Podcast Episode - Ask Suze (and KT) Anything


Investing, Mortgage, Retirement, Taxes


June 17, 2021

Listen to Podcast Episode:

On this edition of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Maritza, Serena, Christine, Lauren, Lisa and more, all selected and read by KT. 


Podcast Transcript:

June 17th. Can you believe? It's June 17th 2021 baby. So here we are. We're at the Women and Money podcast. Where today is, Thursday? You get to ask Suze and KT anything. You get to ask Suze anything. And KT is going to do the asking for you. What have you all noticed that she has just taken the opening? She just, she just took everything away. Like what can I tell you? You know why? Why is my first question is called do over. Do Over. Wait a minute before we begin. And I just want to remind everybody, what do I want to remind you this afternoon we're on LinkedIn. Suze's on LinkedIn with their buddies from CNBC. She's really excited. So you can all listen and register for free at. She has taken the podcast away everybody. So truthfully at one p.m. East Coast time so you can adjust that for wherever you live. I'm going to be doing a live session for small business owners and to register it's free. It's at CNBC.com/suzeormanevent. So I'm kind of excited to be there, be there, I'll be there. Right, okay. All right, I'm going to tell you all secret. Suze stop drinking coffee about a week ago, which is why I'm doing the opening because it's early in the morning. It's Thursday and she just needs like a little fuel and I've had two cups. She is drinking any coffee. Took me a while to get over that headache that happens. But it's a good thing. We're doing a little friend. Everybody. I only drink maybe half a cup of coffee a day. We both were not big coffee drinker. But when I make a good pot, I like two cups. Yes. But but when I stopped it, oh my God, I had a headache for like a week. Okay. All right. So my first question to you, Suze is called Do Over. Ready? And I'm going to read this is from, it's from running green lights. That's all I have. That's her email address. I'm assuming it's a her. KT used to run yellow lights. Uh, not anymore. No way. So this is what it said details from an article I read an obscured tax law allows those who collect Social Security to halt current benefits, pay back everything collected interest free and restart benefits at a new, higher rate based on your current age. It's called Do Over. And it can dramatically increase your Social Security benefit. So the question from this, um this request is Suze, is that a real option or an urban myth? So it actually KT is true. You can do a do over. However, today you only have 12 months from the time you started to collect social security to actually do it over where you call them up and send them back all of their money and then wait to claim social Security at a later date where you then will get more money. I have a feeling however, that the question is really pertaining to the laws of years ago because it's not going to make a dramatic difference to you if you do that, so to speak. Years ago, you used to be able to collect Social Security, let's just say at 62. And you would get your check every single month and every single month you would put that check in a savings account and back then you were getting 5% on a savings account. So you were making 5% interest on your Social Security check. And you did that every single month until you were 65 or 67 or later on in life. And now you would accumulated all of this money that you were making 5% interest on. Then you decided you were going to pay back all of that money you were going to do a do over. And you were able to pay it back absolutely interest free. Why the government doesn't want you to pay interest on that money when you do a do over is beyond me. Actually. I write about that in my books, my books from way long ago. Want to get an interest free loan. Let me tell you how you can do it from your Social Security check. So then you would pay it back. You would have made 5% interest on their money all those years. And then you claim Social Security at a lot older age when your check would be dramatically more. Today, it doesn't make sense to do that because interest rates are so low to begin with. And again, today there's only a 12 month max that you can do so. So that's the answer to that question. All right, girlfriend. Next. Okay, next question is from Maritza. Happy belated birthday Maritza. She, when she says it, Maritza she has the biggest smile on her face. Okay, Maritza, Happy belated 70th Suze. I live in southern California. I'm 43. Our property has a lot of equity in it right now. And friends are suggesting we take out money from the house and invest in a second home or condo. Now, she said, I also want you to know I have two children, 14 and 16. My husband thinks if we buy the second property and rented, we can use the profit to help pay for our kids’ college. So the question is should we stick to our plan of paying off the house? They have a 15 year loan, 12 years left, so we don't have a house payment when we retire or should we take the money out and have a rental property as an investment? I know she's 43 I know what you're gonna say. So here's what's so sad everybody just because you all now have a lot of equity in your homes possibly because real estate prices have just skyrocketed. You think, oh, you can continue to make a lot of money in real estate. You have already forgotten what happened in 2007, 2008. You forgot that just a little bit ago. People who were renting from you couldn't pay the rent because why they didn't have a job, but yet you couldn't evict them. So why do you want to do that to your lives? Can you just tell me why do you want another payment or a larger payment on your primary residency? And you get a rental where you have another obligation, other costs. Things can go wrong. What if you have a tenant that doesn't pay, on and on? So what you want her to do? So what I want Maritza to do is stick to plan and don't do that and pay off the and pay off your mortgage. If you have the money and you didn't have to take a loan to buy another property, okay? But not if you have to take a loan to buy another property and put a loan on that. Are you kidding me? You are denied. Did you all like the can I afford it segment by the way on the Today show? I had the best time doing that denied. Anyway. Okay. All right. This is from, I love your name, Serena Weatherly, Serena Weatherly. Is that a nice name? Yeah. Okay, so do I have a nice name? You do Suze Orman. Yeah. So, Serena, Serena has a concern that's more emotional than anything. She's single. She's 44 years old and she's a third owner of a fabulous beach house on the Oregon coast. The other two third owners are her mom and her sister. So here's her concern. I'm just going to cut to the chase. Serena has two young adult Children and her sister has two minor Children. So these cousins are quite a few years apart. What her concern is around what will happen when our children are joint owners together someday. I fear potential conflict. What if one wants to sell the others don't? What if one wants to use the house while the others want rental income? So she's asking. She said the house holds wonderful memories for the family and she doesn't want it to become a curse. So, she obviously, they must have a little bit of cousin issues. She's asking, Suze, is there something we can put in place a legal document of some kind to mitigate potential issues? I think more. I don't think there is. Is there? Well, you could if you wanted to. But but more than a legal document, Serena, dictating what your kids or the cousins have to do with this property. I think you all need to sit down and have a talk with them. You know, one of the craziest things in life when it comes to leaving anything to children that are going to have to split it on some level. You never talk about it. You let them deal with it and then they end up fighting. So you got to sit them down with all of you and say, what do you think if you're going to get this, do you want to keep it? Do you have any ideas what you're going to do now? If they're too young, with that, you also have to then understand things happen. Maybe one of the children really will do really incredibly well and their lives, financially speaking, and maybe another one really won't. And they'll go through a divorce or something and they really need that money more than they need this home. So you also then possibly need to let them work it out. And possibly where there's a document that if one of them wants to sell the other three have to buy them out. They have to figure it out. But I would talk about it but I wouldn't make it so they couldn't do anything. Because what if they really, really needed the money? The house might not do them any good and the money might really just save their lives. So be gentle about it because your past memories may not necessarily need to be theirs. What were you going to say? I was gonna reminded me of the segment we had on your show called, What Would Suze Do? It reminded me of that. And I'm thinking the third partner of the two sisters is their mom? Which is grandma to these kids. So they could sit down with their mom and say listen, you know, is there something that you have a wish or desire that we could leave in writing to your grandchildren in the event that when we all pass the property, the beach house, goes to the kids. Anything mom that you that you have a wish for? They could do that. They could do that. But grandma's wish may not really be something that she would wish for if she were still alive. If one of the grandkids had a serious illness, they needed it. All kinds of things happen in life. So the best thing I can say to all of you is can you talk to your kids, can you talk to your grandkids? Can you tell them what your wishes are and hear how they feel about it and then jointly make a decision as to how, you know, they are going to decide things as they get older when they inherit this property. Okay, Suze. Next question is from Christine. Hi Suze and KT, will you please tell me why I should invest in a Roth IRA money market fund to double as an emergency fund? Because I don't have my emergency fund fully funded yet. When the money market funds are returning 0% I can make more at Alliant. Or another high yield savings account. It's difficult for me to put money into an account that's not making anything. In addition, could I actually be paying them to hold the money regarding fees? I currently have a Vanguard Roth IRA. When I started out with funding my Roth IRA, the fund was earning more than 1%. What do I do, Suze? Christine. Let's put things in perspective. Here you are talking about approximately $30 a year in interest on $6000. $30 a year. And that why, that may seem like a lot of money to you. Obviously according to this email. The advantages of having money in a Roth for you to use as an emergency fund totally outweighs $30 a year in a high yield account anywhere else. Because once a year passes, you can't put money into that Roth. So my goal for you is over the years is to fund the Roth. And once you have 12 months of an emergency fund in the Roth, then you can continue to fund the, your emergency fund outside of the Roth and start investing the money that's in the Roth. The more money you have in the Roth, the better off you are going to be later on in life. So the next question is from Lauren, Hi Suze and KT. So my question is, the bulk of my retirement assets around a million are in four different 403 B accounts with TIAA/CREF invested in various vanguard and TIAA funds from when I worked at a university and a nonprofit. Between my husband and I. He's 62 by the way and she's 56. We have about 400,000 in other retirement accounts like Roth IRAs invested in Vanguard, target date retirement funds as well as some fixed income account through my union that earned 7%. Fabulous. Yeah. Nice. That's great. My husband and I recently met with a free advisor. No such thing. From TIAA who presented us with an investment plan to rebalance the portfolio based on our risk tolerance and planned retirement age. It entailed major selling and purchasing across all funds. I bet it did. I know what you're doing, where you're going with. It seems like a lot of buying and selling, basically shuffling things around only to end up in a slightly different place overall. So the question is this, do I rebalance based on the TIAA/CREF recommendation, tweak it myself to lower the amount in equities or do nothing? You ready for this? My gut is saying do nothing. So Suze, what do you say? Well, you know, I always have the same that you never ask a question that you don't know the answer to. Oh, you stay exactly where you are, you do it on your own and you trust your gut. It's just that simple. And you know, when you even have to ask, I want you all to think about this. If an advisor tells you to do something and you have the urge to ask me and KT if it is correct or not, that already tells you your answer. Because inside of you feel that it isn't okay or you would have done it. Pay attention to how you feel. So Lauren when you take your after work walk today, make sure you have that big smile on your face knowing that Suze agreed your gut is what you want to do. But she's done so well how I was gonna say the same thing. You've done great. Yeah. When things are going great for you. Be very careful. How did you even get to the advisor? Why did you speak to the advisor? Its just please. All right. Next question is from Lisa. Have I told you yet today how much I love you? Yes you did. Okay making sure. I love to tell her every single day many times how much I love her. Same with me. Okay next is from Lisa she wrote what the heck is tax loss harvesting? And should I do it? So Lisa, I don't know what it is either but Suze before you respond let me read to you the rest of it. She said I'm 34 years old. My portfolio is spread among my Roth 401K which has a 5% match from my employer. It is done through Betterment. This is where they are suggesting the tax loss harvesting. Are you telling me she just wrote you and me and said that the advisor at Betterment for her retirement account is suggesting tax loss harvesting. Is that what she just wrote? She said so should I tax loss harvest. But you, I don't know what it is. Wait now I'm mad now. Yeah. Now you got me fired up. Something Betterments telling you to do is not sitting well with miss Suze. Well I'll tell you why. First of all you can only do what's called tax loss harvesting. And I'll tell you what it is in a second. In an account that is not a retirement account. You would only do it, and only be able to do it, in account that is like a regular investment account. And in a regular investment account sometimes you buy a stock and it goes up really fast and if you sell it you're going to owe ordinary income tax on it. And sometimes you have stocks that have gone down. And what you do is you sell both of them and the stocks that go down to offset the gain of the stock that you sold that made money. So you harvest your losses against your gains. And it's just that simple. Like KT earlier this year to remember I bought that stock Microstrategies and I bought it at 100 and $25 a share and this was on my birthday a year ago. And then a few months later I sold it at $1035. There was a lot of money that I made in a very short period of time. And because I did not hold it for at least a year, it didn't qualify for capital gains. But I sold it because I knew that Microstrategies was probably going to go down and it did, its around 400 right now. But because of that I owe or do we owe KT ordinary income tax on a serious sum of money. However, I also have stocks that I had losses on. I did, you know? And so I sold the stocks that I had losses on to offset the gain from microstrategies so that I didn't have to pay taxes on the gain for microstrategies. So I harvested the tax losses. So the losses offset the gains and now I don't have to pay taxes. Betterment is telling Lisa to do some harvesting in in a farm you're not allowed to harvest him. That's right, yeah. Because well in an IRA or a Roth IRA a 401K. If you sell something at a loss, you don't get to take it off your taxes because it's in a retirement account. If you sell something at a tremendous game, you don't have to pay taxes on it because it's in your retirement account and you only pay taxes on it when you go to take it out later on in life. If it's a traditional retirement account or if it's in a Roth, you don't pay taxes at all. Like if I had owned microstrategies in a Roth IRA and sold it, all that money would have been tax free, totally tax free. So, so that's why you can, you legally can't do it in a retirement account. So I don't know what they're telling Lisa and why but it doesn't make sense. But that's what tax loss harvesting is. You compare your gains to the losses and you help yourself on taxes, yep. All right, so here's another one. It seems like these questions we've kind of grouped together have a lot to do with getting advice from someone besides Suze. Ready for this one? Hey, Suze and KT, this is from Elizabeth. I have a question regarding targeted retirement funds and if Suze likes them. So Elizabeth is 29. She has about $10,000 in a Roth IRA and $5000 in a rollover IRA with Vanguard. A few months ago, she asked for advice on what to do with it. The advisor at Vanguard recommended a targeted retirement fund for 2055 since that would put Elizabeth at 63 years old. So that's what she did with both of these accounts. She put them in a targeted retirement fund. All right. Do you know what that is, KT? Um basically they're put, you're putting money in a fund that you're not really gonna touch or use until 2055. And if you leave it, if you take it out, there's penalties I think. No, no, no, no, no, no, no, no, don't go there, don't know more than you know. So when a targeted date retirement fund or fund targeted retirement fund, right is she's targeted 2055 is when she will retire. So the advisers of the fund automatically changed her investments to be more and more into bonds, the closer she gets to 2055. Right? That's exactly what he wants to do. So maybe this is great advice because right now ready for this, she's 29 and he said to her the asset mixes 90% in stocks and 10% in bonds. Elizabeth, as you get closer to retirement age, the mix will shift to less risky options and be made up of more bonds. That's what I just said. But Suze has been not a big fan of bonds in the past few months so I don't know how to feel about bonds being part of the asset mix. So let me why KT has the cutest little faces today. Anyway, Elizabeth, here's the thing. I don't believe in investing because of your age. I believe you invest according to what's happening in the markets and with interest rates at the time that you are investing because what if it's 2055 and all of a sudden you have almost all of your money into bonds and they're not individual bonds, their bond funds within this target date mutual fund and interest rates have been really low and now they've started to skyrocket. When interest rates go up, the value of bonds and bond funds go down. So at the exact time that you need your money and you think that everything's fine because you're in bonds, you may lose a lot of money because interest rates are going up very rapidly. So again, I'm just not a fan on saying this is how you should invest because you're getting older and this is what you should do. I want to know. Well Elizabeth, what are you doing when you're 50 or 60 years of age? Do you need money? Do not need money. Are you still going to be working? Who knows? So I like more control over my money. And I want your advisors to know more about you when they're investing money for you versus your at this age. So this is how much you should have in stocks and this is how much you should have in bonds. Now, I just have to say something. I know in my Ultimate Retirement Guide for 50+, I give you the advice that you have to do 70/30 and I do that. However you have to remember that when I write a book, it is read by millions and millions of people who maybe are listening to the podcast but most likely not all of them. So I have to give traditional advice to make sure that everybody is safe and sound. However safe and sound may not be what you all want. What you may want is more growth and the economy may be dictating something and once you write a book I can't go in and change what I've written in that book. So it is true. I don't like bonds right now because here we have inflation and what's going to happen with inflation if inflation continues on, maybe interest rates are going to start to go up in order to curb inflation and if that happens there goes bonds. So I just think dividend paying stocks, growth stocks, index funds are such a better way to be investing for the long run for growth and especially at 29. However, with that said, the 2055 fund isn't that bad of a fund. Um If my memory serves me correctly, I think it's got a 0.15% expense ratio, which is really relatively very, very little. And you know, I do like the Vanguard Total Stock market index fund better. Their expense ratio is only 0.04%. And if you look at where they are year to date, the Vanguard Total Stock Market Fund really has done better than the 2055 fund. But listen, if you're comfortable in there, you can stay in there for the next few years, it's not going to kill you. But for me, I like the Vanguard Total Stock Market fund better. But really Elizabeth, you can stay there because 90% is in stocks and its Vanguard and Vanguard is a fabulous company. So there you go, KT. You know what's up now? Right, Are you looking forward to it? I can't wait for my quizzie today. You should not lie. What is it? All right. It is. Hi Suze. So everybody listen to this one closely because these quizzies by the way aren't just for KT. They for everybody. I tried to ask this question to my mortgage company but they were not sure of the answer. Okay, I have $125,000 left on my mortgage at 3.85%. Here's the choices. I can pay down my principal in one lump sum one time a year, $10,000 each year in January. Or I can pay a little extra each month and spread it out over the year, around $835 each month towards my principal balance. I can afford to do either method. So the question: is one method better to shrink down the amount of months and years of paying off the mortgage? So is she better off pain $10,000 in one lump sum in January or $835 each month. Which one will reduce your mortgage? Which one would reduce it better? Or which one? Which one reduces her overall mortgage the quickest? I don't know but I would do the 800 a month. What would you all do everybody? What do you think? Why I would do that? Why? For the what ifs of life? But she says she can afford it. She can afford either one. But if you put all the eggs in the basket in January basically you're paying up front for the whole year. I would pay month by month. I would think the upfront probably reduces it faster. But it doesn't matter what you would do. She has a question. Why do you always have to change what people are asking? I thought she's saying which one would you do? Which one would you do? I do? The 800 shrink down the amount of mortgages and months of paying off the mortgage some upfront. Why? I don't know exactly why, but there is a reason. Yes. But you just don't know it. Wait, let me think about it. We don't have time for this. The reason why $10,000 up front every January that is put towards the principal is that the more the principal shrinks down when she makes her normal mortgage payments, the more it pays down the mortgage because there's less interest accruing on the entire mortgage because it's been reduced by $10,000 at the beginning of the year. Just that simple. All right, everybody. So I hope you enjoyed today's Ask Suze an KT and we'll see you at 1pm eastern. I'll see them. Stop saying. I'll be there. I'll be right there next to her. But I'm not on the screen. I'm not on tv. To register it is free. Just go to CNBC.com/suzeormanevent. So until Sunday Father's Day. And everybody remember Saturday June 19th is juneteenth. So all of you should be celebrating and honoring that day. All right. We will see you then. Until then stay safe. Bye bye. Bye now.

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