Podcast Episode - Ask KT & Suze Anything: For Love and Money?

On this edition of Ask KT and Suze Anything, Suze answers questions about paying fees for investments, types of pre-tax retirement accounts and financial intimacy.  Plus, a great quizzy and so much more!

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Podcast Transcript:

Suze: July 11th, 2024. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. This is the—what is it, KT?

KT: Ask KT Anything with a bad cough and cold. I celebrated too much on July 4th, Suze.

Suze: You think?

KT: Yes.

Suze: Anyway, after July 4th, KT did catch a cold, and let's just hope she doesn't give it to me.

KT: That's why we're as far apart in the studio as we can be, which is a really small studio.

Suze: Anyway, wait, before we begin, I just want to thank all of you for the tremendous love sent my way for last Sunday's podcast, which was the loss of my good friend Judy Jacklin Belushi. Thanks everybody. It totally touched my heart. But before we begin, we want to wish somebody a happy birthday today.

KT: Mila, Mila, Mila — feliz cumpleaños! Mila is our incredible friend here on the island and she's from Peru, and she cooks every day the most amazing lunch for Colo and her husband Motto. Mila and Motto are Colo's best friends, and we just want to wish our sweet Mila a very, very happy and lucky day today.

Suze: Sweet. Let's get to it, KT, since we haven't been able to do this for a little bit. What's that that you're holding in your hand?

KT: So, Suze, what I'm holding in my hand is a Fourth of July story that actually came in from someone you know by the name of Laurie Seligman.

Suze: Laurie is who I lived with in Champaign-Urbana. She was my girlfriend at the time.

KT: Yes. She said it was July 4th, and off we went in your car. It might have been the Volvo, I'm not sure.

Suze: It was a 510 Datsun.

KT: Ok. She said they were going to the stadium in Champaign-Urbana. She said there was—

Suze: KT, it's Urbana.

KT: All right. They were going into the stadium in Champaign Urbana. Well, that's because you're from the Midwest. Everyone says “Urbanna,” you got that accent — “Kaaaathy,” right? And Laurie wrote, “Suze said we aren’t going,” and Laurie said, “I wondered.” You said, “We don’t need to go inside.” And she said, Suze, you parked outside and told me it was the same sky without a parking fee and we weren’t gonna be covered in ashes. Nor was the car when we left. And then Laurie wrote: Suze, you're so clever and you always were.

Suze: Oh, sweet. Right. It's true, KT though, we went to this little field because in Champaign-Urbana there are fields everywhere. And I just parked the car. We got out, I took out a little blanket that I kept in the back of the car, just because for picnics and things like that, and we lay down, looked up, and literally it was maybe one of the best fireworks nights...

KT: And you didn’t get covered in ashes.

Suze: And we didn’t have to pay for it.

KT: Clever, clever girl. Ok. So my first question, Suze, is from Linda. Hi KT and Suze. My husband and I have a brokerage account where we pay a 0.7% fee. While we trust our financial advisor, I'm not sure it makes sense for our children to pay a fee as they start their investing careers. Any advice?

Suze: Well, obviously their kids must be young still because they haven't even started anything. The true advice is, before they invest any money anywhere, they should be investing in a Roth IRA. If they have earned income, they should be participating in their company Roth 401(k) or 403(b) or TSP. And they should absolutely be investing that way. If they are maxing out those accounts, then should they be paying a fee? I don't think so. I think that they're better off just dollar-cost averaging into the Vanguard Total Stock Market Index Fund or something like that, or even buying slices of stocks that they like. And you know, we all still love Palantir, Tesla, Microsoft, NVIDIA. So I personally would be telling my kids, “How much do you want to invest? Open up an account at a discount brokerage firm and buy slices every single month of those accounts — especially Apple and Palantir.” All right.

KT: And wait, I have one more message for Linda — for Linda and her twin brother Bob. Happy birthday! It's my twin Lynn and I — our birthday is July 21st. I don't know when your birthday is, but I know it's in July.

Suze: Sweet KT.

KT: All right. My next question is from Sandra.

Suze: That was a twin win.

KT: That was a twin win, yeah — twin win. All right. From Sandra: “My husband opened a small business and makes good money. We've opened a pre-tax retirement account. We wanted the tax deduction to offset the taxes of a new business. Should we continue with the pre-tax account (which puts $3000 in our pocket instead of Uncle Sam’s this year) or should we switch to a Roth? Thank you for your help. You are both wonderful.”

Suze: Listen, Sandra, please listen to the podcast called “Don’t Be Partners with Uncle Sam.” That’s obviously on the Women and Money podcast and that will answer your question. And for all of you that are writing me — should I convert, should I do a Roth, should I do a traditional — make sure you listen to that podcast, “Don’t Be Partners with Uncle Sam,” and you will have no doubt what to do after that.

Also, one more thing. A lot of you are writing and asking, “I have $200,000, I have X amount of money, should I be converting it?” I am not going to be answering any of those emails. All of you need to go see a CPA and let that person know everything about your financial situation and let them decide if financially it makes sense for you in your particular situation — if you should be converting to a Roth or not, especially when you are near retirement. Some of you need money to live on from your retirement account — maybe then it doesn't make sense to convert. Some of you are a lot younger and it will make sense to convert. But I would check with a CPA to know your tax situation if you convert and how much you should convert every single year or not. All right, KT.

KT: Ok. Next question from Cheryl. “Thank you, Suze and KT for sharing all your financial wisdom and challenges in the quizzes.” That’s for me…

Suze: Wait till you hear her quizzy today — and for all of you.

KT: Question for you: “Is there an investment opportunity for high-yield notes for a minimum of $10,000? For this investment I believe they would pay 15 percent interest per annum sending a check monthly. My complete investment will be returned at maturity.” So is that possible, Suze?

Suze: Listen, here’s what all of you need to understand. I’m gonna tell you just a little Suze Story, KT, if it’s all right with you — we’ll save your voice today. It was when I was seeing clients way, way back when, and an opportunity came where if a client invested X amount of money, they would get almost twice the amount of interest that bonds and things were paying at that time. I thought it was such a great idea — why not? And I did it with two people's money, KT, right? I'll never forget this. Everything was good, and then all of a sudden I read in the paper how this company had gone belly-up. It was never a legit company to begin with. It wasn’t registered, it wasn’t on the stock exchange. I learned a really big lesson — the clients lost all of their money.

I felt so bad because I hadn’t done my homework. I went for a higher yield than what everybody was getting at the time, thinking I was so smart. Remember, everybody’s got to learn — you learn the hard way sometimes when you’re starting out. When I made money later, I paid those clients back everything they had lost. You bet I did. Helen Winter was one of the women I paid back — she died many years ago — but I paid her estate back, and the other woman’s as well. They were both very wealthy and didn’t care because they could afford to lose it, but I cared.

So the answer to this question, Cheryl, is: you’re asking, “Is this too good to be true?” Even the fact that you are asking that question means it is. You say they’ll pay you 15% a year, but they’ll pay monthly? Sounds like a Ponzi scheme to me. I don’t care if it’s legitimate or not — you aren’t to experiment on money that you have. Either the company is registered, it’s on the stock exchange, it’s a legitimate bond account or whatever — but I wouldn’t touch it with a ten-foot pole. Don’t learn the lesson my two clients happened to learn. All right, go on KT.

KT: Suze, next is from Moni. I love that name. You know, I love that. Last week, I think last Thursday, I had a name Peachy and this week I have Moni.

Suze: You know why I like the name Moni?

KT: It’s like money. How’s your money doing, Moni? How your money? You got money, money, money, money, money. Ok. Moni said, Suze...

KT: If you and I had a kid, do you think we would have named them Bill or Penny?

Suze: Or Buck?

KT: No?

Suze: All right.

KT: God, that’s the oldest joke you’ve been telling for way too many years. All right, ready. This is Moni’s question. “What are the top three to five things to do financially when getting married? And where do we get the advice on these three to five things?” So Suze, you’re gonna go for five?

Suze: We’ll see how many come out of my mouth as I see. What are the top three? What advice do you get on these things? I think it’s in the book *Courage To Be Rich.* There’s a whole chapter called *For Love and Money* that talks about everything that you should know about each other, the questions you should ask one another — all of those things before you say “I do.” You take vows when you get married. Part of the ceremony sometimes ends with “till death do us part.” I have learned that’s hopefully true, but usually that saying might be “till debt do us part.” Because when you have debt, the number one reason for divorce today — and one out of two people that get married, get divorced — is arguments over money.

So therefore, before you get married, what do you do financially? You become as financially intimate with each other as you are personally intimate. You know the person’s financial habits. So, what does that mean? You have to know: are they a spender or are they a saver? Are they a big tipper even though they don’t have money? You have to know their FICO scores. You have to each look at each other’s credit reports. You have to make sure that when you do get married, you pay all the bills together, you make all the investment decisions together. You have to have three accounts — yours, theirs, and a joint account. You really have to know: how do the families come into play? Do they have big families? Are you expected to buy gifts and do all these things for all the family members at holidays and things like that? Regardless of how much money you have, you have to know everything about them financially, intimately speaking.

And the number one thing for financial success is to stay out of debt. If all of a sudden you find that one of you is carrying a balance on your credit cards and only paying the minimum payment due, they have started going down the path of financial debt — credit card debt — which really can be the ruination of a relationship. There you go. Did I miss anything, KT?

KT: No, you covered it. Suze makes you not want to get married.

Suze: And do not make any large purchase without the spouse saying, “OK, we can do that.”

KT: Financial intimacy is more difficult than personal intimacy. We both learned that from years and years of listening to what husbands, wives, partners, spouses don’t know about each other.

Suze: And one last thing, KT — don’t spend a lot of money on a wedding. And if anybody has to finance the wedding by putting it on a credit card, you cannot afford it. You are denied. Don’t do it, don’t do it, don’t do it. All right, KT.

KT: Ok. Next question is from John. “Hi Suze, my wife and I recently got the trust completed. Yay John, congratulations! Do we put the trust as a primary beneficiary on all accounts — brokerage, retirement, savings, etc.? I know you have answered this before. So if you wanna just direct me to the podcast, I can try to find it. Thank you for all you do. You are awesome.”

Suze: So John, the only advice I'm gonna tell you is yes — in my opinion, you should put everything, meaning things that have a title (not your car, not things like that) but your brokerage accounts, your bank accounts, all of those things in trust. The one account that you have to be very, very careful of is if you are married, you are not to put that or an HSA beneficiary as a revocable trust — especially the primary beneficiary needs to be the spouse. And truthfully, on a retirement account, if your kids are of age (meaning they are no longer minors), they could be the secondary beneficiaries if you want on those accounts. But a trust should never be a primary beneficiary, in my opinion, of a retirement account of any kind or an HSA account, which stands for a health savings account. All right, KT.

KT: So just to follow up to that question and answer, this is from Carol. “Pick me, pick me, pick me! I’m so confused and just want to make sure I’m handling our estate correctly. My husband and I live in Ohio. In 2016, we had all the must-have documents completed. Now, 2024, we want to change our documents to turn over to our daughters to handle as they are of sufficient age. I updated all of our must-have documents. We contacted a lawyer and he said a trust was not required — that transfer on death is sufficient — but informed him: what if one of us becomes incapacitated, will we still be able to sell our house? He said for $350 he can come out and discuss the reason a trust is not required. Suze, what do you have to say about that?”

Suze: Listen to me closely, everybody. Now, it is true: if all you simply want to do is avoid probate for your children or your beneficiaries and have your assets passed to them without probate, just then do a transfer-on-death account or pay-on-death account, put them as beneficiaries of your retirement accounts, whatever it may be, life insurance — and it will avoid probate. But for me, avoiding probate is not the main reason that you want a living revocable trust. Many people become incapacitated — and who’s gonna pay your bills? Who’s going to write your checks for you? A lot of decisions have to be made. While it’s true that many of you think you can avoid that and not need to have a trust that has an incapacity clause in it that says who will make the decisions if you can’t do it yourself when you’re still alive — that a general financial power of attorney or a durable power of attorney and all those things can come into place — and that may be true.

But there are many financial institutions, and I have experienced this not ten times, not thirty times, not even a few hundred times over my career — when there was an incapacity, the client’s children had a durable power of attorney, they had a springing power of attorney, they took it to the bank, they did certain things like that, and the bank or the financial brokerage firm did not want to accept it because they did not know: was it still in effect or not? Because it’s possible that they could have given you power of attorney and taken it back, and the financial institutions don’t know if it’s still valid or not. So they’re very, very careful. When they have a trust, the trust is dated, and normally if there’s been a change in the trust, a new trust is provided, whatever it may be, so they feel more secure in following the directions of a trust than a power of attorney of any kind. So, Carol, what I would say to you is in my opinion, there is no downside to having a living revocable trust. There are many, many upsides to it.

Many of you say you have a power of attorney that allows your beneficiaries, if you become incapacitated, to buy or sell real estate. Who cares about the real estate? I care about who’s going to manage your money, who’s making those decisions, who’s going to write your checks for you, who’s going to pay your bills for you, all of those things. And what happens if you happen to be in an accident and you have the pay-on-death account and the durable powers and everything and you’re incapacitated and that person happens to have died? Then what happens? Have you thought it all the way through? The mere fact that this attorney said for $350 — which is far more than you paid for the must-have documents — to come out and do such a thing tells the story there.

One last thing, and I know I’m going long with this, KT, but it’s important for those of you who are being told that a living revocable trust is not necessary. What I would do is whatever lawyer is telling you that, simply say, “OK, then here’s what I want you to do — on your letterhead, with you signing it, I want you to tell me that if I were to die today, what would my beneficiaries have to pay in probate fees or for your services so that I know that it makes sense? And I am going to give that to my beneficiaries to make sure that they hold you to that.” That’s what I used to tell people when they would come see me when I was a financial advisor — and Janet, the trust lawyer at the time that I shared an office with, would say, “All right, if you don’t want to believe us, go ask the attorney who’s telling you that and ask them that question: what would it cost if I become incapacitated and these documents didn’t hold up? What does it cost to go through probate to get a conservatorship and all of those things?” See what they say. It’s very easy to say you don’t need one, but what would it actually cost today given how you have set everything up? It’s not just about going through probate — it’s about incapacity as well. Check it out. For those of you who are interested in the must-have documents that Carol is asking about, go to musthave-docs.com and that is where you will find them — $2500 worth of state-of-the-art documents good in all 50 states. Currently, if you go there, I believe it’s $99 right now.

KT: It’s an incredible, incredible investment and great value. Just do it.

Suze: Right. But want to know why it’s such a great investment, KT?

KT: Because they need to.

Suze: No, because they can share it with all their family members. Every time they make a change on it, they can come back and it doesn’t cost anything. Just something to think about. All right, KT, what else do you have?

KT: So, Suze, I have a question from Susan. “Hi Suze. I have a 20-year $100,000 term life policy. It has come to an end and I can’t afford the monthly amount. Can I sell it? I’ve been paying $50 a month; now it’s going up to $435 a month. So I’m in a grace period of 30 days. What should I do? Any advice?”

Suze: I hope that this came June 14th, so you’re still good, girlfriend — you have just a few days left, obviously. So here’s the thing. The first question is: why do you need insurance? I get that you needed it 20 years ago. But now do you still need it? If you were to die, is there somebody still financially dependent upon you? If the answer to that question is no, then you don’t need any type of insurance anymore whatsoever. I don’t think you can sell it because it’s already come due — it’s up. If, let’s say, you had a 20-year level term policy, you were five years into it and maybe you wanted to sell it, there are places that you can sell it. Normally people can sell it when it’s a whole life or a universal life or whatever it may be, but there are some companies that will purchase term life insurances through what’s called life settlements. The best-known companies — and one of the largest — is Coventry Direct. There’s Abacus Life and all kinds of ones like that, but those two really are the biggest. But at this point, I don’t think you can. Hopefully you do not need life insurance anymore. All right. Ready for your quizzy?

KT: I think my voice is gone. All right, I’ll give it a shot.

Suze: All right, everybody, this is for KT and all of you — very short. “Hi KT and Suze, this is from Kathy. Is it OK to have taxable bonds in my Roth IRA?” You should see her face. Think about it, KT. A Roth IRA is a tax-free retirement account. You invest in it, you buy things in it, and when you go to take it out, if you’ve had it for at least five years and you’re 59½, everything in it is tax free. But can you put a taxable bond in a Roth?

KT: Well, you know what, Suze? It sounds like it’s a no, but I’m gonna say yes because it’s a bond.

Suze: No, not because it’s a bond.

KT: It’s a taxable bond.

Suze: All right. But you’re gonna say yes. But you’re not sure why you’re saying yes. Come on. Just be honest. It’s a yes or no?

KT: I’m going for the yes.

Suze: Ding, ding, ding, ding! Right — but for the wrong reason.

KT: Yeah, I guessed it.

Suze: Listen, you guessed it. I need everybody to use their logic here — who just guessed it?

KT: And I’m not ashamed to tell you all that.

Suze: They’re not ashamed to hear it either. Everything outside of a Roth IRA is taxable. If you buy stock and do whatever with it, KT, you’re gonna pay income tax on it. If you buy a bond within a traditional IRA — a taxable bond — you don’t pay taxes while it’s in there, but when you go to take it out, everything you take out, you pay tax on as ordinary income. No matter what you put in a Roth IRA, doesn’t matter if it’s taxable — it doesn’t matter. (Now she’s laughing.) Oh my God — tell everybody why you’re laughing.

KT: Don’t make me laugh. I can’t — my laugh sounds horrible. Um, I have a cold. All right, just get to the point.

Suze: The point is because a Roth is a tax-free holding vehicle. No matter what investments you put in there, they become tax free. The only investment you would not put in there is a municipal bond because it’s already tax free and the interest rates are lower. So yeah — is it OK to put in a taxable bond? Yeah. And you picked this and it makes sense because her name is Kathy.

KT: The reason I’m giggling is because Suze knows I would never know the answer to that one.

Suze: Suze doesn’t understand why you would not.

KT: If any of you out there knew that answer, let me know. I want to know what percentage of listeners knew that answer.

Suze: Maybe I’ll put a poll on the Women and Money app. But KT, there’s no such thing as tax on a Roth IRA if you meet the guidelines. So what difference would it have made?

KT: Ok. You’re right.

Suze: Of course, I’m right. Oh God. See — and it’s, what are you gonna say about it? It’s my fault, right?

KT: I lost my voice. Now I can’t talk, and you’re not supposed to whisper when you lose your voice. It’s worse. I can’t talk.

Suze: Don’t whisper.

KT: Let’s tell them how I’m going to be unstoppable.

Suze: All right, everybody. So until Sunday for another Suze School — I have to decide what that is going to be. I have no idea yet. There’s only really one thing that we want you to remember when it comes to your money, and that is anything that you put in a Roth IRA, if you follow the guidelines, is tax free. So stop it, everybody. Just understand that and just know it’s people first, then things—

KT: And if you follow those rules and listen to that Roth business, you will be unstoppable.