Financial Q&A for the Second Half of Life
A helpful excerpt from the book Your Money After the Big 5-0.
Answer: Benjamin Franklin's Poor Richard's Almanac quotes, "Neither a borrower nor a lender be." Although it's good common sense, it's not from God's Word. However, many Christians feel that all borrowing is prohibited according to Romans 13:8: "Owe nothing to anyone except to love on another; for he who loves his neighbor has fulfilled the law." In order to interpret this Scripture properly, it must be considered in light of the context in which it appears. In this particular reference, I do not believe Paul was talking specifically about money; he was teaching that we are never to allow someone to do something for us if we are not willing to do even more for him or her.
Neither borrowing nor lending is prohibited in Scripture, but firm guidelines are given. Borrowing is discouraged, and, in fact, every biblical reference to it is negative. Consider Proverbs 22:7: "The rich rules over the poor; and the borrower becomes the lender's slave." The scriptural guideline for borrowing is clear. When you borrow, you promise to repay. Literally, borrowing is making a vow. God requires that we keep our vows, so be sure to pay what you owe (see Psalm 37:21).
Scripture shows that we are to be cautious about borrowing, and it should never be normal. Yet, when you look at our society, you find that borrowing is rampant. Americans think it is normal borrow for periods of thirty to forty years. WE have created an economy that borrows to exist. That is not God's way. God's Word says that borrowing is a consequence of ignoring His statutes and commandments (see Deuteronomy 28:43-45). It is never God's best for His people.
Question: What is a financial decision that you have made in the past and are still benefiting from today?
Answer: To pay cash for cars. After I decided to pay cash for all cars, related decisions followed to help my financial position. We kept cars longer. We bought less expensive cars because we didn't have enough saved for the luxury cars. Avoiding debt to buy an item that rapidly depreciates in value is on of the best decisions I made.
Finishing a close second was our decision to pay off our mortgage. That was, and is, such a sense of freedom.
Question: In what areas do you see the over-fifty crowd going overboard on their spending?
Answer: Probably in the areas of leisure and recreation. I think it is a spiritual issue. It comes back to the philosophy so many have accepted that it's OK to retire to a life of pleasure and comfort. It certainly is attractive when you are in the midst of being worn out and wishing to enjoy the fruit of your labor.
Judy and I have been dealing with this issue. Several years ago we bought a second home as a place to get away. We have spent some time there, but what we have found is that the resort environment, the atmosphere, and the people are all in an amusement and retirement mode.
We stepped back after a few years and said, "We are not sure this represents our value system." It's been a hard decision because we do enjoy it. We are not saying that second homes are sinful or wrong, but we found the experience was not in line with what God wanted us to do. As of right now, we plan to sell that home.
Question: My widowed mother is concerned that all her money is going to go to a nursing home someday. She is seventy-five years old and wants to sign all her assets over to us. But she still wants to have control of the assets. We are unsure about this and are considering long-term care insurance from her. Is this insurance a good idea for us?
Answer: Many people have tried to appear poor on paper by transferring assets to family members and then trying to qualify for Medicaid to pay for nursing home costs. I have thought the practice to be dishonest. The states have wised up to your mother's plans now. Generally, assets must be given away or transferred at least three years before eligibility for Medicaid.
Your decision about long-term care insurance is truly matter protecting assets. Let's say, for instance, that your mother had $500,000 worth of assets. Let's further assume she decided to self-insure rather that obtain long-term care insurance. If her nursing home costs $50,000 per year and she spent four years there, then her assets would be reduced to $300,000. The state would not pay for her stay because she had available assets. The most your mother could pay for would be ten years.
On the other hand, let's say she had to pay $5,000 per year for a policy because of her age. Let's say she paid the policy for five years and then entered a nursing home for four years. After that four years, her assets would be $475,000 [$500,000 - ($5,000 x 5)] instead of $300,000 above.
Long-term care insurance is expensive because the cost of nursing home care is expensive. However, it is generally appropriate for those with larger amounts of assets (about $250,000 or more).
Let's assume that a single seventy-five-year-old individual owned a home, a car, and a savings account of about $100,000. That person's nursing home stay would consume all those assets in approximately two years. Medicaid would then pick up the costs for as long as he or she would require. In this example, it's really a toss up whether long-term care insurance is a good deal for them. Long-term care insurance premiums could eat up much of their savings account.
Question: My parents, who are in their seventies, need a health-care supplement. They both have Medicare but no supplemental policy. Do you recommend supplemental insurance for Medicare?
Answer: Yes, Medicare covers the major items but not everything. There is a substantial difference between what medical care costs and what Medicare will pay. I recommend that you purchase a supplemental insurance policy. The nonpaid portion of medical health care can put a great strain on your parents' finances. In my estimation, supplemental insurance is wise for the majority of Medicare recipients.
Question: I'm a widow in my mid-sixties. Should I pay off my home or invest the money my husband left me?
Answer: Although I don't know you specific risk tolerance, my experience is that a widow of your age is very conservative, and you likely should be. Anything can happen in our economy, and any investment can be lost. Regardless of what happens in the economy, a mortgage liability will survive because the lenders are protected by law. Take a portion of your assets to pay off and retire your home mortgage. Keep some funds available and liquid.
Many people never thought they would lose a large portion of their wealth, but they did when the economy turned down. Any investment, whether it is stocks, a farm, oil and gas, precious metals, art, or anything else, can decrease when the economy sours.
Do what the Bible says, "Listen to counsel and accept discipline, that you may be wise the rest of your days. Many are the plans in a man's heart, but he counsel of the Lord will stand" (Proverbs 19:20-21). In other words, take your counsel from the Lord. He is your primary counselor. If you have peace about paying off your home, do it. If you don't have peace about paying it off, don't do it.
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Adapted from Your Money After the Big 5-0 by Larry Burkett and Ron Blue. Copyright © 2007 by B&H Publishing Group. B&H Publishing Group grants permission to use this excerpt as originally printed in the book Your Money After the Big 5-0. All rights reserved. Excerpt may not be reproduced without the prior consent of the publisher.
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