Spendthrift or Thrift?

Paying income taxes is always the right thing to do. But don’t be foolish.

By itself, the word “thrift” can be a helpful approach to many things in life.  Thrift is generally a good thing, unless you are giving money to a deserving charity. We should be extravagant givers. Thrift is using wealth entrusted to you by God carefully, and not wastefully.

However, to be a spendthrift is not a good thing. This is selfish and generally foolish. This is a person who is wasteful, or person who spends money in an extravagant, irresponsible way. That is my Uncle Sam. He never has enough, and he spends more than he has. Yet, I love living in the land of Uncle Sam. So I am not complaining, just observing.

Why I am paying Uncle Sam

First of all, it is biblical. Matthew 22:21 gives Jesus’ response when he was asked if the Jews should pay taxes to the corrupt Caesar. He asked to see some of their cash. He asked them whose image was on the coin. “They said, ‘Caesar’s.’ Then he said to them, ‘Therefore render to Caesar the things that are Caesar’s, and to God the things that are God’s.’” (God’s image is stamped on you, so you render to God yourself.) Lest there be any doubt, the Apostle Paul told the church in Rome, “Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed.” Romans 13:7

When the Market Goes Down

Most investors don’t like to see the stock market go down. I see down markets, as I have often said, as opportunities for special action. One type of action is to buy more shares of good investments. Another is to look for tax-savings opportunities.

What I did Today

This morning I called Fidelity Investments and asked them to transfer my 400 shares of AT&T (ticker T) from my traditional rollover IRA to my ROTH IRA. This means I now have 1,600 shares in my ROTH. I don’t hold AT&T as a growth investment, but I love the steady flow of dividends, the high yield, and the general long-term growth of the dividend. AT&T can provide cash for many things, including charitable giving. Because we increased our giving this year to a couple of different worthy ministries, we have more deductions for our 2020 Federal and state income tax returns. If we can gain additional tax-free income in the ROTH, that provides even more cash flow for charitable giving.

My 400 shares of AT&T before I moved them. It shows a “loss.” That is OK.
Moving shares when the price is low means I pay less tax on the move to the ROTH.
Don’t buy AT&T for growth. Consider it for income.

AT&T Income

The bottom line is this: AT&T pays $0.52 per share quarterly. That is $2.08 per share per year, if AT&T doesn’t raise or lower the dividend. In other words, my 1,600 shares should bring me $3,328 in dividends in the next twelve months. Those dollars are not taxable under current law. Those dollars can then go to work helping others. Remember, I am just the steward, not the owner. I am to be an image of my Creator, not a god who does anything he wants. The reality is that this is the only way to have real joy. The money doesn’t bring joy, but the opportunities to put the dollars to work in the lives of others does.

At $2.08 per share, the dividends are a nice source of cash.