Investing, Mortgage, Roth IRA, Saving Money, Women And Money
April 29, 2021
Listen to Podcast Episode:
On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Anthony, Nancy, Nina, Beth, Jasmine, Gayle, Shirley, Dan & Diane, Monica and Emily, read by KT.
April 29, 2021. Can you believe we're almost in May? No I can't believe the whole beginning of 2021 has gone so fast because you know once we're in May, we're in June and once we're in June what does that mean? Suze's birthday? All right. She doesn't like to celebrate. But it's a big one. It's a big one coming up. Tell everyone how much fun you had on that webinar and what happened? Oh, just getting unindated with responses from everyone excited about the three-step reset. They kind of like a dance like a tiktok. Anyways all right let's do this KT. All right, you ready? First question is from Anthony. Hi KT and Suze love your podcast after watching you on tv for several years. I'm glad I found you again a couple of months ago and I especially love hearing KT's voice. I had to start with that. So, Anthony has a quick question regarding Roths. KT's favorite topic, if I have a Roth 401K and when I retire, hopefully in the next 1 to 3 years and I roll it over to a Roth IRA do I have to wait five years before I can withdraw any of the money without a penalty or since this is a rollover, does the five-year rule start with the original account? No. If you have a 401K and you do a conversion, it does not start from the date that you opened up the Roth 401K. It starts from the date that you converted. But you know this is so complicated. Truthfully KT, let's do for Suze School on the five-year rule for Roth IRAs I think it's really important that you understand how it works and the laws and everything. So, this Sunday, make sure you tune in for a five-year Roth Suze School, I will probably take off that day. She thinks she's so funny, Roths are not my favorite, but it's very complicated. All right, Suze will make it easy for everyone. So next question is from Nancy, she just turned 59 and she's about to sell her secondary home and property. And this actually was left to her as a beneficiary was transferred to her from her late husband who died in 2010. So, the question is, am I able to claim the home and 41 acres as inheritance when I sell it? So here we are in the year 2021, she actually inherited it 11 years ago, the day Nancy that this property became yours, it went from your deceased husband's individual name to your name. That reset the cost basis on the property. So, whatever it was worth in 2010. Now, whatever it's worth, you are going to have to pay capital gains tax on the difference between what you inherited it for and what it is worth now. Now, obviously, maybe since that time you've put money into it, you've developed it and who knows, whatever. So, you would take the cost basis, add to that, whatever you've added into that property or onto that property. And the difference between the two is going to be a long-term capital gain and that's just how it's going to be. Yeah. But you know why she was asking that KT, I'm sure is because if she had lived in that house for two out of the past five years as her primary residency, then she could have added on an additional $250,000 to her cost basis because you're allowed to do that for your primary residency. But because it's not her primary residency, she's going to have to pay capital gains tax. Never It never works. Even if you live in it for 2-3 years as a vacation home, has to be primary residency. Alright, I didn't know that. Hello, KT and Suze. This is from Nina. I'm a 40-year-old woman in the middle of getting a divorce. I have a 14-year-old daughter and a 65-year-old mom who lives with me. All right. So basically, the question is, I have about $100,000 to invest. After having saved a 12-month emergency fund. I was planning to buy an investment property to rent out so I can give time to my family and I can create income. So, you're ready for this, Suze? Oh, Nina wants to earn at least $5,000 every month, which will give her the funds to support herself and her family. And she wants to do that with her $100,000. So, Suze, the question is, is there anything that Nina could possibly do with $100,000 as an investment in order to generate $5000 a month? I'll tell you Suze, if you know the answer to that, I think everyone that's listening is going to want to know that as well, including me. You know, Nina, even if you had asked, how can I generate $5,000 a year? From $100,000? I wouldn't even know how to answer that question for you right now, if in fact that money needed to be safe and sound because really today, you know, you're looking at it may be generating safely for you really a few $100 a year and that's it. So, here's what I would say to you have two choices. That either you take the $100,000 and you put it in the Alliant credit union very seriously and you give yourself essentially two years to figure out how to make your life work for both your mom as well as your daughter and you use that money to actually live on. And if you need $4,000 or $5000 a month to live on all right, it may last you close to a year and a half or two, but within that year and a half or two it is your job to figure out. How are you going to go out and find a career, find a job that's going to pay you after taxes, $5,000 a month. Because the only way that you're going to be able to do this honestly. And I wish I had a magic wand. I wish I could turn $50,000 a year. You know, income from 100,000, but that's a 50% return on your money year in and year out. That is absolutely impossible. It's even kind of impossible at 5% a year. So, we have to get realistic and just because you have $100,000, you can't ask it to do something that it's not capable of doing. But you girlfriend, are capable of doing it. So rather than asking your money to generate income for you, I am asking you to generate income from yourself, effort from what you do from you making sure that you're okay and that money will just carry you through until you figure out how to do that on your own. Okay. Next question. Suze is from Beth. Wait, you don't want to make a comment on my sigh. Well, let me tell you why I sigh. First of all, I was like I was when I read that and I chose that, I said to myself, really Nina. What makes you even think that you could generate that kind of money? No, KT. But here's the thing, right? It's really important that all of us always understand number one not to be judgmental of anybody seriously. And that why you might know that. And I know that obviously Nina did not know that somehow. She really believed that it was possible. And there's nothing wrong with that. But somebody then has to be honest with Nina and tell her what's real and what isn't real. And the reason that I sighed is because this goes back to our lack of education in our school systems everywhere about teaching everybody, what they can expect safely from their money. And of course, Nina would think that if she doesn't have financial education and maybe somebody said something to her and you know maybe somebody told her they bought Bitcoin and they're making $5,000 a month from it. You never know, but you all have to be very careful here because you cannot ask your money to do something for you that is out of the norm. And many things have been out of the norm lately. I just want to say something else. Somebody a good friend of mine just wrote me and said Suze my daughter is so excited about Bitcoin. You know you talk to her months ago about it, Suze and she invested in it. But her boss has made millions and millions of dollars on Bitcoin. He's a big CEO from a major company and she's so excited and she can't wait to invest every penny that she has. Listen, when you're out there and you have serious sums of money and you want to invest millions of dollars and if you lost millions of dollars who cares? I don't have a problem. But if you're just starting out you have got to be careful, just because other people are making a lot of money doing something that isn't how you create wealth. Wealth is created $1 at a time, making sure that you have a 12-month emergency fund. You are out of credit card debt. You know you are paying down the mortgage on your home, you don't own anything on your student loans or your car loans or whatever. You do it in steps. You just don't go for or let's invest everything I have in Bitcoin or GameStop because other people made so much money on it. That's kind of why I sigh because I have a feeling somebody said that to Nina that was possible. And anyway, all right, go on enough. All right, next question Suze is from Beth and I think we need to set Beth a little bit straight here because it is true she said, Suze advises women to keep their own accounts when they get married and she wrote separate from their spouse meaning checking, savings accounts, credit cards that they should keep them only in their own name. Now I think you'd better explain why you say that and what the benefit is. However, now we're in a situation where Beth did not keep any of her accounts or credit card in her own name and unfortunately, she isn't employed right now and wants to start she wants to get a credit card in her name. So, if she applies for the credit card and she feels she has a pretty good Fico score it's like 750 plus. But if she applies for a credit card she asks, do I need to list my husband as an authorized user to be able to use his income. Then after being approved, can I remove him as the authorized user or does one have to close the card and get a spouse removed from the credit card? I think you better explain a little bit about how she can do this or not do and her name is this, is from Beth. Beth first of all using your husband as an authorized user doesn't help you get a credit card. It would help him if he was in a situation where he couldn't get a credit card in his own name and you had a credit card or you apply for one and then you added him as an authorized user. Most people only add people as authorized users in order for that person to take over your Fico score, chances are that if he didn't have a high Fico score and therefore could not get a credit card on his own and you added him as an authorized user to all your credit cards. Your Fico score would become his Fico Score. His Fico score then would go up. Then he could probably get a card on his own. I think you should try to get a credit card and just let's see if you can get one on your own before you assume that you can't, maybe they'll give it to you based on your Fico score. You never know. Otherwise, what's important for you then is, if you want a credit card in just your name, another way for you to do it is to get what's called a secure credit card and a secure credit card is a credit card that is secured by a deposit that you make to it so possibly $500 or $1,000. And every time you go to use that card, they do not debit the $500 or the $1,000. They actually are using it to secure whatever you charge. And what happens is you charge on it. You get a bill at the end of the month saying you owe X, Y and Z. And you have to pay that. And over time you will establish your own credit. But what's interesting here is that if you have a high Fico score right now you might really be able to get it on your own. So can you just try that first and then we'll go from there. Yeah. Suze, one of the things I forgot to tell you is a lot of these women or you know fans calling in and writing are now stay at home parents because of Covid. And that's why one of the spouses is staying home and forfeiting a job. So that's happening and it's becoming frequent and they're trying to figure out, okay now what how does that impact? Well, the other thing is she could apply for a credit card just in her name and say that she's married. Right. And then what happens at that point, KT is that usually your marriage partner, even though it's just in your name, is legally responsible for any money that you charge on it. So, you might want to try and do it that way. Good. That's good advice. Okay, next one is from Jasmine. So, it says hi KT. This is just for me. I love that Suze reads and responds to all of the emails. So, Jasmine has been a fan for years. She loved episode 29, which was trust your gut. And she said her husband who listens every time she says because Suze Orman told me so she has to give you credit for the fact that they paid off their home. They maxed out the retirement contributions. They have a 529 plan set up for the son. She has her four must have documents, and her question is, and she dipped her toes into Bitcoin Paypal. So, the question is this, this is what surprises me. Our 13 year-old son is very much into art. Would like to go to school as an art major to be an artist or animator. Now my husband thinks we should support him doing what he loves and makes him happy. But I wonder if he'd still be happy if he can't pay his bills in the future. So, Suze. Before you answer it, KT has something to say to Jasmine. Oh KT, why are you crying? Jasmine, you have to support him if he wants to be an artist. But you have to tell everybody why you're crying. It just makes me so sad that people feel that they, their children or people that love art or music or performing arts won't be able to make it. It makes me so sad. So, Jasmine I'm a graduate from the Rhode Island School of Design. And when I went to art school, I remember looking at my dad and saying, and I was very young, daddy I'm going to make pots, I'm going to make pottery, make a living on pottery. And he looked at me and he said, okay and I just want you to know that. I went to RISDE. I had an incredible art education. I went to Paris, I studied printmaking, I did things that I'd never thought I could ever do. And I ended up at the age of 30, at the age of 30 years old, well a baby multimillionaire baby millionaire I guess, at 30 because I had learned advertising and design and graphics and my life is great. I love what I do, I've always loved and it makes me so sad that, bet we have a lot of people that are crying 13 encourage him. When I was 13, I was able to paint with oil paint. My parents gave me an oil painting set for like $12 for Christmas. It was the best Christmas present I ever got. Oh, we're going to maybe have to take a break here. So but Jasmine, I think KT answered that question for you. Art is a very big part of the world. Song is a very big part of the world. Creation and inner inspiration is what keeps this world going. If your son at least knows what he wants to do, let him do it. Always let him follow his passion and his passion will lead him to a life of true well and this time your husband is right? All right, can you pull yourself together? You okay? Yeah. Okay. Next is from Gail. I have a quick question when you start to withdraw your retirement funds, which order should you withdraw? So, should I give you the order? I already know the answer, but all right. Well then I won't have to go through it. But for the sake of everyone else Gales, 64 currently retired, received a government pension and she supplements this income with her retirement funds. I have a traditional IRA 253,000, Roth IRA 52,000, brokerage account 71,000 which is a lot of mutual funds. I don't receive Social Security and she wants to Wait till She's 70 to get her Social Security. Currently I withdraw an even portion from each of these accounts 500 each a month. So, the financial advisors said the default plan is to withdraw from the Roth IRA first, then brokerage account and then traditional IRA. Right? So, I disagree. Okay, I would do the Roth IRA last. And the reason I would do it last is that it's obvious and have all of you listen to me over all these years. Do you remember me saying to you? I want you to do a Roth, I want you to do a Roth, I want you to do a Roth 401K. And a Roth TSP a Roth 403 B. And you many of you would write and go but Suze I have to pay so much in income tax right now. Do you see what's happening with income brackets? Do you remember me saying invest in the known versus the unknown. The known is your income tax bracket right now, the unknown is what your income tax bracket is going to be later on in life. And I've said to you, given the deficits that we absolutely have right now, I don't care who's in office. Across the board, we're going to have to raise tax brackets for us to pay our deficits and we can do that in very interesting ways. All of a sudden, your mortgage deduction could go away. Capital gains taxes, you see right now is going to go for those making $1 million 23.8 to maybe 44%. So, there's all different kinds of ways that tax brackets can go up without saying we're raising tax brackets. What you do have to remember is when you are on Social Security, you might not want your Social Security, your Medicare and everything to be taxable. So as time goes on, if you can take money out tax free from a Roth IRA a later on when maybe tax brackets will have gone up, then you're not going to have to pay as much in taxes on Medicare as well as Social Security. So right now, the known is what tax brackets are currently. I would invest in the known take the money from the taxable places now and let the Roth grow and grow tax free. It's such a cute little look. You're giving, is that like, is that a new rule? No, no. Right. I've always said, let your Roth IRA grow and grow and grow because I've always said tax brackets are going to go up. The other thing, it's not KT, just about your own tax bracket because let's say, I don't know, she doesn't say so, but let's say she has kids or she has beneficiaries that are making a whole lot of money. And now later on in life, she has all this money still in a Roth IRA and now she dies. It gets to go to her beneficiary's income tax free versus she has money in a traditional because she's used up all of her Roth IRA money. Now she leaves her beneficiaries $400,000. And they have to wipe that clean within 10 years and their doctors, who knows what they are and they're in a really high-income tax bracket and there goes all the money you have to really be a multi-dimensional thinker. Truthfully, yeah, we talked about that the other day, which is why it's really important when even if you hear advice on this show and whatever it may be this podcast, everybody has their own individual situation. Which is why I'm just going to have to create a program. Right, where you get to fill out everything and then we give you your answers. That's what we need to do next. That's our next project. All right. We can do that. Oh, we can. That means I can. All right. Anyway, go on. Okay. Next is from Shirley. Hey Suze. I'm 69 years old and I've been retired for five years. I have five insurance policies, all of which are term policies when I'm 70, they'll reduce in value. I have one son who is 44 and recently married. Should I cancel the policies or try to find a life settlement company that will buy them? Do you know what a life settlement company is? No, not yet. But wait, listen to the rest of this. Right. This is what scares me. She's 69. She's same age as you. What should I do with the money I will save from paying for this insurance, quarterly. And then she said it's hard to find a trustworthy financial advisor or attorney. I married, but in a marriage that may fold any minute. Well let's start there. So, if you really are in a relationship that may fold any minute, then what do you do with the money that you're saving on the life insurance premiums? You save every penny of it to make sure that if your relationship folds that you're holding money to be able to do that, what you need to do, possibly rent your own apartment, get your house, whatever it may be. So, you keep all the cash you possibly could keep. Best place to keep. It is where KT? Alliant Credit union in the ultimate savings account and cause why they're paying .55% interest. And obviously you can get that $100 bonus. But anyway, and you can get really great advice from Suze through Alliant as well. Right? Because the blog, Suze's doing some wonderful, wonderful content on Alliant’s blog that's exclusive for Alliant. It's on their money mentors’ block. Right? So don't miss that. We think it's great. We're happy to participate. Right? Here's what I would do. Surely if I were you, you obviously can see if somebody will, a life settlement company will buy it. And KT, just so you know what a life settlement company is, they are a company, a business that literally takes over your life insurance policies in the hopes that you're going to die. They may be pay you a little amount of money for a term policy. It's going to be very little. They're also called Viatical Companies and eventually when you die, they get the life insurance proceeds. But what they give you is based on your health and what kind of policy it is and everything. So surely, I doubt highly you're going to get anything for term insurance policies. You can try but you're not going to get a lot. I would just let them absolutely lapse at this point in time and just take that money and save as much as you possibly can for yourself. You know, it's funny, KT, I think I heard you say that she was talking about how she has these insurance policies and out of the blue, she says, I have one son who was 44 and recently married. So what does that have to do with her question? I just always find it fascinating that when somebody throws in a fact like that she might have had these term policies and made him the beneficiary, not the husband. So I think that's what, because you always tell people what do they need term for, really to take care of someone else. And in terms of I just also have to say this, I think she said in her email that it was hard to find a trustworthy financial advisor and attorney. You want to find the best financial advisor in the world, look in the mirror because nobody's going to care about your money more than you. No, but there are some good ones out there. There is some fabulous ones when you do find them, as Suze says, they're worth their weight in gold. But no matter what financial advisor you find, you have to know, you have to know that everything he or she is telling you to do make senses because you have educated yourself. Okay. Next is from Dan and Diana. All right. Hi Suze, my wife and I are huge fans. You're the best. We just purchased your must have documents on HSN and I'm working on this right now. Dan and Diana also just join the Alliant Ultimate savings account which we're very proud of. Good for you both. Not only did they open the ultimate savings account, but Dan and Diane are looking to buy some of the CDs. That alliant is offering because the rates are more they say the most credit unions and banks so good for them. Here's the question. My financial advisor is suggesting an index annuity from AIG. I know how you feel about this, interest rate is per S and P maximum of 4.5% Seven-year term and you can pull out 10 without penalty. Ready for this part. Everyone not FDIC insured but advisor stated it's the first guaranteed by the insurance carrier than by the state insurance pool. Yes or no. Listen everybody it's no I don't like indexed annuities to tell you the truth I think you're far better off just dollar cost averaging into a standard and poor's 500 index. Vanguard total stock market index the dividend aristocrat whatever it may be and get capital gains tax appreciation versus ordinary income tax. KT. Maybe two weeks from now we're going to have to do another Suze school on annuities and why I really ,unless it's a certificate of deposit annuity, why I really do not like them. So, this is from Olivia. I just have to say one other thing. So, it's not that I don't like all annuities. Like sometimes you need an income annuity and I talk about that help to people you know get them. But in the ultimate retirement guide for 50 plus I like CD Annuities. There's just usually annuities that invest your money in mutual funds or index are annuities I do not like. So next is from Olivia. Hi Suze. So excited to ask you this question please please please please help me. She doesn't trust anyone else but you Suze. So here we go. I'm a single 64 year-old who has retired. I have half a million sitting in a TDA Non stock fund 100,000, a TDA Just so you know it's a tax deferred annuity. Okay in TDA Non stock fund I have 100,000 sitting in a chase bank, plus a second mortgage of 114,000 at 4.5% Since 2018 from Chase. It's her only debt. What should I do to sustain myself and maximize my money? I feel lost. What do you think? I'm going to tell her to do KT? There should have been a quiz in my quizzie, should we save this as my quizzie and come back to it? Yeah, I want you to think about it. All right. We can do a quizzie now. We don't have to do it at the end. You want to make All right, we're doing it. Okay, wait, let me think about this. Her only dead. Okay. I think the first thing you're going to tell her is get rid of the debt at 4.5% Ding ding ding ding ding ding passed that quizzie. Did it. So, all of you if you were taking that quizzie, the reason that I want Olivia to get rid of her debt is because she says, what should I do to sustain myself and maximize my money? I feel lost. And the truth of the matter is she has been paying 4.5% on a mortgage. That most likely isn't that tax deductible anymore and it's a second mortgage. So, you want to feel secure, nothing is going to make you feel more secure girlfriend, then owning your own home outright. Nothing's going to make you feel secure that you don't have to write a check or automatic payment every single month to anybody, that you are free and clear. And that's what you need to do. And you say you feel lost. Guess what? As soon as you pay off your mortgage, you're going to find you don't feel lost anymore. Suze, next questions from Monica. Hello KT and Suze. I started listening in the last six months or so. I recall Suze mentioned that in April the stock market will take a hit, but I'm not sure if it will go further. It seems it has only gone down a little. There you go, Suze. So, here's the thing you guys obviously do. I know exactly the date, something's going to happen or when something's going to happen. I don't, but if you really look at the stock market for the past few weeks now it's gone up, it's gone down. Some stocks have gone up, some stocks have gone down. But have you really made any money chances? Are you really haven't? Because it comes, it goes it comes and it goes. So maybe I was a little early with the call. Maybe it wasn’t in April. But do I think eventually here, maybe it will be may maybe June I don't know. But I think we have more of a chance of decline than we do increase. It's very, very difficult right now with all the new tax laws with capital gains tax, for many of the very wealthy people probably going to be passed for people to decide are they going to sell out of the stock market before the capital gains tax goes up, what are they going to do? So, I just think that may be the market could go up a little bit more here. I don't know. But I just think if you don't have time on your side, if you need this money within a year or two, this is not money that belongs in the stock market. And since we're still relatively high, take advantage of it, especially if it's inside a retirement account. So, there's no way for me to know everybody when it's going to decline if it's going to decline. I just don't like these markets as much as I did a year ago at this time, Suze. Before we close out. I have one perfect email one. Perfect question. One. Perfect fan. Listen up everybody. This is the kind of question I love Ready. This is from Emily, Emily, you get a gold star from KT today. If a revocable trust inherits a Roth IRA does the trust pay taxes on the inheritance. So, there's two types of taxes. One is income taxes and know the trust is not going to pay money in income taxes because it's a Roth IRA. So, there are not going to be any income taxes on it. Obviously, there might be something with the five-year rule, which I'm going to talk about on Sunday in terms of inheritance tax. As long as the entire estate is under 11.7 million. Currently, don't worry about it. You're not going to oh, estate taxes on it at oh, okay. Everybody that brings us to the end of asked Suzy and KT Anything. Tune in on Sunday for Suze School because you have to know the five-year rule and how it works when it comes to Roth retirement accounts will be there. Don't be late. You said you weren't going to show up. It's Roth. I need to learn about this thing. All right, everybody, you take care. Bye bye bye.
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