Podcast Episode - Ask KT & Suze Anything
Must Have Documents, Retirement, Roth, Social Security, Trust
March 10, 2022
Listen to Podcast Episode:
On this podcast of Ask KT & Suze Anything, Suze answers questions from listeners about buying versus renting, inheritance, umbrella insurance, social security after divorce and much more.
Podcast Transcript:
March 10, 2022. Hello, my dear KT. Hi Suze. What a busy day this is. Okay. So, everybody, it's actually still it's still February. We're getting all of these great podcast and questions answered and banked in case Suze loses her voice again after this surgery. So, it is truthfully February 23, still the day before my surgery we've done like three or four podcast, but now she's losing her voice because we're doing so many. But this will drop on March 10th, 2022. Drop, drop means that's when you're going to listen to it. No drop means is when it gets posted right? But they don't know that they don't know that term drop. They know it. You don't know it. I'm in the tv world. Of course, I know it. Suze. KT that word doesn't exist in the tv world. Yes, it does. It does drop mean in the TV and the communication world drop it drop it post its on. Okay. Today is March 10, 2022. You know what I'm thinking when you use the word drop, what do you think I'm drinking? What do you think I'm thinking of? What are you drinking? My drinking? Not allowed to drink. My first question is okay. Anyway, everybody this is Ask Suze & KT Anything and if you want to ask us a question and why wouldn't you, all you have to do is write in to AskSuzePodcast @Gmail.com. And if KT chooses your question. We're gonna answer it on the podcast at this rate, we're going to answer every question that's ever been written to us. The first question Suze I selected is from Marianela, do you remember I worked with a great, great girl named Marianela in San Francisco, she was so much fun, she was a secretary in an office that I was consulting, a design firm, and she was the most fun ever. You remember her? Oh my God, she lived in Oakland California. She and every Sunday she would have these incredible Mexican family gatherings. Always invited us all the time. We never went, yeah, we never went because we never wanted to go over the bridge. She was so much fun, so much fun. Anyway, Marianela. Suze's answering your question, but you remind me of such a great, great experience I had with my Marianela back in the day in San Francisco. So, here's the question Suze our Marianela from Boulder Colorado is 58 years old, she's recently divorced, and she wrote sadly, so she obviously didn't want this divorce, but she has some money for a down payment on a new home. She has about $100,000 and she works, she makes about 75,000 a year, which is a very nice salary. She said the rents are skyrocketing in Boulder and she's paying $1,999 a month but a townhouse that is selling for 473,000 is a remodel and available. So, she said without buying a new home, she has about 500,000 saved for her retirement, which she wants to use when she's 65. She has no debt. And she wants your help, Suze on deciding what should she do? Should she buy this town house or rent continue renting? What would you tell her? KT definitely buy the home, she's gonna make her feel great. She's gonna own something. You know, she can afford to put a down payment on still have money for her retirement and she has a home that she owns. What would you tell her Suze? I wouldn't tell her that. We'll figure out the money. I think it's going to cost the same. Listen to me everybody, there was one-word KT and Marianela one word in this email which says to me you can't do anything yet. And it's not about the money, it's not about the money, it's sadly right. It's right. You said you were recently divorced sadly. And what is my rule of thumb, KT don't do anything until you for six months to one year after suffering the loss of a loved one. And the loss of a loved one comes in the form of death. But very interestingly enough, the loss of a loved one sometimes is even harder in divorce because they're still there. You maybe see them with their new person that they're with what it can be equally if not harder when it's divorced that you don't want and actually death KT. So, it is for that reason Marianela that I don't want you to do anything right here. And right now, also you're 58, you want to retire in essentially seven years from now. You know when you're 65, 7 years is not a very long time. So, in seven years from now you will no longer have $75,000 a year of income and you would not be that deep into this mortgage because even if it was a 30-year mortgage, fixed rate mortgage, interest rates now are up. So, it would be about a 4% rate to get a 30-year fixed rate at this point in time, your monthly payments on that mortgage would be about $1,830 a month. Close to what she pays in rent. But it's not just rent. When you buy a home, you have property taxes, you have insurance, and you have maintenance. So, I always say that you have to add at least 30-40% above your mortgage payment for you to really figure out exactly what this would be. So, you're looking at an additional 4, 500 a month. So, you're looking at about $2,200 a month, $2,300 a month, which is higher than what you're paying right now. Now obviously you'll get a tax write off for the beginning years and everything but not right now girlfriend. The houses old, you said it's 1983. That means it can need a new roof. It can need new water heaters. It can either continue renting as your advice for now continue renting. Yes. Let her life unfold. Let's see what happens sweetheart. You never know what God has in store for you. Yeah, that's true Marianela. Suze. The next question I selected is because of the subject title. You ready? It said, am I a horrible person, Suze? Okay, KT no, no, no. Just so you know I answered this person directly. Ah good. Right. So, but KT doesn't know that but she picked it because obviously it really, I'm excited to hear what your answer was to her. But this is what she said. I'm a 54-year-old woman who was at a pretty big financial crossroads and I could really use some input or reassurance about my choices ready. Everyone she's divorced, she's making do. But I am no means wealthy. My current assets total about half a million dollars, but I do not own a home. I have no debt. A big issue I have is that my dad died last year, and I stand to inherit approximately $600,000 from him. My brother who was completely estranged from my dad for over 12 years will inherit just a few $1,000. My brothers not asked me for any of the inheritance, but my mom who was divorced from my dad for decades is pressuring me to give my brother half of my inheritance. Suze, I do not want to share this money with my brother. My brother is not wealthy either, but he is financially stable. He owns a home, he is married, and his wife works whereas I am single, do not own a home. I am currently employed part time. My brother has two children, whereas I have three. I worry every single day about my retirement and my three kids. Another related issue is that my oldest child will be going to college this coming fall and I feel nervous about contributing to her college cost. I would love to be able to help her, but I worry about spending money which I'll need in my retirement. As someone once told me you can borrow for college, but you can't borrow for retirement. I wonder who that was. I know that her dad will be contributing some and I just feel that she can borrow the rest in student loans. So, Suze, am I a horrible person for not wanting to give my brother part of the inheritance and for not wanting to contribute to my daughter's college education, guilt over these two issues is eating me up inside. Please give me some advice. All right. So, you know when I first started to write the answer to this question, I was like, no way! Your father, it was your father's money and your father wanted you to have it. If your father wanted your brother to have it, he would have left it to hit your brother. But he didn't. And then I thought about my own situation how truthfully there are some people in my family. It's true that our really close relatives to me and I don't want to leave them any money and I'm not leaving them any money. And KT, I have to say I would be really upset if I died. And I found out that you for instance, decided, oh it's not nice and you left them some money. I would never, I would never do not honor your wishes. No, I know that. But if you would never not honor my wishes, why would this person not honor her dad? Her father? She does. It's the moms pressuring her. But it's the mom who was divorced from her husband. For good reason. Of course, she would want her son to have money. Of course. So, my original answer was no way. And then I thought about it and then I thought about it and I wrote this person back and I asked them why was your brother and your father estranged? What happened between them? And the answer was I don't know, I have no idea. So, I wrote back, and I said, you know what I always say people first, then money then things and now the soft side of me started to come out. I want you to sit down with your brother and I want the two of you. Forget your mother do not include her in this equation and I want you to sit down with your brother and ask how he feels about it, what his thoughts are about it because he very well may say I don't want any of that money. You never know. People have written me in the past and they said I don't want any money from my father. My father wants to leave me money and I don't want it. So, you never know. So, I think that’s important. So it ended so far. We'll see she'll write me again back is that she decided to make an appointment with her brother. Sit down and talk about it in terms of your daughter and not paying for her college education. I don’t have a problem with that at all. She wants to go to college, let her take out loans, let her figure it out on her own. I am not an advocate of parents unless they have a serious sum of money and even then, I don't think they should. I'm not an advocate of paying for your kid to go to school and I’m just not. I would want them to take out loans and be responsible for it and the amount of loans they take out to dictate the kind of college they can go to. Otherwise let him get a scholarship up to them. So that was my answer to her. What do you think about it? I think that's good. It was wise to because I was wondering what the backstory is. Why did the dad leave him nothing. But it's, it's as long as she talks to her brother about it, whatever they decide, at least she won't offend her brother because she'll see what happens. So, we'll see. But I have another subject title that was very creative from Ann, if you carry an umbrella, does it mean it won't rain? All right, Ready. Hi KT and Suze. Your podcast and banter are the highlight of my week and always put a smile on my face. Isn’t banter fighting? I don't think we banter, isn't bantering like kind of boxing, fighting, isn't it? We don't fight, we’re not fighting. We don't fight. But like that, that was just bantering. Ready. I hear you talk a lot about how you're not a fan of whole life insurance, but I have yet to hear you mention anything about carrying personal liability umbrella insurance. Just curious as to what are your thoughts on that type of insurance. My bad. Tell her about, oh, tell it. What, what do you mean? My bad, my bad. I should've covered this topic a long time ago, but many people don't know about that obviously, which is why I should've covered it. So, for those of you who don't know is umbrella insurance is a different liability insurance. Its for liability, but you can only have an umbrella policy and an umbrella policy refers to that, it’s kind of covers everything after you have home and automobile insurance if you own a home or an automobile. So, umbrellas in addition to those, you have to have it in addition to those because you're in a car accident, KT, your car insurance policy may have a $300,000 liability or medical policy or whatever on it. You're in a serious car accident was your fault. And now the medical bills and everything are 500,000 but your policy will only cover 300,000. An umbrella policy covers the extra 200,000 and they're really so cheap like $1 million dollar policy is maybe, you know, three or $400 a year in premiums. So it's usually if you have a net worth above 500,000 and it's, you know, if you have a, if you have things like a pool or a dog or a trampoline and maybe your dog gets out and bite somebody and hurts them or somebody's over and they get hurt in your pool or bouncing on the trampoline. It will not pay for you though, if you get hurt, it's for other people essentially, you know that sue you. So, um that's what that's about. All right, there you go. So next question is from Monica. Oh and one second and yeah, I think it's a good idea to have umbrella. Absolutely. If you have a high net worth and you have you have parties you have a lot of people, if you have a lot of kids and they play with the neighbors and other kids and someone gets hurt. Which is bound to happen when you have lots of children, then it might be a good idea. So, Monica's question is Suze, what do you think is better a 5-29 plan or a Roth IRA for kids our eight-year-old will have earned income of approximately $6,000 in 2022 eight years old. Wonder what they did, 6,000 dollars. Maybe they're a little model or a tv person or something like that or cuts a lot of grass. But eight years old that's still very young. What is the best thing to do with this money? I prefer the investment flexibility of a Roth IRA. But wonder if this is the best move. What are your thoughts? My thoughts are like your thoughts if I had a kid who was eight years old and KT, we put that money into a Roth IRA, which you can. Do you know, even if they can never put another penny in there and let's just say they even forgot about it. I didn't even remember they invested it in. You know the Vanguard Total Stock Market in ETF or whatever and over the next 60 years Kids now 68 And all it earned was 8% annual average rate of return. Do you know they would have almost $725,000 in that account if they never put another penny in it? There’s your answer. If I were you, I would put that $6,000 in there for your kid and don't even let them know they have it ever. Okay. That's good advice. I like that love when you tell me it's good advice, what else would it be? No, but that was really a great one. No, the part doesn’t tell them about it. Oh that part. Don't tell them about it. Of course that’s what she thinks is great everybody. So, this next question really pertains to so many of you ready for this? This is from Jamie. Hey KT and Suze. My mom's getting super stressed out about this. I'm trying to figure out how to help her. She's 67 ready, she’s finishing 40th year as a kindergarten teacher, she'll retire this June, so Mom is 67 alright. She's currently figuring out pensions, she has won from Florida, one from Maryland. She has retirement accounts and Jamie recently asked her Suze about you know how if if something happened to her and she was incapacitated, does Jamie have access to the accounts? Well mom burst into tears and she gets very emotional because her sister suddenly died in 2019, nothing was in place and the mom had to go through and deal with everything for her sister which put her into a real tizzy. So, she said she's currently has a Living Will and that Jamie has power of attorney over healthcare. When Jamie asked her about access to her pension and retirement in case, she needs long term care and needed to access the money to help her live comfortable, again, she burst into tears. So, my assumption is that we need to create a Living Revocable Trust. She gets so upset and cries a lot when I try to figure this out, am I right about needing the Living Revocable Trust? Yeah, the answer is yes on that. You know, KT, what I really don't understand after all these years of talking about Living Revocable Trust. Here, you have a woman whose sister died without anything. There's nothing in place. She sees everything that she had to go through. And yet she doesn't want to take that kind of burden off of Jamie. Like what is wrong with that situation? So, Jamie here is what I would say to you. First of all, you said she has a Living Will. You need to understand what a Living Will is. Another name for a Living Will is an Advanced Directive and Durable Power of Attorney for health care and a Living Will is simply a directive that says what her doctors are to do in case your mother becomes, ill and can't give them directions themselves, it has nothing to do with who gets her assets, how it's done, nothing. So, you are in danger that if your mother dies without a Will and or a Living Revocable Trust that the state that she lives in has already decided where her assets are to go upon her death. Maybe half will go to you. If you have a brother or sister or something, maybe half them. It's isn't it in probate though as well, then it goes to probate. So maybe Jamie should explain that to mom. So maybe Jamie should have mom listen to this podcast and mom listen to me. Okay you are a kindergarten teacher and you have hopes and dreams for these kids that you teach. You want to teach them. So, they grow up to make the wisest decisions that keep them safe and sound. But yet you haven't learned what your sister taught you. You are not protecting your child. You are not protecting yourself. You become incapacitated. Who writes your checks for you, who pays your bills for you? So, I am begging you to sit down with Jamie and talk about all these things. You need a Living Revocable Trust. You need an Advanced Directive and Durable Power of Attorney for healthcare. You need a financial power of attorney and you need a Will. You need all of those things and what's so fascinating it's so easy for you to get them. You know. So, I have what I call the Must Have Documents. You would go to SuzeOrman.com/offer. We are now in the month of March. So, they are now $99 and there are over $2,500 worth of state-of-the-art documents that you and Jamie can do right in the luxury of your own home. It's good in all 50 states. Are you kidding me? So, I am asking you to have the same profound wishes for yourself as you do for the children that you teach. Next question, KT. Okay, this is from Julie. This is a real catch 22 everyone. Ex-spouse Social Security clarification, I now have a stomachache. That's what I did. I read the subject and when it says I know have a stomachache. Okay this if you all remember this was January 27 podcast everyone and Julie's from Boston. She said she listens to every one faithfully. So, I believe I believe her. She said my ex is 68 and began taking Social Security at 62. We divorced two years ago. I am 58 since he was born before January 1, 1954, he was born in 1953. I thought I could get the equivalent of half of his Social Security and then when I'm full retirement age take mine which will be higher than the half of his regardless of when I was born, which was May 1963 is there a different rule than the one you noted when the ex-spouse who is currently taking Social Security was born before 1954? I let me answer that first because it seems like she has two questions there. I just wait a second. KT. Right? You needed to be born before January 1, 1954. So, the reason that KT and I can do exactly what you're saying Is because we were both born before January 1, 1954. You were not born before then. So no, you cannot do that. Do you have a second question from her? Yeah. Ready since he had no retirement when we divorced, and she did. I gave him half of mine. I thought I would. Wait stop for one second. Everybody. You Julie did not give him half of yours. Social Security gave him half of yours. You do not pay for that. It does not cost you anything. So, you yourself did not do that. Alright, go on. And then she said, I'm all of a sudden very nervous about what you explained. I never miss a podcast. I trust you and count on your guidance. So now she's saying I thought I was going to be able to make up some of this loss through this. You have no loss. I know that's what, wait a minute. That's what you need to help Julie understand. So, Julie isn't losing any of her Social Security benefits whatsoever. Right, Suze. All of you have to understand that when you get ex-spousal benefits for a divorce, it has nothing to do with you. It just has to do with your records. It doesn't come out of your pocket doesn't reduce your benefits. It doesn't increase your benefits. It does nothing except your record is used. It comes out of the Social Security pot, not yours. So, don't worry about it. You didn't give him anything. You did not lose anything. You just need to understand that girlfriend. He was entitled because of the law. But that's it. That's it. But not from her, but not from it doesn't affect Julie. No, it's like KT, I'm not giving you half of my Social Security. I get it because. Social Security is giving it to you. But it doesn't change. It doesn't change my amount and it won't change mine either. You can't wait. You know, somebody wrote in, I just have to say, and they said, Suze, I thought you said you should always wait until you're 70. What I did was remember I'm one year older than KT and you can do this as well. There's a calculator on the Women & Money app that's there to figure out when is the best time for you to take Social Security. So, when I used that app on my app, it told me I should take Social Security when I'm 69 and I think it was three or four months. So that KT could get half of mine for almost two years. And that would equate to more than if I waited till, I was 70. So that's what I did, and I get that check every month, you do. So, Suze. This next this next one is very sweet. I started reading it and it’s kind of put a smile on my face, so I want to share it with everyone. But it's just endearing. It's a very sweet sister relationship. So, it's this is from Mary she wrote I believe this is the third time I've written to you. I was talking to my sister again this morning about opening up a Roth IRA at Charles Schwab. Wait I just have to say something. I read this one and she got me when she said it's the third time. So, I did answer her but let me share it with everyone because it's really sweet it will put a smile on your face. I keep explaining to her that you have said to open up an account at Charles Schwab. She does the stock market through her bank and I keep telling her that she needs to open up a Charles Schwab account and then open up a Roth IRA. She keeps asking me well why can't I do this through my bank? What is the difference? And I keep telling her I've written to you Suze, but I have not heard back from you yet. Please help. I can't remember why you said not to invest through your bank and that it's better to invest through something like a Charles Schwab. Please help me so I can explain to my sister so, she will switch over to a Charles Schwab. It's so sweet and invests through them instead of her bank. So, Suze. I think Mary should go work for Charles Schwab and be a rep man. This is great. All right. So, what did you tell her? So, first of all, Mary, I've never just said Charles Schwab alone, Charles Schwab is a fabulous brokerage firm known as a discount brokerage firm. But you have Charles Schwab, you have E trade, you have Fidelity, you have Ameritrade, you have many of them. Just so you know, the reason why I like discount brokerage firms over most banks is because number one you can buy things online through any discount brokerage firm right now for no commissions whatsoever. You could buy slices of stock, let's say you want to buy Amazon and Amazon is $3,000 a share. And you can't afford $3,000. You could buy a slice of Amazon for anything of $5 and up. There are all kinds of things that you could do at a discount brokerage firm that really you can't do at a bank. Most banks have financial advisors and many banks have financial advisors that sell you loaded mutual funds that have a 5% commission on it. They charge you commission to buy and sell stocks. They have all of those things. So overall you're better off, especially if you're doing it on your own and you all need to learn how to do this on your own. And even if you don't do it on your own, you should know what you should do. So that when somebody tells you to do something, if it's not right, you know it. So, I would never truthfully hold an investment account at a bank. Ever, ever ever. So that's just something obviously, you know, you could open up an investment account at Schwab or TD Ameritrade, a Roth IRA, you could do many things at a discount brokerage firm. So everybody listening to this right now, I did write Mary back and I explained all this to her, but I went a step further and I asked her to ask her sister to send me the names of everything that she purchased and the commission that she paid for it. Because the only way in my opinion to get through to Mary’s sister is to show Mary the cost and if I'm wrong and the bank that she's with doesn't charge her commission and everything and then okay, she can stay there. Although I still think it's better for her to be at a discount brokerage firm. KT quizzie time, quizzie, quizzie do you think this, what do you think this is about KT? I have no idea, what would I do? A quizzie with you, my favorite type. My friends, my friends, the Roths, and I'm going to keep doing quizzies on Roth with you until I don't get any more questions about Roth. So why don't you beg all your fans out there to stop asking questions about Roth and listen to the podcast carefully. Let’s see if we all get this one right. Alright, this one is from Jennifer and she says hi Suze and KT and again I remind all of you this quizzie is for you as well. After listening to all the Roth podcasts over the last few weeks, I didn't hear you address 401K Roth accounts. Wait, they weren't listening very well. We talked about 401K Roth’s all the time. Are you kidding me, Jennifer? Are you kidding me? That's beside the point, my question is, how are employers’ contributions and profit sharing considered at retirement? Is their contribution taxable or is it treated the same way as my contributions? Meaning it comes out tax and penalty free over the age of 59.5. Is it segregated into buckets, tax free versus taxable? I am fully vested at my company. Thank you for all your education and passion for financial empowerment and security. Think about it, KT, everybody else think about it. Is Jennifer’s employer's contribution to her Roth 401k taken out tax free or not? I think it's the same as Jennifer’s contribution. It's the same rules apply. Is that your final answer? Well wait a minute 59.5. We're assuming that she's going to be over 59.5, can she take out her employer's contribution? She puts money into her Roth 401K her employer matches that, you know, one fallacy, all of you have by the way, is that you think that you have to contribute to a traditional 401K to get the match from your employer. That is not true. You could contribute to a Roth 401K and your employer still matches your contribution. The question is, where does that contribution go? I'm giving you a hint now. Mhm. Here she goes. Here she goes, I don't think anything is tax free. So, your answer is she's good, she's good, she's good. You're good, Jennifer, you don't have anything to worry about. You got the official okay from Miss Travis? Oh God. Alright, so when you contribute to a 401k Roth your employer matches your contribution, but their contribution goes into a traditional 401K. So, it is segregated because your employer wants a tax write off. So, when they put it into your traditional 401K. And the government knows when you take it out, you're going to pay taxes on it, the employer gets a tax write off that, right? So therefore, when you withdraw money from account that your employer has been putting the match in? Oh, you betcha you are going to pay taxes on it, are you going to pay a penalty on it? Not if you're over the age of 59.5. And remember traditional 401Ks and traditional IRAs are not subjected to the five-year rule. Only Roth retirement accounts are, so that's the answer. So, there you go, KT. That was a good podcast. Suze. KT, they're all good. No, but this was really varied. I like when we have a real variety. Sometimes I like when we theme it like my Roth questions, but it's good to have variety. I know. Alright, everybody. So, do you believe it's March already? No, because it's not. Okay. So anyway, we want all of you to do what KT to be smart, strong, and secure. That's it, baby. See you soon. Bye bye now. Bye now.Take advantage of the Ultimate Opportunity Savings Account with Alliant Credit Union at: https://bit.ly/3vEUTZW
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