Podcast Episode: Ask KT & Suze Anything: Can I Afford a Swanky New Apartment?

On this edition of Ask KT and Suze Anything, Suze answers questions about term insurance policies, IRA rollovers, and interest rates.  Plus, a quizzie about selling a home with no mortgage to buy a fancy new apartment and more!

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Podcast Transcript:

Suze: September 26th, 2024. Welcome everybody to the Women and Money podcast. As well as everybody smart enough to listen. This is the KT and Suze episode.

KT: Ask us anything. I'm a little jet lag. Still.

Suze: You're a little something this morning.

KT: You keep waking up at 330 in the morning. So we got back from Spain. We had a great time. Everyone. We both gained three pounds each

Suze: and now we're in the end of September, which is also a big birthday month. We have lots of birthdays this month.

KT: So everybody who has a birthday this month, we wish you a happy, happy birthday.

Suze: And what else do you want to tell them anything about Spain?

KT: Yeah, we loved visiting with Mel. We loved seeing Sammy in the hometown she grew up in. I just have to tell you this. It was spectacular.

Suze: So we've been friends with Sammy and her mother Lithia now for 10 years because it was in 2015 that the first time KT and I walked the Camino,

Suze: it was Marley Camino, which is Lithia's company that hosted us. And since then, we have become such close friends. I can't tell you.

KT: We did two more caminos thereafter.

Suze: So however, but I just have to tell this story. So they've always told us, Sammy, her daughter who's just stunning, by the way, always told us about how she was raised. She grew up in Majorca in her grandma's home, grandma. And we pictured this home that she described on a cliff overlooking the Mediterranean, kind of like really elegant in its own way or that's how I pictured it. And we finally went and visited her there.

KT: It was on a cliff. It was a 300 year old home that her great, great, great grandmother and grandfather actually built. It had a well that you would get water from and it was everything and more that we envisioned.

Suze: And nothing had been changed over all these years,

KT: Including the wait, including the little itty bitty tiny bed that she had in her bedroom with her brother. These two little skinny wooden beds and Sammy's like, you know, 5 ft seven or eight. And she's gorgeous. And here she was in, I should post a picture of her sitting on the edge of this little bed that she grew up in as a child.

KT: The same sheets, kind of same Snoopy sheets sheets.

Suze: But anyway, fabulous. So fabulous. Anyway, we're glad to be home and it was a great adventure for you.

KT: Can't wait to go back to Spain. We just love it there.

Suze: So, KT, before we begin, where you're asking me questions, is I want you all to know if you don't already know that Alliant Credit Union while we were gone did have a rate decrease on their one year CD. And it's now 4.60 for amounts under $75,000 and 4.65 for amounts of $75,000 or more. If you compare that, by the way to the one year treasury, which is currently at about 3.92 depending on the state that you live in and your income tax bracket. That's still a great, great deal. 

Suze: Also, I just wanna say, remember that the 12 month CD at Alliant Credit Union is good for anywhere from 12 to 17 months and 30 days. You choose your maturity, you have to talk to them to make sure that you're able to do that. So if you compare that and you get it for 17 months and 30 days, now we're talking because the two year treasury is at 3.5% right now, right around there.

Suze: So you should still go to my alliant.com. If you want to lock in a good rate for that period of time, I would take advantage of it if I were you? What do you got for me, KT?

KT: My first question, Suze is from Scott.

Suze: Scott.

KT: He said, Suze and KT when my dad passed away, my mom put their home into a Tod to my two sisters. And I, so that's a TOD.

Suze: KT, Tell everyone...

KT: It's transfer on death account.

Suze: Ding, ding, ding, ding, ding, ding, ding, ding, ding, ding,

KT: Listen to this everyone. So Scott's oldest sister said to him privately. I don't want anything to do with this house. Pay me my third. The home in question is a lake home with an assessed value exceeding $750,000. And, and this is a little bit interesting. He said, Suze, I feel immoral asking but can I open a term life policy for my mom so I can cover the cost to buy out my sisters? I don't think that's immoral. So anyway, that's his question.

Suze: Scott, here's what I would tell you. Now, it's not an immoral question, but I'm not sure it solves your problem. And let me tell you why a term life insurance policy is only good for a specific term.

Suze: So let's say, I don't know how old you are right now, but let's say your mother is older. Let's say she's in her seventies and maybe she's gonna live to her nineties, possibly even 100.

Suze: There's no way that a term policy at this point in time, if that's how old she is, is going to be cost effective. You may find that you pay more in premiums over a long period of time than you do if you were just to save that money, possibly to have the money to buy out your sister at the time. So I don't think a term policy is the way to go. 

Suze: Remember, term life insurance is meant to only be there during younger years before you've had time to accumulate assets and it allows you to do so at a very cost effective rate, it's not meant to be your whole life. So if I were you, that isn't how I would solve this problem. I mean, I could go on and on about ways that you could solve it, but that wasn't your question to me. So, no, I don't think your term life insurance policy will do it. I just don't. All right.

KT: So Suze, the next question is from um a listener that said, I just got my must have documents and started filling them out. It's a little surreal thinking about passing. I read that I may wanna make my trust the beneficiary for all of my bank and retirement accounts. Is this accurate or would it be better to make some or all of them POD provided? I have no debt or expenses after death?

Suze: So here's my question, KT, does he say or she say how old they are? Do, do they say if they're married anything?

KT: No, but they're just filling them out for the first time.

Suze: So here's what I want everybody to know about. The must have documents and what are the must have documents. They are a living revocable trust, advance directive and durable power of attorney for health care, a will and a financial power of attorney. Those are four documents that you must have. And if you want those by the way, go to must have docs.com and take a look because that's where you can get them. 

Suze: What you have to understand is if you are married, you never ever, ever want the trust to be the beneficiary of any retirement account or any HSA account. Let's be clear on that. So when this person says that it should be my beneficiary for all my bank and retirement accounts, not if you are married.

Suze: Again, I am underlining this. You do not want your trust account to be the primary beneficiary if you are married of any retirement accounts and or an HSA insurance account. So here's what you all need to know as well. Sure, you can make your accounts and everything pay on death. But as I've said, many times, what if you don't die? What if you become incapacitated, then the pay on death account isn't going to help you who's going to be able to access that money if you need it. A living trust with an incapacity clause in it, which the must have documents have is the way to go bar. None. Just telling you you want to avoid problems. Get the must have documents. All right, KT.

KT: So the, the next questions from Nicole...

Suze: Doesn't my voice sound deep today?

KT: It sounds better. Yeah, it was a little bit hoarse yesterday. So I'm glad today it's smoother.

Suze: Tell them how I ran.

KT: Oh my God, Suze. And I had a connection from Majorca to Madrid. Madrid, Miami and the connection in Madrid was less than 45 minutes. The plane got there a little bit late but still.

KT: So they changed the gate as soon as we comfortably arrived to it, to the other side of the airport with a train with a quarter of a mile of walking and with all those floor escalators for another half a mile. Suze was the marathon woman. Unbelievable. And we were the last people there as their

Suze: They held it.

KT: Yeah, they held the plane and I said, please, please, we need to make this flight and she looked at me. She said, oh, Senora, follow me and we ran and Suze was running like a bunny. Never saw her. I never saw you run like that in the 24 years we've been together.

Suze: Because the thought of missing that flight was more than I could deal with. All right, go on.

KT: My next question is from Nicole. She says, hi KT. She wrote it to me. Do you know when Fitz will have a plan to advise us. So Fitz is Keith Fitzgerald everyone.

KT: And she said, I've been waiting ever since Suze mentioned that possibility. Money market is still good, but I have a feeling it will tumble next week. I can't wait for your answer. So I'm not gonna answer it, Suze. You tell Nicole.

Suze: So first of all Nicole money market rates are not going to tumble next week. So don't freak out about that. 

Suze: Now, hundreds of you are writing and asking that question. So what did I do? I sent them all to Keith and said, what do you want me to tell people, Keith? This is in your hands. This is your brilliant brainchild of how it works. And here is what he wrote the back. He said, tell them that we're down to brass tacks and on the home stretch, we are quadruple checking the math to be sure it's right.

Suze: We need to make sure that every research point is backed up quantitatively and we are doing a final review legally to ensure the appropriate protections are in place and that the language is sufficient to clearly delineate what's happening and the boundaries associated with users who sign up. I am quoting Mr Keith Fitzgerald there.

Suze:  So I'm bugging him. KT is bugging him, right? Everybody's bugging him, but he is a man of perfection. And until he knows that every single thing works the way it's supposed to, it's not gonna happen. But I do think it is probable that in October you may see it and if not October, I would almost say for sure, by November, almost for sure, but we'll see what happens. All right.

KT: Next is from Teresa or Teresa...

Suze: Wait... I have to say, right. And partly it's my fault because when Keith talks to me about it, everybody I keep saying.

Suze: But what if, but what if they want to do this? What if that, so he has to keep going back and redoing the math and everything to make sure that every single one of you will be taken care of. All right, go on.

KT: OK. This, this is my favorite kind of question. Everyone from Teresa.

KT: You ladies rock. I heard I can do a one time rollover from a traditional IRA to my HSA account tax free if so how?

Suze: You are absolutely right, My dear Teresa. One time and one time only if you wanna use the money in an IRA, a traditional IRA. So you've never paid taxes on it or even a pretext, IRA rollover that you may have, you can take that money and use it to fund up to the max if you want of the HSA that you have and it is absolutely tax free. So if you want to know how to do it in your particular company, I would ask your HR person how to do it. All right.

KT: OK. So on the theme of 401ks, this is from Jenny. My employer is being bought by another company. I have a 401k with Fidelity. They're switching to a 403 B with Empowered. I think that was formally prudential. Should I roll over or start a new retirement account? I don't know much about 403bs. Thank you. A

Suze: 403 B works essentially the same way as a 401k, really...

Suze: That's what you need to know. However, if it were me and I had a 401k with Fidelity and now they're switching it to a 403b within power. What I want you to think about, however, is if you did an IRA rollover with the 401k that you have at Fidelity and start a new retirement account there, you also have the ability if you want to start converting to a Roth IRA and your investment options will be far grander than any 403b with E hat they'll offer you. 

Suze: But if you make a lot of money and you want to do a backdoor Roth IRA one day, if you have a traditional IRA that you rolled over and you're not gonna be able to do a backdoor Roth. So therefore you might just wanna leave it with the 403b with Empower just depends how much money you make a year, how much money you think you're gonna make in the future. And if you like the investment options and the fees that empower is going to charge you other than, and, and actually the amount of money that you have in there because if there isn't a lot of money in there, then, oh, you bet I would do an IRA rollover and then convert it to a Roth IRA. All right.

KT: Next question, Suze is from JJ. I've rolled over a 401k to an IRA and the money is now sitting in cash instead of the old mutual funds since they were unavailable in the IRA. With it being several $100,000... our listeners are getting so rich. It's not even $100,000. Is it better to quickly reinvest it all or try to do dollar cost averaging dollar cost. Averaging was several $100,000. I, I mean, I'm shocked. Go ahead.

Suze: What are you shocked about?

KT: The amount of money all these questions I'm getting there. They are getting wealthier and...

Suze: That's happens when you listen to me for the past 20 years. And for those of you who are new to this podcast, you can also watch the Suze Orman show that all of these people most likely watched before the podcast and it's on Freevee so you might want to take advantage of that as well. But here's what I would tell you JJ.

Suze: These markets are a little precarious right now. Do I think they're gonna continue up? Oh, you bet I do. But nothing goes straight up. So for you to take a few $100,000 and invest it. All right. Now, I think would be the biggest mistake you could ever make. Pick out a few things that you want

Suze: and you can invest now and then just see what happens and then little by little dollar cost, average this money into the market. So, bottom line, my dear one, I would be dollar cost averaging slowly, by the way at this moment and not investing all at once. What do you got next, KT?

KT: From Karen? Hi KT. Pick me, pick me, pick me.

KT: I love when they write that to me. Over the last several years, I've accumulated a 12 month prudent reserve and that amounts to a lot of money. 75,000 in one account and 30,000 in another. Good for you, Karen. I've had the money in high yield savings accounts so that money is made 5% interest. However, as the interest rates are gonna come down, I'm wondering what to do with that prudent reserve. I know it's supposed to be readily available, but it seems like such a waste not to make great interest on that amount of money, Suze, what should I do? I love you guys. She said I love you guys.

Suze: Karen. First of all, I don't think you're going to see the 5% or the 4.5%. I doubt that you're really at 5% right now. Maybe you're at 4.5% go down immediately to nothing. So everybody needs to stop thinking that interest rates going down, it's gonna go down bam and in a month from now they're gonna be at 0% again.

Suze: They're gonna go down little by little because this is money for an emergency fund. You cannot lock it up. You have to be able to get at it any time that you want. You might, if you want to make sure that you're getting 4% or close to 4% get the one year treasury bill right now, put the money in there, you can sell them at any time. 

Suze: If interest rates do go down, you'll probably get back at least what you put in when you sell it. But that way you've locked in 4% for the entire year and then we see what happens there. You really can't lock it in for longer than that. Only because it's an emergency fund and maybe one year from now the markets will be in such a place and you'll have more money that maybe you take that money and we start to invest it.

Suze: But for right now, don't freak out about something going from 5% to 4% in your case. That's about a $1300 difference or $100 a month. And even though that's a lot of money, it is, the situation never forget just a while ago, not that long ago. Interest rates were at what? 0% 0.1% many of you, by the way are still in bank accounts where you're only getting 0.1% or that, what are you doing? That is just nuts. Anyway. Go on KT.

KT: All right. Next is from Melissa.

KT: Hi, Suze. I understand you're a big fan of dollar cost averaging. I will be receiving about $10,000 for a car accident settlement within the next few weeks and $30,000. Next September, I'd like to invest all of this money in dividend ETFs, because I have no debt. I'm contributing 12% to my 401k and I have a six month emergency fund.

KT: Do I put everything in a high yield savings account and then invest maybe $1000 at a time every week into a dividend ETF or what's the best way to go about dollar cost averaging with large sums of money?

Suze: Given that you only have a six month emergency fund when I have been telling you now for years that everybody should have an 8 to 12 month emergency fund. Looks to me like girlfriend, you're gonna be taking this money and putting it in a high yield savings account or money market account and you're gonna add the $30,000 to it again when it comes in a year from now. And then you're gonna see, is that an eight or 12 month emergency fund? And if it is, and there's anything extra then we'll talk about dollar cost averaging into things at that time. All right, KT.

KT: Ok. Next question is from Pat and Pat is asking Suze and KT.

KT: I have a question about IRMAA. So I have to tell you all I didn't know what IRMAA was, so I looked it up. It's an Income Related Monthly Adjusted Amount from Medicare. Suze will tell you what that means. But this is a question about IRMAA...

Suze: You pay IRMAA.

KT: My husband, my husband...

Suze: Did you know that you pay IRMAA every single year?

Suze: So do I. Alright. Go on, go on.

KT: IRMAA Must be rich man. All right, my husband and I are selling our rental property as we no longer want to be landlords. Nor do we want to invest in other options that said we are prepared to pay the taxes. No, we will have to pay IRMMA for a year and just wanna be totally done.

KT: So then the question is, do I have to wait for the two year Look back with Medicare to charge the IRMAA fees? I don't know what that means.

Suze: All right, let's see if I can explain this to you. As you know everybody when you turn 65 which is so fabulous. You qualify for Medicare and I can't tell you how incredible Medicare is when it comes to health needs. Do you know that that entire operation that I went through and everything I did not pay one penny for it.

KT: What do you think that would have cost? 

Suze: Well over a million, over a million for what they had to do and how long they had to do it. I mean, I'm sure it was over a million dollars anyway. So, what is IRMAA?

KT: Wait, so she paid 0.

Suze: You know that.

KT: I know I'm telling everyone listening. That's what Medicare is incredibly, incredibly important every year. Let's hope it never goes away.

Suze: So you turn 65 and Medicare has a part A and a part B and when it comes to part B, you pay a monthly premium for it based on your income and your income depending on what it is, you could pay like up to $500 a month. I think we pay 526 a month. KT out of our social security check for Medicare Part B.

Suze: But IRMAA is really, it's a monthly adjusted amount for Medicare, but IRMAA is based on your modified adjusted gross income from two years prior. So they're always looking back two years. And so therefore, uh you know, if you had an income sale from a piece of property in 2024 the income from that sale in this case would generally affect her 2026 Medicare premium.

KT: I got it.

Suze: Now, here's the thing. However, with social security, if you have what's called a life changing event and I think it's form. Oh God, are you gonna quote me on this social security at SS A dash 44. Ok. I think that's it. Right.

KT: You're probably right because you memorize numbers. Anyway, you can request that. Social security adjusts your IRMAA based on your current income.

Suze: Usually if there's a significant reduction to a qualifying event. So, and I have to tell you the sale of a property qualifies for that. So Patricia, if I were you, if you want the IRMAA increase to start in 2025 and be done after that one year, just you need to contact them and see if in fact it qualifies or what happens with 2024 what, 2022 whatever it is you need to contact them and see if it will help you. All right.

KT: Ok. This is my final question from...

Suze: Do you wanna know something here? I wouldn't necessarily wanna get it done. Oh, I, you just handed me her income tax... her email. Did you see on the bottom? It says she wants to do it now because she thinks tax brackets are gonna go up over the next few years. That's why she wants to do it now. I got it. All right. See what you can do. Life changing event form.

Suze: SSA dash 4444 you said?

KT: Ok, so from Danette. Hello Suze and KT. Happy Travels, Suze. I purchased the must have documents online in 2009. Yes. Yes. She is smart.

KT: I opened my revocable trust changed my house title. You mentioned the incapacity clause. Is it available with my Docs automatically or do I need to fill it in, you know, all over again and have them co-signed and notarized again? Then she says, do I have to buy the newest Docs? This is from Danette.

Suze: So Danette, here's the great thing about the must have docs. It's a one and done.

Suze: That's it. Meaning what once you have purchased them, no matter what updates are made, you qualify for the updates and without any extra cost at all, you know, I would never talk to you about something that I want you to buy that you have to continue to buy and buy as it changes. So unlike many of the other companies, when something changes, you have to buy it again, that's not true with the must have docs, your 2009 ones that you did buy has the incapacity clause in it. 

Suze: However, given that that was so long ago, I think it's a really great idea if you re-did them so that you see, where is everything? How did you do it? Is there any changes that you wanna make and therefore on your documents. When you go back and you go to the program, there's a little help tab or whatever, just contact the company and you'll automatically be updated to the program as it is today and it's just been totally updated by the way. So if I were you, I would do that. I know another thing I love about the must have docs KT besides that. You can share it with as many people in your family as you want.

Suze: So it's like it just takes one of you to do it. $2500 worth of state of the art documents you have to go to, must have docs.com to see how much they're selling for now because I actually don't know. Right. But whatever it is, it is worth the price and you can share it with as many people as you want. Quizzie time. KT.

KT: OK. What do you got for me?

Suze: This is from MS. All right. And she says the following and I know it's a she, by the way, anyway, I'm 40 which means that I've gone by people first, then money, then things for half of my life. Thank you. 

Suze: I currently own my home outright but only have about 35% of total net worth invested in the markets. The rest are in cash. I have relatively low expenses for myself. Now, are all of you listening to these facts because this quizzie isn't just for KT to be able to answer, I give quizzies for all of you to be able to answer, to know if these things ever happened in your situation, what you should do. 

Suze: All right. Now, again, this person is single no kids. She says, however, my job is quite unstable. Hence, I must be prepared to be retired at any time. I am a citizen of a low cost of living country. Hence, plan on retiring there, should the need arise. She's 40. She plans to retire there if the need arises. All right, I am able to live at my parents' home indefinitely from my estimates. If I were to liquidate my assets and put the money in the bank with 3% interest, I should have two times the monthly expenses that my parents currently use.

Suze: Has anybody ever heard of inflation? But anyway. All right. My question...

KT: Sounds like a great place to go.

Suze: My question is I have been thinking of upgrading my apartment to a swankier one in the city center, downtown vibes, better air. I plan to use all or most of the cash I have on hand for the upgrade or take a minimal loan. Now, I am assuming here that she has a home that she owns outright. She may be thinking about selling her home, moving to a bigger swankier apartment in the city, but she'd have to use all the cash from her home and to make an upgrade or make or have a minimal loan. Do I approve? Think about it.

Suze: Oh, you're looking at me like...

KT: There's nothing to think no brainer here, Suze.

Suze: Is that no?

KT: Why would you do that? I would never do that if I had an unstable job and I'm 40 years old, I'd want to accumulate as much cash as possible. So then I'd feel free.

Suze: So, you've denied her?

KT: Yes. Totally.

Suze: Say it, Kt.

KT: You are de-nied. That's the way you say it.

Suze: So, what's funny about this quizzie is I wrote her back.

KT: What did you say?

Suze: I sent her a little picture of myself with a stamp that said deny. They're ding, ding, ding, ding, ding. So you're right. But here's why MS that you're thinking in my opinion is not logical. You currently own your home outright, you don't have any bills, whatever. And what you're saying is that you want to move to a swankier place, which means more expenses, more taxes, more everything and you don't have a stable job.

Suze: So you have to be prepared to retire at any time. No, at the age of 40 if you lose your job, you get another job, you stay where you want. Obviously you're liking wherever you live and you just want a little more life around you. So go to that place, the Swankier place and be entertained and then go home to a place that you own outright.

Suze: So at 40 years of age, this is still your compounding years. These are not the years for you to be spending money and you need to be saving it and investing it and being wise with money. And then when you're old, like us, you can live on a private island, you could do whatever you want at that point in time.

KT: Why doesn't she just rent something in the city and see if she likes?

Suze: No!

Suze: She doesn't need to be paying more money.

KT: I don't know why she wants to do that.

Suze: That's not our problem. Here's the other thing you say that if you liquidate your assets and you put the money in the bank with a 3% interest, how do you know what interest rates are gonna be? How do you know what your assets are going to be? If you had done this plan years ago?

Suze: And you were thinking, oh, it's 2007, you've now lost your job. You're gonna sell your home, you're gonna sell your assets. You wouldn't get anywhere close to what anything is currently worth today. And you say that you would have two times the monthly expenses that your parents currently use. Do you really wanna live the lifestyle that maybe your parents are living?

Suze: So your thinking is wrong on this, you are to think that you are going to make the most out of your life here where you're obviously enjoying yourself or you would be back home already. You're gonna save it. You're gonna invest it. If you wanna swank your lifestyle, go there for the weekend and come back, do whatever but no, you are denied. All right, KT...

KT: That's it. That's a wrap.

Suze: That's a wrap. We may have gone too long today, but we'll see. Sunday is going to be a very interesting Suze School. Do you wanna know, why?

KT: Do you know what you're doing?

Suze: Yes.

KT: What is it? Give us a hint. Tell us why it's gonna be interesting.

Suze: It's gonna be interesting because for over a year now, have I not been saying to all of you to buy 20 or 30 years preferably of treasury bonds? Have I not been telling you that? Well, when interest rates went down a week ago, those bonds absolutely skyrocketed so much. I can't even tell you now, I have a new strategy for you and therefore for those of you who didn't do it back then,

Suze: I'm gonna give you a new strategy of what I want you to be doing now. So until Sunday, there's only one thing that we really want you to remember when it comes to your money. And what is that KT?

KT: People first, then money, then things.

Suze: And if you do that, stay safe, don't wanna live in a swankier place and stay healthy. You will be unstoppable.