September 28, 2023
Listen to Podcast Episode:
On this edition of Ask KT & Suze Anything, Suze answers questions about trusts, IRAs, reverse mortgages, savings accounts for children and more.
Suze: September 28th. Are you sure that's the right date. KT?
KT: It is! it's the end of September. Remember we sang, see you in September. Now we're gonna say so long, September. So long...
Suze: Stop, stop, stop, stop, stop. September 28th, 2023. Welcome everybody to the Women and Money podcast...
KT: and everyone smart enough to listen.
Suze: This is the
KT: ask Suze and KT anything edition.
Suze: And if you want, you can send in a question to ask Suze Suze podcast at gmail dot com. And if KT chooses it, we will answer it on this podcast. All right girlfriend.
KT: So the first, I don't really have a question. I have a big thank you. This is from Lindsay Newton and I want everyone to know that Lindsay Newton stumbled upon Suze's podcast and said it is exactly what I've been looking for for finance and life guidance. She added life guidance. What do you think about that,
KT: Please share with me the hyperlink, So I can get my documents started. Thank you so much for your wisdom. So Lindsay, obviously Suze, is referring to the must have documents and I think that she's so excited to get her house in order.
Suze: All you have to do is go to must have docs dot com and you can get them there. Ok. Ok.
KT: Next question is a nice simple one, Todd. Thank you so much. I picked you right away. Suze, can you have more than one trust?
Suze: I'm not exactly sure why you are asking that question. Is it? Do you need more than one revocable trust? Chances are no, but you can have a revocable trust. You can have an irrevocable trust. You can have a personal resonance trust. You can have so many trust, a special needs, trust, whatever a life insurance trust. So yes, you can have more than one trust. All right, I only have one to and it does everything I need.
KT: All right. So next is from Naomi. Hi, Suze. I have all the proper documents done by a lawyer.
Suze: What did you do? Pick all trust questions?
KT: Well, quite a few actually, I kind of group them together, the ones that are common but, but listen to hers, she said by a lawyer that my company paid for, we do not have to pay for anything. My question to you is that we have bank accounts life insurance policy, 401K
KT: that ask for beneficiary information
KT: So do we put each other's names or do we put it in a trust because we have the paperwork done. How does it go? So, now, now that the lawyer that her company paid for, who provided all of her documents, she's wondering, what do you do with them?
Suze: No, it's not. That's not exactly what she's wondering. KT she's wondering who should be the beneficiary of many of these accounts. The 401k,
Suze: the beneficiary if you are married should always be your spouse. So the primary beneficiary in a retirement account, whether it's a 401k, a 403B, a TSP, an IRA a SEP IRA or a Roth version
Suze: of any of those should always be your spouse. The contingent beneficiary should be the trust as far as a bank account and things like that. It can be the trust. That's not a big deal. All right.
KT: All right. Next question from Teresa comments. Hi, Suze. Thank you for just being you and sharing your wisdom that has helped me and my family.
Suze: You see what she said, KT? Thanks for just being me.
KT: What's wrong with that?
Suze: Do you ever wish? I wasn't just me.
KT: No, I just...
Suze: I knew it. I knew it. I knew it!
KT: Recently, my job announced they're now offering a Roth 401k as another option with our current 401k yearly. Max is the same company. Match the same. Yes, Suze. I am maxing the match.
KT: So grateful to you for that. I want to understand the difference and what should I do? I am not sure if I can or should contribute to both or move to just one. I am 60. So retirement for me may be 5 to 7 years and I'm now going through a divorce.
KT: Pray you can give me some advice.
Suze: The first bit of advice that I could give you is really finalize that divorce as soon as possible or make sure that everything that you are accumulating, stops going towards a joint amount
Suze: until you are actually divorced so that you don't have to continue to save money knowing that half of it may go to your ex spouse and the beneficiary. But that's number one. But number two, I don't care what age you are. I don't care what your situation happens to be. In my opinion,
Suze: there is not one age one tax bracket. One situation that would make me ever, ever, ever change my mind from saying if you are offered a Roth retirement account and you are also offered a traditional retirement account,
Suze: forget any pretax retirement account that you have and only put everything you have into a Roth.
KT: Next question, next question is from Carol. She said hi, Suze. I am my mother's live-in caregiver. She's 93 and she has dementia.
KT: She has a reverse mortgage on her home. I'm told if anything happens to her, I have to vacate the premise. Can you please tell me what my options are, I've been here caring for my mother for over 20 years because
KT: she's always been disabled to some degree. Thank you so very much, Carol.
Suze: Yeah. So what's funny everybody, although this isn't funny is that you may or may not know, I go through all the emails, I never know which one KT is going to choose,
Suze: but I go through them and when I see an email like this, I personally answer it and KT, I personally answered Carol. So what did you tell her? And here's what I told her is that when you have a reverse mortgage and for those of you who don't know, a reverse mortgage is usually for people who own their homes outright. They're 62 years of age or older and a company
Suze: pays you to stay in the house. It's the reverse of a mortgage when you're paying a company to buy the house outright. So now you're getting a specific sum of money every single month for the rest of your life and they charge you a specific interest rate for that. It's based on your life expectancy, the interest rates at the time. Sometimes people just get one big lump sum
Suze: and that's that. But over the years as they keep giving you money or if they gave you a large lump sum and that money is growing and growing and growing, sometimes you could end up with them giving you more money than the house is even worth if you live long enough.
Suze: But regardless once the person who took out the reverse mortgage dies, in most circumstances, there are two possibilities.
Suze: You either have to pay the reverse mortgage company back, the amount of the appraised value of the home or the house is almost immediately sold. And that's how they get their money back. Either way I have a feeling and this is what I told Carol, Carol, you're most likely needing to make arrangements right now. What are you going to do
Suze: when mama passes away? Because chances are you're going to have to leave and vacate the house and they will sell the house almost immediately. So you have to make plans for that. And Carol wrote me back and said she doesn't know what she's gonna do. She's a little bit still confused. She loves so much that I wrote her.
Suze: But in my own mind, KT want to know what I was thinking when somebody has spent 20 years or more of their lives, taking care of their mother,
Suze: something will happen and everything will be just fine for Carol. I hope so. Carol will say prayers for you and your mommy. All right. Next question.
KT: Next question. This is from Peggy. Suze, I am 60. I have a Roth. I...
Suze: Wait, wait, I have to say one more thing right before you go. This is a lesson to many of you though. The Carol example
Suze: as to why you have to be very, very careful if you are taking out a reverse mortgage, especially if you have somebody who lives in that house, maybe they live in that house, a child as a caretaker or whatever. Because chances are upon your death, they're going to lose where they live at the same time they lost you.
Suze: So please be very careful. Everybody. I do not like reverse mortgages. I do not like reverse mortgages. I just don't like them. All right.
KT: Hi, Suze. This is from Peggy.
KT: I am 60. I have a Roth Ira at TD Ameritrade, I love TD Ameritrade. We had so much fun with them. I actually...
Suze: The truth is Peggy. You now have a Roth Ira at Charles Schwab. Just so you know.
KT: So let me, let me finish here. I've had it for many years. You probably were responsible for that, Suze. Can I take $100,000 out
KT: to invest in a three year fixed annuity then put it back in keeping its Roth status. That's the question.
Suze: That's your quizzie.
KT: Oh, Suze. I have no idea. I think the answer is no.
Suze: Ding, ding, ding, ding, ding, ding, ding, ding, ding, ding. So Right. So here's the question back at you, Peggy. Why would you even want to do that if there's a three year fixed annuity that you want to buy for some reason? And I can't imagine why,
Suze: why not buy it within your Roth IRA. Obviously the three year fixed annuity must be giving you some extraordinary interest rate for three years. But please just be careful that that three year fixed annuity matures in three years and you can get all your money back, especially if you did it within the Roth IRA
Suze: and not where it's just fixed for three years and then you have to go on and keep it because the surrender charge is for seven years. Please. The money that you have in the Roth there is no way that of annuity could be paying you more than
Suze: uh you know, six months or three month treasury bill or something like that or even a longer term treasury note or maybe even a bond. So please don't do it, don't do it, don't do it. Oh, look, she says happy anniversary to you and KT,
KT: Happy anniversary, Suze again,
Suze: Again and again and again and again and again because we have three. So anyway, go on.
KT: Ok. This next question is from Raquel. I love this question says, hello, Suze and KT. I'm so glad I found y'all's podcast and that she wrote. No, that's what she wrote. She wrote y'all's podcast. This is my southern girl Raquel. I love that. There is so much about money and finances that I don't know. And your show has refreshingly pointed me in the right direction.
KT: So my question is, my dad started a Gerber savings account for my son about three years ago. Please give me your opinion.
Suze: Can, you can hear her making my great breakfast bad...
KT: Suze, please give me your opinion about the Gerber savings. And can you suggest a better one if necessary? So, there you go, Suze. Give Raquel.
Suze: Well, Raquel, I think I already gave you my opinion, but here's the thing I want you to not just take my opinion and obviously I think it is one of the worst things you could ever do.
Suze: I think it is absolutely sad that they are profiting off of the fact of that. There's this sweet little baby in the Gerber baby and how they advertise it. Go online.
Suze: I don't even have to do this to know what you're gonna find. Go online and find out what does everybody from nerd wallet to everybody think about the Gerber savings account, which really is like a life insurance policy and blah, blah, blah, blah. It is absolutely ridiculous. Now, it says, please give me your opinion about the Gerber savings account that I've done.
Suze: And can you suggest a better one if necessary? I have to tell you
Suze: my alliant dot com. You should go there and for now because it's gonna be up sooner than later. If you have an ultimate opportunity savings account there, then you can open one up for your child. You put in $100 a month. After 12 months, they get another $100 plus currently the 3.10% interest. Who knows? They may change that soon and raise it. But even if
Suze: they don't raise it $100 a month, you get $100 at the end. That is still an extraordinary double digit return on your money. After that, you can make a decision. Does it make sense to leave it there? Does it not, you're free to do anything you want? So I would go to my alliant dot com.
Suze: You'll see three choices there. Click the kids' savings account. And if you don't have one yet, open one up in your name, you put in $100 a month, you get $100 at the end, both of you do it and that would be so much better than this Gerber whatever you want to call it.
KT: So they stick to baby food, they stick to baby food and money, you stick to Alliant. Ok. Next question from Naomi. Good morning, Suze. May I ask what type of insurance you would recommend for a one
KT: and two year old? Also, my husband wants to buy life insurance for himself to protect us. What should we do? He is 58 years old.
Suze: So you did group these. Look at your little thing. So you have two about kids. So this is a little bit controversial because I have a belief that you only buy insurance on somebody when in case that person were to die
Suze: there would be somebody who would suffer a financial loss. You're one and two year old, you're not necessarily going to suffer a financial loss. Will you suffer an emotional loss beyond your wildest dreams? So, even though it might just cost you pennies on the dollar
Suze: here is my thing about it over all the years I've been doing this and people did buy insurance for their child and their child happened to die all of a sudden, they didn't want that money. They just hated that money. It was like, oh, I have money but I don't have my child and I don't even know why I did that. So
Suze: there are people who ever, however, who believe in it because it's so inexpensive that if you lose a child, you may need that money to just emotionally yourselves get by because you might not be able to work or whatever.
Suze: I don't believe in it. However, if you're going to do it, the type of insurance needs to be term insurance, which is good for a specific period of time. And what should your husband do? The exact same thing? Get term insurance in this situation, he probably should look for a 10 year level term because after those 10 years,
Suze: if he continues to have insurance, it's going to be far too expensive. Where would I go to get it? My favorite place is select quote dot com. I get nothing for it. They don't even know that I recommend them, but they have been around forever and I still love them. All right. You know, KT, here's, I just want to make a comment on this one
Suze: here. They want to buy term insurance on their young child when really
Suze: why. But yet the father, the husband is 58 years of age and they haven't even thought about buying term insurance yet on him. When really they should have bought it on him years ago.
KT: We don't know how long they've been. We don't know enough information, but at that age, you would think
KT: that he may already have had insurance, but he could be a brand new dad at 58.
Suze: But still anyway, the time to buy it, everybody is when you are in your twenties and thirties, forties, the older you get with term insurance, the more expensive it is. All right.
KT: Ok. This one you need to translate for me and I don't mean his name. This is from Banoosh. Dear Suze and KT. I have
KT: VUSTX, a long term bond fund that is not doing well. I listened to your podcast today. If I understand correctly, you were encouraging us to buy long term bond funds. As of 9 22 23. This fund shows a negative 5.7 year to date return.
KT: I'm not sure if it's a good idea to stay with this fund, please advise.
Suze: All right. So maybe this Sunday I'll have to do a Suze School once again on the difference between individual bonds and bond funds. What I have been saying is that I would start to dip my toe in. Did I not say that little by little by little into longer term
Suze: bonds? When interest rates go up, the value of bonds go down when interest rates go down, the value of bonds go up and it could take a while. So if you're looking at 30 year treasury bonds, for instance, individual ones, they have started to go up from 4.1% in yield to 4.3 to 4.5 the other day, they were at 4.6%.
Suze: And which is why I wanted you to go little by little. It is absolutely possible and probable that the 10 year treasury note will maybe go to 5% which means the longer term bonds most likely would also go to around five per cent.
Suze: So as they're going up in interest, the value of the bond is going down, which is why you see your long term bond fund not doing that well, a year from now, two years from now, will it do so? Absolutely. However, if I were you and you own this bond fund outside of a retirement account,
Suze: I would sell it. Now, I would take the losses off my taxes and I would go very slowly but surely into longer term bonds, but also at the same time into short
Suze: term treasury bills. So remember the dumbbell theory that I talked about the other day where you take the money and little by little, you have money in three and six month treasury bills or certificates of deposits, whichever ones are paying you the most. And again,
Suze: maybe some into a 10 year treasury note little, just a little amount and a 20 year or a 30 year treasury bond, but not everything at once because as interest rates go up, you'll keep going and going into them. And then once we think that you've hit the top because we never know when something can change right away, then all of the money will be invested that way.
Suze: But please don't be confused between long-term bond funds and long term bonds. Big difference between the two. Are you have a preference? Are you kidding? I am not a fan of bond funds on any level, however, but if you had to choose if, well, if you have to,
Suze: oh my God bonds individual bonds. However, a lot of times in these 401k plans and all, they don't have a choice. So we've watched long term bond funds go all the way down when interest rates were going up. Now, they're kind of stabilizing around here when interest rates eventually one day, I don't know when that will be start to come down, they will go up in value again. All right.
Suze: Looks like interest rates are going to stay put for a little right. That's what Jay Powell said. All right.
KT: Ok. From Maria, "Yikes!"
KT: That's why I picked this one. Her comment, Yikes. Hi, KT and Suze. I have around 60% of rollover IRA and Fidelity Intermediate Bond funds rest in stocks and T bills. Is it ok to sell some of the bond fund to buy the long term notes and bills you were talking about on Sunday's podcast. I'm happy Suze, that people really listen and they take action.
KT: To be honest, the bond fund hasn't really made any money since January just wondering if I need more diversification in bonds. Thank you so much for any advice that you go. And this part to that question you just answer.
Suze: So, Maria, if this is money that has, you have designated to be invested in the fixed income portion of your entire portfolio,
Suze: then I rather see you any day be in individual bonds, bills or notes than any type of bond fund again, just like I said a second ago, if you decide to come out of it truthfully and put the money in a money market account at Fidelity where you will be making 5%
Suze: and then are around there 4.5 5% whatever they may be paying and little by little, you diversify from three and six months, maybe some into a two year, maybe some, like I said, into a 10 year note, some into a 20 year bond, some into a 30. But you keep putting that money in as interest rates change or go up. Then I think in the long run you'll be happy. But listen,
Suze: KT will tell you just yesterday morning, I was talking to the person who buys bonds for me and things like that and the bonds that I bought the 30 year bonds that I did buy, I'm down money on,
Suze: but I didn't buy them to sell them yet. I bought them to lock in the 4.5, the 4.3 the 4.1% interest rates knowing that there will come a time. And I don't know when that time will be when interest rates will start to come down again. And the 30 year bonds will skyrocket
Suze: in comparison to the 20 year bond in comparison to the 10 year note, the seven year note, the five year note, the two year note or the bills.
Suze: And it's then when I will make the money in the meantime. All right. So I'm making 4.14 0.3 versus 4.6 or whatever. I'm not interested in that. It's a great interest rate. They are treasuries, they're safe and sound. But when interest rates start to come down, that's when you want to be long term, we just have to kind of figure out when that will be. It is your time right now, Miss Travis.
KT: Suze - 30 year
KT: and bonds bonds, 30 year bonds, 30 year bonds ready.
KT: We're going to be over 100.
Suze: I'm not holding them for 30 years.
Suze: I expect within two years, I was gonna say to everyone, she's gonna stick around and see what now in 30 years, somewhere within a year or two, KT, we will be selling for a very handsome profit. Even if it's three years from now, we will be
Suze: so happy that we did that.
KT: What's my quizzie? It's for all of us. Everyone listening. Listen up. It's not just KT, I usually get it wrong but let's see how we do on this one. All right.
Suze: Hello, Suze. I want to start a compound savings account at $2000 a year starting this year for my seven year old granddaughter.
Suze: I researched that if I did that for eight years, starting in 2024. Are you writing this all down? Everybody.
KT: I'm listening...
Suze: and never contributed or touched it again until she was 54. So, KT starting next year in 2024.
Suze: All the way for eight years. Right. So, $16,000 for eight years, she's seven years old. She's gonna be 15, 15 years old. She'll be,
Suze: she'll be 15 years old and she's gonna have $16,000 that has been compounding over the past number of years. So, here's the question. How much is she gonna get? Wait? So if she never touched it again. She never put in another penny. Right. And she did not touch it till she was 54 years of age.
Suze: She would have about $2.3 million with her compounding interest. This could be retirement money for her.
Suze: What kind of ETF or compounding account would be best for this? Do you like this idea?
KT: So, so what's the question? What's the quizzie question?
KT: Do I like the idea or not?
Suze: No, because here's the question. Do you believe KT
Suze: that if she put in $16,000 for over an eight year period of time, 2000 a year. And she never touched it again.
KT: When the girl's 15, she stops getting that 2000
Suze: And she didn't touch it till she was 54. Would she, is there any way possible that she would have $2.3 million?
KT: So that's like 50 years of compounding
KT: the $16,000 compounding money? 50 years, 40 50 years. Um, would she have how much?
Suze: $2.3 million.
KT: Well, I think she'd have close to that but not exactly that much because that's a, I mean, even if it was like a 10% of compounding, which is a lot,
KT: um, I think she would have like a little less than that close though, maybe 2 million.
Suze: So, what's your answer?
KT: So, wait, what's the question again?
Suze: The question is, do you think that's really possible at an interest rate, forget investments in the market, but just simply by getting an interest rate, is that possible?
KT: It is if it's compounding for such a long time...
Suze: At what interest rate?
KT: Wow. A lot,
KT: a pretty high interest rate. Right, Suze.
KT: Wait, wait, wait, if it's an interest, you always use like a 10% interest rate as a model, it would have to be almost 15% I think.
Suze: Right. So, listen to me, everybody.
KT: But is that possible?
Suze: Only if she makes approximately a 12.9 to 13% interest rate or annual average rate of return. So the answer is
Suze: it's possible if it was more with like 15% interest. So anyway, here's what you need to know everybody seriously and especially especially Leslie, chances are, I'm the one who created that example because I was trying to get kids to understand the compounding value of an annual average rate of return. So if this is something that you would like to do for your granddaughter,
Suze: it is possible but you would have to have an annual average rate of return, which means some years, the money might be up 30% some of the years, the the money might be down 50%. But over all 40 years,
Suze: it averaged about 13% a year. Now, that used to be really attainable years ago because the average annual rate of return over 40 years in the stock market a while ago was about 12 or 13 or 14%. Now, I think it will be a little bit harder just to give you an idea,
Suze: you know, over 40 years, if you were just to get, let's just say 4%.
Suze: Right. And let's say you put the $2000 in every single year and for those years, the money earned 4%.
Suze: That means at the end of the time when you stop, for those eight years, you would have $19,165 in that account.
Suze: Then that $19,165 over the next 40 years. Listen to me, everybody.
Suze: If you didn't put in another penny, if it earned 4% or it was an annual average rate of return of 4% you'd have only $92,000 at 6%. You'd have 100 and $97,000
Suze: at 10%. You would have $867,000 at 12%. You would have about 1.7 million and at about 13% you would have the 2.3 million. So you should do it.
Suze: But you need to understand that to get that million dollars, it really is going to have to be invested in an exchange traded fund like the Vanguard Total Stock market Index fund and the hopes that over all that time it averages for you about 13%. So that's what you need to know. But it is not
Suze: guaranteed under any level, but something will be better than nothing. Even if you locked in a thirty-year treasury bond, she would be guaranteed to have $92,000 grandma put in $5000 a year.
Suze: No, no, it's like, but just know that when you read examples like that and I can tell you, I was the one who created that example years ago just so, you know, you have to understand how it really works and now all of you do, right. KT, that's it.
KT: So what are you gonna do on Sunday? She said to all of you, she's going to do another lesson in.
Suze: Maybe, maybe, maybe because you can all look it up and listen to it. You know, we'll have to see what's gonna really, really happen here with the government. Are they going to shut down? Are they not what will happen? Although it's just such a boring topic because they go through this all the time, you know. So there's other things that are kind of on my mind as well.
Suze: You know, about some of the scare tactics that are out there about certain ETFs that invest all kinds of things are out there right now. So I just kind of wait and see what really, really happens.
KT: Also I'm going to remind everyone we're in the throes here, we're in the throes of hurricane season and Suze and I have been glued as we always are every autumn to the weather
KT: and what we're seeing with these water events and rain events and water rivers and all these things that I never heard of before. It makes you really wonder what is important to prioritize and get those must have documents in order for, in order for us. Right. We have one hurricane that might be coming right at us. So we'll see what happens to, but we're definitely preparing for it. Yeah, if you get a best of Sunday means we had to get out of all right.
Suze: But until then there's only one thing that we want you to say every single day and it is today, wherever I go, I will create a more joyful, peaceful and loving world. And if you do that, you will be unstoppable. Bye bye now. Bye.
Get your savings going with Alliant Credit Union: https://bit.ly/3rg0Yio
Get Suze’s special offers for podcast listeners at suzeorman.com/offer
Join Suze’s Women & Money Community for FREE and ASK SUZE your questions which may just end up on her podcast!
To ask Suze a question, download by following one of these links:
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.