No one becomes a proficient investor overnight. As with any other endeavor in life, you start small and learn along the way. The important thing is to start.
SMI's Mark Biller discussed that with host Rob West last week on Faith & Finance on American Family Radio. Mark and Rob also answered listener questions about Roth IRAs, capital-gains taxes, and more.
Click the play button below to listen. Scroll down to view the transcript.
Faith & Finance airs weekday mornings on AFR. A different version airs weekday afternoons on Moody Radio.
(More radio appearances by members of the SMI team are posted on our Resources page.)
Transcript
Rob West:
You don't need a fortune to start investing, just a few small, faithful steps.
Hi! I'm Rob West. It's easy to assume investing requires a large sum of money, but today we'll show you why that simply isn't true. Mark Biller joins us to explain how to start small, stay consistent, and keep it simple — and get yourself on a path to lifelong, faithful stewardship.
Then we'll take your phone calls at 800-525-7000. This is Faith & Finance on American Family Radio — biblical wisdom for your financial decisions. (opening music ends)
Well, our guest today is my friend, Mark Biller. He's executive editor and senior portfolio manager at Sound Mind Investing, one of our longtime faithful underwriters. SMI and FaithFi — or MoneyWise or before that Christian Financial Concepts — goes all the way back to the late Larry Burkett.
Mark, did you happen to know Larry?
Mark Biller:
I met Larry just one time in person. That was about a year or two before he passed, but I didn't work much with him. That was back in the "Austin and Larry" days, and then I kind of took that over after Larry had handed that off.
Rob West:
Gotcha. Yeah, so Austin Pryor, the founder of Sound Mind Investing — Mark Biller now at the helm. But yeah, we walk in some pretty big shoes with Larry and Austin, that's for sure.
Mark Biller:
Right.
Rob West:
Well, Mark, you've got a great article in your latest newsletter of Sound Mind Investing, reminding readers they don't need much to start investing. Just a willingness to take those first steps.
I'm so thrilled we're covering this today because there's so many in our listening audience that call in regularly saying, "All right, I'm ready. I've got the money, I've got my emergency fund. I want to start. I just don't know where to begin." So let's begin there. Where would you point them?
Mark Biller:
Yeah, Rob, it's interesting you open the program this way — because this is a great example of how financial markets do change, the investing world does change over time. There's a lot that's different now 25 years after Larry and whatnot, but there are a lot of things that stay exactly the same.
And this is a topic that Austin and Larry could have covered almost exactly the same way we're going to cover it today. And a lot of that is because it's straight out of biblical wisdom about how to manage our money.
So how do we help someone who's just getting started, what do we tell them? Well, we always start with their financial foundation, and that's because as exciting as it is to jump right into the investing part, it just doesn't make sense to start risking your money in the markets if your financial foundation isn't already solid.
So regular listeners of your program, Rob, they already know what "having a solid financial foundation" means. It means paying down any consumer debt, building at least a small savings fund, and then creating and following a budget. Those are really the pillars of that financial foundation.
If somebody's paying double-digit interest rates on a credit card, or even high single-digit interest rates on a student loan or a car loan, they're going to be better served by taking the sure return of paying down that debt before they start putting money at risk investing. You don't want to take risk before you've got a strong foundation.
It's just like climbing a ladder. If you're going to go up the ladder, you want that ladder on stable foundation, stable ground. So that's why we always start there.
But then, as people do start to put that foundation in place, naturally they're going to ask, "Okay, I'm ready for that investing step. How do I get going?" And we usually will direct them to their workplace retirement plan if they have one, a 401(k) or other retirement plan there at work. And the reason for that is a good workplace 401(k) is going to give them a few key benefits.
First, it's going to give them a tax-advantaged vehicle to invest within, and that's going to make a huge difference in long-term returns if they're not having to pay taxes every year on their gains.
Then, second, it's going to easily automate their investing process. That's often overlooked, but that's a huge behavioral "hack" to help a person actually be consistent with their investing. If you have to make that decision to send the check every month, life is going to happen. Things are going to come up and you're going to miss a lot of those contributions because you think, "I just can't afford it this month." If it's automated, you're not thinking about it, it's just running in the background. That's a big deal.
And then if their 401(k) or other workplace plan will match their contributions, if that's a dollar-for-dollar match, well, you're making an immediate 100% return on your investment. That's unheard of in the investment world! Even if it's just a 50-cent-on-the-dollar match, that's a 50% return. So that's why we always suggest investigating the workplace plan first.
Then, if a person doesn't have a workplace plan, that's when we would turn to the next best thing, which is an IRA. And since we're talking today about people getting started, that's often younger investors, and that's usually a really easy decision to go for a Roth IRA for younger investors.
Rob West:
Great thought. By the way, we'll be taking your calls and questions today for Mark Biller. We'd love to hear from you — 800-525-7000. He's our go-to guy on the markets and investing. If you have questions about your own investments or anything related to the economy, Mark is here to take your questions today. We will prioritize those questions while he is here. So call right now — 800-525-7000.
Mark, you mentioned getting started with a Roth IRA. That's what Julian wants to talk about in Georgia. Julian, go ahead.
Caller:
[I want to ask about] the Roth IRA — if you can get one for somebody under 18 that don't have a regular income? Also, about the "backdoor" Roth IRA — what do you think about that?
Rob West:
Well, let's unpack that. Those are some great questions there, Julian.
Mark, let's start with a Roth IRA for a minor without earned income.
Mark Biller:
Yeah, the catch with any IRA at this point is that you have to have earned income equal to the amount of the contribution. So if they're working a part-time job, if they're earning income —even from things like babysitting, yard care, that sort of thing — then you do have the option to start an IRA for them.
And importantly, it doesn't have to be their money that goes into the IRA. So if your kid earns $500, $1,000 from a part-time job over the course of the year, and the parent wants to start the IRA, they just are limited to the amount of earned income the child makes.
Now, one thing you probably have heard of, Julian, it's a very recent thing, is the new Trump Accounts that they've been talking about. And a lot of the focus on those has been for newborns — putting $1,000 in for new babies and so forth. But, really, I think the much bigger story around these Trump Accounts is these are de facto IRA accounts for minors. We're going to have an article in our next issue of SMI that does a deep dive on these. So you can look for that a week from now on the SMI website.
But the very quick overview is this essentially removes the earned-income provision for putting money in a minor's essentially an IRA account — these new Trump Accounts function much like a traditional IRA — that then they have the option to convert into a Roth IRA when they turn age 18.
Now, that's not quite as ideal as starting as a Roth, but if you think about it, most 18-year-olds have almost no income, which means that the tax involved in converting that to a Roth is going to be very, very minimal. So keep an eye on these Trump Accounts as a way to do IRAs for minors because that's essentially what has been just put on the table with these new Trump Accounts.
Rob West:
A great website for that is the official government site — trumpaccounts.gov — to learn more, and a lot of information still emerging. And we'll look forward to unpacking all that with the team at SMI in the weeks ahead.
Julian, stay right there. We'll be right back on Faith & Finance.
Rob West:
Great to have you with us today on Faith & Finance here on American Family Radio. My good friend Mark Biller's here today. Mark is executive editor and senior portfolio manager at Sound Mind Investing. You can learn more at soundmindinvesting.org.
Before the break, we were talking to Julian in Georgia, and Julian, I know you were also asking about the "backdoor" Roth. Are you considering one for yourself, or you're just trying to understand what it is?
Caller:
Just understand what it is, and I got a little bit in a 403(b). I think I might do that, and I'm trying to pass it on to some of these other people, too.
Rob West:
Essentially, the backdoor Roth is a workaround for people with higher incomes to get money into a Roth where they would not have been able to do that normally because they exceed the income limits. And it's a current rule that's allowed under the IRS, so even though it's a workaround, it's fully permissible unless the law changes.
So essentially what happens is you do a non-deductible traditional IRA contribution, and so you make the traditional IRA contribution with after-tax dollars — which is permissible even when you're at the higher-income levels — and then you convert that money to a Roth. That's the "back door" that's being referred to. So because you can't contribute directly given your income, this allows you to get into the Roth without that income limit.
And so, you still are subject to those normal contribution limits over — 2026, we're talking either $7,000 or $8,000 — you don't take the deduction, and then you convert it to the Roth. And, typically, people do it right after they make the contribution. So that way, any growth is not taxable because the quicker you can convert it to the Roth, the better.
Mark, I was explaining what the backdoor Roth is. Anything you might want to add to that?
Mark Biller:
Yeah, so the main "gotcha" in that is that if you have any other traditional IRAs, you can't just specifically convert the new traditional IRA into a Roth. What the IRS is going to do is they're going to look at all of your traditional IRA money.
So, let's say you had a traditional IRA from a 401(k) rollover from an old job, and you have $90,000 in that. And then you try to do this new traditional IRA and you want to just convert the new $5,000 you've just put in. They're not going to let you do that.
What they're going to do is they're going to say, "Well, $5,000 of this $95,000 is going to be able to be converted.'" So you're going to get into a pro rata situation. I know that's confusing, and I just would throw that out there as a caution flag. So if anyone's thinking about doing this, you definitely need to look this up, walk through an example to see exactly how this is going to impact you. It's not quite as straightforward as just, "Well, I put 5,000 in this year, I'm going to convert that amount and just that amount." That can get kind of confusing, but it's a big one to watch out for.
Now, if you don't have any other traditional IRAs, then this should work very, very smoothly for you just the way, Rob, you described it. But there is that one little hitch to look out for.
Rob West:
Yeah, very good. And so this is probably a good one, Julian, to go ahead and get in touch with your CPA about before you do it, just to get all the pieces in line and make sure you don't miss anything. But if you can line it up and work around the issue that Mark just mentioned, it can be really powerful. Thanks for calling today, sir.
800-525-7000. We'll head back to the phones here in just a moment.
But, Mark, a lot of people, as they're getting started in investing, just feel overwhelmed by the sheer amount of information. So what would you say to them in terms of staying focused without feeling buried by it all?
Mark Biller:
Yeah, well, the first thing I'd encourage listeners with is, you definitely don't have to know everything before you get started.
It's easy to feel overwhelmed and paralyzed — and, honestly, the financial industry kind of tries to foster that, honestly, in a lot of cases to get people to "turn it over to us. We're the experts, we know all this stuff. You don't know it, so you better let us handle it for you."
And so, naturally, most individuals are worried that they're going to do it wrong. And I would just say when you're getting started, you might do a few things wrong. That's pretty normal with anything new that you start in life. But just getting started really is the most important thing.
And like I was saying, anything else in your life, you learn a lot just by doing it. So get moving, get a little bit of momentum. There's plenty of time to course-correct as needed later on. So this idea that "I need to know it all before I start," boy, that's a really high bar. Even professionals don't know it all about investing. They're constantly learning.
The other piece of that, Rob, that I would say is investing is a habit. So if you can get started with consistent contributions, even if they're small. A little bit each pay period is going to go a long way because it's going to start building that habit over time. So that's why we really focus on these basics, these fundamentals, save consistently, diversify, stay invested, those sorts of things, because anybody can do that and can get going on the path towards becoming an investor.
Rob West:
Yeah, that's really helpful. Mark Biller here today. If you'd like to read the article we're discussing today and get some more information on where you start in your investments, head to soundmindinvesting.org. We're going to take your phone calls here as well — 800-525-7000.
Mark, for someone who's just starting out, the SMI newsletter can be really powerful as well 'cause you take a lot of the guesswork out, don't you?
Mark Biller:
Yeah, we do. We give really specific recommendations. We're very much of the, "Okay, this month you need to buy fund A and sell fund B." And what that does — while we're also doing teaching through the articles, through our model portfolios — so someone who doesn't know how to do this, they can come right in their very first month, we'll tell them exactly what to do in their own brokerage accounts. So they're the ones actually making the trades, but we're telling them exactly what to do, and they're learning as they go.
So the first month, they don't know anything, they just enter the trades. The second month, they've learned a little bit, and so now they're starting to get comfortable. Maybe by the end of the first year, they're feeling like, "I kind of know what's going on here." They're still following the trades that we're giving them, but their confidence is growing and their knowledge is growing.
Like the questions we get all the time on this program about specific products — I'm sure a lot of times listeners are like, "I've never heard of that." But they learn a little bit by hearing that question. And it's the same thing with the newsletter. We'll tackle these subjects — I mentioned earlier, next month we're going to have an article about these new Trump Accounts. Well, that's something most people don't know anything about. By the end of that article, they're going to know if that applies to them, how they can use that — if they're a grandparent, can they get involved in that?
So that's really what we're trying to do: build that knowledge, build the confidence, and give really specific instructions for our members.
Rob West:
Yeah, that's really great. Thanks for that. soundmindinvesting.org is where to go.
Let's see. Wendell will be coming your way in a second. First, Wisconsin — Greg, go ahead.
Caller:
Thanks for taking my call. [I'm] driving through Indiana and caught your station.
I'm just considering transitioning into some type of part-time job from my full-time job. I'll be 67 in February. My wife has got about a $200,000 IRA investment through her work, and I think I have about the same — $200,000 to 300,000. Our only big debt is our mortgage — at $1,400 a month. I have a daughter in high school at 17.
And I'm just curious on your wisdom for transitioning, or shrinking down my 40-hour work week if I can talk my boss into that, or just transitioning into something else to serve the Lord, or just do something else.
Rob West:
Boy, I love that. What an encouragement. And I think this is the way we should be thinking about repurposing this next season of life. Not retiring from something but retiring to something, recognizing this is a season where you've got incredible wisdom and experience, and God created us to be workers, even though it looks different throughout different seasons of life.
But, Mark, specifically on the financial side, what should Greg be thinking about?
Mark Biller:
Yeah, Greg, I think that usually these conversations start with your budget and getting a really good handle on what your expenses are because once you have that piece of the puzzle locked in, then you're to, you're better able to go look at, for example, "What will our Social Security income be on a monthly basis? How does that compare to our expense need?"
And then you can figure out what that potential gap — most people can't live just on Social Security — but then they can see, "How much would I need each month to either be bringing in from part-time work or from my investments or a combination of both?" And so when you kind of break it apart that way, it becomes a little less overwhelming to get those answers.
So I guess the first question, Greg, would be, do you guys have a budget that you guys are pretty faithful with — to where you can easily identify what your monthly expenses are? Now, of course, that's without some of the expenses like your saving for retirement — that goes away. Some of these expenses will change. But do you have a good handle on that at this point?
Caller:
We don't. We're trying to work towards that reality.
Mark Biller:
Okay. Well, that tells you that probably your first step, Greg, is to take three to six months of trying to be really intentional, recording all of those expenses, putting together that budget — that target retirement budget of what you think you're going to realistically be able to live on. And then you can start to make that evaluation of "Are we close? Is this a little more distant than we thought? Do I need to work a little bit longer? Do we need to tighten up some of these expenses?"
So that exercise is really going to go a long way towards helping you make this decision. Rob, what are your thoughts on that?
Rob West:
Yeah, I think you're right on. I think the other thing is just really dialing into, "What are my income sources and" — if you're going to rely on investments — "What is a reasonable withdrawal rate?" And then I think just have a lot of conversations with your wife in advance about "What is this next season going to look like?" so you all aren't caught off guard with perhaps a little more time.
Hey, stay on the line. I want to send you a book called An Uncommon Guide to Retirement as my gift to you. I think you'll enjoy it. Thanks for your call.
We'll be right back.
Rob West:
Let's go to Ohio. Wendell's been waiting patiently. Go ahead, sir.
Caller:
Good morning, Rob and Mark. Thanks for your outstanding work. Really appreciate the program.
Rob West:
Well, thank you, sir. I appreciate that.
Caller:
I recently came across an idea called tax-loss harvesting, and the idea was that you would invest into the S&P 500 as an index. Obviously, not every company will show a profit or the stock will gain, so you sell the losses, you set those aside, and then you can apply those toward future capital gains.
I guess where I thought it might apply to me is that I've got a substantial portfolio of residential real estate that I've owned for, I started about 15 years ago. It'll be another maybe 10 to 20 years before I sell, but when I do, there will be substantial capital gains liabilities. Would this tax-loss harvesting be applicable to those capital gains, and would that be a good way to protect or offset some of that capital gains exposure?
Rob West:
Good question. Mark?
Mark Biller:
Well, Wendell, there's good news and there's bad news. The good news is that it may be helpful for you to have some of these taxable losses to offset your real estate gains. The bad news is that you really don't want that to be the case, and here's why that's going to work this way. If you make an investment in a taxable account into the S&P 500 index, you're naturally hoping that that investment is going to go up, that the index is going to go up — and, really, whether or not you're hoping for that, generally over time, the S&P 500 index is going to go up.
Now, along the way, you're right, some of those stocks are going to be losers, and you can sell those. But the reality is that you're probably going to be accumulating more gains than losses in that taxable account.
Now, it's true that if you're investing in all those as individual stocks and you don't sell those stocks, you're not going to realize the gains from that side of the index investment until you sell those stocks. But, basically, what you're creating is — if you think of it as just kind of drawing a table here on one side, you've got a bunch of taxable gains that are unrealized. You're going to have these realized taxable losses.
Those taxable losses could be applied to your real estate gains, but then you're just going to have the taxable gains from the S&P 500 sitting there waiting for you eventually. So you're kind of replacing one pool of taxable gains with another pool of taxable gains.
So it's not to say that this is a bad strategy by any means, Wendell. The thing is investing in all of those individual stocks, and then trying to keep up with and figure out when the right time to sell the losers is, and what to do with that money at that time — it probably is going to turn into kind of a complicated thing for you to keep up with, is my guess. So I would just urge some real thought about how much time and effort you want to put into that part of your overall investing process.
Rob, what are your thoughts on that?
Rob West:
Yeah, I think that was a great explanation, Mark. It can be done, but it is going to get complicated and, obviously, one of the ways to avoid all of this is to try to do as much investing as you can in a tax-deferred environment.
But Wendell, what are your thoughts on that?
Caller:
No, that makes perfect sense. I'm able to follow that. I hadn't really thought about the unrealized gains sitting there waiting to be taxed at some point in the future. So that does make sense.
Would there be any other ways of maybe sheltering some of the potential capital gains from real estate that you've owned for 20, 30 years?
Rob West:
Yeah, so you're talking about a rental property?
Caller:
Yes.
Rob West:
Yeah, I mean, so the primary way to do that would just be to kick that can down the road through a 1031 exchange. Now you'd have to take that money and roll it into another investment property, whether it's a straight investment or a rental, and you've got timeframes that you have to do that generally within 180 days. You have to not only identify it in a shorter period of time, but then close on it within 180 days. But if you could do that, then that would allow you to push that out and deal with that down the road.
Obviously, another way to avoid capital gains is — if you want to do any giving on the sale of any properties — you could give a portion of a property to a donor-advised fund before you sell it, and then that portion would be excluded from any capital gains.
But Mark, anything else to add to that?
Mark Biller:
No, I mean those are the main ways to do it. The other main way, Wendell, is to hold onto these things until you die and then pass 'em on. And that's one of the big tax hacks, but obviously not an efficient thing if you're wanting to use that money. So yeah, the options there are a lot more limited if you're not going to be rolling them into a new property.
I guess the only other thing I would add there is there are ways to strategically plan your income so that you can purposely create some very low income years depending on the rest of your tax situation. And if you can do that, then you may be able to create a situation where even though you're realizing some gains from a property or multiple properties, they're hitting at a time when your overall tax bill is relatively low. So those are a couple of thoughts.
Rob West:
Yeah, very good. Thanks for your call, Wendell.
Quickly to Missouri — Jeb, you'll be our final caller. Go ahead.
Caller:
Yes. Basically, what I'm doing, I've been dealing with a financial advisor. I'm 56 years old. I am currently working full time, probably looking retire around 60, 62. Everything's paid for that I have. And dealing with him — I was looking for somebody to help me deal more strategically with my IRA and 401(k), and I will be getting a pension after I retire — but he's kind of pushing a variable annuity on me, and I know nothing about that. It almost sounds too good to be true. Do you know anything about that?
Rob West:
Yeah, these aren't our favorite solution, especially for somebody who's still got a good bit of working years ahead of you. But, Mark, your thoughts?
Mark Biller:
Yeah, like Rob just alluded to — variable annuities, they certainly can be a piece of the puzzle. They have some really attractive aspects to them. Sometimes, depending on the specific annuity. They also tend to be pretty complicated. They can be expensive — in terms of the expenses you're paying within the annuity. And they tend to lock your money up in ways that other options. And so those are the three main reasons why Rob and I often give kind of a lukewarm response to these.
Now, that said, in very specific situations, sometimes they can be a good match. And so if your advisor really likes this, I would hear him out, and then perhaps take that product and get a second opinion on that with another advisor. Or if you know somebody, maybe at your church, that is knowledgeable about this stuff, that could walk through it with you — just to get another perspective is usually pretty helpful.
I hate — without knowing anything about the product, we can't say if it's a good one or a bad one or a good fit or a bad fit. But I would love for you to get a little bit more counsel than just the one voice, especially if you're uncomfortable with it.
But it's always worth hearing your advisor out. They know your situation and hopefully have your best interests in mind. So that's where I would start with it, Jeb.
Rob West:
I think that's exactly right, Jeb. If you wanted a second opinion, you could go to findaCKA.com and look for a Certified Kingdom Advisor or two — maybe you end up interviewing three people, total, there in Missouri. Thanks for your call today. I hope that helps.
Mark, let's put a bow on this — by the way, folks, if you want to read this article we've been referring to throughout the program today, Starting Small, Finishing Well, head over to soundmindinvesting.org. But what would you say as we round this out?
Mark Biller:
I'd just leave people with some encouragement, Rob. Investing can be really complicated. It can go as deep as you want to dive in, but it doesn't have to be complicated. It's a great example of the 80/20 rule, where just doing 20% of the stuff is going to give you 80% of the benefit.
So just get started. Don't be afraid to jump in and actually start learning and start making some mistakes, perhaps — but that's the way you learn. Getting started really is the key. You don't need a lot of money to start.
Rob West:
Yeah, that's great advice. And you could use just a simple index fund. You could also head to soundmindinvesting.org. They have an indexing strategy they call Just-the-Basics. It's simple, it's diversified, it's beginner-friendly. They take all the guesswork out, and they'll be there to walk alongside you. But it's a do-it-yourself approach, with all the guidance you need, and it's really simple. That's soundmindinvesting.org.
And then as you build assets, the Private Client group that Mark leads could also be helpful to you as well, when you want more discretion, more hands-on from an advisor.
Mark, we appreciate your partnership, my friend! Thanks for being here today.
Mark Biller:
Oh, it's always a joy, Rob. Thanks for having me again.
Rob West:
All right. We'll talk to you next month. That's Mark Biller. Head to soundmindinvesting.org to check out this article. For more than 30 years, do-it-yourself investors have trusted SMI for proven strategies and clear, reliable guidance — helping families provide for today and prepare for tomorrow. Also, to give generously.
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