Ask Suze & KT Anything: Should Interns Enroll in a 401(k)? - Podcast Episode


401k, Career, Investing, Retirement, Stock Market, Stocks


June 22, 2023

Listen to Podcast Episode:

On this Ask Suze and KT Anything episode, Suze answers your questions IRA conversions, pensions, discounted stocks, where to retire and more.


Podcast Transcript:

00:00:01

MUSIC: Music (in).

00:00:33

Suze: June 22nd, 2023.

00:00:39

KT: Good, good morning, Suze.

00:00:41

Suze: Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. This is the Ask KT and Suze edition. This is where you write in a question and you do so by sending in your questions to ask

00:00:58

Suze: Suze - Suze podcast at gmail dot com. That really is the best way to do it. So send in your questions there and if Miss Travis chooses it, then guess what? We answer it right here. Alight, KT, I just have to begin with something I am never ever, ever

00:01:21

Suze: gotten so many responses about:

00:01:26

Suze: I can control my popcorn.

00:01:29

KT: Oh, that's a week ago. She hasn't had any, by the way, everyone.

00:01:34

Suze: But people are writing me saying Suze Orman, you should be able to control yourself. There's nothing unhealthy about popcorn. It doesn't have that many calories. Just let me make a statement here.

00:01:48

Suze: I'm an all or nothing kind of gal. I'm either all in or I'm really all out. Right. KT. Right. So the point is I wasn't just eating a cup of popcorn. I just wasn't eating two or three cups of popcorn.

00:02:03

KT: She'd have a massive bowl in front of her on her lap and then not share it. Ok, let's get to the, let's get to the gist of this. So

00:02:14

KT: my first question happens to be from Allison who has a comment about popcorn. She said, hi, ladies, love you both. KT, if you make the popcorn with coconut oil, it's really good. I do mine in the skillet and my kids love it. Alison. I'm not gonna try that because we are on a popcorn ban in this household.

00:02:37

Suze: But is that how you used to make it?

00:02:39

KT: Yeah, that's how I make it. But I, I would do it with avocado oil, coconut, coconut. But this Allison's question is really complicated. So I need you, Suze ready.

00:02:55

KT: The question is on 529 to Roth conversion. I'm wondering if it's 35,000 for each 529  plan I have three. So would that be 35,000 times three that I can convert eventually or a flat 35,000 total?

00:03:17

KT: And then it said I'd like to use the 529 contributions as a state tax write off for me the money I contribute is not used for the kids' college.

00:03:29

KT: So there you go.

00:03:30

Suze: So you, you chose this...

00:03:32

KT: Based on popcorn, but I have no idea what these conversions are. The 529 the 35,000. I don't have a clue. So you have to straighten this up for me and for Alison.

00:03:44

Suze: KT,

00:03:45

Suze: the best way for me to straighten this up really is not in an Ask KT and Suze Anything podcast. It needs to be its own Suze school. So this coming Sunday, I will do Alison a Suze school just for you and everybody else who needs to know the answer to this question. And that's a lot of you...

00:04:12

Suze: KT, will you stop picking out such complicated ones?

00:04:15

KT: Well, I didn't understand what she was talking about so I figure most people don't. Well, if I didn't get it, no one's gonna get it. Suze, you're so smart. You know the answer to everything.

00:04:25

Suze: I do not, I sometimes get things

00:04:28

Suze: absolutely wrong.

00:04:29

KT: Except for directions.

00:04:30

Suze: Here we go again, everybody now we're going from popcorn to Suze, not having a good sense of direction, which I don't.

00:04:38

KT: She is not good with direction. She told me because she lived in California for so long

00:04:44

KT: that she's backwards on the east coast and...

00:04:47

Suze: Will you just continue going on?

00:04:49

KT: Alright. So we have another question here. This is from Georgie. Hello, Suze and KT, thank you for all that you do to educate people and allow them to become financially empowered. I am 24. I'm in the third week of a three month summer internship. My internship

00:05:08

KT: offers a 401k with a 4% match. Fabulous. My question is, should I enroll or not? I'm only in this internship for three months and since the company is on a hiring freeze, I'm not sure if I will be hired on a full-time basis at the end of the summer. Thanks in advance for your help. Definitely sign up.

00:05:32

Suze: Yeah, this is why you should do it even if you're going to get laid off. So you put money into 401k, they're gonna match your contribution. That's free money. I don't care. In fact, if you're putting a lot in or a little, but it's still free money for you. They lay you off. You simply do an IRA rollover with it, including their 4% match

00:05:55

Suze: and that's money then that you can have for your retirement. KT Go, girl, go.

00:06:00

KT: Ok. Next is from Patty.

00:06:03

Suze: What direction am I facing right now?

00:06:05

KT: South.

00:06:06

Suze: I am not facing south.

00:06:08

KT: You're looking at me and you're facing absolutely facing south, Suze.

00:06:13

Suze: I was going to say west. All right. Go on.

00:06:14

KT: No. West is that way.

00:06:16

Suze: That's what direction I'm facing.

00:06:18

KT: No, you're looking at me and I'm sitting in the south seat

00:06:22

KT: now, the reason KT knows her direction impeccably is because my years in Hong Kong and watching everyone play mahjong and if you ever want to know about that. Look up mahjong and look up the four seats. They're based on north east, west south.

00:06:39

Suze: Can you just ask me a question?

00:06:43

KT: So, I've read all your books, Suze. I listened to you guys faithfully. You have helped so many of us. Thank you from the bottom of my heart. Love you two together. Great team. I am a 60 year old divorced woman living with her 30 year old special needs child. I plan on working till I'm 70. And do not plan on taking RMDs until required. I have two years of emergency savings and still adding.

00:07:12

KT: I have all the must have documents and my house is paid off and in my trust, I have no debt whatsoever. So the question is Suze, how much should I convert into the Roth IRA each year? Is there a limit? And can I still invest the 7500 each year if converting?

00:07:35

Suze: So the real question here is, can you convert into a Roth IRA each year

00:07:42

Suze: as well as invest the seven you know, the $7500 each year while you're converting? And the answer is you absolutely can. One has nothing to do with the other. Just make sure that you know that the money that you convert into the Roth IRA each year that you will owe income tax on it. And there is no limit as to how much you can convert. So if I were you, I would sit down with a CPA,

00:08:12

Suze: a tax person and figure out tax wise because you're still obviously working that. How much can you convert, given your income and everything without putting you into a higher income tax bracket? All right. Yeah, KT.

00:08:28

KT: Ok, from Jean. Dear, Suze and KT, I'm 62 years old. My husband and I recently built a house on my grandparents original homestead.

00:08:39

KT: We ran out of money and took out a home equity loan from our credit union for 75,000 to finish it up. The interest rate on the loan jumped from 4.5 to 7.5%. Crazy. Right.

00:08:53

Suze: Probably gonna go higher.

00:08:54

KT: So my husband's 66 he has a pension that he can start drawing on in the next couple of months. He's got about 150,000 in the optional retirement account.

00:09:06

KT: Would it make sense to use his optional retirement funds and apply it to the loan in order to avoid paying excessive interest?

00:09:16

Suze: No, next question.

00:09:17

Suze: What do you mean? Why? Right. So, but the interest rate jumped, I don't care. He takes out $150,000.

00:09:25

Suze: Right. He's gonna owe taxes on all 150,000 in order to pay off a $75,000 loan. So he has money right, in an account that he's never paid taxes on. That is why I tell all of you to do a Roth retirement account because if that were the case here, I would say absolutely take out $75,000 from your Roth retirement account and pay that off because that's like guaranteeing you a 7.5% return on your money

00:09:54

Suze: because that's the interest rate that they are paying. But that is not what they have. So, even though he can do it since he's retired, it will be totally taxable. So, no, just leave that $150,000 there and whatever money you have that you can put towards that, he absolutely do it.

00:10:16

KT: All right, this is from Penelope.

00:10:19

KT: Hi, Suze and KT. I'm 36 and recently bought your new book, the ultimate retirement guide. Let me say loud and proud that people under 50 should absolutely read this book.

00:10:34

KT: I've been aware of my finances and investing for the past decade. So I consider myself somewhat knowledgeable, but all I was really focused on was saving and investing as much as possible for retirement. But no one, no one ever told me the specifics of what actually happens in those 50 plus years.

00:10:56

KT: So all Penelope is saying there's no question here. She feels comfortable confident because I feel like I understand what will actually happen and what steps I need to take once I retire. She said, Suze is such a gift.

00:11:12

Suze: KT, since she ended with Suze is such a gift is her email address on there?

00:11:19

Suze: Yes. Yes. All right. So I want you to send her a little gift from us, not a book, but I'll tell you. So, Penelope, KT will be emailing you. You will give her your address and we will be sending you a gift, alright.

00:11:38

KT: I can't wait to know what the gift is.

00:11:40

Suze: I have an idea. I know exactly what I want to give her.

00:11:44

KT: Ok, next question from Julie in Oklahoma. Thanks for all of your great advice. My spouse recently became eligible to participate in a discounted stock purchase program from his employer. He can choose a percentage of his salary to use to purchase stock in the company for a 5% discount.

00:12:07

KT: We are each saving 15% of our income towards retirement maxing out our Roth and our employer matches. We're building our emergency fund and currently have nine months saved. Should we take advantage of the discounted employer stock program?

00:12:26

Suze: What would you say to that?

00:12:28

KT: I don't know.

00:12:30

Suze: I love when you're just so honest.

00:12:32

KT: I don't know. I don't know because I don't know what the company's stock is if it's performing, if it's even though it's a discount..

00:12:40

Suze: But Julie's  husband would know because he works there. So everybody when you work for an employer

00:12:49

Suze: and that employer offers you a discount stock purchase program, which means you can buy shares of their stock for usually between five and 15% of a discount as to what it's trading at the day that you buy it. So that's like KT an automatic 15% increase or 5%. It's like me saying to you, KT,

00:13:16

Suze: we could go in and we can buy this item for five or 15% under what it's selling for right now. And it's an item that you like, you know, it's good, you know, it's gonna be worn for a long time. You would say. Of course,

00:13:31

Suze: the same is true, Julie, with your husband's stock purchase program. So, as long as he feels like the company is doing well, their earnings are doing well, they're not having layoffs. They feel like everything's solid. He can tell he knows people who work for a company know how their company is doing. Absolutely.

00:13:52

Suze: You should take advantage of that. Absolutely. All right, KT, next.

00:13:57

KT: Next question is about a lion credit union.

00:14:01

Suze: Uh oh...

00:14:01

KT: Do you know Suze if they extended the $100 a month offer?

00:14:07

Suze: Well, the truth is, the $100 a month offer for new people has never ever gone away. It's called the Ultimate Opportunity savings account.

00:14:18

Suze: And that is where you put in $100 a month every month for 12 consecutive months. And at the end of those 12 months, you get $100. Now, I have to tell you if that's all you put in at the end of those 12 months, you get your $100. Obviously, it's NCUA insured, you get a 3.1% interest rate while it's in there as well. So

00:14:44

Suze: you should know that that is still available. You just go to my alliant dot com and that is where you sign up. However, what you should know and I'll just give you a little, little inside info that they haven't even announced yet. We're going to have an offer kind of like that for your kids.

00:15:07

Suze: So we're going to make finances a family affair. If in fact, you've already done it though, Karen, you've already got your $100. No, you don't get another $100 just so, you know, but for people who have never done it. Fabulous. Fabulous program.

00:15:28

KT: All right, Suze. Next question is your favorite topic. Whole life and term insurance.

00:15:37

Suze: You wanna hear? What happens? Can I just tell you what happens? So, we answered last Thursday. I think it was a question from Lloyd. I think that was his name about how he bought this. He's now 80 years of age. It's the one that Colo talked to us about last week. You know, Columbia listens to every podcast and he came in and he said, I disagree with your answer.

00:16:02

Suze: And I'm like, what are you talking about? He said I wouldn't have told the 80 year old that I would tell him of course, cancel it. But then go to Las Vegas have, have fun, forget about investing this money. Look how much money you already have. You don't need to save anymore. And I'm like he disagreed. He disagreed with me and I'm like...

00:16:20

KT: He said, Suze, he's 80 years old. Tell him to go, have a good time. Go to Vegas, baby. Anyway. Hi, KT...

00:16:28

Suze: Wait, wait. But ever since that email was answered,

00:16:32

Suze: I've gotten hundreds of questions like that. So, you chose them, see everybody. I read them all. KT gets to choose the one she wants.

00:16:42

KT: So, I like this one. The question is this Suze from Audrey. I have a 20 year term life insurance that runs through 2033

00:16:52

KT: when I turned 67.

00:16:54

Suze: So that means she's 57 right now.

00:16:56

KT: It's for $150,000. I pay $33 a month, which I think is reasonable...

00:17:04

Suze: More than reasonable.

00:17:05

KT: But before I started listening to you and learning about your dislike for whole life policies, I took the bait

00:17:14

KT: and converted some of my term policy to whole life. The draw for me was that I got a locked in rate and no medical exam and it would carry me past the age of 67.

 

00:17:26

Suze: Now, before you go on anymore, how much you wanna bet me? Right. If she's paying $33 a month

00:17:36

Suze: right now, is that correct, KT for $150,000 of term insurance that her conversion is gonna be at least five times that amount for a whole life. So it's gonna be 100 and 50 or 100 and 70...

00:17:53

KT: 152 a month.

00:17:55

Suze: And I will bet you any amount of money she doesn't get as much life insurance. So, do you understand what just happened here? Everybody. She's paying almost five times the amount of money for a $50,000 less in insurance. Sorry, KT go on.

00:18:13

KT: No. So that's the question is now that I'm negatively thinking about the $152 a month. Whole life policy worth 100,000. What can I do with it? I am in good health. See, she's sorry she did it. She's sorry she took the bait.

00:18:30

Suze: So cancel it. If you're in good health, cancel it. And this is what I would have you do with the money. It's very simple. This insurance company knows

00:18:41

Suze: that you probably since you are in good health, you are not going to die for at least 30 to 40 more years. Actuarily they have already figured out when you are going to die. Ok. So

00:18:58

Suze: let's just take conservative, let's say it's only 30 years from now, even though it's probably more if you took that $152 a month right now

00:19:10

Suze: and you put it in to the Roth IRA for your kids. Assuming that you want this money for the kids and the kids, let's just say are working and making money. Do you know in 30 years from now at just a 5% annual average rate of return? That is nothing.

00:19:29

Suze: Right. You'd have 124,000, almost $125,000 in those accounts. That's $25,000 more than this death benefit is going to give you, let's say you get 8% on the money, which is not impossible on any level over the next 30 years, you would have $178,000 in there.

00:19:57

Suze: So, do you understand?

00:20:00

Suze: Right. Why? this makes absolutely no sense. You could leave a whole lot more money. 24% more. 78% more, maybe even 100% more to your kids. If you stop thinking that insurance is the way to do it

00:20:18

Suze: because do you understand they're making the $178,000 over the next 30 years and you will only be getting 100,000. That's why they do it to make money. You could do it on your own. Right. KT go on.

00:20:36

KT: I wish people really just forgot about whole life insurance.

00:20:40

KT: Ok. Ready next questions from Vicky...

00:20:42

Suze: Well there is sometimes it makes sense but very seldom.

00:20:47

KT: Next questions from Vicky. Suze, would you say now is a good time to move out of the G fund? That's the government security investment fund, right Suze?

00:20:57

Suze: She's obviously either in the military or the federal government...

00:21:00

KT: Wait a minute... and to dollar cost average back into the C and S funds each month.

00:21:07

Suze: Absolutely. I would do that, Vicky. So just to explain to everybody, KT. The employer sponsored plan

00:21:15

Suze: for government employees. The military is called the TSP plan, which is the Thrift Savings Plan. Now, the Thrift Savings Plan for years only had approximately five different types of mutual funds that you could invest in. Then they decided to offer you hundreds, which I'm not a fan of on any level.

00:21:37

Suze: So really what Vicky is asking is that she currently has her money in the G Fund, which is KT said is the government securities investment fund, which means that the money is safe and sound. It's making a good interest rate. It's not attached to the stock market.

00:14:44

Suze: you should know that that is still available. You just go to my alliant dot com and that is where you sign up. However, what you should know and I'll just give you a little, little inside info that they haven't even announced yet. We're going to have an offer kind of like that for your kids.

00:15:07

Suze: So we're going to make finances a family affair. If in fact, you've already done it though, Karen, you've already got your $100. No, you don't get another $100 just so, you know, but for people who have never done it. Fabulous. Fabulous program.

00:15:28

KT: All right, Suze. Next question is your favorite topic. Whole life and term insurance.

00:15:37

Suze: You wanna hear? What happens? Can I just tell you what happens? So, we answered last Thursday. I think it was a question from Lloyd. I think that was his name about how he bought this. He's now 80 years of age. It's the one that Colo talked to us about last week. You know, Columbia listens to every podcast and he came in and he said, I disagree with your answer.

00:16:02

Suze: And I'm like, what are you talking about? He said I wouldn't have told the 80 year old that I would tell him of course, cancel it. But then go to Las Vegas have, have fun, forget about investing this money. Look how much money you already have. You don't need to save anymore. And I'm like he disagreed. He disagreed with me and I'm like...

00:16:20

KT: He said, Suze, he's 80 years old. Tell him to go, have a good time. Go to Vegas, baby. Anyway. Hi, KT...

00:16:28

Suze: Wait, wait. But ever since that email was answered,

00:16:32

Suze: I've gotten hundreds of questions like that. So, you chose them, see everybody. I read them all. KT gets to choose the one she wants.

00:16:42

KT: So, I like this one. The question is this Suze from Audrey. I have a 20 year term life insurance that runs through 2033

00:16:52

KT: when I turned 67.

00:16:54

Suze: So that means she's 57 right now.

00:16:56

KT: It's for $150,000. I pay $33 a month, which I think is reasonable...

00:17:04

Suze: More than reasonable.

00:17:05

KT: But before I started listening to you and learning about your dislike for whole life policies, I took the bait

00:17:14

KT: and converted some of my term policy to whole life. The draw for me was that I got a locked in rate and no medical exam and it would carry me past the age of 67.

 

00:17:26

Suze: Now, before you go on anymore, how much you wanna bet me? Right. If she's paying $33 a month

00:17:36

Suze: right now, is that correct, KT for $150,000 of term insurance that her conversion is gonna be at least five times that amount for a whole life. So it's gonna be 100 and 50 or 100 and 70...

00:17:53

KT: 152 a month.

00:17:55

Suze: And I will bet you any amount of money she doesn't get as much life insurance. So, do you understand what just happened here? Everybody. She's paying almost five times the amount of money for a $50,000 less in insurance. Sorry, KT go on.

00:18:13

KT: No. So that's the question is now that I'm negatively thinking about the $152 a month. Whole life policy worth 100,000. What can I do with it? I am in good health. See, she's sorry she did it. She's sorry she took the bait.

00:18:30

Suze: So cancel it. If you're in good health, cancel it. And this is what I would have you do with the money. It's very simple. This insurance company knows

00:18:41

Suze: that you probably since you are in good health, you are not going to die for at least 30 to 40 more years. Actuarily they have already figured out when you are going to die. Ok. So

00:18:58

Suze: let's just take conservative, let's say it's only 30 years from now, even though it's probably more if you took that $152 a month right now

00:19:10

Suze: and you put it in to the Roth IRA for your kids. Assuming that you want this money for the kids and the kids, let's just say are working and making money. Do you know in 30 years from now at just a 5% annual average rate of return? That is nothing.

00:19:29

Suze: Right. You'd have 124,000, almost $125,000 in those accounts. That's $25,000 more than this death benefit is going to give you, let's say you get 8% on the money, which is not impossible on any level over the next 30 years, you would have $178,000 in there.

 

00:19:57

Suze: So, do you understand?

00:20:00

Suze: Right. Why? this makes absolutely no sense. You could leave a whole lot more money. 24% more. 78% more, maybe even 100% more to your kids. If you stop thinking that insurance is the way to do it

00:20:18

Suze: because do you understand they're making the $178,000 over the next 30 years and you will only be getting 100,000. That's why they do it to make money. You could do it on your own. Right. KT go on.

00:20:36

KT: I wish people really just forgot about whole life insurance.

00:20:40

KT: Ok. Ready next questions from Vicky...

00:20:42

Suze: Well there is sometimes it makes sense but very seldom.

00:20:47

KT: Next questions from Vicky. Suze, would you say now is a good time to move out of the G fund? That's the government security investment fund, right Suze?

00:20:57

Suze: She's obviously either in the military or the federal government...

00:21:00

KT: Wait a minute... and to dollar cost average back into the C and S funds each month.

00:21:07

Suze: Absolutely. I would do that, Vicky. So just to explain to everybody, KT. The employer sponsored plan

00:21:15

Suze: for government employees. The military is called the TSP plan, which is the Thrift Savings Plan. Now, the Thrift Savings Plan for years only had approximately five different types of mutual funds that you could invest in. Then they decided to offer you hundreds, which I'm not a fan of on any level.

00:21:37

Suze: So really what Vicky is asking is that she currently has her money in the G Fund, which is KT said is the government securities investment fund, which means that the money is safe and sound. It's making a good interest rate. It's not attached to the stock market.


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