Podcast Episode - Ask KT & Suze Anything: Am I Saving Enough for Retirement?

On this edition of Ask KT and Suze Anything, Suze answers questions about auto insurance, long term care, and secured credit cards. Plus, a new quizzy and so much more!

Listen to Podcast Episode:

---

Podcast Transcript:

Suze: Juuuunnnne (Suze exaggerated the pronunciation of “June”) 27th 2024. Welcome everybody to the Women and Money podcast, as well as everybody smart enough to listen. This is the KT and Suze Ask Us Anything edition and you can do so by simply writing in your question to askSuzePodcast@gmail.com. All right, KT, who am I imitating — Juuune 27th?

KT: Here’s Johnny! Johnny Carson, Ed… Ed McMahon.

Suze: Right?

KT: A lot of people listening may be way too young to even know, but most of you — even for me, we were pretty young when Johnny Carson… it was like my dad’s favorite show.

Suze: We weren’t that young.

KT: Pretty young when he started. He was great.

Suze: When he started, but not when he ended.

KT: Some of the best interviewers on television, non-scripted, in my opinion were Johnny Carson and my favorite of all time, which was who?

Suze: Larry. But I just want to say something — I think it was my tenth anniversary on The Suze Orman Show, one of them, maybe the fifth, maybe… who knows. But Ed McMahon at the time was one of the people that came on and said, “Here, Suze,” and congratulated me on my show, a milestone. And it was quite a milestone.

By the way, for those of you who want to see The Suze Orman Show — all 13 years of it, about 600 episodes — you can watch on Freevee TV for free. All right, watch them; they’re kind of funny and you can still learn a lot, and you can watch with your kids the infamous “Can I Afford It” segment. There’s one “Can I Afford It” for kids too. Really, people would tune in just to watch that segment. Go to Freevee, tune in and you’ll see why. All right, what do you got for me?

KT: First is from Brett and…

Suze: Wait — before you start, do you know what tonight is?

KT: Oh, tonight is the big debate.

Suze: The presidential debate.

KT: The big debate.

Suze: I can’t wait to see what happens here.

KT: You know what’s gonna be the best part? It’s at first it’s 90 minutes; there’s only two commercial breaks. Did you know that in 90 minutes? That’s pretty amazing. And I’m just wondering who the advertisers are. You know I love advertising.

Suze: There’s something else on tonight that is before the debate. And do you remember when I first started the Women and Money Podcast? And maybe you can go back to the very beginning, and there was a woman, our friend, by the name of Sarah Puil was on it. And she is going to be on tonight sometime between the 7 and 9 p.m. hour on QVC. And you’ll see why she left the podcast and what she has created on her own. So you might want to tune in — not that you have to buy anything — but just to see why Sarah is no longer part of this podcast. And that happened years ago, but she went on to do her own thing. So we’re so proud of her. You might want to tune in and watch. All right, Miss Travis, what you got for me?

KT: Ok everybody, first is Brett is up at bat. Brett is up at bat — ready? He says, Hi KT, I may need a Suze Smackdown.

Suze: What does a bat make you think of, KT? Who?

KT: Oh my God, the first big bus-tour book-tour I did with Suze, we hired two bus drivers and one was about six foot five, 300 pounds, named Randy. And Randy — he was supposed to be like a bodyguard to go across America on a bus with Suze. And then Mike was the driver who was a professional driver. Randy shows up with a pair of jeans, an old denim jacket and a big cowboy hat, cowboy boots, and a baseball bat. We’re in Chicago and I’m like, “Suze, did you invite him to go to a game? It’s winter. There’s no baseball.” He said, “I’m Randy, I’m Suze’s protection.” And I said, “What’s the bat for?” And he said, “That’s my protection.”

Because I said, no guns ever — we’re anti-gun girls. Bats are ok.

Suze: We loved those boys so much. I can’t tell you.

KT: All right. Ok, so Brett said I may need a Suze Smackdown. I’m 35, single. I earn $93,000 a year, no debt. Watching Suze’s show on Freevee, I see people in their thirties with astounding amounts in retirement. It makes me question myself — any tips on what I may consider doing differently? Suze, I max out my Roth IRA annually. I started last year at my credit union. I invested 5 percent in the CDs and then he has, the amount is like $14,000. I’m contributing 5 percent towards my Roth.

Suze: Let me just see this right, KT, because this is important. He has $14,000 in a Roth IRA because he’s contributed approximately the max every year and all of that’s in a CD, correct? All right. So now go on — next, in his 401(k), what has he got? Is it a Roth 401(k)? Go on next.

KT: So I’m contributing 5 percent towards my Roth TSP with an employer max matching, all invested in L funds.

Suze: Lifestyle target-date funds. We all know I don’t like them. Go on.

KT: That amount is about $54,500.

Suze: So he’s already contributed — he has 54,000 there, 14,000 in his Roth. Next?

KT: Should I contribute more? Should I diversify? He’s asking for guidance at age 35 — what else should he do to have a whole lot of money for retirement?

Suze: The very first thing you should do, Brett, is stop comparing yourself to other people. What other people have or say they have does not matter because right then and there you’re like, “I want to be as rich as that person, I want to have that much money.” Brett, you only need to have the amount of money that makes you secure so that you can support yourself in retirement, your family, whatever. It doesn’t matter what somebody else has; it matters what you have. That is number one.

Number two: it’s not about should you be investing more or whatever. The biggest mistake in my opinion right now that you are making is you are 35 years of age. What in the world are you doing — ready for your Smackdown? Sit down, boyfriend, because here it comes — BAM! All right, what in the world are you doing investing your money in a Roth IRA in 5 percent CDs? You are too young to have any money in certificates of deposit, especially in a Roth account. At the age of 35 you need to be going for growth — for ETFs, individual stocks. And let me give you an idea why…

If you continue on this path of CDs within a Roth, there is no way you are going to have as much money as you could have had if you continue doing, let’s just say on average, for now, $8,000 a year (over the next 30 years till you are 65) and all you ever make on that money is 5 percent, you are only gonna have $600,000. That sounds like a good amount of money, but if you had been investing in the markets in ETFs and certain things that absolutely make sense — $8,000 a year, given the $14,000 you have now — at 10 percent, which is absolutely doable, you would have $1.7 million — $1.1 million more than if you just leave it conservatively. And by the way, if you work till you are 70 — forget the 65 thing — 35 years from now you would have $2.8 million. Now that is just in your Roth IRA. If you kept it at 5 percent, you’d have about $850,000. So, what is it, Brett? You want $850,000 or $2.8 million — all tax-free? Two million dollars more because you’re investing the money rather than putting it in CDs at your age. All right, next...

Your life-cycle fund — are you kidding me? I don’t like life-cycle or target-date mutual funds. Do me a favor, look for index funds; get out of these life-cycle funds. Manage your money for growth at this age and you’ll probably have seven or eight million at 70. You’re doing pretty well, so don’t compare yourself to anybody. Should you contribute more? Always if you can. What do you want to say?

KT: Brett got this idea from watching Freevee because he loved the segment “How Am I Doing?” That’s exactly what he’s doing.

Suze: Yeah. How are you doing right now? I’d give you maybe a C-minus — not because of the amount you’re saving but because of how you’re investing it. Your way to an A: get more aggressive — stocks, ETFs, things like that. Next question, KT.

KT: Ok. Next question is from Peggy, and Peggy asks this: my car insurance is way too high. I think all insurance is way too high. Peggy says, would it be unreasonable to give up the uninsured motorist coverage?

Suze: Does she say where she lives?

KT: No, but can you do that?

Suze: There are certain states that you can do so, but many states, everybody, just so you know, make it a requirement that you have uninsured motorist coverage. So you need to check with your state if they require this before making a decision. However, if you’re having trouble affording your car insurance, then you better be very, very careful because if you are in an accident with a driver who does not have insurance or whose insurance is insufficient to cover the damages, Peggy — and by the way, this includes medical expenses, lost wages and all those other things — you’re going to be the one who has to pay for that out of your own pocket.

Without the coverage, you could be absolutely financially responsible for medical costs and other costs if the at-fault driver is uninsured or underinsured, and this could really destroy you. If you’re having trouble paying a little bit more for this insurance, imagine what would happen otherwise. Therefore, truthfully, I would not do that if I were you, even if your state allows it. All right, KT.

KT: Judy Mason is asking, “Suze, I’m 72, retired for two years. I’m OK financially, able to pay my bills. I met recently with my financial advisor.”

Suze: Uh oh. What did he tell Judy to do?

KT: I told him that I had a paid-up MetLife policy valued at $16,000.

Suze: What’s her death benefit on it?

KT: $26,000. I told him I...

Suze: What does he want her to do with it? Go on.

KT: She told him she had no long-term care insurance. He said I could trade in my policy plus some extra money, and that could help defray the cost of a long-term care policy. I’m confused on what to do. I had always thought the policy would be used for burial. Is it better to have long-term care? I’d never heard about insurance policy conversion before to long-term care. Are they legit? Please explain. I actually haven’t heard that.

Suze: They’re legit — for a whole lot of money. Judy, here’s the thing: you say that you are OK financially. You say that you are able to pay your bills. You did not say, “I have all this extra money. I can pay my bills and take vacations and do this and that.” You are able to pay your bills. This advisor said to you that you could trade in your policy plus some extra money — some extra money. Did he tell you how much extra? Did he tell you how much extra per month to keep it going?

At the age of 72, the older you get, the more expensive a long-term care policy is because the average age of entry into a nursing home is 84. Normally once you’re in your seventies, most people can’t even afford long-term care. And many of those policies today — and people know this who are listening — they are getting serious increases on their long-term care premiums, especially those of you who have Genworth. Incredible increases, because the companies didn’t actuarially figure out the true cost. So when you say to me that you wanted this policy to be used for burial, that also says to me, you don’t even have enough money, Judy, elsewhere to pay for your burial.

Would I be doing this if I were you? Absolutely not. The truth of the matter is, most likely you will qualify for Medicaid if you have to go in a nursing home because you probably don’t have that much money. Do not do this. Do not do this. Do not do this on any level. Maybe in a different situation, KT, with different facts, I might say, “Oh, before you do this, make sure you talk to Phyllis Shelton,” who is the nation’s expert on long-term care insurance. If you go to the Women and Money app, you can find how to get a hold of her. But truthfully, I personally would never be buying a long-term care insurance policy unless I talked to Phyllis Shelton first. And want to know how much money we get just to say that? Not a penny.

KT: Ok. Next is from Nicole. “Dear Miss Orman” — I opened it — “Dear, dear Miss Orman.” She wrote, she’s being very formal or she’s being very...

Suze: Can you believe we’re Mrs. and Mrs.?

KT: She’s being very politically correct.

Suze: I just have to tell you...

KT: Dear Mrs. Orman...

Suze: I so wish I could change my name to Suze Travis because I love KT’s last name so much. But I can’t, because I’m Suze Orman. But the question is, KT, how come you don’t change your name to KT Orman?

KT: I’d be so famous. It’s you — you’d be like in the dust.

Suze: Go on, next question.

KT: Nicole says, “Dear Ms. Orman, I opened a secured credit card using my savings as collateral, perhaps erroneously so, but I have done it and I’m about to pay off the balance. My question is, can I legally get my deposit back and retain my high credit score after doing so?”

Suze: Absolutely.

KT: Oh, I didn’t know that. The issuer wants to keep me around and I want —

Suze: Of course they do; they’re making interest on your money.

KT: — to go to a better, more reputable bank who allows me to do things like exchange currency and easily receive international transfers. I have opened a new account and would like to add the money from my deposit, but I fear closing the credit card could harm my credit score. This whole letter, the way it’s written, Nicole, I know you’re European.

Someone told me it might be a better idea to open a new account after the old one has been paid off and wait to cancel the old one in order to retain my high score. So what do you think?

Suze: Well, let me see the email. Don’t hog it — KT’s hogging the emails today.

KT: I just want you to read the end here. She says Nicole’s re-establishing herself financially.

Suze: I get it all, Katie, I get it, my love. Right, so here’s the thing that I want you to know, Nicole, and everybody. Let’s first have kind of a little quizzy — but no, not really, KT, because I love the quizzy I have for you today. Anyway, when you can’t get a regular credit card — your credit isn’t good enough, people don’t want to give it to you, you have a low FICO score (which is a credit score) — what you can do is get what’s called a secured credit card, where normally you put in $500, maybe $1000, and now that amount of money secures your charges. So when you go to make a charge, it’s not a debit card — it doesn’t come from that $500 or $1000 you gave them. You make a charge and obviously you would pay interest on it if you didn’t pay it off in full, but you have to pay the interest and the payments on that credit card and over time it builds up your credit score.

So if Nicole has been doing this long enough and she has checked her FICO score, and it’s now in the 700 area (I would like to see it at 760 or 780), if it is there, then chances are you can open up a new credit card somewhere else that gives you the benefits you want. What’s very important is that you have no debt whatsoever on the secured card that you currently hold. You don’t want to close it until you have paid off all debts on it. You stop using it — assuming your credit score is high — and then you can absolutely close it down. Now, they might get tricky with you and want to keep your money, so maybe you’ll find it takes five or six months, whatever, to get your money back. But legally they have to give you your money back.

Will it hurt your credit score? Chances are it will not, because your amount of credit limit on your secured card was only $500 or $1000. So if you close it down, it’s not really gonna hurt you whatsoever. But those are the things you need to know. Why are you looking at me like that?

KT: I’m trying to just capture and understand what’s the benefit of having a secured card for her?

Suze: It gives you a FICO score. Remember, the way that FICO scores or credit scores are built is through establishing a payment history — are you on time, do you not use up all your credit limit, how long has your credit history been open, do you pay your bills on time? So if she has done all of that, she was able to do that because she secured her card with that $500 or $1000 deposit. But it was used like a regular credit card where she had to pay everything on time — that deposit just secured the fact that she could do it, but it’s not a debit card. That’s why people do it.

KT: And the bank wants to keep her because they’re earning interest on that secured amount. All right, I get it now.

Suze: She’s got $500 or $1000 in there; let’s say they’re making five percent—

KT: She gets nothing, she just gets the security. So this is from Deanna...

Suze: It should have been your quizzy.

KT: Yeah, because I didn’t understand what’s her real benefit.

Suze: Now you get it, good. So now wait, stop for one second. I’m so sorry. I just have to say that everybody listening, KT had the courage to ask something she did not understand.

KT: Do they know that I do that every day living with Suze? I do that every day.

Suze: But she has the courage to ask when I’ve just given a detailed explanation of something and she still didn’t understand it — and there’s nothing wrong with that. So she asked again and I explained it again. For those of you who are in a relationship with somebody and you give somebody an explanation for what they wanted to know, read their face. See if they really understood it, but more importantly, have the patience to do it over and over again. Like I wish I didn’t know. Go on, KT.

KT: All right. Next is from Deanna, and the reason I picked this, it said “best way to survive.” She said, “Hello KT and Suze, I loved hearing about your trip. Now let’s talk about me. I have $575,000 in a 401(k), $95,000 in a traditional IRA rollover, and $75,000 in a Roth IRA. I’m 62. I want to stop working at 65 but wait until 70 to draw Social Security because I listened to you. For those five years between 65 and 70, I’ll need to draw about $50,000 from the funds listed above each year. Would it be a good idea to move $150,000 now from the 401(k) to the rollover and then invest this $250,000 in a CD within the IRA and save it there so I have it for those five years?”

Suze: She currently has $95,000 in a traditional IRA rollover and she wants to take $150,000 from her 401(k) where she works, roll it over to that and have $250,000 in there, invested in a CD within the IRA and save it there for those five years. This is the worst plan I’ve ever—

KT: This is her idea. Give her what you think would be a better—

Suze: No, wait, seriously, Deanna. This is the worst idea that you could possibly have. And let me tell you why. Number one: while you are still working for your employer, unless they allow partial rollovers while you are working for them — which means that you can partially roll over some of the money that’s in your 401(k), but never more than 50% — you may not be allowed to do that at all. But that’s OK because I do not want you to do that at all. That’s number one.

But if we do a quick math addition in my head, I think you have about $745,000 total, and only $75,000 of that is in a Roth IRA. Therefore, when you withdraw money — if you were able to do this from your rollover or whatever it may be — the question then becomes: are we talking about $50,000 pre-tax or do you need $50,000 after-tax? Because if you need $50,000 after-tax, you’re going to have to withdraw close to $60,000 or $65,000, if not more, so it gives you $50,000 after-tax. But let’s just assume you’re talking about $50,000 pre-tax. That’s all you need. You do realize that that $50,000 over five years is gonna come to $250,000.

That’s going to leave you approximately — depending on how your money is invested — we may hit over the next five years a total market downturn. We may not only hit a total market downturn over the next five years, but interest rates most likely will be going down. So you’re not gonna be making 5% anymore on CDs. You may go back down to 3% or 2.5%. You never know what can happen. Just remember three years ago when you couldn’t even get a half a percent on a CD. So now you have depleted your savings by over $250,000. All right, maybe that will leave you $500,000 if your money is all safe. But what that $50,000 means to me is that you are planning to get at least $4000 or more from Social Security, because you expect your Social Security to replace that $50,000.

Problem is, remember when you claim Social Security, you’re on Medicare and now you need to pay for Medicare B premiums. You may find that $400 or $500 a month is subtracted from that to pay for Medicare B — it just depends how much your income is the year you do that as well as the two previous years from when you do that in figuring out the taxation for Medicare B. It’s not just the year that you retire. So I do not think you should do this on any level whatsoever. I think, given also the possibility that they may decrease Social Security benefits a few years from now, you never know what they may do.

However, here’s what I would do if I were you. You say you want to stop working at the age of 65, but the question is, can you afford to do so? And the answer to that is I do not think that you can. And if I were you, I would continue to work until I was 70. I can only really, really hope that you listen to this advice. So, KT, before we go to the quizzy, people are wanting to know — did I actually go in the ocean? And how was it? And I want you to answer this.

KT: So I need to do a little backstory before I give them the answer as to why we did not succeed with the ocean entry last week. So let me give everybody a little backstory. For those of you who may or may not know, Suze had a very, very serious surgery on her spine that required a great deal of recovery time. And when she felt great—

Suze: Almost exactly four years ago.

KT: When she felt great and it was around Labor Day, I said, come on, let’s go in the ocean. So we went in and on the way out she strained the surgical site, the whole thing, and it really set her back — set her back big time. But more than setting her back physically, emotionally she had this great fear of going back into the ocean. And it’s been a fear now for almost two years. So she goes into the side where she can walk in — it’s flat, it’s easy — but this is the Atlantic Ocean where we used to love every day to soak and dive and snorkel. And I’ve been wanting her to start that again and she wants to, but she still has this fear she has to get over. So now she’s ready to give it a go. But for me, I can only do this with her if I think the conditions are 100% perfect, which means we can’t have a lot of rocks, the sand has to be somewhat firm, the water has to be crystal clear. Those are the conditions that she can try to do an entry. And the other thing is we have Colo — our railing on standby — to pull her out, maybe both of us out.

So we’re going to give it a go in the first week of July.

Suze: Because the conditions were not...

KT: The conditions haven’t been right. And it’s been a bit windy and wavy on the Atlantic side anyway. So we’re waiting, everybody. But when it happens, oh, you will hear from me. What’s my quizzy, Suze?

Suze: But I was standing there looking at KT, who went in, and I knew right away — because as soon as she went in...

KT: I was real wobbly and—

Suze: She sunk into the sand and I went, I can’t do that.

KT: She waits for me to give her a thumbs up. But I—

Suze: I tried, everybody. I tried. And that’s what was important. You try. You try, but you know if you should or shouldn’t. All right, are you ready?

KT: Yes.

Suze: Your quizzy — and this is everybody’s quizzy. People loved your quizzy from Dennis last week, by the way. Dennis, don’t think that you’re gonna get that type of privilege over and over again. From Sherry: “If you only have $600,000 after the sale of your home and are 65 and still working and planning on working as long as you can, when you purchase your next home, should you take a small mortgage and put the rest of the money in the bank towards retirement, or pay for your home outright? The home that I’m thinking about buying will only cost $400,000, and I would then put the rest in the bank. Please advise.”

So, just to be clear — she’s going to have $600,000 after the sale of her home. She’s going to buy another home for $400,000. She’s going to put $200,000 in a bank or somewhere safe. She wants to know, rather than paying off this house in full for $400,000, should she maybe only put $300,000 down and take out a small mortgage for, let’s say, $100,000? What should she do — pay it in full or take a small mortgage out?

KT: Do we need to weigh in what other money she has? OK, then pay it off, because I think you’ll feel great not having any debt or mortgage and you’ll have an excess of $200,000.

Suze: What if she would feel great having $300,000 in the home and a $100,000 mortgage? What if she would still feel great at that?

KT: What’s the mortgage gonna cost?

Suze: Depends when she does this.

KT: It’s gonna cost something and it’s probably gonna be higher. I personally would pay off the house, and with that extra money probably make more than what the mortgage is gonna cost her with the extra $200,000.

Suze: All right. So is that your final answer?

KT: Well, that’s — I think that’s my smart answer.

Suze: That means that’s her final answer. And are you ready, KT?

KT: Yes!

Suze: Ding, ding, ding.

KT: Oh yay! Well, you always tell people if you can pay it off, you’ll feel so good. But the mortgage rates are going up, up.

Suze: No, actually they’ve gone down the past few weeks. All right. But anyway, here’s the reason, Sherry, I would like to see you pay it off in full. Why? Because in my opinion, nothing makes somebody feel more secure than owning their home outright, especially when it is a woman. And you never know — even if it were a small mortgage, $50,000 or $100,000, the interest rate on that mortgage still, no matter what it is, is going to be higher than most likely the interest rate that you would get on this money if you wanted to keep that money safe and sound. I wouldn’t want you to take that money that you did a mortgage with and invest it in the stock market. I would want you to keep it safe and sound just in case, just in case something happened. You never know what could happen. And as you just heard KT tell the story with my own life four years ago. Anyway, therefore, I just wouldn’t do it.

Listen, you’re going to have $200,000 of extra money — do what you want with that money, but don’t play around with a mortgage. Now, one other reason why — if you have a mortgage, you have to insure the house because that is a requirement of a mortgage. You may decide that insurance is too expensive on this house and you want to self-insure, or when the time comes for you to do this, you might not be able to get insurance on your home depending on where the home happens to be. So can you just do me a favor and make your life easy and buy it outright?

KT: Remind her to do one more thing. She’s 65 — the title of the new home has to be in a trust.

Suze: Be in a trust. If you want a trust, a will, an advance directive and durable power of attorney for health care and financial power — $2500 worth of state-of-the-art documents — and you would like to do that on your own, you should go to musthave-docs.com. $99 currently. You will get documents that are good in all 50 states, $2500 worth as I just said, as well as all updates are free and you can share them with as many family members as you want.

Suze: All right, KT, what is it that we want everybody to remember?

KT: Remember this, everyone — people first, then money, then things — and you will be...

Suze: Unstoppable. Bye-bye, everybody.