401k, Emergency Fund, Marriage, Roth IRA, Saving, Trust, Will
June 10, 2021
Listen to Podcast Episode:
On this edition of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Yamuna, Kristen, Dianne, Amanda, Ruth, Michelle, Clara and more, all selected and read by KT.
Podcast Transcript:June 10th 2021. Good morning, my dear KT Suze, how are you today? I feel great. How come? I feel great because we just had the most wonderful birthday celebration for you. Her 70th birthday came and went. She's very happy because we did exactly what Suze wanted to do. We did nothing. Yeah. I got this whole day with my KT. It was a very sweet day. It was very simple. I think we had a really special little lunch together and the wishes that you know Suze sat and read all of the wishes and text and emails and videos and really fun things. And they opened up all the gifts. I got gifts. She did, and I get to open them because I love to open gifts and I get to open say look Suze, look what you got. So thank you. Even the Today Show they sent her beautiful white roses like amazing bouquet of roses. So thank you everybody and now that's over. But she looks, she looks like 10 years younger. Welcome everybody. This is ask Suze and KT anything. Before we start. I want to say something because KT, I've been thinking about this. Okay. You ready? Yeah. Does it scare you? Never. Are you sure? Never, Never, Never. Right. Which is this? I was thinking about how you don't like to understand or you don't understand Roth IRAs and all of these things and what I want people though to know about you is I never want them to think that you don't really understand money. Oh wait, yeah, Right. But because I was thinking how I sit in the car and you're the driver. For some reason, I don't like to drive, I just don't. And so KT drives and we've gone to places over and over again. And if I were to get in the car and drive, even though I've gone to those places over and over and over again with KT, I have to tell you truthfully, everybody, I wouldn't know how to get there. I would have to turn on my navigation on my phone and follow the directions. And the reason is I don't need to know how to get there because KT gets there or my GPS will get me there. And KT when it comes to a Roth IRA and certain things like that. She is such a smile on her face. I'm thinking Suze's analogies north, east, west, south. Yes, Right. I mean she's doing a great analogy because she does not know direction ever. Ever. I mean, I get off the elevator to go to our hotel room when we used to go to hotel rooms almost every night when we were, you know, out in the world and I didn't know do you go right or left when you get off the elevator? I mean really, I just don't pay attention to those things. And so KT, what I realized about why you're not comprehending Roth IRAs and all the rules. You don't need to, you don't have a Roth IRA, you don't qualify for a Roth IRA. We don't do backdoor Roth IRAs and why should you know any of this stuff? Because none of it applies to you. But I do want to learn this summer. I do want to master and learn and be able to understand the nuances, the differences and the rules. It's the rules and regulations. Why do you want to? Why not? I should, I should know. Why should you know? For 20 years I've been listening 20 years. I've been listening. I've been sitting next to you in the car for 20 years and I still don't know how to go where we're supposed to go. I look at her when we're in Florida on the porch and I say Suze, where's Miami? She doesn't know to point south. It's south of us. Well, I have to think about it. I have to think about it. So the point is though, that we'll work our stuff out about Roth IRAs or not, is that when it comes to money though, the money that KT has in her accounts, the money that she is responsible for, the money that she has invested in stocks. Oh you can bet your bottom dollar that she knows every single penny that is spent every single day. She knows where every penny of her money and is and where my money is. Because remember we have separate accounts because it's really our money, but in separate accounts. But I opened the statements, I look at them, I say, hey Suze, you're up or you're down and give her report every month and I, we sit down together and we go over it together. And if I were to die tomorrow, financially speaking, KT would not be a financial wreck, meaning she would know everything, the bills, the stocks, the bonds, the savings deposits, everything. KT is totally powerful over that. So she really does own the power to control her destiny. You do KT, financially speaking. The documents too, I know we're all of our documents are and that's really important. And we look at our documents together all the time. So the reason that I'm making such a point of this is that even though we have fun and we joke about KT not knowing about Roths and everything like that in certain rules and regulations. That's not what KT needs to know because those things don't really affect her. So please know that even though we've been together 20 years, she doesn't need to know certain things. But she does know the things she needs to know. So, you all need to know the things that apply to you. It's never too late to learn. All right. I just wanted to tell you all about, Are you ready? I was born ready. That's my life, KT. I have to tell you, you took that line for me. I did. What do you mean? Of course you did. This is from, Ilove this name. Yam. I love yams. It's yeah, better. Yams and butter. So great. Yeah, she does. It's Yamuna and she calls herself yam. Hi there. I can't remember if you answer this or not in a previous podcast but I'm going to be selling my home and moving into a rental for the next year. I expect to have between 50 to 100K. In cash after the closing and after paying nonmortgage debts off. So I planned to rent and then put the money towards another home. Should I park this money in a simple account or try any type of investments with this money for the next 1.5 years. So the answer to that is simple. You just park the money. Please remember everybody, money that you need to do something with cannot be invested in the stock market. You need to not need that money for at least five or 10 years. If you're going to put money into the stock market. So don't do it. Where should you park the money? You should absolutely park the money in my ultimate opportunity savings account. What is wrong with all of you that haven't done it yet? They are going to be giving you, if you just deposit $100 a month for 12 consecutive months they're going to be giving you an extra $100 which is a big deal. Everybody. So for you, Yam, they're also going to be paying you .55% interest on that money which is one of the highest interest rates out there. So park it at Alliant Credit union. Go to myAlliant.com and open up the ultimate opportunity savings account. Just make sure you open it up and you fund it within one month of opening it and you continue to put $100 a month every month into it. And the extra money that you have that you got from your home sale? Yeah, that's what you should do. Alright, alright, so, Suze to your point earlier about Roths and all right, so this next question you answer? No, this is why I need to learn. I should be able to answer this. Oh my God, wait, wait, let me read it. To Hi KT and Suze. So she's address. This is from Christian. She's addressing KT first. Maybe I will try to answer. I listened to your five year rule show recently and I have a question I'm hoping you can answer from me. I am a 48 year old single mom of two girls, 14 and 17. I participate in my employer's 403 B and Roth 403 B. She's contributing 16%. That's a lot. I had 3000 in extra money and opened a Vanguard fund purchasing ETFs. After listening to your podcast recently regarding the five year rule, I realized I should have opened a Roth. Is it possible to convert my account from straight ETFs to a Roth? I believe. I've heard you say that you can purchase ETFs inside a Roth. If so, how do I go about this? Kristen, this is very simple. You absolutely can purchase exchange traded funds or ETFs within a Roth. However, because this is going to be a new Roth or contributory Roth where you contribute to it every single year, hopefully. You cannot fund it with ETFs. You have to fund it with cash. So you would sell the ETFs that you currently have, you might have a little bit of gain on it. So if you do then you have to pay taxes on that. But I'm sure it'll only be a little bit of a gain if any. And then you take that money and you fund your Roth IRA and buy ETFs within the Roth. Okay. Next KT. Okay. Here you go. Suze. This is from Diane. Hi, Suze and KT. Thank you for your podcast. I've learned so much. Here's my question for you. I'm looking for a taxable account to invest surplus income in after maxing out 401k Roth HSA and 529. Our advisor recommends a tax-advantaged blue chip diversified account. Fees would be about 1 to 1.2%. Is this fee range reasonable? So Diane, 1% is absolutely feasible above 1% is not, in my opinion feasible. However, only if he or she is going to be buying individual stocks for you. I have a really hard time paying an adviser any money in order for him or her, to do what, to buy mutual funds for me. So is this person going to buy individual stocks or is this person going to buy a blue chip mutual fund? So if this person is going to be doing individual stocks, I don't have a problem with a 1% fee or below If they're going to be doing mutual funds with it, I won't touch it with a 10 ft pole. Can you negotiate with the advisor? You bet You can. Well, there you go, everybody. I absolutely love anything you can negotiate. How much do you negotiate with your advisor? At least at least six times a year. So you and I get them to delete things that I don't understand or I don't think are necessary little fees. So yes, absolutely. You can negotiate. Good. That's great. That's good advice. Diane definitely negotiate. All right. So next one is from Amanda. Dear Suze and KT, thank you so much for the great podcast. Your insights on revocable living trust have been especially significant for my family. Both my mother and father are in the process of setting these up, which is a great relief for me and my sister. Thank you so much for your advice on this. See, Suze, that's important that we help people. So I have a question regarding. That is what we have been doing for years and years and years. But we always tell you know, when it's difficult to have those conversations about, do you have a trust or will or your parents? Yeah, it is. So this is great. And that's why I picked this question. So Amanda has a question regarding these trust for herself. I do not own any property or assets beyond my retirement accounts. And then she lists all of these accounts. And then she says, does it make sense to do a living revocable trust and name the trust as the beneficiary for these accounts and the life insurance policy? Or should I just designate beneficiaries for various accounts without going through the trust? Okay, so Suze, the last piece of information here from Amanda is the most important in my opinion. She's 46 year old mom and she has a two year old son. And does she have a husband or just a boyfriend? Anybody? She has a boyfriend, but they don't plan on getting married. Got it. All right. So, Amanda, here's the thing. Could you take all of your assets such as your life insurance policy, your IRA accounts, your bank accounts and could you designate them truthfully to go directly to your beneficiary without probate? Absolutely. You can in a bank account you can set up a pay and death account. Life insurance policy. Just designated beneficiary IRAs just designated beneficiary. That's all you would have to do and it would avoid probate. So then why does one need a trust? If we're avoiding probate? You need a trust because it's not just about avoiding probate. It's also about what happens if you become incapacitated, you become ill. Uh you know a pay on death account or designating a beneficiary isn't going to help you. You it helps your beneficiaries when you've died. But a living revocable trust helps you while you are alive in case you become incapacitated. It also helps you because you have a two year old and a two year old is a minor and minor's cannot inherit money. So of course you would want to set up a living revocable trust and designate the trust as the beneficiary. And in the trust you would name the person who would be financially responsible with this money for year two year old. So that is the right way to do it. So whether you have real estate, you don't have real estate does that doesn't matter if you should have a trust or not. What matters is if you yourself become incapacitated everybody and I want you to think about this, who is going to pay your bills for you, who is going to write your checks for you, who is going to take care of the money for you while you are alive. That is why you need a living revocable trust. And again I'm just gonna say if you don't have one, you absolutely should go to SuzeOrman.com/offer. And you should at least look at getting, my Must Have Documents. $2500 worth a state-of-the-art documents for $69 that you can share with any family members. You really can't pass that offer up. Truthfully. All right, KT, okay, Suze. So this next question we should be able to answer very quickly after that previous question. Hi, Suze. My question is I have a Roth retirement account. My beneficiaries are my three kids who are 21, 14 and 12. Should I make my trust the primary beneficiary or the kids? Here's what you all need to understand. If you are married, your spouse needs to be the primary beneficiary of any retirement account you have and your trust is the contingent beneficiary if you are a single parent and you have kids. Yeah. Your trust needs to be the primary beneficiary of all your retirement accounts. So it's just that simple. Okay, ready. Here's another question, Suze. This is regarding the stock market. Suze. I'm 95. Okay, now, Ready Ruth. This is from Ruth. I'm 95 have suffered from bank losses, attorneys, banks. I now have several million in the stock market and wonder just how safe is TD Ameritrade Etrade or any other company? I'm insured for $250,000 in the bank. But what happens with a stockbroker account? Okay, Ruth. Well, I really, I love that you have millions. Great, here's the thing. So the $250,000 at a bank or credit union is very, very different because that's ensuring cash that in fact that if that financial institution were to go under that you are insured for at least $250,000. There's a way to increase that by the way. But that's a Suze school. Anyway, when you have money that's invested in stocks, there's no way to ensure you that if those stocks go up or down in value, that cannot be insured. So that is a risk that all of us are taking. However, most brokerage firms you are insured under Civic SIPC, which will ensure you for considerable amount of money. I personally would not be worried about it. KT and I both have millions and millions and millions of dollars in a brokerage firm. All in one brokerage firm by the way to tell you the truth and I feel totally safe with it there. So I would not be worried about that if I were you. What I do want to say to you, Ruth, How fabulous is that? I love that. That's your situation. I love it. So congratulations girlfriend. Is that great? Yeah. Remember my old friend Ruth? Yes. Ruth Karnowski. Yeah, Yeah. I actually picked that because when I saw Ruth and 95 I thought oh Suze used to see Ruth and have spaghetti every Wednesday or something like tha. Yeah Ruth was my smartest friend I ever had when her financial advisor, her stockbroker, left Merrill lynch where she had her account and went to another brokerage firm. They assigned me to Ruth. They gave me all the women for some reason. And Ruth and I became really, really dear friends. And she was quite a bit older than me. She had her PhD in ancient Greek literature that she had gotten from Harvard. It was she was one of my favorite people of all time. And every single Wednesday I went with Ruth and um we had spaghetti that she did out of a can and then we would go, I would drive her because she didn't drive and get her little food and everything. And I just loved that woman. She was one of you. I miss her so much to this day. So, Suze! This next question reminded me of you of us. All right, you ready? Is there anybody in this world that could remind you of us? Listen to this question. Good morning KT and Suze. I'm one of the walkers that listened to your podcast and thank you for entertaining and educating me while I walk. So I this is from Michelle, by the way, Michelle. We're really proud of you that you walk. I hope you do as many steps a day as I do. KT does 20,000. Not every day. All right. So she does 15,000 to 20,000 steps a day. She swims 20 laps a day. It's really an amazing thing for me to watch since maybe I stiff I walk 1000 steps a day. Anyway, go on. My husband and I married in Mexico but never filed here in the US. We've been together 21 years were considered common law married in Texas. We file everything is a married couple. My question is, if I will be eligible for his social security once he passes and we are not officially married in the United States. And is there anything else I should be aware of because of this. Okay, okay, let me tell you a story. So Suze and I got married in South Africa and we actually didn't plan it. It just to happen because we learned that in South Africa, they absolutely accept you know, all marriages, all marriages. And this was back in 2010 when it wasn't legal yet here for same sex marriage in America. So, Suze tell them the rest of the story. So we're married. We're excited. We have our official document from South Africa. Tell them. Then approximately five years later, America, the United States made same sex marriage legal. And so then they had, where you could get married, you could go and have all these ceremonies and everything. And we wanted to get married here in the United States, but we couldn't get married here in the United States because we were already married in South Africa and it was absolutely considered legal. And if you look at it right now, I'm collecting Social Security, KT is collecting half my Social Security and so obviously it is considered legal. So I wouldn't worry about it if I were you. And if you are worried about it, go down to city call and try to get married, bring your marriage certificate and see if they'll let you do it or not. And that will take all the confusion out of it for you. All right, we have time. Maybe for one more KT. What do you got? So Suze. This next question is from Clara. I think it's so important for kids to start learning about money early the earlier, the better. Suze. I know you feel the same way I do because you've recommended that kids be involved with family finances. So I have one burning question that I'm asking for my 13 year old son. How does a teenager start to invest in the stock market and what are the best vehicles to do this for example? Can he open a Roth IRA, what are the age limits? Do I have to open the account for him? This is from Clara and she loves your podcast, our podcast. He loves our podcast, KT. Should this be a quizzie for you? This can be a quizzie. I have your quizzie but should this be another can be a quizzie? Well can they? So first of all, I think that yes, he can, he can have stocks in his name at 13 but he can't open a Roth because that's with earnings. Oh, I am so proud of You. See, I'm learning, you're learning. Yeah, baby. So exactly what I wish I had a sound machine that was like, like, like fireworks going up. So here's the thing, my dear Clara, which is this, KT's right. Your son can have a Roth IRA. Absolutely. Not all brokerage firms will allow you to do so, but it has to be a custodial Roth IRA. Where you where you would be the custodian for it. But your son has to have earned income in order to open up a Roth IRA. If he doesn't have earned income, he can also have a U. G. M. A. Account or a U. T. M. A account. A uniform gift to minors. Act where again, you're the custodian and invest in stocks that way. But just remember a U. G. M. A will absolutely affect financial aid. So be careful there. All right, KT, you got your semi quizzie? Right, wait, wait, wait. I thought that was my quizzie. No, here is your quizzie. Now here's what you should change. You should look forward to quizzie. All right, Suze. I do pretty good on the first quizzie. But we usually do one, but I want you to start looking forward to quizzie and to do that. So are you ready? Here we go, Go for it. Hello, Suze. I've heard you say that if someone is married, their spouse has to be has to be the beneficiary of their four 401k r 403b account unless they sign something acknowledging that they are not. So are you clear on that? So far, KT? All right now, everybody you need to know. This is something you really need to know. Everyone needs to know this. Okay. Does that mean that if I get married in the future I must change the beneficiary of my existing 401k to my spouse? What happens if I don't change the beneficiary designation? Do they automatically become the beneficiary? I currently have my trust listed as the beneficiary on my account. So, KT, this is simple. A yes or no question here, does one have to make a spouse the beneficiary of a 401k r 403b. When they get married, they are married when they have a spouse whenever that is yes or no? Um Yes, that's my girl. Yeah. So all of you listen to me, that's really important that they get this. You when it comes to a 401k or 403b. You have got to make your spouse the beneficiary of your 401k or 403b. And if you don't want to, your spouse has got to give permission in writing to the company that says it's ok that you don't If you don't get that permission and you name somebody other than the spouse, your spouse can absolutely claim it and come after it. This is a big mistake people off to make when they get divorced and they forget to make these changes, right? Yeah. Well what happens is that once you are divorced, half of the retirement account will have gone to your spouse, your ex-spouse and the retirement account that you have left, KT, you can put anybody in there as your beneficiary if you're not remarried. So just by divorcing your spouse doesn't mean you've divorced their rights to the money that's in that account. So they'll go through and by law they will get probably half the money that is in your retirement account. Now you have to also know however, everybody that if you have an individual retirement account and you do not live in a community property state, you do not have to make your spouse the beneficiary of your IRA. And the reason is that a 401k and a 403 B. Are governed by pension laws and an IRA Is not. So you could be married, KT if I wanted to, I could make somebody else. The beneficiary of my IRA. Even though we are married and it would absolutely go to that person. No problem whatsoever. Unless you live in a community property state. Now, many of you might not even know that you live in a community property state. So the community Property states are Arizona California, Idaho, Louisiana, Nevada, New Mexico Texas, Washington, Wisconsin and Alaska. You get to choose whether you want to have community property rights or not. So there are essentially 9 or 10 if you include Alaska. Community property states. If you live in one of those states, you have to make your spouse the beneficiary of your IRA. If you do not live in one of those states, such as Florida, you do not have to make your spouse the beneficiary. Have you checked the beneficiary of my IRA lately? I see my name there. So that's right. So that is really important for all of you to know. How many times have I gotten an email you were married? Your spouse was named the beneficiary of your IRA. Now you're divorced, you forget to change the name of the beneficiary you have now remarried somebody else. But you forgot to change the name and now you die. It's going to go to your ex-spouse. If that was a 401k K plan, it won't work that way. So be very careful everybody and really stay up to date on who your beneficiaries are. All right? So that's it, Miss Travis until next time. Sunday I'm going to do an entire Suze school. Does that mean I'm not invited or not invited? I'm so sorry. Well let's just ask everyone listening if you want me there just to know you're not there. And the reason is I want to do a school about so the school is going to be about annuities that I told you I was going to do before. I want to talk to you about series I bonds. I want to talk to you about some changes in laws that might come into effect. And I want to talk to you about Bitcoin as well as the stock market. So that sounds like a great school. I'm gonna listen you listen, I'm not going to be here. You're going to get to sleep late. Maybe a big listener. Alright, Alright, everybody. So until Sunday, what do you want to say? KT. See you then. All right. We love you all. And thanks again for all my birthday wishes. And Robert, especially thank you Robert is our producer of the podcast. So fabulous. Alright, bye.
Credit & Debt, Saving, Investing, Retirement