January 25, 2024
For this episode of Ask KT and Suze Anything, Suze answers questions about retirement accounts, securing your information, keeping or selling a car and much more.
Listen to Podcast Episode:
KT: Good morning. Everybody. Today is January 25th, 2024.
Suze: Why are we laughing?
KT: Because this is like take 17, Suze couldn't quite get the 25th, the 25. She couldn't get it out. Right. But anyway, we're not going to waste your time listening to our unfortunately... so here we go...
Suze: Now, KT, you cannot open it like that. You have to tell people where they are. What today... the date...
KT: Do you know where you are? It's the Ask KT and Suze anything podcast. Over 500 episodes.
Suze: But what else is it? It's the Women and Money podcast and everybody...
KT: All that matters is KT and Suze anything.
Suze: Well, this is a great start to this morning's podcast.
KT: It's gonna be a doozy.
Suze: Do we want to say anything about Kansas City Chiefs winning last week?
KT: Oh, Suze is so excited. I think that he's going straight to the Super Bowl, but she still has doubts.
Suze: KT, you can't just say he...
KT: Mahomes Mahomes. Patrick Mahomes Suze loves this guy, but she has a little doubt because it's gonna be a tough
Suze: He's got to win again this weekend and if he does, he gets to go to the Super Bowl. Can we go to the Super Bowl?
KT: Vegas Baby! You want to go?
Suze: They said we could go if we wanted to go.
KT: Do you want to go?
Suze: No. Alright.
Suze: This is where you write in to ask Suze Suze and why do I keep spelling my name? It's because many of you still don't get that. I spell it, Suze. So ask Suze podcast at gmail.com. Write your question in. If Miss Travis chooses it, we will answer it on this podcast. Go girl, go.
KT: So Suze, sometimes I like to start my day with a story or not a question, but a thank you. And this is a great one. This is from Lindsay and
Suze: Wait, I want to say something. I think it's great to start a podcast or anything with gratitude for anybody. Anything.
KT: Well, this is a great one. This is gratitude for you, Suze.
Suze: I really love that.
KT: This is from Lindsay. The subject said divorced mom, Millionaire at 39. Thanks to Suze. Of course, I would pick this one.
KT: It says hi Suze and KT. Although I have many questions. This is not a question but a thank you at 39 years old. I have a net worth of $1.2 million. The primary person I have to thank for this is Suze. I grew up with a single mom who often did not have enough money to buy groceries for the week. And I promised to myself that would never be me.
KT: So then she goes on to tell me her story. She worked hard, went to a great school to get a good job. Then said, but without Suze, I would not have known how to save and invest my money to accelerate my financial independence. I've been a federal government employee for almost 20 years. So listen to that people.
KT: She works for the government and she's now worth $1.2 million from investing in saving. So here's what she said. I remember during multiple tours in the Middle East, I used to walk in circles around my work location, listening to the audio recordings of the Suze Orman show. She said during the past 15 years, I got married, had a child, got divorced, got remarried. I also cared for my mom and financially supported her in the last years of her life. Through all of that, I know that I would be ok because I had my own wealth to fall back on. And I had the power to make my own decisions. I had a power and independence, my mom never had.
KT: And while that makes me very sad for my mom, I'm happy I took her situation and the lessons of Suze to create the life I want and deserve. Thank you Suze and KT for all that you do. You've truly changed my life and the life of my child.
Suze: Now, KT, before we go on and thank you for that email, Lindsay. KT, do you know the one word in there that made it so Lindsay could create the life that she wanted. Read the one line in that email that has the word deserve in it.
KT: I'm happy I took her situation and the lessons of Suze to create the life I want and deserve.
Suze: So the reason everybody, that I point that out to all of you, including KT is because you have to feel that you are worthy of having the life that you want.
Suze: You have to feel that you deserve the life that you want. So many times, particularly women, we don't feel deserving, we feel everybody else should have everything. It's for them. It's not for me, it's for the kids, it's for the spouse. It's for everybody else. Every single one of you deserves to own the power to control your destiny, which is what the Women and Money podcast is all about. Next question. KT
KT: OK. This next one is from Suzanne. She said hi Suze and KT. My employer recently...
Suze: Is it ok if interrupt you for a second. Of course, I can, right? I just, I wanted to say something else about Lindsay. I just realized as I was sitting here.
KT: What's that Suze?
Suze: Which is... Here we are, KT, at 72, 71 years of age for you.
KT: I'm the younger one, everybody.
Suze: And the smarter and the more beautiful and we just kinder and sweeter and we've been doing this, at least I've been doing this in this arena truthfully for almost 40 years now. So one has to ask the question, why do I continue to do? So, what is the purpose of me continuing to do the podcast? Other things that we're probably going to be doing and so on and so forth and letters or emails like Lindsay is the exact reason why I continue to do what I do.
Suze: I just want you to know that your emails when you tell me how your life has been transformed, reside within my heart and I feel them every moment of every day.
KT: Oh, that was sweet, Suze. She's getting very softy on us.
Suze: I am not.
KT: She is Suze softy. I call her like a softy ice cream cone. So this is from Suzanne.
KT: She goes on to tell me about um that she and her husband before they met, both had retirement accounts, but she put much more money in hers. They've been together 17 years married for 11 and here's what she, her question is. My employer recently started offering a Roth 403 B. So I changed my contribution from the pretext 403 B to the Roth. Good girl.
KT: My husband's job offers a deferred compensation plan only. No options for a Roth. So she's asking Suze rather than us contributing equally to each of our accounts, would it make more sense to stop his contribution to his deferred compensation plan and put as much money as we can into my Roth 403 B?
KT: That seems to make sense financially. But it makes me feel selfish watching the balance of my accounts outplace his.
KT: So here you go. What should she do?
Suze: Absolutely do that. And Suzanne, here's the thing. Did you hear what you just said in this email? It makes me feel selfish. What are you talking about? Just hear me say the word deserving if you know, you're in a great relationship. If you know everything really is how it's supposed to be financially emotionally and spiritually between the two of you, then your job is for the two of you to make the most out of the money that you have. So, in my opinion, you should absolutely do that because remember with the deferred compensation plan, you are just deferring his compensation. So he doesn't have to pay taxes on it currently. But eventually when he claims it and everything, you'll have to pay ordinary income taxes on it. So, actually, you should do that without a shadow of a doubt. All right.
KT: And I, I think he'll be happy Suzanne that you're kind of taking charge here. I love that for both of you.
Suze: Well, I wouldn't say that she's taking charge.
KT: She is.
Suze: It's just that she deserves it. She shouldn't feel guilty and it's the best financial decision in my opinion for both of them.
KT: Ok. This is from Melissa.
KT: Hey, Suze and KT. Thanks for teaching us so much. Over the years. I learned a lot. I have a question unrelated to finance. I found out recently that my personal data, address, phone number age, et cetera are on people search sites and I don't like it. Is there a way to remove all personal data from these people search sites?
Suze: It's very difficult because you'd probably have to contact each one of them and then it would just go to another search site once it's out there. It's truthfully almost impossible to get it out of being out there. So, the best way to protect your information is to do a credit freeze.
KT: We have those, we have those and I have that for a long time.
Suze: And a credit freeze is nobody can check your credit reports or your FICO score including you unless you unfreeze your credit freeze. So you would call up your credit bureaus and put a credit freeze on every one of your credit reports. That would be the best way to cut that off.
KT: It would certainly protect her financially speaking, right, Suze?
Suze: Well, as best as you can.
KT: Next is from Ruth.
KT: Dear KT and Suze. I like that she starts with KT. I don't know if...
Suze: Now everone's gonna write in putting your name first, thinking that's the key. I'm telling you, you should just write my name first and I'll make sure she picks it.
KT: All right. I don't know if you can give me advice or not, but here it goes.
Suze: I've never had a situation I couldn't give advice over. Go on.
KT: I inherited a car from my parents when they died. I drive it everywhere.
KT: Ready, Suze. It's 20 years old. I keep up the maintenance and it runs. Ok. It won't win a beauty contest, but neither will I.
Suze: I don't know, you might. You both might.
KT: Nostalgia creeps in every time. I think of buying a new car, but I have money saved to buy a new car.
KT: It would have to be modest. No bells and whistles. So, what do you think? Should I get over my nostalgia or should I drive the Saturn into the ground?
Suze: Drive the Saturn into the ground.
KT: So, Sally, wait...
KT: Sally, our car, is 11 years old or 12 or 13 with like very low mileage. So we keep it because it runs great and we also do maintenance very regularly. So, what do you think, Suze?
Suze: I just already said it. Here's the thing. You have the money to buy a new one. Ok.
Suze: If you buy a new one, your car insurance goes up, everything will go up. You're gonna have to maintain it. Just like the old one in a certain way. But the money that you have to buy the new car is where hopefully sitting in an account making you at least 4.5 5% interest that you can get at it any time you want.
Suze: Let that money grow for you while you continue to drive this car that really your heart is in. I just have to tell you something. We're coming to you from Florida right now. So we went somewhere, we parked the car, got out of the car and this guy and he says that that's a beautiful card. Do you wanna sell it? What year is that? And we said, how old it was. He said, how many miles do you have on it? And I said, 40 or 50,000, he said, I'll buy it.
Suze: That car looks like it's brand new, which is the key, everybody, to keeping a car for a long time. And I said, no, I'm not selling it. He said, I'll give you any amount of money you want.
KT: I told him I would sell it. I said, how much do you want to pay me for this?
Suze: And I said no, because I'm also nostalgic about that car.
KT: She loves her boat and her car.
Suze: I love them. So I'm gonna keep them until it's run into the ground. So I get it. Trust me.
KT: All right, next is from Linda. And this is a nice...
Suze: Wait, I have to tell you one other thing. So he walks away. And what did you say to me, KT? Do you remember?
Suze: That's what happens when you get to be 71 or 72.
KT: What did I say to you?
Suze: You said, do you think that he was hitting on one of us?
KT: He was flirting with one of us, and I looked at her. I said probably me because I was the one that was ready to sell him the car.
Suze: And probably KT because I had a hat and sunglasses on and everything.
KT: He was an older guy, good looking man.
Suze: And of course, she would have thought it was her. Anyway, go on
KT: The next question from Linda. And I picked it because she signed off tired teacher Linda and we love teachers, but this question's been keeping her awake at night and she and her husband are about to retire and they have two main questions. Do we need one year of an emergency fund or five?
Suze: What's the next question?
KT: And what do you recommend is the best way to move funds when we need cash?
Suze: All right. So here's what I would tell you, Linda. Listen, when you go to retire for most of you, most of your money is in a retirement account, whether it's a Roth retirement account or a traditional retirement account, it does not matter. But that's usually where the bulk of your money happens to be. And that's also where you usually get your monthly income in order to live and stay retired.
Suze: But the problem becomes if all of your money happens to be invested, whether it's in stocks bonds, whatever it may be, when you go to take money out every single year, you usually have to sell something to do so.
Suze: But what if the market has crashed at the time that you want to do that? Because it's not always that stocks go down and bonds go up or bonds go down and therefore stocks go up, sometimes everything can go down. So there is a rule of thumb that says within a retirement account or even outside of a retirement account that you have at least 3 to 5 years of cash sitting somewhere that you can access. Now, what's great about interest rates currently being as high as they are and probably will stay not so low as they used to be back when, when it was like 0.6% interest, but maybe it will stay in the 1 2 or 3% area. Even if interest rates go down that, that money stays there safe and sound. Why?
Suze: Because when you go to take money out at a time, when the markets have crashed, rather than touching stocks and mutual funds and ETFs and, or bonds that have gone down considerably, you go to your cash reserves to withdraw it. Why 3 to 5 years?
Suze: Because normally it will take from the top of the stock market to the bottom of the stock market, back up to the top of the stock market again, for things to return. Usually anywhere from 3 to 5 years. So if you really, you want to be on the safe side, it's five years. If you wanna just play it so that you have at least three years, ok, you can do that as well. Maybe you split it and you do four years. But that is the first thing I would tell all of you so that when you are having to take money out of a retirement account and the markets have crashed, you leave your stocks alone and you take it from the cash in terms of how do you get that cash? Well, the markets are quite high right now with certain things and if you know that you're gonna be retiring shortly, then you would take it from the stocks that either have not performed, are not going to perform in your opinion or bad investment decisions and just do it from there and, or I would probably do it from, if I knew I had good investments, all of them have been performing, I would do a little bit from each one. All right. Next KT.
KT: Well, next question, Suze is from Josh: My husband and I are long time fans.
KT: There is just one place where we have not followed your advice. We do not have living revocable trust. We have named each other as beneficiaries on all of our bank accounts and retirement accounts. We own our home and joint tenancy with right of survivorship. We had a lawyer draw up documents to protect ourselves in case one of us is incapacitated. We have living wills, health care, proxies and powers of attorney naming each other. Is there any reason left why we would still want a living revocable trust? And they don't have children.
Suze: Josh, here's the reason why over all the years that I did personal financial planning for people one on one, they would come, they would have the exact same set up as you. They would have the power of attorneys for finances and things like that. One of them would die or one of their parents would die or whatever it would be and when they would go to the bank or they would go somewhere where they needed that the financial institution didn't want to take it because there's no way for the financial institution to know if it's still valid.
Suze: So maybe you gave your spouse the financial power of attorney and then you guys got in a fight and you revoked it and she has a piece of paper. He has a piece of paper that says this is my financial power of attorney. But again, there's no way to know in many cases for the financial institution that you didn't take it away when you have a living revocable trust that assigns a person to be successor trustee in case of an incapacity or whatever it may be. When you open up an account, you have to give them a copy of your trust. So they actually have the copy. And if you made a change, you then would go and give them the new trust if you redid your trust. So for KT and I, for instance, when we go and we open up an account at a bank or wherever we're doing it. Credit union or whatever it may be in the name of the trust, they need a copy of the trust on file. So all the times that I was doing financial planning, we ran into more problems with people who thought they had done it correctly with power of attorneys.
Suze: The financial institution won't honor it, especially the brokerage firms didn't want to honor it. I never ran into a problem like this when somebody had a living revocable trust. So that's just something for you to think about. All right up to you. You've set up everything as best as you can. Would I still do a trust. I have to tell you I would. All right, KT.
KT: Ok, Suze, I have one more question.
Suze: Just one?
KT: Yeah. Well, I have lots of questions.
Suze: I was going to say I'm looking at you and there's a pile of questions.
KT: No but we, we don't have time to do all of these. Now we'll do another podcast. All right, dear. Suze and KT, my dad passed away almost two months ago. He was 91. He always watched CNBC.
KT: We're sorry for your loss. But he sounds like a great guy.
Suze: At least a smart guy. And by the way, all of you can watch all 600 some odd CNBC shows that I did the show on FreeVee .
Suze: It's something that you all should do. Number one doesn't cost you anything but number two, you get to watch the Can I afford it segments and how am I doing? And they're fun and they're still relevant to this day. All right.
KT: It's fun to see Suze's hairstyles over the years and jackets her collection of leather.
Suze: I think that this haircut I have right now is one of the great ones.
KT: We have to post a picture of you with that. Ok. Ready. My dad passed away almost two months ago. He was 91. He loved watching CNBC. He would buy a couple of shares of this and a couple of shares of that depending upon who was talking about what
KT: I now have various different kinds of mutual funds specifically related to mid cap and small cap stock funds. How do I evaluate how those funds are doing? So, he's asking what does he do and how does he evaluate how they're doing? So, Angelo just needs some advice on his portfolio.
Suze: Angelo, there's a service out there very seriously called Morningstar that I really, really love. And on Morningstar and I use Morningstar, by the way, you can go on it, put in the symbols of the mutual fund or the stock that you own and it will tell you everything that you need to know about it. It will give it a rating, it will tell you all the expenses and everything like that. So do yourself a favor and check out Morningstar also. You can go on CNBC and there's a place there online where you can put in the symbol and everything will come up. There's also Yahoo finance that you can use as well. So there are all these services, some that you pay for some that are free that it will at least tell you and compare how your fund has done to the other funds in its category. Just so, you know, small cap funds have been one of my favorite for the past. Oh, I'd say five or six months now, maybe even the past year in terms of what I think they will do in the future, but check them out and you'll get a good idea of what you should do.
Suze: Well, it's time everybody. It's time. It's time. I love this time.
Suze: Why would you lie to people?
KT: No, I do love it because I know that one day I'm just gonna keep getting ding, ding, ding, ding, ding. Come on, ask me it's quizzy time, everyone.
Suze: Tell everybody about quizzy time.
KT: Quizzy time is when Suze tries to stump me.
Suze: I don't try to stump you.
KT: You tell him what it is.
Suze: It's not hard to stump you. I try to make sure that you understand how everything works so that if ever I'm not here and a question is asked or you are in a situation that you know how to answer it. But the quizzy is never just for KT, it's for all of you.
Suze: Wouldn't you all love to get to a place in your life where every question that KT is asking me or during quizzy time, I'm asking her, you would know the answer to it. And that isn't an impossibility. That is totally a possibility. And over time it is actually a probability. So there you go.
KT: I'm working on it.
Suze: She most certainly is. Hi, Suze and KT. This is from Nicole.
Suze: I've been so enjoying discovering your podcasts and diving into the wealth of past episodes. It's like reconnecting with a beloved friend. Thank you, my dear Nicole.
Suze: Your books and TV shows set me on a confident financial path 15 years ago and I'm thrilled to continue learning from you. I know that's not a question, but I just so loved that I loved it. Right. It was a little ego boost. No problem. Now on to the question that keeps me up at night,
Suze: I've worked my tail off in my career and now have vested RSUs at a major global corporation with a sizable amount vesting on February 4th anticipating around $35,000. I am 40 years of age.
Suze: So how should we use this? $35,000? That is what Nicole wants to know KT. She has a mortgage on her home of about $467,000. She has $22,000 on an auto loan as well as 55,000 on a HELOC at 8.5%.
Suze: She says her auto loan and her mortgage are both at low interest rates. Your first part of the quizzy is what is an RSU?
KT: I don't know. I was trying to figure it out. It must be a stock something. It's, it's something that her employer gave her. So it shares, right?
Suze: So an RSU is a restricted stock unit. That's what that stands for. Now, a lot of times everybody, when you work for an employer, they will give you stock options, which means that you can then exercise those options and then convert them to stock, but you have to pay for it and a better way to get rewarded when you work for somebody is a restricted stock unit while you're in your vesting period, meaning your employer has given you the RSU but you haven't vested in it. Maybe it takes you one year or five years to vest. They're not worth anything the day that you vest. Like what Nicole is doing here. That's the day that you get the money and they're worth something. So, Rs us, first of all are far better than stock options. So therefore, if you have a choice with your employer, you should do that. So now we know that Nicole as of February 4th is going to have $35,000.
Suze: And the quizzy really is. Should she put that towards her home mortgage? Her car loan?
Suze: Both are at low interest rates or a $55,000 Heloc Home Equity line of credit at 8.5%.
KT: Personally, I think I would pay off that Heloc.
Suze: You sure?
KT: I think so. If she's paying 8.5% that's high. Get rid of it.
Suze: Ding, ding, ding, ding, ding, ding,
KT: Get rid of it. That's a no brainer. Nicole who wants to pay a Heloc loan for that much money. Get rid of it.
Suze: Nicole. That is the correct answer. So, first of all, given that according to this, you say you're only 40 years of age, you have time to pay off your mortgage, especially if it's at a low interest rates. So I'm sure that you will have it paid off within the next 25 years since you're only 40 which is usually around when people gear things towards retirement, your auto loan at a low interest rate, 22,000, you could pay it all off. But why when you're paying a higher interest rate on your home equity line of credit.
Suze: So as you all know, and I have told you now over the past year, if you have a home equity line of credit, make it your number one priority to pay that off after your credit cards. Of course. So that brings us to the end of another, what KT?
KT: Ask KT and Suze Anything podcast.
Suze: And what is it that we want people to know? That there's only one thing that matters when it comes to their money and it is what KT?
KT: People first,
Suze: Then money,
KT: Then things
Suze: Now you stay safe. And if you do that, everybody, you will be. What?
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.