July 27, 2023
On this Ask Suze and KT Anything episode, Suze answers your questions about student loans, trusts and probate, finding your passion, ROTHs at an older age and more.
Music: Music (in).
Suze: July 27th, 2023. Welcome everybody to the Women and Money podcast...
KT: And everyone's smart enough to listen. It's KT here.
Suze: They know who you are. It's Suze. O, here. And this is the Ask KT and Suze edition of the podcast. So the main question everybody has
Suze: at hand Miss Travis was, how was your birthday?
KT: It was the best birthday ever, Suze went over the top. Everybody and wrote me the most gorgeous letter which I'm not going to share. She then made me an incredible video, a beautiful video with probably my most favorite song. It's an aria
KT: and it's just maybe we'll have to play that Aria. And then, and then she surprised me with so many wonderful things throughout the weekend.
KT: Um And we had a big sushi dinner and my sister Lynn had a good time. It was a, it was an uneventful, perfect, perfect weekend.
Suze: There you go. Everybody. So that's over. Thank God. Till next year.
KT: Yea, Suze's not a big celebration holiday. Birthday, Christmas, Hanukkah girl on any level.
Suze: Want to know the truth, but have no idea what we did on my birthday.
KT: We didn't do anything on your birthday.
Suze: See! I remembered. All right. What do you got?
KT: Ok. I've got a real mixed bag of questions here. So let's start with one that I found a little bit amusing from Brad. Right. Listen to this. Everyone, Suze, my Roth is in
KT: invested into two ETFs, VTI and VOO. Is it ok to be in both or should I just be in one? Do you even like VOO? I feel FOMO watching the market keep going higher but I will just keep dollar cost averaging like you say so ready everybody.
KT: VTI, Vanguard Total Stock Market Index. VOO is the Vanguard 500. But what stumped me, Suze was him feeling FOMO. Do you know what FOMO is?
Suze: It's fear of missing out.
KT: Yeah, and it's, and it's described as anxiety.
Suze: He's got anxiety, Brad just stay where you are. It's fine. VTI obviously just invests in a whole lot more than VOO but there's you since you have both just keep doing so. However,
Suze: in terms of fear of missing out,
Suze: that is very dangerous, just dollar cost average. These are still not situations where you should lump some into the markets. Just dollar cost average every month, month in and month out and maybe you won't make as much as if you had put a whole lot of money in and everything skyrocketed, but it can go the other way as well. So just keep dollar cost averaging and stop being afraid that you're missing out.
Suze: You're not missing out on anything. Go on.
KT: No, keep listening to us. You'll never miss out Brad. Ok. Next question is from Merrill. Merrill said my student loans have been a heavy weight on my shoulders for years. Suze, that's the most important sentence. Heavy weight on my shoulders for years since loans have been in forbearance. I've been saving that money and built up an 8 to 9 month emergency fund.
KT: My loan is $44,000 at 6.5%. Now that the payments are about to resume, I'd love to pay off my loans completely, but I want to make sure I'm not making a huge mistake. So Merrill's 40 years old, she's single. She has no debt. If she pays the loans off, she has to save up again for her emergency fund and she also has a goal of buying a home. So she's asking you for a green light.
Suze: KT just handed me your question, Merril. And a few things that I see on this is that your $44,000 student loan is at 6.5% interest. You already have an 8 to 9 month emergency fund, which is $30,000 that you contribute $500 a month for
Suze: you have an I Bond. All right, and you will be getting a $10,000 inheritance soon. So here's what I want you to do. I want you to stop contributing the $500 a month to your emergency fund because I do not want you to use up your emergency fund to pay off your student loan in case something happens to you. So take that
Suze: $500 a month, add it to whatever you are paying now towards your student loan and it will be gone before you know it. Next, when you get that $10,000 inheritance, apply all of that to the student loan and before you know it, that heavy weight on your shoulders will be gone. Next question.
KT: I love that advice, Suze. I love that. Ok, this is from Lisa.
KT: Hi, Suze and KT. I'm 51 and my husband is 53. My friends make fun of how much time I spend listening to your show and reading your books. But I'm the only one with a will and revocable trust. So guess who will be laughing last? Now, here's the question. My husband and I both have term insurance. His policy is for 1.5 million. Mine is for 750,000.
KT: They're in place until we're 70. Wow. Our son will be 33 by then and hopefully self-sufficient. My main concern is our later years. Would it be smarter to have less life insurance and put money into long term care. So take a look at their ages again.
Suze: Right. So currently at the age of 51 and 53 I have to tell you this is the perfect age, believe it or not. I used to say it was 59 but 51 53 is essentially the perfect age to at least look to long term care insurance
Suze: and to see if it's something that not only can you afford now, but you will be able to afford it for the absolute rest of your life. So, Phyllis Shelton, in my opinion, is one of the world's finance experts on long term care insurance. You might want to write her at Phyllis, Phyllis at got
Suze: LTC I dot com. So that's got GOTLTC I that stands for got long term care insurance dot com. Just so, you know, I do not get a penny if you do business with her, whatever it is. She's fabulous though. Just so, you know. All right. Go on, KT.
KT: Hi, Suze and KT. You are my favorite and I listen every day of my life,
KT: Kim must be really tired of us. Ok. So you really caught my attention this week when you shared your perspective about saving money for your own care at your age. Here's my question.
KT: My husband and I have no living parents, no siblings, no children. I'm 62. He is 57. The only debt we have is our mortgage, which is half a million dollars. I realize that mortgage balance is not small and we will need to downsize one day.
KT: Do I still need a revocable trust to protect me from losing my home? Should illness or something like that happen to one of us? She doesn't have a will or a trust.
Suze: It's not about, Kim, a living trust will never protect you from losing your home. The only thing a living trust really does is it avoids probate
Suze: as well as protects you against an incapacity in case one of you should become incapacitated and you want to sell your house or make financial decisions for that person. So the simple answer to this question is, yeah, you still need a revocable trust but not to protect yourself from losing your home.
KT: All right. Hi, Suze, my husband and I are very confused about this market.
KT: Do you agree with the majority of people on CNBC that we aren't in a bull market instead of dollar cost averaging in the market? We've been laddering CDs DS d treasuries. Where did the recession go? I'm baffled. We still have outrageous inflation.
KT: And then she said this is funny. She said the same mattress I bought two years ago has now doubled in price. Luckily we're financially sound. I don't know how the less fortunate make ends meet. So the question is, what are we in Suze?
Suze: So, what all of you have to understand is there's no such thing as a bull market, that's only a bull market.
Suze: What you really need to understand is that there are secular markets and cyclical markets and a secular market is a very long term market. And within every long term market, there are cyclical market cycles where the market goes the other way.
Suze: So I think very possibly now we could be entering or we already did a bull market in some areas, not all areas of this market, right? But there are cycles within this market that will obviously still go down. So it's not just that simple to say, are we in a bull market or are we not, you should continue to dollar cost average if you want to be in the stock market,
Suze: there are fabulous stocks that I would absolutely think about being a part of a few of those. Uh, um, way long ago somebody asked me, was there one stock they should invest in for artificial intelligence. And way back when I said Microsoft, I still think that's a fabulous stock, but you have to,
Suze: you have time on your side, you have to know what you're doing, but remember just a few stocks pulled this market up, not all stocks participated, which is why you have to know which stocks you're gonna be in if it's individual stocks or ETF S just so you can have everything and still participate. But nothing ever will go straight up forever.
Suze: It will go up and then it will go down and then it will go back up again. So just keep dollar cost averaging. Go on KT.
KT: Ok. Next question, Suze is from Amber. KT and Suze a quick note to start by saying you are both so amazing. I always like those compliments. Thanks, Amber.
KT: My grandma has a home owned outright in the name of her trust. She is leaving me the option to purchase her home from the trust at the time of her passing. If I so choose, I think I recall you saying to have homes passed down to you by a trust is the best way to avoid unnecessary taxes.
KT: Does that go out the window if you exercise an option to purchase the home from the trust?
Suze: Yes. So what you have to know Amber is that I've never said that a living trust will alleviate taxes. What it does is it alleviates
Suze: once again, everybody probate, the cost of going through probate, which is a court procedure, which is what is needed to get a home from a person whose home is entitled and their name has passed away. They're not alive to sign it over to you. So it has to go through a court procedure known as probate where a judge signs the deceased person's deed over to the person it's meant to go to.
Suze: However, if she simply has a home that she owns outright and she's leaving it to you.
Suze: She doesn't even have to give you the option to purchase her home from the trust at the time of her passing. Right. If you so choose, if she's just leaving it outright to you, whether she gave you that option or not, you have the option to sell it if you want or to purchase it if you want from the trust, that's totally up to you.
Suze: So the trust doesn't take away from that at all. What the trust will do is it will provide that you get the house probably within two weeks versus possibly two years. And you also get a step up in cost basis either way. So that if you do decide
Suze: to sell the house, chances are you won't owe any income taxes on it at all.
KT: Suze, next question is from Karen. My in-laws in California passed away about five years ago. They were both in a convalescent home during their passing,
KT: their primary residence remained empty after they passed, they did not have a will or trust the house was paid for with no mortgage. None of the adult Children did anything with the house. Is it still in the deceased names? Is there a deadline to go through probate? Will there be penalties for the delay? Sounds like Karen wants to try to
KT: help, you know, take the property back. I don't know. What do you think?
Suze: So, what's interesting... she says my in-laws in California. So, what do you think the relationship is that her husband or her spouse's parents...
KT: Right. So, it's her spouse that hasn't done a damn thing about it. None of them have done anything. It's like they don't care. And Karen is thinking, well, wait a minute, maybe we can...
Suze: Karen, you're the only smart one among all these in-laws of yours on some level. They're kind of like outlaws at this period of time. Listen to me
Suze: in the state of California, which is probably the worst state in the United States to have to go through probate. But it, there usually is a 30 day limit to where probate has to be begin. And if you, they failed to do so, if the in-laws failed to do so,
Suze: so then you bet you that's gonna lead to penalties. Now, do you know for a fact that the house is still in the name of the parents? Have you checked that? How does she do that? She would go down to the court systems and find out who's the title on this house? Because if that's true, then what's really important is that one of you needs to file a petition with the probate court
Suze: that's in the county where your in-laws absolutely resided and died. Then the court will then appoint an executor, uh to deal with everything. However, you have to know when somebody dies without a will or a trust
Suze: number one, it passes by something known as intestate succession. So the state of California has already decided who is to get what of the estate that was left? Now, I'm assuming the only thing that was left obviously was the house and that there was absolutely no money whatsoever.
Suze: So has been paying the property taxes on this house because if they haven't been paying the property taxes on this house for all these years, I'm sure there is a tax lien that is now on this house. And if it keeps going, they have the right to sell the house,
Suze: right? Because obviously everybody's abandoned it. So this is not a good situation. So, whoever you're involved with, that's an in-law of these people who died. Are you kidding me? Are you kidding me? Right. So whoever you're dealing with in terms of you're in a relationship with that is involved in this, you better give them a swift kick in their booty.
Suze: Maybe a really hard one because this is just stupid because more and more penalties are going to be assessed. There's a lot of money that is being left on the table here. It just makes absolutely no sense that they've done nothing with it whatsoever. So again, the main thing I can tell you is that you need to file a petition with the probate court in the county that the parents resided in,
Suze: right? When they count they resided in the house, they they resided in the house. So it's where they were, I'm sure part of that,
Suze: that county there. Right. So, um, is that bad situation?
KT: I have a question if this were me and I were her trying to find out, should Karen find out if, if there's any value to the house or the property,
Suze: There is always some value to it, whether it's $10,000, $50 whatever. But regardless, penalties are now accruing because you have to,
Suze: to file a probate. It's not like you can just walk away from things. So somebody has to be responsible for it or it's going to be sold, they're going to lose it all. And what a shame. It's just stupid. Karen.
KT: No, you're not stupid.
KT: You're not, you're not stupid. You're the smart one.
Suze: Yeah. But if you're married to somebody that's stupid, I'd have to think twice about it. All right. Go ahead.
KT: Ok. From Donna...
Suze: Karen. Well, KT think about this. No, seriously. Now I'm pissed off. See, now I have some energy...
KT: Now you're spicy.
Suze: I was like, oh, these questions are ok, but there's no juice to them. Now, I'm full of spicy, spicy. I'm... But it's that if your spouse is so irresponsible in this situation that they did nothing, what have they done in regards to your own situation? Do you have a will? Do you have a trust? What are they gonna do if you were to predecease them?
Suze: And do you have Children? And how really irresponsible are they gonna be at that point in time? So you better make sure that you have a trust a will, an advanced directive and a durable power of attorney for health care. You better protect yourself against the person that you're married to doesn't have the ability to do. Especially if they live in California, especially California is the worst because it's statutory probate fees.
Suze: Right. Anyway, go on. No. Ok.
KT: All right. Ready. Let's be nice. Donna has a nice question, Suze. Recently you answered a question from someone who said her financial planner bought an annuity without her approval. You indicated that she might have signed some document giving him this power. Can you tell me what was the name of that document? I think I may have signed the same document
KT: and I want to talk to my financial planner to cancel it. Good for you, Donna.
Suze: So normally Donna, when a financial advisor has the ability to make trades, buy for you, sell for you without having your permission to do so,
Suze: you have signed what's called a discretionary account form. You are giving that advisor discretion to buy and sell things without consulting you.
Suze: If that is not something that you want, then obviously you just call the advisor and you get rid of it so that they don't have the discretion to do. So. Just that simple many advisors though that take your money under a management fee,
Suze: they're registered investment advisor. You give them a lump sum of money, they get to buy anything they want with you. And what's happening is they get a percentage of what's there. Normally they have discretion. But if you just have an account with a financial advisor that you aren't paying an annual fee for like 1% a year to manage your money
Suze: and you're just, they're just buying and selling and getting commission to do so every time they make a buy or a sell, that is not right. And that you should change,
Suze: right. The reason why when somebody takes money under a registered investment fee, they get 1% they don't participate in commission at all or they get less than 1%. They should never, by the way, get more than 1%. And therefore they're not making money if they buy or they sell or things like that in terms of commission, they're buying
Suze: and selling things simply why, so that the account can grow because they want 1% on more money than 1% on less money. And if they start losing money for you, they get 1% or whatever the fee is of less money.
Suze: So they really, you both then are on the same side but to buy something like an annuity or something like that, I doubt highly would be part of a registered investment advisors fee to do so.
KT: All right, Suze, I have one last
KT: email. It's not a question. Well, it is a question. It's from Marissa. This might calm you down and take you down memory lane.
Suze: What you like when I'm calmer?
KT: You always, we all do, right? Everybody.
Suze: You do not.
KT: Hi, Suze, I'm currently...
Suze: and I would be just like every other boring financial advisor out there. Go on.
KT: Hi, Suze. I'm currently interested in pursuing finance. I know you have your own podcast and share your knowledge on finance. I have a few questions for you. Do you love what you do? And do you regret anything with your occupation?
Suze: Do you want to answer these one at a time? This one's a good one. If I'm not that great at math, should I still consider finance?
KT: Marissa, I'm not great at math. And there's something called computers out there. All right. Then what advice would you give to pursuing a career?
Suze: Does she say how old she is?
KT: No, but I'm assuming she's, she's pretty young and..
Suze: You know, it's interesting KT lately, a lot of kids when you're 72 you can call them kids, right? 29 30 years of age are writing all of a sudden,
Suze: even though I had originally geared this podcast to everybody who is like 50 60 70 years of age and older because very few podcasts when it comes to money are geared towards the elder crowd. So I just find that fascinating that 29 year olds are writing. Marissa, listened to me it doesn't matter what occupation that you're in, you better love it
Suze: and you better love it with all of your heart. I want you to think about this for 40 years now. I've been doing this, I've essentially been asked the same questions because when it comes to money, questions are relatively the same over and over and over again. I've answered tens of thousands of questions that I've answered before, over and over again.
Suze: And I love answering every single one of them because I love what I do. I love that I have the ability to help people with their money and in life really. There's nothing in my opinion that is essential as knowing about your health and your wealth. You've got to know about these two things. You can't just trust it to somebody else. You have to be knowledgeable about it as well.
Suze: So do I love what I do? I love it with so much you can hear it in my voice right now. I have a passion for it that I can do this forever and a day into the future. If I were lucky enough to be able to do so, no, I don't have any regrets about my own personal occupation. But that's because I've always been strong enough to stand up
Suze: to what I believe in and to stand in my truth. A lot of times in finances, you have to do what the company who you're working for. Wants you to do. You have to really be able to go. Oh, really? And you have to do it in order to keep the job even though you may not believe in it. So I don't have any regrets. And that's because I have never put money before. The advice that I give people,
Suze: I give people the advice that's good for them no matter what that means for me financially. So I don't have any regrets, but you have to be careful because in this industry it's easy to do what others want you to do so that you can make money over doing what's right for the people.
Suze: And you ask me or you say that you're not good at math. Should I still consider finance? Math, English? Any talent that you can learn at a university is not what will make you a great financial advisor. You have the ability to really comprehend it with your heart, with your mind, with your soul.
Suze: I was dyslexic. I wasn't good in English. I really was a waitress as you know, till I was 30 years of age, essentially making only $400 a month. I had no preparation on any level really to become a financial advisor...
KT: No, to become the world's personal finance expert.
Suze: Yeah. What's interesting KT..
KT: The world everybody,
Suze: Yes. But want to hear what's interesting is that
Suze: I said that about myself and somebody wrote it,
KT: Then they should complain to the White House or to Washington DC or to the Pentagon or to every major publication about Money. Suze Orman was titled not by herself, but by all of them,
KT: the world's personal finance...
Suze: And a lot of that is because I've traveled the world. Remember the Suze Orman show was shown in 18 different countries throughout the world. I'm not sure if the other people that are the so-called financial pundits of the United States of America traveled to India, Australia, all of Asia and South Africa where they sold out
Suze: 12,000 tickets in like just a few minutes. I have traveled the world and I am known throughout the world. My books are written and God knows how my language and therefore that's how that title came about. So please know it's not me giving me myself that it's really the studies of who was the most recognizable and on and on.
KT: So, do you think Marissa has what it takes for this career?
Suze: Well, only Marissa knows. Right. So that girlfriend is how I would answer that question for you girlfriend.
KT: Ready, Suze? Where's my quizzie?
Suze: Oh, I have your quizzie on your most favorite topic? Oh, yes, I love asking you a Roth question.
Suze: Right. Listen up everybody for all of us. Kara says, Hi, Suze and KT longtime fan and listener love you both my husband and I are both 61. Our gross annual income is 200,000.
Suze: The kids are grown and off the dole. That's kind of funny. KT, no debt except a small mortgage at 2.5% fixed that will be paid off in 3 to 4 years. They have about 1.2 million in a traditional retirement account. Plus we have a 12 month emergency fund. Are you all writing these things down?
Suze: The question is, should we be doing a Roth 401k available through our employer with 3% match and a rough ira at our age or are there more or are they for more young people? We have always done tax deferred. We're going to need about $8000 per month after tax when we retire to live comfortably and have a little fun.
Suze: We are healthy active, projected to get about 56 30 a month. If we take social security at 67 we appreciate your advice in the final stretch of our working years at KT. Think about it closely.
Suze: Our Roth retirement accounts is what she is asking is that for people who are younger than 61 years of age and they're obviously still working.
Suze: They expect to stay active and healthy, right. They plan to take social security at 67 but they want to really live comfortably and have a little fun after retirement, should they or should they not
Suze: continue to do? Roth 401kz plus a Roth Ira.
KT: Yeah. First Suze, I would not pass up the employer match of 3%.
Suze: So good. So good. Ding, ding, ding, ding, ding, ding, ding, ding, ding. Yes.
KT: I absolutely wouldn't pass that up. And why not have the other one?
KT: This has nothing to do with age has to do a lot with time but not with age. So,
KT: That was good. Right. I got it.
Suze: You got double ding, ding, ding dong, ding dong, ding dong. You were so good. Yes, and you knew it right away. No Kara. Seriously listened to me. Now the answer to this question really
Suze: can help you live the lifestyle that you asked to live. You need $8000 a month after taxes you say to live. All right, you're 61. Obviously, you're thinking of retiring at 67 because that's when your social security you say will start. So that's six years from now
Suze: in six years, the $1.2 million in your traditional IRA, which is going to be totally taxable to you. If you even just kept it safe and sound in a treasury right now at 4% will be worth $1.5 million at that time. Now listen to me closely
Suze: if you claim social security at that time, which is $5630 a month between the two of you since you are both the same age.
Suze: You have to understand after taxes on that because obviously 85% of, that's going to be taxed because of the money you're gonna be taking out of your taxable Ira at that time. And Medicare premium B you're gonna be lucky if you get $4000 a month after taxes from your Social security,
Suze: that will leave you the need of $4000 a month after taxes from your IRA to meet the $8000 a month that you want. That means you're going to take out 4% or $60,000 a year.
Suze: From what? From your IRA? That's totally taxable to you. It's about $1000 a month in taxes. So that gives you your $8000 a month. Not a good plan cutting it too close if however you were smart
Suze: and you both stop this thing about the Roth IRAs being for people who are younger. If you were to continue to fund both of you, your Roth Ira s to the max because you're 50 or older is $625 a month, a piece or $7500 a year for each of you or $1250 a month together
Suze: over the next six years till you are 67 at just 4%. You would have $101,000 in there. Absolutely tax free more than you have. Now, if you were to continue to contribute up to 3% of your match, which is all your company matches in your Roth 401k.
Suze: That would be 500 a month from you, $500 a month from your employer. That would be in another six years at 4% $81,000. You now would have $182,000 tax free
Suze: if you took $8000 a month
Suze: out of your tax free Roth. Just from the two things we just did that will carry you two more years. At that point, you have two more years of growth of your Ira money and you can then collect social security at 69 versus 67 which will be an incredible raise to you
Suze: and then your life will work far easier. That's something that you should consider either way. However you do, it do not stop contributing fully to your Roth Ira s and at least up to the point of the match in your what? Roth 401k? Oh my God.
Suze: Maybe that was a, that was a financial plan. Maybe the woman who just asked about. Does she have to be good in math to do this? Maybe a little bit because you have to be able to think like that and do things like that almost like in your head
Suze: to be able to off the cuff, tell people what they need to do.
KT: All right. So that's a, that's a wrap Suze. That's a good financial plan. I got a little energy boost with that...
Suze: but it's you know what's wrong with me? KT is only letting me drink like a quarter of a cup of coffee in the morning.
KT: That's it. That's all you need. Just a couple sips. Get you going.
Suze: Well, obviously I needed more than that today. I needed an
Suze: question that aggravated me. Can I have another cup of coffee? Can I have a full cup of coffee? I said when you have breakfast and then she didn't want breakfast.
KT: So we have our green protein shake, which is delicious...
Suze: But nothing was stopping me from getting off my booty and making my own cup of coffee if I really wanted it.
KT: Ok. So let's just remind everyone, Suze today, wherever I go,
KT: we will create a more...
Suze: I forgot because...
KT: peaceful, loving and joyful world.
Suze: And if you do that, everybody and say that every day, day in and day out or do we promise them, KT?
KT: You will be unstoppable.
Suze: Yeah, baby,
Music: Music (out).