Podcast Episode - Ask KT & Suze Anything: Can I Afford to Have a Baby?

On this edition of Ask KT and Suze Anything, Suze answers questions about RMDs, ROTHs, investing in art and wine. Plus, a “Can I Afford It?”  quizzy and so much more!

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Podcast Transcript:

Suze: May 30th. Hi KT.

KT: Hi, Suze. Are you still jet lagged?

Suze: A little bit... but 2020 everybody. Welcome to the Women and Money podcast and everyone's smart enough to listen. This is the KT and Suze Anything addition. Now, I know you all want to know about it. So, and what is it, KT?

KT: Our trip, our safari. Wait, are we gonna reveal what animals we saw?

Suze: We're gonna reveal everything but you know what...

KT: I've a mountain of questions in front of me.

Suze: I know you do. But KT everybody wants to know. So tell everybody briefly about our trip.

KT: OK. Here we go, everybody. First and most important. We need you all to go to the Women and Money community app because that's where you're gonna see the photos of what I'm about to mention. We were able to see the big five and the big five were the five most sought after animals on every safari. We saw an elephant, we saw the leopard, we saw a lion, we saw an African buffalo and the fifth and most elusive is the white rhino, which we were able to find on our departing day as we left the Kruger camp.

Suze: And we just didn't see one of each. We saw herds of them. So it was really extraordinary. Go on. Sorry.

KT: So we, we started in Zimbabwe and that's where we actually encountered the Victoria Falls. Suze and I have been trying to get to the Victoria Falls for almost 20 years. And for many reasons, we were never able to make that trip until now. And we're so happy we did. It was a big bucket list for us. And in the Victoria Falls in Zimbabwe, we actually went to an elephant orphanage, which is where my little sister's birthday dream came true and she was able to interact with elephants. And this isn't like

Suze: the zoo. This was in the wild in massive massive amounts of acreage where a small family of elephants roam, but they're friendly and they become um I guess accustomed to people and they allow you to embrace them, literally, hug them, scratch them, come up personal and you know, close and personal with them, feed them.

KT: But it's very um it's an awesome experience because we were in their habitat following them. They're, they're not like chained to anything. They just live in the wild and we became part of their environment extraordinary. And then we went on to Tintswalo in the Kruger National Park. A must for anyone looking to have a very authentic colonial safari experience. It was established by a family, this beautiful Tintswalo camp and it was so much fun and our guide, Mike was beyond the beyond. Probably the best experience for all of us was to have such a knowledgeable and passionate guide who taught us so much more than we would ever imagine about the wildlife, about being people among animals, being one of them. It was great.

Suze: But I think the best way to experience it with us is really go to the women and money community app. Take a look at just some of the pictures. The hippos are what we really encountered in Zimbabwe on the rivers. Where our little huts were right there where the hippos came out of the water and they were really pretty close to us and we were like, oh my God, look at this. And so, you know, it's, it's impossible to really encapsulate what we've experienced in the past week or so. But the main thing we experienced was we fulfilled a promise that was made over 20 years ago to Sophia and Travis, our niece and nephew that one day we would take them on a safari and guess what we did. And for us, that was the greatest experience of all.

Suze: So now that you've heard about our adventure, we want all of you to just venture to my alliant.com. You have approximately five days left to take the stay smart quiz for 2024. Only five questions. Don't you want to know how you're doing with your money? Easy, easy, easy questions. But the real reason I want you to do it is after you've done that up will come a place for you to enter your email if you enter your email and this is only good now till June 5th. Everybody after that date, one of your emails will be selected and guess what? You will win $5000. So don't pass that up. All right, KT, what do you have for me today?

KT: My first question is, hi KT and Suze, KT is the best.

Suze: I know that you don't have to tell me that, KT.

Suze: Wait, this is, this is it before you go on, tell them what happened this morning. I was in bed. It was very early. You were sitting in the chair looking at the questions that you were going to ask and I looked over at you and what happened? What did I say to you?

KT: You started crying.

Suze: Tell everybody...

KT: She told me she was in love with me and never loved anyone as much as me in her life. Why do you want me to tell them that?

KT: Because because it was so sweet.

Suze: No, because I get how lucky I am. Everybody I get that KT is the best and I get that. I am far luckier having her, believe it or not than she is having me in my opinion. All right. Continue KT.

KT: See what you did, Ed, this question from Ed, see what you did.

KT: And then he, he writes, hopefully she will pick my question while I sure did. I'll keep it short. I'm 51. I have 10,000 in a bank account. Would susie suggest investing it in a low cost brokerage account or using it to pay the taxes on converting some of my somewhat hefty balance $600,000 in a traditional 403b to a Roth 403b.

KT: Now, Suze, remember Ed's 51.

Suze: If it were me, Ed, I would absolutely take that $10,000 since you want to take it and invest it anyway in a brokerage account. I think that your money would be far better converting money to a Roth 403b where you will be also investing it, but you're going to be investing it tax free. So yes, I would be doing that if I were you, but I would be checking it with my CPA KT.

KT: So next question, another man, Mike.

KT: I love, we get all these mixed up questions because it's a women and money podcast. But I love when men come on.

Suze: I thought she was going to say, I love answering questions from all these mixed up men.

KT: They're not, no, they're not mixed up. They're, they're listening. So, Mike says I'm 61 years old and my wife is 59. We are fortunate to have about $6 million in retirement savings currently. Good for them.

KT: Good for them. Right, Suze?

Suze: Can I just butt in for one second?

KT: Yeah.

Suze: So, here's what's interesting a while ago, I was being interviewed by someone and they wanted to know how the questions that are coming into this podcast differed from the questions that came in for the Suze Orman Show in 2001 all the way up that I did, I think to 2015.

Suze: And I said, well, I'll tell you something, everybody when I was on the Suze Orman show, which you all should be watching, by the way on FreeVee, because they're really fun and still important to watch. But anyway, when I was doing the Suze Orman Show, almost all the questions were, I'm in debt. I don't know what to do. I don't have any retirement. I need to claim bankruptcy and on and on and on. Very few. Seriously. Very few were about, I have a million dollars here, $6 million there and on and on today, the majority of the questions because most of those people now that are writing in, listened to me from all of my books, watched me on TV, all those years and now they're all multimillionaires. The majority of them, they all own one or two homes outright. They are all doing so great. I cannot even stand it. I'm so happy for them.

KT: That's a tribute to your work.

Suze: So, but that's a tribute. Everybody to you can go from less to more. You can have money in your life.

Suze: There is nobody out there that is excluded from being able to do that. The only person that excludes you from doing that is yourself. Alright KT, go on.

KT: So, Mike is saying that he and his wife are very, very fortunate and they plan on working until they're 62. So he's 61. She's 59 perhaps late and, and continue to work. My question is regarding RMDs. Have you done an episode or do you plan on doing an episode on what type of planning you should do? Three years prior to retirement? I find it all a bit confusing. I'm not sure how to prepare.

KT: If not, can you direct me to some resources on RMDS? I love you, Suze. I love your podcast and the community that's from Mike.

Suze: We love you too, Mike. And the community that Mike is talking about is the women and money community. And if you simply go on Apple apps or Google Play, you get to download the app for free and it's on that app that I say a lot of things that I do not say or do on the podcast. You know, KT, I think I answered him. But let me just tell you, Mike, the most important thing. I think you should do. Most important thing.

Suze: You asked three years before RMDs start, what should you do? Why in the world would you wait for three years before you take RMDs? Because you have to remember that they changed the RMD laws. I think it was the Secure Act 2.0 and I think KT it was December of 2022. They changed the rules. Why are you laughing?

KT: Because I can't remember what they did in December 2022. How do you remember all these dates? Oh my God. She's a genius.

Suze: No. Don't say that. I don't like when you say that anyway. Anyway, so they changed the rules and these rules really apply to you, Mike even more than me. Obviously, they changed the rule from RMD starting at the age of 72 to 73. But the big change is that starting in 2033, if you were born 1960 or later, RMDs don't start until you are 75. Now, think about that here, you are only 61. So that's 14 years from now. I don't care about three years before your RMDs. And now we have a really big problem.

Suze: Why don't you, now if you can start to convert money from a traditional IRA or a traditional 401k or wherever it is to a Roth IRA, a Roth 401k. Why don't you make sure that you're doing backdoor roths or whatever?

Suze: Because if you were to do that, then you wouldn't be building on the money that you have in these retirement accounts right now, you would actually be building your Roth retirement accounts. So when the time comes, guess what, your RMDs won't be that big anyway. Just so, you know, so that's really what I would be doing.

Suze: There's all kinds of things that I could tell you to do that. I'm sure I wrote you about. But that is the most important thing I want you to consider. All right, because if you start planning now, you'll be very happy that you did 15 or 14 years from now.

Suze: All right, KT.

KT: You don't like RMDs.

Suze: I just think I'm mad at myself that we have to take them. I told you before.

KT: You told us a couple podcasts that you made a mistake.

Suze: I made a serious mistake and I was yelling at the person I do all my money with. I was like, why we were discussing what my RMDs are going to be? When should we take them? Should we take them in like kind, what should we do with them and things like that?

Suze: And I said, and why the heck didn't we convert in 2010 when we were able to convert all of it? Who cares if I would have paid taxes. I was allowed to pay taxes over 2011 and 2012. Not 2010.

Suze: And for all these years, I would have had all this growth because I did magnificently truthfully, KT for us during all those years. And I'm like, what was wrong with me? What were you thinking? I was not thinking.

KT: I, I love this question, Suze. This is a need or a want question from Eric.

KT: Curious on your thoughts.

Suze: Another man.

KT: Yeah, I, I picked a lot of guys, Suze, curious on your thoughts on investing in art and wine, both solo and I love this question and actively managed with a company or through an app. So Eric said, asking your thoughts on investing in art and wine. I love this question. I like it.

Suze: Then why don't you answer it?

KT: Yes, yes, yes. However, I'm gonna answer if you can afford it because it's, if this is a need or a want, it's really a want. And if you can afford to invest in art and wine boyfriend, as Suze would say do it however...

Suze: But you don't know I would say that.

KT: So, KT would say boyfriend do it. Now, wait. KT has another bit of advice. I'd be very careful in who I invested with in terms of a company or an app.

KT: I think it's really important that maybe you start some direct investing either with a small gallery that you know, or with the wineries themselves, every great winery here, just here in our own country in California has fabulous programs and investigate what you wanna do before your investment.

Suze: Oh, she's so proud of her answer everybody. You, you know how she always says, oh, you should see her face when she's talking about me. When an insurance question comes up, you should see her face. She's so, so (laughs)...

Suze: Here's what I would tell you, Eric. There are more things than you realize when it comes to investing in art or wine.

Suze: It's storing the wine. We have a very big wine collection.

KT: We do, we do, Suze doesn't drink by the way, everybody, but she has a sip.

Suze: Maybe when KT met me, I had already started to invest in wine and I took her to a cellar that I had and she was very impressed with it. And of course, that investment went into her stomach. But that is, besides the point...

KT: It went into a fabulous fine glass. That's right with a great dinner.

Suze: But it cost me a lot of money to store those wines just so, you know, it costs us money today to store all the wines and insure them. All right. Now, let's move on to art.

Suze: We invested in some art and we thought we were gonna do great with it. And one of the pieces that we had evaluated the other day actually has gone down in value rather than up.

Suze: And so when it also comes to art, you have to ensure your art. So there is a cost to protecting these investments and therefore you better take that into consideration. So, Eric, you better know what you're doing because chances are it might not be as great as an investment as you think after all the costs, especially if you don't have a reputable person to guide you start with the wine.

Suze: I have to say one other thing, most people who invest in serious pieces of art, they invest because they love the art, they love it, they love looking at it. They want it around them. They don't necessarily care about selling it ever. They just kind of want it. But KT, I know we can go on here. Why don't you tell them about the art that you missed investing in? Come on a quick story. Come on, KT.

KT: I was very, very good friends with Andy Warhol, everybody.

Suze: And tell him what you passed up.

KT: And I remember and I was young, I was a young art director in New York at the time. And I remember and Andy loved me. He would, he would take...

Suze: Everybody loves you!

KT: ...take me to studio 54 and all those great night spots in New York. So anyway, I remember one day we were in his factory um in New York City and, and he was doing all these silk screens of Chairman Mao and different portraits, his famous portraits.

KT: And he asked me if I wanted one. And I said, how much is it? He said, for you, $350 dollars. Everybody. I said, well, let me think about it. Maybe, maybe I'll get one next month or so. I didn't think at all about it

Suze: And you didn't ever really afford it at that time.

KT: No, no, no, no. I, I could afford it but you didn't do it. I didn't do it.

Suze: Why?

KT: Because I thought I could just do this any time. We're friends now.

Suze: Just tell everybody what that sells for today.

Suze: I don't really know the exact price of his prints to get many millions, millions, many millions. He had the Marilyn Monroe. He had quite a few famous, great, great portraits. Grace Kelly. Grace Kelly was a beautiful one. Yeah. All right.

Suze: So anyway, you, you probably shouldn't listen to KT. All right. Go on.

KT: Ok. So next question, stick with the wine.

Suze: There was another thing she passed up that would have made her so wealthy. It's not even funny, but we can talk about that another time.

KT: Coffee, right. The coffee story. Oh God, it kills me.

KT: All right. Next question. Let's get into my questions. I have a mountain of questions. Hi, Suze. Let me start by acknowledging you as a Trailblazer and beacon of light for all of us women who want to take charge of our lives. And finances. Thank you. And I am. This is from Darchase.

KT: She said I am a recently widowed retired veteran spouse equity in the home that we purchased is in 2005 has doubled. The present mortgage rate is 3.5% with a balance of 100 and 16,000. The home was built in 1986. It's presently worth about 270,000.

KT: Suze. I would like to do some renovations and I've been thinking about using the equity to acquire upfront cash, a 30 year refinance loan, especially with rates in excess of 7% is out of the question.

KT: What would you suggest as an alternative to acquire cash without losing my current rate of 3.5%?

Suze: Here's the scoop girlfriend you didn't list in this email. And first of all, both KT and I are very, very sorry for your loss.

Suze: And the truth of the matter is that if you want to do some renovations, you didn't tell us any other alternatives that you have for cash, meaning a retirement account, an investment account, anything else? So I'm gonna assume this is the only way that you can do it. So if I were you, I would simply do even though I don't suggest it right now because interest rates are so high, but I would seriously simply not refinance my home. I would try to do a home equity line of credit in the hope that they see that you have enough income and everything to qualify for that. When interest rates go back down again. If you want, you could then possibly refinance all of it back to maybe 3.5% or who knows what. 

Suze: But here's something that I just want to say for all of you. If you ever do refinance in any situation, if you have, let's say a 30 year mortgage, you have been paying on it now for seven years, you have 23 years left. Now, interest rates have come down and you've decided. All right, I want to refinance and if you refinance for another 30 years now, you have totally obliterated the reason that you should really be refinancing. 

Suze: So if interest rates come down and you do refinance, and let's say you owe 23 years still on your mortgage, then you would refinance for 20 years, never refinance for longer than the period of time you currently have left on your mortgage.

Suze: All right, KT.

KT: Ok. This is from Lynn. Hi Suze. I want to open a 12 month CD with $3000 and I also want to add more money in every month, like $1000. Is it possible for this type of account?

Suze: It's actually it's not.

Suze: And let me tell you why, let's say you decide you want to take advantage of the high rates of the CDs right now at Alliant Credit Union, which you probably should do if you want a 12 month. Just so, you know, and you lock in that rate  the next month, the you cannot add to that account and get that rate. The minimum is $1000 to get a CD at a bank or a credit union. So therefore, every month you would open up another CD.

Suze: And by doing that, you would get the rate that was in effect that month. So I don't want you to think that you can open a CD that's giving you a great rate today and eight months from now, if rates have gone down, you're gonna get the rate that you got when you invested your $3000. So a certificate of deposit is exactly, that is a certificate of that deposit.

Suze: If you add $1000 it will be a certificate for one year or whatever you do of that 1000.

Suze: Otherwise you always have the ability to do a money market account for $3000. Get maybe a higher interest rate, who knows? And just add the $1000 a month into that up to you. The danger with that is if interest rates go down, you are going to get a lower interest rate with a certificate of deposit. You lock it in. All right, KT. Ok.

KT: Next question. All right, next question ready. All right. Hi, Suze. In your podcast. Don't be partners with Uncle Sam.

Suze: That was a great podcast.  Did you listen to it KT?

KT: Not all of it. But I know you underline the superiority of Roth retirement accounts. I agree with you. But there is a glitch. This is from Lana, but here is the glitch...

Suze: There is no glitch.

KT: She thinks she has a glitch,

Suze: No glitch.

KT: She thinks she has a glitch. My job only offers a 403b traditional, not a Roth traditional. Everyone is when it's invested with pre-tax dollars. So

Suze: So smart. OK. You pretty, you're smart. OK. All right.

KT: Let's get through the question. Anyway, I opened a Roth IRA with Vanguard and I've been contributing to the max since 2021 Suze. I'm 38 years old. It seems like contributing up to the max of 23,000 in a traditional 403 is better for my future.

Suze: So why can't you do both? Number one.

KT: So here's what should she do?

Suze: Of course, here, if you say contributing the max which is 23,000 in 2024. If you're under 50 it's 30,500. By the way, if you're 50 or older for a 403b, I don't know if they match your contribution or not.

Suze: However, you could absolutely do both. If you don't have the money to do both, then put the max of $7000 this year into your Roth and the remainder of 16,000 into your 403 b just that easy. If you could max out both. Great. That's what you should do. It's better to do something than to do nothing. 

Suze: However, one last thing, remember, go back in the podcast where I do a whole session on how possibly investing in an investment account is better than a pre-tax retirement account after the point of the match. Just listen to that and then decide. All right, KT got any more for me or is that it? That was it? Are you sure? All right, because guess what I have for you,

KT: A Quizzy!

Suze: And everybody. This is a great quizzy. I love this quizzy, but it's not just for KT, as I say, every week, it's for you as well. How would you answer this question? Because there will be many of you out there who happen to be in this exact situation. Are you ready, KT?

KT: I'm ready.

Suze: This is from Ashley and I picked it because I bet there's a lot of our younger listeners that are in this exact situation.

Suze: Hi, Suze and KT. You two are the best all in capitals. You help me fund my first broth by our first place in New York City and start investing on my own. I fired my financial advisor whom I never heard from dollar cost averaging. Yeah, baby. So here I am at another big life step.

Suze: Having a baby. Yay. It's so easy to calculate the cost of affording a home but it's so hard all in capitals to find info on whether you're financially secure enough to take care of another tiny human, so sweet Ashley. And she says I'm, this is all not only some of it in capitals but bolded.

Suze: I'm very worried about the financial stress of this step, even if it's an amazing one.

Suze: Just the cost of daycare in our area, write it down. KT is $3500 a month and my husband and I are willing to postpone kids till it makes sense. Financially, adoption is always an option for her for you, Ashley. I have to tell you that, but here is Ashley's situation. Now, everybody that you have to write down the monthly income is about $10,000 after taxes plus bonuses.

Suze: And so therefore it's about in my estimation and I'm the one doing this about $15,000 a month after taxes, they have $86,000 in an emergency fund.

Suze: Their retirement investments are about 100 and $38,000.

Suze: Their monthly expenses are $6000 including mortgage insurance, food and transport. Now, what I'm not exactly clear about with all this, everybody is, does that include the savings into retirement accounts and things like that? I'm not sure, but we will just take her word for it that it's $6000.

Suze: So the question is KT with all of that,do you think that she has enough money at this point in time to have a baby. Everybody think about it. Please add in at least the cost of daycare and she does not say how old she is just so, you know. Ok,

KT: I, I have my answer.

Suze: That was quick. I can't wait to hear this.

KT: So her expenses right now including daycare with the baby is about $9500 a month. Let's say those bonuses don't really come to fruition as much as we want them to. So you're, you're estimating 15,000 a month of income.

Suze: And I'm the reason I'm doing that, KT is, she also says on her, her annual income, their annual income before taxes is $237,000.

Suze: So in the state of New York, you have cities. All right. All right. All right. So, so let me just get to my point. I feel comfortable with that $15,000.

KT: Ok. So let me just get to the point here. I would wait a little bit before I had the baby and I'll tell you why. I think if you have a little bit of a, I would put another bucket in your list here called Baby Fund. I would build a little more of a cushion just for the what ifs of having a baby? And I would eliminate the most important thing you put in this email, which is the word stress. You cannot get pregnant and enjoy nine months before your little tiny human arrives and have any stress. So just wait maybe two years. If you can, we do again, we don't know how old you are.

Suze: But if you could wait two years, you could probably acquire a great deal of money in just a baby fund. So that's your answer. There is no right or wrong answer here.

KT: No, because we love babies and we think it's great.

Suze: So let me tell you how I think about this and what I would tell you to do, Ashley. Right. And again, I'm not going to approve or deny because you're the one once again, that has to make this decision. But I just want to give you a little bit more information about how to make this decision, your income and bonuses again, after tax 15,000, we all know that 86,000 in emergency savings expenses and things like that. All right, we all know your money. What is not in this equation is the cost of a child today. 

Suze: Forget daycare, forget that there are costs to having a child and it comes out to be approximately $25,000 a year till about the age of 17 or 18. And that does not include, by the way, saving for college. So what we have to do is we have to add $2000 to your actual cost, not just 3500 a month, but another 2000 a month. So that's $5500 added to what you say of 6000. So let's just say your monthly expenses now are $12,000 a month.

Suze: So here's what I would like you to do to see if you're figuring things correctly, if it is true that your expenses are $12,000 a month. And now you have approximately $15,000 a month of income.

Suze: The difference there is $3000 a month. Correct, Ashley for you to just get by with this child. Therefore, for the next six months, I want you to play having a child.

Suze: In fact, what you should do is put away anywhere from 3 to $6000 a month into a high yield money market account and see how it feels that you have this child and you have an additional, let's just say $6000 of expenses from what you have right now because I'm just going to assume that the difference between what your expenses are now and your income, you're putting away in savings. So let's just say you do increase by $6000 a month, you put $6000 a month away for one year and see how it feels. Now, you have to ask yourself the question. Was that easy for you to do? You should set a date at the first of every month that you put that money away. Can you put it away on the first of every month or is it too hard for you to do that. Can you not afford it?

Suze: Was there a month that you could not do it? Was your lifestyle changed dramatically because you had to do that. And if it was changed, how did it change? Now, obviously, your life's gonna change when you have a baby and you're going to be just like everybody else, you're gonna experience love. At least this is what everybody else says more than you've ever experienced love in your life. So it's gonna be fabulous.

Suze: However, can you easily afford it before the baby comes? Now, here's the good news. If you're able to do that, let's say, put $6000 a month away for a year.

Suze: Now you have an additional $72,000 my love to add to your emergency fund, which will then bring you to a total of $158,000 and that's one year of living expenses if something goes wrong so that you can maintain everything, even if you can't work or whatever it may be. That is how I would decide if I were you. If you could easily afford a child without stress,

Suze: KT, how was my answer?

KT: Ding, ding, ding, ding, ding.

Suze: Thank you, girlfriend. All right, everybody. I hope we didn't go too long in this podcast for you. I hope you are very happy to have us back. Don't forget to go to my alliant.com to sign up for that Quiz and possibly win $5000. And what does everybody need to remember KT?

KT: People first, then, then things

Suze: and if you do that and you stay safe, you will be what? Unstoppable?