Podcast Episode - Ask KT & Suze Anything: I Enjoy Saving, More Than Spending

On this edition of Ask KT & Suze Anything, Suze answers questions about annuities, CD callbacks and medical debt.  Plus, a Roth quizzy and so much more!

Listen to Podcast Episode:

Podcast Transcript:

Suze: October 24th, 2024. Welcome everybody to the Women and Money podcast

KT: and everyone smart enough to listen.

Suze: That was high speed

KT: High speed, fast speed and everyone's smart enough to listen.

Suze: All right, this is the KT and Suze Anything podcast and on high speed. Ok.

KT: I'm getting ready for New York.

Suze: So tomorrow, by the way, October 25th, I will be speaking at the women's event for Forbes 50 Over 50 with Mika Brzezinski. I'm so excited to see her again and all the women that are part of this seriously exclusive group. So let's see how that goes. Anyway. KT...

KT: I want to start with a really nice email I got...

Suze: Right away. You don't want to say anything else. You just want to go right to emails.

KT: Yes, because we have a, we have quite a few. We have this one. Let me just...

Suze: But KT, you have not put up your little poll yet that you were gonna put up about my Halloween candy. So are you waiting till Halloween to put that up? So next time we say

KT: I'm gonna put that up next Thursday

Suze: Right. So next Thursday will be Halloween and that's when you're going to put up the poll. Tell everybody what the poll is about.

KT: Guess Suze's favorite Halloween candy.

Suze: I have so many though, KT.

KT: No, no, no. We're only giving them a multiple choice with three. And you have to, you have to just rate it, which is the number one. That's it.

Suze: Maybe we could put it up a few days before and then talk about it on Halloween. What do you say about that?

KT: We can do that too. You so look for it. You have to go to the wall.

Suze: The wall on the women and money app where you can simply download it at Google Play or Apple Apps. It's free and we have a wonderful community there. All right now, KT

KT: So, so I wanna share, sometimes I like to start with sharing what people have achieved by just listening to Suze Orman's great advice. And this is from Gina and she said after following your rules for over 25 years, I was able to now get... ready everybody... This is a list of 10 great things that Gina has done. Number one. Get out of credit card debt for the third time, survive a painful divorce. The reason it was painful, Suze is because she paid her husband $100,000 almost 10 years ago because she made more than him. But she survived that.

Suze: KT that's not why it was painful. When you are married and you get divorce. Any divorce is painful because you originally entered that relationship in the hopes that it was going to be as great as ours. So that's what truly makes a divorce painful, money isn't what makes a divorce painful, truthfully, but it still stings. All right. Go on.

KT: That 100 grand is a big sting. So, number three, she paid off her house at the age of 53 and now it's worth almost a million dollars. Suze. She paid cash for a car and she kept it for... what's your favorite number?

Suze: Well, my favorite number is nine.

KT: Nine years.

Suze: \However, I would like all of you to keep your cars for at least 10. All right. Go on.

KT: And then she opened a Roth and saved 200,000. She accumulated 1.8 million in her work 401k Roth. She accumulated 25,000 in Series I bonds. She has 250,000 in liquid savings, which I suppose could be her emergency fund. And then she said she retired from a job she hated at the age of 56 with a pension.

And since that retirement she can afford ready everyone. Keyword. I can afford to exercise with a personal trainer. I lost 35 pounds. I no longer have high cholesterol. I'm working on getting off my high blood pressure medication and I did this all on my own Suze because you taught me how to enjoy saving more than spending.

So, Suze Gina is 56. Congratulations Gina. I love everything she did and continues to do.

Suze: The thing I love most about you doing this, KT is that so many times people feel so hopeless, they feel like no, they can't do this. They'll never get out of debt, they'll never be able to save, they'll never be able to recover from a divorce, all of these things and you can and you will baby steps. But the main thing that Gina said in that email is she gets more pleasure out of saving than she does spending.

When you feel less than everybody, you spend more than you want to be more. You wanna have more, you wanna feel like Gina and have security because that is the goal of money, then learn how to define yourself by how you feel and who you are and not the things around you.

KT: All right. OK. So now my first question is from Marietta. She said, hello, Miss Orman. Marietta is being very proper. I have just finished reading the transcript of your podcast, Suze School Understanding Annuities, which was on April 9th 2023. See everyone, you can go back and find exactly what you need.

Marietta goes on to say I am new to investing and recently started looking into annuities. One thing puzzles me though. I was reading the advice where you say that I should get an annuity with an interest rate guaranteed for the entire surrender period. I have noticed that some annuities offer a bonus rate for one year, then they drop off to a lower rate. How would I go about securing this higher bonus rate for the length, I guess, for the duration of the surrender period?

Suze: Now, first of all, Marietta, if you heard me say that I want you to get an annuity. I don't want you to get annuities. Actually, I find it very difficult to find a situation where an annuity in any place. Now makes sense. However, if you want to get an annuity for whatever reason, because all annuities have what's called a surrender period where you cannot come out of that annuity without a penalty, usually 7% the first year, 6, 5, 4 whatever it may be.

So if you're going to, for whatever reason, get an annuity, get an annuity where the surrender period and the interest rate that they are offering you is for the exact same period of time. Now, companies may not do that anymore. It used to be called a CD annuity. So they sucker you in.

However, in your example here in this email of offering you a bonus rate for the first year, then they drop you down all the other years during the surrender period to make up for that bonus rate that got you to go with them to begin with. My best advice I could give you is since you're probably very new to investing, stay away from annuities. I doubt if there's any reason that you really need one.

That's number one, number two, if for whatever reason you do get an annuity, only get an annuity, which is a fixed annuity where the interest rate is fixed for the entire length of the surrender period. If you can't find one like that, don't buy it at all.

All right. Next KT.

KT: So the next emails from Kim, hi, Suze. I recently started listening to your podcast after discovering my parents who are 80 and 81 bought a $200,000 deferred annuity upon recommendation from the financial advisor, my mom asked me what I knew about annuities and I don't think she realized it was already purchased.

Ready, Suze. My parents are extremely secretive about all of their finances. They have five children and I am the financial power of attorney, but they don't tell me anything. I've never met their financial advisor who is the grandson of an old family attorney who passed a few years ago. They put all of their trust in him.

So, Kim's question is on behalf of herself and siblings, what can we do to help my parents realize they need to trust their family to be involved in their finances?

Suze: So, Kim, what's interesting is that no matter how old we get or our parents get, we tend to act like we're still kids we tend to act that we cannot question their authority that we have to do anything that they say. We act like we're 10 years old, 12 years old, 18 years old when we really were kids.

You now and all your siblings are mature adults. If your parents are in their eighties, then you are probably in your fifties, maybe even in your sixties, you are no longer kids. Therefore you have to stop acting like one and just being around them and doing whatever they say what I suggest to you and everybody listening to this right now, your parents are in danger, they're in danger. Therefore, you have got to go to them, sit them down all of you at once and say, let's play getting older. Mom, what would you do if dad dies? Because it's not an if mom it's a when.

Do you know where your money is going to come from? Do you know how much it costs you to live every single month? Do you know about the titles to all your accounts and retirement accounts? Mom? Will you be ok? And mom, let's just say dad is gone or dad, let's just say mom is gone or has become incapacitated, who's going to write your checks for you? Who is going to pay your bills for you? Mom and dad, this is not about how much money you have and how much money you are going to leave to us. This is about your children being able to take care of you as you age and the two of you are putting yourself in danger.

Kim, ask your parents to listen to this podcast, ask them to listen to Suze Orman saying to them mom and dad, please don't do this to your kids. How many thousands of kids have come to me when their parents had gotten sick or had a stroke or had whatever it may be and they can't pay the bills, they can't do anything for them. Everybody now is in danger.

Please mom and dad stop acting so immature that you just don't want to deal with this because I know that you're afraid to deal with your death. I know that you are afraid to make decisions because it's hard to get old. I know that KT and I both experienced that, but you don't have a choice anymore. So I am not asking you. I am begging you to bring your five kids in who love you, especially Kim, who has power of attorney, introduce Kim to your financial advisor and make sure that the decisions that you are making or this person is making for, you are wise for you because on no level, is it wise that you have a $200,000 annuity on no level? Is it wise for you to have any annuities at all? And just because his grandfather was, your attorney doesn't mean that the grandson is just like his grandfather, please. I am begging you and all parents that are listening to this right now.

Next question KT.

KT: So, next is from Emily. Suze: Love, love, love, love your podcast,

Suze: I love it too, Emily.

KT: And this is, it's a really good question because I'm curious too, Suze. How did I miss that CDs can be called back? Was this ever discussed on your podcast? I have received a notice from Chase that my CD was being recalled and money to be cashed out at nine months instead of my 12 month expiration date.

KT: So Suze, Emily says, why didn't I know this?

Suze: You didn't know it, Emily because you don't listen to the podcast every Thursday and Sunday or any time in between them. So just so you know, I have addressed this in the past and basically the reason a financial institution has what's called a Callable CD is because interest rates are high and when interest rates go down, they wanna know that they don't have to continue paying you that high interest rate because they wanna be able to recall it so that if you do get another CD, it's at a lower interest rates and that's how they make more money.

Now, most financial institutions such as banks and even brokerage firms offer Callable CDs and sometimes to sucker you in, they offer a little tiny higher interest rate than a CD that is not callable. And you fall for that trick. You should never ever, ever get a callable CD, but they are plentiful out there. So you just have to ask the question before you buy a CD. Is this callable or not?

KT: Does Alliant do that?

Suze: No Alliant would not offer callable CDs. Because really they're for the advantage of the financial institution, there is no advantage really for a consumer to buy one and Alliant Credit Union, in my opinion, would never do anything.

Anything that wasn't for the advantage of their members. I would go to my alliant.com.

KT: All right. Next is from Sylvia Suze. I have a traditional IRA and a Roth IRA with Charles Schwab. The traditional is doing really bad. She said I would like to choose investments myself following the advice of your podcast, but I don't know how to take control of my account, how, you know, help her. How does she do that?

Suze: Sylvia, do you have control over your Roth IRA? This has nothing to do with Charles Schwab. This has to do with who is making the decisions over your retirement accounts. So, if your Roth IRA is doing well and your traditional IRA is not. I have a feeling that probably you just recently started a Roth IRA and there isn't a lot of money in there, but there's probably a whole lot more in your traditional IRA.

So how do you take that over? You just tell whoever is in charge of that account that you no longer want them to be. So, so therefore you pick up the phone, you gather your courage and you say you no longer want the traditional IRA under an investment advisor. However, I do just want to say if it's really doing bad, now might be the time to take some of the money that's in the traditional IRA and convert it to a Roth every single year. Now, I just also have to say this, we're at almost the end of 2024.

So it wouldn't kill you, possibly, I don't know enough about your circumstance, but to take small amounts of money at the end of this year in the things that are especially down and you're losing on and convert them to your Roth and then do the same thing at the beginning of January next year. So that's what I would be doing if I were you. KT, yhy do you think it's so hard for women to take power? Like did, did she really need to write me to say that? How does she do that?

KT: A lot of people, men and women are afraid to ask questions or to question anything that has to do with finances and don't ask me why. I don't know. I mean, for me, I love to ask questions about money and I have no fear but most people do.

Suze: So listen, here's the bottom line for all of you. It is your money what happens to your money directly affects the quality of your life. How many times have I said this? Not your financial advisor's life, your insurance agent's life, your banker's life, your life. So if you don't like what's happening to your money, do not be afraid to pick up the phone and talk to whoever is in charge of that money.

If you don't like what's happening to your money and you're the one who's in control of it, then maybe you do need to find somebody who could help you or simply listen to last Sunday's podcast and maybe you'll learn what to do with money that you are not happy with. All right, KT.

KT: Ok. Next is from Cecilia. She said, Suze, your podcast has been a true gift. Love that. She said when I left my company, I had a 90 day window to exercise my vested stock options just before they expired, an acquisition was announced, but I had no guarantees about the deal closing or a written confirmation on the equity payout. The cost to exercise was $193,000 with a net gain of 122,000.

I could have used my home equity line of credit to fund it, but I decided against it to avoid potential financial stress on my family. So now, now she's regretting it. She said I can't help but feel unlucky for not seizing that up upside. So, Suze, how do I move past this and stop dwelling on what could have been, another could have, should have, would have email.

Suze: So basically Cecilia, there is a law of money that I have, which is look at what you have not at what you had or you could have had.

If you spend all of your life buying a stock, you then sell it because you made maybe some money on it or you lost money on it and then it skyrockets. And if you had simply held it, you would have made $100,000 200,000 dollars. I did an entire podcast on "If only" try to find that podcast. If only I had done this and not that if only I had exercised those options, I would be $122,000 richer if only if only now what you could have done.

But you didn't even ask the questions to your HR person because you were coming from a place of fear. You wanted to make sure that you stayed secure. You didn't want to take equity out of your home. But you didn't ask the company questions such as how can I do this? If I don't have any money, there are many companies out there that have what's called a cashless transaction to help you exercise when you don't have the cash to do. So, did you even ask that question of your company?

So for all of you again listening to this and maybe you're in a situation like Cecilia is in or was in and maybe you will be in is, can you ask your company now that if they ever do something like that you have stock options? Do they offer something? That's a cashless transaction? Can you do that? But Cecilia, why waste time on what could have been versus what is you didn't do it because you didn't want to cause any financial stress on your family. And now it's causing stress on you. No girlfriend, look at what you have, which should be a life of no stress. So therefore just stop it. But again, listen to the podcast on if only. All right, KT.

KT: Ok, next is from Scott. He said, Suze, on a recent podcast, you answered a question about medical debt, affecting a person's credit report, you mentioned under $500, but in Illinois, no amount of medical other than debt placed on a credit card can affect your credit report.

Suze: Yes. And Scott and KT, you should know everybody. I read this and I answered Scott directly. But here's the scoop. It's true. In Illinois, they passed a bill last year and it was signed into law by Governor Pritzker.

However, it doesn't go into effect until January 2025. So when I'm doing a podcast, everybody that goes out to the entire United States, it's very difficult to break it down state by state but it is true that there are six states currently where no matter what it cannot go on your credit reports. And very shortly in 2025 there will be seven states including Illinois and those six states currently are California, Colorado, New York, Minnesota, Connecticut and Virginia.

The laws are changing and hopefully one day all states will have that law. So I should have been more specific. You are absolutely right, Scott. But now, you know, I try to answer it for the majority of people out there, but now we corrected it. You feel better now, Scott? I know I do.

KT: I feel great about knowing that. So, Suze, next question, this is from Susan. I am 45 years old and I've been with Walmart for nine years. We love Walmart. Wonder if she's been to Bentonville?

Suze and I've been to Bentonville. There's some great barbecue places there. So I'm leaving Walmart and I have $45,000 in the 401k and I have stocks with them and the new job I'm going to has a 401k also. Do I have to transfer my Walmart 401k to the new job or can I open a Roth IRA with Fidelity?

Suze: So, first of all, Susan, right, if you choose to roll over your 401k to your new company, that's fine. Right. But the problem is, chances are they're not going to be able to take the Walmart stock that you have within your 401k. I would suggest doing an IRA rollover to fidelity with all of it.

And then if you want start to convert little by little to a Roth IRA, because if you roll it all over to a Roth IRA, then all $45,000 is gonna be taxable to you that year. As ordinary income. You also, by the way, have the ability to leave it right at Walmart. If that is what you would like to do. Next question, my dear KT.

KT: OK. This question was on the wall and it's to KT

Suze: And it is the last one.

KT: It says KT. If you still have money in an HSA account when you start receiving Medicare, do you lose it? So if you all listen to last week's podcast, I surprised Suze as to what I know about HSAs and I'm gonna answer this for you for them. Is that all right, Suze? The answer is...

Suze: wait...

KT: you don't lose it. You just add to it. You don't lose it. There you go. I know a lot about HSAs,

Suze: Ding, ding, ding, but you're still getting a quizzy, girlfriend. Wait, wait, wait, I'm not there yet. Let me answer Miss Speedy today. So it is true that you can use your HSA money for anything that you want. But did you also know that you can use your health savings account funds to pay for Medicare premiums? Everybody including those for part B, part D and Medicare advantage plans part C.

Suze: All right. But you need to know KT. This should have been your quizzy. Can you use HSA funds to pay for Medicare supplement or Medigap policies since you know so much about these funds?

KT: I don't know that much.

Suze: And the answer to that is no, you cannot

KT: Sounds like a no, right?

Suze: So just remember that when you have money in an HSA, you can use it for so many things, including long term care premiums. Everybody. All right, quizzy time, you didn't get out of your quizzy, my little manipulator you... which is this from Darlene.

And by now all of you know what quizzy time means. If not, that means you have not been listening to the podcast and go back and listen to a lot of them anyway. All right, if I do a Roth conversion from a traditional IRA, even though I'm 67 would I have to pay income taxes on the withdrawal amount if I took it out before the five year rule since I paid income taxes on it when I converted it to a Roth?

Don't answer yet. KT, what Darlene is asking is she has a Roth but the Roth has not been open for at least five years. She has converted money to it. She is 67 if she converts and then takes the money out, let's say she leaves it in there for a year from now. It grows. But it's still under the five years.

Will she owe income tax on that money? And will she owe a 10% penalty on that money?

KT: You mean both or either?

Suze: I'm asking you both?

KT: Well, I don't know. All I know is that if taxes are involved, usually you have to pay it.

Suze: She will have paid the taxes when she converted. You have to answer the questions if she withdraws the money prior to when the five years are up and that money has grown, let's just say it's grown and she withdraws it prior to the time the five years are up. She's 67.

Will she owe a 10% penalty? Will she owe income tax on that?

KT: She's 67. So I think she won't owe income tax but she might have the penalty. I don't know. Is that a good, is that a good answer?

Suze: It's only good if it's good for you.

KT: Is it?

Suze: I have to tell you whether you're right or wrong, do not try to get out of this.

KT: I don't think, I don't think, I don't think you pay taxes twice but you definitely have a penalty but she's 67. So I don't think she's penalty exempt either.

Suze: All right, that's your answer? (Suze gives the wrong answer sound).

KT: Ok, I don't know it was Roth. Right.

Suze: Alright. We should just know that any Roth question it's going to be a (Suze makes the wrong answer sound again).

KT: You can bet on that everybody.

Suze: It doesn't have to be though KT. So Darlene, here's what you have to get once you are over the age of 59 and a half, even though your Roth IRAs have not been open for at least five years. Everybody. So this applies to everybody. You will no longer, ever, ever, ever pay a 10% penalty because you're already over the age of 59 and a half.

However, what you have to remember is that when you convert money to a Roth IRA, you pay 100 percent tax on the amount that you converted. But now the money is in that account and it is growing. So it is earning money. If you take out the earnings before the account has been opened for five years, then you are going to pay tax on the earnings that you have never paid tax on yet. So that's just what you have to take into consideration.

It's just that easy. Now, did that make sense to you, KT?

KT: Yeah, that made a lot of sense.

Suze: Really? I just made sense to you.

KT: What made sense...I think my, the thing and I knew, I couldn't remember

Suze: There she goes defending herself again.

KT: I knew that 67 was a good thing, but I didn't remember how it all worked.

Suze: We get that because I went (Suze makes the wrong answer sound yet again).

Do you see everybody? Now? I just want you...

KT: I'm not defending myself. I'm just trying to,

Suze: what would you call that

KT: Recall?

Suze: Uh huh. Now, can you just imagine what our relationship is? Really like, do you think this just happens when we're talking about Roth IRAs or maybe, do you think it could happen about other things? You, you think KT?

KT: Ding ding, ding, ding, ding, ding, ding Suze got that right. 

Suze: Ding, ding, ding, ding, ding. All right. But I still love her and more importantly, I like her. Anyway. What do you want to say?

KT: I want everyone to look for my poll that I'm gonna be posting for Halloween.

Suze: Yeah,

KT: but we're gonna do it. But look for it. You know, it's coming up and it's autumn and it feels good. So just make sure you do that. It's fun. Let's play.

Suze: All right. Let's, let's do KT play all. Stop that. She's, she's sitting here playing. Yes, I'm saying that she's sitting here playing with two little socks that she wants to put on and the mics will pick them up now. Just sit there and be good and take us out KT.

KT: All right. There's only one thing I want all of you to remember and it's not her favorite candy. It's this, go Suze, These three things.

Suze: She so wants out of here right now.

KT: These three things. What do they have to remember? 

Suze: People first. Then money, then things and when you're wrong, just admit it. It's not a big deal.

What are the six greatest words in life KT?

KT: I admit that I was wrong.

Suze: Ding, ding, ding. And if you do that stay safe, healthy. You will be unstoppable.