WEBVTT - Why Delaying Retirement Could Make All the Difference 0:00:08.920 --> 0:00:11.080 So teach us to number our days that we may 0:00:11.080 --> 0:00:14.520 gain a heart of wisdom. Psalm 90, verse 12. Hi, 0:00:14.560 --> 0:00:17.400 I'm Rob West. If you're a few years away from 0:00:17.400 --> 0:00:19.960 retirement and your savings isn't quite what you want it 0:00:19.960 --> 0:00:22.520 to be, you might feel like you've run out of time, 0:00:22.520 --> 0:00:24.840 but maybe you don't need a time machine to solve 0:00:24.840 --> 0:00:28.360 the problem. Today, Mark Biller joins us with some encouraging 0:00:28.360 --> 0:00:32.120 words about beefing up retirement savings. Then it's on to 0:00:32.120 --> 0:00:38.760 your calls at 800 525 7000. That's 800 525 7000. 0:00:38.960 --> 0:00:42.400 This is faith in finance live on Moody Radio. Biblical 0:00:42.400 --> 0:00:47.080 wisdom for your financial decisions. Well, Mark Miller is the 0:00:47.080 --> 0:00:50.839 executive editor at Sound Mind Investing and underwriter of this program. 0:00:50.840 --> 0:00:53.720 He and his colleagues provide a wealth of biblically grounded 0:00:53.720 --> 0:00:57.440 wisdom and financial stewardship. It's always a great joy to 0:00:57.440 --> 0:00:59.820 have Mark with us on the program. Mark. Welcome back. 0:01:00.020 --> 0:01:01.460 Thanks, Rob. Good to be with you. 0:01:01.980 --> 0:01:04.100 Let me mention, while Mark is here today, we want 0:01:04.140 --> 0:01:08.220 to be sure to tackle your investing related questions. That's 0:01:08.220 --> 0:01:12.460 Mark's domain that in retirement related issues where we'll be focusing, 0:01:12.459 --> 0:01:15.900 the first part of our conversation is really the order 0:01:15.900 --> 0:01:17.699 of the day. So if you have a question you'd 0:01:17.700 --> 0:01:20.819 like to get in the mix today related to investments, 0:01:20.860 --> 0:01:24.860 call right now 800 525 7000. We've got some lines 0:01:24.860 --> 0:01:29.580 open 800 525 7000. We'd love to hear from you today. 0:01:29.580 --> 0:01:33.100 We will be getting to those calls in just a moment. Mark, 0:01:33.140 --> 0:01:36.620 of course, as people near retirement, one question seems to 0:01:36.660 --> 0:01:39.980 weigh heavily on their minds. And that is, have I 0:01:40.020 --> 0:01:43.060 saved enough? I'm sure you've experienced that as well. 0:01:43.340 --> 0:01:46.460 Oh, absolutely. Rob. You know, even people who've saved quite 0:01:46.459 --> 0:01:49.580 a lot wonder if they'll have enough. And that's largely 0:01:49.580 --> 0:01:55.340 because there's so many uncertainties around retirement specifically related to 0:01:55.380 --> 0:01:58.810 health care. And a lot of those tend to accumulate 0:01:58.810 --> 0:02:02.090 late in life, so you can feel like you're in 0:02:02.090 --> 0:02:06.370 good shape as you you near retirement age. But it 0:02:06.370 --> 0:02:09.410 really is hard to project exactly what you're going to 0:02:09.410 --> 0:02:11.450 need and so forth. So a lot of people are 0:02:11.450 --> 0:02:15.010 wondering if they're going to be okay financially. Of course, 0:02:15.010 --> 0:02:18.530 if a person is getting close to retirement and they 0:02:18.530 --> 0:02:22.450 realize that they really don't have enough saved, you can't 0:02:22.450 --> 0:02:25.090 go back in time. You can't take the time machine 0:02:25.090 --> 0:02:28.250 like you mentioned a minute ago, and go back 30 0:02:28.250 --> 0:02:31.530 years and boost your savings rate. But the good news 0:02:31.530 --> 0:02:34.010 and what we're going to talk about today is all 0:02:34.010 --> 0:02:38.370 is not lost. There is one simple solution that can 0:02:38.370 --> 0:02:42.010 really move the financial needle quite a bit, and that 0:02:42.010 --> 0:02:45.530 is to work a bit longer. So a few years ago, 0:02:45.570 --> 0:02:48.650 there was a study on this topic which concluded that 0:02:48.650 --> 0:02:51.889 at least for some people, getting close to retirement age, 0:02:52.250 --> 0:02:56.710 working even a little bit longer than they'd planned can 0:02:56.710 --> 0:03:00.550 have the same effect as having saved a higher percentage 0:03:00.550 --> 0:03:05.030 of their income over the last three decades of their careers. 0:03:05.669 --> 0:03:09.790 Hmm. Interesting. Now, that seems to challenge everything people have 0:03:09.830 --> 0:03:12.350 about compounds. Maybe you should undo it more. 0:03:12.550 --> 0:03:16.910 Yeah, absolutely. So it was a Stanford study in 2018 0:03:16.990 --> 0:03:20.709 titled The Power of Working Longer. And the key takeaway 0:03:20.710 --> 0:03:23.750 from the research I'll give you the quote, was delaying 0:03:23.750 --> 0:03:27.990 retirement by 3 to 6 months has the same impact 0:03:27.990 --> 0:03:31.950 on the retirement standard of living as saving an additional 0:03:31.950 --> 0:03:36.470 one percentage point of income for 30 years. Now that's 0:03:36.470 --> 0:03:39.710 pretty amazing on the face of it. And of course, 0:03:39.710 --> 0:03:43.110 for people nearing retirement with the fear they hadn't saved enough, 0:03:43.110 --> 0:03:46.270 that was a big relief because, you know, a few 0:03:46.270 --> 0:03:49.470 more months of work does seem like a relatively small 0:03:49.470 --> 0:03:54.690 price to pay to make up for multiple decades of under-saving. 0:03:54.930 --> 0:03:58.210 But of course, Rob, as you know, with any research, 0:03:58.210 --> 0:04:00.970 the output is only as good as the input and 0:04:00.970 --> 0:04:03.090 you have to know what the assumptions were that went 0:04:03.090 --> 0:04:05.850 into the research. And in this case, some of those 0:04:05.850 --> 0:04:08.610 assumptions do take a little bit of the shine off. 0:04:08.810 --> 0:04:12.530 But that said, there are still some important and encouraging 0:04:12.530 --> 0:04:16.810 implications for people getting close to retirement. Feeling a little 0:04:16.850 --> 0:04:18.050 short on savings. 0:04:18.450 --> 0:04:21.010 It is a big claim, though, Mark, that it could 0:04:21.010 --> 0:04:23.770 just buy a few months, make that kind of difference. 0:04:23.770 --> 0:04:26.450 So why don't you unpack those assumptions before the break here? 0:04:26.730 --> 0:04:30.849 Sure. So there were four main ones. They focused on 0:04:30.850 --> 0:04:34.690 a theoretical worker called John, and the assumptions were that 0:04:34.690 --> 0:04:39.010 John started saving at age 36, put 6% of his 0:04:39.050 --> 0:04:42.530 pay in a 401 K and got a 3% match. 0:04:42.770 --> 0:04:46.409 Second one was John was going to retire at age 66, 0:04:46.410 --> 0:04:50.170 which is his full retirement age. Claimed Social Security right 0:04:50.170 --> 0:04:53.270 at the beginning of retirement And then the last one's 0:04:53.310 --> 0:04:55.630 a doozy. He was going to use all his retirement 0:04:55.630 --> 0:04:59.350 savings to purchase an inflation indexed annuity. 0:05:00.470 --> 0:05:03.909 That sounds kind of random. Well, we'll certainly circle back 0:05:03.910 --> 0:05:08.070 on that, plus much more. And what takeaways can you 0:05:08.070 --> 0:05:11.429 apply to your financial life as you prepare for retirement? 0:05:11.430 --> 0:05:14.870 Perhaps feeling a little behind the game. Mark Biller is 0:05:14.870 --> 0:05:18.190 here today to explain this study. This all comes from 0:05:18.190 --> 0:05:22.390 the article you'll find at Sound Mind Investing. Org. Retirement preparedness. 0:05:22.550 --> 0:05:25.030 What a difference a little time can make. Back with 0:05:25.029 --> 0:05:27.750 Mark Biller and your calls right after this. Stay with us. 0:05:33.270 --> 0:05:36.510 The opinions offered during this program represent the personal or 0:05:36.510 --> 0:05:40.950 professional opinions of the participants, given for informational purposes only. 0:05:41.230 --> 0:05:44.670 Any information provided is not intended to replace advice from 0:05:44.670 --> 0:05:48.910 a financial, medical, legal, or other professional who understands your 0:05:48.910 --> 0:05:50.500 specific Of its situation. 0:05:57.779 --> 0:06:00.500 Do you feel a little behind in your retirement savings? Well, 0:06:00.540 --> 0:06:03.940 perhaps we have some answers for you today. Mark Biller 0:06:03.940 --> 0:06:07.060 is here. He's executive editor at Sound Mind Investing and 0:06:07.060 --> 0:06:10.860 underwriter of this program. We're talking about a study that, uh, 0:06:10.860 --> 0:06:14.820 SMI featured in a recent edition of the SMI newsletter. 0:06:14.820 --> 0:06:18.500 It's called Retirement Preparedness. What a difference a little time 0:06:18.500 --> 0:06:23.260 can make. And it basically that concluded a Stanford study 0:06:23.260 --> 0:06:28.820 from 2018 essentially that by delaying retirement 3 to 6 months, 0:06:28.860 --> 0:06:31.740 even it might have the same impact on the retirement 0:06:31.740 --> 0:06:35.619 standard of living as saving an additional one percentage point 0:06:35.620 --> 0:06:39.540 of income for 30 years, which is a pretty significant claim. Now. 0:06:39.820 --> 0:06:42.380 Before the break, Mark shared with us some of the 0:06:42.380 --> 0:06:46.339 assumptions which, uh, you know, assumptions are obviously everything in 0:06:46.339 --> 0:06:50.880 terms of the the outcomes of this study. But, Mark, 0:06:51.000 --> 0:06:53.440 what can we begin to take away from this? And 0:06:53.440 --> 0:06:57.360 why do you think delaying retirement had such a significant 0:06:57.360 --> 0:06:58.760 impact in their model? 0:06:59.120 --> 0:07:03.320 Yeah, well, the biggest thing, Rob, was definitely the impact 0:07:03.320 --> 0:07:08.560 that delaying has on your Social Security benefits. So by 0:07:08.920 --> 0:07:15.320 waiting to start his benefits beyond his full retirement age, John, 0:07:15.320 --> 0:07:18.960 in the example in the study, was able to ramp 0:07:18.960 --> 0:07:22.840 up his Social Security. And as we'll probably dissect here 0:07:22.840 --> 0:07:26.280 in a minute, that has multiple layers to it. And 0:07:26.280 --> 0:07:30.120 then the second factor in the study was that John 0:07:30.120 --> 0:07:34.320 was able to get the higher, higher annuity income. Again, 0:07:34.360 --> 0:07:37.360 we said right before the break that he used his 0:07:37.360 --> 0:07:41.080 retirement savings to purchase an annuity, which of course we 0:07:41.080 --> 0:07:44.520 probably wouldn't recommend going that route. Certainly with all of 0:07:44.520 --> 0:07:47.620 your retirement savings. But that's what they did in the study. 0:07:47.900 --> 0:07:50.860 And with an annuity, the older you are when you 0:07:50.860 --> 0:07:54.340 buy that, typically the more you can get, the more 0:07:54.340 --> 0:07:57.540 monthly benefit you'll get with the same amount of money 0:07:57.540 --> 0:08:00.300 because you're older. So the annuity is thinking, well, we're 0:08:00.300 --> 0:08:02.660 not going to have to pay as long, so you 0:08:02.660 --> 0:08:04.940 get more for your money. So those were the two 0:08:04.980 --> 0:08:09.460 big reasons that it really helped us in the model 0:08:09.460 --> 0:08:10.580 that they used. 0:08:11.220 --> 0:08:14.380 So then Mark, in your estimation, how do these assumptions 0:08:14.380 --> 0:08:16.820 hold up against reality? Because it sounds like, you know, 0:08:16.860 --> 0:08:19.860 at least one of them around the annuity piece is problematic. 0:08:20.180 --> 0:08:23.980 Yeah. You know, with with any kind of retirement planning, um, 0:08:23.980 --> 0:08:26.820 you have to go through the variables and you have 0:08:26.820 --> 0:08:29.860 to match it up with the individual. Because every individual 0:08:29.900 --> 0:08:32.900 is different. Their income may be higher or lower. They 0:08:32.900 --> 0:08:38.700 may have started saving earlier or later their retirement portfolio. Uh, 0:08:38.820 --> 0:08:42.260 investment performance could be different. There's just a whole bunch 0:08:42.260 --> 0:08:46.930 of variables. That last one, that annuity piece. That one 0:08:46.929 --> 0:08:50.930 is quite the wrinkle. But I think as you dissect 0:08:50.929 --> 0:08:54.570 this study that was kind of a minor piece. So 0:08:54.570 --> 0:08:57.010 I think we can kind of set that to the side. 0:08:57.050 --> 0:09:01.689 It certainly doesn't invalidate the conclusions. The biggest piece of 0:09:01.690 --> 0:09:05.609 this really came from Social Security. And thankfully that's something 0:09:05.770 --> 0:09:10.170 that anybody can manipulate that variable when they're thinking about 0:09:10.170 --> 0:09:12.770 when they start claiming their benefits. 0:09:13.170 --> 0:09:14.929 Yeah. Very good. We're going to jump into these phone 0:09:14.929 --> 0:09:18.610 calls here in just a moment. But first Mark, then, uh, 0:09:18.610 --> 0:09:22.330 assuming those assumptions might be a little off, uh, what 0:09:22.330 --> 0:09:26.250 practical encouragement might we take away that is applicable here? 0:09:26.650 --> 0:09:32.170 Yeah. It's that the power of delaying those Social Security benefits. Um, 0:09:32.250 --> 0:09:35.210 they said in the study that he took his benefit 0:09:35.210 --> 0:09:39.650 at his full retirement age, which is 66, in the study. 0:09:39.890 --> 0:09:42.929 But as you move closer to 70, as you delay 0:09:43.030 --> 0:09:46.950 that for each month that a person delays claiming their 0:09:46.950 --> 0:09:51.710 benefit past that full retirement age, their monthly benefit amount 0:09:51.710 --> 0:09:55.070 increases by two thirds of 1%. That's kind of a 0:09:55.110 --> 0:09:59.590 weird number. So let's go with 8% per year that 0:09:59.590 --> 0:10:03.790 you delay, your benefit goes up by 8% per year. 0:10:04.030 --> 0:10:09.310 And because those Social Security benefits are already indexed for inflation, 0:10:09.470 --> 0:10:12.830 really what we're saying, Rob, is when you wait beyond 0:10:12.830 --> 0:10:16.830 your full retirement age to claim Social Security benefits, you're 0:10:16.830 --> 0:10:23.750 basically buying yourself and potentially your spouse and increasingly attractive 0:10:23.750 --> 0:10:28.230 inflation adjusted annuity. And that's a really compelling offer. 0:10:28.950 --> 0:10:32.710 Yeah, no doubt about it, Mark. That's really helpful. Um, 0:10:32.910 --> 0:10:36.790 there are other financial advantages to working longer. We will 0:10:36.790 --> 0:10:38.990 get into those, uh, between now and the end of 0:10:38.990 --> 0:10:41.230 the broadcast. This is really helpful though. And again, folks, 0:10:41.230 --> 0:10:43.210 if you want to check this out, I just had 0:10:43.210 --> 0:10:46.209 to sound mind investing. All right, let's begin to dive 0:10:46.210 --> 0:10:49.250 into your questions today, Mark, taking your investing and retirement 0:10:49.250 --> 0:10:54.370 related questions today at 800 525 7000. We'll begin with 0:10:54.370 --> 0:10:56.090 Barbara in New Hampshire. Go right ahead. 0:10:57.410 --> 0:11:01.210 Hey, guys. Thank you for taking my call. Sure. I 0:11:01.370 --> 0:11:07.890 am looking to invest, um, the money sale money from 0:11:08.250 --> 0:11:11.610 my mother's house. She's going to go live into a 0:11:11.610 --> 0:11:16.530 retirement village, and I am trying to take the entire 0:11:16.530 --> 0:11:21.410 amount and invest in the best way I can to 0:11:21.450 --> 0:11:25.050 get her the best interest, um, that she can get 0:11:25.050 --> 0:11:31.329 every month. Um, you know, to be able to, um, avoid, um, 0:11:31.730 --> 0:11:35.410 dipping into, uh, the principal of the house, and she 0:11:35.410 --> 0:11:41.040 can just live off the interest, um, right now, she 0:11:41.040 --> 0:11:45.400 has a savings account with about 20,000 in it. That 0:11:45.400 --> 0:11:49.000 doesn't make anything but what I was going to do. 0:11:49.040 --> 0:11:51.600 I was going to just leave that the way it is, 0:11:51.600 --> 0:11:56.400 because right now she's running about an $800 deficit per 0:11:56.400 --> 0:12:00.439 month to make her bills once she goes into the village. 0:12:00.679 --> 0:12:05.520 The retirement community, she's running about $800 short. So I 0:12:05.520 --> 0:12:10.400 was going to just let her keep dipping into this 0:12:10.400 --> 0:12:14.679 present savings account to make up that deficit, and that 0:12:14.679 --> 0:12:18.840 will carry her for about the next two years, roughly. Um, 0:12:19.200 --> 0:12:22.040 what I was going to do with the money from 0:12:22.040 --> 0:12:26.520 the house was put it into a high yield savings account, 0:12:27.000 --> 0:12:30.319 and but I'm not sure how to do it. I 0:12:30.360 --> 0:12:33.800 need to split it because I don't want to go 0:12:33.800 --> 0:12:41.260 over 250 because the FDIC usually doesn't cover it over 250,000, 0:12:41.260 --> 0:12:43.390 so I was going to put at least 250 in 0:12:43.390 --> 0:12:46.699 1 high yield savings account. But now I'm left with 0:12:46.740 --> 0:12:50.699 about 90 left over, and I'm not sure what I 0:12:50.700 --> 0:12:54.500 should do with it. Do I do another, um, high 0:12:54.540 --> 0:12:57.100 yield savings or do I do? Or, you know, what 0:12:57.100 --> 0:12:58.340 should I do with this? 0:12:58.860 --> 0:13:00.500 Yeah. Mark, did you follow that? 0:13:00.740 --> 0:13:05.060 Yeah, I did. Um, Barbara, good questions. And, you know, 0:13:05.100 --> 0:13:07.980 the easiest it sounds like, you know, you've you've narrowed 0:13:07.980 --> 0:13:10.500 down what you'd like to do with the money. The 0:13:10.500 --> 0:13:13.660 high yield savings account certainly seems like a good idea 0:13:13.660 --> 0:13:18.060 to me. Uh, keep that money very safe, very liquid. Um, 0:13:18.059 --> 0:13:24.460 the FDIC limit that you noted of $250,000 per institution. 0:13:24.500 --> 0:13:28.219 The easiest way around, that is what you're suggesting, to 0:13:28.260 --> 0:13:32.339 just find a second high yield savings account at a 0:13:32.340 --> 0:13:35.700 different institution that you like, and you could split the 0:13:35.700 --> 0:13:39.800 money between those to get get around that problem. Um, 0:13:39.840 --> 0:13:42.600 CDs are fine, but you do lose the liquidity. I'm 0:13:42.640 --> 0:13:45.119 not sure you're going to get a lot more interest 0:13:45.120 --> 0:13:47.480 out of those at this point, but you could certainly 0:13:47.480 --> 0:13:51.079 shop those. Uh, shopping online is usually a good idea 0:13:51.080 --> 0:13:55.280 to see the full range of, uh, yields available to you. 0:13:55.679 --> 0:13:57.719 So that would be my recommendation. 0:13:58.240 --> 0:14:00.840 Yeah, I would agree with that, Barbara. I think Mark's 0:14:00.840 --> 0:14:04.560 right on. Keep in mind different account types carry the 0:14:04.559 --> 0:14:07.360 additional coverage. So if you had one account in your name, 0:14:07.360 --> 0:14:10.280 you could get 250,000. If you had one jointly held 0:14:10.280 --> 0:14:13.680 you and your mom, you could get another 250,000. You 0:14:13.679 --> 0:14:16.320 can go to Bankrate.com. Or if you want to find 0:14:16.320 --> 0:14:18.440 a banking partner that shares your values, you could go 0:14:18.440 --> 0:14:22.880 to join Christian community.com for Christian Community Credit Union. Thanks 0:14:22.880 --> 0:14:30.920 for your call. We'll be right back. Hey, thanks for 0:14:30.920 --> 0:14:33.200 joining us today on Faith in Finance Live. I'm Rob 0:14:33.200 --> 0:14:35.620 West with me today, my friend Mark Biller. Mark is 0:14:35.660 --> 0:14:39.500 executive editor at Sound Mind Investing, an underwriter of this program. 0:14:39.500 --> 0:14:42.340 You can learn more at Sound Mind Investing. Dot. Learn 0:14:42.340 --> 0:14:45.620 how to become an SMI member and, uh, get the 0:14:45.740 --> 0:14:48.820 newsletter delivered to your mailbox each month. You can also 0:14:48.820 --> 0:14:52.420 check out the SMI private client group. Uh, you can 0:14:52.420 --> 0:14:55.940 also read the article we're talking about today. Retirement preparedness. 0:14:56.140 --> 0:14:58.940 What a difference a little time can make. Again, all 0:14:58.980 --> 0:15:02.860 of that at sound mind investing. Uh, Mark, before we 0:15:02.900 --> 0:15:05.500 dive back into the phone calls here, uh, we talked 0:15:05.500 --> 0:15:08.340 about this study that you referenced as a part of 0:15:08.340 --> 0:15:12.540 this article from Stanford in 2018. Really, this big idea 0:15:12.540 --> 0:15:15.820 was if you can just delay your retirement by even 0:15:16.020 --> 0:15:19.660 six months, you could have a pretty profound impact on 0:15:19.700 --> 0:15:22.380 making up for some lost time in your retirement savings. 0:15:22.380 --> 0:15:26.020 One of those key factors was the higher Social Security. 0:15:26.220 --> 0:15:29.020 If we take it early, let's say 62, we're going 0:15:29.060 --> 0:15:33.530 to take a 30% haircut, maybe 32%. If we wait 0:15:33.570 --> 0:15:37.410 until age 70, though, we could have as much as 24% more. 0:15:38.090 --> 0:15:39.930 No studies I've seen say you need to live at 0:15:39.970 --> 0:15:43.210 least 12.5 years on average, and it's going to vary 0:15:43.210 --> 0:15:45.770 based on, you know, your income and your benefit and 0:15:45.770 --> 0:15:48.370 so forth when you're full retirement age was. But let's 0:15:48.370 --> 0:15:51.050 say on average, it takes 12.5 years to be paid 0:15:51.050 --> 0:15:54.290 back for what you didn't get in benefits between full 0:15:54.290 --> 0:15:57.850 retirement age and age 70. Obviously, if you outlive that, 0:15:57.850 --> 0:15:59.770 then you enjoy this higher check for the rest of 0:15:59.770 --> 0:16:02.410 your life. But that is a factor to consider where 0:16:02.410 --> 0:16:05.290 you might look at family history and your health, things 0:16:05.290 --> 0:16:06.290 like that. Right? 0:16:06.570 --> 0:16:11.370 Yeah, 100%. It's a very individualized decision because of, you know, 0:16:11.410 --> 0:16:16.330 health histories and individual health outlooks. You know, one thing 0:16:16.330 --> 0:16:18.810 that we run into on the planning side, Rob, is 0:16:18.810 --> 0:16:21.490 a lot of times when we talk to people about this, 0:16:21.890 --> 0:16:24.690 you know, you throw out numbers like that and a 0:16:24.690 --> 0:16:27.290 lot of people just kind of immediately like, oh, I 0:16:27.290 --> 0:16:29.730 don't think I'm going to, you know, make it that long, 0:16:29.770 --> 0:16:34.430 you know, maybe 80, but 82, 85. I don't know. And, 0:16:34.470 --> 0:16:37.830 you know, one thing that we kind of will, will 0:16:37.830 --> 0:16:41.230 come back with is that. And of course, these are 0:16:41.230 --> 0:16:44.350 just rough averages here. Every individual is different. But the 0:16:44.350 --> 0:16:47.950 rough averages actually say that if a couple makes it 0:16:47.950 --> 0:16:52.110 to good health to age 65, and both of them 0:16:52.110 --> 0:16:56.710 are in reasonably good health, the percentages actually say that 0:16:56.710 --> 0:16:59.710 it's 50 over 50, that at least one of them 0:16:59.710 --> 0:17:02.990 is going to live to be 90 years old or older. 0:17:03.390 --> 0:17:06.070 And so when you look at it that way, the 0:17:06.070 --> 0:17:09.950 idea of not breaking even on a delayed Social Security 0:17:09.990 --> 0:17:13.590 decision until you're like 82 years old, well, if you're 0:17:13.590 --> 0:17:17.430 only playing for one or the other and figuring an 0:17:17.430 --> 0:17:21.870 extended benefit beyond age 82 out into their 90s, you 0:17:21.869 --> 0:17:26.230 know that that really gets people's attention. Um, because, you know, 0:17:26.270 --> 0:17:29.770 we always hear, you know, the average age is like 0:17:29.770 --> 0:17:33.810 77 or 78 or whatever. That's the average length of life. 0:17:33.930 --> 0:17:36.969 But those numbers shift a lot. If you both make 0:17:36.970 --> 0:17:40.930 it to retirement age in reasonably good health. So you 0:17:40.930 --> 0:17:43.290 really do need to plan for quite a few years, 0:17:43.330 --> 0:17:44.930 potentially in retirement. 0:17:45.410 --> 0:17:47.369 Well, and as you point out in the article, you're 0:17:47.369 --> 0:17:51.970 essentially by waiting and getting this higher check, maybe 2,425% higher, 0:17:52.010 --> 0:17:58.690 you're buying yourself an increasingly attractive, essentially inflation adjusted annuity 0:17:58.690 --> 0:18:01.609 because you get that cost of living adjustment every year, right? 0:18:01.650 --> 0:18:04.129 Yeah. That's right. And that's the biggest thing that people 0:18:04.130 --> 0:18:07.129 are really worried about when they go into retirement is 0:18:07.130 --> 0:18:11.810 what if inflation accelerates? What if, you know, my investments 0:18:11.810 --> 0:18:15.330 can't keep up and my standard of living declines. And 0:18:15.369 --> 0:18:17.609 you know, the article talks about a couple of other 0:18:17.609 --> 0:18:23.210 benefits that maybe are obvious, maybe not. But by delaying 0:18:23.490 --> 0:18:28.920 your retirement, you're you're not drawing money out of that 0:18:28.920 --> 0:18:33.960 nest egg as soon, and presumably since you're continuing to work, 0:18:34.000 --> 0:18:38.520 you're actually building that that nest egg up even bigger. 0:18:38.800 --> 0:18:42.000 So you're making it bigger. You're not drawing it down 0:18:42.000 --> 0:18:44.840 as quickly so it doesn't have to last as long. 0:18:45.000 --> 0:18:47.399 And then you actually mentioned a great point when we 0:18:47.440 --> 0:18:53.400 were talking earlier about replacing, uh, usually a lower income 0:18:53.440 --> 0:18:58.600 year in your, um, your work history that that determines 0:18:58.600 --> 0:19:02.159 what your benefit is going to be, because most people 0:19:02.200 --> 0:19:04.920 towards the end of their career, they're earning more than 0:19:04.920 --> 0:19:07.480 they were earlier in their career. So it can actually 0:19:07.480 --> 0:19:10.920 even boost the actual benefit itself, which I thought was 0:19:10.920 --> 0:19:11.919 a great point. 0:19:12.280 --> 0:19:14.639 Yeah, no, it can make a lot of difference. All right, 0:19:14.640 --> 0:19:17.080 let's head to Chicago. John, you've been waiting patiently, sir. 0:19:17.119 --> 0:19:17.600 Go ahead. 0:19:20.920 --> 0:19:24.920 Hi, uh, I apologize. Hi. Uh, good. Good to be 0:19:24.920 --> 0:19:27.139 on the show. Bob and Mark, I appreciate you taking 0:19:27.140 --> 0:19:30.620 my call. Sure. Just wanted to know if, uh, I 0:19:30.660 --> 0:19:34.500 have a an investment with my 401 K. Uh, it's 0:19:34.500 --> 0:19:39.220 about 25,000, um, 48 years old. I'm married with children, 0:19:39.220 --> 0:19:44.380 and I wanted to try to increase my, um, portfolio 0:19:44.380 --> 0:19:48.020 by investing in different vehicles. Uh, right now, by taking 0:19:48.020 --> 0:19:50.900 out from the 401 K and investing in different vehicles 0:19:50.900 --> 0:19:54.379 so that I can be prepared for retirement. And I 0:19:54.380 --> 0:19:57.100 would like to try to retire at least by at 0:19:57.140 --> 0:20:00.700 least 70. Excuse me. By. Yeah, by 77 years old. Uh, 0:20:00.700 --> 0:20:04.219 to to have that Social Security benefit. Uh, yeah. What 0:20:04.220 --> 0:20:05.260 are your thoughts on that? 0:20:05.619 --> 0:20:07.740 Well, give us a little bit more on that. So 0:20:07.740 --> 0:20:09.620 what did you have in mind? Were you actually thinking 0:20:09.619 --> 0:20:12.740 because you can't roll out that 401 K until you 0:20:12.780 --> 0:20:15.419 separate from service, and you don't want to take it 0:20:15.420 --> 0:20:19.620 out because you'd have the penalty because you're under 59.5 0:20:19.619 --> 0:20:22.300 and then you would no longer have the tax deferral. 0:20:22.540 --> 0:20:24.360 So what is it you were thinking? Did you have 0:20:24.359 --> 0:20:27.360 access to something called a brokerage window, where you can 0:20:27.520 --> 0:20:31.040 invest in investments beyond your plan or something else? 0:20:31.840 --> 0:20:34.239 So what I'm able to do now, I'm able to 0:20:34.240 --> 0:20:38.440 take out without being without any tax, uh, hits, uh, 0:20:38.440 --> 0:20:42.080 because my job will allow me my my my, my work, 0:20:42.119 --> 0:20:45.760 my employer will allow me to, uh, take the funds 0:20:45.760 --> 0:20:48.639 right back out of my check, uh, as as if 0:20:48.640 --> 0:20:51.239 it was a loan. Uh, so it's being lent to 0:20:51.280 --> 0:20:54.439 me with no interest or not being hit, so I can. 0:20:54.480 --> 0:20:57.280 So it can be taken right back out of my checks. 0:20:58.240 --> 0:21:00.520 Yeah. So you're going to borrow it from the 401 0:21:00.520 --> 0:21:02.280 K and then turn around and invest it. Is that 0:21:02.280 --> 0:21:03.040 what you're thinking? 0:21:03.560 --> 0:21:04.320 That's correct. 0:21:04.840 --> 0:21:07.480 Okay. Yeah. The challenge with that is there is interest. 0:21:07.520 --> 0:21:09.920 I mean, even though you're paying it to yourself, you 0:21:09.920 --> 0:21:12.880 have in fact borrowed the money. And if you ever 0:21:12.880 --> 0:21:16.520 separate from service, even unexpectedly, it's all going to be 0:21:16.520 --> 0:21:20.480 considered a distribution, which then would be subject to a 0:21:20.480 --> 0:21:24.420 penalty if you're not 59.5 and be taxable unless you 0:21:24.420 --> 0:21:27.260 could pay it all back. And then when you turn 0:21:27.260 --> 0:21:29.700 around and invest it outside the 401 K, you're going 0:21:29.700 --> 0:21:33.380 to have the taxes, uh, placing a drag on the investments, 0:21:33.380 --> 0:21:35.900 which is not the case inside. But let's do this. 0:21:35.940 --> 0:21:37.699 We've got to take a break. I want to get 0:21:37.740 --> 0:21:40.260 Mark to weigh in on this. Uh, so, John, you 0:21:40.300 --> 0:21:42.179 hang right there. We'll come back to you. Uh, as 0:21:42.180 --> 0:21:45.179 soon as this break is done. Uh, Wayne in Spokane. Uh, 0:21:45.180 --> 0:21:47.460 Spokane coming your way as well. We'll be right back 0:21:47.460 --> 0:21:56.660 on Faith and finance live. Great to have you with 0:21:56.660 --> 0:21:59.139 us today on Faith and finance live. I'm Rob West. 0:21:59.140 --> 0:22:02.219 Mark is here today. He's an investing expert. He's the 0:22:02.220 --> 0:22:07.380 executive director at Sound Mind Investing, an underwriter of this program. 0:22:07.380 --> 0:22:12.180 We're talking about retirement preparedness and the benefits of delaying 0:22:12.180 --> 0:22:15.660 retirement as one solution, one big, uh, or at least 0:22:15.660 --> 0:22:19.820 part of the solution toward, uh, being ill prepared for retirement. 0:22:19.970 --> 0:22:22.770 Perhaps not saving enough. Before the break, we were talking 0:22:22.810 --> 0:22:25.970 to John in Chicago. He feels like he's in that 0:22:25.970 --> 0:22:28.290 position and wanting to know what to do, and had 0:22:28.290 --> 0:22:31.130 an idea about borrowing from his 401 K to then 0:22:31.170 --> 0:22:34.290 invest outside of the 401 K. John I shared a 0:22:34.290 --> 0:22:36.930 few of the reasons why we're not fans of that. 0:22:36.970 --> 0:22:39.330 You know, if you're separate from employment, it's all a 0:22:39.330 --> 0:22:42.810 distribution that then runs the risk of the penalty. The 0:22:42.810 --> 0:22:46.250 investments outside would be subject to taxes and no longer 0:22:46.250 --> 0:22:48.810 in that tax deferred environment. So there's a lot of 0:22:48.810 --> 0:22:51.050 reasons not to do that. I want Mark to weigh in. 0:22:51.050 --> 0:22:54.290 But first, what were you planning to invest in? Were 0:22:54.290 --> 0:22:56.609 you trying to kind of invest in something that you 0:22:56.650 --> 0:22:58.170 thought could perform better? 0:22:59.609 --> 0:23:05.730 Uh, yes. Correct. Some stocks or some, uh, anything in 0:23:05.770 --> 0:23:08.770 that vehicle, some stocks or some bonds or anything that 0:23:08.770 --> 0:23:14.650 could definitely, uh, bring uh, uh, what would you call that? Uh, 0:23:14.650 --> 0:23:15.650 quick returns. 0:23:15.890 --> 0:23:18.130 Yeah. Is there a is there a brother in law 0:23:18.190 --> 0:23:21.230 involved with a hot stock tip or something? Uh, no, 0:23:21.230 --> 0:23:25.909 I'm just kidding. No problem. Mark. Your thoughts on all this? 0:23:26.230 --> 0:23:29.790 Yeah, I think John, what Rob was, was talking about 0:23:29.790 --> 0:23:33.230 before the break is really important because what what can 0:23:33.230 --> 0:23:37.790 happen is when anytime you borrow from a 401 K 0:23:37.830 --> 0:23:42.510 for any reason, um, it, it opens the door for 0:23:42.790 --> 0:23:47.230 things to potentially snowball against you in a bad way. 0:23:47.470 --> 0:23:50.470 And the reason that I say that is that provision 0:23:50.470 --> 0:23:54.150 that Rob was talking about, where if you end up 0:23:54.150 --> 0:23:59.389 separating for service for any reason, and unfortunately, the one 0:23:59.390 --> 0:24:03.190 that most people, um, don't think about at all, but 0:24:03.230 --> 0:24:06.149 is being let go from the job where the decision 0:24:06.150 --> 0:24:09.790 is not in their hands. Um, if that were to 0:24:09.830 --> 0:24:13.310 ever happen, then a lot of things start to happen 0:24:13.310 --> 0:24:19.330 really fast at a time when you're already potentially reeling 0:24:19.330 --> 0:24:22.450 by losing the income from the job, now you've got 0:24:22.490 --> 0:24:24.850 to come up with the money to repay the loan 0:24:24.850 --> 0:24:28.290 to the 401 K. And if you can't, then the 0:24:28.290 --> 0:24:32.810 penalty kicks in. You owe taxes potentially right away on 0:24:32.810 --> 0:24:35.250 the distribution, which you probably don't have the money to 0:24:35.290 --> 0:24:38.609 pay the taxes. So now you get into additional penalties 0:24:38.609 --> 0:24:41.450 on your income taxes. There's just a lot of bad 0:24:41.450 --> 0:24:45.170 things that can kind of line up like dominoes if 0:24:45.210 --> 0:24:49.010 things go against you. Now, of course, hopefully they wouldn't. 0:24:49.170 --> 0:24:52.290 But the point is that it opens a door to 0:24:52.330 --> 0:24:56.369 a lot of risk, and it's probably unnecessary risk if 0:24:56.609 --> 0:25:00.730 you're planning to invest in things like stocks and bonds 0:25:00.730 --> 0:25:03.730 that you could invest in, maybe in a little bit 0:25:03.730 --> 0:25:08.369 different way within the 401 K plan itself, the 401 0:25:08.410 --> 0:25:12.090 K plan is there to give you these tax advantages. 0:25:12.450 --> 0:25:16.840 So we'd be really hesitant to not only forgo those 0:25:16.840 --> 0:25:20.560 tax advantages by taking the money outside the plan, but 0:25:20.560 --> 0:25:24.760 also then to layer in these additional risks that can 0:25:24.760 --> 0:25:28.600 line up when you're borrowing from the 401 K. So 0:25:28.640 --> 0:25:32.640 I would I would be really cautious with that one. John. Um, 0:25:33.080 --> 0:25:36.240 I can't say that it wouldn't work. Um, because certainly 0:25:36.240 --> 0:25:39.639 it could. But you're layering on a lot of risk 0:25:39.640 --> 0:25:41.120 when you take that approach. 0:25:41.480 --> 0:25:44.320 Yeah. And the odds are, John, that you have other 0:25:44.359 --> 0:25:47.520 options in that plan. That could be a great investment. 0:25:47.520 --> 0:25:50.359 And maybe you need to change the investment mix using 0:25:50.359 --> 0:25:54.359 the investments inside the plan. Also, don't you know, miss 0:25:54.359 --> 0:25:58.080 the idea that your most powerful wealth building tool is 0:25:58.080 --> 0:26:00.640 your own income? So the extent to which you can 0:26:00.640 --> 0:26:04.280 dial back lifestyle spending and get that, you know, percentage 0:26:04.280 --> 0:26:06.760 of your income going into your 401 K out of 0:26:06.760 --> 0:26:09.280 every check up is really going to be your most 0:26:09.280 --> 0:26:12.320 powerful tool to help make up for lost time. Hopefully 0:26:12.320 --> 0:26:14.740 that's helpful to you. We appreciate your call today, sir. 0:26:14.780 --> 0:26:18.180 God bless you. Questions for Mark Biller. Today investing related 0:26:18.180 --> 0:26:21.220 questions call. Right now we've got some lines open. 800 0:26:21.260 --> 0:26:24.659 525 7000 is the number to call. Let's go to 0:26:24.700 --> 0:26:27.139 Spokane Wayne. You've been waiting patiently, sir. Go ahead. 0:26:28.820 --> 0:26:31.380 Well, the first thing I have is a comment. And 0:26:31.380 --> 0:26:37.379 that is, is maybe we are overthinking investing because many 0:26:37.380 --> 0:26:41.260 people think they can beat the market, but most don't. 0:26:42.140 --> 0:26:46.380 And if you look at SMEs best returns over the 0:26:46.380 --> 0:26:52.540 last five and ten years, it's just the basics is 0:26:52.540 --> 0:26:57.700 the best return. So maybe we should just get index 0:26:57.700 --> 0:27:00.980 funds at low cost and call it good. 0:27:01.700 --> 0:27:03.660 Yeah. Well, before we get to your question mark, I'd 0:27:03.660 --> 0:27:05.740 love for you to weigh in on that. Your thoughts 0:27:05.740 --> 0:27:07.100 on just keeping it simple? 0:27:07.340 --> 0:27:11.100 Yeah, I mean, that that works for a lot of people. Um, 0:27:11.200 --> 0:27:15.720 I will I will definitely admit that it's been very 0:27:15.720 --> 0:27:20.520 difficult for any type of active management to beat. Just 0:27:21.080 --> 0:27:26.840 simple indexing, really. Since the financial crisis in 2009, um, 0:27:26.880 --> 0:27:31.560 it's been a perfect environment for indexing. All of the 0:27:32.080 --> 0:27:36.080 the dips in the market have been fairly short, short lived. 0:27:36.080 --> 0:27:40.360 We've had kind of the, the classic v-bottom recoveries that 0:27:40.359 --> 0:27:43.520 have been fast and sharp recoveries from all of the 0:27:43.560 --> 0:27:47.840 bear markets. So it really has been a perfect environment 0:27:48.000 --> 0:27:52.720 for buy the dip and index investing. Um, and that's 0:27:52.720 --> 0:27:55.800 why we have an indexing strategy as one of our, 0:27:55.840 --> 0:27:59.240 our options. And it has been the top performer for 0:27:59.240 --> 0:28:02.560 the last, you know, 10 to 15 years. Um, the 0:28:02.560 --> 0:28:08.000 decade before that was the complete polar opposite story. So, 0:28:08.280 --> 0:28:11.550 you know, those feel like long time periods, and a 0:28:11.590 --> 0:28:14.630 lot of people tend to look at a period like 0:28:14.630 --> 0:28:16.950 10 to 15 years and say, well, that's long enough 0:28:16.950 --> 0:28:20.590 for me. Um, as a student of market history, you 0:28:20.590 --> 0:28:23.950 see that these cycles go back and forth. Active managers 0:28:23.950 --> 0:28:26.830 do great for a while. Then, you know, the index 0:28:26.830 --> 0:28:31.230 does great for a while. So not too surprising there. 0:28:31.230 --> 0:28:34.270 I wouldn't put all of my eggs in any one basket. 0:28:34.270 --> 0:28:37.510 That's why we offer multiple strategies in the first place. 0:28:37.510 --> 0:28:41.070 But all of those observations, Wayne, are dead on. They're 0:28:41.110 --> 0:28:42.430 absolutely correct. 0:28:42.710 --> 0:28:44.670 Yeah. And I don't mean to say, you know. Yeah, 0:28:44.670 --> 0:28:47.430 but this time is different. And yet, Mark, I'd love 0:28:47.430 --> 0:28:50.390 your thoughts on this. It seems like just the environment 0:28:50.390 --> 0:28:54.190 we're set up for for the next decade may seem 0:28:54.190 --> 0:28:57.550 to be that that perhaps could favor and tip back 0:28:57.550 --> 0:28:59.430 toward the active manager, do you think? 0:29:00.390 --> 0:29:03.550 You know, I'm I'm biased in that direction, Rob. I 0:29:03.550 --> 0:29:09.530 do think that, you know, when you look at, um, especially. Look, 0:29:09.570 --> 0:29:12.290 if you go back to the last period when we 0:29:12.290 --> 0:29:16.130 had a more inflationary environment with rising interest rates, you 0:29:16.130 --> 0:29:20.450 look at the period from like 1968 to 1982. Um, 0:29:20.450 --> 0:29:23.450 the reason that active management was so big in the 0:29:23.450 --> 0:29:28.730 80s and 90s is because indexing was horrible from, you know, 0:29:28.770 --> 0:29:33.010 the mid 60s until that period. So nobody wanted to 0:29:33.010 --> 0:29:36.209 do it anymore at that point, because just like today, 0:29:36.570 --> 0:29:39.610 you'd had 15 years where things had gone the other 0:29:39.610 --> 0:29:42.450 way in a in a big way, and active managers 0:29:42.450 --> 0:29:45.090 had looked so good. So they're going to be periods 0:29:45.090 --> 0:29:47.610 when active managers look great. They're going to be periods 0:29:47.610 --> 0:29:51.730 when everyone says, why are we bothering with these active managers? Yeah, 0:29:51.770 --> 0:29:54.290 it just goes back and forth. And so as with 0:29:54.290 --> 0:29:59.130 most things, you know, having some exposure, some diversification even 0:29:59.130 --> 0:30:02.490 between strategies makes an awful lot of sense. 0:30:03.010 --> 0:30:05.610 Yeah. And that's why again, as Mark said, there's multiple 0:30:05.710 --> 0:30:08.950 strategies offered at SMI. You can check it out. SMI. 0:30:08.990 --> 0:30:12.190 Excuse me. Sound mind investing? All right, Wayne, I know 0:30:12.190 --> 0:30:14.110 we didn't get to your question, so let's do that 0:30:14.110 --> 0:30:16.630 right after this break. I apologize, I'm going to have 0:30:16.630 --> 0:30:19.030 to ask you to hold again. But if you you can, 0:30:19.030 --> 0:30:21.070 we'll come right back to you and and get to 0:30:21.110 --> 0:30:24.190 that primary question. Brad, you've been waiting patiently there in 0:30:24.230 --> 0:30:26.670 Tampa will be coming your way as well. I'll probably 0:30:26.670 --> 0:30:30.750 have room for probably up to two additional questions. 800 0:30:30.790 --> 0:30:34.390 525 7000 Mark Biller is here today. If you want 0:30:34.390 --> 0:30:36.710 to read the article we've been talking about, it's titled 0:30:36.710 --> 0:30:40.150 Retirement Preparedness. What a difference a little time can make. 0:30:40.190 --> 0:30:44.510 You'll find it sound. Mind investing? Stay with us. We'll 0:30:44.510 --> 0:30:52.670 be right back. Hey, thanks for joining us today on 0:30:52.670 --> 0:30:55.150 Faith and finance live here on Moody Radio. I'm Rob 0:30:55.150 --> 0:30:57.990 West with me today, my friend Mark Biller from Sound 0:30:57.990 --> 0:31:01.830 Mind Investing. All right. Right back to the phones we go. 0:31:02.150 --> 0:31:04.970 Wayne is in Spokane. Wayne, let's get to that main 0:31:04.970 --> 0:31:06.410 question that you had. Go ahead sir. 0:31:07.730 --> 0:31:11.970 Yes, I had a question on senior loan ETFs and 0:31:12.010 --> 0:31:15.530 wondering if that would be a good option as far 0:31:15.570 --> 0:31:21.890 as diversification and maybe using that in place of part 0:31:21.890 --> 0:31:24.770 of the bond portion of the portfolio. 0:31:25.450 --> 0:31:27.010 Okay. Yeah. Mark your thoughts. 0:31:27.850 --> 0:31:32.130 I haven't I haven't looked real closely at those lately. 0:31:32.170 --> 0:31:36.570 Wayne what what have you seen that has you thinking 0:31:36.570 --> 0:31:38.770 that those look attractive right now. 0:31:40.610 --> 0:31:43.450 Well they're 8% return. 0:31:43.810 --> 0:31:44.370 Mhm. 0:31:45.090 --> 0:31:49.130 And of course, that's assuming that you maintain the value 0:31:49.130 --> 0:31:56.330 of what you bought. But they're paying about 8% per annual. 0:31:56.770 --> 0:32:02.560 They're paying uh monthly the equivalent of 8% per year. 0:32:03.560 --> 0:32:09.200 Yeah. Um, yeah, I would, I'd have to look at 0:32:09.200 --> 0:32:14.480 those a little bit more. Um, to be honest with you, uh, Wayne, I, 0:32:14.680 --> 0:32:19.440 you know, my impression of those is that they, um, 0:32:21.280 --> 0:32:26.160 they are not particularly sensitive to interest rates, which is good, 0:32:26.200 --> 0:32:30.040 but they can can definitely have more company risk, which, 0:32:30.120 --> 0:32:33.280 of course, that's why you go into an ETF, um, 0:32:33.640 --> 0:32:36.880 and hopefully spread that risk around. But I would have 0:32:36.880 --> 0:32:41.440 to look a little more at the specific, um, you know, 0:32:41.480 --> 0:32:46.280 risk profile and, and why those are yielding so much more. 0:32:46.320 --> 0:32:50.120 My guess is that it's because they are, um, going 0:32:50.120 --> 0:32:53.720 down the quality ladder in terms of the companies that 0:32:53.720 --> 0:32:59.040 are involved there. Rob, what are your impressions about those products? 0:32:59.080 --> 0:33:01.780 Do you. Yeah, I mean, I would certainly defer to you, Mark, 0:33:01.780 --> 0:33:04.460 but I would just say, generally speaking, what I'm familiar 0:33:04.460 --> 0:33:07.500 with here is that, you know, these loans would be 0:33:07.980 --> 0:33:13.860 below investment grade, which would typically carry a higher default risk. Um, 0:33:13.900 --> 0:33:17.700 and so that's how they get those higher payouts. Um, 0:33:17.860 --> 0:33:20.020 I mean normally there's liquidity risk, but I guess if 0:33:20.020 --> 0:33:23.060 it's packaged in an ETF, that's not an issue. I 0:33:23.060 --> 0:33:25.260 would also be interested in the fees. A lot of 0:33:25.260 --> 0:33:29.260 these have higher expense ratios than that can erode some 0:33:29.260 --> 0:33:33.700 of the returns. Um, you know, obviously, you know, it's 0:33:33.700 --> 0:33:38.740 helpful in the sense that it can hedge against, you know, rising, uh, 0:33:38.900 --> 0:33:42.020 you know, inflation and so forth. But, um, and it's 0:33:42.020 --> 0:33:45.940 collateral backed. Um, but I would just look at, uh, 0:33:45.980 --> 0:33:49.100 whether we're taking an elevated amount of risk in terms 0:33:49.100 --> 0:33:51.460 of potential default, especially if we were to get into 0:33:51.460 --> 0:33:54.860 a recession, uh, or something like that. So I would 0:33:54.860 --> 0:33:57.300 be careful there. I certainly wouldn't make it a, you know, 0:33:57.300 --> 0:34:00.440 a significant portion of the portfolio. What percent would you 0:34:00.480 --> 0:34:03.600 be comfortable with for something that might have an elevated 0:34:04.160 --> 0:34:08.200 risk profile mark that still fits into the fixed income category? 0:34:08.480 --> 0:34:12.120 Yeah. You know, the thing that gives me a little 0:34:12.120 --> 0:34:16.520 pause is that those yields are so much better even than, um, 0:34:16.640 --> 0:34:20.279 high yield bond funds. And so, you know, when I'm 0:34:20.280 --> 0:34:24.239 thinking about riskier bonds and high yield bonds, to have 0:34:24.239 --> 0:34:27.080 something that's paying even more than that, there's got to 0:34:27.080 --> 0:34:30.919 be more embedded risk in there somewhere, or else they 0:34:30.920 --> 0:34:34.120 wouldn't be getting those returns. So, you know, a good 0:34:34.160 --> 0:34:39.680 high yield, um, allocation within somebody's bond portfolio. You know, 0:34:40.040 --> 0:34:44.000 high yield generally performs pretty well until you get into 0:34:44.000 --> 0:34:46.319 a recession. And most of the time you're not in 0:34:46.320 --> 0:34:50.640 a recession. So if someone's got a good sized bond portfolio, 0:34:50.680 --> 0:34:54.800 I wouldn't have a problem putting, you know, 20 or 25% 0:34:54.800 --> 0:34:58.550 in high yield. Since this seems more risky. I'd probably 0:34:58.590 --> 0:35:01.790 be inclined to go a little bit lower than that 0:35:01.790 --> 0:35:04.270 with a product like this, and I would really look 0:35:04.270 --> 0:35:09.230 into the details of the specifics of that fund, of 0:35:09.230 --> 0:35:12.750 any senior loan fund. We have not focused on those 0:35:12.790 --> 0:35:14.550 a whole lot. I wish I could give a little 0:35:14.550 --> 0:35:19.590 more detail, but yeah, any time you're getting that type 0:35:19.590 --> 0:35:22.509 of a yield, Wayne, you have to just recognize that 0:35:22.510 --> 0:35:25.590 there's a reason for it. Nobody gives that away for free. 0:35:25.870 --> 0:35:29.790 And so you probably are going down the the ladder 0:35:29.790 --> 0:35:33.190 in terms of the quality of the companies. And the 0:35:33.190 --> 0:35:37.310 time to really be paying attention to that is anytime 0:35:38.110 --> 0:35:41.989 you have heightened recession risk, because that's when you tend 0:35:41.989 --> 0:35:45.830 to have trouble with high yield bonds in general. You're 0:35:45.830 --> 0:35:50.310 really it's really more of an equity like investment profile 0:35:50.310 --> 0:35:53.830 as opposed to a traditional bond profile. So those would 0:35:53.830 --> 0:35:57.090 be the the things to look for and look out for. 0:35:57.610 --> 0:35:59.890 Very good Wayne. I hope that's helpful. And just for 0:35:59.890 --> 0:36:02.450 the benefit of our listening audience, senior is not like 0:36:02.450 --> 0:36:06.570 senior living. This is senior, meaning they have priority over 0:36:06.570 --> 0:36:09.290 other debts in a case of a bankruptcy. But if 0:36:09.290 --> 0:36:13.210 these are made typically to below investment grade companies in 0:36:13.210 --> 0:36:15.690 terms of their credit ratings mark, that might be equivalent 0:36:15.690 --> 0:36:17.170 to like a junk bond, right? 0:36:17.610 --> 0:36:21.810 Definitely. And I would say possibly even below what we 0:36:21.810 --> 0:36:25.250 would normally think of as junk bond, because junk bonds 0:36:25.290 --> 0:36:29.050 typically are not yielding 8 to 10% in those funds 0:36:29.050 --> 0:36:32.649 right now. So that's that's the concern. Yeah. 0:36:32.690 --> 0:36:35.330 Very helpful. Let's go to Tampa. Hi, Brad. How can 0:36:35.330 --> 0:36:35.930 we help? 0:36:36.850 --> 0:36:39.969 Hey. Good afternoon. Uh, I have my first job out 0:36:40.010 --> 0:36:42.170 of college. I was there eight years. I have a 0:36:42.170 --> 0:36:46.089 pension plan of several times over the years, they've tried 0:36:46.090 --> 0:36:49.649 to buy me out. I've got until May 23rd this 0:36:49.650 --> 0:36:51.529 year to decide if I want to get bought out. 0:36:51.530 --> 0:36:54.750 I can get a lump sum payment, a monthly payment 0:36:54.750 --> 0:36:58.030 until I pass away. Or I can just wait until 0:36:58.030 --> 0:37:01.750 I officially retire and start drawing it then. So what 0:37:01.750 --> 0:37:03.629 would be the best course of action? 0:37:04.230 --> 0:37:06.390 Yeah, and this one comes up a lot. Marc, how 0:37:06.390 --> 0:37:08.750 do you counsel folks to make this decision? 0:37:09.430 --> 0:37:12.190 You know, a lot of it. You know, as is 0:37:12.190 --> 0:37:14.710 often the case with these types of things, Rob, as 0:37:14.710 --> 0:37:18.750 you get a big it depends. It really depends on 0:37:18.790 --> 0:37:23.030 the the terms of the specific deal. Um, we have 0:37:23.030 --> 0:37:27.150 an article on our SMI website that is, uh, lump 0:37:27.150 --> 0:37:31.750 sum versus annuity that helps people kind of walk through 0:37:31.750 --> 0:37:35.109 that decision so they can look at the exact details 0:37:35.110 --> 0:37:38.710 that they're being offered and kind of line up, which 0:37:38.710 --> 0:37:44.109 makes more sense. Brad, did I understand you correctly that, um, 0:37:44.150 --> 0:37:47.430 you're eight years out of college, so the. 0:37:47.550 --> 0:37:50.830 No, no, I that was my first job. Okay. 0:37:50.870 --> 0:37:51.469 Okay. 0:37:51.540 --> 0:37:53.660 That's what I wanted. 63 now. 0:37:53.860 --> 0:37:54.580 Okay. 0:37:54.980 --> 0:37:57.580 I'd like to go for about five more years, maybe. 0:37:57.620 --> 0:38:00.540 And I have a another pension plan that will be 0:38:00.540 --> 0:38:04.020 pushing almost 30 years by the time I do retire. 0:38:04.060 --> 0:38:05.060 So okay. 0:38:05.100 --> 0:38:07.620 That that and my 401 K are going to be 0:38:07.620 --> 0:38:11.219 my major source of income after I retire. 0:38:11.900 --> 0:38:15.500 Yeah. Well I would definitely look to see is there 0:38:15.500 --> 0:38:20.660 an inflation adjustment with the pension, any type of inflation 0:38:20.660 --> 0:38:24.379 rider or anything with the annuity that's being offered? And 0:38:24.380 --> 0:38:28.420 do you know roughly what the the rate of return 0:38:28.460 --> 0:38:31.500 of that is that's being offered. 0:38:32.660 --> 0:38:35.299 I know what the lump sum payment would be and 0:38:35.300 --> 0:38:38.100 the monthly payment would be. But no, to answer your question, 0:38:38.100 --> 0:38:41.380 I'd have to check into the other things you just mentioned. 0:38:41.820 --> 0:38:46.500 Yeah. Well, what you're trying to do is, um, you're 0:38:46.500 --> 0:38:50.160 basically trying to figure out what is the implied interest 0:38:50.200 --> 0:38:53.080 rate of the annuity. Like what is the rate of 0:38:53.080 --> 0:38:57.399 return that you're getting in the annuity? And so if 0:38:57.440 --> 0:39:01.600 it's if that internal rate of return is low, then 0:39:01.600 --> 0:39:04.840 people are more likely to take the lump sum thinking, 0:39:04.840 --> 0:39:06.839 I can invest that on my own and make a 0:39:06.840 --> 0:39:12.400 better return. If the implied rate of return is relatively high, 0:39:13.000 --> 0:39:18.080 then that's generally a fairly attractive thing to have that annuity, 0:39:18.120 --> 0:39:22.040 especially if you have a 401 K apart from that, 0:39:22.040 --> 0:39:25.479 because then you've got a blend of income streams and 0:39:25.480 --> 0:39:28.160 that can be a very attractive thing. Rob, do you 0:39:28.160 --> 0:39:32.200 have any quick pointers on how to size that up? 0:39:32.719 --> 0:39:34.480 I mean, I think you're right on Mark, and I 0:39:34.480 --> 0:39:37.160 think that the bottom line is and Mark shared this 0:39:37.160 --> 0:39:41.799 earlier is once you reach age 65, your life expectancy increases. 0:39:41.800 --> 0:39:45.319 So if you're fairly healthy, expect to live past 85. 0:39:45.360 --> 0:39:47.920 Of course, no one knows ultimately, but if that's a 0:39:48.100 --> 0:39:52.380 reasonable assumption and you're comfortable investing, you know, on your 0:39:52.380 --> 0:39:56.380 own and looking for higher returns, and you can, you know, 0:39:56.540 --> 0:40:00.100 outpace the internal rate of return provided by that income 0:40:00.100 --> 0:40:04.460 stream through the annuitization on your own and then still 0:40:04.460 --> 0:40:06.660 have something to show for it in the end, perhaps 0:40:06.660 --> 0:40:09.380 to leave as an inheritance or something you could tap 0:40:09.380 --> 0:40:11.660 into if you needed it. That's where I think the 0:40:11.660 --> 0:40:14.700 lump sum can shine. If you would rather, you know, 0:40:14.739 --> 0:40:18.980 pass that off or you have some health concerns or, 0:40:19.020 --> 0:40:21.819 you know, longevity is not on your side in the family, 0:40:22.020 --> 0:40:24.780 you know, and you would value having that guaranteed income 0:40:24.780 --> 0:40:26.739 for life. Well, you know, then that may be the 0:40:26.739 --> 0:40:29.299 better option. But I think as a starting point, start 0:40:29.300 --> 0:40:33.660 with the financial side, calculate essentially the the internal rate 0:40:33.660 --> 0:40:37.060 of return you would be getting by taking that monthly payout. 0:40:37.100 --> 0:40:40.940 Compare that to what you might do reasonable reasonably without 0:40:40.940 --> 0:40:43.540 taking too much risk on your own. And I think 0:40:43.540 --> 0:40:46.339 that may begin to give you some clarity as you weigh. 0:40:46.340 --> 0:40:50.000 way than those other considerations like health status and so forth. 0:40:50.040 --> 0:40:51.040 Does that make sense? 0:40:51.160 --> 0:40:54.040 Sure. Yes it does, yes it does. Thank you so much. 0:40:54.360 --> 0:40:57.520 Excellent. You're welcome. Brad, we appreciate your call today, Mark. 0:40:57.560 --> 0:40:59.480 Tie a bow on this for us. You know somebody 0:40:59.480 --> 0:41:02.480 who's listening right now saying, I just feel like, you know, 0:41:02.520 --> 0:41:05.800 I'm behind, uh, you know, the game here. I haven't 0:41:05.800 --> 0:41:09.440 saved enough. I'm staring down retirement in the next five years. 0:41:09.800 --> 0:41:11.840 What counsel would you offer them today? 0:41:12.160 --> 0:41:16.120 Yeah, I think the biggest takeaway from today's conversation, Rob, 0:41:16.120 --> 0:41:20.040 is that Social Security gives people a little bit of 0:41:20.040 --> 0:41:23.800 an out if they haven't saved enough for their retirement. 0:41:23.960 --> 0:41:26.960 And while it can be hard emotionally, if you've kind 0:41:27.000 --> 0:41:32.160 of fixed on a particular retirement date or retirement age 0:41:32.239 --> 0:41:35.000 to consider, maybe I'm going to need to work a 0:41:35.000 --> 0:41:38.880 little bit longer. The decision to do that can really 0:41:38.880 --> 0:41:43.759 make a big difference to your retirement income situation, so 0:41:43.760 --> 0:41:46.590 it's definitely worth running the numbers. You can go to 0:41:46.630 --> 0:41:50.589 the Social Security Administration website and look at what the 0:41:50.590 --> 0:41:55.390 difference would, would be to your benefit amount by changing your, uh, 0:41:55.390 --> 0:41:58.870 your retirement date. That's a good first step. And then 0:41:58.870 --> 0:42:01.950 to prayerfully consider if that's if that's a good way 0:42:01.950 --> 0:42:05.230 for you to to boost your retirement income. 0:42:06.030 --> 0:42:08.430 Yeah. No doubt about it. Not to mention the other 0:42:08.430 --> 0:42:13.150 benefits of continuing to stay engaged and productive healthwise, spiritually 0:42:13.150 --> 0:42:16.390 and and otherwise. Mark, we always appreciate your time. You 0:42:16.390 --> 0:42:18.350 have so much to share with us. Thanks for your 0:42:18.350 --> 0:42:20.750 partnership and for your presence today. 0:42:21.150 --> 0:42:23.710 I'm so happy to do it. Thanks for having me, Rob. 0:42:23.989 --> 0:42:27.230 All right. That's Mark Biller, executive editor at Sound Mind Investing. 0:42:27.270 --> 0:42:29.790 Check out this article when you visit Sound mind Investing. 0:42:31.030 --> 0:42:34.550 Big thanks to my team today Amy Taylor Dan Ryan 0:42:35.150 --> 0:42:37.430 Amanda couldn't do it without those. And everybody here at 0:42:37.430 --> 0:42:39.830 Faith by Faith in finance live is a partnership between 0:42:39.830 --> 0:42:42.230 Moody Radio and Faith fi. We'll see you tomorrow.