Podcast Episode - Ask Suze & KT Anything: Insurance, Warranties and Security

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On this episode of Ask Suze & KT Anything, Suze answers questions from you all about the right monetary gifts for grandchildren, car warranties, term insurance, partners with significant debt and more

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Podcast Transcript:

00:00:35

KT: Okay everybody. It's September 1st and it's KT here. And I bet you all want to know how Suze is recovering. Well, guess what? She's here. She's here and we're going to sing for you. (Sings) See you in September...

00:00:56

KT: We always do that. That's like my favorite song of all time.

00:01:00

Suze: So that was an easy surgery everybody. So just a little sore...

00:01:04

KT: Suze is like a trooper but I have to let her not overdo it. So I'm keeping this podcast a little bit short. I hope she doesn't go on, and on, and on, because I want her to rest. But

00:01:16

KT: we want to thank everyone at Cleveland Clinic for doing such a fabulous job. What a great group of people. So uneventful. I can't begin to tell you. So here we go. Our first question is from Vai.

00:01:32

KT: I have put money in a CD-account for my kids, Suze. The rate is 2.10% for 24 months.

00:01:41

KT: The penalty to withdraw right now is about $16. Should I withdraw the money and put it into I bonds? Mm Hmm.

00:01:53

Suze: So here's the scoop girlfriend. If you don't need this money for at least five years or longer, I would absolutely take a $16

00:02:02

Suze: penalty right now and switch to the I bonds for the kids. You can open one up as a minor account for them, you can do that in your own treasurydirecy.gov account, because I think that the interest rate is going to be pretty good for next few years. Alright. However, if you need the money sooner than that,

00:02:24

Suze: I would leave it where it is right now.

00:02:26

KT: This is next question Suze, is from Georgiana. What a pretty name. Georgiana. Dear Suze. I'm divorced. I'm a single parent with full custody of my teenage daughter. I currently have a term life insurance policy for $200,000 that I opened in 2017 with my daughter as the sole beneficiary.

00:02:50

KT: Now I don't want you to get riled up because you're in recovery, Suze. But ready... I no longer work. I'm on a fixed income due to a non-curable non-terminal health condition. Recently, the insurance company called to talk me into converting into a whole life policy for $75,000.

00:03:15

KT: My premium would increase, ready, from $30 to $132 a month. I've listened to your podcast and only recall you speaking about term life insurance. What is your opinion of whole life for someone in my situation?

00:03:36

KT: I know. You should see her face. I'm supposed to keep her calm.

00:03:39

Suze: Here's what upsets me. Georgiana. You say you listened to the podcast. How can you have listened to this podcast, and not have listened to all of these podcasts,

00:03:52

Suze: and know how much I seriously hate whole life insurance? What gives this away, is in your email, you say that they called you. They went and talked to you to talk you into converting into a whole life insurance policy. Now why do you think that they would do that?

00:04:17

Suze: Why?

00:04:18

Suze: It's not like you went looking for something. They came to you saying, I know, this is what you should do and on, and on, and on. I think if you are still insurable,

00:04:32

Suze: and I'm not sure you are because you say that you're not working, you're on a fixed income, because you don't, you have something that can't be cured even though it's not going to really kill you. So I don't know if you're insurable or not. I also don't know how old your daughter is, but a term life insurance policy, and I also don't know how long the life insurance policy is good for.

00:04:59

Suze: Right? So I get that she's a teenager, but is she 17 or is she...

00:05:03

KT: 13?

00:05:05

Suze: Right. Because really a child only needs life insurance usually up until the age of about 23, 25 to when they could be on their own. What good is $75,000 going to do for her?

00:05:22

Suze: Right. If you die versus $200,000? So no, I would not be doing this. If anything, what I would be doing is to see, unless you have a 20-year level term policy, which would bring you to 2037 when your daughter would be old enough, I would see if I could extend my term of the policy that I already have, but I would not be doing a whole life policy.

00:05:51

Suze: And listen. All you need to do is go on the Women & Money community app. And on the wall there you'll see you can search past podcasts.

00:06:02

Suze: Just put in the words whole life. And you'll see, you'll see quite a few podcasts come up. All right. Just now. I hate in most circumstances, whole life insurance and one last thing. You're on a fixed income and she's on a fixed income. But $100 more a month is $1,200 more a year, over 30 or 40 years. That could be hundreds of thousands of dollars.

00:06:32

KT: The broker's making money not you.

00:06:36

Suze: The broker is making you broker.

00:06:36

KT: This is from Debbie. This is another concern. Mom. We have lots of concerned Mommy's here.

00:06:41

Suze: The last podcast was all about Dads.

00:06:43

KT: I know well, listen to this. Hi Suze and KT, my daughter opened a VTI with Vanguard. Are they a discount broker? This is actually kind of sweet. You suggested Fidelity and TD Ameritrade on Thursday’s podcast, but not Vanguard.

00:07:01

KT: Should she transfer her money to one of those mentioned, she's only 42 and has years before retirement.

00:07:09

Suze: There's absolutely nothing wrong with Vanguard. I love Vanguard funds. I love Vanguard brokerage firm. The whole thing. However,

00:07:18

Suze: the reason that I normally don't say anything about them, but I tout their fund all over the place, is because as far as I know as of last month, Vanguard doesn't offer slices of stock.

00:07:34

Suze: And I like Fidelity and Schwab when you can buy a slice, you want to buy maybe a slice of Tesla. You like Tesla, but you don't have hundreds of dollars a share, right to do that.

00:07:48

Suze: You know to buy one share. So you could buy $10 worth of Tesla. You can't do that at Vanguard. However, you can't do that at TD Ameritrade either. So, I don't know why I don't recommend Vanguard. I'll have to maybe add them to my list. But my true two favorites are Fidelity and Schwab. Just so you know. All right.

00:08:12

KT: All right. This is another grandparent.

00:08:15

KT: Our grandson is turning one in September. This is from Kathy. What would be the best gift for his future? Should we start a Series I bond? We were thinking of starting with $1,000 and giving a monetary gift each year rather than toys. You're all for that Suze.

00:08:36

Suze: You know, I am for that. But at one year of age,

00:08:42

Suze: it's also kind of the perfect time to start of 529 plan because over the next 17 years, maybe you want this money for him or her to go to college. That money will probably grow more in a 529 plan than in a Series I bond.

00:09:04

Suze: Because as interest rates come down here in the future, three years from now, four years from now, I bonds might only be paying 2%, 1%, 3%. So then you would be better off in a 529 plan.

00:09:21

Suze: So it's difficult to know. But you might want to do $500 right now in a Series I bond. $500 in a 529 plan, or do only this year in a Series I bond, maybe next year and then start doing that $1,000 a year in 529 plans. And as interest rates come down, maybe you can then take the money out and put it all into a 529 plan.

00:09:50

KT: I have a question.

00:09:51

KT: What

00:09:52

KT: if he doesn't want to go to college?

00:09:55

Suze: Well if he doesn't want to go to college then obviously any money that they put into a 529 plan, they can take out what they put in. But anything that that money earned, they'll have to pay taxes on it plus a 10% penalty.

00:10:11

Suze: Right? But it just depends. Right?

00:10:15

KT: You never know. You never know what the future holds. (Suze: Was that a good answer?) It was good. It was a diversified answer that for a description. This is from Michelle.

00:10:27

KT: My partner and I have been together for 27 years. We’re registered domestic partners but not married. Should we set up individual trust or just have one joint trust?

00:10:40

Suze: No. Set up individual trusts. Usually a joint trust is for people who are married, a marital trust. But absolutely set up individual trusts. Next

00:10:52

KT: is from Cathy Mac.

00:10:55

KT: Hello. Should I purchase a warranty for - this one's a great one. I forgot this one I picked because it pertains to you and me. Should I purchase a warranty for a used vehicle? It cost over $2,000 for five years. My vehicle is a 2013 Avalon with 54,000 miles. It covers all electronics, AC etc.

00:11:24

KT: Thank you. This is from Cathy. Now. We don't. You and I have a car that's 10 years old, but it's not used. But we don't have warranty anymore. And you know what, let's tell the story about Kevin.

00:11:37

Suze: Yeah. So here's the thing that I've learned about cars and boats. It's now seriously, especially boats. It's almost as if, every part that they put in a boat, an electronic part,

00:11:53

Suze: absolutely breaks three years to the date of when they put it in. So the battery goes in three years, the pumps going three years, everything goes in three years. I've never seen anything like it. Now. We love our car. We have had it now over 10 years, KT.

00:12:13

KT: And about the same mileage 55.

00:12:16

Suze: We have about 50,000 miles on it. But things have started to break

00:12:22

Suze: on it. And every time we take it in, it's like 2,000 here, 3,000 there, KT keeps saying to me, why don't we just get a new car? Because I’d rather spend two or $3,000 or $4,000 once a year then get a new car that's a whole lot more money, but wait, but our driver Kevin,

00:12:45

Suze: was talking to us that he and his husband have, both similar cars, and they decided to buy a warranty on it. Because it's a little bit older. Sure enough, the month after they bought the warranty,

00:13:05

Suze: their car broke down. It would have been $4700 to fix it, and the warranty absolutely save them. So the answer to this question for you, Cathy, is if you are going to keep this car, you're going to keep it for another five or 10 years, and you know exactly what the warranty covers,

00:13:27

Suze: I have to tell you, I would fork out the $2,000 for it. Because over the next five years, don't be surprised to see many things start to break.

00:13:37

KT: And it's only 54,000 miles. That's the benefit. That's why she wants to keep it.

00:13:42

Suze: Well, we don't know if she she didn't say she wanted to keep it, but if you're going to keep it like we have no intention on any level of selling our car. You know, I'm fine keeping it another 10 years.

00:13:54

Suze: So if you're going to keep your car, get a warranty and maybe KT, we need to look into that.

00:14:00

KT: Yeah, I'm going to do that. It says this next one is from James. Dear Suze and KT,

00:14:07

KT: I absolutely love

00:14:10

Suze: Wait what was that?

00:14:12

KT: Because that's how he wrote it. He writes, Dear Suze. And then in parentheses, he goes, and KT.

00:14:19

Suze: So what she's doing here everybody, she's...

00:14:21

KT: I'm sounding it out.

00:14:22

Suze: She's sounding it and she's like dancing and I'm like, what made her dance?

00:14:25

KT: Okay, James. I love that you included me. Dear Suze and KT.

00:14:30

KT: I absolutely love your Women & Money podcast. I'm currently a 34-year-old.

00:14:37

KT: I have two traditional non-Roth 401ks. One from a former employer with around 80,000 in it, the other with my current employer with 3,000 in it. Both are through Fidelity. I also have a traditional TSP 401 with 12,000 in it saved from this period of active duty. Should I move everything to my current employer?

00:15:06

KT: And, does it matter when I do it? Will the market be up down so on and so forth. Thanks Suze, and KT.

00:15:16

Suze: So James you absolutely, if you wanted to have everything in one place, you could actually transfer everything to your current employer. But you would only do that if and only if, the investments within the retirement plan at your current employers,

00:15:36

Suze: are investments that you like. They give you the diversity that you want. Or better yet, do you take all of that money and do an IRA rollover with it in one place, where you have all the diversity in the world. You could buy slices of stock, you could buy anything that you want. You could convert little by little to a Roth IRA.

00:16:03

KT: So

00:16:04

Suze: my preference always is if you have a lot of retirement accounts all over the place,

00:16:11

Suze: rather than you know putting them all into your employer, your current employer's 401k, or retirement plan that's limited, why not do an IRA rollover all in one place? Have them there, you're diversified. You can dollar cost average, you can convert when you want to to a Roth and do it that way.

00:16:33

KT: Suze. This next question is from May. And I was very reluctant to include this in the lineup, simply because it might open a can of worms. But because I didn't understand what this was about, I thought might as well educate everyone. Hi Suze and KT. I know you don't like universal life insurance,

00:16:55

Suze: That is putting it mildly, girlfriend.

00:16:59

KT: But my question is, what are your thoughts about investing in 7702 Indexed Universal Life? That's why I picked this because I have no idea what she's talking about. As a way to diversify your investments and also avoid paying income taxes in the future when you withdraw your money?

00:17:22

KT: So I have no idea everybody what a 7702 is, and I thought that Suze could enlighten us. All right.

00:17:31

Suze: God. So

00:17:34

Suze: we all have to be on our toes as time goes on. Because

00:17:41

Suze: advisors or salespeople truthfully more than advisors, will always figure out a new way to present an old idea. Getting you to think that it's a really great thing to do.

00:17:56

Suze: The 7702 is simply an IRS. Tax code. And it came about a while ago that's, that's about cash value life insurance policies, and that the cash value had to be higher, and it's just it's complicated. But no matter what, it's not something that I want you to do.

00:18:18

Suze: The only reason that you can avoid paying income taxes in the future on one of these universal life insurance policies, or index policies or 7702 policies, is because when you go to take money out,

00:18:36

Suze: you take money out as a loan. And loans are not taxable according to the IRS. Now. Maybe they charge you an interest rate on the loan, maybe they credit you the same interest rate, but it's a loan.

00:18:52

Suze: And sometimes these policies can backfire on you as the mortality charges increase and Blah Blah Blah Blah. The other thing is that it's just something that you don't want to do. So can we just get this straight? So all of you can stop writing in. I am never going to tell you that a universal life, variable life, or a whole life insurance policy in 99.9% of the cases is something that I want you to do.

00:19:21

Suze: I'm just not going to do that. So there you go. And I don't care what the name of it is.

00:19:28

KT: There you go everybody. Now we all understand. Stay and steer clear.

00:19:33

KT: See it was the numbers. I was wondering what the heck is that about. So Suze, we come to the end of this podcast, we're cutting it a little short everybody, she has to rest. But you said you had a quizzie for me. That was a little bit different. A conversation quizzie.

00:19:52

Suze: I do a...

00:19:52

KT: ...point of view quizzie.

00:19:54

Suze: I wanted to do a little bit different of a quizzie today. I didn't want to do a yes no answer type thing or right or wrong.

00:20:04

Suze: I got an email from somebody that really touched my heart.

00:20:09

Suze: Now

00:20:10

Suze: you need to know I personally responded to this person so they already have their answer from me. But I'm always so curious as to how you would answer something like this. It's a thought provoking quizzie. And hopefully it's a, it's a learning quizzie for everybody listening

00:20:32

Suze: as to what I look for when I read an email. Right? Hello Suze and KT,

00:20:42

Suze: I am 28 years of age. My significant other is 40. He was previously married, and he has about $100,000 debt he incurred. I have no debt. He is planning to marry me by next year.

00:21:01

Suze: How do I protect myself from that debt? A little background on me. I earned my bachelor's and Master's degree in nursing with no debt thanks to the military. I start my doctorate in nursing in September. This month with no debt. I paid off my car. I also have a TSP, that's a retirement plan everybody, through the military, a Roth 401k, and a personal Roth IRA.

00:21:31

Suze: I have a savings account at Alliant Credit Union thanks to you, I started investing since I was 20 and I made it my mission to not incur debt. I want to buy a condo, but I want to save up so I can at least put 25% down, in maybe a few years when the market cools off a bit.

00:21:51

Suze: I am worried and afraid to marry someone with that much debt. Thank you for everything you do, and stay safe and healthy.

00:22:03

Suze: So KT, and everybody, we have a 28 year old here.

00:22:09

KT: Very accomplished.

00:22:10

Suze: Very accomplished.

00:22:11

KT: Very accomplished and responsible.

00:22:14

Suze: Whose significant other is 40. And also I didn't read it. But the significant other also has a child from a previous marriage, and has $100,000 in debt.

00:22:29

Suze: What should she do? How does she protect herself?

00:22:32

KT: Can I just tell you for me? The key buzzword. There's only one word in there that makes this answer very easy for me, Suze. And you know what that word is? Afraid. Who the heck talks about marriage, the person they're in love with, the one you're supposed to want to spend the rest of your life with, and be afraid? It doesn't work. It's oil and water. It does not work.

00:22:59

KT: Here's what I say. 28 years old. You're about to start and focus on attaining a master's in nursing this month. (Suze says: A doctorate). You don't have time to be afraid. Oh my God! 28 years old. You do not have time my friend to be afraid and to be worried about getting married next year to someone that

00:23:25

KT: is already, you know, giving the signals. (Suze: So she should move on) Absolutely. I wouldn't even say wait till he gets out of debt, or I wouldn't even go there. I would say this is not the right person for you.

00:23:40

Suze: Alright.

00:23:41

Suze: So there is no right

00:23:42

Suze: or wrong to this answer. So you don't get an ehhhh or a ding ding ding. But here's what...

00:23:48

KT: I want her to get a ding ding ding. And personally Suze I don’t think she should be marrying him.

00:23:52

Suze: Yeah. So here's what keyed me off. Right? So why I would not be doing this if I were you, I would not be getting married to him. And I'd be thinking twice about this relationship. It's not because he has $100,000 of debt. That's not it. There are a lot of people who have a lot of debt.

00:24:16

Suze: But are they trying to get out on their own, are they showing you that they're responsible, what else are they doing? What I didn't like about this email with this one line KT, that said he is planning to marry me by next year. She did not say, we are planning to get married next year.

00:24:41

Suze: This rings, and don't get upset with me. But this rings as a somewhat abusive relationship already. The age difference, not that that means it's abusive, but he is planning to marry me by next year. I don't like that. I wanted you to say in this email,

00:25:05

Suze: I'm hoping that he gets to marry me, or we are planning it. You tell me all about your life. And everything that you have accomplished.

00:25:17

Suze: And you say, I want to buy a condo. You do not say we want to buy a condo. You say I want to save up, so I can at least put 25% down. You do not

00:25:30

Suze: There is not one place in this email that uses the word "we."

00:25:39

Suze: Nowhere.

00:25:41

KT: That's good that's a really good signal.

00:25:43

Suze: That seriously concerns me.

00:25:46

KT: Red flag.

00:25:47

Suze: Red flag. So now all of you need to know. And I keep telling you this, that at times I do answer you back. And I wrote her back. And I told her really, that she was my daughter, that I would tell her don't you dare marry this man.

00:26:09

Suze: Right, that I would move on so fast. It's not even funny. I told her that she's 28 years of age, off to a great start, so don't screw it up. Now what was so sweet is she wrote me back and she said thank you so much Suze Mom, I will take your advice, thanks for everything that you do. So I’m a Suze Mom now. But here's why I wanted to do this quizzie.

00:26:38

Suze: When you have a friend or anybody who's speaking to you about a relationship that they're in, listen very closely to the words that they use. Do the words fear, shame or anger pop up? Do they only use the word I? Does we appear in the conversation or not?

00:27:02

Suze: And it will really give you the clues that you need to help a friend or somebody who comes to you in a situation like this. Now before we end this KT, I want to say something to you.

00:27:20

Suze: Right. I want to say thank

00:27:22

Suze: you.

00:27:23

Suze: I want to say thank you. For how many times you've had to take care of me over the years that we've known each other.

00:27:31

Suze: My very first serious operation that I had,

00:27:35

Suze: when I was in Sloan Kettering in 2002, was one year after KT and I met.

00:27:42

Suze: And that was a serious operation. I've had so many since then.

00:27:47

Suze: And KT has been through it. And I saw it as they took me in for a simple operation, like a gallbladder, but I saw that look in your face

00:27:57

Suze: again.

00:27:58

Suze: And you've had to take care of me so many times and I just want to say thank you.

00:28:05

KT: You're most welcome. But guess what? We are in it together.

00:28:09

Suze: I know. But I just want you all to know I appreciate her more than you have any idea. And it's been so very, very hard on her.

00:28:18

KT: Oh no it hasn't. Not at all.

00:28:19

Suze: But anyway, so with that, not that I meant to cry there. But we only really want one thing for all of you. And that's for you to all be smart,

00:28:31

Suze: strong, safe and

00:28:33

KT: secure.

00:28:34

Suze: And healthy. Alright we love you.

00:28:37

KT: Love you, Suze.

00:28:38

Suze: Love you, KT. Talk to you soon, bye bye.

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