Podcast Episode - Ask KT & Suze Anything: How Do I Avoid a Hit to my FICO Score?

Credit Cards, Family, Must Have Documents, Podcast, Saving

January 18, 2024

For this episode of Ask KT and Suze Anything, Suze answers questions about CD maturities, correcting mistakes, caregiving and so much more.

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Podcast Transcript:

Suze: January 18th, 2024. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. And I mean, everybody, every single one of you today is what

KT: Today is the one and only Ask KT and Suze Anything podcast.

Suze: I think you're more popular than me.

KT: On Thursdays, I'm definitely, I override you big time. My ratings are much higher than yours. But wait, can we tell everyone about the, the Chicago grammar school reunion?

Suze: Since when do you need my permission to do anything?

KT: It was so much fun. But I, I wish they could have stayed with us all day.

Suze: But first you have to tell people what happened only because maybe they didn't even know my friends were coming.

KT: Ok. So four of Suze's friends that she's had from childhood. Do you believe it? From the south side of Chicago.

KT: We had Laurie, Leslie, Benji and Marsha. Benji and Marsha are brother and sister a year apart. Anyway, all four of them arrived to this little island on a, on a kind of rough flight.

Suze: By the way, if you want to see pictures of this, they are on the Women and Money community app, which all of you should be partaking in.

Suze: It's absolutely free, as is this podcast obviously, where you can download the women and money app at Google Play or Apple apps. Just search for Women and Money. Go on KT. 

KT: The best part of the entire visit was telling stories. And for me not knowing Suze when she was in grammar school and high school and being naughty in her teen years, I laughed all day long. I could have listened to those stories for days, but it was just very touching and they all cried when they left us, we had a fabulous lunch. We toured the island. We sat and, and it wasn't even nice weather. We just so enjoyed being together and especially Suze was moved that they came all the way from Chicago and Benji from Utah to be here. Unbelievable.

Suze: And went back crying. Leslie went back the very next morning, back to Chicago in the snow while she did that is beyond me. But Benji, when he got off the plane and I loved Benji so much. I still do. I can't tell you. And he looked at me, he said, Suze, I never thought I would ever see you again, with tears in his eyes.

Suze: And really everybody we never know when we're going to see somebody again, whether they're old friends or friends of today or family members, we never know what's in store for us. So live your life with understanding that everything you should do should bring more what KT? Joy, peace and love...

KT: And go Southside!

Suze: ... to this world Ok KT.

KT: So I'm going to start with a story and this is from Sarah.

KT: She said, KT and Suze, I started listening to your podcast last year and I'm loving it. You kept asking us newbies to go back to previous podcasts. So I did, I just listened to the Suze and KT's Formula for Financial Harmony episode on my way home from work and let me just say I loved you both before, but I really love you both now. And she said your explanation of how you met, how you both finish each other's sentences, made me smile and laugh. I am 47 years old and hope someday to find a love like yours. So the there's no question here. It was just Sarah telling us she loves going back and listening. But for those of you that haven't heard our formula for financial harmony. Go back to July 7th 2019 and have a listen. You will love it sweet. OK. So my first...

Suze: I just have to say to everybody that there's always hope. KT and I did not meet till we were 50. KT was actually we were 48. I was 49 when we met and then we kind of sealed everything on my 50th birthday. All right.

KT: Ok. So Suze, we have a question here and this is regarding Alliant and the CDs, which are so great right now with the rates. This is a question that said, for instance, Suze the 12 to 17 month CD, it shows the maturity date as being one year from today. So how do you keep it in for nearly 18 months? I hope my question makes sense.

KT: And this is from Sarah.

Suze: Just to be clear, everybody. The one great thing. Well, there's many great things actually, but about Alliant Credit Union is that you get to choose maturity dates, you know how sometimes CDs 12 month maturity and that's all they offer and then an 18 month of maturity, that's all they offer with Alliant Credit Union, which is why I love their CD so much.

Suze: Is that obviously $1000 minimum, but you can choose to get a 12 month or a 13 month or a 14 month all the way through 17 months where you can lock in the exact same rate as a 12 month, which currently by the way is 5.4% which is a fabulous rate.

Suze: But the way that you have to do that is if you're going to open up a certificate that has flexible maturities, like what I just said, you have to do it with the online banking or the mobile app once you have a savings account and are an existing member of Alliant Credit Union. So if you aren't a member of Alliant Credit Union yet, then all you can do is sign up for the 12 month or the 18 month or whatever it may be. 

Suze: But if you open up an account at Alliant Credit Union, become a member, put money in the savings account there, then you can transfer it from there and get a flexible rate CD. If that makes sense, it's really not that complicated, but it's just something that you should think about. Also, I just wanna say for those of you who have 12 month CDs, you did that maybe a year ago and now maybe they are maturing and you happen to sign up for just renew it. All you have to do is go on to the mobile app and edit your maturity date within the renew certificate option and select the date that you want to renew for. 

Suze: So if you add a 12 month and when it renews, you want to renew it for a 17 month or a 16 month, whatever it may be to lock in that higher interest rate longer, just do it there and select the date you want. And for those of you who don't know you go to my alliant.com and do what KT

KT: Look for, Suze, look for Suze's smile, everybody and click through these rates are great. So, take advantage of them. All right.

KT: So I thought that it would be interesting for those of you that listen, on a regular basis a couple weeks ago after Christmas we got an email, a sad one from a Christina who had lost her sister in law to cancer. And her sister in law had two teenage daughters and they came to visit at Christmas with their daddy.

KT: And he's told um Christina that he took money, I suppose the insurance...

Suze: All of the life insurance money...

KT: and gave it to an insurance agent bought whole life policies on the teens. And of course, Christina thought that was not a wise idea according to Suze's advice. So she asked Suze, how do I talk to my brother in law And maybe he can he cancel them? Like, what can he do?

Suze: And so then what happened, everybody after that is I told her on the podcast that you can, you have days to cancel it but be brave and talk to him about it. And I'm telling you this because sometimes when you make a mistake, it can be corrected. 

KT: So we just got this, we got this one. Listen to this. This just came in,

KT: Suze, thank you for your sage advice. I spoke with him and while he was understandably defensive at first, he said he would contact the agent and try to get out of the policies and find a new advisor.

KT: And then without listening to your podcast, I would have not understood the predatory nature of some insurance agents. My agent has tried for years to get my husband and I to transfer our term life policies into whole life for cash value.

KT: So everyone really listened to Suze's advice. There's a big reason behind it and it's not always in your best interest rather than the agent's best interest.

Suze: And again, not all insurance agents are of a predatory nature, but what you have to know is that everybody has to make a living and whole life universal and variable life are some of the highest ticket commission items out there were anywhere from 80 sometimes to 95% of the first year premium is the commission. So there's a tremendous financial reason why certain agents push it as you know, I will forever say, if you need life insurance term is the way to go in most cases, do not, do not do anything else.

KT: So the next question is from Anna. Suze, thanks for last Sunday's podcast. It was very informative. I changed jobs and rolled over my Roth 401k with the old employer to a Roth IRA. Does the information transfer about what portion is taxable, meaning the employer match versus non taxable, my contributions and gains associated with them. So, there you go. And she's thanking you for taking her through this journey of retirement.

Suze: It's quite the journey, isn't it my love. So, here's what all of you need to understand if you have a 401k at work or even a Roth 401k or 403 B or TSP at work, and your employer matched your contribution, which means you put in a dollar, maybe they gave you 50 cents for every dollar you put in up to 6% of your base pay prior to this year, really. If you have a Roth 401k, which is after tax, their contributions went into a traditional 401k. 

Suze: So if you work at a place like Anna did and you contributed to a Roth 401k, Anna, the contributions of your employer did not go into the Roth 401k. They went into a traditional 401k, then I'm sure you still have there. Now, starting this year, employers can put their match in the Roth 401k if they choose to, I hope they all start to choose to, but it's up to them. So when you then quit and you transfer your money from a Roth 401k to a Roth IRA, it's all after tax money for you, Anna. So you don't have to worry about how it's divided and how they keep track.

Suze: So you might want to check with your ex-employer and see if you still have a traditional 401k with them. Also, I just have to say, since we're on KTs favorite topic here, Anna, if you had started a Roth IRA years ago, put a dollar in it just left it and never even contributed more. You started the five year time clock that you all know about or should know about running.

Suze: So, therefore, when you go from your Roth 401k to a Roth IRA, possibly you've already met the five year rule that is in existence with Roth IRAs

KT: Tell them quickly what it is.

Suze: Oh, you have to look at past podcasts for that. But the advice there is if any of you have Roth 401ks 403bs or TSPs, can you just start a Roth IRA right now? Even if you just fund it for $1?

KT: All right. Ok. Next is from Paul. Suze.

Suze: As long as you qualify for one.

KT: All right, ready from Paul,

Suze: I like to interrupt you...

KT: Suze. I bought the must have docs that you recommend and I have all my properties in a trust. My investments are in a joint account with beneficiaries. If I have beneficiaries in my investment accounts, is it necessary to change to a trust? I don't know the advantages of switching to the trust.

Suze: This is one of my main jobs in life is to educate all of you on why I think a living revocable trust is a must have for every single one of you, whether you have a lot of money or you have a little amount of money. Now, as you may know, living revocable trust when you fund your trust and you put your assets into the trust upon your death, it passes to your beneficiaries without probate. But a lot of you think you don't need a trust because you own something and joint tenancy with right of survivorship with your beneficiaries and or you have a pay on death account. So upon your death, it immediately goes to them without probate.

Suze: But here's what I keep saying to all of you, what if you don't die? Even though you will die one day? What if you don't die and you become incapacitated? You don't know who you are possibly. You can't pay your bills, you know, nothing, none of those other things a will putting their name on it is pay on death isn't going to help you.

Suze: So if you put it in a living revocable trust and you name a successor trustee, somebody that can take over your affairs for you when you are no longer capable of doing. So then you don't have to worry about it, which is why all of you need a living revocable trust.

Suze: Obviously, if you want one in the trust documents that this gentleman is referring to just go to musthavedocs.com and you will see them there. They are $99 for $2500 worth a state of the art documents. All right, KT.

KT: Make sure you all get that. I have it. So does Suze.

Suze: Yeah, of course we do. Ok. Next

KT: This is a story and I'm gonna keep it really short, but it's something I think that many of us and many of you listening will totally relate to or relate to sooner than later. It's called Caregiving.

Suze: I read this one as you know, I read all the emails and by the way, if you want us to possibly answer your question on the Women and Money podcast, just send in your question to ask Suze, it's ask Suze podcast at gmail.com. And if KT chooses it, we will answer it on the podcast. But I read them, I scan them to pick out KT's quizzy and I read this one and I answered this person directly but go on KT because it's a good one. 

KT: Yeah, let me give you all the story, the back story. So caregiving, there's a gentleman that had elderly parents in their later, later eighties and they both became very ill and required help. So he left the state. He lived in, went to live with mom and dad to care for them. He's got some siblings, a brother and a sister. 

KT: So he's been taking care of mom and dad for the past few years and his cousin came to visit and she gave him a little break for a few days so he could take care of some personal matters. And the cousin realized what kind of a job this was to be a caregiver for mom and dad. So she said to the mom, you know, are you paying him? Are you compensating him for all of this, you know, effort and work for his sacrifice? And the mother said, well, gee, no, we didn't really think about it.

KT: So now the mom wants to compensate me. He said, but is there a way, Susie for my mom to compensate me and recognize my sacrifices monetarily so that we avoid later disputes from the siblings? The mom is looking to him for advice. Should she leave a savings account to me in a will write a check or something else? So there you go. These things happen and thank God for this cousin for realizing what work it was for him to do this. So what did you advise him?

Suze: Well, I just have to tell you, he also sent me a picture of himself with his parents. They're so cute and fabulous. It gives me goose bumps. The, the love that just exudes from the picture is beyond the beyond. What I told him was this. If this is something that mom and dad want to do it is their money, it is not the kids money, it is their money. And regardless of what the siblings may think about it or feel about, it doesn't really matter all that matters is what mom and dad want to do. 

Suze: So personally, especially because his time goes on. This person may be the one that needs to write the checks and pay the bills and everything like that is you might want to open up a joint account with joint tenancy with right of survivorship.

Suze: And so that if anything happens, he can write the checks, he can pay the bills. Obviously, he's trustworthy. But upon death, the money automatically passes to him without any will, any trust, anything like that because there's nothing anybody can do about it. 

Suze: Remember how you hold title to an asset overrides the wishes of a will. So even if mom and dad had a will and a trust that said all money was to be divided equally between all three kids. But yet mom and dad own an account in joint tenancy with right of survivorship with this one son upon death, all that money would go to him regardless. So that would be exactly what I would do.

Suze: Mom and dad can decide, do they want any of their money at all to go to the other two kids? And if they do designate what amount of money that happens to be and leave that via a trust or a will to the kids that's pay on death. But I think the majority of the money honest to God should go to this.

KT: So next is from Gloria, Gloria said, Suze, I plan to convert a traditional IRA to a Roth this year. Is there an ideal time to do this? The beginning of the year when the markets are down, are there any advantages to making multiple conversions throughout the year versus a one time lump sum conversion?

KT: That's a good question because I, I wouldn't know how to answer.

Suze: The best time to do it is when whatever investments that you are converting, that you tend to keep, because you can convert them, obviously in kind, it's called as investments when those investments are going down. Like right now, if you had energy stocks that you wanted to keep perfect time to absolutely convert them to a Roth IRA, then there are stocks that are skyrocketing right now.

Suze: You might want to wait and just see. Is there a pullback in them? What happens? So I would pick and choose which stocks I want to do. If the entire market was crashing and absolutely everything was down, then maybe you would want to do it in one lump sum. However, you don't have to do it all in one year. Remember everything that you convert will be taxable to you as ordinary income. So I don't know how much money you have in your pre-tax traditional ira. But if you have a lot of money, regardless of what the markets are doing, you would never want to convert it all at once because it might increase your tax bracket. So then the next best advice I can give you is to consult a tax person and make a plan as to how to do this. Ok, so that you're not hit with serious taxes. All right.

KT: Ok. Next question is, and this is my last one from Judy

KT: Suze. Currently my HSA is at a bank and getting pathetically low interest rates. I was wondering if there is any HSA A vailable at a brokerage house or even Alliant Credit Union that I would be able to invest some of the HSA money in T Bills or CDs.

Suze: For those of you who don't know an HSA A s a health savings account and a health savings account comes with what's known as a high deductible insurance policy. And it's where you fund a health savings account with pre-tax money. However, when you go to use it for a qualified medical expense, it's also tax-free, so fabulous way to save money. 

Suze: However, you want to know, where are you keeping that health savings account so that you're getting the highest interest rate. So there are great investment options for you and so on and so forth. So obviously this person is looking for an alternative to where they are. Alliant does not do that. However, you have many companies that do great health savings accounts like Humana, for one.

Suze: Fidelity happens to offer a wide range of investment options for health savings accounts including T Bill CDs and mutual funds. HSA Bank, they offer a brokerage account that allows you to invest a portion of your HSA in funds and a variety of investments including T Bills and CDs And there's another one called Lively, they offer a self directed HSA that allows you to invest in a variety of securities including T Bills and CDs. But it's really important to note everybody that not all HSA A roviders offer investment options. So it's really a good idea to research and compare different providers and ones that meet your needs before you sign up. 

Suze: So for moving your HSA to a new provider or investing any of your HSA funds, by the way, be sure really that you consider the risks, the fees, the potential returns associated with each investment option. Because remember this was money for your medical expenses. And really, it's also a good idea to speak with a financial advisor, believe it or not, who can't provide personalized advice and guidance based on your specific situation and goals. Do you know what time it is? Right.

KT: It's time now listen up everyone. It's not just for me, it's for all of you listening. Hopefully you get it right because I usually don't, but let's see what she has in store.

Suze: But I like doing these quizzies because it's not enough that I'm able to answer these questions for you.

Suze: You want me to answer no, but I want all of you to be the masters of your own financial destiny. I want all of you to own the power to control your financial destiny.

Suze: And the way that you do that is you start to learn the answers to these questions. So when you're listening to the Women and Money podcast, when you're listening to the quizzies, see if you can answer these. So this one is from Elizabeth. 

Suze: Hi, Suze and KT. I foolishly opened an airline credit card a while ago on a flight thinking it would be a great way to accumulate miles despite having accrued a reasonable amount of points. I have yet to use the card because the flights either have large layovers or no return flights and is therefore too restrictive. I don't want to continue to pay for a card with no real benefit to me, but I'm afraid it will take a big hit to my FICO score. I have a $16,000 credit limit. This card is in good standing and paid in full monthly. I just want to know when I cancel how I can best mitigate the effects to my FICO score.

Suze: Should she close the card just close it? Because obviously she is paying a yearly fee of probably 90 or $100 a year for this card or keep it open.

KT: I would close

Suze: But KT, she's afraid if she closes it because remember your debt to credit limit ratio, which all of you should know how much debt you have on your credit cards in comparison to the credit limit that all those credit cards have given you account for more than 30% of your credit score. So if she closes this credit card, she is then reducing her credit limit by $16,000.

Suze: And if she's carrying debt on her other cards, that will increase her debt to credit limit ratio, which will decrease her FICO score, which is why she's concerned. I ask you again, should she close the card or keep it open?

KT: And I say to you again, close it and be done with it. She'll feel great.

Suze: Final answer?

KT: Final answer.

Suze: Ding, ding, ding, ding, ding, ding, ding, ding. Right. Oh my God, you've learned something.

KT: It's not gonna affect her FICO score assuming she doesn't have any outstanding debt on the other cards.

Suze: KT got that. Absolutely correct. Which I'm just so thrilled about.

KT: I know about FICO. I'm good with FICO. Not Roth.

Suze: So all of you need to understand that if you don't carry any credit card debt, which means you pay off your credit cards at the end of every month. All right. So you really don't carry any debt.

Suze: What difference does it make if you have a $16,000 credit limit that has gone away because still really your debt to credit limit ratio is going to be zero. It's not going to be anything. So that's why you would do that. However, if you do carry a lot of debt on your other credit cards. Now, what I would do, Elizabeth is I would get another credit card that doesn't have any fee on it whatsoever. That gives you a $16,000 15,000 dollar credit limit. And once you get that close, this credit card down and everything would be the same. If your debt to credit limit ratio goes up, your FICO score will go down. You never want to have a debt. What you owe to credit limit ratio of more than 30%. So if you have $10,000 of credit limit, you never want to carry more than $3000 of debt. So that brings us to the end of the Ask Suze and KT and Anything podcast.

Suze: Remember there's only one thing that matters when it comes to your money and it is what KT?

KT: People first...

Suze: and when we say people first, we mean who? You.

KT: So people first then money then things...

Suze: and if you live your life like that, you will be unstoppable.

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