Podcast Episode - Ask Suze (and KT) Anything

Listen to Podcast Episode:

On this Ask Suze (and KT) Anything, Suze answers questions from listeners Victoria, Lauren, Susan, Kathy, Prudence, Lobel, Kevin and Alex, selected and read by KT. Plus, a Quizzie.

• Victoria - My daughter helped her boyfriend buy a house, is she going to be financially responsible?
• Lauren - Can I afford to give my two daughter's some of the inheritance money I am receiving?
• Susan - Should we opt out of my husband's pension plan?
• Kathy - Would rolling over the required percentage of a traditional IRA to a Roth be considered RMD?
• Prudence - Why is it better to buy when the market is up?
• Lobel - Is the interest rate for the Ultimate Opportunity Savings account going to change?
• Kevin - Should I take out as much as I can from my inherited IRA while I am in a low tax bracket?
• Alex - Can my wife and I buy series I bonds on 1/1/22 if we just bought in after November 1st or do we have to wait a full calendar year?
• Cathy - Where should I pull money from in my accounts to put a down payment on a car?

Podcast Transcript:

December 2, 2021. Good Morning, Mrs. Travis. Wait, Suze, it's December already. Do you believe it, it is the end of 2021. Yes, but wait, I have to tell you how proud I am, that you and Colo, caught that one wahoo last Sunday. Oh my God, KT. Do they know why you were proud? It was the tournament. Yes, I've told them. Well, the tournament, it was a tough day, everybody. So happy, I didn't go out so she couldn't have gone out. I'm sorry, I went out. Really? Somebody wrote in and they said, well, how little is your boat? That it was so rough out there? Our boat is 32 ft, but when it's rough in these oceans you can be in a boat that's 50 or 60 ft and the people came in and they said, oh my God, it's so rough out there. And even the real big fishing yachts, they didn't catch anything. It was really tough to fish. So, most people caught nothing. They were lucky if they cost caught one, the winners went 40 miles and they each caught six. But for our boat to go 40 miles one way and then 40 miles another impossible, impossible in those conditions. But I just want to tell everybody and you how proud I am of you. We just wanted to be good sports and we did it. But you've become such a great fisherman, or is it a fisherwoman? What is it? It's, I'm really good at fishing. Alright, sweetheart, let's get started because I've got a whole lot of questions. Let me tell everybody what today is, it’s December 2nd besides that. I already told them that today is ask Suze and KT anything. And if those of you who are listening would like to write a question, just go to asksuzepodcast@gmail.com and send in your question and if chosen, we will answer it on this podcast. And again, you never know when I will answer you directly. And Suze, you're sounding much better. Oh my God, she's had a really stuffed nose. Horrible cold, I have. I don't even know how I got it. We're healing her and she's just, her nose has been like, she can't breathe everybody. So, wait. But let me just say Alexis, who is my niece in Santa Barbara has been writing, I'm so worried. Does she have a cold? Yes, I have a cold sweetheart. I'm fine. Don't worry about it. All right. All right, KT, what's the first question. First is from Victoria, and this is I'm starting with this because this again, this email made me mad and sad at the same time. And Suze, I don't think she can do anything about it, but you're the expert. It says hello, I have a question about my daughter. Her boyfriend wanted to buy a house right there is when I started getting mad Suze because he questioned everybody as you're listening to this. But did the daughter want to buy the house? He did. Wait, wait. But the point is he did not qualify for a loan because he did not have a sufficient income. My daughter helped him providing her income and credit history. So, they together bought the house. But here's why I'm mad. In several months or several months later, he wanted to refinance and the house is now under his name. Only now he has the house rents it and travels. The daughter has nothing and continues to work very hard every single day. I think that she made a big mistake Suze by helping him but not helping herself. I also think he took advantage of her, obviously he did. I do not find what happened to be fair at all. May I have your opinion? What can we do here? Victoria, but here is the question. Did your daughter just lend her credit history and payments to qualify for the loan? But did she come up with any money to buy the home? And you don't say that's what she did. She only provided her income and credit history. So, now KT is looking at me. So, isn't she on the mortgage? No, because he refinanced the house. Which means he refinanced it in just his name. And most likely when they originally bought the house, it wouldn't surprise me if the house was also just in his name. Even if it was in both of their names and then he refinanced it, KT to just his name. The daughter isn't out anything. It's not like she's lost money. She's not legally liable for the mortgage on that home. She really didn't lose anything financially speaking what she did gain, however, was a serious life experience, my dear Victoria as well as you. So, obviously this boyfriend and hopefully he's now her ex-boyfriend, but her boyfriend obviously used her credit to get this house. Did she not know what his plans were? Did she not understand it? As a loving mother are you just heard because you wanted your daughter to own a home? And do you see what I'm saying? And that's not how it turned out. So, maybe it was a great lesson and a blessing after all. You know, I have this saying that everything in life happens for the best and I get especially at times of loss or illness or whatever it may be. That's a really hard thing to grab onto and to believe. But you have to believe that, because now maybe she understands the true motives of her boyfriend and like I said, hopefully it is her ex-boyfriend, but that is my opinion. What can you do? Get your daughter to understand that. That's what you can do. All right. Next question is from Lauren, I'm a fairly new listener. I look forward to your podcast while I'm on my rowing machine or walking. Good for you Lauren. Now I'm turning 65. My husband is 66, he is still employed full time, earning $180,000. We have no debt other than a $33,000 mortgage on a $400,000 home. We have $450,000 in retirement accounts and $60,000 in savings. I just recently lost my best friend Suze, last February, I lost my mother, I miss her terribly. I expect to receive about $175,000 in inheritance money. My question is, can we afford to give some of this to my two daughters? My husband wants to give $10,000 to each child. What would you tell her? KT? No. Oh I so didn’t you expect you to say? What? Why is that? Well for two reasons, number one they're going to have the money that her mom gifted her or that she is inheriting is meant for her and her husband to be even more secure. The children will get money that these parents are obviously very generous. They'll take care of the kids at the right time. But this is her best friend, her mom's money that she wants her to have. You are towards your, this should have been your quizzie. All right, so, and she didn't want to give it to her husband? Your answer is correct, but your reasoning is not necessarily correct. Alright, well it doesn't matter what I do. It's like Ding Ding Ding Ding. Oh my answer. But let me answer, we're going to be out of time on two questions. Here's the problem. You're 65. Your husband is 66, still employed, making $180,000 a year. Right? You don't have any other debt other than $33,000 on a $400,000 home. However, you can't count your home because that's where you live. All right, so what do you have? All you have to show at least what you're telling in this email to show for all of this work is $450,000 in retirement accounts and $60,000 in savings. Got that. Now you're used to living on $180,000 before tax. Once your husband retires and that goes away, there is no way that $450,000 in retirement accounts, and chances are they're pre-taxed retirement accounts, so that when you start to withdraw money out of them, you're going to have to pay taxes on it. So, in reality you're looking at about $225,000 after tax over the long run and $60,000 in savings. But you've just been given $175,000. You need to keep that money Mama. Because the truth of the matter is even though these may be daddy's little girls, the truth of the matter is this, you actually don't have enough money to retire truthfully. Things go wrong, you need long term care, your expenses go up as you get older on and on. So no, you are to keep every single penny of that $175,000 and keep it safe. What I would be telling you to do versus giving $20,000 away to the kids, is I would take $33,000 and I would pay off your mortgage and reduce your expenses and start really saving more and more and more and put money into a Roth retirement account, not a pre-taxed one or you're going to find yourself possibly as you get older in trouble. I just want to tell you that. That's what I'm telling you now. Totally agree. Make your best friend proud of you Lauren. Okay. Next question is from Susan, my husband's pension has an option for survivorship benefit 25% or 50% or an opt out option, we've been advised to opt out and save that extra cost which is 5% or 10% of monthly benefits. Yes, I'll explain all that. Based on our present savings amount for retirement, I will also be receiving my own pension from my workplace. I will have my own health insurance so I will not need to be covered on his. Is this a smart thing to do? So, should they opt out or not? Did some financial adviser tell them to do this? I'm just curious. I'm reading the email everybody. All right, Susan there's not a lot that I can tell you because I don't have the exact numbers of what we're talking about. However, a lot of times with interest rates as small as they are right now. I have to tell you that I might not opt out of a pension here because your pension when you actually get benefits usually pays about a 5%, 6% or 7% return on this money. Now, what is important is that you're saying that your husband's pension has an option for survivorship of 25% or 50%. What that means everybody is let's just say Susan's husband was to get $1,000 a month. He could get that $1,000 a month every single month. And then when he dies it's over, Susan would get nothing. Or that $1,000 might be reduced to $800 a month. And then when he dies, if they took the 50% joint and survivor option, then Susan would get $400 a month. The 25% option would be maybe that $1,000 that he would get every month, if he had no joint and survivor option might be let's just say $900 a month. But when he died, Susan would only get 25% of that. There is another option that most companies Susan offer and that's known as 100% joint and survivor benefit, which means that maybe his $1,000 a month pension would be reduced to $700 a month. And when he dies you get $700 a month. That is the option you are to take. You are never to take any other option other than 100% joint and survivor benefit, if they offer it. Now, you say based on your present savings amount for retirement and that you're also going to receive a pension from your workplace. Therefore, you need to do the same for your husband because there's nothing that says, a husband always dies before a wife. It doesn't always work that way. Your health insurance really has nothing to do with this because truthfully when you retire and you get of age and everything, you're 65, you get Medicare, then you can also look into obviously Medicare supplements or there's other ways to do it as well. But I'm not worried about your health insurance, I'm worried about your ongoing income as time goes on and I'm just going to spend one more minute on this. Remember as you get older, normally you sit down with your spouse and you realize I'm going to get X amount of money and Social Security, he or she is going to get X amount of money and Social Security, you figure out everything else and you go I can afford it. Everything's great until one of you dies because please everybody remember, that upon death, you will lose one Social Security check. And that is a big deal. If you also have a pension coming in, and you haven't chosen 100% joint and survivor benefit. And then your income gets reduced that way as well. You are really going to be in trouble. So again, I like pension options. I like 100% joint and survivor benefits only. And that's just what I think. So, is this a smart thing to do? Do the numbers and you'll know. All right. I have a question. You can ask me anything my love. When there's two Social Security checks and let's say her husband dies and his was greater. She gets to assume his and forego her. She has to forgo hers. Okay, that's important. So, it's just, it's very sad, KT because people always plan their future on both of them are alive. I have to tell you when your spouse dies, you think that your expenses are going to go down? They do not, your expenses actually increase. And why is that? Because maybe your spouse was the one like right now, KT, what am I in charge of in the house? Everything. No, she's in charge of everything that operates in terms of electronics and she does all of the bookings for calendars, travel, all of that. I do all of the domestic side of the house. Right now, if I died, KT, you very well might have to hire somebody, seriously. Absolutely, because I would be lost. Now, that's an additional expense to you. Maybe if I died maybe not. But you would be really lonely and you would want to go out to eat more or you would do all kinds of things. Do you know what I mean? Just to take up time maybe you would travel more to go see your sister or your nieces or your nephews. But you know the car breaks down or something happens your expenses just happened to go up. Truthfully that's just how it is. Alright. Okay Suze, next question. Hey my husband is on board with your expertise in the financial area. Thank you husband. It's about time then then then Cathy, this is from Cathy she said I've waited and waited and waited for this moment. He does have a question. He's asking her to ask it. We are retired. He's 67. I'm 66. We don't need to tap any retirement accounts yet. But when the time comes and we have to take out RMD, required minimum distributions. That if you have a pre-tax retirement account like a regular IRA, regular 401K, whatever it is. You have got to start taking money out by the time you know 72 used to be 70.5 now, 72. Okay so, if you read my Ultimate Retirement Guide for 50 plus you would know that? I didn't read that page. You sure heard me read all the other pages to record it. Yes. My God that was fun though. Would rolling over the required percentage of a traditional IRA to a Roth be considered RMD? Thank you so very, very much for contributing your wealth of knowledge to all of us who were not schooled in the world of finance. Well guess what Cathy, people still aren't schooled in the world of finance. You are not alone girlfriend. Right. But so what should she do? So, here's what I would tell you Cathy and you can tell your husband, I wish I knew his name. This you of course when you take out required minimum distributions you can do anything you want with that money, you are going to owe income tax on those funds. If at the time you take out the required minimum distributions and you have earned income because remember for you to make a contribution to a Roth IRA. You have to have earned income for you to be able to contribute to the Roth and you can either contribute a maximum of $7,000 for 2022 and or whatever amount of money you earned whichever one is less. So, in that year if all you earned was $3,000. That would be the maximum that you could put in to a Roth IRA. So, that's what I would do. Can you do a conversion and no, it's got to come out of your retirement accounts. Let's say your traditional IRA or your traditional 401K. And then if you have earned income then you make a contribution to your Roth IRA. All right, okay. Next question is from Prudence and this is interesting. She is an HR expert. She's on board. She's in a junk professor. Very wait this is a very great woman. But if you're on HR boards you have got to look into our secure new company that I co-founded about a year ago called secure save. So, go to securesave.com and look at what I've done. I think it's the most brilliant thing that I've ever helped to create in the entire 40 years that I have been doing this. So, go there and look at it briefly. It is the very first employer sponsored emergency fund for employees. I'm telling you it's so fabulous. I can't even stand it. All right, come on. So, here's the question Prudence said, Suze you mentioned recently that you buy when the market is up. I have actually been buying ETFs and crypto when the market price drops. Can you please explain why it is better to buy when the market is up? You need to, everybody listened to this answer because prudence got this wrong. No, and soon as he heard what I said, she was right, KT, but not with the complete understanding of what I okay, that's what I mean. Listen to this answer really carefully, Prudence. There's no way for you to know, is something going to go down and is it going to go down and then turn around and go back up. Back in 1999 and early on when network, you know, Internet stocks and all of these things they kept going down. Uh stock would go from 120 to 90 and everybody would say, oh my God, I have to buy and then it would go back down to 45 and people would load up again, then it would go to 3,015 and then possibly totally off the charts. So, I'm not saying that you shouldn't buy something that you love that you know, is really good quality when it goes down. But when something starts to go up and you really like it, you know, like, like Zoom. Zoom was the stock that I really liked when it first came out and so maybe it went from where I first started to buy it from 80 to 100. And as it went up, I continued to buy it because I liked it, I wasn't just going to wait till it went down. So, depending on the stocks that you're looking at, you have to make that decision. Like there is one stock right now and I won't say the name of it because I own quite a bit of it but it went all the way up to $400 a share and I was buying it all the way up from when it first came out at about 50 and I think that this is a stock that in the long run is going to go way up and is here for the long run. But then it went from 400 back down to 350 down to 245. Now I'm buying more at 245 because I like this stock. Now today it's all the way down at 190. Do I have this stuff? No good, one day you're gonna wish you had. Right. But the point of that is so will I buy more now I will, if it goes down to 150 I will buy more again because I really know that this stock is solid, solid and that it will continue, it will turn around and go way back up again. There were stocks like Facebook, KT, when it first came out that went from 48 when it came out, went all the way down to 18, we bought it all the way down and then it started to go up and we bought it going up and up and up and then when I had accumulated enough shares of what I wanted for both of us, I didn't buy it anymore. And so does that make sense to you now, Prudence in that you can do both, but you just don't wait till it goes down. If it's a fabulous company, you know, then you also buy it when it's going up. You know, you get on the train rather than stand in front of it. Oh, that's a good analogy. All right. Next question is from Lobel. Hi, I'm happily saving in the Alliant Ultimate Savings account. And here's her question is the 0.55% interest only for the 12 months or will this continue forever? If not, what is the standard rate after 12 months? Well, of course it's gonna what season. So, Lobel obviously there's no way to know for sure what happens with interest rates and what Alliant Credit Union will offer. However, I doubt highly given that interest rates are probably going to start to go up given what you know, the environment is right now and that they're going to loosen things up with the stimulus is and things like that. I think chances are I don't know when but in the long run you may get more than .55%. But I doubt highly that at this point in time that it's going to go lower than that. So, Alliant Credit union is always want to give you as much as they possibly can because they have a reputation of giving one of the highest interest rates out there and they don't want to lose that. So that's what I think, KT I just before we go on, I have now spoken to Jonathan and Nemesio two of our sweepstakes winners and I have to tell you they are the sweetest. Jonathan, you are so sweet. I can't even stand it. And Nemesio so fabulous. And I love speaking to both of you and I know you listen every single week. So, I just want you to know I'm so happy that you won and you know, I'm still waiting. I made calls to Donna as well as Alfred who won and they want to speak, but they haven't returned any response to me. So, okay, not my problem. All right. Next question is from Kevin, long-time fan of viewers, Suze. I was committed, I was a committed viewer to your show on CNBC and now I enjoy the podcast. I'm writing with a question about my inherited IRA which was $32,000. I'm currently in a low tax bracket but will increase substantially after I finished my training as a physician in a year. Would you recommend taking as much out of this account now in order to pay a lower tax rate on the income? Those dollars would go into my annual Roth IRA contribution and a private investment account, since I've already maxed my employer, IRA contributions, I would obviously make sure my income didn't exceed my current tax bracket. I'm doing this. All right, so here's what I will tell you, my dear Kevin is, here's what's great about where we are this time of year. Now you didn't give me your age, but I'm sure it's under 50 since you're still studying and working to become a physician, a doctor. How does that sound Dr. Kevin? And so you not only if you took some money out that you could fund $6,000 for this year into your contributory Roth and $6,000 immediately for next year. The other thing that you could do is therefore also split your withdrawal. So, before the end of this year, I would take out $16,000 from your inherited IRA this year. Come January 1st take out another $16,000. So, now you've split the income on that money rather than taking it all out let's say $32,000 at once, which could possibly increase your income tax bracket. Where at the end of the year take out $16,000 immediately, January 1st take out another 16,000 and there you go and then you do whatever you want with that money. Absolutely. Also, you said in here that you've already maxed out your employer's IRA contribution. So, I think you obviously mean you maxed out your employer's 401K contribution. And I just hope that if you have a 401 K. With your employer that it is a Roth 401K, not a traditional one. Next KT. So, Suze. This next question is a great one from Alex since it's after November 1st. As you suggested, Suze, my wife and I just bought series I bonds at $10,000 each. Awesome suggestion. Thanks. Yahoo! Anyway, here's what he writes since it looks like you can only do this once each calendar year. Can I assume that we can buy it again as of January 1st 2022 lock in another 20,000 totally working at the 7.12% rate until April 2022? Or do they mean you have to wait 12 months? There you go. What would you answer, KT? Let's say this was your quizzie. I would say go for it boyfriend, by January, what a great way to start the new year buy again. So, it's once every annual year. So, yes that's what that means. So, starting next year again in January you can buy $20,000 more or $10,000 each. Yeah. Also, you do know KT that if you're getting a tax refund, besides the $10,000 that you buy each, you can also buy another $5,000 worth with a tax refund and get paper bonds series I bonds. So, you're allowed to, you're allowed to exceed the 10,000 limit using your tax refund money. You got it. But does it have to be $5,000 or? Any amount up to 2,000. And that's good, people shouldn't get a tax refund. The last time we ever got a tax refund, I never do you know about the question? What do you mean? Do we file jointly? What is wrong with you? Oh my God, are you ready for your quizzie? Everybody that's quizzie time. Which means I'm going to ask KT and all of you a question because I want you to start thinking about that. You're an advisor, somebody comes to you and even if it's a family member and sometimes you have to know how to answer their questions. So that's what we're trying to do in educating all of you. All right. So, this is from a Cathy spelt with a C. Right, Love you and your podcast. Thanks girlfriend. I'm about 49 years old and I'm going to move to Seattle soon. Eventually I would need a car. I'm planning on getting a new car and spending about $25-$30,000. I don't know much about cars and feel more comfortable by new than used. Okay. Besides the market for used cards right now is not good for the buyer. This is what I have in my account. So, listen closely everybody. In her emergency fund, KT, she has $40,000, in her brokerage account invested in index funds she has $35,000 in her Roth IRA. She has invested $40,000 in her traditional IRA invested in index funds she has $28,000 and her 401K she has $55,000. Here is the question. Everybody, which account should I use for the down payment of the car. I'm thinking about taking out $10,000, maybe more. I'm a bit hesitant to pay the car all off in cash because I like having my money invested and growing and I need to save as much as I can for retirement. My income is enough that I can make $500 in monthly car payments and still put away $500 a month in my retirement accounts. Thus, I could pay off the car in three years. What do you think? Where should she get that? $10,000 from KT, her emergency fund, her brokerage account, her Roth IRA, her traditional IIRA or her 401K? I thought she was going to say should she? I knew we were. You know, I didn't know you're gonna ask me that complicated problem with our relationship. You always think I know what I'm going to. But is it take out of your emergency fund. Are you serious? Yeah that's your answer. $10,000 out of the emergency fund. You know why? These are all locked in. You always say don't touch your retirement accounts, although you can take a loan out of it, but you have to pay them back. I would take it out of the emergency from $10,000 dollars. All right, final answer. Yeah. What's all your answers do you think? Do you think KT is right? Did you see you that you always say don't take it out. These are all locked in accounts and the emergency fund, she can keep putting that extra weight stopping advisor here since you're not correct? All right. All right. So, you are right with the $10,000 from the emergency fund. However, from her brokerage account, the reason that you would not want her to take any money up there is that if she sells, especially since she's an index funds, KT, which just this last year they're up 20%. Okay. She would owe income tax on that money. So, why do that in a Roth IRA. However, she could take out any amount of money without taxes or penalties, regardless of her age up to the amount that she originally contributed. So, she currently has $40,000 in there. So, she obviously could take out $10,000 and not have to pay any taxes or penalties on it whatsoever. Her traditional IRA, she cannot touch in any way before the age of 59 and a half. And her 401K, she could take a loan from her for one, but you're taking money that you've never paid taxes on your now taking a loan from it. If you lose your job, or something happens, you're gonna owe a 10% penalty plus taxes on that money. And again. So, no. So, absolutely the $10,000 comes from your emergency fund. And just in case you get in trouble, remember, you can take out your up to your original contributions from your Roth IRA without any taxes or penalties whatsoever. All right, KT, that puts us at the end of this, you would you advise? Um because she said she can pay it off in three years and it makes her feel happy to still save money and not use. What's your question? So, the question is, would she be better off just buying that car out? No, because it wouldn't make her feel secure. The good thing is Cathy, you've obviously listened to me before in the past because you are never ever, ever to finance a car for longer than three years. If you have to finance a car for longer than three years in order to afford the monthly payments. I'm telling you, you are so denied because you are buying a car that you cannot afford. All right, Mrs. Travis, that's a wrap for another ask Suze and KT anything. I'm after time. Oh God, we have to tell them we have to wait and have Colo sing it with me, Colo. And I have been building a new garden here on the island, everyone. And we sing this song together, Cyndi Lauper's old song, Time after Time. And he's got the worst voice. And so do I. And Suze came out and we're at the top of our lungs screaming this song and she couldn't believe it. She said, what are you doing? And then what did I do? She sang along with. Absolutely. So, time after time, I hope all of you continue to listen to the Women and Money podcast. Um, we do it with a lot of love and a lot of joy and hopefully you're learning everything that you need to know about your own personal financial situation. So, until Sunday we all want you to remain safe, strong. And most of all to hear. All right, take care. Everybody talked to you on Sunday. Bye bye.

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