College, ETFs, IRA, Life Insurance, Retirement, Roth IRA, Saving
July 22, 2021
Listen to Podcast Episode:
On this edition of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Erica, Leigh, Mary, Pam, Aga, Kamud, Jenny, Tracy and Tricia selected and read by KT.
Erica - Where do I save my down payment?
Leigh - How to maximize my money?
Mary - How to split my mother's home?
Pam - Roth contribution limit?
Aga - Can I still start a 529 plan for my son?
Kamud - How do I help my daughter's future?
Jenny - Should I move my IRAs?
Tracy - Should I sell my car to save more?
Tricia - Roth or Traditional 401k?
Kelly - How should I use an extra $300 a month?
July 22nd 2021. 1 day, one day after Mrs. Travis's 69th birthday. You don't tell them how the number. Why not? Because KT, I'm a numbers girl. Of course I'm going to tell the numbers. I have to tell everyone first. Thank you for so many wishes and blessings and incredible, you know, thoughts. I felt your heart in every one of them. But I have to tell you from Suze, from the love of my life. I received the most precious, amazing motion picture video that she herself made and the songs and the photos and the memories that she collected over our 20 years plus. Unbelievable. I want to share it with all of you. But I'm not sure if I can. Where would I put it? Well, maybe we could put it on the app if you really want to share. I would love to share it with you. But I'm not sure that we can but we can see it's like, well the only reason it's like long, 20, some odd minutes, 20 something minutes. But for me it was super special. Made me cry. I did your own personal podcast. She did, she did a little personal podcast, which I'm not going to share because it was very personal and very beautiful and very heartfelt as well. And for the girl that has everything and doesn't want anything, she did give me a gift that I can't wait to use. I love love, love, the gift she gave me and as soon as the weather comes down and I could get back in the ocean, I can't wait to use these. They're swimming ear pods and she loaded them with some of my favorite, favorite music and you snorkel, and I snorkel for hours everyone, and listen to music. It's unbelievable. That's what she gave me as a little birthday gift and a few other things as well. Like I made her breakfast. Oh yeah, delicious. Suze can cook a great omelet and she made me a delicious omelet and coffee and we sat on our front porch and Colo came and brought me flowers. He went all over the island and gathered flowers probably from everyone's yard, surprising they weren't shooting him. But that was KT's birthday, it was the best. Yeah. And my twin sister and I wished each other from afar a wonderful birthday and I made a video for Lynn. Yeah, she did. But we'll get together soon with her and it'll be fun. All right, so with another year, another day with that. Welcome everybody to the ask Suze and KT Anything podcast, and this is where you ask questions and have chosen by Miss Travis. We answer them here on the podcast and all you have to do is send in your question to email@example.com or download the women and money app. And right there you can send in your questions as well. Now go for it, birthday girl. All right. So, I have a real assortment of questions here, but I like these, they're all over the board. It says hello KT and Suze love your podcast. And this is from Erica. Erica writes, I share what I learned with my 21-year-old daughter who just graduated college with a physics degree. That's great, congratulations. She is finally starting to take more of an interest in her finances. So, she starts a new job as a physics teacher in September and she wants to begin saving for a home of her own. So, she's asking the moms asking Suze, she hopes to buy a home in five years, has about $5,000 saved in index funds. Where should she invest the money from her new salary to save for her own home? If you are going to save for your own home and that home purchase is going to be within five years, as you say in this email, how many times have I told everybody that money that you need within 1,3, or 5 years is not money that belongs in the stock market. And why is that? Because on average, from the high of the stock market down to the bottom back up to the high is normally 3.1 years. However, there have been many times that it's been five years. So, the last thing you want is to have your daughter's money invested in the stock market and all of a sudden everything turns around and goes down and implodes. And in five years she doesn't have the money then to put down as a down payment. But here's the thing you didn't tell me She's saving for a down payment. What about her emergency fund before you can buy a home, you have to have at least an eight month to 12-month emergency fund, then an additional 20% down, to buy the house. So, if I were you, which is exactly why I created with Alliant Credit Union, the ultimate opportunity savings account. Because there she can save, she can get currently .55% interest. She can do all kinds of things there. She could get a checking account there for .25% interest. By the way, that reminds me, just reminded myself of something KT is that, you know, so many times people have checking accounts still and they have all this money and they're checking accounts and they're not making any interest on it whatsoever. At Alliant Credit Union, you could have a checking account for 0.25%, everybody. There is a reason why Alliant Credit Union has been named the number one credit union by so, so, so many entities that are truly, truly legit. So, I would go to myalliant.com and I would absolutely open up an ultimate opportunity savings account. And that is where I would say for the emergency fund as well as the down payment on a home. KT, I just have to say one other thing before we go on to another question I've been because I do look at the emails by the way, I just don't know which ones KT is going to choose. Is this a lot of you are writing in and you're saying you opened up an account at Alliant, but it's not the ultimate opportunity account. You don't know, nobody knows what you're talking. You're all confused. The only way that you could take advantage of the ultimate opportunity savings account where you can get that $100 bonus is how by going to myalliant.com. Just don't go straight to the Alliant Credit Union website, that's the overall website because it won't take you to the ultimate opportunity savings account. All right, So, Suze, next question is from Leigh and everyone listening Leigh is twin. So, she said to Suze that this response will help both. She and her twin sister. Why do they share money? I don't know what the question the question is this. And first let me give you a little background. So, Leigh is extraordinary. She's 26 years old, Suze. She makes a really great salary. She has everything in place. She has no debt. She has maxed out her 401k, her Roth. This girl, she has an emergency fund and an Alliant account. She is golden. So, she's asking you, what should I look into next to maximize the use of my money? Does it say in there, KT that she owns a home? No, she didn't say anything about a home and she's 26. So KT just handed me Leigh your email. And as I'm looking at this, here's what I have to say to you. You have everything That you could possibly want. You have such a solid foundation. Here is, I'm looking at this. It's not even funny, especially at the age of 26. Are you kidding me, girlfriend? So, the thing is, what I don't see here is a piece of real estate and you're investing according to this email is all in either spiders, which is the standard and Poor's 500 index, the Vanguard Total Stock Market index fund, which is the total stock market index fund of over 2000 stocks or ARKK, which is Kathy Woods Technology stock and Innovation Stock fund. Fabulous, for the long run. However, I don't see real estate. Is it a good time for her to buy? Well, it's not necessarily a good time for her to buy because real estate prices are so high, KT, but it's a good time for her to start saving a real estate or a home owners fund. So, when the time does come Leigh and you're ready to buy a home or you want to buy a home, then you have the 20% down to put towards home. So, that's what I would be doing if I were you if you have no desire at all to buy a home and you know, you never will. Although I don't know how you know that at 26, I would then be just simply opening in investment account at either TD Ameritrade, Schwab, at Fidelity anywhere. And then I would just start investing every month into that account and watch the money grow. But, but really I would start a safe home fund if I were you. Oh, KT is giving me the signal Pat her on the back. Suze. 26 years old. Look at this. Great. I want to say one more thing, shouldn't she also think about if she has future marital plans to get a prenup. I mean when she is of course, Leigh if you if you ever decide that you're going to get married, you best get a prenup. Do you hear me both of you need a prenup period? All right. All right. All right. Next question another sister. Question. This is hi Suze. My sister and I recently inherited our mom's house. I don't have any interest in owning the house with my sister. It's almost three hours away from where I live. It is a very expensive property to maintain. My sister wants to keep the house, but can't afford to buy me out. Should I have her record a promissory note agreeing to pay me back my equity over time? Or should I give her my share as a gift? I'm concerned that issuing a loan to a family member can complicate things. And while I'm in a fortunate situation where I don't need an equity payout, is it crazy to just give it away? That's from Mary, Suze. What do you think? I'm just so curious, KT, what would you do since you have a sister? I don’t. I would so just give it to her. I would give it to her and I would say you know what mama loved us all and you know you you want the house, I don't. Let me just project and now there's a reason why she clearly says, Mary clearly, clearly is in a very comfortable financial lifestyle right now, right now. Wait, stop. 10 years from now, everything changes. All of a sudden, Mary gets sick. Mary needs help. Mary doesn't have money and can't work anymore. And now Mary's not that fortunate anymore, but yet her sister has this house that that Mary gifted to her that's now doubled in value. It's now worth so much money now Mary sister decides to sell it. Very sister now! Stop, Stop, Stop, Stop. Wait, nope. Stop. I think if that's what you're projecting or thinking of the what ifs in life then Mary should absolutely say to her sister. You know what right now, I don't want the house. I don't need the house. You keep it. But I do want a promissory note that if you sell mama's home, we split the profit. Done. All right. That's simple way that this is your quizzie KT and it's uh. Everybody, here's what you have to think about. I get that all of you think today is forever. That health today will be health tomorrow. And I can personally tell you that is not true. Things can happen in life that you never ever expect to happen. And this is hard for me, KT because tomorrow I'm going to cry. You know what tomorrow is? Right? Yeah. Okay. Don't cry Suze. Well it's true. It's a year, a year since Suze had a serious, serious surgery and one would expect that in a year it would be fine and it's still okay. Yeah. Alright. But anyway, so you can't live life like that people I'm just telling you that you can't. And so, what I would tell you Mary is you can put let your sister for now have the house but I want your name on the deed, not on the loan if there's a loan but on the deed so that you and your sister own this home together in joint. Don't they? If their mom lived, not necessarily if she's going to gift it to her sister that her name won't be on it anymore, it will be her sisters. But if her sister were to die and her sisters trust or will says that her sister's kids or friends or whatever are to inherit that house, then Mary's out, commissary note isn't really gonna help unless she puts a lien on the thing. No Mary, I want you to put your name on the title and I want you to own this home with your sister as joint tenancy with right of survivorship because in the same way that you were willing to give her all of this money, she should be willing to give you all of this money as well. That's what I would be doing. You can also own it in tenants in common where if something happens, you still have your half and her half might go to her children if she has children. But you need to have your name on the deed period. That would be my advice to you. Okay, that's good advice. You always say that's good advice. Well, I didn't think about it that she should just make sure that she has her name. KT, what you just said, you said you didn't think about it. You know, the reason about the what ifs and the reason all of you get into trouble is just because today you can afford a car payment doesn't mean you can afford 5 years from now. Just because you're living a great lifestyle now, you're making a lot of money. Everything's great right now, doesn't mean that's always going to be the case. So, unless you have a serious sum of money that can support you, no matter what happens in your life, you have to think about the what ifs of life. Next question, KT. So, this is from Pam. So, in 2020 and 2021 I contributed to my Roth IRA a total for both years $13,000. So, she put in $6,500 a year. Okay, Currently I have $13,800 approximately in that account. Does the increased amount of $800 count as contribution? Once you contribute the amount of money that you want to contribute to a Roth, it could have doubled, you could have $26,000 in there right now. And that has nothing to do with your contribution limit. So, the amount of money that's in there, the increased value is absolutely yours girlfriend. Just keep contributing. Okay, the next is from Aga. Hi Suze and KT. I'm almost halfway with catching up with your podcast and I have to tell you, I cannot believe how empowered and informed, I feel. Yay Aga. My son is 12 and I wonder if it would still make sense to open a 529. Can I say something before you go on? The goal of this podcast, KT, if you remember was to make everybody feel strong, smart and secure and when you feel that way you feel empowered. So, it's not just do you know about money, do you know what to do? Do not know what to do? How much do you, can you contribute to a Roth? It's how you feel about making those decisions. So, Aga has absolutely achieved the goal of this podcast to feel empowered. Alright go on. Okay, so my son is already 12. I wonder if it would still make sense to open a 529 plan for him. For many years, my husband and I were using a savings account to put aside money for his college. We have around $20,000 and we are still able to contribute $200 a month. So, they went to their financial advisor and the advisor said we could still open a plan at first and have him take out student loans. So, I'd stop for a second. So, the son is 12 in about another four or five years will go to college. So therefore, that isn't money that should be invested in the stock market. However, if the son takes out loans for four years, then we have another four years that that money can grow in a 529 plan making it nine years. Fabulous advice from the financial advisor. Great. Fabulous. Great. Yeah. And then Aga said, I will make sure that he will be a good student and teach him that we are on this boat together. Great. The other thing I just want to say in case Aga was worried about the stock market and obviously she's not investing that much. Like she's putting a few $100 you know, $200 a month. Remember everybody? Series I bonds, if you invest in them, they're paying approximately 3.5% interest right now. But that the interest that you get when you take it out for qualified educational expenses is absolutely tax free. If you make under a specific sum of money, which if you're single, it's about $98,000 a year. If you're married finally, jointly, it's about $153,000. You can always find out by checking IRS form by the way 8815. Don't ask me why I know that, but I do. And you can see what those income limits are. But for those of you who want to save in a short term and you don't want to risk it. Series I bonds, if you meet the income qualifications, right now I think are a fabulous way to go. All right. All right. Next question is from Kamud again. This is another college question. I'm new to podcast and already in love with yours. Okay? So, already in love with you? All right. God, so commute and her husband are in a little dilemma. She said I'm writing this email because I think that you are the only person Suze who can help us. We have an 18-year-old daughter, intelligent and smart with ADHD and depression and we have a 14-year-old son with high functioning autism. My daughter doesn't believe in a college education and she thinks that she can do well without it. She got admission into the University of Houston. We paid for her fall and spring semester, but she did not attend any classes. Now that she says college is a big scam. I've tried my best to convince her, but it has only made our relationship worse. I'm really worried about her future. Please help. What do you think, Suze? I know what I would say. All right, let it rip. Alright. I'd say Kamud, trust your daughter and just let her not go to college whenever she's ready. If she chooses to have higher education, she'll go. You said right up front, she's intelligent and smart. Let her go on her own. Okay, KT. However, Kamud, here's what I would say. It makes no sense financially speaking to pay for college education and then your daughter doesn't go to the classes. That is just ridiculous. So, if your daughter thinks that college education is a scam, then you have to be very clear that if she decides not to go to college and she therefore has to go to work. That she therefore has to pay you to live at home, to eat in your home, and to do whatever else it is because someone has to learn, really the cost of living and what it means to be on your own. And obviously she wants to be on her own and she thinks she can make it. So even if she's staying at the house, there needs to be an amount of money that she pays you every single month. So, she gets used to that. Otherwise, it's a free ride now she's living with you. She's not going to college. She has no expenses, KT, what is that look for? Because I, I have to say I disagree. I think this simply is a matter of Kamud’s daughter not wanting to go to college. So Kamud should ask her daughter, then what do you want to do? So she says, I want to get a job then what? And then Kamud will say to her daughter, okay, great. Get a job. We believe in you. And what if you get a job? Where are you going to live? She should ask her daughter. She shouldn't set rules for her. Have a conversation. Empower the daughter. I really mean that empower her. Well, now, you know why I was never a parent. No empower your daughter, encourage her to go out on her own and show us what you can do. We're excited for you. You can help mom and dad out. How can you help us out? I would be a little bit more, strict everybody. But that's okay. As you know, KT has the softer heart between the two of us. All right. I don't okay, next is from Jenny. Dear KT and Suze. Have I mentioned yet how grateful I am for the two of you? Anyway, here's my question, Suze. I'm reading your women and money book and I'm still twiddling around in chapter three retirement. I know this question has been raised on the podcast, but I still don't quite understand. So, originally I had a TD Ameritrade account, but I have since moved to Vanguard. Why'd you do that? I don't know, when I google Vanguard, it says it's full service and a great place to invest for ETFs, which is what I do. I guess my question is should I move my IRAs elsewhere meaning to a discount brokerage account. I think really it all comes down to what are you paying in commissions to buy your ETFs. The reason that I love so much a discount brokerage firms such as Schwab, TD Ameritrade, Fidelity and so forth is because you could buy ETFs online for absolutely free. You could buy slices of stocks and create your own ETF, so to speak for free. So, I still think that an individual accounts such as that at a discount brokerage firm gives you more things that you can buy, especially one day if you want to buy bonds or other things you can do. So, I don't know why you switched to Vanguard to begin with. Vanguard is fabulous. I don't have a problem with them. I just think you probably have more variety back at T. D. Ameritrade Schwab or Fidelity. Okay, Okay. Next is from Tracy. So, hi KT and Suze. I've been listening weekly to your podcast since the beginning of Covid. It has truly helped me get through such a challenging year. I couldn't have done it without you two ladies. So, question for you today, Suze is that Tracy says my wife and I are expecting a baby in august. We currently have two cars. I was listening to your podcast and you said it may be a good time to sell a used car. Well, I jumped on carvana they were willing to offer me $2,000 over the amount I owe on it. It's great. They don't say how old that car is, do they? All right. Don't think so. Um, my wife works from home and we'll be on maternity leave starting in August. So, remember this, my wife works from home. Ready, would it make sense to turn my car in and operate on one car for the next six months and put the $400 a month towards car payment, towards household expenses and savings etc. So, Tracy pays $400 a month right now for a car payment. So, what could happen is for the next six months that's $2,400 plus the $2,000, so that's $4,400 that they could save. Okay, go on. So that's the question. So, Tracy is also a real estate broker and drives quite a bit. So, what do you think Suze? I would have to tell you, I would take advantage of what's going on in the used car market right now, where used cars are up 35-40%. I'm still not clear why exactly, but they are but here's what I would do. I would get used to having just one car, especially because Mrs. Travis pointed it out. Your wife works from home, so why do you need two cars and you have a baby on the way? And that's, I just think, you know, if an emergency happened and you were out, there's always Uber, there's a neighbor, there's something, but I would see how it feels to have just one car because there's your kid's college education, there's your retirement accounts, there's a lot of money there. So, I would absolutely sell it now. But get used to having just one car. Good. I agree, 100% on that one. Suze and KT, this is from Tricia. She says you to kill me. Especially when Suze goes, when KT, when KT stop it. When KT stop it. When KT gets a question wrong. So, here's my question, Suze, can you explain when it would make sense to choose a traditional 401K, over a Roth 401K, if ever. I'm 36 years old, I make about 150,000 a year and until this year and your podcast, I've been in a traditional there you go. Mistake that I don't Know one more thing. Can you also confirm that a Roth 401K doesn't make you pay taxes on the growth of your money? If that's true, why would anyone do traditional? Girlfriend, do you know me saying people usually don't ask a question, they don't know the answer to. The reason why people do traditional 401Ks, or traditional IRAs or traditional 403Bs. Whatever it may be is because they want the tax write off right now and they've been told by a friend or somebody that hey, when you retire, you'll be in a lower income tax bracket. When you retire, you'll be making less money. So therefore, when you go to take the money out, it will be at a lower income tax bracket. How did they know? They don't know. So again, I have a lot of money invest in the known versus the unknown and the unknown is what future tax brackets are going to be and what your income is going to be in the future. My income is greater today than it was years ago, who knows what it's going to be. I wished I had had all my money in a Roth IRA. Are you kidding me? Um, so yeah, you should absolutely be doing a Roth. Oh, look at this KT. Cause KT just handed me the email. Tricia says also, just an idea. Can you guys have a contest where five winners get to have a zoom Happy hour with KT and Suze? I want to meet you two. I'll plan it. Maybe we will. Maybe we will have, I love happy hour. Suze doesn't drink. You don't love happy hour. I do. I like every hour is happy hour for me. Yeah, but your happy hour has nothing to do with alcohol. No, it has to do with all the snacks you get with it. That is true. Alright quizzie time Mrs KT. This is from Kelly. And again, as I've told all of you that these quizzies are all about you thinking what the correct answer is. They are not just yes, no, this, that; there is thought that is required. Because my goal this year, is that all of you think before you make a financial move, you think about the what ifs you think before you do, what are you going to say? Think before you speak? Think before you leap. You wish I did, don't you? They call me unfiltered Suze. Oh my God, let's do your quizzie. First of all, Kelly starts with happy birthday KT. Thank you. I need help deciding what would be the best use of about $300 a month. I am 59 divorced, scheduled to pay off my house by 66. So, in seven years her house is paid off. She has an emergency fund. She has a credit score of 850. She has, that's a perfect Fico score by the way. So, I don't know if you have a Fico score of 850 or a vantage score. But either way it's a great score. Right? No credit card debt or other debt or loans. Would I? Here's the question, would I be better off contributing more. There's many choices here now so, think about these. To my 457 plan, using this to offset tax implications of rolling over my 401k into a Roth IRA. So, obviously she rolled over her 401K into a Roth, she owes taxes on that KT. So, should she make a deductible contribution to her for 457 plan? Should she take that $300 a month and pay down my house quicker? Her current interest is 3.125 right, so that's your second choice, everybody. Should she take that $300 and save it for a car, which she will need to replace in three years? Or should she buy a long-term care plan? Which one? Which one? How old is she? She is currently 59. Boy, I want to say use the money for long term care insurance because again, what ifs or the car? I would do the insurance or the car. Got to pick one kiddo, well, not knowing how her health will be in the future. And she's had, she's got a plan to pay off that home. But I think in seven years you said something like that. I would do the long-term care insurance. It's a huge. Mo, I think maybe, maybe the car. You fall for it every time way you had it, right. And I said because my face was like, I was fooling you and you fell for it because you think I'm gonna tell you what the right answer new from my gut, the long-term care. What do I tell you, I have long term care insurance everybody? Yeah, I don't. Right. So, it's like I wish I could, but I don't, I do. Yeah, but I've been paying for it. I think I got it when I was about 59. You did get it at 59. It's a perfect time to get long term care insurance. That is my final answer. Alright ding ding ding ding. See I got smarter now that I'm a year older, I'm smarter. Now the reason why is very simple rates on long term care policies go up dramatically from the age of 59 to 60. Also, there is no guarantee that you will be able to qualify to get a long-term care insurance policy because the reason I don't have one is I didn't qualify for it even when I was 60 which is true, health reasons and those health reasons have now come to pass. Here we are. We kind of know why. So, it's important that if you have this money, she has everything that she needs, everything's going great for her. I would absolutely look into getting a long-term care insurance policy. Now, I'm just going to say this everybody is that if you are looking into getting a long-term care insurance policy, you have to get in touch with Phyllis Shelton who is my opinion, the nation's expert in long term care. So, I would write an email to Phyllis, firstname.lastname@example.org, that stands for long term care insurance. Now, you know, Phyllis because she sold me my policy. I mean a long time ago. Fabulous, fabulous, brilliant woman. You all have to know when I make a recommendation like this. I do not get a penny. KT does not get a penny. No entity that we own gets a penny. If you decide to use her and purchase a policy, we just trust her. She's really informative to we trust her because over all these years, people who have simply had questions go to her and she helps them. Even though she wasn't the one who sold them their policy they have. So, that's what I would do if I were you and Kelly, that's what I would do if I were you All right, Miss Travis, this went long. I think so. You got to say by quickly, Okay, everybody have a great, great, great day. Suze. We'll see you Sunday. She has a great show planned and I just want to say, she's out of words. Thank you for all my wishes. I'm still celebrating. And I'll All right, everybody until Sunday. We want you to stay strong, smart and secure. See you then. Bye, bye.
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