Podcast Episode - Ask Suze (and KT) Anything

Debt, Family, Home Buying, Mortgage, Retirement, Roth, Saving

August 26, 2021

Listen to Podcast Episode:

On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Brent, Beth, Lena, Dereck, Mo, Rena and Tiffany, selected and read by KT.  Plus, a quizzie for KT.

Questions asked:

Brent - Do I need to cancel my old will before I use the MUST HAVE™ Documents?

Beth - Why are you against reverse mortgages?

Lena - Are Alliant's overdraft fees more forgiving?

Mo - Can I transfer my holdings from my brokerage account into my Roth IRA?

Rena - Is it okay to buy a place with 5/10% to start building equity?

Tiffany - How should I care for my mother post independent living?

Sally - Can I use money in my 403B to pay for my taxes?

Podcast Transcript:

August 26, 2021, just a few more days. Hi Suze. Hi KT. But just a few more days till our Colo comes home to us. I'm so happy, he finally got to see his family and girlfriend and eat his delicious, well he would have told us? You think yes. Suze keeps thinking that he was missing his girlfriend so much that he wouldn't got married. But I don't think so. We'll see what happens. But Colo, in case you're somewhere and you hear this podcast, we miss you so, so, so much. But we're so happy for you. All right girlfriend. Come home, come home to us. He will. All right, so Suze. I have a really great mixed bag of question that every single time I start. I try to theme some of them, I try to make them thematic like real estate or my favorite Roth topic. I try to make them thematic. But this is these are kind of interesting and I picked them because their timely and the first one is from Brent, Suze and KT. My name is Brent. I'm from Kentucky. I'm 37 married with two small children that are five and two. Currently we have a will created by a lawyer that we have through a legal service plan at my employer. I pay about $8 a pay period for the service. Only one child is included on the will and we need to update it. If I get your Must Have Documents for the will do I need to cancel the old will or does any new will created take over for the old one? I'd like to get your must have documents and cancel my legal service plan. I'm curious on your thoughts. So, Suze, there's one big mistake that that I read on this which is what I want you to address. He's just talking about a will. He needs to talk about a will and a living revocable trust. He does, does he. He does. So, Brent here's the thing. Normally when you have a monthly fee at a corporation for legal services, it's usually for more than just a will or a trust or whatever. It usually is there for you to be able to talk to them about something that comes up that you need other legal advice for. But if I'm wrong however, and that $8 or $9 a month that you're spending right now is only to create a will or something like that, then it is not worth it on any level, but just check before you cancel it. Number two, you are 37, you are married and you have two small children. What you have got to understand is that minors, which your children are, cannot legally inherit money. So, you and your spouse are out on a date, something happens and you're in a car crash now you're both killed. It happens Brent. Now, any money that you've left to your kids or in this case your kid because it's only including one via the will, and they're not going to be able to get it till they're legally 18 years of age because it has to go into a probate guardianship at that time. Where somebody is in charge of that money until they reach the age of 18. So, not only should you get the must have documents, but you should absolutely also make sure that when you get the must have documents that you do, all four of them must have documents. I don't want you to purchase the must have documents thinking that all you can do is a will because you can't. The way that they're constructed is that you answer questions after you have answered the questions that are asked of you, then all four documents are printed out and it takes you through it line by line. So, you need a will and this will, will replace your other one. You need a will. You need a living revocable trust. You need an Advanced Directive and Durable Power of Attorney for Healthcare and you need a Power of Attorney for your finances. However, for those of you who want to buy the must have documents, you absolutely can do it by going to https://www.hayhouse.com/checkout/cart/add?product=17668&qty=1. However, it will cost you $69 there. Now, that's still a deal of a lifetime to get $2,500 worth of state of the art documents. However, I am going to be on HSN September 18th and 19th. The 18th, it is at six p.m. East Coast time, 19th 3 p.m. East Coast time adjust that to whatever your time zones are because it is live. And you will be able to purchase the Must Have Documents and the hardback version of the Ultimate Retirement Guide for 50 plus and a few other things. But it all will come to approximately $65. So that's a real deal, especially if you want The Ultimate Retirement Guide for 50 plus, which by the way has almost 5,000 5-star reviews on Amazon, it's something you might think about. Okay, next question Suze is from Beth and I'm going to summarize this for everyone. Beth is 61 years of age, she does not have any children and her home will be paid off in two years. Good for you, Beth. Okay so but Beth has some issues, Beth absolutely, don't we all Beth. Beth doesn't really want to work beyond 65 she would like to retire and she knows that she's got quite a few good investments and savings at hand but with everything combined she feels that by the time she's around 70, she'll be slightly short every month for her to cover her expenses. So, you actually, I was gonna say KT I responded to this women. I want you to share this with everyone. So, you wrote back to Beth are you totally against working until 70? But let me tell everyone the story. So, Beth then wrote to Suze and said My mom died at age 42. My dad died at 67. I don't want to work till I die. I want to have time and energy to garden, meditate, read, write hike, bicycle and then she said Suze thank you for caring about us all. But, the question Beth has for you is why are you so against or adverse to reverse mortgages? That's Beth’s solution. This is an entire podcast in its own KT. It could be, but Beth wants to make ends meet by doing so. So why not? So, let's just start first with forget reverse mortgages for a second here. Let's go to why I responded to you Beth and because KT chose this, I'm not, I'm not going to be writing you back otherwise I would have written you back personally. However, here's the thing I get that your mom and dad died at relatively early ages. That doesn't mean that's what's going to happen to you. Let me talk about my mother for a second. Both her father and mother died approximately around your parents is age sixties, early 60s. Okay. And the problem. And my grandfather died far before his 60s. The problem is my mother lived till she was 97 and her sisters and her sisters lived till their late 90s. So here we are, we have a situation where you are living in the fear of what happened to your parents is going to happen to you and death is one thing, but you know what's kind of worse than death. Is living a life where you don't have the money to pay your bills to do anything you want to do you know and now you're suffering while you are alive, you know. So, once you're dead, I know I don't want to sound crazy here but you don't have any problems anymore because you're dead. But if in fact you continue to live a long and healthy life and you already are afraid that you're going to be running out of money by the time you're 70 or it's not going to be quite enough. And you live another 20 years after that, why would you want to do that to yourself? So, my advice to you is this I want you to work till at least 70 and at 70 is when I want you to start social security. The longer you work, the less you need to take from your retirement, the more your retirement funds will last you. And the longer you will live our life where financially you can pay for everything. When you get to the point where you need a reverse mortgage in order to pay your bills and to live, that is the time that you need to sell your house and totally downsize. Reverse mortgages I don't like for many reasons, especially when interest rates are so low right now. What you get out of it will not be what you think and in the long run, when you go to sell it because you may need to sell it, you're going to get hardly anything from it. What do you want to say? I think that Beth also can look into at that time assisted care living. Yeah, if she needs to or an independent living independently were great, you know, 55 and older community, so, you have people around you. But a reverse mortgage for those of you listening, if you think that is your answer to be able to pay your bills when you get older. It is not. If you're at that point you need to sell your home and downsize just that simple. All right, next question, next question is from Lena. She said Suze, I know you love the Alliant credit union. I do. And have all of you opened it up. Remember if you open it up before September 13th, your name will be added twice., twice for the sweepstakes. Alright, come on. Lena's question is about a checking account that now she would like to open where you talked about getting a .25%. That's right, I did everybody, you know .25%, I just have to say this KT. .25% on a checking account for those of you who still use checking accounts is higher than most of you are getting on your savings account. And remember Alliant pays .55% on their savings account. Alright, so Lena doesn't want to disappoint but she said that made me so laugh. I tend to bounce my checks probably because I don't pay attention to my balance. You think so? Then she said so Suze, are overdraft fees better at Alliant. Sounds like she's had a lot of run ins with overdraft fees. So, what should she do? That's very funny. KT Lena, isn't that your grandmother's name? Yeah, that was her nickname. Is that why you chose this? Maybe right now. I just love to say Lena. Lena. Lena. Lena. Also, that's the nickname for your sister. I call KT’s sister Lynn, Lena. So, Lena, you bounce checks, we can't have a person who bounces checks by the name of Lena in our family, we can't do that Lena. So, we have to change that. However, it's true. I do love Alliant credit union and I love them because they are a credit union and a credit union always has the best interest of their members, but you want to know if they will charge you if you bounce a check or whatever that may be and guess what? Alliant credit union does not charge non-sufficient fund fees or overdraft fees on any checking or savings accounts for that matter. All right, KT, Next question. So, Suze. This next email is pretty different and exciting. It's actually heart-warming and it's from Derek. Hello, Suze and KT. I listened to you all the time and it was brought to my attention of just how much when my foster children, a three-year-old boy named Pharaoh and a two-year-old girl McKinley started singing your theme song. So, Derek included a clip, Suze that I want to play for you but he said it's never too young to learn about money. All right, we're going McKinley. (*cues video) Fabuluos KT. Next is from Mo. I love the three stooges. I of Was the dumbest watch this. Ready? Remember when they did that? So I'm too used to do that. I think it was mom. Oh the one with remember everybody who are older out there? More used to do this thing where he would snap both of his fingers and anyway, sorry if you're younger out there, it was just like curly curly, was bald had no hair and everyone would kind of pick on him. The other two brothers would pick up where they all brothers. I think they were supposed to be brothers. Let's forget this. I'm sorry I brought it up. God, hello KT and Suze. Number one, I first opened an individual brokerage account and made some investments and then a few weeks later I opened a Roth IRA, can I transfer my holdings in the brokerage account to the Roth IRA? Two if so, does it make sense to transfer stop KT, Mo can't do it. You cannot take investments from an investment account and fund your Roth IRA with it Mo, it has to be funded with cash. Next question, KT, All right. Next is from Rena. Hi Suze and KT, this is the first time I'm submitting a question and I've been a huge fan for years and years. Okay, so this is Rena's question. She has, she's been renting a townhouse for four years. She just signed a lease to start year five but ultimately would like to buy real estate. So, she's building equity rather than the monthly rent just going out the door. So, Rena said Suze, I have a 12-month emergency fund, some of it is in the Alliant Credit Union. I also have a Roth 401K Roth IRA and traditional IRA totaling around $350,000. I'm 56 single. My kids are 26 and 23. I still help the 23-year-old while he's in school for his second bachelor's degree, he has student loans but I pay for things like his insurance, car insurance, gas, cell phone, so on and so on. Now she's asking Suze You recommend putting 20% as a down payment. However, it may take me many, many years to save another chunk of money not touching my current emergency fund and then continue to let my rent money go out the door and not build equity. Do you think it's okay to buy a place for 5 or 10% down so I can start building some equity? So, Rena you wanna know what's so sad is that if you had all $350,000 of that in a Roth especially a Roth IRA, oh my God you could just take out your 20% down from there income tax free penalty free, assuming you put that much in over the years. Oh my God, that would have solved your problems. However, you are a saver, you have a 12-month emergency fund, you don't have any debt or anything like that. You have $350,000 in retirement accounts and you want to buy a home. If you want to buy a home as long as the 10% down, not five Rena, as long as if you put 10% down. That down does not come from your 12-month emergency fund or your retirement accounts then I don't have a problem with you doing that at all. You do have to know however, when you don't put 20% down you do pay what's called PMI which stands for private mortgage insurance. Which means the interest that you're going to get on your loan could be 0.5% to 1% higher, then if you had put down 20%. But in your particular case I just think it would be absolutely fine if you bought a home with only 10% down. You know what I've noticed you really haven't chosen any questions that deal really with Roth retirement accounts. I mean you skimmed it today but you are kind of like are you avoiding the topic? Of course, I am. Would you if you were me? Of course, I am topic we all, we talk about that Roth guy too much. Okay, ready. The reason she said the Roth guy is it was Senator Roth who created years ago, the Roth IRA. All right. Travis, go on. Next question is from Tiffany. Tiffany, I like this Suze because I think many people, many people are in the same boat as Tiffany in terms of dealing with this next question. So, hi Suze, my mom is seriously considering moving close to me. When I read that first line, I said oh this is going to be a good one. She said I live in Seattle and I am an only child. My mom currently lives where we grew up in Northern California. She's almost 73, I think it would be good to have her close by to help her and spend time together in these later years and get her out of the fires. Alright gone. Yeah and also keep an eye on her. So, you know Tiffany sounds like a great daughter, but she has some issues. Mom has some issues, she retired early due to an aneurysm and all of my life she struggled with credit card debt. Currently mom has about $12,000 in credit card debt and she has so these are some of her expenses, she has a car payment and a monthly income of about $4,500 gross, no savings to speak of. But still KT $4,500 a month gross right, it's pretty good. So, this is where Tiffany's conflicted, she says that if she stays in her current place, her monthly cost for housing are only about $1,300. However, every time I go visit her there something needs to be fixed and I ended up fixing it for her. So, that said if she keeps paying her cards off she has the opportunity to save money. Here it will go to the rent. We found an apartment for her in an ideal 55-plus location 10 or 15 minutes, from us here in Seattle. The rent is about 1650 a month. We submitted an application waiting to see if she gets approved. It's similar in size to her current is her question. Okay, so we there's another issue here. I just want you to know. We also learned that her Kaiser insurance may not transfer from California to Seattle. So, Tiffany's asking you, Suze, can you provide any guidance on how I should help figure out the best choice for her. We know if we sell and she moves here, we basically can't turn back as she could never afford to buy again if she wishes to move back to California. So, what do you think? You really you went into this. Well of course it's a two-page email. It's really, really a long email but I think Tiffany is a little bit torn with, she's a lot torn KT. Tiffany, listen to me number one Seattle is a tax-free state. Northern California or California is one of the highest state income taxes in the United States. So, you might want to take into consideration that if you were to move Mama from Northern California to Seattle, she may very well make a little bit more money because she's not going to have to pay any income tax too. The state of California anymore and she won't have to pay it to Seattle, that's number one. She has $12,000 in credit card debt. What does that tell me? That tells me that her $4,500 a month gross isn't enough and it's not enough because why, she has $12,000 a credit card debt. So, she's living above her means. And the credit card debt is probably growing and growing. So, it's not about the credit card debt paying it off, things like that. It really is about your mother being taken care of and have people around her if something were to happen to her. Now obviously she's 73, which means she is on Medicare. So, if the insurance that you're talking about, the Kaiser that won't transfer from California to Washington. So what? So, get yourself another policy. There are many companies that will sell you a Medicare supplement policy which goes with her Medicare. And I really think it's important that she'd be around you. I also, I just have to say this, I think it's really important that she'd be out of California and this isn't easy for me to say because I really love California, KT and I lived there for 20 some a long, long time. Separately, this was even before we knew each other. But you know, I was there since 1973 until I moved to Florida, which was really in, when was that KT, 2004, almost 20 years ago. So, she needs to be near you because California is really fire after fire, all the smoke that's in the air, everything that's going on there now I wouldn't want my mother there. I would want my mother with me in Seattle. And therefore, bottom line is this, if she qualifies for this apartment that you found in a location that's just 10 or 15 minutes from you. Can you just go ahead and do it? The rent, you say 1650, that's only $350 difference than what she's paying now. But the difference also is she's not going to have to pay and you're not going to have to pay for any improvements to the house, anything that goes wrong, just do it. So, that is the bottom line. It's always better to have your parents near you, especially when they get older. Hi KT. You know what time it is? It is quizzie time. It's this is an easy one. You're going to absolutely get this one. I hope so. Okay, everybody put the, put the bet on does KT, get it right or wrong. So, you know KT, this quizzie isn't just for you. This quizzie is for everybody. So, are you ready? This is from Sally and Sally says Good afternoon Suze and KT, my name is Sally and I'm 58 years old and I have a 403B with my employer. I wanted to ask you when I get ready to retire and start taking money out of my 403B each month. Am I able to use the money in my 403B to pay for my taxes, is she? Or is she not, KT? Absolutely not, she cannot. Are you sure? Yeah, you can't take that money to pay tax. You can't you can't do that. That's so is that your final answer? Yeah, my final answer. That's it. All of you, have you answered? So, it's kind of like a ding. Ding, Ding, Ding ding. And no, wait, wait, don't tell me something isn't when it is. So, Sally, do you love when KT tells me that I'm wrong with critiquing her? That that of course she's right. All right. Can you imagine what it's like living together? So, sally? Here's the thing. Of course, if you want you can take money from your 403B for any reason and you can take that money and when you take some out, you can actually use it to pay taxes. But what you have to understand is any amount of money that you take out of the 403B is taxed to you, twice. Not just to pay to taxes the money she takes out to pay taxes on other, but she doesn't pay taxes twice.KT. It's not really like two, it's like peter and paul, it's it doesn't make sense. That's why I said don't do it. Do not defend your answer. I was right. Right? Was that right? I told you? Ding Ding Ding. And uh no, but more the dings. KT, Really let me answer this question? Right. So, the thing is when you take money out of a 401K. For any reason, as I was trying to say, KT you owe income tax on whatever you take out. So, it's kind of like a catch 22. You take out money and you want to pay taxes on it. So, you have to take more money from your 401K, and you pay taxes on that. And it's not double taxation but you're far better off leaving always leaving as much money as you possibly can within your 403B to earn and to grow tax deferred. What would have been fabulous as if it were a Roth 403 B, or if you had a Roth 401K, which you would never have to then pay taxes on it when you go to withdraw it. So, you bottom line should be prepared to pay the taxes on the withdrawals from your 403B from funds that are outside of your 403b. Even though you can do it that way, but it's not a smart way to do it the way that you're thinking about it. What is that look for? I was right. So, Suze, that concludes another great Ask Suze anything. It does. But I just want to remind everybody. Although did I remind them at the beginning, they only have until September 13 to open up their Alliant credit union account? I did for the sweepstakes. But I am going to remind you again. Please don't miss it. It's really so, so important for you. And I just also want to make it clear for one thing for many people, if you open up an Alliant credit union account and you want to be part of the ultimate opportunity savings account where you put in $100 a month and after 12 months you get $100 which the that plus the 0.55% interest that Alliant Credit Union pays you is a 16.7% return on your money. That is reason enough to do it. You have to start funding it the very first month that you opened it. So, if you open it, start funding it with $100 a month at least that that month. You can't put in a large sum of money and then three months later start putting in $100 a month. It does not work that way. So, you just have to know that everyone. All right, Sunday, Sunday, I'm joining Suze everyone. Why is that? Because can I tell them the topic? You are not joining me. I am, I'm joining you because I have questions about my long-term care insurance policy. Well, you're going to ask me those questions when we're when we when were No, I'm going to be there everybody, look for me. No, she's not. Everybody coming. KT is coming in Sunday School with Suze. Absolutely, I have questions. All right. General Sunday. All you need to stay safe, smart and secure. All right. See you Sunday. Bye bye.

If you want a chance to be on NBC’s Today with Hoda and Jenna on September 17, 2021 go here: https://www.today.com/money/can-you-can-afford-your-next-special-purchase-t219808 

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Suze Orman Blog and Podcast Episodes

Suze's Financial Strength Test

Answer Yes or No to the follow statements.

I pay all my credit card bills in full each month.

I have an eight-month emergency savings fund separate from my checking or other bank accounts.

The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!

I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.

I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.

I have term life insurance to provide protection to those who are dependent on my income.

I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.

I have checked all the beneficiaries of every investment account and insurance policy within the past year.

So how did you do?

If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.

As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!

But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.

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