401k, Financial Advisor, Mortgage, Retirement, Roth, Saving, Social Security
March 03, 2022
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On this episode of Ask KT & Suze Anything, Suze answers questions from listeners about Series I Bonds, Collecting Social Security, 401(k) matches, refinancing mortgages, finding the right financial advisor and more.
Good morning Suze. Good morning KT. So, we, before we begin this podcast, which is ask KT and Suze anything. We've already begun it. Okay. Before we start the questions for this, ask KT and Suze Podcast. We just want you to know that today's March 3rd that you're listening. However, we're recording this early before Suze's surgery. So this is being recorded in February and we just want you to know that full transparency. So, Suze, are you ready? What if they don't listen to it till later on? They're not maybe not listening to it on March 3rd? Listen to it whenever you want. But that's when it drops. All right. I’m just was giving her a little hard time. Hi, Suze. What else do you want to tell anyone? If you have more questions? Send them to go and keep going, KT. Go for it. We, listen, you better get used to my voice because I may be doing The March. Let's see what's 7th March 7th podcast without her. It would be March 10, March 10 Podcast Without her. Okay, if you want to send in a question where if KT chooses it, we answer it on this podcast, please send them in to ask Suze. How do you spell that, KT? A S K S U Z E --I meant, How do you spell Suze? Oh, that's all right. AskSuzepodcast at gmail.com. S U Z E S U Z E? Yes. Alright. Alright, what do you got for me. So, first question is from Laurie and Laurie said, dear Suze, I love your podcast. Listen to every one of them. I'm 52 and bought the Ultimate Retirement Guide for 50 plus. That's Suze's new book. Everyone fabulous. New. It came out over two years ago. Fabulous. It's the newest. In your podcast, you're promoting series I bonds and how great it is to buy them now. I would love to buy series I bonds as I am now in a place in my life That I could afford $10,000. So if I buy at age 52 and I don't touch it at all, what happens when my I bond matures at the age of 62? What do I do next Suze for instance, can I not touch it until I want to cash in the bond? Can I take some of the money or interest once the bond matures? So there you go, Lori needs some answers. So, KT, why do you think everybody is still so confused on I bonds? Like I think they're confused on all financial transactions. Not just I bonds, especially the roth. Yeah, because Lori, this is worrying me. Are you all not listening to what I've been saying over and over again. I have told you that number one, the maximum that you can put in to a series I bond, I stands for inflation, is $10,000 per year per year. Thank you Miss Travis. You're welcome. Suze. I listen, I listen really good. That makes me feel good because I don't know, I'm not sure anybody else's or they're listening and they're hearing what they want to hear. But that's why you all get in trouble. You don't have to put in 10,000 though. You could put in 100, 200 any amount of money you want. Alright so I bonds, you can purchase for small amounts of money up to $10,000 a year maximum. Number one, I bonds have a 30 year maturity. They do not mature in 10 years. They mature in 30 years. When you purchase an I bond, you cannot touch the amount that you put in for at least one year, no matter what, you can be screaming bloody murder and you cannot get it out from years to through five. You can take any amount you want out all of it, a little of it and you will get a three month interest penalty. That's it. After five years of it being in there you can take any amount of money you want out with no penalties whatsoever. So it's your money totally. Your money penalty free after five years. While your money is in an I bond, you do not pay taxes on it. You never pay taxes on the state level no matter what state you live in. And you only pay federal taxes when you actually withdraw, that is how a series I bonds works. So you have to understand that everybody, remember a series I bond is made up of two components of fixed part and an inflation part. The fixed part never changes currently it's at 0%. So if inflation went down to 0% you might not make any interest on this bond at all. Suze. We should tell Laurie that you actually did a Suze school on this, a big one maybe two months ago. I don't know why but not not long ago. Lori look it up, look at and listen to that. It's so good and so clear. But just know that the second part is inflation. If inflation continues to go up for stays here, you're going to get a great return on I bonds remember they changed the inflation rate twice a year Every May and November they come out with a new one May 1 November 1. So can you just remember that, I am not going to answer any more questions on I bonds. Okay. We'll see about that Now. We'll see about that. We'll see about that. Okay. Next is from Nicole. Hi Suze and KT. I've always planned on waiting to collect social security till reaching age 70. As per your advice. I recently heard something and was wondering if it was true. I heard if you retire before age 65 for example at age 55 but do not collect social security and wait until age 70. You do not get more money by waiting until age 70 Rather than 62. Since that is based on you. I know. I know, wait, wait, wait wait. She's going to tell you don't listen people ready since it's based on you working until you collect social security. If you stop working, the money only goes up pennies. Is that true? Mm hmm. Nicole needs a little straightening out. I think most I think most of these need a little straightening out. So, so here's the thing Nicole is that here's how they calculate social security. You need at least 35 years of earnings. So 35 years of earnings because they take the top Income for 35 years if you have less than that And stop working. Yeah, your benefit is going to be affected nothing to do with you take it at 70 versus whatever it's because You know, for every year under 35 years of earnings, Let's say you worked for 25 years And now they need 35 years of calculations, they're going to give you a zero for each year that you had without earnings. So years with no earnings reduce your retirement benefits. Just that easy. So again, remember your social security has figured on 35 years of earnings. So lower earning years are replaced by high earning years and that increase is what affects your benefits. Again, your 35 highest years is what makes up your average monthly indexed earnings benefits. And if you wait till 70, You usually will get about 124% more. Then if you took it at 67, that's not pennies, Pennies, pennies. And if you took it at 62 That you're hearing that it doesn't make a difference, you're going to get 30% less than you would have gotten at 67. So no, it doesn't work the way that you think. what's that look for? Because she keeps referencing 70. Yeah. If she waits till 70, if she's worked at least 35 years of earnings, she will get more at 70. Even if she retires at 55. Yeah. Your retirement has nothing to do with the amount has to do with when you take it out. Right. No, KT. It has to do with do you have 35 years of earnings or not? But it has nothing to do with are you going to get penalized because you haven't worked till 55? And now if you take it at 62, it's the same as 67. It's never the same. If you take it at 62 vs you take it at 67 versus you take it at 70. The longer you wait, the more you get. Just that simple. That's all you have to remember everyone wait as long as you can, baby, depends on your situation. All right, next is from Michael. Hi KT and Suze, I'm fully contributing to the max amounts of my employer, traditional 401k. And to my Roth IRA. My employer doesn't offer a Roth. There is a 3% employer match on the 401k. Since I can't get a Roth, would it be better to reduce my 401k. Contributions to 3% and invest the rest somewhere else. Like an investment at a discount brokerage firm? Just wondering your thoughts on this Suze? Yeah, Michael, you didn't tell me how much money you make but I have a feeling that you qualify for a Roth IRA. So when you have an employer that doesn't offer a Roth 401k. Or a Roth 403 B. If your nonprofit or a Roth Tsp if you're a federal government or in the military And all they offer is a traditional 401K. And they match the contribution you contribute up to the point of the match and then you stop contributing and then you open up your own Roth IRA And you fund it to six or $7000 depending on age. And that is how you invest Then after the Roth IRA then it's up to you. Do you have a home, Do you have any debt? What else do you have going on assuming that everything is like it should be then there's nothing wrong with after maxing out a Roth to open up an investment account at a discount brokerage firm such as TD Ameritrade, Charles Schwab, etrade, Fidelity, whatever. I don't have any connections with any of them and invest there And you'll find that that might be better off than a traditional 401K. At your employer because 401Kk. When you go to withdraw, Number one are totally taxable to you. In the year you withdraw and you can't do it till you're 59.5. In most cases or older, you can't get at that money penalty free up until that point. So you will pay ordinary income taxes on it. You could very well just invest in a investment account And if you tend to keep things long term, you buy individual stocks and you know that you're going to keep them for 10 20 30 years or whatever. You don't pay taxes while the money is in there and then later on in life when you go to sell her any time you go to sell, if you kept it for more than a year, it's capital gains tax. So what? So yeah, I don't think that's a bad idea at all. But only after you have funded your Roth. Okay, so Suze, my next question, how come you're not telling me to go shorter with my answers. I think that he needed to have that information and maybe those listening needed it too. But this is a long question with a real short answer. I love this question. It's a great story. Everyone listen up and this may affect a lot of you out there. She's 63, she's been a single mother of five. Ready everyone for the past 20 years. She's very proud that she's rolled modeled good financial responsibility for her Children. So here's the backstory real quick. I'll make it a little bit short. Suze when she was 25 she fell in love with a fabulous man. Life intervened, he moved west, she moved east and they didn't see each other for another 30 years, while seven years ago, they're both divorced seven years ago. They reconnected, he moved across the country to be with me. It wasn't until he moved here though that I realized just how bad he is with money. Big gulp. Ready. He's 60 for spends like he has a hole in his pocket, he buys new shirts new, this new that he eats out breakfast, lunch and dinner and if he sees something he wants, he just buys it. So she said, I've tried reining him in but it never works every time I help him save a chunk of money, he blows it every single bit of it. And then she wrote, It scares me that way. listen, and remember that line, it scares me Suze. now she said 30 years ago When she got divorced, she had a net worth of $4,000 over the Past three decades. Ready. Everyone, she's been disciplined, work, smart and remember she raised five kids, she nurtured that amount to a net worth of $2 million dollars today. So she's scared of the boyfriend because he spends crazy. She saved for 30 years over $2 million. Ready. This is the Clincher, Suze. He wants to marry her. He drops hints regularly. I told him, I don't want to get married to anyone. He wants to live together. I told him I don't want to live together and so on and so forth. He's saying, okay, the bottom line is she loves him. He's good company. But she's concerned about being with him is not good for her and it would set a bad example for her adult Children, Which are still relatively young from the age 33-22. After all, I'd be distraught if any of them dated someone with my boyfriend's habit for spending, he's 64 and hasn't saved a dime. help me know what to do, Suze. Now wait you all should think about that. And when you hear this story rather than me answering it right now, because the truth of the matter is I wrote back KT and I said a few things to her and she said, yeah, you're right, Suze. So I want all of you now to think about if she was your best friend, what would you do? Send us your answer to askSuzepodcast at gmail. com. We will tally all of them. And then later on, we'll see. what would you do? Come on, we want to hear from you. Alright, and this next question is from heather assuming one had a decent interest rate on a 30 year fixed and they could pay more than their minimum payment. What are the pros and cons of keeping the 30 year fixed and paying more per month towards the principal versus refinancing to a shorter term loan? I know when one is young, you advised to invest extra money, but what about people who are older and more focused on being mortgage free at retirement heather. heather sounds so proper. Suze was gonna give her a very proper to say what is wrong with you, KT. She says when one is young, when one is like watching her, everybody read this question, sitting up very straight, she's talking like heather is very proper. How do you know? Because listen, look how she wrote it. When one, It's very cute, it's her when one is go ahead read, give her an answer. Give her a proper answer. Suze, KT. Nothing I do is proper. Anyway, here's the thing, my dear Heather, is this you all have to understand At a 15 year fixed rate mortgage Is usually 0.5% less to begin with. Then a 30 year fixed rate mortgage and many of you get 30 year mortgages because you're afraid That something will happen in the future and you won't be able to afford a 15 year fixed rate mortgage, even though currently you could afford a 15 year fixed rate mortgage. So it just depends. If you have a 30 year mortgage and let's say you're only five years into it, and interest rates are still relatively close to where they were when you had originally done it, because remember everybody interest rates are going up. So you may find that now a 15 year fixed rate, if you refinance, is the exact same interest rate as a 30 year mortgage that you got years ago. But let's just say that's not true and you were able to refinance to a lower interest rate for a shorter period of time using a 15 year versus your current 30 year, I would go ahead and do it. if I knew I was going to be staying in that home long enough to at least recoup the closing costs with the savings. So you just, you, you have to know that it makes sense because you're really going to stay in this home. So I always think number one when you're older, you know, you're going to stay in that home. Hopefully for a long time, your number one goal is to have the mortgage on that home paid off by the time you retire. That is your number one goal and your key in my opinion to success when it comes to a really carefree retirement really because nothing makes somebody feel more secure when they own their homes outright. That's for sure. Those are the pros the cons of keeping your 30 year fixed and paying more per month. Is that Your paying possibly at a higher interest rate than you need to be pain. So you're better off refinancing if again the interest rate is lower currently than your 30 year fixed when you got it. Alright, okay. This next question is from “Help Too much money”. So I want to just tell you all that. When I look at the emails, I read the subject line obviously first and some of them are really compelling. Those of you that send in question about a Roth. I usually skip it. Alright. Alright. Ready help. Too much money. Dear Suze and KT. Is there such a thing? No, you can never be too rich or too thin. That's not true, KT. No, but that's absolutely, that's my friend Beverly's quote. Never, never can be too rich or too thin. I couldn't disagree more. She's on a diet all her life. Alright, ready. Dear. Suze and KT. Aunt Anne gave me a set of your books and videos. 20 years ago when I was in my early twenties. Your advice shaped my family's life and protected our major life decisions including purchases, savings and other life decisions as a result here in our mid forties, my husband and I have no debt except a 15 year mortgage at 2.25%. We have more than a 12 month emergency fund and retirement accounts in the mid 300,000 range. We're an average middle class family with average middle class backgrounds. What has me feeling panicky is that my husband and his two partners are selling their S Corp And we will have millions to manage by the end of 2022. We have no idea what to do or not to do with the money or how to communicate with our extended families. We don't want to tell anyone, not even our Children. We have had terrible experiences trying to find a financial advisor because all have turned out just to be salesman. We don't know how to live life with money like that. It's a good problem to have. So any direction would be very much appreciated because we haven't told anyone and I think we're not going to, could my name please be anonymous. Okay. There you go, Suze. So this is a very hard question for Suze because she believes in total transparency. You know, this reminds me KT of a story when on the Suze Orman show, I don't know if you remember this when the daughter of a woman who worked at Costco called in. I do remember that and they won the lottery. There were 20, some odd. I don't remember the number of Costco employees and they each got $3 million dollars. After they each got $3 million. Her mother was more depressed than ever. Now. here was a woman working at Costco never made hardly any money at all. And she was so happy. Then she wins and she gets $3 million dollars and now she is having to see therapists, she is just miserable and her daughter calls the Suze Orman show what can I do to make my mother happy? My mother's miserable now. And so one has to ask why do you think money an amount of money When you're gifted with two million, three million, not even gifted with it. Your husband or your spouse works really hard and now they have it. Why would you be ashamed of that? As if money is dirty, money is going to judge you. People won't like you because you have money. That's not it. People don't like you if you show off, if you start changing if you become a different person because now you have money. You think you're better than everybody because you have money. And you're going to find very soon that money offers you security for not only yourself but your Children and allows you also to help those that you may want to help. And it's a freedom. It's not a jail sentence. So I really hope really from the bottom of my heart that you decide to absolutely share this with your Children to share this with your friends to share. You don't have to share the amount that you got two or three million. But oh my God, I can't believe that my husband just sold his business and for the first time ever, we're going to have some money. I'm so happy about it. And what's important though is it's too, if you're going to look for a financial advisor, be careful because you have to know that a financial advisor has your best interest at heart versus their own and while there are fabulous financial advisors out there and if you know one, they're worth their weight in gold. There are so many that don't have a clue about how to do anything. And it's not even funny. So there's nothing wrong with this money just sitting when you get it until you can trust yourself more than you trust others. Listen to the past podcasts about financial advisors, all of those things, but you'll find somebody. The key here is you have to find yourself, you have to find the wealth within you, you have to find the strength within you so that you know that you define your money, your money doesn't define you. And if people don't like you because you don't have money, who cares? One of my greatest joys was always KT do you remember this? Me walking on stage and I would look at everybody and I would say somehow I would get around to and I'm a very wealthy woman, I didn't marry it, I didn't inherit it, I didn't win the lottery and I'm proud that I'm really, really wealthy. And then I would always say, who do you want to give you financial advice? Somebody who doesn't have any money. But I stood in my truth of what I have and I'm proud of what I have. And I don't feel guilty when I spend money and I don't feel guilty when I don't spend money. I don't feel guilty when somebody comes, KT and asks us for money. And I just look at them and you look at them and we go, no, we're not supporting you because we don't want to anything you want to say about it, KT, because you're in a situation seriously where you really no really, KT, you have more money than most of your family members. You just do, and that's a fact. How do you feel about that? I feel great about that. Yeah, I don't know, I feel great about that. And Suze and I obviously are very generous, but we're also very careful about what we do with our money. And we've made it pretty clear that the majority of our, you know, for all of our income and or our wealth of our wealth will be left to charities and our favorite charities and and that's very private for Suze. And I right now, but we're very proud of that and we've absolutely shared that information with family members. And one other thing that I just want to say about this is that when KT's younger sister Barbara and her husband Don and their two kids started to in 2004 and we were already extremely wealthy In 2004 came to visit us in florida. We had a small two bedroom condo, that's it. And Suze loves to tell this story. We we love to be together and for our family and the kids. So Barbara's children Barbara don's kids, our niece and nephew are like Children of our own. They've always spent summers with us since they were born and that's as long as almost Suze and I have been together and we just love being together. So regardless of how much money we have and our ability to afford just about anything we want. We used to get these blow up air mattresses that she loves to tell this story and fill the living room with beds so that we could all be together. And it was just fun. And what was funny is once they became 14, 15, 16 we thought it wasn't proper anymore. Yeah, I remember that one summer we got a beautiful suite down the road at a fabulous five star resort. We were so excited that they would love that and they didn't like it. They wanted to come back. They called and they said can we come and stay with you again on the floor. So the point of that is that money didn't change any of that. And so don't let it change you and be proud of it and don't be afraid and you know, again if you have young Children you don't have to tell them. But you know, show them how proud you are of your husband and that don't use an excuse anymore that we can't afford it. Now. If they want something you can say no, I don't want you to have that. I don't think it's good for you. Don't say anymore. Sorry, we can't afford it because guess what? You can. All right, Kids time Suze. Now I have to tell you because as you know, I read all of the emails, um people are still confused. I don't know how that's possible, but they are. Wait, let me guess about Roth The 5 Year Rule. Oh that yeah, that five year rule is a little tricky but we'll set them straight doing this until I don't get Any more questions about the five year rule for Roth IRAs Alright, this is from jean and she says Hi Suze and KT thanks so much for the wonderful podcast. As retired woman nearing 71. Alright, everybody remember the quizee isn't just for KT, it's for all of you and as I read these, I like to point out little things that are clues for all of you. So as a retired woman nearing 71 and divorced, your advice is invaluable. I especially appreciated the podcasts on the five year rule for IRAs. But I'm still a little confused, I have a small about $15,000. Traditional IRA all invested in technology stocks. I would like to convert the IRA to a Roth while tech stocks are beaten to death because I feel sure they'll come back and the account will do well over time. Here's the quizee. Once I convert it, Does the 5-year rule apply to both the converted funds I've paid taxes on or just the earnings so she converts it. KT, a conversion starts a new time clock right away. No matter what her age, a conversion always starts a new time clock. So everybody, are you thinking about the answer? Does the five year rule apply to both the converted funds I've paid taxes on, or, just the earnings? Well she's 71 you're clear baby doll, you're over 59 a half. Oh my, you got this dude. Just remember the age everybody and it's real easy. So is she totally clear with earnings as well? Oh no, no, no wait, sorry, no earnings you haven't paid taxes on and no matter what you got to pay your taxes. So you cannot answer. What do you mean? You're not using the five Year rule, the five year rule, But she's 71 earnings have to stay in there for how long She five years, 5 years pay taxes on? No, no, no, no. If she wanted to take it out, she would have to pay on the earnings. But if The five year rule applies to the earnings, no matter what. Until it's been five years and Right. She has to be 59.5. Yeah. Well, she's 71, but I'm clear on that. You got that. All right. I got I got both Right. Alright. Miss Travis. That ends another one. There's only one thing that we want for everybody, KT. And what is that? Stay strong. Stay smart and stay secure. See you soon, everybody. God bless. Bye bye.
Credit & Debt, Saving, Investing, Retirement