Podcast Episode - Ask Suze (and KT) Anything

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On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Nathan, Chris, Diana, Laura, William, Cheryl and more selected, read by KT. Plus, a quizzie for KT.

Podcast Transcript:

July 1st, 2021. Can you believe we are in July? Do you believe it, we're halfway through the year. It's a very auspicious day today. And why is that? It's our baby brother’s birthday, John, happy birthday. Happy birthday, baby boy. He's doing so great. We call him the cry baby. He's my little brother and I don't want to tell you how old he is, but he's my little brother. But he's actually a man. He's a man for sure. But no, but you know what else, KT, you know whose birthday it is tomorrow? We have we have two family members are niece Alexis, Alexis Tandy. But you know what? I don't remember. Is she going to be 45, 40? No, she's like just 40 you're wrong. She was 40. Alexis, I'm on your side sweetheart. You look like you're 30 because you've been doing the Peleton every day for almost a year. We're so proud of Alexis. We love you so, we miss all of you and miss you and miss you. All right. But it's also my month, July. July 21st is your birthday and my twin sister's Lynn. All right. Just for the record. I do love gifts. Unlike so she's not soliciting, she's not I'm not soliciting but I do love gifts. I love gifts. I love flowers. I love everything about birthdays. I'm trying to give Suze some hints here. Okay, I have, I have lots of great question again. So, welcome everybody to ask Suze and KT anything and I realized that for so long we haven't even told you how to write in and ask a question if you really want to. But if you do just go to asksuzepodcast@gmail.com. Or better yet, download the Women and Money app. It's a community app and you can do it at apple apps or google play and download that. And right there on the app, there's a little section, ask Suze a question. So, you can send it there as well. Also, that app is fabulous because it tells you my favorite links and things that you should look at. Um, obviously it lets you search the past podcast. It automatically connects you to the Ultimate Opportunity savings account with Alliant Credit Union, which every one of you should have. And if you don't shame on you. But, that's besides the point I'm not going to guilt trip them, KT. I No, it's a good day today. Good day. All right, sweetheart. Ask away, okay, I have lots of good short questions which make KT very happy. First one is from Nathan and Nathan's question is Suze, I need a financial advisor, I can trust. So where do I begin? Please help. And this is from Pastor Schaefer. You know, here's the thing, everybody, it's very difficult to know where to find a financial advisor you can trust. But let me give you just a few guidelines. I personally would not be using a financial advisor on any level that hadn't been in the business at least 15, 20 or 25 years so that they have history through up markets, down markets, all kinds of things, number one. Number two, if you are going to use a financial advisor, I would prefer if you used one with a major financial firm so that if anything goes wrong and there's anything illegally done, you have a major firm backing that person that you could probably get your money back from. I get afraid when a lot of you use financial advisors that are just in one office, it's just them. And if something happens to them, what happens? Also, you should always keep your money at a major firm, so that you know that you can get at that money no matter where you are in the world. When you find your financial advisor, the money should be made out directly to the firm, never to a financial advisor’s individual name. With that said, you're going to have to trust your gut on this one. Because a lot of times what happens is, you ask friends for a referral and they tell you somebody is good and they got that person because somebody else told them about that person and somebody else told them about that person. And the truth of the matter is, have they checked to see what they've actually been getting? Are they better off with this financial advisor or would they have been better off just simply investing in the Vanguard Total stock Market Index Fund. And the other thing is this, and I know this is a long answer, but it's a good answer, KT, is you have to know that you really need a financial advisor. If you have credit card debt, if you don't have a retirement account, you need to know that there is a reason why you need a financial advisor. A financial advisor is not somebody who tells you how to get out of debt to do this. No, a financial advisor usually takes a nice sum of money and tells you how to invest it. But here is what I'm going to tell you and I believe this with the bottom of my heart. If you want to find the best financial advisor in the world, look in the mirror because nobody's going to care about your money more than you do. And what happens to your money directly affects the quality of your life, not your financial advisor’s life. So, I would hope that you just look at this twice and think oh maybe I really can do this on my own. You were so good. Usually wait, I just have to say this. Usually when I answer that long in terms of answering a question, KT is sitting there going and doing this thing a wrap sign, that's a television thing. I told them that. So, it's like so wrap wrap, like she's going around and around. So, I see this finger right in front of my face going round and round and round as I'm trying to educate you and she didn't do that today. What should I do for you, because you didn't do that? I think about it. What can I do 21st? What could I do for you today, that you would love name just one thing. Today? Yeah. And I'll do anything. You can name anything and I promise I'll do it. I know it's just today, maybe we'll have a little birthday cake in honor of John's birthday and Alexis', but we don't eat cake. I do. I don't. All right. So, we don't need to do anything we’ll just throw, we'll throw wishes out. I thought for sure you are going to say empty the dishwasher? No, no. I always want to go fishing with you. I know we're getting there. We're getting there. Hopefully we might be able to do that this month. I go on the boat. She did go out once and it was very successful and a lot of fun and I'm just praying for that, next time. Next question is Hi, KT and Suze. I love the podcast. I'm a longtime listener and I have all my must have documents in place. Okay, this is from Chris. So, I enjoyed Suze's recent Suze School about I bonds currently paying 3.54%. So, Suze, just to segue for a minute. So, many people wrote into you about your Suze school. And although it wasn't one of my faves, so many people loved it, I didn't make you feel bad. You asked me a question, did you like it? And I said it was all right. You can't make me feel anyway. But after you said what? You said, I felt bad. No. Well, you asked me about me, but look at all words, girlfriend. Your words, Suze, look at everyone. I'm playing with you. Okay. So, Chris said I know Suze said we can contribute $10,000 a year. I maxed out my contribution. But now I see that if I have a trust which I do, thanks to Suze's must have documents, I can contribute an additional $10,000. Seems like a great bonus. So, Suze, Chris said do you have any thoughts about this? Now, my dear KT, that should have been your quizzie why what would I what would you ask me? So can Chris do it. She's looking at me because she doesn't know for sure. But anyway, I think yes. All right let me you know because I know you studied all about I bonds. Well not only do I study about them, it's what you and I do KT. So, here's what you all need to know. The maximum that you can put in to buy series I bonds at TreasuryDirect.gov is $10,000 per year or $5,000, in addition to that, if you take your tax refund and you buy paper bonds with it for a total of $15,000. However, Chris is absolutely correct, if you have an account that's in your individual social security number and now you have a trust account that has to have an eton number, which is entity tax identification number. If you have that, then you can deposit another $10,000. So truthfully, you could put up to $20,000 via Treasury Direct in your name, in two separate accounts, if you have a Social Security number and an eton number, you absolutely can do that. So, I bet you all didn't know that. You can do that as well with series double E bonds, everybody. Series double E bonds or something that you might want to look into as well. Because even though they're paying like a fixed interest rate of like 0.1%, nothing like a fraction, all double E bonds are guaranteed to double in 20 years. So, that's something you might want to look into if you just want real safety for your money. But yeah, Chris you can do it as long as you have two separate numbers. All right, KT. So, this next question is from a man smart enough to listen and not leave his name. I feel sad for him a little bit Suze. So, you're ready for this? How did he sign it, he said a man smart enough to listen and not leave his name. All right. That's who this is. So, and I feel a little sorry for him. He's going through a divorce and his spouse works for the state of California, but she left him. His wife left him for a coworker and they're all lawyers. So, he's a little nervous. That's why he's reaching out to you. Here's the main question. Which method should I use to divide our pension? There's a time rule formula and the separation of account method. We're both in our late thirties and will probably work until our late fifties or sixties, he said. But his spouse will probably make more money as her career goes on. So, he's asking if a time-based seems like the best option that would give him the most money. The only downside is I have to wait for her to retire or die. And he wrote, believe it or not, I don't want this, before I can collect. So, what's the what's the recommendation? Yeah. So, this is a hard one because the truth of the matter, even though you didn't leave a name, so what should we call him, sweetheart? So, the truth of the matter, sweetheart here is that sometimes you have to put your own needs in front of a financial outcome. So yes, there are two ways, especially if you're in the state of California, that those are the two ways that you can choose. In this particular situation, I would absolutely do it right now by the separation of account method because then you're not tied to this person, then you don't have anything to do where you have to think about this person. Because for you to really go on with your life, you now need to be free to meet somebody else and to do everything else and you're still in mediation right now with them. So, if I were you, I would absolutely when choosing the way to divide your pension to do it by the separation of account method because I wouldn't want you to have to wait until she decided to retire or die young. So do me a favor. Just get it over with now. Don't worry about the amount of money, really take your power and separate so you can truly be free. Start a new life, sweetheart. Oh sweetheart. You calling somebody else's sweetheart. Besides me, no we said we are calling him sweetheart. You're so serious today. Start a new life sweetheart. You can do it. You want to know in all the years, KT that I've been doing this and I get emails or I see the people personally or talk to them on the phone or on tv that are so heartbroken. Heartbroken because their spouse left them and they just don't, they say they can't even breathe they don't know what they're going to do. Four or five years later, not even that long but usually about that you know what they come back and they tell me oh my god this thing is the best thing that ever happened to me. I know I've heard that song. It's the best thing that ever happened to me. And then they go on to tell me why their life is so much better. So, this person's life in time. Yeah, It'll be better than they ever dreamed possible. Both you and your ex-wife you're young so start over you can do it. We all had to do it. Yeah. Next question is from Diana, Hi KT and Suze, our financial advisor is recommending a blue-chip tax advantaged taxable account to invest in beyond our retirement accounts Roths, HSA. and 529. However, the fees for this account are 1 to 1.5%. Or we could go to it with a cheaper traditional taxable account like Vanguard VTI for fees of 1% but would not be specifically managed with limiting tax burden in mind. Any thoughts on this? Yeah, I'm a little confused because I'm not I'm not exactly sure I have to tell you Diana what a taxed advantage taxable account happens to be. Does that mean that they're buying things for you that are going to be dividends or certain types of stocks that are going to be taxed as capital gains tax and things like that. I'm not exactly sure what they mean, because if in fact you bought in did the Vanguard total stock market index ETF or the Standard and Poor's or whatever it may be or a dividend paying one, you know, with the symbol of NOBL. If you did any of those that while the money is in there, you're really not paying any taxes on it whatsoever, and as long as you keep it there for at least a year after that, when you go to take it out, it's all capital gains to you. And in the meantime, you're also getting a dividend of possibly 1 to 2.5%. So, I'm not exactly sure what they're talking about, but I am sure of one thing, you know, sometimes KT people don't think it really makes that big of a difference. Like, you know, Vanguard charges 0.04% like nothing, like nothing. And then they go, well what's the difference, this financial advisor is telling me that they'll charge just 1.2% or 1.3% or whatever and they don't think it makes any difference. Let me just tell you the difference that it makes my dear Diana, let's just say you have $100,000 and let's say you're going to leave it there for 20 years. Just let's say that's true and you average 6% a year after fees and everything on that account. And you're getting like it's in a vanguard account so there really are no fees, essentially they're nil. And after the really 20 years you're going to have $331,000 in there. But you decide to go and put your $100,000 possibly with this adviser. And let's say it would have made 6%. But because they're charging you 1.2% it really only averages 4.8%. So, what difference can 1.2% so little make, You know, per year for 20 years? Well, let me tell you a girlfriend at here it comes. Suze slap down time. In the very first example at the end of 20 years you would have had $331,000. In the second example paying the 1.2% fee, you would have only had $200,670. Which is a difference of $130,330. You think 1.2% doesn't make a big deal? Oh, it most certainly does. Have. I just answered your question for you? I think so. Ooo I saw that coming sent a Suze takes out a calculator. Whoa. Okay. Next is from Laura. Hi. Oh, it says dear KT and Suze. Do you think you could advise us on how we're supposed to estimate the amount of money we will need in retirement, more specifically the amount we need in our accounts on day one, retirement calculators online simply don't take into account all of the variables and there's lots of them, right, Suze. So, this is, Laura's only 38 but she's looking to determine what her goal should be. So, I'm going to let you read this and let's give her some guidance. So, Laura, I'm going to give you different guidance than probably anybody else in the world. But then that is why I'm Suze Orman, it's not how much money you have, it's what are your expenses that you need to pay for? And one of the greatest ways to guarantee yourself a successful retirement is to have as few expenses as possible. And that way really, you don't need as much income and I can go on with stories about how I know this is true because you have to remember that before I was the Suze Orman that all of you know, I had my own financial planning firm. I saw many people, thousands of people all who are going to retire because my specialty was retirement planning. Most typical advice is if you just withdraw 4% of the money that you have in your account, it should last you a lifetime if you do it at retirement age. I think that can be very, very dangerous because you never know what can happen in the world, not necessarily to the stock market or the economy but to you, to you are you going to get long term care insurance? Are you even going to qualify for it? Are you going to be able to afford the expenses, is somebody else taking care of you or no matter what happens to you in your life? Are you prepared for that? So no, I'm not going to give you a goal of how much money you should save. I'm going to give you a goal of, to make it your number one priority if you own a home, get rid of the mortgage on your home, do not have any debt whatsoever, own your cars outright. Be totally flush with cash, just to carry yourself through in case of a down market and then you'll see whatever amount of money you have, it will work because that's what I've learned over all the years I've been doing this. You tend to adopt the way that you live, according to the amount of money and the needs that you have, the less needs that you have, the less money you need. Oh, that's good. We should write that down. What did I do? Less needs that you have, the less money you need? Okay that's a great quote. Write it down. She's writing it down. Yeah. That's adding to my Suzeism. Next question’s from Willamina. And again, this is almost the same type of question. It said, I'm looking to learn about investing or who to start with. I'm 60 years old and she'll be 61 next this month July. So, as you can see, time is valuable and I believe it's never too late and we believe the same thing Willamina. So, Willamina only has $1,500 in an IRA individual account that she recently open and she doesn't know what to invest in. So, she's asking you, Suze, where does she begin? You begin by building a solid foundation. I'm going to assume that you have at least an eight month to 12 month emergency fund. That you don't have any credit card debt. You don't own anything on your car. Because as I just said in my previous answer, you want to make sure that you have no debt whatsoever. And the less debt you have the less money that you need. My advice to you would be to have a Roth IRA only a Roth IRA, not a traditional. So, if you happen to have a traditional IRA, I would first convert it to a Roth. You will owe income taxes on that conversion but it should not be that big of a deal. And then if I were you, I would invest in the vanguard total stock market index ETF symbol VTI, and that way you will have true diversification and have exposure to the entire stock market. And the way that I would do it, is I would put approximately $100 a month. That's it. I would dollar cost average into that Roth IRA. Now you make sure that that Roth IRA is at a discount brokerage firm where they don't charge you any commission when you do this online. So, you have to have it commission free for that to make sense. Okay. Okay. Suze. This is my last question before my quizzie. You ready? This is a rather long question but I think it's an important one and it's similar to what some of the previous ones are asking about these accounts they should open. So, this is from Cheryl. Hello KT and Suze. My name's Cheryl. I'm 56 years old and I hope to work until I'm 65. Suze, I recently went through a divorce and with my settlement I ended up with 250,000 in cash and 270,000 from my ex-husband's 401K. Recently per the advice of my financial advisor for retirement, I opened with the cash $200,000 a central investment positions, professionally managed account. Currently the rate is 1.147%. This is a fee again. I kept$ 50,000 in savings because I'm currently unemployed. She's been a single mom for the past 10 years. And the question is, so the question is I haven't done anything with the $270,000 the 401K. Money. So, the advisor wants her to put that in a similar account and she's a little scared ready for this. This is like one of those gut questions. I already lost $2,000 in cash in less than a week and I know Suze you're saying be patient that will go up and down. So, she's asking what should she do with the $270,000? Should she put it in a similar account? No, and um for a few reasons it's in your 401K now, you can just leave it exactly where it is. You really don't have to do anything with it. So, Cheryl, you're 56 years of age, right? And you say in here that you hope that you can work until you're 65 which is really only nine years away. So, if I were you, I would trust my gut. As KT kinda mentioned, there's something about this person that you are not liking. I personally think that if ever you pay a fee above 1% you are paying too much to a financial advisor and hopefully if you do pay that 1% is because the advisor is buying you individual stocks, not mutual funds, but individual stocks and they are making you 4% or 5% a year more than what you would make in an exchange traded fund that buys the entire index. You want to know that they make you so much more so that their 1% fee doesn't really matter because you're making a better return. And so, I would say to you, things go up and things go down when you're afraid, because if that's something you don't like them, that's not where you belong. So therefore, I would just leave if you can the $270,000 invested in the 401K, where it is, that's in your name right now. And if you can't then I would just sit on it for a while. I would just make sure that you're okay. Because remember you went through this divorce just six months ago and what is my rule of thumb? You are to do absolutely nothing other than keep your money safe and sound for at least six months, preferably 1 to 2 years after suffering the loss of a loved one and the most painful loss. Believe it or not, sometimes it's the divorce because of how angry it can be and bitter it can be and not just sad with death. So, it's important for you. I wouldn't do anything right now other than keep that money safe and sound. All right, KT, I'm ready. All right, here's your quizzie, KT and everybody listening. Now the quizzes are getting a little harder. I can take it. You can take anything girlfriend and they're getting harder because I want all of you. I want you to think about it before you really answer. So, are you ready everybody? Hello, Suze and KT. I've been a fan for years and can't thank you enough for how you have brought calm and understanding to the scary world of retirement and investment for me. I'm widowed 49 turning 50 this year and just became an empty nester. I'm a federal civilian employee in the D.C. area, and I own a home that I just purchased last year for $470,000. And I owe $360,000 on it. And it's a 30-year fixed rate at 3%. Right, so we all got that right, KT is writing it down. So here is her question, KT. You need to listen rather than write, are you listening? I'm ready. All right. My question is this I feel like my net income is sufficient for me to increase the TSP contribution. That's a retirement plan, just like a 401K, KT. For federal employees to the $26,000 maximum. But I'm not sure if at this point it's better to put that $6,500 towards retirement or is it better to pay down my mortgage? Now here's the key, I don't intend to stay forever in my current residence but it's possible I could still be there when I retire. An online calculator estimates, here is the other key for you, that the contribution to the TSP would earn me about $50,000 more by the age of 60. While putting the extra towards my mortgage will pay down an additional $60,000 by the age of 60. Which one should I do? Retirement fund TSP. And this one is from Leslie. And why do you say that, you said that so fast without any thought? Absolutely. For two reasons, you gave me two big keys here, you've got it's a 30-year mortgage. You've only paid a little bit on it. Like it's a huge mortgage and you don't think this is your forever home, even after retirement. Possibly, but it doesn't sound that. So, you're voting for the TSP. Absolutely not, come on. Even funny. Wait a minute. I'm not waiting a minute now. You have to get an education here. Don't argue with me, don't argue with me, you have to listen to me. Okay so Leslie, here's the thing. The reason that KT is wrong is this, there is not one calculator than in the entire world that can guarantee you that at the age of 60 you are going to have $50,000 more in your TSP. They cannot do that because anything can happen at any time unless you're putting it at an interest rate, that's at least 3% or higher, like it is with your mortgage. So that is the unknown, that is number one. Number two, even though you are getting a tax write off, when you put the 6,500 into your TSP, unless it's a Roth TSP and I wish it was. But if it wasn't, you're getting a tax write off for this. But when you go to take that money out, you're going to have to pay ordinary income taxes on that money at whatever tax bracket you happen to be at. So, we don't know the outcome there. And in the meantime, you may decide, you know what I like this house, I like my neighbors, I am going to stay and your mortgage payment is still then as hefty as ever and what, you have now retired. Therefore, if you put it towards your mortgage, that money is guaranteed to make 3% which is the interest rate that you're paying on that mortgage, that's number one. Number two, you might never have to pay taxes again on that money. Because when you go to sell it and you take it out, remember you get an exemption and it's in the house and it's not going to be taxable to you in the same way that it is where, in your TSP. So absolutely, I would do the mortgage if I were you bar none. And it's also $10,000 more than the $50,000. So, do the mortgage. Well, KT. So, here's where I messed up. I messed up because I didn't realize that the TSP is not ever guaranteed and the way it was written, I was assuming that yeah, she was going to get that extra money every year. But she doesn't. Well unless she puts it into the G fund, but then interest rates and that. I was confused. I just took it for granted that it was going to be extra income. But KT, even if it was guaranteed that it would be $50,000 given the tax consequences of it and the unknown of that, you still. She doesn't make out as well as if she invested in the property. Because what is the goal of money to secure, keep your money is to make you secure and nothing makes anybody more secure than owning their own home outright. All right, KT. That brings us to the end of another Ask Suze and KT anything. I want to take us out! We want to send you a big birthday wish, John. The great sailor that you are may the wind stay strong at your back. We love you. And I want to send a wish to my niece Alexis, may you always stay strong, know that you're loved and know that the only thing that matters in life is how you feel about who you are. All right, everybody until Sunday. I want you all to stay safe, strong and secure and secure and healthy and healthy. See you then. Bye, bye.

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