401k, Investing, IRA, Marriage, Roth, Saving
December 09, 2021
Listen to Podcast Episode:
Listen to Podcast Episode:
On this edition of Ask Suze (and KT) Anything, Suze answers questions from listeners Reggie, Jennifer, Lisa, Richard, Rosalyn, Anthony, Janet, Danielle and Katie, selected and read by KT. Plus, a Quizzie sent in by Pam.
Podcast Transcript:December 9, 2021. What do you think of my voice? KT. It still sounds a little foggy, but I'm a little sad today. We can use my sadness as the reason for your horse voice. Why are you sad? Oh, I know why she’s sad. You know why. You are to. Tell everybody you are to. You are too well. Yes, you are. She's sad to cola's leaving us were bittersweet. Sad. We're happy because he's going to get married. But we're sad because never left us for a month ever. So, we're a little bit sad. But he's leaving today and we're excited. We're giving him and we're hosting a really great lunch for him and all his island friends. And then he had sent him off to get married. You know what I was saying to KT this morning? He's going to be awfully surprised to see he's going to not get a tax refund because now he's going to have to file, Miss. Let’s not reminded. All right. Anyway, but welcome everybody to the Suze and KT ask anything as you can hear. I don't know why. I don't know if in the past two weeks I can't get rid of this sinus infection. I've done antibiotics. I've done everything but KT. You think it's your cooking? No, I've been giving her delicious honey tea and all nice potions, and she hasn't had any dairy. She's eating all the right. Good pro the truth is this is the best that I've sounded in weeks. All right. I will try to get through this. All right, Miss. Travis go for. Okay. We're going to go right into it. Everybody here we go. So, the first question is a three part. This is from Reggie and she wrote Suze. I would like to use the Heloc to pay off the mortgage before I retire. Home equity line of credit baby girl before I retire and use her pension to repay the Heloc before the 13th month. And oh, I remember this, wait a minute and relieve me of the weight of a mortgage. What do you recommend? And then she wrote P. S. I already took the Helocfunds so let me just interrupt KT here. You know, I do read all the emails. I don't know which one she will pick for the thing. But I wrote Reggie back and said, why would you want to do this? I don't understand. And she wrote back what KT. So, here's what she wrote. Hi Suze. I appreciate your quick response. The advantage for me to pay off the mortgage is and then she wrote, it's my accomplishing a personal goal to not have a mortgage when I retire next year, I believe I will have the option to use the paid for property as collateral on small business endeavors in the future. I expect an initial pension payout upon retirement that will enable me to repay the Heloc in 12 months. I'm not going to answer this. You answer this but keep it short for your voice. All right. It's hard for me to keep it short because when I read the answer that she responded and just like now I like was in shock. I was in shock because it was like no Reggie, no, you don't understand. A Heloc is simply a home equity line of credit that has an adjustable rate mortgage on it, which means the interest rate fluctuates. You already have a fixed rate mortgage with only nine years left on it and you know about the same interest rate as the Heloc, but it's fixed. Here's the problem, Reggie, you do not have a paid off property, you still have a home equity line of credit on it and therefore you don't own it outright. Therefore, you can't pledge the entire paid for property as collateral on a small business because it's not paid for. You still have a mortgage in the form of a home equity line of credit. So I don't know where that idea came from, but it's just so wrong, Reggie and I get that you already took the home equity line of credit out, but yet you don't have to use it just because you have a home equity line of credit doesn't mean you have to use it. It's just there for you for when you want it. Number one, Number two, you say you expect an initial pension payout upon retirement and that's going to enable you to repay your Heloc in 12 months Reggie If you take $75,000, Heloc and now you have a payout of a pension. And let's just say that pension was $75,000, that's before tax. All pensions in a lump sum are owed taxes on it. If you take that pension out in a lump sum. So, if you took out $75,000, you would owe ordinary income tax on that money and not give you anywhere near $75,000 to pay off your Heloc. So, let me just put it to you this way. This is the worst idea I've ever heard of in my life. You are to keep your mortgage; you can keep your Helocs in case of an emergency and you are to not take a lump sum of your pension. Do you hear me? Next question KT. Suze. Next question is from Jennifer and keeping with the spirit of Cola's wedding. Listen to this one, dear Suze, I've recently gotten engaged to a wonderful man who is worth $25 to $30 million who he is 16 years my senior, I am 54 and he is 70, he is widowed and I am divorced. I do not have any Children and he has one child. Currently we're working on our prenup and I feel that I have a very competent lawyer, but I need your advice on this matter. Suze, I have no money of my own, my soon to be husband and I are building a new home worth about $1.5 million. Of course, it's being built with his money. The problem is that my fiancé wants to have a clause in the prenup that if he were to die before me, I would have two years to move out of our home we're currently designing and building together. Suze am I wrong to think that I should be allowed to reside in the home for as long as I wish I would love you to hear your thoughts and advice. What do you think? What do you feel about this? Oh, let me see this, KT. All right, Jen, here's what makes me so sad is that when you're getting married, the main goal truthfully of your spouse to be, should be to make sure that you are protected against anything and everything, no matter what. Is it that he has, you know, a child and he wants to make sure that if he dies, that the kid gets all of this money and blah, Blah, Blah. And obviously he's probably left you three or $4 million dollars just in cash to take care of you and everything like that. But here's the problem. Sometimes when people are living in a home and they live in a home for quite a while together and let's hope that's the case here, He obviously is going to die before you. Given that there's no, you know circumstances here with your health because he is 16 years older. Number one and men normally die. Their life expectancy is shorter than a woman's. So here you are, you’ve been living in this home, let's just say 15 years and now he dies. And this is a home that you've been attached to and that you really love and you don't want to move out because it normally will take when somebody loses their spouse 2-5 years just to even want to get out of bed sometimes. Really? The other thing is the two of you are in a car crash. KT just gave me a look like really, you're going to go there, Suze. Yeah. Because KT, let me tell you why. All right. You're in a car crash. He's been killed. You are severely injured, and you want to stay in that house because that's where you will be taken care of. And it's familiar to you and it's what gives you security. He doesn't know what your situation is going to be. Can you move out? Can you do all that? Maybe? Yes, maybe. No. So as I started this answer with his goal in marrying you and if he has $25 or $30 million. Really? $1.5 million is not that much in comparison to what he has. His goal should be that you are totally taken care of. You can get to choose anything you want to do with that house, and you get to sell it when you want to. All of that should be there. If it's not, you got to think about this and ask him, why doesn't he want to protect you? Why doesn't he want to do that for you? And so, this really gives me red flags. And I hope you address it because you deserve better than that. You really do in my opinion. All right, KT Next. So, listen to this one. This isn't keeping in the same spirit. Hi, Suze. This is from Lisa. I'm 59 and my sweet loving boyfriend of five years is 55. We live about 100 miles apart and we want to sell our homes and buy a house together. I will net enough from the sale of my home to pay 50% of the cost of a new home. But due to a divorce several years ago, he will only have about 20% what is the right way to do this? I hate to put down enough to match what he has because I don't want us to start a big mortgage at this age. But I know we need to be responsible and protect our individual interests as well. Now see that is a caring spouse or partner. So, thank you Suze and it says, I love your podcast with KT. She does because I love that you said this is easy, only put in what he's going to put in. You guys keep it fair. You guys have lived 100 miles apart, that means you haven't really lived together day by day and you've only been together five years. So, who knows when you actually move in together? You're living together every single day. Is it going to work or is it not just put in 20% period. Keep things equal. That's what I would tell you to do. All right, KT, What's next? Okay, Suze. This is from how I do it. I'm getting through it. Getting through it. Everybody just bear with the sound. But she's clearing up. Okay. This is from Richard. Hi, Suze. I've been working part time for myself since August 2021. Is there something I can do with my 403 B to roll them over to a Roth without penalty? Thanks for all you do to help us get money wise. Love KT on the podcast too. What's the name of this verse? This is from Richard Rich. There's never a penalty to roll over a 403B into an I. R. A. or a Roth I. R. A. All right. However, there are tax consequences if you roll over a 403 B, which is money you've never paid taxes on because you didn't say it was a Roth 403 B. If you roll that over to an I.R.A. rollover. No penalties, no taxes because you're not taking anything out. If you roll it over to a Roth I.R.A. No penalties. But you will owe taxes. Ordinary income taxes, on the amount that you roll over. Next KT. Okay I have another Roth question everybody, these are so popular. This is from Rosslyn. Hi KT and Suze. I have a question about pulling money from my Roth I.R.A. I have about 100 and $40$140,000 in my Roth I.R.A. and need about 25K. Which is less than I have contributed for a down payment on an investment property. So, what that means, KT, when she says, it's less than what she contributed. If she obviously contributed, let's say $50,000 or $70,000 over these years for her to have 100 and $40$140,000 in there. So she's obviously contributed 50 or $70,000 or some amount of money into her Roth I.R.A.. And that she only wants 25,000 of her original contributions out. Okay, next then it says, when I called Fidelity, they said, I can't just pull out the money that I put into it. If I pulled the money out, it would include earnings, which would be taxed plus penalized. I hear you say all the time. That one can pull out what they put in without tax or penalty. S,o I'm confused. Is it really possible to pull money out of a Roth I.R.A. without needing to pay a penalty and tax on a portion of it. KT. This makes me so sad. I can't even tell you, Ok, why is that? Because Fidelity is such an incredible firm. I tell all of you all the time that Fidelity, Schwab, all of them are great. But that doesn't mean every financial advisor that works for them, is going to be great. Which is why you have to make sure you know more about your money then probably your advisor does in this situation. This advisor is 100,000% wrong, wrong, wrong. I mean, you could go to fidelity.com and see it right for yourself, Rosalyn where it says exactly what I've been saying forever. Which is you can withdraw any amount of money that you contribute into your Roth I.R.A. without taxes or penalties, regardless of how long that money has been in there. How old you are. All of that. So, your advisor doesn't have a clue what they're talking about. And there are actual rules when you withdraw money from a Roth I.R.A., what comes first? You know, contributions come first, then conversions come first than earning and on and on. The mere fact that your advisor told you this tells me one thing and it should tell you one thing. You best get yourself a different advisor at Fidelity. Just that simple. Oh, go on, KT. Here you go. Roslyn. Alright, next was next question Suze is from Anthony. Hi KT and Suze, what's your opinion on ISO stock options for private companies? I have a number of options and some have increased significantly. About $22,000 in total gain. The price when I was granted my first shares was $1.27, and that was 2013. My next grant was $1.43 in 2015. And following that in 2017, $2.98. The price is now $4.13 per share. They expire after 10 years, which I think means I can cash them out if I'm still employed. Now Suze, the company's stable. It's been around for decades. What general rules of thumb or things should I consider? Thanks, from Anthony. So, KT do you know about stock options? Yeah, we have them to have them. We have them to. We have a lot actually. There are different types of stock options, Anthony and a stock option. Everybody is something that a company that you're working for grants to you in the hopes that it will keep you as an employee because they know if you're an employee and they keep giving you stock options and you have more invested in that company, chances are you will just stay. So, in Anthony's email he said that he's been granted I. S. O.’s. Which stands for incentive stock options. The other type of option that you might be granted is called a non-qualified stock option. I'm not going to answer about those right now. So, my answer is only about Anthony your stock options or incentive stock options I. S. O.’s. Those are the absolute best kind of stock options that you want to be granted. The reason is this, you can exercise that option anytime you want and because you've exercised it, if it's an incentive stock option, you do not pay taxes on exercise, you pay taxes when you sell the actual stock, so if you exercise your right to buy and now you own this stock if you simply keep it for at least one year or longer when you sell you pay capital gains tax on it. So if you really believe that this is a solid company and a stable company and probably the price is going to go up, then you would absolutely exercise these options. So you can at least start your capital gains tax holding. You just have to make sure that you have the money to be able to exercise them. If you're exercise grant is at a dollar, and you have 9,000 options you would have to come up with $9,000 to exercise. Do you understand? So if I had incentive stock options in a stable company, I didn't know if I was going to stay with them or not because a lot of companies when you leave, they have what's called a claw back provisions, which means they can take the options away from you, I would exercise them now at least wait a year before I sold them so that I would only have to pay capital gains tax. What's that look for now is He he talked about 10 years. After 10 years they go away. So he's got to exercise sometime within that 10 years, KT. Otherwise they disappear just so you all know a non qualified stock option when you exercise, it you immediately owe taxes on the difference between the price of the stock and the exercise price. So they are very different, whatever. Okay, next question, Suze is from Janet. Hi, Suze. I was just listening to one of your more recent podcast. You were talking about buying Bitcoin through a Roth I. R. A. I thought that really made a lot of sense. So I called my broker. He said that Finra rules and regulations do not allow me to buy unregulated stuff and that I was a regulated account. So, what does she mean by unregulated stuff? Finish and then I'll tell you. So then she's saying is there something he doesn't know that you could share with me, Suze. There's probably a lot he doesn't know. Oh, sorry right. Ever. But I only say that because his answer to you should have been really Janet is you can't we can't do it at our brokerage firm, but you can do it. But the answer to you because KT just showed me your email is very definitive. Like you just can't do it can't do it anywhere. So, which is not true. There are companies that are springing up. Bitcoin, I R A.com is one of them where you can actually buy the physical Cryptocurrency within an I.R.A. or Roth I.R.A., I don't particularly like them because I think their fees are just way too high eventually and I'm sure that there will be other firms that you'll be able to buy cryptocurrencies in for retirement account as well. So, it's true for his firm like KT and I, in the firm that we deal with could not buy Bitcoin either. And that's just how it is. But there are firms that are being set up that you actually can buy crypto currencies in. All right, KT, okay, Suze, I have two more questions for you. This is from Danielle, Dear KT and Suze, I'm just starting to learn about finances and retirement. You sound like you're getting my cold. I'm not and I've been devouring your podcast daily. I'm learning a great deal from you and I want to thank you for sharing all this important knowledge with us. But here's my question, I don't remember in which episode you said backdoor Roth is not as valuable as a contributory Roth. Could you please explain why, oh, Danielle, let me see if I can do this quickly, why my voice is still with me a contributory Roth. The reason that it's so great and that's kind of what I alluded to in one of my earlier answers to a question about somebody wanting to take money out of their Roth I.R.A. for a down payment on a home. Is this. Again, any money you put into a contributory Roth, which means every year you contribute either six or $7,000 depending on your age. That is money that you can take out any time at any age, regardless of how long the account has been open without any taxes or penalties. It's the earnings on that account that cannot be touched for at least 5 years and Until you are at least 59.5 years of age, otherwise you will pay penalties and taxes. In a back-door Roth. When you put money in, you can't touch that money for at least five years. So that isn't money that you can get at any time because it's really a conversion. You're converting from either a nondeductible I.R.A. or even a traditional I.R.A. and going into a Roth I. R. A. But it's technically a converted Roth and as a converted Roth, they do not have the same rules as a contributory Roth. So again, in a converted Roth, which is essentially what you'll have, if you do a back door, you can't touch that money that you originally converted for at least 5 years, that's a big deal. So that's why a contributory Roth is better. All right, KT last one for you. Here's another Roth alarming Roth question says, I'm a little alarmed by what I heard on last Thursday's podcast about Roth I.R.A. max contributions. My husband, 45 years old, started working again part time in November this year and will not earn $6,000 before the year ends In 2018. We decided he should stay home with the kids since I made more money and we started a spousal Roth I.R.A. contribution that year and have been contributing to the max ever since. How does the rule of maximum Roth I.R.A. contribution change in our situation? His 2021 contribution will be maxed out this month at 6,000 From what I understand on Thursdays podcast, he can only contribute up to the amount of money he will make this year. If that is less than 6K. Do we then need to withdraw the amount over my God, I got I got I got All right, so, KT, here's what you need to understand is that the rules that apply to contributions into a regular Roth or I. R. A. are very different then nonworking spousal I.R.A.s those I.R.A.'s whether it's a Roth or traditional are set up so that one spouse can stay at home and not make any money and the other spouse who is working, as long as that spouse makes at least $12,000 or $14,000 a year to fund both. Yours and your spouse is no problem. So your spouse is just fine. Don't worry about it. Again, the nonworking spousal I.R.A.s whether it's Roth or traditional have nothing to do with contributions to a traditional or a Roth I. R. A. So as long as you have what it takes to contribute to your Roth I.R.A. you met those income qualifications and you made enough to cover his as well. You're good as gold girlfriend, KT, I'm ready now I'm ready. Suze. This quiz.E isn't something that maybe you've heard about in the past on this podcast. But it is something that over all the years on the Suze Ormond show I have spoken about. So, you might have to jar your little sweet memory to answer. But this is something that I think everybody should know. So pam writes in and says Suze, My credit Karma report. Trans Union is 643 but my Equifax, credit Karma report is 775. Big difference there. So I cannot figure out why the 100 point difference. Do you know why it would be different and what can I do about it? So here's the question everybody. Why do you think pam's reports from Credit Karma? Her trans union is at 643. Her Equifax is at 775. Why do you think there would be such a large discrepancy between those two. Why KT think about it all of you need to think about it. Okay. I think maybe because they started at different times Try one more time. You really have no idea. Do you know you know what Suze? I probably wasn't paying attention on that show. I don't. Alright. So to all of you know why that's possible. All right. Here's what you need to understand. All of you have three credit reporting bureaus. They are Trans Union Equifax and Experian. Some of your creditors report to maybe one some report to another. Some report maybe to another. But it's not always that your creditors report to all three of your credit bureaus. So, it is really important that you check all three scores all the time. And if there is a discrepancy then you need to look at your credit reports because it's in your credit report that will show does one credit report from Trans union pam show that you're laid on something. Has somebody stolen your identity as somebody opened up a credit card that only reports to Trans Union and they haven't been paying the bills? And that's why you have a 643 credit score with them versus Equifax. You have 775. So, the way that you do this Is get your credit reports now all of you once a year are entitled to a set of all three Equifax Trans union and experience your credit reports at annualcreditreport.com. So just sending an email to them and get your credit reports because remember your credit score is made up from the information on your credit reports. So, the answer to this and what's going wrong will be on your trans union credit report. And it's just that simple. You will if you go into the credit reports you will on your own be able to figure out why there is a discrepancy and then can she be she entitled to use the highest number? No, you usually if you have three numbers and no you cannot just decide which number you're going to use if you're applying for a mortgage. So is fight go better than karma. I'll always think the Fico score is better than it's more accurate. More accurate. No that's not why KT because 80% of the lenders out there today are set up only to take your fight, go score the credit karma score which is why they can give it to you for free is made up of something called advantage score. It's figured a whole different way than a Fico score is. They're close but they're not accurate. Right? So um you know, but they're they're free. So they give you an example that something's going wrong but you really want to apply for a loan. You better know what your actual Fico scores are because that's what your lenders are looking at. All right now a few things. I just want to say before we end very shortly here, we're going to be in January And in January many, many of you are going to be getting your $100 bonus from Alliant credit union. So, you should start looking for that at the end of the month and I'm so excited for all of you again. The interest rate will continue to be for now. .55%. And the good news is alliance is going to continue with this offer because so many of you love it. Now remember as well that we had an Alliant credit union sweepstakes and some of you got credit when you would refer somebody or whatever for an entry into that sweepstakes, you never know when we might do that again. So I think it's really important that you tell as many people as you possibly can about the offer at Alliant credit union because really with the $100 bonus, it is the best thing going anywhere and you might say anything, KT, it's almost see your and, he doesn't know what to say. Okay, you don't have to say anything. The only other thing you have that I want to say if you want to ask a question, all you have to do is send in a question to ask Suze podcast at Gmail dot com. It comes to us. KT looks over them, chooses them and have chosen. It will be answered on the air. So very shortly it will be the holidays where a lot of gifts are given. Love is probably the best gift you can give of all. And when I say that, KT, I want to thank you for all the love you've given me this past year and a half. That has been quite the year for me. You're getting better Suze. We give each other love. All right, sweetheart. Anyway, until Sunday. Hopefully my voice will be there to carry an entire podcast by myself. We all want you to be safe and strong and most of all secure. See you Sunday. Bye.
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