Podcast Episode - Ask KT & Suze Anything: Should I Be Working Only For Health Benefits?

Suze and KT are back with another Ask KT & Suze Anything episode, where you’ll hear answers to questions about student loan debt, ETFs versus mutual funds, reverse mortgages and so much more.

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Podcast Transcript:

Suze: November 2nd 2023. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. Today. Today is the ask

KT: KT and Suze, I'm back. You have to tell everyone, I'm back. I'm in the studio.

Suze: Well, obviously they're hearing your voice, right? What's it feel like to be back?

KT: Fabulous. Boy, I missed sitting here with you, Suze.

Suze: You are so lying. I know she's lying.

KT: Everybody, did you miss me?

Suze: They did miss you.

KT: They actually didn't because Suze did some of the best podcast ever in the history of the Suze Orman podcast, Women and Money podcast without me, but it's not only November 2nd, tell them all about November 3rd with you and Chris Wallace.

Suze: What do you want me to say other

Suze: as you know, because I told you a few days ago when I was in New York, I did about a 30 minute interview with Chris Wallace and you all can see it starting tomorrow on Max is where it will be streaming and I had a great time with him.

KT: It was fun. Chris is funny. It was a great interview.

Suze: I'm so glad you approved. All right, KT.

KT: OK. So my first email is not a question. It's actually a statement and I like to share these because it helps all of you listening to realize what people are learning from Suze over the years. And, and this one was very moving.

KT: Said many years ago I started my journey to financial wellness. Thanks to Suze, I raised my four kids with financial intelligence. Yeah, I like this.

Suze: You know how I knew it was from Shelley because I answered her back. Right. Shelley has been somebody that over at least KT, even before you,

Suze: I've been communicating with.

KT: Well, when, when I read this, everyone will understand how far back you and Shelley.

Suze: So it's funny you picked it.

KT: Yeah, I, I liked it a lot. It said during my divorce settlement in 2022 small student loan payments of 6000 for each of my two boys was overlooked in the financial settlement because the payments were frozen. And so the loans were forgotten. Fast forward to today.

KT: And my two sons happily married with no other student loans. We were recently notified that they need to repay the loans. I was so upset and felt like I failed them. Here's an excerpt from the conversation we had after I apologized that we hadn't repaid the loans

KT: Ready for this Suze? Mom, it's not your fault. You were going through a lot. Thankfully, you raised us to never get comfortable to have an emergency fund, save our money and put people first. And we did.

KT: Now, within an hour of being notified, they both made $6000 payments and thanked me for raising them well. Suze, I wanna thank you for everything you have done for me and for so many other people who are better off because of the work you do to help people become financially intelligent, wishing you and KT all the best, Shelley. But here's the, the key. Everybody,

KT: her son said, mom, you taught us how to put people first, which means that Shelley's been watching you, I guess since the Suze Orman Show.

Suze: I ended every single Suze Orman show on CNBC with "And remember there's only one thing that matters when it comes to your money and it is this people first then money, then things now you stay safe." That's exactly how I ended it.

Suze: And Shelley obviously taught her Children well, now Katie, what questions do you have?

KT: Ok. I've got a whole little assortment here, but I'm going to start with a very short one.

KT: So this is from Sharon. Hi, Suze and KT. What are your thoughts on fixed rate? Annuities are annuities, a good investment.

Suze: So, as you know, annuity seem to be a keyword with me, but the truth of the matter is fixed annuities are essentially just like certificates of deposits where the insurance company

Suze: guarantees you a specific interest rate for a specific period of time. I don't have a problem with them.

Suze: You just have to know is the insurance company safe? Do they have a good rating? Are there surrender charges? And most importantly, do they guarantee you that interest rate for the entire time of the surrender charge? Because the last thing you want is a fixed annuity and a fixed annuity means the interest rate usually is fixed.

Suze: But the last thing that you want is a fixed annuity where the interest rate is fixed for only one year. The surrender charge to get out of it is five years. They sucker you in with a high interest rate the first year and then lower you way down years 23, 4, 5,6 or whatever it may be. So just make sure that the interest rate equals the amount of time of the surrender charge.

Suze: Also, you should only do an annuity if you are 59.5 years of age or older, not younger than that.

KT: So, Suze, why 59.5 or older for annuities?

Suze: Because what's interesting is when you do an annuity KT which is a contract with an insurance company while the money's in there, you don't pay any taxes on it.

Suze: So part of that means that you get to defer just like a retirement account, you get to defer the taxes on your interest. Most annuity companies allow you to take 10% out a year. But if you want to take out more than that and you're not at least 59.5 years of age, you're gonna pay a 10% penalty.

KT: Ok. So my next question is from Velly again, a short question.

KT: I am 55. My husband is 64. I know Suze, you recommend ETFs but those need to be done manually by me. And I feel insecure doing that. I'd much rather put the money in mutual funds, but I don't know which mutual funds to pick. So, do you have any advice for Velly?

Suze: So Velly, what I don't quite understand is why you feel ok, picking a mutual fund on your own,

Suze: but you don't feel OK about picking an exchange trade.

KT: No, she's asking you which mutual funds should I pick?

Suze: I'm asking you to tell you the truth. I don't like mutual funds as much as I like exchange traded funds. So listen to me closely,

Suze: you could do the Vanguard Total Stock market index Mutual Fund or the ETF version of that would be the vanguard total index ETF symbol VTI, what is the difference between the two?

Suze: Listen closely, take out your Suze notebooks for this seriously in exchange traded fund

Suze: trades every day on the exchange, which means you can buy and sell it at any time you want when the markets are open a mutual fund, however, can only be bought or sold at the end of the day when the markets close. So just imagine this, it's first thing in the morning, you hear some horrific news, something just has happened

Suze: and you really want to get out of the market, but your money is in mutual funds, you can't get out, you can place an order to sell, but you're going to get the closing price of whatever that mutual fund closed at that day. In exchange traded fund. You hear horrible news. You want to get out, you place your order to sell, bam, you are sold right then and there. So

Suze: I like exchange traded funds. I think if you're not comfortable with picking an exchange traded fund on your own, you shouldn't be comfortable with picking a mutual fund either. So let's start getting comfortable with exchange traded funds where you can do it yourself. Not a big deal. Vanguard total stock market index, ETF any of those I like. All right.

KT: Ok. So Suze, this next question

KT: I chose because I think people will relate to this, sadly, because of all the layoffs and changes within corporate America. So it said Hi, Suze and KT. I'm new to your podcast. I'm trying to absorb it all but a little overwhelmed at times. So this is what Kathy is her name. My husband will be 60 in January and I am 58.

KT: He was recently laid off from his job of 11 years. He was planning on staying for another 6 to 7 years then retiring. But as we know, we need to expect the unexpected. We have 146,000 in savings in a money market. We have eight different 401(k)s from past jobs and that's about 800,000. We also have 56,000 on our mortgage at 5.5%

KT: and they pay about $2000 a month. Now, Cathy says I'm working in health care at the moment, but my job is as needed. I could probably handle the expenses minus the mortgage.

KT: I know you would say to pay the mortgage off. But with my husband's job situation, would this still be the thing to do?

Suze: So, first of all, what I want to say to you is I get Kathy that sometimes it can feel overwhelming some of the podcast that you may be listening to. But if you start essentially at the beginning and work your way through, I promise you

Suze: you're not going to be overwhelmed, you're going to find that you have what it takes to do anything and everything with your money, little by little. So just stick with it and just listen to it. The great thing is there's almost 500 podcasts now, right. So it might take you a little while, but they're really not that long.

Suze: Yes, I absolutely would tell you to pay off the mortgage with your husband's job situation without a shadow of a doubt. Listen, your monthly payment is because I'm looking at your email right now is $2100 a month on a $56,000 mortgage at 5.5%.

Suze: Let's just say you have that 56,000, which you do because that's part of the 146,000 you have in savings is making 4.5 or 5%. That's two tho about $2200 a year.

Suze: That's taxable. So you are only earning in one year on this money

Suze: what it costs you per month for a mortgage payment. So you are essentially paying $25,000 a year

Suze: on a mortgage payment versus your $2240 a year in interest that you're making on that. So you betcha you should take that money as fast as you can and pay off that mortgage tomorrow. And then that reduces your expenses by $2100 a month, which you say in this email that you would probably be able to pay it off

Suze: given what you do. And if there was no mortgage payment with what you have now, so without a shadow of a doubt, you should absolutely do that. Why are you looking at me like that.

KT: I'm not just listening with great intent...

Suze: ...because you forgot

Suze: what my answers were like.

KT: I haven't been in the studio with you in like three weeks.

Suze: Have you missed me?

KT: Yeah.

Suze: All right. Go on. Next question, KT.

KT: So, Suze, this next one also about mortgages, but this is from Annie about reverse mortgages. A few podcasts ago, a woman who lived with her mom had a reverse mortgage and you briefly told everyone why you don't like them. So I live with my elderly mom as well.

KT: So Suze, when my mom dies, how long will I be able to stay in the house? And if the reverse mortgage has grown to be worth more than the house and if I want to stay here, do I have to pay what the reverse mortgage is owed?

Suze: Yeah, so complicated. I don't like reverse mortgages because these situations happen. So Annie, you will have generally speaking, you have up to one year

Suze: to stay in that house. But however, the reverse mortgage or the loan servicer, which is what they now have become

Suze: when your mommy dies, right? Is that there's usually an initial six months where they need to know. What is your plan for the house? Are you going to pay them back? Are you going to stay there? What's going to happen or are you going to sell it? All right now, the executor of your will or the administrator of the estate? Whatever it may be, or the trust

Suze: usually has the opportunity to request 290 day extensions to make these decisions. All right. So that's just for you to know in terms of you have a reverse mortgage and obviously mommy took this out a long time ago

Suze: and now she owes more to the reverse mortgage company based on the interest rate that was being charged than what the house happens to be worth. If that is the situation, you only have to pay back the reverse mortgage company, the fair market value of the home.

Suze: It's just that simple. Ok, in the reverse situation where the home is worth more than what is owed on the reverse mortgage. If you sell the home, you only have to pay the mortgage company back what you owe them. So that's how it works. Next question, KT.

KT: This is from Aunt Connie.

KT: Hi Suze. What is a reputable debt consolidation company? My niece can use. She has credit card debt. So for all the nieces and nephews out there, listen to what Suze has to say.

Suze: Yeah, you have to be very, very careful here because there are many consolidation companies that tell you the following. All right,

Suze: you have this credit card debt. Stop paying all the payments on the credit cards and ruin your FICO score. Then what they do is that you normally will pay them the money that you have normally paid the credit cards

Suze: and once you have ruined your credit score, they then go to the credit card companies and they make an offer and they say, all right, you owe $10,000 they'll pay the credit card company $5000 to settle.

Suze: And then you have to usually also pay this company a percent of what they negotiated the credit cards with. Now, that type of company is debt consolidators. You don't want a debt consolidator, you want a debt management company

Suze: and the best place to go would be to NFCC dot org. And that stands for the National Foundation of Credit Counseling. And what they do is they work with you. They help pay off your debts faster. They're a nonprofit corporation. Usually they charge 10 or $15 a month. I believe it is to work with them.

Suze: But what happens is they work with your credit card companies. They get the interest rate to go down hopefully to zero. You pay them and they pay the credit card companies for you every month.

Suze: So check them out and that's who I would be using. Stay away from debt consolidators. Next KT.

KT: This is from Kirby, Suze. I like this one a lot. A professor once said there will come a time in your career when you work for the benefit

KT: fits more so than the money I'm there. I hate my job. I want to leave but I'm 60 I need the health insurance. Other than that. I'm totally debt free is the health insurance marketplace. The answer for those in my situation.

Suze: So here's the thing Kirby is that you are never stuck in a situation you are stuck in how you think about your situation.

Suze: You are 60 needing health insurance at a time when most corporations can't find experienced help to help them right now, they're offering all kinds of incentives. Come work for me, come this because people don't wanna work today for some reason. So there is a massive unemployment thing going on with most companies. If you hate your job,

Suze: don't tell me, especially since you're debt free. That means you must have some money to carry you that you can't go and find a job that you like. Obviously you could go to the health insurance marketplace. You can always also, if you did quit your job, they have to offer you insurance for about 18 months, but it will be expensive. But Kirby, you have

Suze: to be more creative than this, but you don't stay in a job that you hate just because of insurance. You go out and find a job that you like that also offers you insurance. Just that simple. Yes, KT.

KT: Hey, this is from...

Suze: How am I doing, KT?

KT: This is my last question from Natalie,

KT: ready? Is this what makes me laugh? Hi Suze and KT. I've been listening to your advice since I was a teenager ready. My mom used to make me watch your show to learn about money. I love that. Natalie. Now, I love listening as I navigate middle adulthood and its major complexities. See, Natalie, your mom was right.

KT: My question is about why you recommend funding a Roth at any income level. I thought at a higher income level, it made more sense to max pre-tax retirement contributions

KT: given we pay the highest marginal rate on a significant portion of our income. Currently, when we withdraw money in retirement, our taxable income will be substantially lower than it is now. So there you go tell Natalie what your thoughts are.

Suze: Natalie. How do you know what your income tax brackets are going to be when you retire?

Suze: We are now in the United States of America facing a situation where we have so much debt,

Suze: Social Security is not secure. Medicare is not secure. There's only a few ways that they're going to be able to solve this problem. And one of them may very well be raising income tax brackets. The one thing that the government knows for sure when you put money in a retirement account

Suze: that you've never paid taxes on, they know for sure that currently by the age of 73 you have got to start withdrawing money from that retirement account. It's required

Suze: according to whatever tax bracket you're in at that time is what the taxes you will pay.

Suze: So you are investing today

Suze: in the known which is what your income tax bracket is today

Suze: to withdraw it sometime in the future for the unknown because you don't know what that amount of money is going to be, that you're gonna owe taxes on. I have a lot of money which is invest in the known versus the unknown. What's interesting in a Roth 401k or a Roth Ira.

Suze: There are not required minimum distributions. You don't ever have to start taking the money out. Even if you do, they will not count towards the income of your social security or the Medicare premiums that you are paying.

Suze: There's a reason why that they limit the income of people who contribute to a Roth

Suze: and it's a true advantage to be able to do a Roth. Therefore, I don't really care what income tax bracket you're in right now.

Suze: Relatively speaking, we're still in the lowest income tax brackets of our lives. Don't think that it's not possible that years from now we could go from 39 back to 50 back to a 70% income tax bracket when I first started, income tax brackets were at 70% had come down from 90%. So, don't think that can't happen again. All right. So

Suze: my advice to you, regardless of how much money you make, invest in the known, pay the taxes now and all of that money will be not only tax free for you,

Suze: it will be tax free for your beneficiaries when you die. Think about that one girlfriend. All right, KT. It is time for your quizz. Ok. Are you ready for this?

Suze: All right

Suze: now, quizzie time. Look at KT's face. I know I tricked her KT today. I'll just tell you this. KT today. Said to me, Suze, can this be my quizzie?

Suze: And it was this really short question that was so easy to answer. And I said, oh, not everyone knew the answer. No, but you did. I did, I knew I was gonna get it right finally. But so I said, sure, no problem KT.

KT: And, but she just pulled out a paper that's a lot longer.

Suze: I abruptly threw that question away.

KT: That was a good question.

Suze: It wasn't a great question, right? Because everybody did know the answer to it already, Miss Travis. So this one is from Janice

Suze: and everybody a quizzie is, you play along with KT, you really need to know how to answer this question. The goal of the Women and Money podcast is what for you to be able to answer every single question that KT asks, including the quiz. All right,

KT: Good luck, everyone.

Suze: Right. This is from Janice. Hi, Suze and KT. I have a question about life insurance. I am a 53 year old female. My husband is 56 and we have two sons, a 20 year old and a 15 year old. I have a $500,000 whole life policy

Suze: that costs $668 per month

Suze: and a 300,000 term policy at $93 a month.

Suze: Our house and two vehicles are not paid off those total. Approximately $300,000. Recently, I have been thinking of canceling the whole life policy. We have approximately 1 million in investments to include retirement funds. What should I do? Thank you, Janice.

Suze: What are you looking at the age of the their 56 husband? She is 53 their son, they have two sons, a 20 year old in college and a 15 year old.

KT: And so the 15 year old. Alright. Um

KT: This is a hard one. Get rid of the whole life.

Suze: Ding, ding, ding, ding, ding, ding, ding, ding. But what were you about to say? Why was it?

KT: It was difficult because I was looking at all of the amount of debt they still have that they're carrying and one of the things that is the 15 year old, there's no way that the whole life makes any sense. You all you need is term everybody.

Suze: So thank you KT, ding, ding, ding, ding, ding.

Suze: Logically I want you to think about this everybody. She's paying $668 per month

Suze: for a $500,000 whole life policy.

Suze: She's paying $93 per month for a $300,000 term policy. So even if she doubled the term to 600,000. If she had, when she bought it, she'd be paying 100 and $86 a month for $600,000 of terms. You see the difference there.

Suze: Insurance is never meant in my opinion, to be a permanent need. It's only meant to be there when those who are financially dependent upon you. If something were to happen to, you need the money. Janice, you only need to carry term insurance until your two sons truthfully are number one, about 23 to 25 years of age. So

Suze: that will be true in about another three years for your older son and really another eight years for your younger sum. So therefore the $300,000 term hopefully goes that long, even at your ages, you're still relatively young. Get yourself another like five or 10 year term policy. Once that's in place, drop the

Suze: whole life, there should be a cash value to that whole life policy and then you can take that cash value and put it towards what your car payment and possibly your mortgage. That is what you should do.

Suze: All right, KT, how was that?

KT: It was great. That was good. Do you like having me back?

Suze: Oh, of course. I like having you back. I love doing the Ask KT and Suze anything with you. So don't forget if you happen to have Max right? Streaming. Tune in to see me on. Look who's talking to Chris Wallace.

KT: It's a great interview, right?

Suze: And Sunday, I will be back with a Suze School. But KT, are you ready? Because we want each and every one of you to say every single day today wherever I

KT: go I will create a more peaceful, joyful, and loving world. And

Suze: if you do that, you will be unstoppable. See you Sunday. Bye bye.