Emergency Fund, Home Mortgage, Marriage, Retirement, Roth, Will
April 08, 2021
Listen to Podcast Episode:
On this podcast of Ask Suze (and KT) Anything, Suze gives us an update on the new COBRA law and then answers questions from Women & Money listeners Amanda, Renee, Lauren, Patti, Sarah and others.
April 8th, 2021. You know what today is? It's Ask Suze and KT. But Suze, I told her keep the school short. Well, what if they didn't listen to Sunday? Okay, Suze moved Sunday’s Suze school to KT's Thursday Ask Suze anything. What? You want me to move it again to this Sunday? No, but I have a lot of questions to get through. And they're all just a few updates that I want people to know about, right? So, I'm actually going to do a really short Suze school because I just want to make sure that all of you get this one thing correctly a little bit ago. Maybe it was a week ago. Maybe a little bit more than that. I was telling all of you about how April 1st through September 30th was such an incredible period of time for those of you who happened to be on Cobra and what Cobra simply is for those of you who do not know is that when you work for a corporation, you have insurance with them, and now you've been laid off. You've been fired, something's happened, but you happen to have a pre-existing condition, so you don't think you can get health insurance anywhere else. You always have the ability to buy health insurance through your ex-employer, but you have to pay 100% of the premium and that health insurance will last for 18 months. But it very well could be 600, 700, or 800 a month. So, when President Biden signed into effect the American Rescue Plan Act and we call it ARPA, it had a provision that was so fabulous that if you are on Cobra because you were involuntarily laid off, you were fired. Whatever it was because of covid, whatever it is, that through April 1st, 2021 September 30th, 2021 you don't have to pay your Cobra premiums, which is a big, big deal. But here is the problem everybody, your human resource people, and to no fault of their own seriously, because all of this is happening so fast some of them aren't aware of how this works. So, I got an email from a woman by the name of Jennifer, which really upset me because she was so excited after she heard this podcast and she had lost her job last March. And she's still on Cobra because she does have a chronic health condition. And so anyway, she called the Cobra provider last week to find out what are the next steps that she should take since April 1st was coming up fast, and she was told that she would receive a letter within 60 days, which is what all of you are supposed to do, notifying her of eligibility and that in the meantime she was still responsible for her monthly premiums and to not stop paying them or her coverage would stop. They also said that when the program does kick in that she would receive a pro-rated refund at the end of her six-month period of government support. So, she's going to have to wait until September 30th is what she was told to get her money for Cobra back, wrong, wrong, wrong. So, here's the bottom line, everybody, the government will be paying Cobra premiums for employees that meet those qualifications. If you're human resource person doesn't quite know yet, and they tell you that you absolutely have to keep paying these things all the way through September. I would check it. I would go back. I would say, I don't think that's how it works because I don't think that's how it works. KT, I just wanted to tell everybody that because a lot of people are paying right now 600, 700, or 800 a month for Cobra, they can't afford it. And they don't have to be. But not everybody knows that. So, I just wanted to bring people up to date. All right, Now, Miss Travis, I'll wait to do everything else for Suze school on Sunday because I can tell. I can tell you want this to be your day. I just have so many good short questions. But that was important because people really, really need to stay insured and look after their health. Alright, so go on. So ready, everybody. Here we go. We're going to roll it out. Suze, this question is from Amanda, and I actually love it. Hi, Suze and KT. Love your podcast. I laugh often when I listened to you. Here's my quick question. And here are the facts: I'm 50, He's 52, I make $100,000 year. He makes $200,000 year. I have a 401k with a quarter of a million and a Roth with$ 40,000. He has a 401k with 1.6 million. We are open to prenups. We bought a house together with a 50/50 investment. We've both been married before. Here's the big question. Are you ready? Yeah, this one makes me laugh. What's the financial benefit to getting married and taxation? You know why it makes me laugh. Why? Amanda, what about what's the benefit emotionally and love getting married. All right, So, Suze, you do the taxation part. I'm going to do the benefit of love part. So, Amanda, you know the way that you should figure this, if we're just looking at it from a financial viewpoint. Seriously, if I were you, I would have my taxes done as if we were married, and I would have my taxes done if we were single. And whichever way, if all you want to look at it is financially, whichever way you pay less taxes for this year because every year it might change. So, you want to do it every year. Then you know, if you should get married or not, if all you're considering is the financial benefit of it. But remember, there's also a financial benefit of it, if his Social Security may be higher than yours and here you are and you're getting older. And now it's 20 years from now, and while you're married, he gets his, you get yours. But if he were to die before you, you could take over his. You also, and this is something that's very important. He has $1.6 million in his 401k plan. So, what that means is, if you are married and he dies, you get to take over that $1.6 million as if it was yours. Otherwise, you're going to have to strip it clean within 10 years. So, there are many, many advantages, really, financially speaking to getting married. So obviously, if KT were to answer this question, she would be telling you how fabulous it is to get married and all of those things. But KT, that's not what she's asking. So, you want to say anything to her? Go for it a man to marry, your sweetheart. There you go. Alright, don't spend a lot of money on the wedding though. Should we tell them how much we spend on ours? No. Alright. God. Alright. But thank you for the short question. That was super. Okay, Suze, here's a question I really like, this is a will and trust question. Hi, KT and Suze. She loves it. When you put KT first, all of you should do that. I hope you're both well, my question is about the will and trust. I'm 52 years old and I have no children. But what I'm worried about are my dogs, Howard and Eugene. I want to make sure. And their little schnauzers, everybody. I want to make sure they're taken care of, if anything happens to me, is there a way I can list them in my will and trust to make sure that they would be taken care of? With your help I am finally taking charge of my finances. I had the courage to raise my prices at work. I'm self-employed. I have not raised prices in years. Thank you for giving me the confidence to do it, Suze. So, give Renee a little response. What is it possible? Can she put them in the will and trust? So, here's the thing you can't put them in the will and trust, because if you leave money to the two pooches, what are they going to do with it? So, you have to leave somebody in charge of them with the amount of money that you want this person to spend on them, the care that you want for them, and it's really just that simple. If, for those of you who don't want to do, the must have documents, you don't want to do the will, the trust and everything. You can do what's called a pet trust. I think nolo press has one, and it's just for your pets who you designate, will take care of your pets and how much money you are going to leave to them. But then be very careful because let's say you left a lot of money to them, and now they die. Where does that money go after that? So, think it all the way through, especially if you're going to leave them a lot of money. Do you know KT, I, when I was seeing clients, there was a woman who left $3 million to her dog. I've heard so many stories about pets, and I kept saying, don't you want to make another plan? She goes, though I can't even conceive that my doggie would die. And it's true she died before her doggie. She did. She did. My God, I know, right? Three million dollars. Three million to that dog. It's a dog's life, doggies. Life All right, this is a sweet email, but I think one that people really need to talk about with each other. So hi, Suze and KT, I'm 32. My boyfriend is 37. We have a great two-year relationship, and we discussed marriage regularly, but we're in no rush. We don't want kids. He's been married before. We don't live together, which works really well for us. I thought that was kind of funny. So, anyway, this is from Lauren. She's an entrepreneur. She's in her first year of business. The anxiety is high and the money is tight. Ready, Suze. So, my boyfriend makes a great living and doesn't worry about money. He enjoys paying for things we do together, like dinners, trips, dates, etcetera. He hates seeing me struggle financially and wants to help. So, to take some of the stress off my plate, it makes him feel good to share his wealth. He also wants to show his appreciation for the sweetness and groundedness that I bring to his life. How would you suggest approaching this since we aren't married? I don't want guilt or expectations of being paid back to negatively impact our romantic relationship. We are really compatible and we see marriage in our future, probably a few years from now. So, there you go. I would appreciate it. I would accept it with absolute grace. And as your relationship and love. And as your relationship goes on, then maybe you're making more money. You never know what can happen. You have to give back equally to him on any possible level. So, Lauren, this is KT. I just want to put my two cents in here. What Suze is saying I absolutely agree with. However, you are an entrepreneur, it's your first year of business. He wants to keep helping you. You need to also be strong enough to realize if this business isn't going to work, you need to be able to not make it, um, an endless well. So, I think that's more important for you to be realistic and to be very responsible with your relationship and your boyfriend? There are two different things there, though. He wants to shower her. Yeah, he No, he doesn't want to shower her. He doesn't want you to struggle. He wants to help you. So, agree with him how far the help should go on the business. Dear Suze, my 22-year-old son, started his first full time job on March 15th, 21. I've instilled in him the importance of having a healthy retirement fund. He started to contribute $500 a month to a Roth IRA and also contributes the max to his company's 401k. And that's 15% of his annual income, which is yeah, baby. Yeah, that's good. Which matches 40%. Is he allowed to have a traditional IRA in addition? Thank you for advice. I followed you for years. And now listen to your podcast regularly. My husband and I are financially stable, thanks to you. And KT. No, no, no. And ready, this is the end. This is why I like this email. I also opened an account with Alliant Credit Union. My son has opened a savings account as well, so I just want to say something about that. The Alliant, is thank you all for all the thousands and thousands of emails that you're sending in, thanking us for the fact that you were able to open up the ultimate opportunity savings account at Alliant credit union. And for those of you who don't know, you put in at least $100 a month, every month for 12 consecutive months. At the end of the time, you'll get $100 bonus, which is a 16.7% return on your money. But don't send thank you’s to us because it's Alliant credit union that did it. Thank Alliant because if you think about it and they have to give $100 to tens and tens of thousands of people, it's going to cost them millions and millions of dollars just to help you save. So, the greatest thing when I was talking the other day to Dennis, their CEO, he said to me, Suze, we've decided that we're going to make 2021 the year that we are going to help savers. We want to help people. And what's so incredible about that? Is there just not using words? They are putting big dollar cash behind it. So, for those of you who want to take advantage of it, and it should be every single one of you go to myalliant.com. That's myalliant.com and sign up there. So here, Patty, there's two things you need to remember when it comes to IRA s. What does that stand for KT? Individual Retirement Account, Bingo Girlfriend. There are two types, the traditional IRA, which is one that you fund with pre-tax dollars and the one that your son has, which is a Roth IRA that you fund with after tax dollars, the maximum that you can put in between the two of them because their contributory Roths. That means you put money in every month or every year, the maximum that you can put in combined between a Roth and a traditional contributory Roth is $6,000 if you are under 50. $7,000 if you are 50 or older, so it would be $6,000 a combination of the two for your son. However, let's say he has a Roth IRA that he is contributing to. And now let's say he has money in another retirement account at ex-employers like a 403b or 401K. And he's got money there, then all or 457 whatever it may be, then what he could do is he can do an IRA rollover, and that's not a contribution. So, he can have both that way so he could do $6,000 in a Roth and have three or $4,000 in an IRA rollover this year as well. Or he could do $6,000 in a combination of a Roth and the traditional contributory retirement account and have money in an IRA rollover that he did this year as well. So, I hope that answers the question that should have been a quizzie. Why? Because you would not have gotten it. That's so nice. The next question. Would you have gotten that right? Of course not. You know, I'm not like one of these IRA, Roth gals. Back door front doors. You say that all at the time. So, this next question is from Sarah. I'm calling you smart, Sarah. And here's the, this is the way I love this. Ready. Hi, Suze. KT and Colo. Colo Colo. Do you all know who Colo is? We love our Colo like our son, and he lives on the island taking care of the house, boat. He is so big everybody. He's 247 pounds solid, solid, likes to say solid. He gets up at five o'clock every morning in the gym. He bench-pressed like tons of weight. I go around poking at him, going like he's solid steel, I said, we need to get him bigger shirts. I mean, he's just bursting out of everything, and he's just got muscles everywhere. But he's our Colo. So ready. Here's the question from Sarah. I'm 28 years old. My parents are divorced, and my mom has always struggled with her money and her spending. Thankfully, my dad instilled good practices with me, and I'm hopefully on a good path with my finances. I'm now helping my mom. She's 52 years old. She was $20,000 in debt and over the last two years has diligently paid it down and has one payment left. Suze, she'll be debt free. I know I'm really happy for her. So now that my mom's about to be debt free, she's focused on building her savings. I would like her to take $1,000 and open a Roth IRA with Vanguard. I know she needs to build her emergency fund, but I was thinking if even $1,000 of her savings could be put to work for her, that would be awesome. Is this a good idea? You know what mama should do? KT, she should take our three-step reset program that is going to be coming out in the next few weeks. Because this is listen, everybody, this is a program. Seriously, I'm calling it the three-step reset. Right, so that you could really reset everything so that you could change how you think, feel and act with money so that you always do the right thing with it. It would be really great for Mama to take that course, but all of you should listen for it. But here's the thing. An emergency fund, is an emergency fund. A Roth IRA can be used as an emergency fund if you put the $1,000 in there, but you don't invest it. Because I know we all think now, that if we invest in the stock market that the markets are going to go up and up and up because of what's happened over the past 10, 11, 12 years. I'm telling you, it isn't always going to work that way. So, the fact that Mommy right now is doing so well and, she's almost out of debt. She has savings. Let her continue on the path that she's doing, so she can feel like she's doing it because you will feel so horrible. If you have her put $1,000 in a Roth IRA, you invest it and then the market goes down, and now she sees her $1,000 go to $700 which is absolutely possible. And that will be like, that's it I'm not investing anymore. So let her just go slow. Let her walk slowly. She's doing so great. I would just keep it in the emergency fund, if I were you. So, Suze, there's one more thing about Sarah. She's a Fly Fisher woman in Colorado. We have to do like a fishing expedition. We need a fishing show with the women and money women, Fisher women. So, Suze, this next one is I called it second chance. This is from Laura. Laura actually sent this question on October 26, 2020 and I don't know, I lost it. And then she sent it again. So, Laura, everyone has a second chance. Hi, Suze, I've always loved following you. Enjoy your no-nonsense advice. Question. I have an extra $1,000 a month, no car payment or credit card debt. I refinanced my home to a 15-year mortgage last year. Should I use the extra money to pay towards the mortgage or invest it Somehow? I'm 51 hope to be able to work to until least 65. Now. She's got quite a bit of investments. But here's the question I have for you, Suze. This was sent to me October. So now she's got $6,000 plus $1,000 a month extra if she sent it to me in October and it's I'm answering it now. She's accrued $6000 but I'm just looking at this because you handed it to me. She's saying that she has an emergency fund, which is almost $5,000 because she re-sent this KT April 5th, right, Right. That's what I'm calling it second chance because I missed it the first time anyway. You are so talkative this morning. Anyway, Laura, it needs to go into your emergency fund just that simple. What is the greatest lesson that we've learned last year is that you need at least a one-year emergency fund. That's what you should do with it. Don't get tricky. That's where it should go. So, Suze, it's time. It's that time. It's the time I dread not to end the podcast, but to end it with a what? Quizzie. She tries to get the answer out of me in so many ways before we do this. I said, KT, I'm not telling you the answer. All right ready, everybody? Give it my best shot. This is from Becky. Becky says she's single, and she has three retirement accounts with different investment companies. Okay, some of them are now exceeding the 250,000 FDIC Insurance limit per depositor. Is there a good strategy to follow once you cross the $250,000 threshold to be sure that the money is safe, do I need, she says, does she need to open accounts with other companies? She has researched this, but she's still unclear and wouldn't love my advice. Now one of the accounts is with a former employer. Another one is with the current employer, and she has a Roth IRA independently that she's invested in with stocks and things. So, is there a way? Should she open up more accounts? What is she supposed to do now that some of these accounts KT and everybody listening is exceeding $250,000? I want me to tell you what I would do. Yeah, all those that have max to the FDIC or whatever Insurance limit is. Don't put any more money in them. And then max the other ones out till you get to the limit. And then when you finish that open another one. I wish you could see my face everybody. You're so proud of that answer. Is that the right answer? I ask, is that the right answer? Yeah. You sure you don't want to change it? I wouldn't keep putting money way. It is so wrong, it's not even funny, KT. Okay. Do you want people to put more? KT, stop! Stop, stop, stop! Stop. Becky, KT and everybody listening, the $250,000 limit is when it's FDIC insured only applies to cash in a bank. It does not apply to stocks that you buy you. I asked you. I am not going to tell you. And I answer that question. You can't be insured about your investments going down. You could have civic insurance security, Investors Protection Corp and things like that in case the company goes down. But when you have money in a retirement account at work, that money is essentially protected with the Pension Benefit Association. But, the value of it that goes up or down can't ensure that can't control. Can't control that you can only control and protect yourself if the company that's issuing the money, that another trick question, it wasn't a trick question. You should know that FDIC Insurance is for banks. There's insurance, obviously, for credit unions, that does ensure your cash, but it’s cash. It's not an investment. She now has retirement accounts that are exceeding the $250,000 FDIC limit doesn't matter, and it does not matter. Well, that's good, unless the retirement account is at a bank in this case, and she has it all in certificates of deposit or just cash at the bank. But that's not what she has. She has money at ex-employers and a current employer and so forth. I'm not doing these quizzes anymore. So, you are so just know that everybody, know there's a difference between FDIC Insurance, insurance for credit union, as well as investments that you have in an investment account or at work. Quizzie days are over. Your days are over, right everybody. That's a wrap, KT. Podcast is over. Are you happy it's over? after a quizzie like that, yes. Because I can't believe that you threw me under the bus again. People will you start writing in and telling her that I don't throw her under the bus? I simply ask a quizzie. Okay. What are we doing Sunday? I don't know. Every time I have a plan, you are taking over this podcast. I'm just going to make it be the KT podcast. No, we're going to have a good time Sunday, so tune in everybody. Right? So, until then, there's only one thing that we want you to remember when it comes to your money. And it's what, KT people first. Then what KT? Then money and then things. Now you say, Say bye bye now.
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