Podcast Episode - Ask KT & Suze Anything: Can I Afford to go on Vacation?

On this edition of Ask KT and Suze Anything, Suze answers questions about emergency funds, credit card debt, leaving assets to children, reverse mortgages, plus a “Can I Afford It?” quizzy and so much more!

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Podcast Transcript:

Suze: May 9th 2024. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen today is what KT?

KT: Today is my brother's birthday.

Suze: All right, tell everybody about your brother's birthday. Go on, go on

Suze: What you were supposed to say there is today is what? Today is Ask KT and Suze Anything.

KT: They know that. There's millions of people that have been listening to us for years. They already know that. Let's tell them something. They don't know. Today's my brother Bob's birthday.

Suze: Are you telling them what they don't know? Are you telling them something they need to know?

KT: What they don't know.

Suze: They don't need to know what's coming up here.

KT: We always called him the Mother's Day baby because it was Mother's Day weekend in May that he was born.

Suze: Nobody knows who you're talking about.

KT: My brother. I said my brother Bobby's birthday.

Suze: And how old is he?

KT: I have no idea, but he's younger than me and he lives in New Jersey.

Suze: What does that tell you?

KT: He makes the best barbecue chicken.

Suze: That she doesn't know how old her brother...

KT: How old is your brother?

Suze: Well, one of them is going to be 80 believe it or not.

KT: And what's the other one?

Suze: The other one is gonna be 77. He was 77.

Suze: Ok. So it took you a little while to get that. All right. Let's get on with it.

Suze: But I got it out.

KT: Let's get on with it.

Suze: I have to say something before we start. As you know, this is Ask KT and Suze Anything. So if you want to ask a question in the hopes that Miss Travis picks it to be answered on this podcast that you have to write into Ask Suze Suze podcast at gmail.com and we read them and if KT likes it, she chooses it. But this is what I want to tell you.

Suze: You don't necessarily get a notice back that says, oh, we're gonna be doing your question this week. So you have to have to listen to listen. If we just listen, just listen. That's number one, number two, I want all of you to go and join up for the Women and Community app. You do that by going to Apple Apps or Google Play.

Suze: And the reason I want you to do that is that is where I post charts and I make comments and things that you should know sometimes photos and sometimes photos that I don't post anywhere else. But recently I posted for everybody that there seems to be a scammer out there who is using my picture, asking you for your email making it sound like they are me. I'm gonna tell you this right now and this will never ever change. Suze Orman herself will never want your email address. Your phone number. Any information about you. When you go to myalliant.com and you take the quiz and you put your email in there. That's for myalliant.com for Alliant Credit Union. Not for me. I would never see your emails there. I would never see your names there. That is private information between you and Alliant and it will be there by the way and you only have till June 5th my birthday to do it. Where if you go to myalliant.com and take the quiz, that's right there.

Suze: Put in your email, one of you will be selected and win $5000. All right, KT.

KT: You ready?

Suze: No.

KT: Are you ready?

Suze: No, there's one more thing.

KT: What is it?

Suze: What is one week from today? Think about it. Think about it. This is your quizzy. Think about it.

KT: We are leaving for our safari, Suze and I are going on safari with some family members. We are so excited.

KT: This was a promise we made to Travis and Sophia when they were, I think six and nine years old They were very young. They were so young they couldn't go on.

Suze: Of course, Aunt Susie said, one day we'll take you when you're older on a safari. Well, guess what? Now that they're in their mid twenties, we decided, All right, they're older.

Suze: Why are we doing it now, KT?

KT: Before they get married?

Suze: Because who knows if we're going to like who they marry. But let's just hope we do.

KT: Ok. First question I have is from Vena. She's, by the way, Suze, she's 52 years old. Just keep, keep that in mind.

KT: So she said Suze, would it be ok to withdraw $10,000 from my Roth IRA to increase my emergency fund? I currently have 9000 in emergency funding in a high yield savings account with Amex. I've been maximizing my Roth IRA for the last nine years. So sweet.

Suze: Right, girlfriend. Listen to me. Have you ever heard say before that it's absolutely ok to use your Roth IRA as a substitute emergency fund. And why is that because any money you originally put in to a Roth Ira, you can take out at any time without taxes or penalties regardless of your age or how long it's been in there.

Suze: So, if you were to take that $10,000 right now that you have in your Roth, that maybe it's just sitting in cash or whatever, why not just put that within the Roth IRA into a high yield savings account wherever you are holding it. So you are making the exact same interest rate is probably you're making on your savings account outside of your Roth. So just do it that way. But no, don't take it out of the Roth to put it in a high yield savings account since you can do it within your Roth. All right. Ok. Next question.

Suze: Should that have been your quizzy?

KT: No

Suze: No, no, because you would have gotten it wrong.

KT: No, I would have definitely gotten it right. You don't take money out of the Roth to put into an emergency fund savings account. It goes the other way.

Suze: And the other thing, I just have to say one thing for everybody, the reason that I don't have a problem with you using your Roth IRA as your emergency funding is because number one of what I just said that you can take it out any time you want without taxes or penalties. 

Suze: However, there's a limit every year you can only put in depending on age seven or $8000 this year into your Roth. As the years go on. If you don't take advantage of those contributions, then you've lost that ability. So let's say all of a sudden, you not only have a lot of money in your Roth emergency fund, but now you were able to also save money in a high yield savings account somewhere that is your emergency fund, then the money that's in your Roth that you wouldn't have had in your Roth. Otherwise you could start investing for your retirement. Brilliant, brilliant strategy if I must say so myself. All right.

KT: You are brilliant. Ok. Next question is from Laurie. Hi, Suze. I have $18,000 in credit card debt.

Suze: Ok. That's good.

Suze: Could have been 30 it could have been 50.

KT: It should be zero. Laurie, in my opinion.

Suze: But listen to me, you shouldn't feel bad because you have $18,000.

KT: Laurie has a plan and she needs your advice. Is it better to get a new credit card that I can transfer my balances over to and pay it off in 20 21 months with zero interest or make the minimum payment plus the interest so I can pay it off faster.

Suze: What you didn't answer in your email or tell us about, Laurie was what is the current interest rate that you are paying on your credit card? I bet any amount of money it's above 0%.

Suze: So for $18,000 would I do a balance transfer? The question isn't, would I the question for you is, can you because if you don't have a really great FICO score in most cases, 760 or 780 or above, you're not gonna be able to do that. But you should at least try to see if in fact somebody accepts you. 

Suze: It is also possible that when you do a balance transfer of $18,000 you're going to have to pay approximately a 3% balance transfer fee to get it into your new card. Therefore, about $540 is going to have to be paid to do that.

Suze: However, at $18,000 at 0% versus $18,000 on a credit card, a lot higher than that. I'm sure it is if you can absolutely worth your while to do a balance transfer at 0%. Next question, KT.

KT: Ok. This is from Eleanor. She said, Suze, my husband died in 2019. I took his social security as a widow benefit at the time I was 65.

KT: I've continued part time work and wanna know that when I turn 72 can I switch to my social security? As I think it will be more.

Suze: So, first of all, we always, it's so sad. It's so sad when any of us lose somebody that we love.

Suze: And even though it's five years ago that that happened for you, Eleanor, I know there's always still pain, there will be pain forever on some level, but still our condolences go out to you even at this time. First of all, it's not when you turn 72 it's when you turn 70.

Suze: I think a lot of you, by the way, are getting when Mac Social Security is for you because of when it used to be 72 for your required minimum distributions from your retirement accounts. Now, by the way, that is 73. So after the age of 70 your social security does not continue to increase like it did from your full retirement age all the way up till 70. So, yes, you can absolutely switch to your social security if your social security is higher than what you are getting right now in widow benefits. That's the answer. Go on KT.

KT: Ok. This is from Julie Suze. You're on a roll this morning. I like it like the energy from Julie. I'm 66. I own a home with about $80,000 in equity.

KT: What document do I need to have in place for my sons so that they will be able to take ownership and sell my home. I'm assuming when she passes, but she didn't say that.

Suze: So it just depends on your situation really as to, are you gonna be keeping this home? Are you selling it? Obviously, you could put the name of your sons on your home as joint tendency with right of survivorship. So that the day that you die, it automatically passes to them. But then there's all kinds of things that can go wrong with that scenario, meaning that maybe your house has gone up significantly in value since you purchased it.

Suze: And if you do that, then you're giving your sons your cost basis on the house as well. So the truth of the matter is the best way financially to pass an asset like a house down to your children is by having a revocable living trust where their names are the successor beneficiaries. Obviously, you would be the primary beneficiary. You are the trustor, the one who has created the trust. You are the trustee, the one that decides. Do you want to sell it? What do you want to do with it? Do you want to eliminate one of your sons? What do you want?

Suze: And you are the beneficiary as well, the primary beneficiary because it's held for your benefit while you are alive on your death. It goes to your sons as the successor beneficiary. That is the correct way that you should do it next KT.

KT: OK. This is from Donna. Hi Suze and KT. You are both such a blessing. Thank you for continuing to shower us with financial wisdom.

KT: I think she means you.

Suze: Don't you ever put yourself down.

KT: I'm not.

Suze: Don't say I think it's you, you...

KT: I think it's you that shower us with financial wisdom. I asked the questions.

Suze: I want you to listen to me, Miss Travis and you listen to me right here. And right now.

KT: Slap down, slap down, Everybody that's called a Suze slap down.

Suze: Your love, your generosity of spirit, your entire being of who you are combines everything I have ever said about money. Money isn't just about money. Money is not just about what you have. It's about who you are as well and you bring to this podcast, the love and the understanding and all of it that is needed. So you are vitally important.

KT: Thank you so much. So, this is what Donna is asking. I've been blessed to be in a position in which I earn too much money to qualify for a Roth. How can I establish and fund one now with at least a dollar for future conversions?

KT: And then I love this. Your podcast is the best part of my Thursday morning. So I didn't know you can fund it with a dollar.

Suze: Well, you could actually fund it with anything you want. And the main reason,

KT: I mean, as little as a dollar...

Suze: As little as 50 cents if you want serious, stop it, KT don't get me off track here. I see. Right now, I complimented her and now look at her like, now she just wants to take over the entire podcast anyway.

KT: Ok, I do, but not today.

Suze: All right. That's good. So, here's the thing Donna is that the main reason that you want to start a Roth IRA is if you have money that's in a Roth 401k A Roth TSP A Roth 403 B, whatever, it may be a Roth IRA. A Roth Simple. You name it and you want to transfer it from where it happens to be at your ex-employer when you transfer it into a Roth IRA, then the time limit has already started and then you don't have to wait any time to do. So, does that make sense? 

Suze: The problem is when you convert, you convert from a traditional account to a Roth, regardless of how long the Roth IRA has been opened, the five year time period still starts every time there is a conversion. But given that you don't qualify for a Roth, I don't think I would be worried about it so much right now in your particular situation. All right.

KT: Hi, Suze. My name is Roosevelt. I'm 59 years old, single and living in Charlotte, North Carolina, by the way, I love your TV show. So he watches you on Freebie. All of you should watch the Suze Orman show on FreeVee.

KT: So, here's the bottom line. His birthday is coming up on May 17th. He pays $60 every three months for his insurance term insurance, but it's gonna be renewed at $160 every three months.

KT: What his concern is and he's got savings. He has a CD annuity. He has no expenses and his home's paid off. So, here's the bottom line. He wants to know. Should he drop the policy and just put money aside that will allow to be buried with his loved ones in California in LA. That's his question.

Suze: So wait, give me this for just one second. Let me see it because usually there's a lot of information on these emails that if we read it, it would just be way too long.

Suze: He has a lot of money in savings. He's fine. He has one son, 36 years old who lives on his own. So here is the real question, everybody. Do you want insurance or do you need insurance? If you simply want insurance, don't waste your money if you need it. That's another story. So I have to tell you, Roosevelt, I would not be doing this. You have enough money that you could just put $10,000 aside or whatever it is and just pay for it on your own. But insurance is not the way to do it, by the way. Happy birthday. All right.

KT: Ok. Next is from Lou Ann. Hi. I don't know where to start.

KT: I love these. I don't know where to start. Oh, no, I don't know where to start.

KT: So basically she feels like she's stuck. She said I have a small IRA around 150,000. A nice checking account, small savings. I live in a condo. I can't stand it.

KT: She can't stand the condo. You never know till you move in. I've been here for one year and four months. So she definitely wants out Suze. She's counting down how long she's lived in her condo.

KT: She said I want to move. I feel like I'm stuck. I don't have a big down payment after sinking a lot of money in this. Not so nice place, any suggestions?

Suze: So it's a little confusing. KT, well, she's been there a year. She says I don't have a big down payment for a home, for a new home. What happens is she sells this one? She has to, she wants to sell it. So here's the thing, Lou Ann, there's people first, then money, then things, you've heard me say it over and over again. You cannot continue to live in a place that you hate.

Suze: All right, you just can't do that it right. You can't feel stuck. You have to put yourself in front of your money. At this point in time, you are never stuck. Even if you have to take a loss to move somewhere fine. Now, there's nothing wrong with you selling it, getting out of there, maybe renting for a little bit until you can figure out where you want to live, what you really want to do and then see what you can afford and what makes sense. But put that condo on the market right now. 

Suze: Now I just have to say something. I'm the one who put the word hate into Lou Ann's mouth. She says she can't stand it. That's how she said it. That translates to me. She hates it. Figure out the money later on, I have another real estate one I picked because this one made me like, whoa, these things happen.

KT: This is hi, Suze, my wife and I will retire in about eight years. Our home will be paid off in 10 years. We have an emergency fund. We have no credit card debt. So the home will be paid off in about 10 years. We would love to stay in this home until we die. We do not want to leave the house to the Children. We do have a will and a trust. My question is, is there any way to get cash out of our home without refinancing a home equity loan? Would you recommend a reverse mortgage? We would like to cash out the equity which is about half a million dollars instead of moving, selling or leaving it to the Children.

KT: So they basically want to live off this home and die in this home.

Suze: Ok. Ok. Now my dear Teresa... KT, what do you think?

Suze: They don't want to leave their house to their kids?

Suze: Not a big deal.

KT: I think they want to retire and actually use the equity in that home to live on so that they, you know, they don't want to leave. They definitely don't want, don't want to leave that says do not in capital letters.

Suze: But Teresa, here's the thing I need you to understand in this email, you say that you're going to retire in eight years and then you say that your home will be paid off in 10 years. You did not tell me how old you happen to be, but when it comes to a reverse mortgage. You have to be at least 62 years of age or older. And the very best circumstance to do a reverse mortgage is when you own your home outright. There are other ways that you can do it, even if you don't own your house outright. But I wouldn't suggest that. 

Suze: So we are now looking 10 years off from now and here's what I'd like to say to you a lot can happen in 10 years. So to be thinking about what is the best way to do it right now in 2024 when really the answer to this question will be revealed in 2034 believe it or not is what I want you to remember. Number one, number two, let's just say you retired, the house is paid off. You're 62 years of age or older. Would I recommend a reverse mortgage simply for you to get money out of your house? 

Suze: Now, as you get older, things really do change your health, the maintenance on the house may get harder, things change things in the house, start to break 10 years from now. And if you do a reverse mortgage, you're pretty much locked in to keeping that house no matter what normally until you die. Because even if you then decide later on, you wanna sell it, you're not gonna get the equity out of it that you really think you have in it. So if you need a reverse mortgage to stay in that home,  I ask you at the time when this will become relevant to you, that you really think about that because if you need a reverse mortgage to stay there, I would be telling you that is your first indication that you need to sell it and move somewhere that you can afford where you use the equity in your home to your advantage. 

Suze: So what you think you want right now may not be on any level, what you want 10 years from now. So just think about that. All right, KT.

KT: This, this um next question is very interesting. This is from a Melissa who met you at 11. She was 11 years old

Suze: Or in 2011.

KT: At 11, I met you at a book signing. No, she said now I'm 39. No, she was 11 years old, ready. So we're old. That, that makes sense. 11 years old. So 20 years later, I met you at a book signing which inspired my journey to financial independence. So you really influenced her. You're gonna like where she's at.

KT: I'm 39. I'm a single mom of 2, 10 and 12 years old. I manage full financial responsibility. I own my home outright. I built a rental property on her land, I suppose I hold a corporate position with max contributions to retirement, ready, ready, everyone. And I have investments totaling around $4 million.

KT: So, Suze Orman, you made an impression on an 11 year old little girl. Now. Ready? Wait, wait, wait, this is, this gets even better after a tech layoff. I'm in a less fulfilling W-2 job. That means she gets a paycheck everyone. But she enjoys some side consulting though. It lacks FTE benefits as I navigate this time, employee benefits. As I now is her question ready? This is it. I'm getting to the question as I navigate the crossroads, she's 39. Everyone. What advice would you give me? And how long should I work now? That's very interesting. She's 39. How, I mean, it seems like she's done more than an average lifetime worth of self accomplishments and financial savings.

Suze: Go back to when you were 11 and you met me and think about what is it when you met me that allowed you to become who you happened to be?

Suze: Because it would seem to me that you are somebody who is very in touch with who you are and what you want to be.

Suze: And maybe you looked at me at that time and you said, oh, now that's a woman who knows who she is. Oh, that's a woman who knows what she wants to be. Oh, that's a woman who loves doing what she is doing and what she does.

Suze: And I have a feeling that you have the ability to know that about yourself as well. You are probably in a situation that you never really have to work again for money. You need to understand that the crossroads that you stand at which are so fabulous. It is your choice which direction you wanna go. And if you start to go down a direction and you don't like it, it is your choice that you get to do a U turn. It is your choice if you want to try the other road or not. And again, if you don't like it, you can turn around that you have to reside in your own power, you have to reside in knowing what you want and what makes you happy. But more important than anything. You have two little ones that are 10 and 12. They are right where you were, you were in the middle of those two kids when you first met me. So let them meet a mother that represents the same qualities that I represented to you that day. So that your two Children grow up to be exactly like you.

KT: Wait, I'm giving her a standing ovation. That was, that was great. That was like Suze standing in her truth.

Suze: Now, KT, we're almost ready for your quizzy. You have another one or a short one?

KT: Yeah, let's do Karen's, I'm 70 years young. I have no spouse or immediate family. I'm single. How can I tell if I have enough money to last till I die? Is there a formula I'm in good health. Please advise 70 years young baby, younger than us, baby. She's younger than us. How does she know what she needs in terms of money till she dies? We don't know how long you're gonna live.

KT: So, here's the thing, that's a question for God. Not Suze.

Suze: Well, it's kind of the same thing. No, just joking, joking, joking. Right. So here's the thing, Karen, nobody knows when they are no longer here that you know, that just will happen when it's meant to happen somehow. All right, you would look and see how much money do you actually have? How much income does it generate for you, including your social security, including all your possible other sources of income. How much do you generate today after taxes?

Suze: And is your after tax income enough to pay currently your expenses that you have, if it is now you are starting from a really strong position as time goes on. It is possible that you, in fact, may need more than what you need today. Maybe you need a helper, maybe who knows what it may be. So then do a calculation as to at a two or 3% whatever it is, growth rate on your money. Just so you can be really conservative assuming that you took out 4% a year from your accounts. How long would that last? You?

Suze: And then you'll kind of know if you have enough, will it last you until you're 100 years? Of age, will it last you till you're 110 years of age? If it would, I would feel pretty safe that you are ok. However, you just never know in life. So just do your homework, do that calculation. I think you probably will find out that you're ok. Now, if you're not, if you don't have enough money, given that you are 70 years young. All right. Find a sign job, do something else that brings in more money right now.

Suze: So you can continue to contribute to a Roth IRA. Maybe you pay down the mortgage on your home, but there's always something you can do.

Suze: She was smart enough to write in to ask Suze podcast at gmail.com. Are all of you smart enough? Derek was absolutely smart enough to write in and this is the "Can I Afford It?" quizzy for today's podcast. I will read this and you will all have to decide. Do you approve him or do you deny him?

Suze: And let's see if Miss Travis gets it right.

Suze: Dear, Suze and KT. You never left out. Are you? No? All right. Recently my mom gave both my brother and me $3500 each. Are you writing that down, KT and my little Suze notebook? All right, there we go. Mom told me I could use the money any way I wanted. 

Suze: However, she said it would be nice if I used the gift so that my husband and I would take a more relaxing vacation than we usually take. Ok, whatever that is. My brother, however, is an accountant and says that I should use the money for a vacation but should put all $3500 in my Roth IRA.

Suze: He says that for a person my age, I haven't saved enough for retirement, but a modest vacation relaxing with my husband sounds very attractive. So here are the numbers. if we were on TV, I would say Derek show me the money. Derek is 50 years old.

Suze: He takes home $2400 a month. His share of the household expenses come to $2140 per month. He has no debt other than the mortgage on their home, which has an interest rate of 3.8% and a balance of $88,720. His emergency fund is $26,100 and between his Roth IRA and his 403 B at work, that's a pre tax account there. He only has a Roth IRA is a traditional 403 B at work. What are you thinking, Derek?

Suze: It contains a total of $137,957.

Suze: Can Derek afford to take $3500 and go on a vacation. A modest one with his husband.

Suze: All right. Are you all thinking about that? Everybody

KT: I know exactly what my answer is.

Suze: All right. Do you all know if you're going to approve or deny Derek, KT?

KT: You are so denied, Derek

Suze: Really denied?

KT: Absolutely no. Listen to your brother. You're 50 years old. Take the $3500 gift, put it in the Roth and just forget it and set it, let it grow. You have $88,000 left on a mortgage at 3.8%. You've got...

Suze: We know what he has in savings. He doesn't have that much in savings and he does have one year of emergency expenses, doesn't matter. He's 50 years old. His brother's right. Final answer.

KT: Derek, you are DENIED. Suze goes DENIED.

Suze: KT is absolutely correct. Although you have to just hear me say it, you are just so denied. I can't even tell you  when you are given a gift. You should never look at the present value of that gift.

Suze: Yes, it's $3500 today. What you need to think about is what if I took that $3500? I listened to my brother, I put it into a Roth IRA and I left it there for the next 20 years until I was 70 over all that time, it was averaging about 9%. That's not a 9% interest rate people. One year it goes up one year it goes down. But in an average annual gain when it's averaged over 20 years, 9%. Do you know in 20 years from now that 3500 would be worth, what, $20,000?

Suze: How do you feel about that? Now, if just out of curiosity, would that have changed your mind?

Suze: So whenever you look at money, it's not what it's gonna cost you today, what is it going to cost you in future earnings in future growth? And then if you still want to do it and think you can afford it. Ok? But thank God you have a brother who's just a little bit smarter, then you. All right, KT that brings us to the end of another KT and Suze Anything podcast. So until Sunday, when we will have Suze school again, there's only one thing that we want you to remember when it comes to your money and what is it, Katie?

Suze: It's people first, then money, then things...

Suze: And if you live your life like that, you will be. What, KT?

KT: Unstoppable!

Suze: Yeah. Girlfriend.