Podcast Episode - Ask Suze & KT Anything: I Want Permission To Retire


Must Have Documents, Retirement, Taxes, Trust, Will


April 14, 2022

Listen to Podcast Episode:

On this podcast of Ask Suze & KT Anything, Suze answers questions from listeners about TSPs, wills and trusts, pausing funding retirement accounts, taxes, imputed income and much more!


Podcast Transcript:

April 14, 2022. How you doing today? Miss Travis? I feel pretty great, Suze. There you go now. Are you just so excited about tomorrow? You know what tomorrow is? Well, it's Tax Day. It's April 15. So, I'm are you not that excited? Is your positive tomorrow is Tax Day? Yeah, it's April 15 is always Tax Day, except tomorrow is Good Friday. So, your taxes aren't due until April 18. I just have to do this to our first thing. Okay. Got that wrong. Alright, what else is coming? Our anniversary is when? The 16th? The day after Tax Day, or two days before Tax Day. That's why I never forget Tax Day because our anniversary's the 16th. That's the day we met each other in person. The truth is everybody, we have three anniversaries. So, that's the first one that we celebrate during the year. That was great one. No, that's not why I think you should be excited and why? I know why. I know what Okay, everybody, I know why she's saying that. And I didn't think about it, but I've been thinking about it for months. We finally, after two years after two full years of COVID safety, we finally are having part of the family join us this weekend. So, I can't wait to see them. Especially little Will and Tommy J who are great great nephews and all they want to do is come to the island and ride on the fire truck. We have a fire truck here. So, they're very excited And I'm excited, we're all excited they are four and two. Right so we'll see how this goes. All right. Are we ready to start? Yeah. I picked out a great question. You say that every No, but this time I really switched them up and some of them I picked out the ones many that I don't know the answers to. Why. Why are you laughing at me, KT? Let's be honest. I do know a lot of the answers. It's like almost every question. Well this one is a military one. Ready? Hi Suze and KT. I enjoy the podcast and love challenging myself with the questions people write in and the quizzies. I love that you do that. Yeah. This is this is Katie. She's a girl after my own heart. As you probably are aware, the TSP will soon offer mutual funds for investment. The TSP system. I'm so glad she's asking this. Yeah. Well I don't know what actually aggravated me so much. I can't even stand it. Okay. The TSP system currently offers GFCS I Funds and lifecycle funds with target retirement years. Suze, can you provide your take on this mutual fund window? We will have an option of 5,000 different mutual funds. That sounds like a lot a lot of mutual funds. don't you think choices are better? No not something. Not when there's 5000. Are you kidding me? No, I don't. The high fees with this option started $150 in administrative fees per year plus $28 transaction fees and any other percentage fees associated with the mutual fund. No, I don't think that's good. 5,000. So what would you tell Katie? Stick with what she was doing with these index funds? Right. The ones that are already decided. Ding. Ding. Ding. Ding. That's what I would do. So, Katie, my dear. The TSP funds, which stands for Thrift Savings Plans have had great mutual funds in them for years. And TSP stands for Thrift Savings Plans and they're like the 401K plan for federal employees. All right. And the choices that they've always been given are the G funds which are the government security funds, The C funds, which are like common stock funds, like the Standard Poor's 500 index S funds, which is like the small cap index I funds, which is international and F funds which are fixed income bond funds, which you know, I do not like, and then target date funds. But all of these funds have performed exactly like all the index funds that I have been asking all of you to buy, just that simple. Their expense ratios are anywhere from. I think about 0.43% to .59%. They're low, no fees, nothing. Why in the world would any of you in the military or using any TSP want to go into a situation where you have to pay $150 a year in administrative fees plus $28 for transaction fees and other percentages associated with it. The biggest rip off I have ever heard in my life. I don't know why they're doing it. You don't need 5,000 choices. The choices that you have in the regular TSP that you always had are all that you need. So, I hate to say it seems like a money grab to me for somebody. Right that's doing this, and I wouldn't touch it with a 10 ft pole. Alright good. You cleared that up. Well first of all who has time to even look at 5,000 choices. Well, you know I always said to people that the more choices you give somebody, the more you confuse them. And one of the reasons really KT that I've always contributed to my success is I don't give people choices. It's like you do it do that, do it my way or go to the highway and get out of here. But it's I don't give you choices. I tell you exactly what I think you should do. And she is usually right. She's always right. Not always. You're usually right, okay, ready. Next question is from Double Dose, double. I don't know but Double Dose asks this. I have all of my documents, Suze checking savings all accounts with POD Beneficiaries not titled in my blended revocable trust or POD to the trust. What's POD KT pay upon death upon death. It's all she's saying. Or he whoever double doses it's a lady. So, she said, if I become in a situation where I'm unable to manage my money, does whoever I name in my financial power of attorney document allow them access to my checking and savings liquid money to handle this? It will depend. One of the reasons Double Dose that. I have been telling all of you that I want you to do a living revocable trust, which you have is because it has an incapacity clause. It's been notarized. There's a date as to when you signed it and therefore if anything goes wrong and you become incapacitated. It is that person, the successor trustee who you named in your trust that usually is able to take over very easily. Because why financial institutions are more apt to honor a Living Revocable Trust, then the financial power of attorney. And the reason that is, is because if you give somebody a financial power of attorney, you can revoke it anytime that you want, and the financial institution doesn't know. Did you revoke it? Did you not? There are also many things that can go wrong with it. So, the truth of the matter is if I were you, I would have my checking account, my savings account, everything titled in your trust. And that way you really don't have to worry about it because whatever happens to you, the person that you named in your trust will take it over and do something with it. The people that you have named for pay on death doesn't matter because you haven't died. So, until you die, the people that are to get this money via that way pay on death. You could also just leave it via trust. That's when they get it. But if you suffer in incapacity where you can't manage your own money, it will be the people who you named as successor trustees in your trust that will have an easier time taking over your accounts. Suze. The next question. I'm calling permission to retire. Alright, ready. This is from Michelle. Hi Suze and KT. I'm 56. I left the workforce. Oh, there you go. I Just think 56 is way too early to retire. For many reasons. But go ahead. Well, let me tell everybody why she's asking you the question. All right. Throughout my working years I've made anywhere from 0 to $40,000. I've averaged probably about 23,000 a year. I've always been good with my money. Currently find myself with a paid off home worth 400,000. A Traditional IRA worth 305,000 and 56 and a Roth IRA with 115,000. I have 80,000 in cash. And I will be eligible for a pension of $850 a month at 62. So, she said, I've always Yeah, she said I've always lived simply in a very few wants. What do you think, Suze? Why is it that she doesn't want to go back to work? She just feels like she needs a break. So, you didn't read the beginning of this. Because you're already denied her by just the number of 56. All right let me read to all of you. What Michelle does say in the beginning, she says I'm 56 and left the workforce in May of 2021. This is not the first time I have taken a sabbatical from work to regroup. I have always viewed work as simply a way to fund everyday life. After my breaks, I usually look forward to going back into the workforce. That feeling doesn't seem to be happening this time. Why do you think that she feels way? Right, so, first of all I can imagine why she feels that way. Truthfully, here's a woman who thinks the only reason you should work is to fund your everyday life. But the truth is Michelle, the reason to work is to fund your everyday life while you're working and later on when you are no longer working. So, it's during these younger years that you have to make sure that you have worked hard for your money. So that one day when you aren't working for money anymore. Your money is working hard for you. However, I think possibly KT is she retired in May of 2021. Look at what's happened to this world since May 2021. She's got nothing that's giving her hope, interest, inspiration, nothing. And you can't blame her. Like I don't know Michelle, we don't really know your life. But I imagine that if you look at life today, it's really very depressing. Truthfully, everybody looks at what's happening in Ukraine, how can your heart not bleed for what's happening? Look, it's what happening even in the United States, how everybody is fighting against one another, the left and the right this and that. It's like we have forgotten what it's like to be a whole society that loves one another, whole world that gets along. Nobody seems to be getting along anymore. That can make it feel like I just don't want to do anything I'm giving up. But girlfriend, you can't give up here. I was right with my initial answer, which is you're just too young. I want you to think about this logically you say you've managed to live on 23,000 a year after taxes, that's $1,900 a month. Where are you going to get that $1,900 a month from? You can't touch the money that's in your Traditional IRA because girlfriend, you're only 56 you can't touch it until you're 59 a half year of age, you have $115,000 in your Roth IRA. But even there you can only touch the amount of money that you originally contributed, the earnings on that money. You can't touch till you're 59.5 years of age. Sure, you have a house worth $400,000. But you're living in that house so you can't count it. You have $80,000 in cash. But you need that kind of money for what? In case you get sick emergencies. You know, you need a 12-month emergency fund at least. And again, Yeah, you're going to have an $850 a month pension. But that doesn't start until you're 62, six years from now. So, what are you doing? You're going to use up everything that you have and you're not going to use these years for you to make that $400,000 grow that $115,000 grow. Your assets grow. You're not going to be contributing to social security. You are really dooming yourself because I'm here to tell you absolutely will need more money as you get older than you do now. So, I know you asked me permission to retire. Not only am I not giving you permission to retire, I am begging you to go back to work and find something fun that you like or just change your attitude. Just change your attitude and understand that this is a need to continue to work financially speaking. You may not want to, but you really need to. All right. That was good needs and wants baby. Okay, next is from Denise. And in keeping with what you just said to everyone. Here's the comment. My friends stopped funding his 403B when the Ukraine War began. See what happens to people. He says he did so temporary. This should be a quizzie. He says he did so temporarily in order not to lose money while the stock market is so volatile. Is this sound advice? No, it's horrific. No advice. I would say no. No way Jose. It's horrific advice. This is the time. Especially if he has 5, 10, 15, 20 years or longer until he needs this money. When the markets go down. This is the time that you just want to keep dollar cost averaging into these markets. If your friends stopped altogether and all of a sudden, these markets turned around and started to skyrocket up like they did a few weeks ago, he's going to miss it. So, if you take your money out of the stock market during times like this, you will never get back into it at the right time. So, leave it in there and just keep dollar cost averaging into these markets’ month in and month out. It would not kill you if you haven't heard it yet. Listen to the podcast on April 10. Fabulous, fabulous podcast and that is what you should all continue to do. Okay go on. All right. Next question is from Nancy, it looks like the I bond can be established in the name of a Revocable Living Trust. How difficult is it to access the funds from a Revocable Living Trust? Do I need a copy of the trust? Well yeah, you know when you start it you do but it's as easy as pie to access it because remember it will go directly probably into your checking account as savings account which should also be in the title of the trust. So, there is no difference owning an asset in the title of a trust versus your individual name except you avoid probate. You have an incapacity clause in it that allows somebody to help you and things like that. You own your house in a Living Revocable Trust. Nothing changes your taxes don't change. Nothing changes except ease of when something happens to you. Suze, next question is from a net ready, where's your energy? Give me some energy girlfriend. That energy, Where's that energy? I've been following you for years and I actually follow your advice. I have a question though I invested most of my money into retirement before the Roth 401K was available then I went back to school had kids. So, the majority of my funds are in a Traditional IRA since funds I convert to my Roth IRA, it says KT's favorite are considered income. You have quite the reputation. I do, I'm glad you all listen to that Roth business. I have to pay income taxes on the rollover amount. Does that mean that my income used to calculate my Social Security benefits also goes up? Is this another benefit of rolling over funds to my Roth IRA? How would you answer that? KT? I don't know that. That's why I'm asking you. This is a little bit complicated for me. If it's considered so cute, I have to pay that cute everybody. It's a little bit complicated for me. My income used to calculate my Social Security benefit also goes up probably if its income, why wouldn't it go up? Everybody you are so wrong. Miss Travis. I can't even stand it because Social Security is based on earned income. Not just income. You know, KT, we get income for instance from investment from investment income from all others. It's not earned income. It's like saying, oh you have a property and you rent it out and you get income from that. That's not no, you need to have worked quarters like 40 working quarters to qualify for Social Security. It's not like you would qualify for Social Security if all you had was income from different sources that you never worked for. So, no Annette it does not calculate into your Social Security benefit. So no, your taxes go up. But your benefit does not. Okay, that's good news for her. However wait she says to this, is there another benefit of rolling over funds to my Roth IRA Yeah there is a benefit because when you go to take the money out of the Roth IRA guess what girlfriend that money is not going to count towards income which then can make your Social Security taxable and Medicare Part B premium taxable. So yeah that's why I keep saying to everybody, can you just do a Roth IRA a Roth 401K because it comes to play later on? Big time. Okay good. That's my next question. This is really cute. This is ready. Hi KT question you have another one. This is the part that's cute. Hi KT and Suze and Colo she loves her boys so much. It's not even funny. Yeah, I do love him. So, do you. It's here's the question I know you like questions to be brief and concise while do my best to keep it short. My husband and I are in our early thirties. Married filing jointly, we both have an Alliant Credit Union account it says and we both received our $100 bonus is good for them. We have an eight-month emergency fund and we do not have any debt besides our mortgage. We make good money to the point that we are almost no longer eligible to contribute to a Roth IRA. So, here's the question. Since our salaries may put us over the AGI limit for this year, would you recommend that we do a backdoor Roth so we can continue to put money into our Roth IRAs or should we increase our contribution to the Roth 401K’s knowing that our employer gives us access to a self-directed brokerage account. So, you know, we've been answering KT this question a lot lately. You want me to tell you the answer? Yeah, definitely do the backdoor Roth, is that right? No. Oh. I thought I would get that one right. All right come on. You were joking. I was so Mika and Casey listen to Suze's advice. You're not joking. She's lying everybody. She's lying. Don't lie to America. Actually, don't lie to the world. This goes all over the world. Oh God, what am I going to do with her? So, here's the thing. You could do both. If you have the money to do both, you could do the backdoor Roth if you want. But you could also contribute up to the max in the Roth 401K. If it's too much trouble to do the backdoor Roth, just do the Roth 401K’s. No problem. Especially because you get to do a self-directed brokerage account. So why not? But if you could do both you should. You really thought it was going to be a backdoor Roth. I did think that if they could do either or. Oh she's lying again, don't start with me. I thought that if you could only do either or, but you can do both. You didn't know that. I didn't know that everybody. Hi Suze and KT. This is from Lisa, everyone. We have two of our favorite people in this world. Have names of Lisa. Lisa Halliday and Lisa Earstbommer. We love you Girl. We call them Lisa H and Lisa E. Lisa. So, it says my mother in law has been in her home since 1968. She says they paid ready for this. That I love this. Her mother in law paid $18,000, I was going to say $17,000. For the family home with three bedrooms and one bath for their three-boy family. Their oldest son died in his 30s and her husband died six years ago. Now. My mother in law is living alone at the age of 87. The home is probably worth 400,000 today. And she wants to will it to the two remaining boys. How do we protect the real estate from capital gains when she passes? I listen to you all the time. And I think the answer is to put the house in a trust right. Of course, your Living Revocable Trust. And then she's simply asking Suze, am I on the right track. So yeah, Lisa, wow. Tell her how to get your trust. Well, more and more than how to get our Must Have Documents. The truth of the matter is that you don't have to worry about capital gains tax or any income tax because when your mama dies and she leaves it to the two boys. They will automatically get what's called a step up in cost basis to the value of what that house is worth the day that she dies. If that happens to be $400,000 and the boys turn around and sell it for 400,000 no income tax, capital gains tax, nothing on any level. The danger would be if while she was alive, she gifted that house to the two boys, then she would be gifting her cost basis of $18,000 to the boys. And then if they turned around and sold it, they would owe income tax on almost $380,000. So, she is doing it perfectly via a will. They're going to have to go through probate if she puts it and re titles it into a Living Revocable Trust that will avoid probate. So that will be more money in their pockets. For those of you who want the Must Have Documents which are a will, a trust, and advanced directive, a durable power of attorney for healthcare, and a financial power of attorney. Just go to SuzeOrman.com/offer and that's where you get $2500 worth a state-of-the-art legal document for $99. We've answered a lot of questions. So, it must be quizzie time. Make it quizzie time. Suze. Alright then it's quizzie time. KT. So I'm so curious to see if any of you including KT know the answer to this one. It's a little bit different KT. Hi KT and Suze. I am a retired 61-year-old woman and received my pension social security and a pension benefit from my deceased husband. I live quite comfortably on the amounts I receive monthly. Ready? Listen closely. Now I receive imputed income. Do you even know what that is KT? Alright so imputed income is you work for somebody and they give you a benefit, they give you a car for you to use. Maybe they give you a life insurance policy, but they give you something of value that you don't have to pay for, but you still owe income tax on that item. Okay go for it. Ask me the question. Why do you look like that? Well I'm trying to think of if I have any imputed income you don't have any imputed income. I don't pay you anything like that. Like it's a gym membership, things that normally if you were going to something that has a value but I didn't pay for it because it's a benefit of the company that you're working for but you still owe income tax on that benefit. Like our friends who are given these big jets because their CEOs of these companies. Guess what they owe tax on that, wow. Anyway. Besides the point I received imputed income that is reported to me on a W2 from my previous employer. Since this amount which is $780 a year shows as income on my taxes. I would like to contribute that amount to my Roth IRA as that. It is the only earned income I presently receive. Is that acceptable? Yes or no. Remember to contribute to a Roth IRA or a Traditional IRA. Everybody you have got to have earned income. It's reported on a W2. So, the question must be okay. Are you sure about that? No but I'm guessing that it sounds pretty good to me. If it's on a W2 right then it should be. It's okay to put it in the Roth. It's on the W2. That's right. So, for those of you can't make up a W2 everybody. No. But the point of the matter is a W2 is what you get when you have earned income. So, if you get a W2 or a 10-99 or things like that you have earned income. So yeah you can contribute up to the maximum amount per year or whatever your earned income is for that year. Whichever one is less. All right, KT tomorrow. I want imputed income. I want some you do you still wouldn't be able to contribute to a Roth. Alright, okay everybody. Wish KT happy family. Yeah. Let's have a great, great holiday weekend baby. And what we really want to do is wish all of you a very, very Happy Easter and Passover. May you all enjoy spending time with your families and offering prayers and hope to all those in this world who really need it at this point, I have a really blessed weekend everybody. All right, everybody. There's really only one thing that we want you to know when it comes to your money. What is it? safe, secure? No safe. I knew she couldn't get it right. Stay safe, strong, and secure. She got it. Right, everybody now. All right. See you soon. Bye bye.


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