estate attorney. Uh, or, excuse me, a
tax professional to help you kind of work through this. Um,
but you're right, uh, you know, with the life estate, essentially,
what happens is, uh, you have the ability, uh, you know,
you are the remainderman. And, you know, by doing the
(37:48):
life estate, it allowed, uh, your parents to be able
to live in the home, uh, throughout the rest of
their lives. But it transfers the remainder interest to the children. Uh,
but they retain possession and control for life, and so
it's still included in their estate at death. And because
it's included in the taxable estate, then it receives that
(38:11):
full step up in cost basis to the fair market
value as of the date of death. So even though
the deed was put in your names back in the
early 2000, the the tax clock resets at their death
because of that life estate. And so that was key.
And so, you know, at this point you've got to decide,
are you all going to keep the house or sell it.
(38:32):
Sounds like you all are wanting to sell. Now there
is an official, uh, life expectancy or life estate table
that's used by the IRS to calculate the value of
a life estate and the remainder interest, uh, at the
time it's created. And so, you know, that table that's
produced by the IRS is updated periodically. Um, but most
(38:56):
advisors and attorneys use that, um, you know, for this
purpose to calculate, Essentially, you know what the remainder interest
would be for that life estate. So you're going to
want to get a tax professional involved to determine the
taxable value of what was given away, you know, based
on this table. And that would be something they would
(39:18):
do all the time.
S10 (39:20):
Okay. So that would be the value of what we
would like. Like when my dad passed in the house
we say worth 200 and we're selling it for 225.
That 25 is not just the only capital gain we
have to there's other components. Is that what.
S1 (39:36):
Yes, that's exactly right. So they created the life estate
to give the and gave the remainder interest to the children.
So the your parents retain that you own the future. Right.
And then essentially because those rights are split the total
property value is decide is divided between the life tenants
and the remainderman using that actuarial table. And and so that,
(40:01):
you know is going to determine, uh, essentially, uh, the
value from a tax planning standpoint. Um, you know, and
so it gets a little complicated, but that's where the
advisor will come in. So for now, you know, you
effectively own a certain percentage of the value of this property. Um,
(40:23):
and that's where the table will come in to value
that life estate.
S10 (40:28):
Okay. It is not as clear cut as I originally thought. Then. Okay. Yeah.
S1 (40:33):
It is a little bit more complicated. So I think
that's where you need to get with a tax professional
who can walk you through that. Uh, at the end
of the day. But they'll handle that for you. That's
what they do every day. And it shouldn't be that complicated.
But we appreciate your call. It sounds like your parents
were well planned, and I'm delighted to hear that call. Anytime.
If you have further questions. Uh, Marie is in Pennsylvania. Marie.
(40:54):
Go ahead.
S11 (40:56):
Yes. Hello. Um, thank you for taking my call. So
I have three months of income saved up, and I
have about 2300 in savings. And I have a, um,
a small like $500 left on a HELOC and about
500 on a credit card, both of which have like
seven and 8.9% on them. My question is how much
(41:21):
I consider my savings separate from my three months of
saved up income because, um, you know, if there was
an emergency car break down or something, I didn't want
that to come out of my three months of saved income. Yeah. So, um,
the question is, how is there a percentage, um, of
what you should have in your emergency fund? That's one
(41:41):
of my questions. Um, do we want to answer that
one first or. Go on?
S1 (41:45):
Sure. Yeah. You know, I think the key here is
I'd love for you to have 3 to 6 months expenses,
but not in your emergency fund. But not if you're
carrying high interest credit card debt. I mean, I think
the HELOC is separate. Let's just get on a reasonable
payback to have that paid back in a reasonable period
of time. But with regard to the high interest credit
card debt, as long as you've corrected the problem that
got you into debt in the first place, and maybe
(42:07):
it was the lack of an emergency fund, I would
spend that emergency fund down to as low as one
month's expenses, maybe even $1,500 to get out of credit
card debt, as long as that meant you could start
building it back up. But there's no reason for you
to be paying 22% interest when you've got money in
your emergency fund. You know, as long as you keep
(42:28):
1000 or $1500, I'd attack that credit card debt. But
then let's get on a budget and make sure that
you're not going to just build it right back up.
Does that make sense?
S12 (42:37):
Yes. Yeah.
S1 (42:39):
Okay. Unfortunately, I'm out of time. If you have a
follow up question, let's get you on tomorrow. Marie, I
really appreciate your call today. Lord bless you. Big thanks
to my team today Josh Taylor, Omar, Tahira and Lisa.
Bless everybody here at Faith five. Faith and Finance Live
is a partnership between Moody Radio and Faith fi. We'll
see you tomorrow.
For God gave us a spirit not of fear, but
of power and love and self control. Second Timothy one seven. Hi,
I'm Rob West. When it comes to investing, wisdom means
keeping emotions in check. Fear, greed, overconfidence, and regret can
all derail sound decisions. Doctor Art Rayner joins us today
to share four ways emotions ruin smart investing, and how
(00:31):
you can avoid those traps. Then it's on to your
calls at 800 525 7000. That's 800 525 7000. This
is faith in finance. Live biblical wisdom for your financial decisions. Well,
it's always a pleasure to have my friend doctor Art
Rayner on the program. Art is the author of several
(00:52):
books on biblical finance, and the director of the Institute
for Christian Financial Health, which certifies Christian financial counselors are
welcome back.
S2 (01:02):
Rob. It is always an honor to join you.
S1 (01:04):
All right. We're talking about the ways emotions can derail
wise investing. And it's really critical that people are aware
of these. Wouldn't you agree?
S2 (01:14):
Oh, absolutely. Over and over I've heard comments like the
market is on fire. I'm putting more money in or
the market is tanking. So I'm going to take all
the money out. People make reactionary decisions as a response
to momentary gains or losses in the stock market, and
they are rarely smart decisions when it comes to investing.
(01:34):
Emotions are your enemy. Allowing emotions to guide your investment
decisions will most likely lead you to buy high and
sell low, never creating the gains necessary to build a
solid retirement fund.
S1 (01:46):
Yeah, and no doubt you want to buy low and
sell high. So that would be the opposite of what
you want to do. So let's look at four ways
you've identified that emotions ruin smart investing so folks don't
fall into the emotional trap. What's first?
S2 (02:03):
Yeah, first. Emotions are often focused on the present, not
the future. Now the now the present matters. But usually
we are so consumed with the day to day market
volatility that we miss the big picture. We're not investing
for today. We're investing for the future. When you keep
your eyes on the future, bumps in the market seem,
you know, less dramatic. So limit emotional decision making by
(02:25):
focusing on the future.
S1 (02:28):
Yeah, that's great advice. And perhaps turning down the noise
of the world through the 24 hour news cycle might help.
What's the second way that emotions ruin smart investing?
S2 (02:37):
Yeah, that would be allowing fear to take over. Usually
during a down market when the market heads south, we
are sometimes suddenly filled with fear. But making fear motivated
investment decisions rarely results in a sound, thoughtful decision. We
saw this in 2008 as the market plummeted. Individuals pulled
out of the market, swearing that they would never invest again.
(03:00):
Of course, most of those people probably would now agree
that their decision was not the best. During a down market,
fear is often your worst enemy.
S1 (03:09):
That's right, and as you well know, your steady contributions
actually buy more shares when the market's down. So who
wants to buy at the top all the time. All right.
What's next.
S2 (03:20):
Next we can be overconfident during an up market. Whereas
fear can hurt you during down markets. Overconfidence does the
same during up markets. We saw this right before the.com
bubble burst in 2000. We could look back on 2020
and point out something similar. Markets moving upwards can lead
people to view the market as free money. Individual investors
(03:43):
who have no idea what they are doing start purchasing
riskier investments. Those who were never in the market before
suddenly jump in, not wanting to miss out on making
an extra buck. Overconfidence fills the market and creates the
opposite effect of fear. However, the result can be just
as devastating.
S1 (04:02):
Yeah, that makes sense. All right, we have time for
one more way emotions can ruin smart investing.
S2 (04:07):
Yes. Feeling regret when you look back on past investment decisions.
While regret can help us make better investment decisions moving forward,
we must be careful not to overcorrect. But regret can
lead us to do just that.
S1 (04:20):
Yeah, no doubt about it. The Bible says that saving
is wise, so we need to be wise and invest
for the future, but not let emotions determine our investment decisions.
All right, all right. We've got just a few seconds left.
Tell us about the certified Christian financial counselor.
S2 (04:35):
So the certified Christian financial counselor helps individuals and couples
get out of debt, create a budget, start saving for
the future. And they can be found by going to
Christian Financial Health. Com. And then right up at the
top you'll see a tab that says search cert CFC.
If you click on that, you'll be able to find
(04:56):
one in your area or find one that you can
meet via video.
S1 (04:59):
Folks, I can't encourage you enough to reach out to
a certified Christian financial counselor. Again, you can do that
at Christian Financial health.com. All right. Great to have you
with us.
S2 (05:11):
Thanks for having me.
S1 (05:12):
That's doctor Art Rayner, director of the Institute for Christian
Financial Health. Again, check them out at Christian Financial Health comm.
Back with your questions after this. Stick around.
S3 (05:33):
The opinions offered during this program represent the personal or
professional opinions of the participants, given for informational purposes only.
Any information provided is not intended to replace advice from
a financial, medical, legal, or other professional who understands your
specific situation.
S4 (05:57):
Great to have you with us today on faith and finance.
S1 (06:01):
We're thrilled you're along today. I'm really looking forward to
taking your calls and questions today. That number to get
in on the conversation today. 800 525 7000. Again, that's
800 525 7000. Whatever you're wrestling with in your financial life,
looking forward to tackling that today and see if we
can help you move forward with confidence as you think
(06:23):
through what it looks like to be a wise and
faithful steward. Great to have doctor Art Rayner here today,
really appreciate his work and just some great reminders. You know,
anytime we get into a market like the one we're
in now where we're bumping up against new highs, it
seems like every day we have to be very careful
that we don't, um, you know, violate time tested principles
(06:45):
that we know are really wise. Uh, you know, we
can overweight in certain categories. I mean, gold prices keep rising.
I mean, we went right past $4,000 an ounce. For context,
just two years ago, we were at $2,600 an ounce.
So gold has continued to rise. Well, what does that mean? Well,
a lot of times folks will, you know, move out
(07:06):
of a typical weighting for gold prices and, you know,
move into, you know, instead of the 5 to 10,
they might go 20% or more. Well, you know, typically
they're doing it at a time when gold has, you know,
reached an all time high or has had a big
run up. Uh, you just need to be careful there.
Doesn't mean it's it's a bad idea, but in many cases,
(07:28):
it is because we're, you know, we're moving out of
a diversified posture and highly concentrated. You know, a lot
of people have done that with these AI stocks and
with the Mega-cap tech stocks. So you've just got to
be careful there. The market moves in cycles. And there's
a reason that we read the wisdom of Ecclesiastes that
we should, uh, you know, have things in seven or
(07:48):
even eight. You know, we don't have all of our
eggs in one basket, and that helps us to make
sure that, you know, when when certain sectors of the
market are performing better than, than others. Well, that's great,
but that doesn't last forever. And it will shift over time.
And if we get into the trap of trying to
chase these returns, oftentimes we will end up losing in
(08:09):
the long run. So have a disciplined, rules based approach
and then stay the course. Now it can be modified
over time, but certainly, you know, not with the whims
of the market. And that I think, underscores why you
want an advisor alongside you, somebody who's not emotionally connected
to these decisions and can really make them with sound judgment,
(08:29):
not reacting to the emotions of the day. I hope
that helps. And some great counsel from our trainer today.
All right. We're ready to dive into your questions if
you have something on your mind. Financially, the lines are
filling up, but we've got room for you at the moment.
Call right now. 800 525 7000. Let's begin today in Connecticut. Uh, Sandra.
Go right ahead.
S5 (08:49):
Hi, I'm Sandra from Connecticut, and, um, I recently lost
my husband, and I'm, you know, have this old house,
and I got an accident in Georgia. And so, um,
I've been making repairs, so I have some, um, debt, um,
unsecured loans that I got to fix the house, and.
(09:14):
But yet there's still more that's needed. So I got
$20,000 for the, um, settlement. And, um, when I got
I got the settlement, I, I was seeing so many
homeless people in Georgia, and they were suffering so much.
And I just thought, that's where I want to like,
(09:37):
instead of spending it on me or lowering my debt
because I listen to you every day. Unless you have
a budget and you learn from your mistakes, you're not
going to fix it overnight. I just need to learn
money management.
S1 (09:52):
That's right.
S5 (09:53):
And so because you just wind up getting in debt again. Yes.
So I'm working on it, you know. Um, you know, um,
money management. And I just thought just having this money,
I could use it for a bigger cause, like a vision,
you know, of people helping, um, that want to help
(10:17):
people that are homeless. And there's this pastor that, um,
on the radio. He was talking about it. He's saw
the homeless people and the the Hartford, and he is
talking about trying to help them and having a fundraiser.
S1 (10:34):
Um.
S5 (10:34):
So I just thought, like. Or I looked up, um,
like how they build, like little houses. Yes. Um, there
is a place in Georgia. And I texted them, you know,
they have like they're trying to help the homeless building
the little houses, but they didn't text me back. Okay.
(10:55):
So I don't know.
S1 (10:56):
Well, I love your generous heart, and I love that
the Lord is pricking your heart around needs that exist.
And clearly your desire to help the homeless and to
be able to support those in need. That's fabulous. That's
on the heart of God. We see that clearly reinforced
in Scripture. But I would also submit that your ability
to get your financial foundation in place and have a
(11:18):
healthy relationship with money, and have a plan to manage
money with an emergency fund to fall back on when
the unexpected comes, and a balanced budget with some margin
and the ability to fund your current obligations, including any
critical needs that you might have or essential needs related
to home repairs, gives you the foundation to give beyond
(11:40):
just the here and now. Because if you give right
now out of this unexpected windfall, because of the settlement,
which is again, great, but you don't shore up your
financial foundation. That's going to be a one time gift.
But I would submit that your ability to perhaps give
maybe a small amount now as the Lord leads and
you could decide, maybe I'm going to take 10% of
(12:01):
this settlement and just give it right away. Um, but
I think taking the bulk of it or all of
it to shore up your financial foundation to do the
hard work on your budget to make sure you're living
within God's provision, even below it. So you have a
little margin, something left over every month fully funding your
emergency fund, any critical or essential home repairs. You get
(12:22):
those done. That's going to set you up for a
lifestyle of generosity. That's going to be an overflow of
you managing God's money well. And I would prefer you
to be in that position and give a, you know,
a smaller amount monthly out of a well thought out
and disciplined plan than for you to give a lump
(12:45):
sum now, but not have your house in order, and
then find yourself in a situation a few months from
now where you're underwater and you're having to take on debt.
Does that make sense, though?
S5 (12:56):
Yeah, yeah. I just wanted your opinion because, um, I
know I listen to you every day.
S4 (13:03):
Yeah, well, I appreciate that.
S5 (13:04):
And you said that you have to find, you know,
you have to be accountable for what you spend. And
a lot of times when you get out of debt,
you just go right back into debt. Yes. So you
have to find out. You have to have control over
your spending.
S1 (13:18):
Yeah, that's exactly right. And you know, your spending tells
a story about what's most important to you. And the
same is true for me. You know, Larry Burkett used
to say that, uh, one of the clearest indicators into
somebody's values and priorities and spiritual condition is how they
spend God's money. Because it's that tangible demonstration every day
(13:39):
of what do I value now? That's not meant to
be a guilt trip. That doesn't mean you can't enjoy it.
In fact, I would submit that the God who is
the author of delight and joy created money to impart
be something that we enjoy. You know, to build memories
with family and friends and enjoy a good meal together. And,
you know, those are, you know, take a vacation with
people we love. Those are good uses of money, but
(14:02):
so is giving. The key is, how do I live
within God's provision? Because what we know is he's not
intended us to live beyond his provision, because that means
we have to take on debt. And even though the
culture allows it, it's not according to God's plan. So
I would say get your financial house in order. Emergency
fund debt paid off, critical house obligations taken care of,
(14:23):
and then give thanks for your call. We'll be right back. Hey,
thanks for joining us today on Faith and Finance Live
here on Moody Radio. I'm Rob West. We're taking your
calls and questions. The line's nearly full, but a few open.
If you have a question today, call right now. 800
(14:44):
525 7000. Here's our goal each day to help you
live as a wise and faithful steward of God's money.
You see, we recognize that stewardship, the recognition that you
and I don't own anything. But we have responsibility as
managers of God's resources has real implications. It means we
manage money according to the master's wishes, not our own.
(15:07):
Because we're the manager, we're not the owner. It means
that we should be faithful in small things. It means
that we should hold it loosely and understand that it's
not ours. It means that we should operate with absolute
integrity as we manage the resources of the master. It
means we should use them for productive purposes. And as
we lean into this understanding of of stewardship and wise
(15:31):
money management faithfulness over a long period of time, we
look to God's Word and we pull out those principles
that we can apply to our daily money management decisions.
We're giving generously to break the grip of money over
our lives. We're spending less than we earn because that's
the key to every financial success. We need some margin,
something left over at the end of the month. And
by the way, studies say that's one of the keys
(15:53):
to overcoming conflict in marriage around money. It's not a
matter of how much money you make. The data says
it's fact. The fact that whatever you're making, you're living
below it. That leads to a more healthy relationship with money.
In marriage, we need to set long term goals because
the longer term your perspective, the better your decision today.
But I would circle back to where I started. We
(16:14):
need to give generously. I would say that one of
the primary reasons God entrust to us what he does is, yes,
for our enjoyment. But perhaps even more than that, it's
to be a pipeline into God's activity as you meet
the needs of others and love them well. Through the
giving of resources being connected into the activities of God,
(16:34):
joining him where he's at work. And here's what the
Bible says. Your heart will actually follow your money when
you give as well. These are the big ideas that
we wrestle with each day on this program. But we
also take your very specific questions and let's do that
right now. We'll head to Minnesota. Theresa, go right ahead.
S6 (16:52):
Yes. Thank you for taking my call. Of course. So
my my husband and I have had a business for
many years, and we are planning ahead and working on
our exit strategy for our business. We found a Kingdom
advisor near us, and one of the suggestions he came
up with to increase capital in our business was to
(17:14):
transfer the the current debt in the business over to
our home. Um, to, uh, to get a better interest rate. Yeah.
And I'm, I guess I'm just not sure that that's
a wise decision.
S1 (17:32):
Yeah, yeah, yeah, I'm not a big fan of that approach.
I mean, I think the key ideas here are, number one,
when you move business debt to your home, it means
you're converting what's likely unsecured or business backed debt into
debt secured by your home. Now it lowers the interest
rate and that can save you a little bit of money.
But it raises the risk because if things go wrong
(17:55):
with the business, your home is now on the line.
If the business is stable, the plan is clear. The
goal is short term restructuring to save interest and pay
it off quickly. Maybe. But I would say, you know,
if cash flow is tight or the business is uncertain
or just even generally, I would say it can be
(18:15):
a big red flag. In stewardship terms, I think clarity matters.
And so mixing business and personal finances, it blurs accountability
and it really can create, I think, both financial and
spiritual pressure. And so, you know, I would say I
would approach the advisor about that and just say, hey,
(18:36):
can we talk about this? I'm feeling uneasy about it.
Can you explain the risks and the alternatives? For instance,
can we look at negotiating business debt terms instead of
collateralizing the house? Because I'd really like the business to
be self-contained, meaning it should stand or fall on its
own economics, not the roof over your head, which is
(18:59):
basically what we've done here. Does that make sense?
S6 (19:01):
Yeah, it sure does.
S1 (19:02):
Yeah. So so that would be that would be my approach. Um,
so I would engage in that conversation and I suspect
that this advisor would be very welcoming, you know, in
terms of hearing you out on that and talking through alternatives.
S6 (19:17):
Great. Okay. Well, thank you for your advice.
S1 (19:20):
Absolutely. Happy to do it. Thank you for your call, Theresa.
Call anytime. 800 525 7000. Let's go to Lansing, Illinois. Hi, Deb.
Go ahead.
S7 (19:29):
Hi. Thanks for taking my call. Of course. Um, my
husband and I will be turning 65 next spring. I
worked in a school office for 25 years. Um, private
school office. I stopped working now the end of May.
My husband still works. Um, the question I have for
you is on annuities. We have a financial advisor we've
(19:52):
met with just a few times. Hadn't talked to him
for a few months. And suddenly last Friday, we got
a call from him talking about how we should really
sign up for annuities. Because next week, Tuesday, the rates
are going to drop. And by Monday afternoon, you need
to make this decision that you should sign up for annuities.
S3 (20:10):
Mhm.
S7 (20:11):
So yeah a lot of pressure. Um rates used to
be really good I know in annuities and I know
they're coming down. But if we have enough money, which
I think we do in our savings and retirement plans
and IRAs and stuff, is it really important to get
an annuity just to have that security of payments every
(20:33):
month or can you. You know, fund your own so-called annuity? Yes.
With your own money.
S1 (20:41):
Yeah. The answer is absolutely. You can. Is an annuity necessary? No.
Do I like you having to respond to something, you know,
in an urgent request? No I don't. Um, but does
that mean that annuity is never a good idea? No,
I wouldn't say that either. Um, you know, basically, you know,
as you think about an annuity, um, at the end
(21:04):
of the day, it's it's guaranteed income for life or
perhaps a guaranteed return with a guaranteed fixed annuity. But
they're complex and they don't fit everyone. So what I'd
like to do is kind of walk you through what
they are. And then let's talk about your specific situation.
Because if I hear you right, and you've essentially got
the income side covered with the various retirement accounts and
(21:27):
Social Security that you have, and this is really just
kind of that surplus. You know, keeping it outside of
an insurance product gives you more access to it, more flexibility, yes,
more risk. But you may be willing to take a
little bit more risk and manage that through a properly
diversified strategy and have access to the money if you
needed it for long term care or something like that,
(21:49):
and have a little bit more upside potential. So let's
talk about that after the break. Deb, stay right there.
We'll be right back on Faith and finance Live. Hey,
thanks for joining us today on Faith and Finance Live.
I'm Rob West. We're taking your calls and questions today.
(22:09):
We've got looks like three of our 12 lines open
800 525 7000. Uh, before the break, we were talking
to Deb in Lansing, Illinois. She's wondering about an annuity. Uh,
her advisor called and said, hey, we need to get
into an annuity kind of quick here because rates are
going down and you might want to lock in. And
we talked about how we don't love reacting to something
(22:32):
with urgency here, especially when it involves a major financial
decision like this one. But Deb's also feeling like they
have really their ducks in a row in terms of
retirement income and just wondering if an annuity is the
right thing for them. So, Deb, talk to me just
about those retirement income sources you're going to have. And
then this money that would go into the annuity. Where
(22:55):
is that position currently?
S7 (22:58):
Um, it would come from IRAs that we have put
money into from 401 S over the years. Um, my
husband does have a pension with his company. It's decent,
but not like huge because as with most companies, the
pension went away a few years ago. Yeah. Um, but
he would take that as a lump sum when it
(23:21):
comes time to payout. Um, when he retires. Um, we've
been advised to do that so we can invest it ourselves. Okay.
S1 (23:30):
And do you know how much he'll get at that point?
S7 (23:32):
Um, I'm not sure. I think it's like 250,000, maybe.
S1 (23:36):
Okay. All right. And then what else are you going
to have in terms of retirement income?
S7 (23:42):
Um, it's from our IRAs. Savings. Um, I have a
very small pension from the school I worked at. Enough
to maybe buy groceries for a week or something. Um,
so not much from there. Okay. But, um. Yeah, I
feel like we have.
S1 (24:00):
Yeah. Sorry to interrupt you. So you have the 250,000.
What would be the other retirement assets? The lump sums?
S7 (24:06):
Um, I don't know if I want to say it
on the radio.
S1 (24:10):
Okay.
S7 (24:11):
But I feel we have enough. Okay, great. We've got
plenty of of IRAs and different funds. We can do it.
Our advisor had said since we wouldn't get the pension
yet by this Monday because he's still working. He's like,
just take one of your IRAs, you can put it
in this annuity. And then when you get your pension,
you can, you know, switch things around or whatever. Yeah. Um,
(24:35):
but you know, we were looking at okay, so do
you do an annuity between 300,000 and $500,000. So you
have a certain amount of income along with your Social
Security each month, or I think just from our own
investing that we've done that there's enough income coming from that,
that I don't know if we have to do the
(24:55):
annuities because, you know, he said it was at like 5.5%,
I believe, was the rate he quoted. And it was
going to go down to like 4.75. Yeah. But then
you look at he said the fee then was going
to be like I think 0.95. So like almost 1%. Yeah.
And it's like, well by the time you get that
all taken out is it is it worth is it
(25:16):
that great of a return. It's not like they used
to be maybe eight, 9% you know.
S1 (25:20):
Yeah. Yeah. You're right. I mean, I think the key
here is what are you trying to solve for? So,
you know, the benefit of the annuity is guaranteed income
that provides peace of mind and retirement and longevity protection
because you can't outlive the payments and then you get
the tax deferral. So this would be a qualified annuity
that you would roll that IRA money into. So that
(25:42):
all sounds good, especially if it's for a portion of
your retirement nest egg where you say, okay, between Social Security,
your small pension that buys a week worth of groceries,
and if you can shore up enough in the annuity,
that's income for the rest of your life, at least
you'll know. Okay, we've got the bulk of our monthly
income covered. Nothing changes that. And then we've still got
(26:03):
plenty of other assets that we can invest outside of
the annuity. That's going to give us money to tap
if we need it. Long term care. We wanted to
take a major trip or, you know, something outside of
the monthly norm. So that's one approach. What's the downside? Well,
to your point they come with high fees. They come
with surrender charges. They're complex. They have limited flexibility. They're
(26:24):
taxed as ordinary income, not capital gains. You know when
you take them out. And so you just need to
understand that going into it. And you may say listen
we don't need that kind of peace of mind. We'd
rather invest the whole thing. Manage the risk through the
diversification and the use of multiple asset classes, have access
to 100% of the money without the added fees and
(26:46):
the kind of the surrender charges. And we're comfortable with that.
And there's not a right or wrong approach. It's really
just what is going to give you the added peace
of mind. And if the guarantee from the annuity with
those few trade offs that I mentioned is going to
give that to you, well, then it's something to entertain.
But I wouldn't rush into it and I don't think
you need it. You know, at the end of the day,
(27:08):
if if that's not your primary concern, it sounds like
you have plenty of assets that an annuity product is
not necessary. And for the vast majority of retirees, they
don't use annuities at all.
S7 (27:19):
Yeah, okay. That's good to know because I kind of
felt like, you know, from the research we were doing
to sometimes it's like, who's getting the biggest benefit out
of it, us or the financial advisor and everybody else
from their fees, you know. Yeah. Um, I do like
it would be great with a nice, you know, income
coming in. We aren't sure when we're going to start
(27:40):
taking our Social Security. That's the other question. Like, do
you wait till you're 65, 69, 70? Everybody's got their
thoughts on that too. Um, yeah. So yeah. Yeah.
S1 (27:50):
Well, I think it's something to consider. I will say
most annuities are bought not sold, not bought. And basically
what I mean by that is, you know, it's an
advisor selling it to someone, not somebody coming asking for it.
And are there healthy commissions built into these products? Yes.
Does that mean every advisor sells an annuity? Is doing
it just to line their own pockets because it's not
(28:12):
in the best interest of the client? Absolutely not. They
have a place. But you do have to ask the question,
you know, is this the right thing for me? Because
you all aren't totally aligned in terms of your purposes,
because the advisor stands to make a lot of money
through the sale.
S7 (28:29):
Right, right. Okay.
S1 (28:31):
So just make sure it's the right thing for you.
And again, I would come back to if shoring up
the guaranteed income that you need to cover your budget
at a minimum is, is something you all would value,
then it's worth looking at. If that's not something you
feel is necessary because of the assets you have, I
would kind of prefer you to keep it outside at
the end of the day.
S7 (28:52):
Okay. I really appreciate that.
S1 (28:54):
Absolutely. Deb, thanks for your call. Lord bless you. 800
525 7000. Let's see. Um, we're going to head back
to the phones here. We've, uh, all the lines are
about full, but, uh, we'll get to as many as
we can. Uh, Juliet, thanks for calling in Minnesota. Go ahead.
S8 (29:12):
Hi. I think you're wanting to talk to.
S1 (29:15):
Yes, it sure is. How can I serve you today?
S8 (29:18):
Oh, hi, Rob. It's great to. Thanks for taking my call.
Of course. So I, um, have a. I'll try and
make it quick. I have a lake home that my
husband built, uh, 47 years ago. And for his parents. And, uh,
17 years ago, we ended up buying it. And we
(29:40):
are still own it, and I'm. My husband passed away
three years ago.
S3 (29:45):
Mhm.
S8 (29:46):
Um, so I'm on my own with it, but I'm
questioning whether or not I'm struggling, making payments and making
all the things happen. Um, I just realized last or
I found out last summer, I have M.S. as well. Um.
My kid, we don't want to sell. I have three children.
(30:07):
We don't want to get rid of the cabin. They
want to own it forever. I put them on a transfer. Uh, no.
What is that transfer upon GST.
S1 (30:17):
Todd?
S8 (30:18):
Yes, ma'am. Yeah, but what I'm questioning or wondering is, um,
can I. There's one of the children that couldn't go
on the mortgage. If I were to say, let's all
split this house and put them on the mortgage as
well as high. Um, that's a possibility. But I know
(30:39):
the interest rate is high, and I have it at 3.75.
The other question I was thinking was.
S1 (30:46):
Let's do this. I hate to interrupt you, but I
want to give you a chance to fully explain this
and then give you my full answer. And I'm up
against a break. So I've got the first part. Stay
right there and we'll pick it up from there. Great
(31:07):
to have you with us today on Faith and Finance live.
I'm Rob West. We're taking your calls and questions today. Uh,
before the break, we were talking to Into a jet
in Minnesota. Her husband, who passed away, built a lake
house that she currently resides in. It's her primary residence.
It's worth, she believes, about $700,000. She still owes about
(31:28):
375,000 on it. Um. Or excuse me, 325,000 at a
very attractive interest rate of 3.75. The challenge is she's
on a fixed income, she's having trouble making ends meet,
and she's just wondering, you know, what are her options
to retain that residence in order to be able to
(31:49):
keep it in the family, but deal with, uh, you know,
the issues that she's having. And I think you've got
a few options here. Um, because I recognize you want
to hang on to the house. Um, so number one
is you could go ahead and sell the house to
the kids. So if they could qualify, they could buy
the home from you and then allow you to stay
(32:09):
there as a renter or a co-owner. Um, you could
use the sale proceeds to pay off the mortgage and
then invest the rest for income. They keep the home
in the family, but the ownership is clear and sustainable,
and you know that provides financial relief to you immediately.
You could consider a reverse mortgage if you live there
(32:30):
full time as your primary residence, you or at least
62 and you have at least 50% equity. That would
eliminate your monthly payment. Now the interest rate would would
go up quite a bit because instead of that 3.75
that you have now would be, you know, right at
maybe even slightly higher than the prevailing rates, which today
are up near 7%. Now, as rates come down, that
(32:53):
rate will come down, but you'd retain ownership. You could
live there as long as you are alive or until
you sell it. And the balance that was paid off
by the reverse mortgage on the forward mortgage would never
require a payment, and it would just grow over time. Now,
when you passed, the loan would have to be repaid,
(33:13):
and if they didn't want to sell it, they're going
to have to pay it off or take out a
conventional mortgage to pay off the reverse mortgage and whatever
that balance has grown to, because if the reverse comes
in and pays 325,000 to pay off the forward mortgage,
then depending on how long you live that you know
interest rate is going to be accruing and fees, you know,
(33:36):
each year, um, you know, at the end of the day,
you know, selling and moving to a smaller home or
apartment could free up resources. But, you know, if that's
not what you and the kids are wanting to do, then,
you know, that would be difficult. Um, so, I mean,
I think those are probably the, the clearest options. Um,
(33:56):
you know, you you wouldn't probably put them on the
mortgage without them being, you know, involved in the home.
And one of the downsides of them receiving it from
you now, as, let's say, a gift would be that
they miss that step up in basis. And so if
we can find a way where they could inherit the home,
then they get the step up in basis. So it's
(34:18):
no longer, you know, what it cost your husband to
build it years ago. All of a sudden their cost
basis would be the market value as of the date
of death. You know, which is going to be north
of of where it is today. But that also means
that you're going to have to have a, a plan,
you know, to cover it. And maybe that's the reverse
mortgage option where you preserve them receiving it as an
(34:41):
inheritance with a step up in basis, but you get
rid of the the mortgage payment. They would just have
to be on board and understand that whatever that balance
grows to, they're going to have to cover it at
that time because it's going to need to be paid off.
Does that make sense?
S9 (34:56):
Sure. It makes total sense. Yeah.
S1 (34:59):
So I would probably sit down with them, talk through
the options, maybe get a real estate attorney involved and
a and a financial advisor and see where you go
from here. If you decided you wanted to do a reverse,
you could talk to the team at Movement Mortgage Movement.
They're the best in the business. They're believers. And our
team here could even have somebody call you and talk
(35:20):
you through it.
S9 (35:21):
I would love that. All right. Appreciate it. And I
thank you for the all the blessings that you give
to us every day and all the information. And I
appreciate that. And I'd appreciate prayers from from you all
as well. So.
S1 (35:34):
Well, we certainly do that. Uh, thank you for for
that those kind remarks. And we will be praying for you,
by the way. Harlan Accola, our go to guy on
for movement mortgage on reverse mortgages is going to be
on the broadcast next Wednesday taking phone calls. So perhaps
wait and call back in and chat with Harlan directly. Um,
but just know that that's we're going to dedicate the
(35:56):
entire program to that next week. So thank you for
your call today. Lord bless you. Uh. Let's see. 800
525 7000. We're taking your phone calls today. Uh, Carrie
is in Florida. Carrie. Go ahead.
S10 (36:09):
Hi. Thank you for taking my call. Of course. Um, um,
we have my parents back in 2010. Did a life
estate warranty deed on their house. And my four of
us and my parents are on the warranty deed, and
they had a life estate where they could live in it, obviously. Yes. Um, now,
(36:32):
my mom passed away eight years ago in, um, 2018,
and then my dad just passed away in December 2020
for 96 years old. Had a wonderful life. So we're not, uh,
we're rejoicing in his life, but, um, we're looking to
sell the house. And, um, the question for me would
(36:54):
be is for all of us is, you know, I'm
hearing that there's a life expectancy table I need to
look at for what we would use as the value
of the house when we sell it for capital gains,
or if there's any losses based on what we're going
to sell it for, and trying to understand that part.
S1 (37:13):
Yes. Good question. So you said it was given. It
wasn't given to you, but it was through a life estate, correct?
S10 (37:21):
Yes. We're all tenants in common. Yes.
S1 (37:25):
Okay. Yeah, yeah. So you are going to need to
visit with an estate attorney. Uh, or, excuse me, a
tax professional to help you kind of work through this. Um,
but you're right, uh, you know, with the life estate, essentially,
what happens is, uh, you have the ability, uh, you know,
you are the remainderman. And, you know, by doing the
(37:48):
life estate, it allowed, uh, your parents to be able
to live in the home, uh, throughout the rest of
their lives. But it transfers the remainder interest to the children. Uh,
but they retain possession and control for life, and so
it's still included in their estate at death. And because
it's included in the taxable estate, then it receives that
(38:11):
full step up in cost basis to the fair market
value as of the date of death. So even though
the deed was put in your names back in the
early 2000, the the tax clock resets at their death
because of that life estate. And so that was key.
And so, you know, at this point you've got to decide,
are you all going to keep the house or sell it.
(38:32):
Sounds like you all are wanting to sell. Now there
is an official, uh, life expectancy or life estate table
that's used by the IRS to calculate the value of
a life estate and the remainder interest, uh, at the
time it's created. And so, you know, that table that's
produced by the IRS is updated periodically. Um, but most
(38:56):
advisors and attorneys use that, um, you know, for this
purpose to calculate, Essentially, you know what the remainder interest
would be for that life estate. So you're going to
want to get a tax professional involved to determine the
taxable value of what was given away, you know, based
on this table. And that would be something they would
(39:18):
do all the time.
S10 (39:20):
Okay. So that would be the value of what we
would like. Like when my dad passed in the house
we say worth 200 and we're selling it for 225.
That 25 is not just the only capital gain we
have to there's other components. Is that what.
S1 (39:36):
Yes, that's exactly right. So they created the life estate
to give the and gave the remainder interest to the children.
So the your parents retain that you own the future. Right.
And then essentially because those rights are split the total
property value is decide is divided between the life tenants
and the remainderman using that actuarial table. And and so that,
(40:01):
you know is going to determine, uh, essentially, uh, the
value from a tax planning standpoint. Um, you know, and
so it gets a little complicated, but that's where the
advisor will come in. So for now, you know, you
effectively own a certain percentage of the value of this property. Um,
(40:23):
and that's where the table will come in to value
that life estate.
S10 (40:28):
Okay. It is not as clear cut as I originally thought. Then. Okay. Yeah.
S1 (40:33):
It is a little bit more complicated. So I think
that's where you need to get with a tax professional
who can walk you through that. Uh, at the end
of the day. But they'll handle that for you. That's
what they do every day. And it shouldn't be that complicated.
But we appreciate your call. It sounds like your parents
were well planned, and I'm delighted to hear that call. Anytime.
If you have further questions. Uh, Marie is in Pennsylvania. Marie.
(40:54):
Go ahead.
S11 (40:56):
Yes. Hello. Um, thank you for taking my call. So
I have three months of income saved up, and I
have about 2300 in savings. And I have a, um,
a small like $500 left on a HELOC and about
500 on a credit card, both of which have like
seven and 8.9% on them. My question is how much
(41:21):
I consider my savings separate from my three months of
saved up income because, um, you know, if there was
an emergency car break down or something, I didn't want
that to come out of my three months of saved income. Yeah. So, um,
the question is, how is there a percentage, um, of
what you should have in your emergency fund? That's one
(41:41):
of my questions. Um, do we want to answer that
one first or. Go on?
S1 (41:45):
Sure. Yeah. You know, I think the key here is
I'd love for you to have 3 to 6 months expenses,
but not in your emergency fund. But not if you're
carrying high interest credit card debt. I mean, I think
the HELOC is separate. Let's just get on a reasonable
payback to have that paid back in a reasonable period
of time. But with regard to the high interest credit
card debt, as long as you've corrected the problem that
got you into debt in the first place, and maybe
(42:07):
it was the lack of an emergency fund, I would
spend that emergency fund down to as low as one
month's expenses, maybe even $1,500 to get out of credit
card debt, as long as that meant you could start
building it back up. But there's no reason for you
to be paying 22% interest when you've got money in
your emergency fund. You know, as long as you keep
(42:28):
1000 or $1500, I'd attack that credit card debt. But
then let's get on a budget and make sure that
you're not going to just build it right back up.
Does that make sense?
S12 (42:37):
Yes. Yeah.
S1 (42:39):
Okay. Unfortunately, I'm out of time. If you have a
follow up question, let's get you on tomorrow. Marie, I
really appreciate your call today. Lord bless you. Big thanks
to my team today Josh Taylor, Omar, Tahira and Lisa.
Bless everybody here at Faith five. Faith and Finance Live
is a partnership between Moody Radio and Faith fi. We'll
see you tomorrow.
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