Ask Suze & KT Anything: How Can I Learn About Investing? - Podcast Episode


Estate Planning, Investing, Life Insurance


June 15, 2023

Listen to Podcast Episode:

On this Ask Suze and KT Anything episode, Suze answers your questions about whole life insurance, money from annuities, estate planning, popcorn, investing and more.


Podcast Transcript:

00:00:00

Music: Music (in).

00:00:33

Suze: This is gonna be an interesting one. Everybody. June 15, 2023. Welcome everybody to the Women and Money podcast.

00:00:42

KT: You know what today is?

00:00:43

Suze: Yes, it's June 15.

00:00:44

KT: But what's what's significant about the day my mommy's birthday, Mama T.

00:00:52

KT: my mom's birthday and all the years I lived in Hong Kong on June 15th was also the Dragon Boat Festival and I used to love that. It was the same day as my mom's birthday now. Happy birthday mama.

00:01:06

Suze: But, but should we finish telling everybody where we are, what we're doing?

00:01:10

KT: Yeah, we're, we're on the Women and Money podcast. You should all know it by now. This is like episode 6000, right?

00:01:17

Suze: But it's 400 something. Anyway,

00:01:20

Suze: welcome everybody to the Ask KT and Suze edition, right? We're a little talkative this morning. What do you want to tell everybody? Come on.

00:01:29

KT: Ok. So I have to share a story with you. But first of all. If you have a question for me about Suze, this is your big chance

00:01:37

KT: because I think I should open it up and answer anything you want to know about Suze Orman because there's things about Suze that no one knows except me and I'm just gonna share a little sample with you right now. Alright. Ready

00:01:52

KT: On June 10th. Today's the 15th and it's still on my mind I don't know what to do with this. I think if I sold it on ebay, I could get a lot of money. On June 10th. Suze decided to record something very, very personal significant and extremely important to her. And she said to me it was in the morning and she said, KT this is really, really necessary and I said, she said I have something to tell you

00:02:22

KT: and I want you to absolutely follow these instructions. And I said, wait a minute, we have to immortalize this, Suze. Let me get my word just recently anyway. So I, I took my phone out, put it on video and I have a recording of this. Everyone. I'm not sure what to do with it, but Suze forbid me absolutely forbid me to make her or serve her any more popcorn,

00:02:50

KT: Popcorn is what she eats when she watches her NBA finals. And she said to me that she gained 10lbs. and I said there's only been like, how many games of these finals? Anyway, she was absolutely strict adamant and very serious. And we recorded this. For those of you interested in sharing it on the wall, which is where,

00:03:16

KT: where everyone goes to see important information.

00:03:19

Suze: Ok KT, we are not.

00:03:21

KT: All right. All right. Let's start this. So no more popcorn for Suze Orman. Her favorite snack by the way. But we make it, we don't buy popcorn because it has too much salt. So I make it the old fashioned way.

00:03:36

KT: Healthy popcorn, the old fashioned one.

00:03:39

Suze: Even though I know we are so off topic here right now. But the truth is she doesn't, but she doesn't understand how I even like popcorn because I won't put butter, real butter on it and I won't put salt on it.

00:03:54

KT: She has olive oil butter, which is healthy until she says there's not enough butter on it KT. All right, let's go. First.

00:04:02

KT: First reading is from Lloyd and it's really, really a long one, but I think one of this will be one of Suze's favorite questions. I know just like I know about popcorn. Ok. Ready? Hi, KT and Suze. Stop laughing. Hi, KT and Suze. Thanks for all the helpful guidance that you provide so many. I have a question regarding what to do with a life insurance policy.

00:04:31

KT: Ready? (Laughter

00:04:35

KT: You all know about Suze with her life in 1999 Lloyd purchased a universal variable life insurance policy with a death benefit way with a death benefit of $350,000 and an annual premium of 4600. At the time the policy was purchased, he was 56 years old and he owned a small business. Then he said

00:05:03

KT: my wife and I both retired a few years ago and we have investments of approximately 2.1 million plus our home. We have no debt and we receive about 45,000 each year from my wife's pension.

00:05:18

Suze: Good for you...

00:05:19

KT: and social security. My wife and I are now 80. We are in decent health for our age. Our financial advisor who did not sell us this policy

00:05:30

KT: has informed us that the cost of insurance is starting to eat into the policy's cash value.

00:05:38

KT: The policy's cash value will be fully depleted in two years. At that time, we would have to pay an estimated 15,000 each year to maintain the policy. If we cash out the policy now, we'll receive a check ready, Suze? $31,000 or

00:06:01

KT: we can contribute an additional 100,000 into the policy now. Oh my God. Which should generate enough investment yield to carry the policy another 15 years

00:06:14

KT: and allow the 350,000 death benefit to still be paid. Ok. Ready, ready for this everybody? From 1999 they had an annual premium of 4600 right ready and now they want them to pay either another 15,000 year or 100,000 which should generate and carry them for 15 years. They're 80 years old. They're both in great health. So

00:06:44

KT: this is crazy, Suze. I, I can't understand. I mean, is this what they're all like these people all like this? But listen, everybody, can you imagine buying this in 1999? And, and you're just told now the cash value is depleted or will be?

00:06:59

Suze: And so does he have a question?

00:07:01

KT: So he said, I realized that life insurance should not be treated as an investment, but we paid 110,000 in premiums on this policy. I have a hard time getting a check back for only 31,000 if we cash it out now.

00:07:21

KT: That's crazy. Everybody now

00:07:24

Suze: I love that you chose this KT right? Because everybody have I not been sane forever and a day. Do not. And I repeat, do not buy a universal, a whole life or a variable life insurance policy. Do not do it, do not do it, do not do it. In the majority of cases.

00:07:51

Suze: The only type of life insurance that I like is term insurance, which is good for a specific period of time. But to this day

00:08:02

Suze: after I have been saying this for so many years, we've been reading emails like this for so many years. So many of you still write in and say, I think I need to buy a whole life insurance policy. I need to buy a variable life insurance policy or a universal life insurance policy and this is what happens. So Lloyd, you need to listen to me, ok?

00:08:32

Suze: I know it's gonna kill you that you put in $110,000 over the past 24 years.

00:08:43

Suze: But you should be happy that you're getting back at least $35,000. Let me just tell you something, ok?

00:08:55

Suze: if you had taken that $4600 a year

00:08:59

Suze: and invested it in the stock market in like an index fund and over the past 24 years,

00:09:08

Suze: the index fund now has averaged about a 6.95% annual average rate of return. Ok.

00:09:18

Suze: So that's what you would have made on your money. Do you know today you would have $284,000 not the $35,000 that the universal life policy is going to give you back

00:09:35

KT: 31

00:09:37

Suze: I thought you said 35... oh 31. Oh God. All right. It is worse. S

00:09:46

Suze: the question becomes at 30 if you're only gonna get $31,000 back

00:09:54

Suze: that's like a $255,000 difference from what you could have had. Where did that money go Lloyd? You have to ask yourself, where did it go? It went for commissions to the agent that sold it to you. It went to the company

00:10:17

Suze: and they've made far more than that. All of you need to understand. Nobody's going to pay you $350,000 as a death benefit,

00:10:27

Suze: if they haven't made at least 300 - $400,000 above that. And maybe more. Right. With term insurance, the insurance company doesn't expect to pay you because very few people die with a term insurance policy. It's just good for the term that you don't have any money in case something were to happen to you. Right? So you need to listen to me.

00:10:55

Suze: I really, really want you to call it quits here. Stop doing something that never made sense. It's never going to make sense. So stop it. So if you just simply take that $31,000

00:11:12

Suze: and you take it and let's just say you do put it in the stock market right now, which isn't a bad thing to do if you really want to know the truth and you added the $4600 more a year that you were paying. Forget the 15,000 they want, but you add the $4600 more in 10 years, you would have close to $130,000.

00:11:38

Suze: So you could start to recoup this money, believe it or not. Why are you looking at me like that KT?

00:11:45

KT: Because I'm just thinking that Lloyd put in already. They're 80 years old. He put in 1999. He buys this, they're 80 years old. Now they put in

00:11:54

KT: 110,000. Now he's saying we can keep this going at 15,000 year. Let's say he wants to keep it going till they're 90 just in case. So that's another 110 plus 150 and 260,000 on a 350. It's not only that, it makes no sense.

00:12:17

KT: It's, it's just really, it's wrong, wrong, wrong

00:12:22

Suze: So let's right this wrong by you saying I'm stopping this. I'm not gonna do anything else. I'm not gonna pass it down to my kids and let them do this. You bite the bullet right now.

00:12:35

Suze: As long as you know that you're in decent health, which you say you are in this email, cash it out, take that $35,000 invest it. If you want to add more money to it every year you can and really, in 10 or 15 years, you'll really have a whole lot more money. Seriously, don't you dare put one more penny in this losing proposition.

00:13:03

Suze: Oh, and everybody listening to this right now, can you learn from Lloyd's seriously costly mistake? Go on KT.

00:13:13

KT: Alright, next one is from Deborah. Hello, Suze. I decided to retire early 10 years ago because I felt burnt out.

00:13:21

KT: I was making $80,000 and I had a pension worth 600,000 which I bought an annuity with. It's been 10 years and I've spent 300,000. I've currently gone back to work making 85,000.

00:13:38

KT: So, Suze, besides calling me stupid, what should I do with the cash value of 300,000 left in my annuity? Should I take it out of my annuity or move it into a traditional market account with a firm like fidelity.

00:13:54

Suze: Here's the problem, Deborah,

00:13:57

Suze: it's not what you did with the money.

00:14:01

Suze: It's that you retired

00:14:04

Suze: too soon. You retired, not knowing that you were going to have to start taking money out to the tune of $30,000 a year from this annuity just for you to be able to live. So now you've had to go back to work making $85,000 a year.

00:14:27

Suze: You know, KT didn't quite read all of this email because it's a little bit long, but she handed it to me and it says that you're 64 years old, you're healthy and you plan to retire in six years at 70.

00:14:44

Suze: Here's the problem. You have to know that you're gonna retire not because of your age anymore. You're gonna retire because you have made and saved enough money to be able to afford to retire. So it's not, should you take out this $300,000 that's left in your annuity because I don't know what your annuity is invested in.

00:15:12

Suze: Do you have a guaranteed interest rate on that annuity? That's a high interest rate and maybe you would be better off just leaving it there because it's safe and sound.

00:15:23

Suze: So I don't quite have enough information here, but I'm not as concerned with what are you gonna do with the $300,000 annuity? Because even if you did really great with it over the next 10 years, it's not gonna be worth $600,000 girlfriend. It's not gonna double necessarily in 10 years. And so the 600,000 wasn't enough. Then,

00:15:51

Suze: how much do you need to continue to live? So that's what you really need to figure out. More important than what you're gonna do with this money. I would be telling you it's how are you going to cut your expenses dramatically so that you don't need as much money from your money as you have over the past 10 years.

00:16:19

Suze: Because this is where we have the problem. So more than getting the most and depending totally on your cash. I want you to depend on yourself. Continue to work until you really can afford to retire and decrease your expenses as much as possible. Next KT.

00:16:41

KT: Ok, Suzie, next question is from Rita.

00:16:44

KT: I recently just paid my house off and I want to leave it to my only child. I'm also single, Suze. I've heard different things concerning my home. Transfer on death, a will, a living trust. I don't have much. But what I have, I want to leave to my only son. Any advice you can give will be greatly appreciated. Rita.

00:17:08

Suze: So Rita, as you know, hopefully, as well as everybody probably does

00:17:14

Suze: the best way to own, especially a piece of real estate is in a living revocable trust so that it protects you while you're alive, you can use that money any way that you want for your own benefit and when you do die, then it will go to your son without probate in the best way possible. All right, KT.

00:17:39

KT: Ok, Suze, next questions from Kathy

00:17:42

KT: Hi, Suze and KT, I am divorced. I was married 16 years. My ex-husband is retired and collecting social security benefits. when I retire at my full retirement age of 67,

00:17:57

KT: and because I never remarried, will I get my full retirement amount and 50% of his or will I get whoever is higher?

00:18:08

Suze: Now, you have to be very careful here and really understand this. All right,

00:18:15

Suze: you are going to retire at your full retirement age of 67

00:18:22

Suze: Whatever is higher, whether his is higher or yours is higher, you will get the higher of the two immediately. It does not matter if he has even started to collect his social security or not. It will be based on his full social security that he's due at the age of 67

00:18:49

Suze: or whatever his full retirement age happens to be. So, whatever his primary insurance amount will be at his full retirement age, you will be entitled to either 50% of that or 100% of yours, whichever one is higher. You do not get both. All right.

00:19:10

KT: So this is from Karen.

00:19:13

KT: Hi, Miss Orman. Can you please share with me the best materials, ready? Books, et cetera to learn how to invest my money? I normally would not approach a person of your status.

00:19:28

Suze: Why is that?

00:19:28

KT: She doesn't know about popcorn?

00:19:30

Suze: I was just gonna say, I don't think my status is very high.

00:19:33

KT: We're  getting older is making me brave. I love this one.

00:19:37

KT: I would appreciate any information that you can share. I'm 59 years young and making investments through work, but I would like to learn more to make decisions on what is best. Thank you for your time, Miss Orman, Karen.

00:19:53

Suze: Can I tell you something KT?

00:19:55

KT: I want to send her a book.

00:19:56

Suze: Let me see. Let me see if her email address is on there.

00:20:00

KT: Send her the retirement 50 plus book...

00:20:06

Suze: Ok, so Karen, your email address  is on here. So we will send you a copy of the Ultimate Retirement Guide for 50 plus...

00:20:14

KT: Because you're brave Karen. That's why I want to send it to her.

00:20:18

Suze: You're brave. However, for those of you who would like to buy the ultimate retirement guide for 50 plus, you can just go to Suze Orman dot com slash ultimate and listen to me, it's only $10

00:20:35

Suze: for a New York Times best seller hardback edition and that includes shipping. So we have made it possible that all of you if you want that book can get it for far less than what you can get it at Amazon or at any bookstore. And then that includes shipping. But Karen, we will send it to you. Now, KT you take this email and it is on you.

00:20:59

KT: You'll get an  email from me, Karen because you're brave.

00:21:04

KT: All right, this next one...

00:21:06

Suze: Do you think she eats popcorn?

00:21:08

KT: No, she's just brave. All right...

00:21:11

Suze: You have to be brave to eat popcorn, especially when KT makes it because she doesn't pop all the kernels. So you have to be careful because if you chew it...

00:21:19

KT: No, you have to be real careful with popcorn anyway, you can break it tooth.

00:21:23

Suze: Should we just call this, this podcast? A pop, pop, pop pop,

00:21:31

KT: This is our KT and Suze "pop-cast" and we've got a pop quizzie. We have a pop up question. We're going to pop you everywhere. All right. Ready. Hello, Suze. I hope this finds you.

00:21:43

Suze: I don't think it's good to tell people you're gonna pop...

00:21:47

KT: Hello, Suze, I... stop it. This is... be good. Hello, Suze. I hope this finds you. Well, I'm writing to ask a question.

00:21:57

KT: I will just explain my background very quickly. I'm 50 years old. I have two kids. I have a fairly good job I need and want to make triple what I make though. Doesn't everybody?

00:22:10

KT: I have a retirement fund saved but will not be enough on its own. I have money in an educational savings account. So my kids will each have 50,000 to go to university, which is more than enough. I will inherit some money from my parents one day, but would rather have them here with me. I rent a home. So now I was ready to buy at the beginning of COVID and the prices skyrocketed.

00:22:37

KT: Now, the interest rate is so high. It's not possible at the moment. And then she goes on to say, I don't know what to do about real estate. I feel depressed about it. I've wasted so much money on rent. Well, Suze, what should she do?

00:22:53

Suze: I think you need to really think about the words that you are using. Fear, shame and anger.

00:23:04

Suze: The three internal obstacles to wealth. You feel depressed and you feel depressed because on some level you feel shame, right? You didn't buy when maybe you could have bought whatever it may be.

00:23:18

Suze: The other thing that I just have to say is that you have saved $50,000 for your kids to go to university and you have that plural, you have kids too, right? That's $100,000. It seems to me that maybe if you took that $100,000 and you combine that with something else, maybe you could buy a house right now,

00:23:47

Suze: but you need to start putting yourself first and you have to stop feeling depressed that you've wasted so much money on rent. It's what you did. It's what you needed to do. Stop it, stop it right here. And right now also, I just have to say KT  did not read this part

00:24:09

Suze: but the very end of this email you say, and this is probably the most important part of this email. How come you left it out, KT?

00:24:18

KT: Because I just got to the question, I was trying to shorten it. But you know what? You're right. Read that to everyone, listen up.

00:24:24

Suze: You say I am also with a man that I am not sure I can stay with.

00:24:31

Suze: He can be really terrible at times. So I feel insecure about whether I can handle things on my own too. It's a bit of a mess I know. Anyway, thanks for reading this. Have a great day. You listen to me closely. I don't care that you rent. I don't care about the price of real estate. I don't care about any of that. I care about

00:25:01

Suze: that you feel insecure about your situation that you can't handle things on your own. So therefore you stay with a man who can be really terrible at times. Sweetheart, you can't do that. You cannot think that you can't handle things on your own. You most certainly can

00:25:24

Suze: when people get to the point where they write in to the Women and Money podcast, they usually write in because they are ready for a change and they are afraid to make that change and they need a little push. You can never ever put money before yourself.

00:25:44

Suze: So therefore you should feel terrible. Not about the fact that you're renting and how much money you've wasted renting. You should feel terrible about being in a relationship with somebody that can be terrible to you. And what is that setting an example with your kids? What are they seeing? How did they feel about it?

00:26:07

Suze: So if that means again, you have to take some of that $50,000 that the kids were getting to go to university. No, you take that money and you leave and you set yourself up so that you feel safe and are protected. What KT?

00:26:23

KT: And maybe her parents can move in with her. That's what she wants or maybe she can move in.

00:26:31

KT: Yeah. But remember you're only 50. I met Susie when I was 50.  So there you're so young..

00:26:37

Suze: Please, I'm begging you. I am begging you. It's never too late. It's not too late.

00:26:43

KT: OK. Next question is a KT question. Hello, KT, please ask Suze to explain why the contribution limit for IRAs is so

00:26:54

KT: much lower than the employer sponsored plans for 401k and 457s.

00:27:01

Suze: That's your pop quizzie.

00:27:02

KT: I know that answer.

00:27:04

Suze: Wait, wait, that is your pop quizzie.

00:27:06

KT: OK, we're gonna pop, ready? Get it?

00:27:09

Suze: Wait one second, everybody. So the quizzie is a question that I want all of you to be able to answer.

00:27:18

Suze: And KT is your voice. She represents all of you out there truthfully. So how...

00:27:23

KT: I'm gonna, I'm gonna take a good calculated guess here, an employer sponsored plan is always a higher contribution because it's a, a match.

00:27:38

KT: They usually match.

00:27:39

Suze: So what?

00:27:41

KT: And then if they match and then you put in money, then it's gonna be more.

00:27:45

Suze: No, you can put like $22,500 or something like that into a 401k. If you're under 50. You can only put $6500 into an IRA. If you're under 50 why, what's the difference?

00:28:00

Suze: This person wants to know, why can they only put $6500 into an IRA but over $20,000 into a 401k, forget the match.

00:28:12

KT: I don't know. I don't know the answer to that.(Suze makes the wrong answer noise)

00:28:15

KT: No, I don't know the answer.

00:28:18

Suze: But if you don't know the answer, then I have to ding you.

00:28:20

KT: Ok. What is it? The answer?

00:28:26

Suze: So we can only guess at the answer. But the truth of the matter is Kimberly. Right. 401ks are far more regulated. They're under a law called ERISA, which is an employee retirement sponsored plan. All right. And it's a lot harder to get at your money in a 401k than it is an individual retirement account.

00:28:55

Suze: And because you can have both,

00:28:59

Suze: remember, you can have a 401k and an IRA preferably a Roth IRA, preferably a Roth 401k as well.

00:29:09

Suze: The laws state that they then an employer can like, automatically enroll you up to at least 3% of your income into a 401k. So it can be automated, taken out of your paycheck. And that will allow you to almost force you to save more money. An IRA, you have to do on your own. So they made it

00:29:36

Suze: that you could put more into an employer sponsored plan because therefore you are more apt to save more because the employer is helping you do it and they are matching you, in most cases. In an IRA, you have to do it on your own. So even if you could do $22,000 in an IRA,

00:29:59

Suze: probably most of you won't because when you don't have anything automated, you kind of just don't do it. Alright, KT. I

00:30:07

KT: have another Ira uh, question here. Do we have time?

00:30:11

Suze: Is it a good one?

00:30:12

KT: Yeah, I think it's pretty good. It kind of follows this one. All right. So, hi, Suze and KT, this is from Sue. I have several questions about IA conversions and also RMDs required minimum minimum distributions.

00:30:27

KT: I'll turn 68 this month. This year, I converted 15,000 from my IRA into my Roth and I'm covering the taxes. I have 75,000 now left in that IRA. I know each conversion starts its own five-year clock. But at my age, what are the consequences of withdrawal if I had to? I can't seem to find the answer pertaining to my age.

00:30:55

KT: Am I also doing the right thing with this strategy?

00:30:59

Suze: That should have been your quizzie.

00:31:00

KT: I know this is a good question.

00:31:02

Suze: So it's a little bit confusing, but here's the good news for you. All right. So for everybody, what you have to understand is when you convert money from a traditional IRA into a Roth IRA your five-year clock,

00:31:22

Suze: which means you have to hold it for five years before a 10% penalty. If you make a withdrawal before that time, will apply an ordinary income tax on the growth of it. For you Sue, because you're over 59 a half.

00:31:42

Suze: It's moot. It doesn't matter. The 10% penalty does not apply to you. And because you've already paid taxes on it. When you convert,

00:31:54

Suze: the amount of money that you converted, you're not gonna owe taxes on that. It's the earnings that you will owe taxes on for five years. So it's not a big deal, but the original amount that you converted, you don't owe taxes on it and you don't owe a penalty.

00:32:15

Suze: It will be the only the earnings that you will owe ordinary income taxes on. If you take it out before five years. KT that's it. Can I have some popcorn, please?

00:32:31

KT: No, I'm gonna play that. I'm going to post that video everywhere. Instagram, Facebook, Twitter... The Wall, everywhere.

00:32:37

Suze: You don't know how to use those things...

00:32:42

Suze: Right? She won't go...

00:32:44

KT: It's such a serious one too. She was so serious. I was the kind of thing you do when you want to tell people, ok, when I pass, this is how I want you to take care of my estate and my

00:32:57

KT: services. But no, this was, don't give me any more popcorn. KT, do you hear me?

00:33:03

Suze: Alright KT, do you want to take us out?

00:33:06

KT: Yeah.

00:33:06

Suze: How do we do it?

00:33:08

KT: Today, wherever I go, I will create a more peaceful, joyful and loving world.

00:33:16

Suze: Can I have some popcorn?

00:33:18

KT: No

00:33:18

Suze: Please? Pretty please?

00:33:21

KT: No, no, no, no, no. And because Suze, if you don't eat popcorn,

00:33:27

KT: I guarantee you you will be unpoppable!

00:33:31

Suze: Bye bye everybody. (Laughter)

00:33:36

Music: Music (out).


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Suze Orman Blog and Podcast Episodes

Retirement


Podcast Episode - Ask KT & Suze Anything: Moved By Intuition

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