401k, Children, Insurance, Must Have Documents, Retirement, Roth, Roth IRA, Saving, Saving Money
January 13, 2022
Listen to Podcast Episode:
On this podcast of Ask KT & Suze Anything, Suze answers questions from listeners Gabrielle, Tinece, Jessica, Rebecca and more, selected and read by KT. Plus, two Quizzies, one of which was sent in by Danielle.
January 13, 2022. How does it feel, KT? Well, first of all, is it too late to say Happy New Year again. Yes, KT. But this is the first Happy New Year that were together in the mic, in the studio, with mics speaking together. So, for me, Suze, it's a happy New Year Day. First of all, welcome everybody to the, to the Women and Money podcast. This is the ask KT and Suze anything. This year you go first, you are first with everything. So, this is where you write in to ask Suze podcast at gmail.com and you ask a question. If KT chooses it, we will answer it on the Thursday podcast again called ask KT and Suze anything, just that simple. Alright, what you got for us. Well, the first one and everyone, when you write in, I often the first thing I look at is the subject title and this one is called gratitude. So, I like this. And I'm going to start this podcast of us being together with Hello Suze and KT. Hello KT and Suze, because you have gratitude that I'm sitting here. Really my voice is still a little iffy but don't use it unless you answer the question. Okay, this is Hello Suze and KT. Hello KT and Suze. My mom used to roll her eyes when she'd see me watching you on tv. My mom was tough and no matter what happens, you push on. I now listen to your podcast all the time. When you spoke about your mom. It touched my heart like you. No matter what I did, I felt I never could do enough. I am one of 10 kids. As I was listening to your podcast, it dawned on me that my mom as strong and commanding as she was, was uncomfortable with money. When my dad would try to tell her to pull the reins in on her spending, she would shut him down. I realized I could not follow her lead. That is one of the reasons why I listened to your podcast. I love how you speak about your life altering health issue and the difficulty you have encountered. Suze, it's helped me with my health issue after my mom died and my sister died unexpectedly and then my dad passed as I held his hand all within a very short period. I was diagnosed with a brain tumor. I had surgery seven years ago. It was really tough. I had to learn how to walk, swallow, talk process things again. I pressed on like my mom taught me I could have easily gone on disability, but I refused to choose disability and I was back to work within 3.5 months. I still have glitches, but I pushed through. I have made some major mistakes regarding money throughout my life but I'm really working hard to do the best I can by listening to your podcast. I am learning and also feeling as if I have gained two beautiful friends. How sweet is that KT. Gratitude do you like that, Suze. That's how I wanted to start today. Okay, so here's a question now everybody about the good old Roth my friend ready? Hi Suze and KT, I absolutely love this show and appreciate your contribution to our lives. I fully understand that we're allowed to withdraw from our Roth IRAs retirement accounts, any money we've contributed, penalty free, tax free and regardless of age. My question, however, is the following. What if my contributions are fully invested? How does one go about withdrawing contribution money then? So, there you go, Suze, what's the answer to Gabriel is question? Gabriel, very easy. You just sell whatever it is in your account that you will need to withdraw and you withdraw it in cash because remember you can't withdraw stocks or ETFs or things like that, you always have to withdraw cash. So, Suze, this next question is wills and trust and this is in my opinion. And did you know this is a good question. Hi Suze. I'm 29 years old and I have a few questions about Wills and trust, I am uncertain as to what happens after you create these documents. Earlier this year. My parents used a lawyer who they're good friends with to create a will and trust. My parents felt more comfortable using someone they know to create the documents and therefore did not purchase your will and trust kit. Too bad because it probably would have saved them a lot of money, probably about $3,000. But anyway. Alright, so Suze, here's the question. There’re only two questions, but this one is pretty straightforward. Once my parents sent the documents to the lawyer, does the lawyer need to take any additional steps? We asked the lawyer what the next steps were, and he just told us keep the originals and copies in a safe place. Yeah, what has to happen everybody, after you do what I call the Must Have Documents, which happened to be a will of revocable living trust in advanced directive and durable power of attorney for healthcare and the power of attorney for finances, is that there are steps that need to be done especially for the living revocable trust. And you have to make sure that you change the title of your assets from your individual name into the title of the trust. So, if there's a home involved, the title to the home has to be changed to the title of the trust. If there are bank accounts involved, those accounts have to be changed, brokerage accounts. So just make sure that all the assets that are owned in the trust are titled by the trust versus your individual name. And this next question is kind of, it sounds a little bit silly, but it's interesting people just wonder about this. Listen to this one, Suze. What happens if the lawyer who created the will and trust for my parents passes away before my parents do? Will these documents still remain valid even though the lawyer is no longer in the picture? Yeah it has nothing really to do with the lawyer after the lawyer has created the documents. Just like with my must have documents that all of you can buy. You're not having a lawyer create these legal documents that are being created by you and so they're legal and their legal, so it doesn't matter. What does matter. However, is that these documents are only valid if you have the original documents. If you lose the original documents. Now we have trouble because scan documents, copies of the documents are not valid. So, it could be very well deemed that you don't have a trust, or anything set up if you don't have the original document. So, keep them safe and sound. Next question KT. Next question Suze is from Tinese. Ready. Hi Suze hope you're doing you are ready. She's very feisty today. She's very feisty in front of the microphone and she's smiling with the biggest smile because she's so happy to actually get her voice back but it's coming back slowly. I’ve been having her drink lots of honey tea. So, hi Suze hope you're doing well. In 2018, I bought a home in Detroit for $87,000. It was a great deal in a great neighborhood. I decided after breaking up with my boyfriend to move on and put the house on the market. My question is what I should do with the profit from the sale of my home. It looks like I may have a profit of approximately $50,000. I would like to use that in the purchase of my next home in 2-5 years. So, she wants Tinese, wants to make sure Suze that she likes the new neighborhood. She's moving too smart, smart, very smart and then she said should I put the profit into a savings account, or should I invest it into something safer like bonds or bond funds? I would love for it to grow until I'm ready to use it again to purchase my next home. So, the first thing is you're so smart. So many people make the serious mistake of they sell a house in one city or one state or whatever it may be. Then they move and they immediately by another home. The problem is you don't know the neighborhood, you don't know if you like living there. You don't know if your neighbors are good. All of that is important. So, for you to wait two, three, maybe five years to buy another one. Perfect. Especially since real estate currently is so high as well. You have $50,000. The very first thing I would do given that you're not going to need it for a number of years, right? 2 to 5 years is I would actually buy $10,000 worth of a series I bonds by going to treasurydirect.gov. Now I'm very aware that the very first year of a series I bond you cannot touch the money at all. After the first year, if you take money out from year two to year five there is a three-month interest penalty After five years, no penalty whatsoever. However, currently they are paying 7.12% and they probably will pay that for the whole year because I don't think you're going to see interest rates go down that much now. I want you to think about this even if you went somewhere and they were paying you 1% a year on your money but you can't get today anywhere. Right that's like seven years of interest in one year of a series I bonds so do that with the $10,000 next with the $40,000 remaining or whatever it is. Do Alliant Credit Union Again. Currently they are at 0.55% interest by going to myalliant.com. And if you just put in at least $100 a month for 12 consecutive months that's going to give you what? An extra $100 bonus. Now I don't know how long Alliant going to keep offering that, but you should absolutely take advantage of it because I can also say that as interest rates go up. I am sure Alliant Credit Union will be one of the first to raise those interest rates. You, however, want to stay away from bond funds so much. I can't even tell you. So, no bond funds. No ETF. bonds ETFs. Simply the series I bonds and Alliant Credit Union. Fabulous combination. Well, there you go. And then my next question is subject I bonds. There you go. Now listen to this one, Suze. I was reading all about the I bonds. I'm ready to make a purchase. I found a chart that shows the composite rates have been as high as 10% in 1999. Why is it a good idea to buy now while they're at 7%. Suze. Help Jessica with this. Jessica sweetheart. You don't know that they're ever going to go up again now. I have my bonds that I got way back when I've been buying, I bonds for longer than I can even remember. It doesn't matter what was, all that matters in life when you are investing is what is, what is happening right now in this economic environment. If you wait and you think I bonds are going to go back up to 10%, I have a bridge to sell you. Just that simple. Take advantage of what's happening right now. Do not look backwards. Look at where you are right now, where you wanna go. Series I bond and again, the Alliant Credit Union is the perfect financial marriage. I'm so glad you answered that because I'm thinking 1999. Oh KT, I do have some I bonds. But how many years ago is that? 20 something? I mean it's really just not even born then. I don't know. Okay. Go on. Hi Suze and KT., Happy new year. My husband refinanced our house and added me to the mortgage and deed last year in January 2021. We're planning to sell our home this year and will make 300,000 in gains because of the housing market. This is after all the money we put in for improvements. We file our taxes jointly. So, here's her question. I have only been on the deed for one year but lived in the residence for the past six years with him. Am I eligible for the 250,000-tax exemption? Or do I have to be on the deed for two years as well? This is Rebecca. Can I turn that into your quizzie? Yeah, because I don't know the answer to that. I was. I didn't know that you have to stay on a deed for two years maybe. I don't know. I love when you say you don't know. Makes me love you so much. But I don't know I thought this was a pretty good question. It says help capital gains home sale. Answer. So my dear Rebecca in order to take advantage of the $250,000 exemption. And what that means. Everybody is simply this, you own a home, you purchased it. It is your primary residency. It's not a rental. It is a primary residency. Everybody on that deed gets a $250,000 exemption above your purchase price. So, but to get that, your name has to be on the deed number one, not on the mortgage, but on the deed. And you have to have lived in that house for two out of the past five years as your primary residency. If you have not done that, you are not entitled to that $250,000 exemption. So no, you're not entitled. Mmm. Yeah. And it doesn't matter if you're married, KT or whatever. It doesn't matter. It's like, let's say you and I weren't married. No, I'm so sad, I can't even say it. So, we're not married. Let's say we bought a house for a million dollars. And now it's worth 1.5 million. We each get a $250,000 exemption. If we were both on title for two in the past five years and lived in it as a primary residency. We sell it. We don't have to pay any capital gains. However, I just want to say one last thing to Rebecca. Rebecca, you're only having $300,000 of gains if you sell it. So, $250,000 of that will be exempt. It is also possible that maybe over the years you've done, you know, $50,000 of renovations or something like that or after your real estate commission, it won't quite be $300,000 in gains totally. So, I would not sell it right now in real estate is that it's high just to wait another year just to save you know, capital gains tax on $50,000. Okay, got that. Alright, gone. Okay. This this question, Suze, I want you to put your shrink hat on. You ready? Yeah, I know this one was when do I ever take my shrink hat off? No, but this was interesting. The subjects have lots of money strained relationship and that's what made me curious like, what's this one about? Hi Suze and KT. I'm 40 years old, married with three small children. Currently, I stand to inherit several million dollars from my parents with a large share of that amount in commercial properties left to my siblings and me to summarize a complicated dynamic. I do not get along with my father who is now 82 years old. I have had a lifetime of deception, verbal abuse, and at times witnessed physical abuse towards my mother. This has remained so even at his older age. So, this is interesting, due to how I feel towards my father. I have repeatedly asked my parents not to involve me in their estate planning. My parents have refused to honor my wishes and chastised me for being imprudent, my husband and I have no debt with nearly one million saved in retirement. But it would be nice to set that inheritance money aside for my children. However, Suze, I feel as though I would be selling my soul if I took the inheritance money, what do I do? You take it so fast. It's not even funny. But let me tell you why. You say you have three kids and their small children. You also say that you have you know, no debt, you have like $1 million dollars saved for retirement, all of this stuff because KT, you know showed me your email and while that seems like it's a lot of money, anything can happen in life to you. You can get ill. You know, maybe your husband dies, maybe something happens. Then what? I understand that you have really harsh feelings towards your father, but I think even more important and listen to me carefully now than being angry at your father. You have to find a way to come to grips with your emotions and your feelings towards him because whether he leaves you money, he doesn't leave you money, it's not going to solve the anger and the frustration that you feel towards him and I can tell you that especially lately and I don't know why these past few months, I've spent so much time thinking about my mother and envisioning all these ways that I wished I had said something because I was so angry at her or that I could go back and revisit with my father because I was so angry with him over many of the things that he did to me everybody. And I wished I could go back and turn back the hands of time and do that. You know, I used to be asked Suze Orman, do you have any regrets in life? And I used to kind of flippantly say, yeah, I regret that my father never saw what a success I was because when he died he didn't have any money to leave my mom and I hadn't made it yet and on and on. But my biggest regrets are, I didn't take the high road when they were still both alive. So, I'm asking your number one to take the high road and somehow come to a place with your father that you just come to grips with it. But don't punish your children and don't punish yourself by turning your back on millions and millions of dollars. Take the money if you want and you want to give a lot of it away and be generous and give it to abuse centers and all kinds of centers that maybe could help that would be far better than you turning your back on it. So, I'm asking you to be bigger than you're being right now, to be more compassionate than you're being right now, not only towards your father but towards your children and yourself as well. Now, KT, one of my greatest pleasures in life is stumping you. I know right or doing the quizzies because I know that you don't like the quizzies so much, especially if you get them wrong. But what's so fabulous when you get them wrong is that there are so many, many millions of people that listen to this podcast. We're getting close to 20 million everybody by the way. That's beside the point. I love when you don't know. So, I want you to start really loving these quizzies whether you get them right or whether you get them wrong. So, since I haven't been able to sit here with you for quite a while, I have to quizzies for you. Okay, I'm happy about that. Go for it. Do you want to choose which quizzie is first? The one that you know I'm going to get right. Alright. Hi KT and Suze, I initiated an online rollover today of an old 401K into a Vanguard IRA i'm having a mini panic attack because at the end of it all the 401 K company said they were mailing me a check. As long as the check is made out to Vanguard FBO my name and I pass it right along to Vanguard, they're not going to withhold 20% for taxes. Is that right? You just answered that right of way. Yeah because the check is made out to Vanguard. What would have happened if it wasn't and they sent it? Doesn't matter. It's not rolled over and then what would happen she has a penalty I think or it's not it's not a rollover. No no no no you're right and you're wrong. I am right about the Vanguard. You're right about the Vanguard. So, everybody please need to know these rules when you're taking money from a 401K and you want to roll it over to an IRA rollover account. The correct way to do so is through a custodian to custodian transfer. And what that means is you go into let's say Vanguard or Schwab or Fidelity or TD whatever it is, Ameritrade and you open up your IRA rollover they contact your old employer, your 401K and your 401K since the check directly to your IRA rollover, if they send the check directly to you at your home address made out to you, they will withhold 20% withholding tax. Which means if you have $40,000, they're going to withhold 8,000 they're going to send you a check for 32,000. You then have 60 days to get that $32,000 check into your IRA rollover. But you will owe taxes on the $8,000 that they withheld or you're going to have to come up with that out of pocket. So, you never do an IRA rollover that way. If your company insists that they're going to send you a check directly. It has to be made out to the name of your brokerage firm for business of FBO your name and then you pass it right along to Vanguard. Right The rest KT about whatever you were saying was just wrong. I don't remember what that was. Is that bad? No, what's the next quiz? Dear KT and Suze. I was just listening to your podcast from October 2020. That's when I had a good voice. After you advised a single mom to purchase term life insurance for herself. You mentioned if I heard it right to also buy insurance for her two teenage daughters in case something was to happen to the children. The mom wouldn't have to suffer financial loss on top of emotional loss. My husband and I each have adequate term life but our kids 13 and 10 don't. Should I be looking into term life insurance for them as well? If so, how much to purchase? And should it be 30 years? This is from Danielle. So, the question is everybody before KT answers, you're a parent, you have term insurance on yourself. You have two minor children. Should you buy term life or any type of life insurance for that matter on your children. Yes or no. I think no because KT? They’re minors’ number one and number two, it doesn't sound like anything we've been advising over the years that you buy insurance on kids, right? Yeah. Doesn't make sense. Proud of you. So, the truth of the matter is everybody listen to me closely now. You only buy insurance. Life insurance. It should only be term insurance in 99.9% of the cases, by the way on anybody who if they died, you would suffer a financial loss. So here you are, you're a mother. Let's say you're a single parent. You die, your kids are going to suffer a financial loss. You're married, one of you dies, you their surviving spouse will suffer a financial loss. What financial loss will you suffer if a 10-year-old, a 13-year-old, a five-year-old happens to predecease you. None whatsoever. So, this idea of buying insurance on children I think is such a waste of money. Of course, you can. That's how insurance agents make a lot of money. That's really bad. It's really bad in my opinion. It should be on the provider, right Suze? So, it should be the one who, right, if that person dies, somebody else will suffer a financial loss. We did it, KT, how'd I do? Pretty good. Your voice is holding up. But more than that, it's her spirit everybody. She's so happy. I wasn't happy for a while. She was not a happy camper for a while, but you're happy and today is a really great day. There's another reason to celebrate. Today happens to be the birthday and one of our favorite people in life. And his name is Reid Tracy and Reid Tracy is the CEO of Hay House Publications who has been our partner now for over 20 years and really almost every single thing that we do, he's one of our favorite people ever. So, Reid. We want to wish you a happy, happy birthday. And also thank you really for all the work that you've done on behalf of Louise Hay who is just so extraordinary who created Hay house to really help the souls and the minds and the hearts of all the people out there that we're looking for validation of who they are and what they could become. So, we want to wish you a happy happy birthday. We love you Reid; we love you so much boyfriend. Alright, KT, We did it Suze. We did it. Now everybody on Sunday, I want to make sure that you all come to Suze school because I think this Sunday, I am going to do a Suze school on bonds. I think it's really important because of the way that these markets are fluctuating the way that they are that you have guidance that keeps you safe and sound. And I don't think bonds are necessarily the answer. I'm not talking about series, I bond. I'm talking about other kinds of bonds. So, until Sunday, KT, there's only one thing we want everybody to do and what is that? Stay safe, strong and secure. You got them all three girlfriend. I love you so much, KT. I love all of you as well. See you Sunday. Bye bye.
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