Family, Investing, Retirement, Roth IRA, Student Loans
July 15, 2021
Listen to Podcast Episode:
On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Laura, Maureen, Florence, Julie, Lisa, Jackie, Claudia and Stephanie selected and read by KT.
Laura- Must Have Document promotion?
Maureen- Can I afford to stay home?
Flo- Best investment for the retired?
Julie- Helping my daughter's student loan debt
Lisa- Can I afford to buy a condo?
Jackie- Minimum Required Distribution?
Claudia- How to save for my kids?
Stephanie- How do I diversify my assets and promote growth?
July 15, 2021. Why are you smiling? Because in one week it's going to be my birthday and my twin sister Lindsay’s. Actually, six days. It's less than one week. You're so happy to have your birthday. I love birthdays. I love to celebrate. I love holidays. I love birthdays. I love parties. I like giving parties. Suze does not like any of that. But once we do it, she's the first one to not want to go and the last one to leave the party. I love gifts. But, I loved the gift that you gave me for my birthday. Did you tell everybody? No, you tell them. No. You want me to sing it? Oh no. I made her music video of all. It's not our best pictures, but our favorite moments and photos and places around the world. And all of the adventures we've been on for 20 years because all she's been wanting is an adventure. Many of you with covid, you know, restrictions and not traveling or going on planes or leaving have been getting real antsy. Including Miss Suze who keeps saying KT I need an adventure. But I gave her a video, gave her a video adventure. We'll go on one soon. But so yes and what was the song? Never gonna let you go, gonna hold you in my arms forever. So, that was the song. We didn't do it justice there, but I loved that. But we got off track here, KT, I'm trying to start this podcast. So, welcome everybody to the Suze and KT, who's almost about to have a birthday, podcast. And this is where you write in, Miss Travis chooses the questions that she wants us to answer here on the podcast. And then we have a lot of fun. And so, are you ready? Are you ready to begin? Well, here's the first question. Are you ready? Are you ready? I am ready. What is wrong with you? Okay. Hello Suze. I was wondering this is from Laura by the way. Hello Suze. I was wondering if I could get the hyperlink for the online program to create my four essential documents for $69. Is this promotion still going on? The reason I picked this, Suze is because people like Laura make me so happy when they're proactive and they get their will and trust and everything in place. All of you need this. So, there you go. Suze send her the hyperlink. So, I'm not going to send it to her. I'm going to tell it to her. So, all of you, if you're interested in taking advantage of the Must Have Documents program which is $2,500 worth a state-of-the-art documents, good in all 50 states created by our own trust lawyer, Janet Deborah Volney. All you have to do is go to suzeorman.com/protect. And right there you will be able to take advantage for podcast people of this offer for $69 if you went suzeorman.com directly, I think it's $199 or something like that. So do it through the podcast if you're interested. All right, Suze. Next question is from Maureen. Hi Suze and KT. I had my second baby in December 2019 while I was on maternity leave. Covid hit. Now this is a great little question I picked up because I'm getting two sides of the fence on this question. All right. I've been working from home. Two sides of the fence? Yeah. Ready? Yeah. Well, that's like people sit on the fence and they don't know which side to go on and on and could be two sides of the road. It could be two sides of the fence is the way the saying goes, I've been working from home for well over a year now and I've been told I'm expected back in Boston in the Boston office full time in September. All right, Ready for this. When did she have her second baby December 2019. She was on maternity. She is so attached to being a stay-a- home mother. It is not even so to make this really short, there's a big, big question, can I afford to give up my $82,000 salary with full benefit package including pension to stay at home for a year? I could take some money out of my heel lock on an investment property that I own. If does she not give you any financials? Like does she have an emergency fund? I could find a job closer to home. I never want to commute to Boston again. Well, everyone knows they call Boston the big dig because it's always under construction, but it's a tough commute. But I'd have to take at least a $30,000 pay cut, help. Now this is she, Maureen's answering your own question, Suze. She said, I feel like life is short and my work and life balance is the most important thing to me right now, especially while my kids are young. Any advice is appreciated. So, do you agree with me? She answered her own question. Well, you know I have the same that we normally don't ask a question that we don't already know the answer to. Sometimes we do. But here KT just handed me the email because she prints them out. I don't know how old Maureen is. All I know is she's obviously probably relatively young at least under probably 45 because she just had her second baby and that she has a property. Is that correct? Right. She said she could take some money out of my heel lock on an investment property I own. Here's the problem Maureen because you didn't give me enough information. That was part of the quizzie last week. Because without all the information, how do I answer? Like I don't know. Do you have any debt? You owe money on a car? Do you have at least a 12-month emergency fund to make sure if anything goes wrong and you get sick that you can take care of your kids? Do you have a term life insurance policy on yourself? What kind of health insurance will be provided for you and your kids? It concerns me, girlfriend, it concerns me. What should she do? So, if I were going to do anything, I would not get myself in a situation where I took out any more money like a heel lock so that I increased my expense. If you really, really want to stay at home and the thought of being away from your kids makes you sick and you want to find something else to do. I would simply look into seriously at this point in time selling the investment property because all properties cost money to keep things can go wrong, tenants cannot pay all things like that, so get rid of your investment property right now. Assuming you've owned it for more than a year, so you're only going to have to pay capital gains tax on it and use that money to be able to make sure that you're totally funded for the next year or so, until you can find a job that you really like or a new career so that you can be fulfilled. Do not do anything until you do that. I was going to say once that baby turns two years old, she'll be ready to commute back to bust. It's hard, you know, KT so many times people think, oh I have a little money here, I want to stay at home with my kids. This is the time, you know, life is short and life is short, but I have to tell you when you don't have the money to pay your bills. When you don't have money, if something goes wrong, if one of those kids get sick and you go into debt over it, you're going to be so miserable. I can't tell you where that trip to Boston will be a piece of cake if it gave you financial security. So, get yourself into a financially secure situation and go from there. That's what I would do. Okay, there you go. Next one is from Florence. So, Flo writes, Suze or are you on first names? Have you gone Florence to Flo? Just best friends now? No, she signs Flo but she wrote from Florence. Alright, so Flo says hey Suze, what's the best investment in the stock market for someone who's retired? That's a really wide-open question flow. And why did you choose that? Because it's short, it's one sentence. But here's another situation. Everybody where you are writing and asking a question and how could I possibly answer that? Because there are people who retire when they're 50, There are people who retire when they're 70. The are people who retire when they're 90. So, Flo, you didn't tell me how old are you, do you own your home outright what you do? Because I'll tell all of you that the best investment you can make for your retirement years, especially if you own a home that you're going to stay in for the rest of your life is to pay off the mortgage on that home. Then I all want you in retirement to have at least a three-year emergency fund if you're invested in the stock market because if all your money is in the stock market and we go into a bear market where the market goes down and down and down. I don't want you to have to sell your stocks while the market's going down. So, I want you to have at least three years of expenses to cover after all of your guaranteed income. And that, that's just something you should think about. So, KT, I can't answer this question. Okay, let me ask you one question. If you were going to give her one stock advice, like let's say she's a beginner for the first time in retirement, she has a little bit of money to start. What should she do? If she has a little bit of money to start and a little bit amount of $1,000 a month. All right, you want diversification and there really isn't enough when you have $1,000 a month unless you're really a good stock picker. And you can do little slices at like Schwab or Fidelity. But if you just want to make your life easy, then you would do like the Vanguard total stock market index fund or if you want it a little bit more of dividends, you could do the Aristocrat fund symbol NOBL ETF. And so, um, that's what exchange traded funds. You would do the vanguard total stock market mutual funds or ETF, I like ETFs better. I just do the mutual funds. So, I would do $1000 a month for diversification into the VTI and that's what I would do. But if you had a lot of money, it would be different than I would be buying individual stocks and all kinds of things. So, it just depends KT. All right, well, that was a good answer, not knowing anything about Flo. At least she has a little bit of direction. Yes, but Flo. Here's the main thing. I would tell. You do not put money into the stock market that you need to touch within less than five years at this point in time, preferably longer. That is not money that belongs in the stock market. Okay. Okay. Next question is from Julie who's worried about her daughter? She says Hi Suze. My daughter has over $300,000 in student loan debt. Now this is the part of the, I already know what you're going to ask me. No, she listened to this. The daughter has a doctorate degree in psychology and she's a licensed psychologist who's freaking out about her student loans. Yes, but wait a minute. Yeah, but psychologist ready? She's the daughter is overwhelmed. She's struggling how she'll ever survive since her loan payments when her loan payments kick in and because of this debt and bad credit history, she feels she's in a hopeless situation. Also, Suze, Julie's daughter is divorced, she does not have children. And Julie's just said that she and her husband cannot help their daughter financially speaking. So, she's asking what should she do? She's overwhelmed and she want, the daughter wants to apply for different debt relief programs. So, there you go. Here's the thing Julie that you can do. I'm really glad KT chose this one because so many times parents feel guilty and frustrated because they can't help their kids financially speaking. What every single parent can do regardless of your financial situation is you can help them psychologically speaking and your daughter should be able to relate to that, given that she has a PhD in psychology and there are options for her and she has to understand that the amount of debt that she created, she chose to create. She'll be able to deal with as long as she becomes successful in what she's doing, so rather than being freaked out about what she owes. She needs to be excited about what she can do and who she can become. And that's where her energy needs to go. If she owes $300,000, go on an income-based repayment program. She doesn't have to do the standard repayment method, which would be about $3,000 month. She doesn't have to do that. She also doesn't have to go into an area where she works for a nonprofit, for a public student loan forgiveness. So, after 10 years it's gone. No, take a warrior attitude and you help her take a warrior attitude where she will be the best psychologists in this world. She will be the best person. She will be able to help other people that are in her situation and she'll be able to tackle this. But when she feels powerless, when she feels like she doesn't know what to do. The number one law of money kicks in power attracts money, but powerlessness repels it. So, she has to put herself into a powerful frame of mind and she needs to go on with her life and you need to help her do so. Great. Be the warrior. Suze, this next one made me sad. And it also is one that I wouldn't, I don't know how to you don’t get sad very often. No, but this one made me sad because I think what Lisa did was great. This is from Lisa And Lisa is single, she's 54 years old. She lives in Scottsdale, Arizona. She's a private caregiver and a student getting an Associates degree in nursing. But listen to this Suze, she's been a caregiver for the past five years for her mom. And that's what made me said the mom passed away in February. So, this is what Lisa's story is: the deed to the house to mom's house is in her name now. I assumed her mortgage of $115,000. The payments are $900 plus utility bills. The house was appraised three years ago for $350,000. It should be a little higher now, but it needs a lot of work to be upgraded, maybe 100,000 plus to be up to code. So, Lisa said, I've been renting to own a condo. I have $60,000 left to buy it. I want to buy it before the owner passes away. I do have a written contract notarized with his and my signature. However, I'm worried that family might fight me on it. I'm trying to figure out how to come up with the $60,000, without a high payment. I don't make enough money for a mortgage loan. My Fico score is 800 which is good. Right? I have emergency cash of $50,000 and my checking and saving is $8,000. I'm not sure if I can borrow on the house equity. So, she is stuck Suze? What should she do? Well, you're actually not stuck. And what's so great really Lisa, is that for five years that you took care of your mother in her own way? Now she's about to take care of you and she's about to take care of you by sending advice through me to you. And this is what she would say to you. I think she would say Lisa I love you so much sweetheart. There's no reason for you to hold on to the house that I left you. Please just sell it and I can see from up here that real estate is really going for great prices right now. And I bet you that if you just put it on the market and sold it as is you would get a nice lump sum of money for that and then I want you to take that money and I want you to absolutely pay off your condo with it and then you'll have even more money that you can put aside and have a great emergency fund and start to invest and be just great. I love you so much Lisa and I miss you and I'm always looking down upon you. That makes me want to cry that’s perfect advice. So, Lisa I have to tell you if I were your mama that is what I would be telling you and that is what I think you should do. And then you would cut your bills at that property. You would just let it go. So, sometimes you really you have to just let things go. So, sometimes I have a saying it's your profound fear of loss that keeps you from gain. If you lose the house that your mama lived in, you're not losing anything, you're gaining the freedom that she would want you to have. Next question. My dear KT. Okay next question is from Jackie. Hi Suze. I've been a follower of yours for years. I have an IRA RMD, so that's everyone is required minimum distribution. So proud of you, coming up in august for about $5,000. And this was formerly from her work 401K. So, Jackie is 74 years old, again that's why the RMD is coming up because it happens, after you're 72 right Suze? Yes, unless it's a long story but yes essentially now it does. The interest I've been getting is 2.25% and my IRA renewal date is in August. Interest is so low and I'll barely make any money on it. What do you recommend I do with my RMD in August? This is all the money I have and I do not want to risk losing it. She's again 74 and conservative. Well, I'm assuming that you own my dear Jackie, your home outright or whatever that may be right but for a $5,000 withdrawal from your retirement account and you don't want to lose it. So, there's two things that you can actually do with it. You could purchase a Series I bond with it and get about a 3.54% currently interest rate but you really can't touch it for five years. So, if you think you don't need it, that's a great place for you to put it. However, if you want access to it and you want to be able to get it at any time you want and you want to earn one of the highest interest rates out there. I really asking all of you to go to myalliant.com and become a member of Alliant Credit Union. You could also take advantage of the offer that's out there with the ultimate opportunity savings account where you put in $100 a month for 12 months and then you get $100 fabulous. So, there's nothing stopping you from putting you know like $3,800 in there and then send $100 a month, every month and you'll be able to get that $100. But the other reason I'm just going to say this and I'm just jumping the gun a little bit here, KT, I'm going to let the cat out of the bag a little bit and I know, yes, I know we're not ready. No, a little no. Let me just say this. Shortly, I have an extraordinary announcement that I will be making about something that we're all doing at Alliant Credit Union and all I'm going to tell you is for those people who have already opened up and funded their Alliant Credit Union account with at least $100, you're going to be so happy that you did that. More so, then people who haven't done it by the time I really make this announcement. Your lips are sealed. Her lips are really sealed, if you can. But it's been on the fence about doing this or you haven't done it yet or you opened up an account and you didn't fund it. I am telling you, you want to do it. You want to do it? All right, okay. Why won’t you let me tell because we're not ready. We're not ready. Her lips are sealed but keep listening to the podcast because very shortly she's going to make an announcement that you let's say this. If you have an account, you will be entitled to participate in Suze's announcement. How about that? Big time. Big time. Okay. Next is from Claudia. Okay. Hi Suze and KT. This is from Claudia. Thank you so much for all the advice and knowledge you provide. My husband and I have finally funded our emergency fund. Yeah. Baby. Yeah baby. Yeah. We have no credit card debt. And we feel we're in a good place to start saving for our kids who are eight and five years old. The kids each have a savings account with just under $1,000 each and it's at a credit union. We would like to get some advice as to what the best plan is to help our kids save for the future. Whether they opt to go to college or not. We were thinking of opening a 529 account. We'd like to be able to save money for them and have a good financial start in life without impacting their ability to receive financial assistance for college. How do we do that? Well, my dear Claudia, you've already made a little bit of a mistake. I'm so sorry to say because if you have $1,000 each in a credit union for them, it has to be because they're minors a uniform gift to minor’s act account. And when you have a uniform gift to minor’s act account, that's essentially money that belongs to the child and you are just the custodian for it. So, when they go to college and you apply for financial aid, let's say you continue to do that and you all of a sudden had a whole lot of money in a UGMA account, that's going to count against the kid for financial aid. So, you're far better off having a 5 29 either prepaid account or a savings account to fund a kid's college education for each for each child. And if they decide that they don't want to go to college for some reason. All right. Anything above what you originally put in, you'll be able to take out, but you will pay a 10% penalty and ordinary income tax on it. Everything that you put in, you'll just be able to take out. But somehow, I have a feeling your kids will probably go to college and that will be the biggest help to them of all because as you just heard a little bit ago, there's a Doctorate of Psychology student who has $300,000 a student loan debt and is miserable. So, kids are always so incredibly thankful for any financial assistance that they get from their parents in terms of not having to take out a student loan. All right. This next question is from Stephanie. I like this question, Suze because of her career, what she does. I would assume you like every question. No, but some of them I really resonate with and I like Stephanie's a lot because we both you and I have many friends that are in the same boat as Stephanie. Not necessarily financially speaking, but for the career. So, hi Suze and KT. I'm not a twin or anything cool, but I'm a newly turned 47-year-old single woman who has about $70,000 in savings, a home in L. A. that's worth ready, Suze. 800,000 with a remaining mortgage of about 188,000. I also have around $20,000 in student loan debt, but that's it, almost zero consumer debt, for which I'm proud. My concern is this I work in the performing arts and I tend to treat my income with a famine approach. In essence, that's the part we both relate to. Right, Suze. We not know the approach, but we understand friends. We have many friends that have the same career dilemma. Yeah. Because you never know. In essence, every time I get paid, I presume it will be my last paycheck. So, I like to hold onto money and look at it. I thought that was funny, maybe not the wisest. Additionally, I bought my first home at 26 which is how I'm able to have so much equity at a youngish age. My question is, how can I immediately and easily diversify my assets to increase my chances of growth from this point? Should I sell my home, which would net about $575,000 and cash out a little condo home for around half a million, then invest the rest or should I stay in my home and begin to fund a Roth IRA immediately and choose a few choice individual stocks. I know that I'm heavily invested in real estate with little attention to an investment portfolio, but maybe I can just pick it up from here. So, and then she, she goes on to be very gracious saying Suze, you were both doing God's work and women like me everywhere, are so grateful for your help and guidance. But Stephanie, we have a lot of friends just like you that have that career unknown. And Suze is going to tell you what she thinks. I always tell you what I think everybody. So, here's the thing Steph is that I don't know how much you love this home. I don't know if you know this is a place that you would like to spend the rest of your life and or not. Financially purely financially speaking, oh, you bet it makes sense to sell at the high right now. But I got news if I were you and I was selling right now, I don't think I would be buying right now when it's a good time to sell. It’s not a good time to buy, when it's a good time to buy, it's not a good time to sell. So, if I were you, even though I know rents are kind of high right now as well, I would seriously think about selling and renting even if I was going to rent for a year, two, or three because by then maybe real estate prices will come back down a little bit to normal. Maybe yes, maybe no. Or maybe you can find a really good buy for a condominium and make sure if you buy a condominium you listen to last Sunday's podcast with all the things that can go wrong when purchasing a condominium. But that, that would absolutely not only diversify you, but it would give you a lot of cash that would probably make you feel a lot more secure. Now, here's a thing though, that I want to say more about what you should do with your money. I want to talk to you just very briefly about your thought process. Because your thoughts create your destiny, and for all of you who um know who Oprah is and if you don't, like what is wrong with all of you. But that's besides the point, if you go to Oprah's podcast, it's the podcast that aired on July 6th, just a little bit ago. Oprah did a recap of one of the first times I was ever on the Oprah Winfrey show with her. And it really talks about the beginning of the Nine Steps to Financial Freedom. And we have people on and you can learn a lot about how your thoughts create your destiny. So, while it's true that you can be conservative when you get something and that you treat that money like it's you might not get another paycheck. I don't want you to think about that like that in your head. I want you to transform those thoughts to, of course you're great. Of course, you're going to get another job. Of course, you're going to get another roll. Of course, you're going to be an incredible star one day and everybody's going to know your name, you might want to start thinking like that. But I really suggest for all of you to go and listen to Oprah's podcast on July 6th, I think you will learn an incredible amount about how money works and how you can manifest things in your own life. All right. All right, KT, Time for my quizzie. Now this is a difficult quizzie and as I've told all of you before, it's important that you think about things before you just answer. So, it's not always just a quick answer, but sometimes there's choices that we have to make when we get older or whatever in terms of where money comes from. I just want you to think about this in terms of the answer. All right. This is from Beth. Beth says I have more than enough from my pension and Widows Social Security to cover expenses and have money left for small wants. I have seen lots of advice on how to save for retirement, but not a lot on how to spend. All right. So, we get this everybody. She covers everything. She has money in retirement and she wants to know about how to spend it and here's what she wants to know when I wish to spend it or pull money from my investments/retirement accounts for a project, remodel, trips from, which account should I pull it from? So, she has three accounts, KT, she has about $80,000 in regular investment accounts, mutual funds and things like that. She has $90,000 in a Roth IRA and she has $340,000 in a traditional IRA. So, where if she wants money, which one of those three accounts should she go to first? How old is she? She's 66. Well, she owns her home outright, right. She's totally debt free and she has enough money for all of her current monthly expenses from her social security, this isn't about her covering her expenses. So, everybody, the question is, let's just say Beth needs $10,000. Does she take it from her regular investment account where she has $80,000? Does she take it from her $90,000 in a Roth IRA or does she take it from her $340,000 that she has in a traditional IRA? Which one, maybe the Roth? Because she doesn't have to pay taxes on that. So, is that your final answer? For now, yes. Alright. I knew it. Alright, conventional wisdom, I'm just telling you a conventional wisdom, is that when you have money in a situation like this, you normally take it from your taxable account first. Now that's just what conventional wisdom is because then it allows the money that's in the Roth IRA or in the tax deferred account which is her regular investments to keep growing and growing. So, it's $340,000. That's what the conventional wisdom is, but there ain't nothing about Suze Orman that's conventional. So again, I would be asking the question here, if Beth was sitting across from me the following, Beth do you have children that you want to leave this money to? Because if you have children that you want to leave this money to, then remember when you have money in regular investment accounts and you die, and it goes to them, they get a step up in basis on that money and therefore they probably won't have to pay any income tax on it. If your children are in a higher income tax bracket than you and you leave them the money that's in the Roth IRA, and it continues to grow. When it passes down to your children, they won't have to pay any income tax on it. The money that is in your traditional IRA, the $340,000 if you were to die and it goes to your children and they happen to be in a higher income tax bracket than you, most likely and most likely they are, then what happens here is that they are going to have to pay ordinary income tax on all of that money and they'll have essentially 5 to 10 years to wipe it clean. You say to me that you are debt free, you own your home outright and with your widow social security benefits, you have enough and plenty of savings for everything to be okay. So, given that your income tax bracket is not that high right now, on any level, I have to tell you the conventional advice works for you. I would be taking it from my traditional IRA, and pay taxes on it now. That's what I would be doing because we don't know what taxes are going to be in the future. We don't know. So, I would take advantage of these low-income tax brackets now and take it from the $340,000. Do you think that was great? I didn't even think of that. I didn't even think about the inheritance. That is why it's really important, everybody. That's why you’re Suze Orman. No, it's really important that you all understand that sometimes it's not just a yes or no or do this or do that. Every one of you is an individual, with individual needs an individual situations. So, you want a financial advisor that asks you questions and takes everything into consideration before they give you the final answer. But that was a good try KT. Alright. Alright. But you want to know what's funny. Everybody also was writing and they say we got it wrong, just like KT, we're always wrong. Just like KT. You're not always wrong though, my love. So okay, Sunday. I have no idea what I'm doing yet, but I'm sure it'll be fabulous. So, until then we want all of you to stay strong, to stay smart, to stay secure and to wish KT a really, really happy birthday. They'll have two more opportunities, right? Well, they could wish you happy, well, they could wish you happy birthday whenever they want, but they won't hear from you again until after your birthday. So, this is the time for them to wish you a happy. They can wish it to me on Sunday. Am I not going to be on Sunday? You're not. Okay? So maybe they want to invite me to show up Sunday so they can wish me happy birthday. She doesn't want me on Sunday anymore. Now, that's not true. It's just right now. I don't want to anyway. All right, everybody a great day, great, great time. And until Sunday, we want to wish you lots of what? KT. Lots of love. Lots of good health and stay safe. See you then. Bye, bye.
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