Ask Suze & KT Anything: How Do I Do Dollar Cost Averaging? - Podcast Episode


Estate Planning, Investing, Retirement


August 31, 2023

Listen to Podcast Episode:

On this edition of Ask KT & Suze Anything, Suze answers questions about the need for revocable trusts, converting IRAs, paper bonds and more.


Podcast Transcript:

00:00:00

Intro/Outro: All right, Suze KT. Are you ready for today's podcast? Yeah,

00:00:04

Intro/Outro: of course, we're ready because we are unstoppable. Yeah, baby

00:00:12

Intro/Outro: Music In.

00:00:33

Suze: August 31st 2023. Welcome everybody to the Women and Money podcast.

00:00:42

KT: And everyone smart enough to listen.

00:00:43

Suze: Right. This is the Ask KT and Suze edition. However, before we begin,

00:00:50

Suze: first of all, as you know, we're in Florida right now.

00:00:54

KT: It's the season...

00:00:55

Suze: and we are safe and sound. We're not even close to where the hurricane hit. However, our hearts and our prayers go out to everybody. It is not easy with these hurricanes. So all we can do is send prayers and hope everybody

00:01:15

Suze: is as safe and sound as possible. However...

00:01:20

KT: Wait on a lighter note, on a slightly lighter note. It's my baby brother, chris' birthday today.

00:01:27

Suze: How old is he?

00:01:28

KT: 70? I don't want to say he's 70 because I just said my baby brother,

00:01:35

KT: he's 70 years old. And Chris, we wish you the most wonderful, wonderful new decade ahead and we hope it's as, as exciting as mine and Suze's

00:01:47

Suze: happens to be as I said you are listening to the Ask KT

00:01:51

Suze: and Suze anything addition. And if you want, what do they need to do KT?

00:01:58

KT: You need to send an email or message t

00:02:02

Suze: Ask Suze podcast at gmail dot com. And that is where you send in your question.

00:02:08

Suze: And if KT likes it, or can relate to it. She picks it and we answer it here on the podcast.

00:02:15

KT: Keep them short, keep them short, everybody.

00:02:18

Suze: Keep them short,

00:02:20

KT: short and sweet and I'll be for sure. I'll pick them short and sweet.

00:02:24

Suze: All right, KT. Are you ready to begin?

00:02:25

KT: I am. Here's your first question, Suze. Do we really need revocable trust? This is from Michael and Michael said he's from Seattle and he's one of those who is smart enough to listen. So Michael says, let me explain.

00:02:42

KT: My partner is 69. I am 54. We are not married but have been together for 22 wonderful years. It's like you and me, Suze. We each have all our investments and beneficiary accounts to each other and we hold title to our jointly owned condo which is

00:03:01

KT: fully paid off with rights of survivorship. We have no debt. We both also have wills financial power of attorney and durable power of attorney for health care in place in our situation, Suze are revocable trust necessary. And if so what would that benefit be? Thanks for all you do.

00:03:27

Suze: So, Miguel, I'm practicing my Spanish already now. So Michael really, I understand exactly why you would think that you don't need a revocable trust. However, one of the reasons is you say you have financial powers of attorney,

00:03:46

Suze: depending on the financial power of attorney that you have many financial powers of attorney become null and void the day that there's an incapacity because the banks and the brokerage firms and the places that they would be used, they don't know. Are they still valid? Did you revoke the financial power of attorney? And yet he still has a copy of it.

00:04:15

Suze: So it becomes very difficult at times when they are really, really needed.

00:04:21

Suze: In case of an incapacity being you become incapacitated and then your partner would have to sign for you. But what if the banks say we don't know that this financial power of attorney is valid? Then what do you do? And don't think that can't happen because it can, it is far easier if you have a living revocable trust

00:04:45

Suze: and within the trust, it has an incapacity clause which names your partner as the person who has that financial power.

00:04:56

Suze: If something happens to you and your partner who then pays your bills, who then writes your checks. Did you do a financial power of attorney that goes all the way down for successor people, successor trustees to do that? Probably you have not when you open up a trust account at a bank, for instance,

00:05:18

Suze: you have to usually give them a copy of your trust. So they already have it on file. If you were going to change your trust, you probably would have had to give them a, the change of the trust.

00:05:33

Suze: And so therefore

00:05:35

Suze: you would be far better protected for incapacities, you would be far better protected if something happens to both of you at once, because if something happens to both of you at once and you only have your home in joint tenancy with right of survivorship. And now the two of you seriously are killed in a car crash together. Don't think it can't happen. Michael, don't think it can't happen.

00:06:05

Suze: Then the house is gonna have to go through probate. If you had a living revocable trust, it would designate who gets it. If you both die. If whatever happens, you could do contingency clauses in the trust. So I can't think of one downside,

00:06:27

Suze: not one for you to have a revocable trust. I could think of 10 to 15 downsides for you not to. I hope that answered your question next question, KT.

00:06:40

KT: So, Suze, this question is from Ariana,

00:06:43

KT: I wanted to seek your advice regarding my retirement accounts. I'm 39 years old. I'm considering the option of converting a portion or all of my traditional 401k. She's got about 275,000 from her previous

00:07:00

KT: employer to a Roth. I'm seeking clarity on whether this would be a wise choice or not.

00:07:06

Suze: It would be the wisest choice you could ever make at the age of 39 because she has so many compounding years left KT until she's got at least 30 or more until she's gonna want to take this money out if she even retires at that point in time.

00:07:26

Suze: And rather than that money compounding and compounding tax wise, so that when she takes it out, she has to pay taxes on it, she could pay the taxes now, convert it over and let it grow. Absolutely tax free. What you have to do, Ariana is pay a visit to a CPA and decide how much per year should you convert to a Roth Ira? Absolutely. You should do it. Just do not do it all

00:07:56

Suze: at once. All right.

00:07:57

KT: Also, I didn't tell you this, but she's reading your retirement for 50 plus. She's almost done with it. She loves it and she's 39. Isn't that great?

00:08:07

Suze: That is great. Great.

00:08:09

KT: That's where she's learning this from. Ok. Next question from Carmen. It's about a 30 year series EE Patriot Bond for $500.

00:08:21

KT: I don't even know what that is, but it says my children each received one from my grandfather when they were born. I have the certificate which is written out to each of my children and I am the or, and the, or part only includes her social security number...

00:08:39

Suze: because her kids are minors. Yeah.

00:08:41

KT: I've never received or expected

00:08:43

KT: annual interest. So Suze, the grandfather passed away more than 10 years ago. They think that this matures at the end of 30 years. But can you please enlighten them into this type of bond? I, I don't know what that is either an EE Patriot.

00:09:00

Suze: Yeah. When September 11th happened KT, back in 2001, the government in all their wisdom decided to issue antiterrorism bonds

00:09:13

Suze: and they were called Patriot Bonds. Now, double E bonds have been around forever. And normally somebody invests in a double E. It gives you a very low interest rate, but it's guaranteed to double whatever amount of money you put in in 20 years. So no matter what interest rates do,

00:09:34

Suze: you're guaranteed to double your money in 20 years. And when you buy a double E Patriot Bond or a double E bond, because they stopped issuing them in 2011. So between December 2001 and 2011, they issued paper Patriot bonds, which is what we're talking about in this case. Now, you can still buy double E bonds if you want, but you have to do it online.

00:10:04

Suze: But if she says that she has $500 each,

00:10:09

Suze: that means that grandpa paid $250 for those bonds. And in 20 years from the date that he bought them, they would be worth $500. Now, I don't know when he bought them if he died 10 years ago

00:10:30

Suze: and here we are 2023 and they stopped issuing them in 2011. The bond's probably at least 12 years old, but Carmen, what you have to do is you have to find out exactly how much they are worth. So you would go online to Treasury direct dot gov.

00:10:54

Suze: And there's a little calculator for double E bonds on the face of your actual paper bond. There is like a number, a serial number you will put that in and you will find out the interest rate that they're currently paying and what they are currently worth. My advice to you would be, it is true. Double E bonds mature in 30 years.

00:11:19

Suze: But in most cases, once they've gotten to the 20 year maturity date, that is usually the time that people cash them in. Unless the current interest rate that this series double E bond is paying is higher than what you could get somewhere else. So that's your job. You have to know

00:11:42

Suze: where you are, how old they are and what they're worth and make a decision there. But I think you would be far better off once they have reached 20 years, do not cash them in before that. Once they have reached at least 20 years, you probably would be better off at this point, cashing them in,

00:12:02

Suze: you'll get $1000 in total $500 each for them at that time. And then you can invest that money for the kids probably in a far more profitable way.

00:12:16

Suze: The key is gonna be. How does she cash them in? Does she take them to a bank? Will her bank accept them, KT or does she have to send them into Treasury direct dot gov to cash them in? But that's essentially what you need to know. They stopped making, like I said, paper bonds in 2012.

00:12:37

KT: Can you still buy a paper bond?

00:12:39

Suze: No, you don't.

00:12:40

KT: You don't. Everything's online.

00:12:41

Suze: That's why KT, that stack of series I bonds. You remember that stack?

00:12:48

KT: Whoa, I do remember. And you used to say, don't lose this if something happens to me, cash them in...

00:12:57

Suze: Not necessarily cash them in, but just know here they are because they were worth a lot of money. However, I ended up sending

00:13:05

Suze: all those bonds into treasury direct dot gov to be put into our online Treasury Direct account and the entire time because that was the only way to get them there. I was so nervous that something was going to happen. KT and they weren't gonna make it there, but that is the only way to do it. Next question, my love, Miss Kathy Travis.

00:13:30

KT: This is from Beth.

00:13:31

KT: Hi KT and Suze. I find both of your voices to be so soothing.

00:13:37

Suze: I find my voice a little froggy today.

00:13:39

KT: Yeah. A little bit, a little horse. Savannah dust.

00:13:43

Suze: Right. Yeah. Yeah. Yeah.

00:13:45

Suze: So explain what that is.

00:13:47

KT: Yeah. Let me explain what that is. So when we're here in the Bahamas and in South Florida, during the summer months, this dust travels in these very fine clouds across the Atlantic, you don't notice it but it's actually in the air and you can,

00:14:02

KT: it can make your throat a little bit.

00:14:04

Suze: I'm having a little trouble here this morning.

00:14:06

KT: So this is from Beth. She wrote Pick Me KT. So I did. But the question is one that Suze's given this answer about a gazillion times, but I'm going to read it anyway. Hi, KT and Suze.

00:14:19

KT: I'm looking for a Suze school on 529 plans. Advantages, disadvantages UGMAS advantages, disadvantages. I hear there is a new rule to allow for 529s to transfer to Roth Iras in the future for your kiddo. But does opening one of these accounts also impact your ability to get financial aid. So

00:14:44

KT: Beth is for years old. Her daughter's one, right?

00:14:49

Suze: So that's what, here's the truth. I did a big podcast on the Roth conversion just a few podcasts ago. So I need you to listen to that

00:14:58

Suze: also to find out everything that you really need to know. Go to saving for college dot com. It's the absolute best website around to explain. 529 plans for you. 529 plans. Far better option

00:15:15

Suze: then uniform gift to Minor Act accounts, however, go there and look it up and you'll find all the answers you need because I've answered this question so many times before. All right, or look in the past podcast, but it's easier to go to saving for college dot com. Ok.

00:15:32

KT: Next question, Suze is from Fran

00:15:35

KT: and, and I picked this because I don't ever want any of you to think a question is dumb. Fran wrote, Suze, KT. This may sound like a dumb question, but I'm going to ask it anyway. When is dollar cost averaging

00:15:53

KT: best to invest $400 once a month or should I split the amount and invest $100 every week?

00:16:02

Suze: It's funny that you picked this. Because everybody I go through and I do read every single email that you send in.

00:16:11

Suze: However, KT gets to pick them and she doesn't know which questions I've answered already directly to the person I answered Fran directly. I said, first of all, there's no such thing as a dumb question, which is why I decided to answer her because I wanted her to feel valid. So I hope you're listening Fran because you know, I answered you.

00:16:34

Suze: And the truth of the matter is when it comes to markets like this, I would be very flexible as to how I do dollar cost averaging.

00:16:45

Suze: If you could do it every two weeks for at least a year, I wouldn't have a problem with that. Or once a month. But you would really look at and take advantage of the days within that month that, that stock has gone down a little bit or maybe the overall market is going down. So I just

00:17:05

Suze: wouldn't set a date every single month and do it. I would, in this particular case, you can invest $400 then do $100 or $200 every two weeks just to see and divide up where the markets are going. All right.

00:17:23

KT: OK. Next question is from Judy and I, I like this because it's a very...

00:17:29

Suze: Do you think everybody knows what dollar cost averaging is?

00:17:33

KT: Well, yeah, you've talked about it so many times.

00:17:36

Suze: So tell everybody, you tell everybody since I've talked about it so many times

00:17:41

KT: You take a set amount of money like Suze just said, let's say it's $100 a week and you put it into your favorite, you know, stock market fund

00:17:53

KT: like you're 500.

00:17:55

Suze: That's, that's, you're such a good teacher today. You should see her little face. So everybody just go...

00:18:03

KT: So I think it's better to set it and forget it. But if Suze said, if you're someone that watches and is a should be a watcher, but if you, the market is really tanking,

00:18:15

Suze: Ok, nevermind.  Here's the real answer to that question. Why do I even do this to myself? Ok. And to all of you,

00:18:22

Suze: you decide on a specific amount of money. Maybe it's $1000 maybe it's $10,000 or $12,000 or $100,000 that you want to invest in the stock market, you then divide that amount of money by 12 or 24

00:18:42

Suze: to decide. Do you want to invest it all within a year's period of time or two years, period of time or whatever length you want no less than one year. And then you take that amount of money

00:18:56

Suze: that is for that month. So if it was $12,000 and you did it for one year, you wanted it all invested within one year, you would take $1000 every month and invest it in whatever it is that you want to invest it in. Now, hopefully that would be diversified, whether it's in exchange traded funds or slices of many different stocks, but you could take that $1000 and do 250 a week if you wanted to

00:19:26

Suze: and do it that way as well. So now since you can buy things without commission, you can do it in any way you want if you do it online, but your dollar cost average in the hopes that if the market goes down, your dollars

00:19:46

Suze: average the price of what you're buying. So therefore you buy more shares. When the market goes down for that amount of money, you buy less shares when the market is going up for that exact same amount of money. But in the long run, you have averaged the cost of what you're investing in over time with your dollars. Now, you could have done that.

00:20:11

KT: I did say that. Go to your favorite ETFs or...

00:20:16

Suze: Never mind. Just ask me the next question.

00:20:17

KT: This is from Judy. I, this is a very, a very sweet question and I really love that Judy. Um, put this in the subject, helping an elderly parent. We've had this conversation many times. She said, Suze, I hope you can help me navigate this situation.

00:20:35

KT: My mom recently died leaving me in charge of the finances for my 88 year old father who doesn't have the skills or interest in doing this. So I just want everyone to know that Judy's an only child. She really wants to do the best thing for her dad. So here's where it gets complicated. There are four checking accounts and three savings accounts now held jointly between my dad and me across three banks.

00:21:03

KT: No money is invested outside of the banks like in the stock market or whatever. He has a pension, he gets annuity payments and he's got cash stashed in a number of properties in envelopes, but significant sums of cash like tens of thousands of dollars. So in total, we're talking about $800,000.

00:21:28

KT: And I think that what Judy's asking you, Suze is, I'm an only child trying to do the best I can, I love my dad and want to take really good care of him.

00:21:38

KT: He likes having the cash around. But what can she do to help keep this safe and sound? And these accounts, by the way, are earning like 1% interest...

00:21:50

Suze: Or less...

00:21:51

KT: Right? So what can she do?

00:21:52

Suze: Here's what I want you to do. And again, our hearts really still go out to all the people who lost everything in Maui and all these storms that are here and around and things that can happen. I want you to sit down with your dad

00:22:07

Suze: and I want you to say, dad, listen to me, you now know what's happened in Maui and all those homes in an entire town are gone. Imagine if the house or wherever he's keeping it burnt down, do you know that our insurance policy on this home only insures up to $500 in cash.

 

00:22:33

Suze: So you would lose all of this money?

00:22:37

Suze: Dad, I am asking you to let me gather up the cash and little by little put it into money market accounts at banks or at brokerage firms because I have a feeling it might be a lot to say, dad, you worked so hard for this money

00:23:01

Suze: and let's say it is 30 40 $50,000 that he keeps around there. He's losing at least

00:23:12

Suze: on that 2 to $3000 a year of interest. Number one, and that money is at risk. You can tell him if he wants to be safe, that's not being safe. The other thing that you can do is say, all right, dad, if you want the cash, let's go down and open up a safety deposit box in joint name at a bank. If they even offer them anymore,

00:23:41

Suze: the least you can do is try to get a serious fireproof box that you keep the money in. But I can tell you because of people who have done that in the past. If the fire is hot enough, it will disintegrate all the paper that's in there and it will all be lost. For those of you who are keeping gold at home,

00:24:05

Suze: people have gone through serious fires. The gold has melted into one another. A lot of it was just all over the place so it can become a mess. So keeping anything above $500 around isn't very smart. Number one, number two, I really think since you're both on these accounts, you should take the power

00:24:35

Suze: and change the accounts to, like I said, a high yielding money market account or treasury bills, whatever it may be at a brokerage firm because you need something that will give you more than $250,000 of insurance. Right now. Your father is easily throwing away close to $40,000 a year of interest.

00:25:03

Suze: And I think so over 10 years, that's $400,000. I think you sit down with him. You have an adult conversation with him. If he still refuses in everything,

00:25:15

Suze: I have a feeling you should just do it on your own and suffer the consequences. You say dad, these are not good decisions. I am not going to let you do this and therefore the two of us are going to do this. You're gonna sign for this and I don't care what you say, you're making a mistake. So that's what you need to do. Judy. You need to become the adult in this situation. And I know you think that's not being a good daughter,

 

00:25:44

Suze: but it really, really is. And if anything, maybe you can have him listen to this podcast and let him hear me say, papa, please listen to your daughter. You really aren't doing what's right for you and you're really not doing what's right for your daughter. Ok.

00:26:04

KT: All right, Suze, that was my last question. So, do you have a quizzie for me?

00:26:09

KT: Uh oh, she has a doozy of a quizzie, don't you?

00:26:12

Suze: I kind of do.

00:26:14

KT: Oh boy. All right. Get ready. Everybody. I'm not in this alone.

00:26:18

Suze: Now, when we say quizze, these are questions that I have chosen from what you have sent in that sometimes deals with facts and things that you have wrong.

00:26:32

Suze: Sometimes you need answers to questions as to what you can and cannot do. Sometimes you're asking for my opinion. So let's see what KT does with this one.

00:26:45

Suze: Hi, lovelies Suze and KT. I love your podcast and I am grateful that there are people in this world who truly want to help others in regards to their financial issues. Isn't that the truth? KT that is so true. Right. I know you have addressed this question in the past, but I just read

00:27:08

Suze: that social security could possibly decrease by 20% by 2033.

00:27:15

Suze: This is the time I was planning on taking my full benefits. I don't have much money and want to hold out till I'm 72 to collect my social security. But now I am second guessing that decision. So here is the question to you, Miss Travis and everybody, should this person wait till they are 72

00:27:43

Suze: to collect their full social security or not since that was their plan?

00:27:50

KT: Yeah, I think they should,

00:27:54

KT: they should until you're 72.

00:27:56

KT: So, is that your final answer?

00:27:58

KT: Yea, because we're not sure if that's gonna happen.

00:28:02

Suze: They're gonna reduce it by 20%. We're not sure.

00:28:04

KT: We're not sure.

00:28:05

Suze: We're not sure. So you would tell this person to wait till they are 72 to collect their social security?

00:28:12

KT: I think so because even if they took it earlier, I don't know how much

00:28:17

KT: of a percentage they would lose from not waiting until... not waiting the distance.

00:28:22

Suze: So that's your final answer? (Suze makes the wrong answer sound)

00:28:26

KT: Oh, no. Come on. All right. So what should they do?

00:28:32

Suze: KT... full retirement age if you're born 1960 or later is 67

00:28:40

Suze: your social security benefit will increase by 8% a year until you are 70.

00:28:48

Suze: After 70

00:28:51

Suze: it no longer increases at all. If you wait till you are 72 I knew you didn't know if you know that. Yeah. And if you wait one second past the age of 70 you are so wasting money. It's not even funny because you would be getting all of those payments. That could be a few $1000 a month. So you wait two years. Are you kidding me?

00:29:20

Suze: The latest? Any of you should wait to collect social security is age 70. There you go. Miss Travis.

00:29:31

KT: I didn't know that.

00:29:32

Suze: I know you didn't. That's why I asked it.

00:29:34

KT: Because the way that she wrote it sounds like 72...

00:29:38

Suze: Do not try to make excuses that this woman wrote it in. And so therefore that's why you got it wrong.

00:29:45

KT: No, for everyone did it sound like 72...

00:29:48

Suze: Do you see what what she's doing. Do you understand what she's doing here? She's trying to get you all to agree with her that it's ok that she didn't know it's ok that she didn't know but it will never be ok again.

00:30:00

Suze: All right. Take us out Miss Travis.

00:30:02

KT: So there's only one thing we want you to remember. First of all, have a great birthday brother and today wherever you go,

00:30:12

KT: wherever you go, Chris, I want you to create a more peaceful, joyful, and loving world.

00:30:19

Suze: And if all of you say that every single day, we promise you you will be what?

00:30:25

KT: Unstoppable?

00:30:32

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