Podcast Episode - Ask Suze (and KT) Anything

Financial Security, IRA, Life Insurance, Spending, Women And Money

February 11, 2021

Listen to Podcast Episode:

On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Cindy, Anonymous, Chris, Name Withheld, Antoinetta, and Tom selected and read by KT.

Podcast Transcript:

February 11, 2021. Know what today is? Yeah. Today's our brother-in-law Tom's birthday. Tom Stender, who is married to Lynn Stender, who is KT's twin sister. Can you even imagine that there are two of them? I always said Tom married the right one. But Tom is 70 today. He’s our elder. Not for yeah, I guess. He's our elders. He's our elder of the family. We love you, tomboy. And we sure wish you were here on the island with us. We are back on the island. We got here just yesterday after a long the longest time that we've been off the island in a while, in a while. And obviously we went to Florida for my treatments and we'll be back there and again for five more days. But we're so happy, so happy to be back in paradise. Alright, KT. Suze, this is probably the best lineup of questions I've had in a long time. And it was very difficult to select because you all sent in great great questions, but I tried to put together a little theme here, but we got thousands just so you know. So, we do have to pick them. Or KT has to pick them. And you have to listen every week to see if yours has been selected. So, you never know when we go way back. Do you go way back to check? Um, sometimes. But I like to be pretty current, and this one that I'm reading is very current. All right. All right. So, this is from Cindy. Hi, Suze. I'm a little late to the financial game, but better late than never. A little about me. My wonderful parents grew up during the Depression, and these hardworking people live below their means. And were frugal so they could give their kids everything. Suze tell everyone you're saying. You know my saying to say it again, right? To live below your means, but within your needs. But I have to tell you, I'm sitting here going, where is this one going? Okay, listen up. So being spoiled and entitled all my life carried over to my twenties, thirties, forties and fifties. Now I am 58 and I am on fire to save money. By the way, I'm not blaming my parents. I own my sense of entitlement. I'm now married. I want to talk to my husband About what I've learned from Suze. He told me not to worry. Don’t worry your pretty little head about it. He told me not to worry at all about Will's irrevocable trust, etcetera. Because everything we have is in an LLC. What's an LLC, KT? Limited liability company. That's my girl. So, the question is, do we really not need these documents because of this LLC? I've joined Alliant and I'm excited to save, save, save. So that's I'm excited for Cindy that she joined the Alliance Ultimate Savings Account house. We all do. Thousands of you did. Okay, so what should she do? Did you pick this because you knew it was going to aggravate me? Well, the next one will even more, this one is gentle. Why don’t you see what's coming up? Cindy, are you kidding me? Cindy, are you absolutely kidding me? Let me just start by saying your husband could not be more wrong if he tried. A limited liability company is very simple. Let's say you own a piece of investment real estate, and you have people living there. And you're afraid that if they hurt themselves while they're living in your property, that they could sue you. So, you take the title of that property and you hold it as a limited liability company which limits your liability with what that company owns and, in this case, a piece of real estate. But it does absolutely nothing that when you and your husband die, it is not an if it is a when that asset then will pass free of probate, down to your beneficiaries. If your husband had an itsy itsy bit of intelligence within his body, he would do it where a living revokable and it is not irrevocable. This would be a living revokable trust. One that you can change would be the member of the limited liability company. So not only, would you be protected against a liability, but upon death, it would avoid probate. That is the way that it should be done. Now, what has this taught you? It has taught you that your husband thinks he knows, but he doesn't know, that your husband is a financial faker. And here's the thing that you have to understand, and this aggravates me. KT is just looking at me like calm down, Suze. But I can't calm down. And the reason that I can't calm down is this actually speaking. Women we live longer than men. And when they die, that is not the time for you to find out when they said to you, don’t worry your pretty little head about it, that you should have been worrying your pretty little head about it. And the reason that it gets to me is to have any idea how many thousands of you write me saying, how could my husband have told me something? Now he's died and it's nothing like what he told me. So, women, you cannot blame them. You have to write in just like Cindy did. So that in fact, you know what you are doing. Now, did you enjoy aggravating me KT? Suze, usually we have a cup of coffee this early in the morning. But maybe we should because, you know, maybe we should have a glass of wine. Now, ready for this one. Hi, Suze and KT that she says. Sorry in advance, KT. For the long question, but here we go. I live in New York and my boyfriend lives in Delaware. We're about to move in together. Well, I'm moving in with him because he owns a business, and we think that long term he will make more money than me. We've spoken about getting engaged, and I think it's happening pretty soon, but it's important to have the talk before moving in. We've been quarantined together since March, and I do all of the cleaning cooking laundry. Plus, I pay for the groceries. I'm the one that goes out and gets the groceries, and she spends about 500 to 600 a month on food. We're about to have the talk about a fair way to split the bills. Then she goes on to say, I think his rent is too high for where he lives, paying 2700 a month, and the location and amenities of the building don't make up for the high rent. Now catch this Suze. He loves his apartment and moving out is non-negotiable. Ready everyone here she goes, I could see the temperature rise. Now, how should we split the bills? I honestly don't want to do a 50 50 on the rent. Also, if he was doing this on his own before I came into the picture, why should I be expected to pay half of the rent? I also believe he needs to take into consideration that I do all of the cleaning, cooking, etcetera. Okay, then what is her question? So the question is, let me tell you how much they both make. He makes 140,000 year. She makes 100,000 gross, and she nets about 4000 a month after investing into her 401k. So, she said, Suze, am I wrong for thinking this way? I'd like to find the fairest middle ground for the both of us. Hmm. So this is all about how do they live together? They're going to get engaged, and he wants her to pay 50/50. I get what the question is and the reason that I'm so silent. I'm sitting here thinking, why? Why do you want to move in and get engaged to somebody who's already saying moving is non-negotiable? The other thing is you're renting. He's renting. If it were buying a house and it was in his name or whatever, okay, or it was in both of your names, it would be different, but you're renting. Also, I have to tell you the other thing before I answer this that really, I don't like. And I noticed you didn't use her name. Why is that? I think I'm afraid, you're protecting her okay. But really everybody is this. Twice, twice in this email, she mentions how she cooks, she shops, she cleans, she does everything. That kind of sounds like I don't know what kind of mentality that is. The fact that she's even bringing that up is she's already bitter about the fact that he's controlling where they're gonna live. He controls the money because he makes more. He does not pitch in to do the things that he needs to do around the house. And yet she wants to get engaged to him. I don't think so, girlfriend. But that's not the question that you asked me. Here is how you should be splitting the expenses now if you're bringing home $4000 a month. I'm just going to assume that he's bringing home after everything, 7000 a month. Okay, you add those two figures together, so you have to do this with real figures. But here's your example. So that's 4000 plus 7000 is $11,000 a month. Now, from the little that you said, I have a feeling that your joint monthly expenses for everything probably are around $6000 a month. Because you have food, you have all kinds of things, but you have to know what your joint expenses are to be able to do this exercise. You then would divide $6000 by your $11,000. In this example, that gives you about 55%. That means 55% off what you bring home. Your $4000 or $2200 is what you put into the joint kitty. He has to put in 55% off his $7000 take home, which is about $3800 a month, and that comes to $6000 or your joint expenses. So, it's equal percentages, but not equal amounts of money. But that's essentially how you figure out who pays what amount of money. But I'm telling you, I would be thinking twice about this if I were you. I thought you would do that. All right, next is from Chris. You're so sweet, KT. Thanks, Suze. I'm happy we I'm very happy. You're always happy, but how come you never yell like I do, okay? Because everyone makes mistakes. That's a really big mistake already. Hi, Suze and KT. I took your advice and increased my emergency fund. Yay, I used to have eight months of savings, but now I have saved 12 months of expenses. However, I hate letting the money sit in a high interest savings account, earning only half a percent. I'm thinking of putting my extra emergency savings into a Ginnie Mae fund at Vanguard. What are your thoughts and love the podcast. Chris, Here's the problem is that Ginnie Mae funds, which is a government fund that does federally backed mortgages, obviously will pay you a higher interest rate than a savings account. Okay. The problem is, if interest rates go up, the value of your Ginnie Mae fund will absolutely go down, when you're in a savings account, you do not have to worry about that on any level. So, you could put some if you wanted to in a Ginnie Mae account, but you have to watch it very, very carefully. I don't know how much you have to watch it like every week. I would be watching it daily. Yeah, I would, because even a little amount, it just Why not just keep your life simple? Really? Is the difference between ah half a percent and maybe 1% or 1.5%? What about a Vanguard ETF? What are you talking about? Instead of the Ginnie Mae? Do you hear this everybody? She is so trying to aggravate me right now. I can't even stand it right. Can't even stand it anyway. If I sing Suze, obviously it’s so early and she's steaming, steaming. We all like we love to get up at about 3/3:30 in the morning because we always love this hour of the day. It's, it's really very quiet, and it's an interesting time to be doing something. There's no noise. There's no nothing. So, it works very well. But to go back to this question, if I were you, I would simply really take advantage of the Alliance Credit Union offer. Again, it’s not going to be around. It's maybe around, I think, another month. And then that's it. And that extra $100 Plus they're paying you of the .55%. Might even equal out it, the Ginnie Mae fund. But I have to tell you an emergency fund, I'd rather see you keep it in a savings account. But you can try if you want. Okay, this one I'm not supposed to tell you that me? They said tell Suze, please do not use my name. So do not tell me. I'm not giving Suze your name. I love listening to your podcast. You and KT have great style and chemistry together. I like that one. She definitely who has more style. You are me. Suze has more style. But I'm all about the chemistry. She definitely added something extra to your show, Suze, and makes it very enjoyable. Does that mean that it without you like on my Sunday show? Without me, all you're going to do is give them slap down, slapped down, slapped. I do not give them slap down. Listen, it's like not even the sun hasn't come up and she's already red hot, steaming. So ready for the question. Is term life insurance appropriate? If you have a kiddo who has a disability and they always need you for support, we've been to several plan or CPA fee only planners, etcetera. They all said term in our situation is not correct. We always had insurance through employers, but now that no longer applies and we need to buy one on the open market. Is there a general rule on this? A little financials about us. My husband and I are in our late forties. We have two teenage boys. Financially, we have been fortunate. We have no debt of any kind. Own our home. Very healthy retirement account, Healthy emergency fund living expense fund, etcetera. Your advice is greatly appreciated. So, no name, here's what I would tell you. I actually don't agree with the advice that your planners gave you, given the fact off how healthy you are financially speaking and that you're only in your forties. In your forties, you could get a $5 million 20-year level, term policy, maybe even a 30-year level term policy for a fraction of the cost. Of what that exact same policy would be in a whole life, universal or variable life insurance policy. The difference is this. They're just assuming, maybe the planners are just assuming, that you're not going to save any more money. You're not going to have enough 20 or 30 years from now when that term policy is up and you're going to need more insurance. I'm assuming that if you die tomorrow and you have a whole lot of insurance that will take care of your child far better than a whole life policy that has a lesser death benefit because it's so expensive. So, I would do the math if I were you. What is the cost of a whole life policy versus a term policy for a serious sum of money and the difference? How would that build up if you were to invest the difference between the two over the length of the term of insurance, including the growth on your current investments? Will that give you in the next 20 or 30 years enough money that if you died, even then, after the term policy was gone, would that give you enough money to take care of your Children or in this case, your child? What you really need in this case is a special needs trust because the last thing you want to do is to leave a lot of money to a child. That may end up on SSI, because that would disqualify them. But I would really do the math if I were you. And I would be surprised if it didn't come out that term insurance for a serious sum of money would make a whole lot more sense for 20 or 30 years. Where does she get it? So, you know, you could go to any quoting service if you want. Select quote happens to be my very favorite because it was the very first. But, you know, I have been watching on television. This one company called Ladders up. I think that's it. That just looks interesting to me. So just check him out. There's so many out there you would simply get whatever you're quoted, the least expensive of that. The other thing you might want to think about is that if the longest-term policy you could get is 30 years right now and you're 40 maybe you renew it when you're 50 you know, for another 30 years. And just see what that might cost you to see if it would work for you. I just have a feeling that it will. Okay, next question is from Antonietta. Oh, Antonietta, she likes I love that name. Hi. Suze and KT. She wrote Kathy, not KT. Some people call me Kathy. My mother is 80 years old and she has a second house she rents. It needs to be renovated. But instead, she decided to sell it as it is. I told her to renovate a little, then sell so she'd get a better price. She bought the house in 1976 and paid $60,000. What do you think, Suze? I think she should sell it. As is. Me too. So, KT, tell everybody the story. That’s a great story. We love Barbara, our little sister, and she listens to everything. She's great. So, Barb and Donner husband, we're ready to sell their home in Pacific Palisades, LA. Very prestigious great neighborhood, Great house. They were moving to Colorado and they wanted to put in a white picket fence. They wanted to renovate it. Yeah, they wanted to do lots of renovation, little stuff, but it would mount up. They wanted to give it curb appeal, and it was already a great house. So, Suze, tell them what you did. And this this is important because people timing could be everything. Well, yes and no. But essentially said, do not waste a penny. You are to go home, put it on the market like it is. Forget this renovation stuff and she went ahead. She went home immediately. Did that. It sold in a week and two weeks later, the real estate market crashed. The point of this story really is this. If somebody is going to buy a house, you don't know what their taste is. You don't know if they're going to like the color that you painted or the renovations that you did. It's better to let them just come in and pay less for it. Be able to imagine what they're going to do with it and for you not to waste money on something that you do, that they may not like on any level. So, no, I would sell it exactly as it is and let your mom do it. Another thing. There's another point to this. She's 80. Wait, no, wait. The other point is my mom. My mom had an apartment in Chicago. This is now. She's like, 90 years old when this is happening and she decides she's going to sell it now. I knew this apartment was worth about $120,000 but my mother was so proud because she sold it on her own for $90,000. And that $30,000 difference was a lot to her. But she didn't get that. She got that she did it on her own, and at 90 she could still do something. So, let your mother do what she wants to do. Don't take her power away from her. If she's convinced this is what she wants to do let her, it's more important than money. All right. Next one is from a man so smart enough to Listen. Hi, Suze. I'm single 28-year-old ready for this. Suze, I make $81,000 a year. In Nebraska. I contribute 19,000 year to my Roth, 401 k. 6000 year to my Roth IRA. And 1700 to an HSA. I have no debt other than $700 a month rent. I have 40,000 in savings in, 81 in a 401 K and 5000 in my Roth IRA. Should I be investing more in a traditional IRA 401K as well for tax diversification purposes, or stick strictly to the Roth? I'm trying to retire in my early fifties. Good stick to your Roth. 28 years old, 1st, 1st, let's congratulate him. Why? Because he's doing pretty damn good. Don't you think Suze. But that is not his question. No, but I wanted I want to say, Tom, we're proud of you so far, right? Now giving him your answer. Now, Tom, don’t you get what you just said here. First of all, you are to absolutely stick to your Roth retirement accounts. Number one. You say that you want to retire, you know, in your early fifties, if you invest in a traditional IRA as well as a traditional 401K. You are not going to be able to touch that money until you are 59 and a half years of age. If in fact, it's in a Roth IRA. You're going to be able to take out any money that you originally put in. You're going to be able to take it out without any taxes or penalties whatsoever. Blah, blah, blah, blah, No. Can you just stick to the Roth and do me a favor? All right. You're doing a good job, Tom. You know what time it is? It's quizzy time, everybody. It's quizzy time, everybody. Favorite time of the day. Right? So here it goes. Dear Suze, thank you for all your care and advice. I see more and more companies, even Merrill offering these self-directed IRA's. Is it true that you can buy coins, real estate, precious metals and the like and consider it an IRA? Can you also get the same tax advantages of an IRA? If you're using a self-directed IRA. I would appreciate your thoughts on this. So, the quizzy is this. Can you buy coins real estate and precious metals in a self-directed IRA? Yes or no. First of all, what's a self-directed IRA versus a regular IRA? A self-directed I have no idea, but an IRA is an individual retirement account. So, can you put a coin, a house and all of this? No, they're not people. I think my answer is no. She's giving me that look like I'm going to be wrong. Wait, I don't know what self-directed means. A self- directed IRA Is that you are the one who directs everything that could go in it. It's done usually with a special custodian that charges you bigger fees. Then, if you just did a regular IRA at a brokerage firm, like a Schwab or whatever. It's not all brokerage firms offer self-directed IRAs. Technically, they're just a little bit different that way. And, yes, the tax benefits are the same. The write offs and everything. You could also have a Roth, self-directed IRA, so that's one thing. But they're asking putting your house, your precious metals like gold. Those aren't people. By the looks of her face, I think the answer is. Yes, but I still want to stick to know, because an individual IRA is for an individual. But a stock is not an individual. Uh, you know, an exchange traded fund isn't an individual, and IRA is in your individual name. You can only own it. But what you own in it has nothing to do with if it's a person or not. So, the answer is yes. You really think that you could put a piece of real estate in an IRA? Is that what you think? Hold on, time out. Answer is no. Is that your final answer? It's my first answer. Did I get it right? Wrong. What? It's Yes, Yes. All right, I got it right. You just convinced me to go back to No. Got to know what you're doing. So, you are denied. You are so denied. So, here's the thing that you do need to understand if you have a self-directed IRA and this is not true for the majority of you that have traditional IRAs or Roth IRAs and really, that's, in my opinion, the only kind you should have. But If you want to go to the trouble of having a self-directed IRA. You can if you want, put an investment property within a self-directed IRA. But it cannot be a home that you live in. It cannot be a home that your family ever lived in or that you purchased from a family member. There are so many rules I cannot tell you, you could If you want to put precious metals, bullion itself in a self-directed IRA. I don't know why you would want to do that. In terms of coins many self-directed IRAs do not like collectibles. They don't want art. They don't want things like that. So many coins. If they're considered collectible, you're not going to be able to put it in a self-directed IRA. But I want you to do your homework on this because the rules are really, really difficult. Remember, you have to pay for everything from within the IRA. So, your property taxes all benefit everything. If you put real estate in there, the bottom line is, can you just not do it? But if you want to, you can. Did that answer surprise you? Yeah. Maybe I didn't hear it right, maybe I didn’t hear the quizzy right. Alright, everybody, it is Tom's birthday. We want him to have a great, great celebration. He's with his with his, with his kiddies. His kiddie is daughter Katie and her husband and their grandchildren. And they're having a blast. But we wish he was here on the island with us, and he'll be here soon. But we love you, Tomboy. Shall we sing? Happy birthday to him. No. All right, everybody. Until Sunday, when it comes to your money, there is only one thing that I really want you to remember. And it is this. What is it, KT? People first, then money, then thing. Now you stay safe. See you Sunday.

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