Podcast Episode - Ask Suze & KT Anything: Dividends, Savings and Investing

Listen to Podcast Episode:

On this episode of Ask Suze & KT Anything, Suze answers questions from you all about where to save your emergency fund, dollar cost averaging, tax credits on a home sale and more.

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Podcast Transcript:

00:00:32

Suze: August 25^th, 2022. And welcome to the Ask Suze and

00:00:39

KT: KT,

00:00:40

Suze: She gets that cue right every single time everybody.

00:00:45

Suze: Although this is the third or fourth time we've done this open, KT tried to open it this morning, why can't you just say it's August 25th and then just talk? Why can't you do that?

00:00:57

KT: I was trying to fit in what the title is of what they're listening to but I can't do that.

00:01:02

Suze: Why can't you do that?

00:01:04

KT: I don't know. Come on, keep going.

00:01:09

KT: I'm not good at that Suze because that to me is like trying to remember everything to hit and I'm not good at that. I'm more of an ad lib spontaneous person.

00:01:20

Suze: Really?

00:01:21

KT: Yes.

00:01:22

Suze: None of us knew that. Anyway. As I was saying, this is the Ask Suze and KT Anything podcast. Now listen, let's just get a few things straight here.

00:01:32

Suze: If you want to ask us a question, you have two ways to do so. You can send in an email to Ask Suze, that's S-U-Z-E podcast at gmail.com or you can download the Women & Money app on Apple apps or Google Play, and submit your question right there. Just that simple.

00:01:56

Suze: Now, what are you looking at me like that?

00:01:58

KT: I want you to remind everybody if they didn't hear your Monday special drop a few days ago about Alliant and I call it the do-good account. But um everybody, this was a huge success so far and I opened a checking account in the name of my grandma. I opened it in honor of my grandma who died of Alzheimer's. So remind everybody what we're doing, what Alliant is doing.

00:02:24

Suze: Now, why is it everybody that

00:02:26

Suze: I'm the one who has to remind you why you remind them, you

00:02:29

Suze: know all the facts!

00:02:31

KT: Because I don't get it right.

00:02:33

Suze: This is going to be one of those days. I can tell you again. All right, so here's the thing everybody, first of all thank you all because there has been a tremendous response already.

00:02:44

Suze: For all of you who have opened up what we're calling the socially responsible checking account, just go to my Alliant, A-L-L-I-A-N-T .com/good,

00:02:57

Suze: and you'll be able to read all about it right there or listen to the August 22nd podcast. It tells you everything that you need to know and why this is so seriously important. Just very briefly you go to myalliant.com/Good. You open up a checking account

00:03:19

Suze: by simply depositing $100, and if you keep that $100 in there until the end of February 2023, you just do an electronic transfer once a month for any amount of money you want. In the end of February, you will not only get $100 bonus, but Alliant will give one of three charities

00:03:46

Suze: $100 bonus as well. A their for cancer, Alzheimer's, and disabilities. Fabulous. You get a wonderful return on your money, and we help others and all you gotta do is deposit essentially $100 to get $100 to give

00:04:06

Suze: $100. Are you kidding me? Anyway, go to August 22

00:04:12

KT: This isn't forever.

00:04:13

Suze: Alright, deadline, KT, is what?

00:04:16

KT: I think October 7th.

00:04:18

Suze: Yeah. You can't miss, this

00:04:20

Suze: opportunity.

00:04:21

Suze: It closes October seventh, so go on and look it up. All right, KT.

00:04:28

KT: I felt real good about doing that. And reminding my, my grandma.

00:04:32

Suze: So we have one more thing we want to tell everybody,

00:04:36

Suze: because tomorrow is August 26^th, and tell everybody about August 26^th.

00:04:41

KT: Hopefully it's going to be a great day, a really great day and long overdue. So Suze needs to take her gallbladder out.

00:04:50

KT: And we booked it on August 26^th, Friday, so she's going in early, early, early tomorrow morning,

00:04:58

KT: hopefully it's

00:04:58

KT: uneventful, this isn't an emergency, it's something we've actually planned now for eight weeks, so she's going in and hopefully she'll be home tomorrow night

00:05:10

KT: safe and sound, and hopefully she’s able to then enjoy any kind of barbecue she wants.

00:05:17

Suze: There you go. So you know, I always like all of you to know what's happening in our lives, and that's just another thing that's happening.

 00:05:25

KT: Yeah, we'll tell you all about it.

00:05:27

Suze: Yeah. And hopefully it'll be great. Alright KT.

00:05:29

KT: Alright, I have so many great questions here. The first one is from Hari. Hello, Suze and KT.

00:05:36

Suze: Hello Hari.

00:05:37

KT: Thanks for the amazing podcast.

00:05:40

KT: I have been following your shows and podcasts since 2008. I bet he has some good stories about the Suze Orman Show. Right?

00:05:49

Suze: I bet he's going to have some more good story shortly about the Suze Orman Show, but that's all I'm gonna say for now. Go on.

00:05:54

KT: All right. Do you see any disadvantage in saving emergency funds in a four-week Treasury bill instead of a high yield online savings account?

00:06:06

KT: And the treasury bill, Suze, has an option to auto renew every four weeks.

00:06:12

Suze: Yeah. Listen, Hari. If you have what it takes to figure out how to buy four-week Treasury bills, a lot of people do not, I don't have a problem with that one, given that they're paying currently about 2.14%. Not bad, boyfriend. Alright.

00:06:28

KT: Alright. Next is from Kathy. Hi Suze. If I want to move my IRA money from my Fidelity 2025 account,

00:06:38

KT: to VTI, should I do it all at once or dollar cost average instead of bonds, which short term treasuries be a good balance. I'm retired but I don't plan to use the money for 3 to 5 years.

00:06:54

KT: It's from Kathy.

00:06:55

Suze: Yeah so Kathy, how many of you have heard me say over the years, I don't like target date mutual funds. And a target date mutual fund is like Fidelity 2025, where that is the date that Kathy targeted that she would be retired and need the money.

00:07:16

Suze: So the way then that Fidelity invests the money, is that as she gets closer to retirement, more and more of that portfolio is in bonds.

00:07:28

Suze: I don't think it's about age as to when you buy something, I think it's about what is happening in the economy as to when you buy something, and when interest rates are going up, that is not the time to be in bonds. Now. I could have my facts and figures wrong here. But I would imagine that the Fidelity 2025 account has probably at this point in time, 45% of its money in bonds.

00:07:59

Suze: It is probably is down 10 or 11% so far on the year. Do I think that you might be better in different types of investments? Yeah. Do I think that VTI is where I would be going however given that you just have 3-5 years to use this money? I do not.

00:08:18

Suze: I think you would be far better in a total ETF that's a high yielding dividend paying ETF that you have a variety of different stocks paying you good dividends or you create that type of portfolio on your own. So truthfully I wouldn't be doing VTI at this time, and I'd probably be switching from the 2025 account

00:08:43

Suze: to what I just said. All right.

00:08:45

KT: Wait till you hear the next question. Everybody here we go this one. I love it. It's from Diane. Hi Suze. Hi KT. Here, here we go again. That's what she writes. Here we go again. Another Series I bond question.

00:08:59

KT: You ready, Suze?

00:09:01

KT: This is

00:09:02

KT: like a puzzle. My husband and I have individual Series I bond accounts with myself as a secondary on his account, and he

00:09:12

KT: on

00:09:13

KT: mine. We also have one in a revocable trust. We purchased a 10,000 gift for each other and put POD  -pay on death, right? 00:09:24

KT: Are we

00:09:25

KT: able, right?

00:09:27

KT: Are we able to gift 10K from individual accounts with the secondary to the individual account with the secondary? You want to hear her example?

00:09:40

Suze: No, I get it. I get it.

00:09:41

KT: Does everyone listening get it? It's a puzzle. Answer. What can she do this?

00:09:47

KT: Basically what everybody is trying to figure out.

00:09:52

Suze: Right. Especially Diane here is how do you get more money into Series I bonds, but still somehow keep control over it. If you listen carefully to the I bond podcast I did on gifting bonds, you can gift a bond to anybody you want, and you can be the beneficiary of that bond.

00:10:16

Suze: You cannot gift a bond to somebody, and be a secondary owner on it. And the reason is, when you have a secondary owner, that owner can do what? They can sell the bond, they can look at the bond proceeds, they can do anything they want with it as if they were the owner. So you can't give something to somebody, but still retain ownership of it.

00:10:42

Suze: The reason that you can gift a bond to somebody, and be a beneficiary of that bond, is because if that person were to die, you then could get that money back. But a beneficiary cannot sell it, cannot really do anything about it, they're just the beneficiary. So that is the answer everybody and Diane.

00:11:05

KT: So she did it right.

00:11:07

Suze: Well she was asking a question, she did it right on the original one she purchased, but if she had done it the second way that she was asking, it would not have been right. All right.

00:11:17

KT: So keep what you've got Diane.

00:11:19

Suze: If you gift a bond to somebody, you cannot be a secondary owner. Just know that.

00:11:25

KT: Alright next is from Karen. My question is regarding dividends. I took your advice and purchased a small amount of DVN. I have other dividend investments, and I'm a big fan of this type of investment.

00:11:42

Suze: Can I just say something?

00:11:44

Suze: DVN Is the stock exchange symbol for an energy stock by the name of

00:11:51

Suze: Devon. That

00:11:52

Suze: I have been recommending now for a while. I really came out on August 1st of this year, and I actually said I don't think it's a bad idea to maybe switch from other oil stocks you have or ETF like XLE into Devon.

00:12:10

Suze: And Devon at the time was about $56 a share. Ever since then it has gone up dramatically to about $66 a share. But Devon and Pioneer are great energy stocks

00:12:25

Suze: that pay a great dividend. Alright go on KT.

00:12:29

KT: And then she goes on to say, since my initial buy in was before the deadline, will other shares purchased after September 8, 2022 be a different rate or not even eligible for dividend payment?

00:12:45

Suze: Alright now. Let me straighten Karen out. All right, and everybody else. When you buy a stock, an individual stock,

00:12:56

Suze: every stock that pays a dividend, it has what's called an ex dividend date. Which says you have got to have purchased that stock by that date,

00:13:10

Suze: and in the example of Devon it's September 8^th, you have to be owner of record by September 8th to get this quarter's dividend. Remember dividend paying stocks usually pay it every quarter. If you happen to buy it September 9^th, it trades without the dividend

00:13:34

Suze: that you would have gotten if you had purchased it by September 8^th or you already own it. Now obviously three months from September 9^th, they will pay another dividend, and you will qualify for that dividend.

00:13:52

Suze: So you just have to know once you buy a stock,

00:13:56

Suze: and you own it, you get the dividends every quarter. If you're just buying a stock right now,

00:14:04

Suze: and you haven't purchased it by the ex-dividend date, which again for Devon is September 8^th, if you buy it after that,

00:14:14

Suze: you'll get the next dividend, as long as you bought it before that ex-dividend date.

00:14:20

KT: Okay. So they're about to buy it. Where does it say when those dates are?

00:14:25

Suze: Just look it up. And I've been telling everybody, but just Google ex-dividend date for Devon, ex-dividend date for Pioneer, and they’ll tell you.

00:14:33

Suze: And they'll tell

00:14:34

Suze: you. Right. And what's also interesting KT, is that the date that it goes ex dividend, is actually the price of the stock is actually reduced

00:14:44

Suze: by the dividend. So if it's trading for let's just say $60 a share, and the dividend is a dollar 55 for that quarter, they will then reduce the price from 60 by a dollar 55. It will trade without the dividend the next

00:15:01

Suze: day.

00:15:02

Suze: So

00:15:03

Suze: either way you're kind of okay believe it or not. All right.

00:15:06

KT: Okay that I didn't know that. But you just look it up. It's easy to find everything.

0:15:10

Suze: Half the things you people write me by the way, you could just Google and find the answer for.

00:15:15

KT: We don't need Suze. See? We don't need you.

00:15:18

Suze: But those are the ones that I normally don't answer just so you know.

00:15:22

KT: This is from Cindy.

00:15:23

KT: I

00:15:24

KT: have recently become power of attorney for my dear friend of my late mother who has no family. She is in poor health and is in an assisted living facility. Her long-term care insurance covers the monthly cost, ready for this everyone, of $6,800 but remaining balance in that account will be depleted in 18 months if she remains at that level of care.

00:15:53

KT: She has $230,000 from proceeds of the recent sale of her home.

00:15:59

KT: I have that in a high yield savings account earning 1.6% interest. I bet it’s at Alliant. So my question is given that I'll likely need to access those funds in 12 to 18 months. Should I dollar cost average into various ETFs now or leave it safely in savings?

00:16:23

Suze: So Cindy your job is a very difficult one. I have to tell you.

00:16:27

Suze: But you have to keep this money safe and sound. And think about it, if you had invested in VTI, dividend paying stocks, all of these things. But all of a sudden, the market starts to tank and goes down.

00:16:44

Suze: What are you going to do then? You need this money in 12-18 months. And I always say money that you need in less than 3-5 years, is not money that belongs in the stock market. So girlfriend, you need to leave it exactly where it is, and just keep making sure you have the highest interest rate possible on that money.

00:17:10

Suze: Yeah. Sad, right?

00:17:12

KT: Yeah this one's even sad or ready for this.

00:17:14

Suze: What did you do? Did you go through these emails and said what can we do that makes it sad today?

00:17:19

KT: No but this one really touches a sensitive chord for you and me. Ready? Hi Suze and KT. I'm in tears writing this because I'm so worried about my parents. They're both in their seventies. There's the sensitive chord Suze. That's our age.

00:17:37

KT: My dad is still working in a stressful job full time because they don't have enough money to retire. They have saved about $700,000, which is just sitting in their checking account. Except 20,000 in I bonds, which I convinced them the purchase after I listened to your podcast.

00:17:58

KT: My dad doesn't trust the stock market. I'm not going to change his mind at this point. But nearly all their savings is in a checking account, earning no interest at all. Not to mention they have way more in there than the 250 FDIC

00:18:18

KT: insured amount. See Suze? It says please, please, please Suze help me steer them into the best path for a secure future. So let's talk about that.

00:18:29

Suze: You know, so when people get older, my dear Lolli, it's that they start to get afraid.

00:18:37

Suze: And it's true. I mean obviously your father is the same age as both KT and myself, maybe he's a little bit older,

00:18:47

Suze: you start to get afraid. Especially if you don't have enough money. How am I going to do this? I don't understand that. I don't want to lose anything that I have, and one of the main reasons they don't want to lose it girlfriend, is they want to have money to leave to you. That's one of the main reasons they don't risk it. They stop thinking about themselves, and all they start thinking about is what can I leave to my kids?

00:19:15

Suze: So I think what's really important that you might want to do with your father, is not try to convince him to invest in something that makes him afraid.

00:19:25

Suze: Because fear is one of the main internal obstacles to wealth. And if you tell him to do something and then it doesn't work out, oh my God. But I think if you just simply showed him, like right now for instance, the Alliant Credit Union and I'm telling you this because it's a really good rate right now, and it's something that I know that your father can relate to, is paying 3% on an 18 month certificate of deposit.

00:19:53

Suze: Now I know and you know, your father will relate to certificates of deposits. So I would say to him something like this. Dad, I have a question. If you were walking down the street, and you saw $175 that somebody dropped, would you pick it up?

00:20:14

Suze: And he's obviously going to say of course I would. You could say, well dad, if you were walking down the street, and saw $3,150, what would you do with that?

00:20:28

Suze: And he would probably say, I'd pick it up, see if anybody lost it, and if nobody did, I would keep it. I would then say to him, do you know that you are losing approximately 175 a day, or over the next 18 months, $3,150 simply by leaving your money in a checking account,

00:20:51

Suze: paying you know interest, when you could put it in a certificate of deposit paying 3%? Why wouldn't you do that dad?

00:21:02

Suze: I don't understand. And if you don't want to do it with all 700,000, let's do it with 250,000. Let's do it with an amount that happens to be insured. Now.

00:21:15

Suze: You could get the insurance on it,

00:21:19

Suze: and again remember everybody, Alliant Credit union is insured by NCUA, same thing as FDIC, just for credit unions by making it so that the beneficiaries on it

00:21:32

Suze: maybe could be the mother. Maybe could be you, maybe you have other relatives, but that you each get $250,000 of insurance. So you really only need like three beneficiaries and he would be totally insured. So, it's just something to think about. But show him how much money he is losing. And why does he want to do that?

00:21:56

Suze: And I think you'll find that he changes his mind. But talk to him out of respect. Not like he's stupid. Okay?

00:22:06

Suze: All right, next question, KT.

00:22:08

KT: All right, next question is from another Dad. From Rajiv. My wife and I have a trust with our three girls as the beneficiaries. Our bank accounts and home are in the trust. I understand that the bank accounts will be covered by FDIC. Does the same hold true for tax free gains when we sell our house? Is the 250

00:22:32

KT: tax free gain per beneficiary or just for my wife and myself? Now, this is the big question, Suze. He says if the latter, why not add our kids to the title of the house two years prior to when we plan to sell it?

00:22:53

KT: He's a smart man, asking a smart question.

00:22:56

Suze: Here's the thing, number one, when you buy a home,

00:23:01

Suze: and you sell it, the owners of that home, when you sell it, each get a $250,000 exemption, as long as they're on title number one, and they lived in that house as their primary residency for two out of the past five years. So if each one of those kids are living there and it is their primary residency,

00:23:29

Suze: but they're working, they have income, they're finally taxes on their own, they're not your dependent.

00:23:37

Suze: There as if they're an individual living in that home. They own 1/5 of it. Since there will be five of you at that point, and then you were to sell it, and they lived there for two out of the past five years as their primary residency, I bet you it would hold up. But be very very careful. They cannot be dependent on you,

00:24:01

Suze: They really, the government has to see this as a legitimate transaction. Not just for you to get another $750,000 of exemption,

00:24:10

Suze: but that it was really you gifted it to them, and you did it legitimately.

00:24:16

Suze: You might want to wait for longer than two out of the past five years to make it hold. But I bet it could. And if it doesn't,

00:24:23

Suze: at least you tried. Okay.

00:24:26

KT: Alright. Suze, this is from Elizabeth. Dear Suze and KT, I love your show so much. Listen to your podcast every week. Just listening to your voice is like you are part of my family. I'm 54 years old. I'm in the final stage of my divorce.

00:24:43

Suze: How does that make you feel that people think we're part of their family?

00:24:48

KT: It makes me feel great because it reminds me of what we went through with my brother. But listen to this.

00:24:53

KT: I'm 54 years old. I'm in the final stage of my divorce process. I heard Suze mention the  VTI many times in her show. I'm really interested and finally ready to invest $5000 in VTI. I was wondering if I should invest it in a Roth IRA or taxable account.

00:25:18

KT: Then, it said I'll also be receiving half of the TSP, right, from her soon from the soon ex, after the divorce. That's about 200,000. Would you recommend me to roll over into my Roth or traditional?

00:25:40

Suze: What would you say KT? (KT says: Roth, baby!)

00:25:41

Suze: That was your quizzie. That was KT's quizzie, everybody. In the middle of the show.

00:25:47

KT: I

00:25:48

KT: always pick Roth because you like them.

00:25:50

Suze: I love them. And everybody should love them. So here's the thing. You can take $5,000 of your own money, and absolutely open a Roth IRA, as long as you have earned income. You have to have earned income, unless you are going to be converting some money into a Roth IRA from another retirement account.

00:26:17

Suze: So that's just something that you need to know. However. You're about to inherit $200,000, half of your thrift savings plan from your ex. You would roll that over first to a traditional IRA, because if you really took $200,000 and rolled it into a Roth IRA, that would be taxable to you 100% as ordinary income,

00:26:46

Suze: and that would put you into a really high-income tax bracket. If you do convert money into a Roth, like the $5,000, I really at this point would be dollar cost averaging. I would not take $5,000 and invest it all in one lump sum. So I do think these markets are going to continue to go up, continue to go down, but be very very careful here. But do not.

00:27:15

Suze: Do not convert $200,000 from your TSP into a Roth in one lump sum. Alright. Yes.

00:27:25

KT: So this next question I was looking for this earlier. It's from Nancy. And I think you answered this about maybe five or six questions ago. Ready? Hi Suze. Not long ago you said there was something

00:27:40

KT: that we had to buy some time in early September. Like maybe September 4th. I can't remember what it was. I can't find it in my notes. I'm listening to older podcasts trying to find it. I'm not having any luck. Any idea what I'm talking about? She said you seem excited about it. Now Suze I'm gonna take a wild guess. Is this the DVN on September 8^th?

00:28:06

KT: Is that what you were talking about? What was it?

00:28:12

Suze: You were so proud of that answer.

00:28:14

KT: I was so excited that I found it for her. So what was it?

00:28:18

Suze: So this is only for those of you who seriously are speculating, and what I said was that come the first week approximately or maybe second of September, Ethereum.

00:28:36

Suze: Right. The Cryptocurrency is going to be doing something that's equivalent to when Bitcoin does this halving thing. And so maybe I'll have to do a little bit of an explanation of that on a Suze School, but when Bitcoin over the past years has done something called a halving,

00:29:01

Suze: and because of my accent here, I can't quite say it, but it's an H-A-L-V-I-N-G. It has, it's halving, halving , there's an L in there.

00:29:12

KT: But it still means half-ing.

00:29:17

KT: It's that's just how they pronounce this, the spelling of the word half.

00:29:22

Suze: But I can't do that, I don't do it very well. But every time it did that,

00:29:30

KT: it's kind of like a split.

00:29:31

Suze: It's, it's a reverse split where the number of Bitcoins available starts to go down, and down, and down. And that always has increased the price of Bitcoin,

00:29:42

Suze: whatever. Right? So around the first week or two weeks of September, Ethereum is going to be doing essentially the same thing, but it's going to be doing it on a far grander level. So I don't have time to explain that now. But if you want to risk a little bit of money, $100, 500 dollars. Not a lot. By any means.

00:30:08

Suze: You might want to pick up some Ethereum. Just saying.

00:30:11

KT: Okay, so that was it. I thought it was Devon.

00:30:14

Suze: It wasn't. 00:30:16

KT: Devon would be a good investment too, right?

00:30:18

Suze: It depends. I don't want everybody, KT, to put all their money into these energy stocks, but when energy goes up,

00:30:27

Suze: the price of all these other stocks go down, it's a great dividend, even if they cut it, the same thing with Pioneer, even if they eventually cut the dividend on Pioneer, which symbol is PXD, still going to be a fabulous dividend.

00:30:44

Suze: So KT, we already did your quizzie.

00:30:47

KT: I got it.

00:30:48

Suze: All right. So you got to be nice to me because tomorrow,

00:30:51

KT: I know we have to rest. She has to rest, everybody. She has to really go to bed early tonight.

00:30:57

Suze: I never go to bed early.

00:30:58

KT: She has to rest. That's all there is to it. Okay, what do we want to say to everyone? Let's all say a prayer for Suze's surgery. That it's uneventful. Let's be safe, strong, secure and healthy.

00:31:13

KT: How about that 4^th?

00:31:14

Suze: And good. Make sure you all go to myalliant.com

00:31:17

KT: good,

00:31:18

Suze: and do good for yourself and do good for others.

00:31:24

Suze: Talk to you soon. Bye bye.

00:31:26

KT: Bye.

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