Podcast Episode - Ask KT & Suze Anything: At Least Three of the Biggest Mistakes You Can Never Afford To Make

IRA, Marriage, Social Security, Trust

May 02, 2024

On this edition of Ask KT and Suze Anything, Suze tells you how to avoid some of the biggest mistakes you can never afford to make, plus answers to questions about Social Security, trusts, prenups and so much more!

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Podcast Transcript:

Suze: May 2nd 2024.

KT: A very auspicious and lucky day. Tell everyone why.

Suze: Well, first of all, welcome everybody to the Women and Money podcast with the most feisty KT this morning, right? And everybody smart enough to listen. Obviously, this is the ask Suze and KT Anything addition.

Suze: If you want, write into Ask Suze podcast at gmail.com and if KT chooses your question, we will answer it on the podcast. But I'm just letting you know there are lots and lots of questions. I have never figured out how she picks the ones that she, how do you pick them?

KT: I usually look at the subject and if it looks like something fun or they say KT pick me, I pick them. But wait, today is May 2nd.

Suze: I know!

KT: Tell everybody whose birthday it is.

Suze: It's our friend Mika Brezinski who hosts the morning Joe show with her husband Joe Scarborough. And yes, it is her birthday today.

KT: We wish you a very, very happy birthday. A fun birthday. And I love that your favorite celebration is ice cream.

Suze: What kind KT? What kind of ice cream?

Suze: Mini Melts! But for all of you, who don't know Mika created the Know Your Value revolution that was here in the United States that has gone overseas everywhere so that women everywhere know their value. All right, Miss Travis. Are you ready to begin?

KT: I'm ready.

Suze: So wait, wait, how do you feel?

KT: I feel great.

Suze: But Colo is gone. How do you feel?

KT: A little lonely?

Suze: You do?

KT: I do because I'm used to his face every morning coming in and we say Colo, would you like a shot? And that shot is his little espresso. We have a great coffee machine here on the island and we make Colo a little shot of espresso. He gets up at 4:30. He's up way ahead of us, way that ahead of us and we see his little face every morning and he knows we're, you know, he knows when we're recording but every morning we either have breakfast together or say Colo ready for your shot, but I miss him. Oh, ok. He's in Colombia with his wife. He'll be back in a couple of days. Well, about a week.

Suze: Me, I'm so happy to be alone with Miss Travis. I can't even tell you. All right, KT first question.

KT: All right. I will be 62 soon. Can I apply for...

Suze: Do you remember those good old days?

KT: It wasn't that long ago. I will be 62 soon. Can I apply for retirement Social Security and receive the $500 a month and invest it while working part time until I am in full retirement age of 67.

Suze: You can. But it would be the most ridiculous thing you have ever done in your life.

Suze: If you really want to make the most out of that money, can you just do me a favor and don't claim it at all? Just wait till you're 67 and you would get a whole lot more money, probably more than you would make, investing it. All right, KT, next.

KT: Next question, KT and Suze, you have done so much for my financial journey.

KT: Thank you. So, Monica says I have a trust with the local law firm and the lawyers keep changing it. Every time I want to make a minor update, it becomes a huge deal and cost. Wait. So she's asking Suze, can I amend my trust with the must have documents.

Suze: The answer to that is absolutely one of the reasons that the must have documents were created is so that you could change them anytime you want and not have to go back to a lawyer and pay for it. So you would have to redo your documents. Obviously, you can't use the ones that you already have. But once they're in the system with the must have documents you can update them any time you want? Ok, next question.

KT: Hi Suze and KT. I have a question regarding when to draw social security again. Another one, I'm 63. My wife is 61. I'm planning on delaying my social security benefit until I'm 70 at a projected amount of $4,515. My wife is retiring...

Suze: How much is he gonna get?

KT: 4515? That's a, that's a lot more than I get.

KT: My wife is a retired nurse and at 62 is expecting a social security benefit of $1850. Question: if my wife begins drawing at 62 will she be eligible to tap half of my benefit when I start to collect as it will be more than her monthly benefit?

Suze: So and so that have been your quizzy.

KT: Um No, no.

Suze: And so KT, you just gave me this and I'm reading it just to make sure I see these numbers, you know, KT that's a lot of money. 4500. But remember we have our Medicare B premiums subtracted from our social security. So it's not a whole lot more. But anyway, so this person, Mike also wants to know because I'm reading this that and he says that they really don't need the money, they just want to do it but they really don't need it. So Mike, listen to me if your wife starts collecting social security at 62.

Suze: Then when she goes to collect your social security, half of it, she's only going to be getting 34.6 of your full retirement amount. She will not get 50%. She's only going to get 34.6% of it. And you need to know, let's just say you were getting $4500 a month. She doesn't get 50% of $4500 a month, which is the amount you're getting at 70. She would only get 50% of what you were entitled to at your full retirement age. Not at 70. So don't make that mistake. The question is, should she do that once again? Do not do that. Listen, if you don't have to take social security at 62 you don't need it to live in. You're not in a dire circumstance. Do me a favor. In fact, do yourself a favor. Just don't do it.

KT: So, Suze, wait, it's also exciting that Mike is so happy that I'm a RISD alum and this is my 50th year since I graduated.

Suze: And why aren't we going?

KT: Because we're going to be just coming back from South Africa.

Suze: All right. No problem. OK. I would think that she would want to go and show off to everybody.

KT: I will, but we'll do it after the commencement week. We'll do it a different time.

KT: I loved Providence. I loved RISD everybody. Any of you that are alum or, or part of Brown and RISD we loved Providence. What a great, great years, great time. All right, Lucy, dear, Suze, my partner and I are getting married soon and are taking your word on getting a prenup. I'm confused about where I can get or do this without forking out a bunch of money to a lawyer. Do you know of any resources where I may be able to do this for free or for a reasonable fee?

KT: What should Lucy do?

Suze: Lucy go online and Google Prenups online and I'm sure a whole bunch will come up now, whether they're good, whether they're hold up that I don't know. So sometimes it's worth it to go to a lawyer, face to face both you and your current person to be.

KT: All right, Suze. Next question is from Maddie.

KT: My question is about life insurance. We had term life and we have outlived our policy. Now. We are in our sixties and both retired. We want to know if you know of anyone that has a reasonable price for life insurance for like 100,000 or 300,000 that we don't have to pay $350 a month or higher for.

Suze: How old is Maddie? Sixties?

KT: They're in their sixties.

Suze: Maddie. Here's the question. It's one thing to want life insurance as you get older. It's another thing to ask yourself. Do you need life insurance? Do you have anybody that is financially dependent upon you.

Suze: Are you dependent on your spouse's income or whatever? And if something happened to him or her, you wouldn't be ok. If you need life insurance, then it's going to be expensive because the older you get, the more expensive it is. So I would go to select quote.com, which is one of my favorite quoting services and see what they come up with for you for even a five or 10 year term insurance policy. However, it's going to be expensive. So you have to answer the question. Do you need it or do you want it? If it is a want let it go, girlfriend. If it's a need, then you somehow have to figure out how to pay for it. All right.

KT: All right. Next question, Suze is from Donna.

KT: Good afternoon. I listened to your April 25th podcast this morning about Roth IRAs and I had a question about conversions. Currently, the majority of my traditional IRA is in a money market fund with some money in investments 28%. When doing a Roth conversion. Would you suggest I take the money from the money market or from the investments?

Suze: Hm.

KT: Wanna make that a quizzy. Wanna make it a flash quizzy?

Suze: What would you say?

KT: Investments.

Suze: You would, would you? (Suze makes the wrong answer noise)

Suze: Again, I'm gonna get her twice today. I can't believe it. So, Donna, right now, I don't know what you're invested in, but overall the stock markets are still relatively very high. At this point in time, we had an incredible run last year into the beginning of this year with certain stocks. And so therefore I would be doing it from my money market accounts if these markets happen to tank and they have a very good possibility that they might sometime later on this year or not so far into the future, nothing is stopping it from going down, It could go down 30%. Who knows? That's when I would be converting my investments. The lower your investments are when you convert the less tax, you will owe your money market accounts. Doesn't matter. They don't go up, they don't go down like a stock does. So when you convert cash that's in a money market account, you're going to owe the same amount of taxes on it today as you would three years from now. So therefore, if it were me, I would first do my cash right now and if the markets go down, start to do the investments.

KT: All right. Next question, Suze. We are a blended family. We each had three adult children. When we married 12 years ago, we did a revocable trust that becomes irrevocable when my husband or I die. We did this to protect our children, should one of us remarry. Do you see any problems with this?

Suze: I really and I'm gonna state this over and over again:

Suze: Unless you have extraordinary amounts of money. I do not like irrevocable trust. Why? Because an irrevocable trust is exactly like it sounds once the money is in there, nothing can be changed. That's what one of your friends is going through. How his father left the money in an irrevocable trust and everything now has changed since his father died and did that.

Suze: And it's a real travesty. A real travesty. So, in an irrevocable trust, if you want to protect your children, should one of us remarry? Are you kidding me? Just set up separate trusts and keep your money separate from the person. You're going to remarry and protect them that way. Don't own the house in joint tenancy with right of survivorship, own it in tenants in common. There's so many ways that you can protect them, do not do an irrevocable trust because if things change and your kids change and they need something different or whatever it may be or you need the money, let's say you're getting older and you need some of the money that was left to them in an irrevocable trust. And now you want to change your mind as to what's going to happen with that money. You can't change your mind if it's in an irrevocable trust, it will be in my opinion, one of the biggest mistakes you ever make. Now, I think KT in this podcast two or three times, I've already said if you do that, take your social security at 62 whatever it may. I think I've already said three times. It will be the biggest mistake you will ever make. Should we call this, should we call this podcast? The three or whatever it is? The X amount of mistakes you can never afford to make. Don't do it people.

Suze: Ok. Here's one where do they get these ideas from? Where does this idea come from? You have never heard me say anything positive about an irrevocable trust on this podcast ever.

Suze: You only hear me talk about revocable trust. So who put that idea in your head? Who put the idea in your head that you should take social security? And now at 62 get $500 a month and invest it. Who, where are you getting this from? KT would tell you what should they do?

KT: Shake the cobwebs out of your head, shake it, shake it, shake it, shake it, shake it, baby. All right.

KT: OK. Next question is from Darlene. Suze, do you recommend a 68 year old to turn a SEP IRA to a Roth at this age? I have to assume Darlene that you're the 68 year old and then it says other money is currently in CDs and savings.

Suze: Here's the thing and, and this isn't just for Darlene, that is for every single one of you listening right now because it is obvious that the podcast on April 21st and the follow up a few days later, I think it was April 25th answering all of your questions on Roth conversions. Roth IRAs has stirred up such a hubbub out there. I cannot tell you. So, listen to me closely if you are in a situation where you have money in a traditional 401k, a traditional IRA which means pre-tax, you have never paid taxes on it and you are going to literally need that money to live on within a year. Two or three. Can you just leave it where it is where you really start to make the best decisions with your money is when you are younger and you are putting money in to begin with in a Roth 401k or a Roth IRA or whatever it may be and it's growing tax free if you're in a situation right now where you're in your mid sixties or your early seventies and whatever it may be and you have $900,000 in a traditional IRA.

Suze: And now you're asking me if you should convert it, chances are you should not because many of you may need the income to live on and it doesn't make any sense to pay taxes on it and then put it in a Roth. If you then need to take it out of the Roth because you have to live on. It makes no sense at all. If you don't need the money, you're getting older, you will never need it for income. That's a whole other thing. And you want to get away from RMDs, you want to make it so that your beneficiaries inherit it tax free. Then you might consider it by going to your CPA and making sure that it makes sense in your particular situation.

Suze: Did I answer that question? Maybe so... Darlene... so I would not right be recommending you to turn a SEP IRA into a Roth at your age if you need the income to live on within the next 10 years.

KT: OK, Suze, this one's one of my very favorite questions and you'll know why in a moment it's from Maria. She said, hi, Suze. I enjoy listening to you and really enjoy listening to KT.

Suze: Why is that? So many people saying I really love that KT is on the podcast. I love that. I love how smoothing her voice is.

KT: But listen to this question. This is why I like it: a few years back, I learned that PG&E offers after tax contributions,

Suze: She obviously knew that I used to do the retirement.

KT: So I opted to do that. Now, I have about 80,000 in after tax contributions. I'm wondering if you're familiar with PG&Es after tax 401k, what is the difference between the Roth 401k and after tax 401k? Besides the growth being taxable? Also, I was told that I can convert my after tax 401k contribution to my Roth IRA without fees or penalties. Is this true? How do I determine if before or after tax contributions are better? So, just want to say she she joined PG&E in 1999 just out of college. I love this question and she was financially illiterate. She grew up, they migrated to America when she was nine. And I think she's a single mom because she's asking how can I teach my eight year old to be financially independent? Love? Maria? Tell Maria that first, we're proud of you, Maria.

Suze: It's, we missed each other because I think it was about 1993, 1994 was the last time I did things with Pacific Gas and Electric because that's when I turned into a best selling author and my career just scooted a whole different way than retirement planning.

Suze: However, first of all, you will have to check and make sure that Pacific Gas and Electric allows you to actually take your after tax contributions and put it into your Roth 401k that you may have there. If they don't, then you can absolutely put it in to a Roth IRA when the time is right. Ok. Number one, number two, you're far better off doing a Roth 401k from the start because your earnings could be substantial.

Suze: Otherwise you're still, if you do an after tax 401k. So, all right, you get to put after tax money in, but the earnings on that money are still taxable by Uncle Sam. So you're still partnering with Uncle Sam. You would be so much better doing a Roth 401k bar none then and after tax 401k, no matter what you think. All right, KT.

KT: And my last question is from Maurice.

KT: Your talk on special needs trust was so timely. I have an adult son who is disabled and getting SSI and health benefits. Only yesterday, I began learning more about setting one up. I do have stated in my revocable trust that all his inheritance will go into a special needs trust. I have been told this would be established, when I die. In my reading, there were differing thoughts on setting it up in advance versus after death when the estate is being settled. What's your thought about doing this?

Suze: It's funny, I read that one and I wrote this person back directly just so, you know, because whenever I see something with a special needs trust or a divorce or a death, I tend to try to answer them personally with an email back. But so if others are interested in the answer to this question, you should set up in my opinion, a special needs trust as soon as you possibly can because things can change in your life. Maybe you want to put some money in the special needs trust so that your son can access that money. Now before you have died and all kinds of things like that. So do not wait just for the inheritance. All right. And have it go through your trust, set it up right now. And for those of you wondering why do you need a special needs? Trust is because most likely his son is on SSI. And if somebody who is on SSI, that means they're getting 6 - $700 a month or whatever it may be.

Suze: If they're on SSI and they get more than like $2000 or whatever it may be, they can get disqualified from SSI. If in fact, it goes directly to them, there's other little ways around it with an able account. And so, but the special thing you should do is a special needs trust.

Suze: Is that everything KT?

KT: That's it. That's a good, that was a good selection. Don't you think I mixed it up well?

Suze: You did all right.

KT: I thought I did that pretty good. Everybody.

Suze: Oh, look how soft and sweet she became. I love how you do it. I actually think you add a tremendous amount to this podcast, KT.

KT: Thanks Suze.

Suze: No, I'm, I'm not kidding. I think it may be rough for them to take me every single week. You want to know why? I think that why I remember when I first started doing Oprah and I got a call from, I think her name was Diane Hudson who was Oprah's executive producer.

Suze: And that was during the days, then Doctor Phil was gonna be on once a week and Iyanla Vanzant was gonna be on once a week and they wanted me to be on once a week as well. And anybody in their right mind would have said, of course, I'll be on Oprah once a week. And I said, no, I can't. And she said, why?

Suze: And I said, because if I go on the Oprah Winfrey show and talk about money with the intensity that I talk about it, everybody's going to end up hating me and they're gonna end up not watching anyway because money is a difficult subject at times to have to listen to all the time to face it. But unless you're ready and then, and with a podcast, you can listen whenever you're in the mood on the Oprah show, you had to watch it that specific day. So, you know, I, I think about that with all of you, which is why I love doing a podcast. So when you feel you're ready, that's when you listen to it because money is probably the most important topic of your life. Alright KT!

KT: What's my quizzy?

Suze: Your quizzy is this... now everybody, a quizzy is where I asked KT a question, but I'm asking it to all of you as well.

Suze: And for a while there we thought, oh, we would just end with, can I afford it quizzes? But then I was like, no, I have to do all kinds of different quizzes. So therefore this is a different kind of a little bit of a quizzy.

Suze: But you have to be...

KT: A quizzy is a quizzy. You get it right or you get it wrong. Ok. Ask me and everyone listening.

Suze: But before you answer KT like, just give people a second.

KT: I'll give you all as much time as it takes me.

Suze: Can I contribute the max every year to a Roth IRA and to my SEP IRA and to my Roth 401k. Can they put the maximum in per year to all three of those accounts? Think about it. Think about it, think about it.

KT: (KT sings a little) Remember the little song that you would hear?

Suze: She wants me to give her an idea of what the answer is.

KT: I think the answer is no,

KT: I don't think you can, I don't think you can put a max into all three.

Suze: You don't?

KT: No. Yeah, I don't think you can do that.

Suze: What do all of you think out there?

Suze: Yes or no? (Suze makes the wrong answer noise)

Suze: You can, you absolutely. All three. As long as you meet the eligibility requirements for a Roth IRA and all the others. Absolutely, you can.

KT: You know why I don't know the answer to that?

Suze: Because you don't have a SEP IRA?

KT: I have a SEP IRA, and when I opened, I remember when I opened my first SEP IRA , when I came back to America I said, um, Len looked at me and said, do you want to put the max in every year? I said, sure, why not? And that's all I did. But I don't remember putting, you just don't know, don't, you can only put a...

Suze: Stop, stop, you're wrong. Once a year. Do you, do you understand what?

KT: Yeah, once a year.

Suze: But it all adds to all of those if you want. Absolutely.

KT: Ok. I didn't know that.

Suze: Right. Do you know the maximum amount for SEP IRA that you can put in?

KT: Oh, it was a lot of money this year.

Suze: Do you know what the max is?

KT: I have no clue.

Suze: Is that your other quizzy?

KT: How much is it?

Suze: I'll give you a choice. All right, the maximum that one can put in a SEP IRA is if you're self-employed is 20% of your net income or either 30,000 a year, 40,000 a year, $69,000 a year, whichever one is less. So, 20% of your net income or 30,000 a year, 40,000 a year or 69,000 a year.

KT: Whichever one is, I think it's the highest amount. 69,000. I used to put a lot in!

Suze: Ding, ding, ding. She did it. Everybody.

KT: I got that one right.

Suze: Oh, see, at least now she's happy. Which makes me happy.

Suze: All right.

KT: I wish we were celebrating Mika's birthday with her today. We're so far apart. We're out on this little island and she's way up north anyway. Happy birthday, Mika.

Suze: And I'm gonna do something that I probably shouldn't be doing right now. But I'm going to anyway. All right. Do you know how I've been telling all of you to go to my alliant.com? And by the way, for those of you who keep getting confused and you're going to Alliant Credit union.com and you can't find the quizzy because I didn't tell you to go to Alliant Credit union.com. I'm telling you to go to myAlliant.com because this is only for Suze people, right? And I want you to go there and remember I've been telling you go there and take the quiz questions and then put in your email address and a lot of you are saying why Suze whatever? Because they will officially announce this on May 6th, but I'm doing it today. I don't care, right? Because my next podcast is May 5th. So that's still before the official start date.

Suze: But for all of you who have already done it, you don't have to buy anything. You don't have to open up an account you don't have to do and take the quiz, take the quizz at the end of the quiz, then you have the ability to enter your email, on June 5th, which is my birthday and the end of your ability to do this. Guess what everybody? One of you will be chosen... your email and you will win $5000.

KT: Can you tell everyone that?

Suze: I'm not supposed to now.

KT: Are you, are you, are you, is it ok to say that?

Suze: I just did.

KT: I don't know, Suze.

Suze: It's all right. I want them to know why I keep saying it. So just do it. Can you do me a favor? You know, just do it.

KT: I don't think you're allowed to jump the gun.

Suze: They, they've been jumping the gun and everybody who did it already for the past few weeks, they're automatically entered all of their friends. They told whatever they're all automatically entered, but only if you left a legitimate email and you can only take the quiz once.

KT: All right. And it doesn't matter if you get anything wrong, it doesn't matter. It's not a quiz like it's just to see it. Its not like the quiz she gives me? It's really a good 15 questions. Ok. How are we gonna end this? How are you gonna wrap it, Suze?

Suze: So there's only one thing that matters when it comes to your money and what is it, KT?

KT: People first, then money, then things

Suze: and $5000. And if you leave your email and if you do that one of you, but all of you really will be unstoppable.

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