Podcast Episode - Ask KT & Suze Anything: Did I Give The Wrong Advice?

401k, Financial Security, Health, Life Insurance, Podcast, Roth

January 11, 2024

For this episode of Ask KT and Suze Anything, Suze answers questions about HSAs, 401(k)s, life insurance and more.

Listen to Podcast Episode:

Podcast Transcript:

Suze: January 11th, 2024. Take it KT

KT: Welcome to the Women and Money podcast where you

Suze: Wait, wait, you gotta do it right, KT. If you're gonna do it...and everybody smart enough to listen.

KT: Right, I forgot about the everybodys

Suze: Alright. And what is today?

KT: January 11th.

Suze: No, it's ask what?

KT: All right, this is, we're off to a good start everybody. January 11th 2024. It's the ask KT and Suze Anything podcast and everyone's smart to listen.

Suze: Welcome everybody. So if you have a question, you write to ask Suze podcast at gmail.com and if KT chooses it or if I go through them and I happen to see one that I like I ask KT to choose it and I'll answer it here on the podcast. All right, girlfriend.

KT: I have a selection of fabulous questions, but I'm gonna start with something that isn't a question. This, everyone is an example of what an unstoppable woman is. All about, this is from Sarah.

KT: Hi, Suze and KT. Hope this email finds you well. I've been listening to your podcast for three years now and have been empowered to make some great strides. You ready everyone.

KT: Sarah left an unhealthy and financially abusive marriage. She opened a Roth IRA saved six months plus for an emergency fund. Opened an Alliant Ultimate Opportunity savings account, started investing in index funds and CDs. And currently she's employed in an institution that's helping her pay for grad school ready for the, the best of all, Suze?

KT: Sarah says, and I'm about to graduate as a family nurse practitioner. This May. Bravo Sarah. So you are an unstoppable woman. She said she's grateful and happy for all of your robust lessons, Suze on finances and she has so much more to learn and apply. But we're proud of you and I love that you sent this love, love, love it.

Suze: You know, I just have to say something which is a lot of times people write in and they have questions, some about their problems, some about not knowing what to do with money. But for those of you who are listening, you need to hear sometimes things like KT just read to know that there is hope that there is a way if you keep doing what we're telling you to do over and over again and you finally get it. You too can be a Sarah so proud of you. All right KT.

KT: Ok. Now, here's another one that is just in, in my opinion, I selected this because of the headline. It says poof just like that. I am no longer financially secure. And this refers to Suze's what ifs of life? This is from Tina. And it said dear Susie, five months ago, I lost sight of those first three qualities of a wealthy woman, courage, harmony, and balance with the shocking news of my husband's kidney cancer diagnosis.

KT: Doctors gave us the worst case scenario. I panicked and reached out to you regarding our finances. You listened, you asked questions and put me at ease. I put on my positive pants and tackled the crisis head on.

KT: We applied for and received temporary disability income since he could not work. His health insurance proved to be very good with manageable co-pays. We thankfully had and have plenty of money in our emergency savings account and are medically debt free. The best possible outcome, financial health wise. I am pleased to announce my husband is now cancer free, Suze. Ring the bell, ding, ding, ding, ding, ding, ding,

Suze: Ding, ding, ding.

KT: His right kidney was removed completely. They were able to save 87% of his left. He does not need dialysis. He's been cleared, will return to work full time with no restrictions, best possible outcome. And again, I want to express my gratitude to you Suze for not only your financial wisdom but your calm your concern, your encouragement. When you say people first, you mean it. Also, I must thank you KT for your sincere empathy and well wishes, when you read my email on the podcast. You both created for me, a more peaceful, joyful and loving world. Isn't that great? I have goose bumps when I read this. So Tina, thank you so much from Suze and me. We just feel so happy to hear this news and to just feel that everything's going well for you. And I'm really happy that you understand our people first and what that means.

KT: All right. Now, let's get on with some questions.

Suze: I have a thought right here right now, which is, it was people first. And remember for years on the Suze Orman show we ended it with, there's only one thing that we want you to remember when it comes to money and that's people first then money and things. And then all last year, it was about a more peaceful, loving and joyful world and it's kind of all goes together. So, KT, what do you think of this year on the Women and Money podcast, we do start ending it with people first then money, then things. What do you think?

KT: And you stay safe and you will be what? Unstoppable. Let's do it. We'll do it today. Everyone, you tell us how we did, but let's do it for this podcast. We have, we have a new, we have a new mantra for 2024.

Suze: Not a new one...

KT: We have the best mantra.

Suze: It's the very, very best one. And I just have to say one other thing about it when I say people first, then money, then things, I mean, you,

Suze: I don't mean about you being generous and taking care of everybody and giving all your money away and buying gifts. I mean, taking care of yourself people first means you. All right KT.

KT: I'm gonna start with some. Just die hard questions ready everyone. Happy New Year.

Suze: We're already 30 minutes into it. It's over. I'm joking.

KT: Oh my God. I have so many great questions that go on. Ok.

KT: Happy. not April Fool's Day. It's Happy New Year. I recently came across a podcast suggesting using the funds in an HSA as an additional retirement fund and not using those dollars to pay for qualifying medical expenses. Is there a benefit paying with after tax dollars versus those inside of the HSA? I never heard of this, Suze.

Suze: Listen, HSA is a health savings account and when you have a health savings account, it goes along with a very high deductible health insurance policy. Just know that you can use it for a retirement account if you want. But the best thing you can do is because as you get older, the majority of your expenses are going to be medical expenses and if you use it for qualified medical expenses can even be for long term care or long term care insurance. It's tax free. So don't go getting fancy schmancy n it. It's not worth it. Trust me. Go on.

KT: Ok. Next question from Sam.

KT: Hi, Suze and Katie. You wrote Katie. And sometimes they call me Katie instead of KT. But I like both. We established 529 plans for all three of our children. We have two already finished with college. We now realize that we may be left with rather large sums of money, about 75,000 in them. After all three finished college

KT: My spouse and I are comfortable and do not need the funds. What would you recommend we do with that amount, leave it for future potential grandkids. Other uh, other ideas. Can you use it? Can you keep it for...

Suze: Sure, your grandkids, other things like that? So $75,000 fabulous if you don't need the money, leave it in there for potential grandchildren. Because now you've got an incredible jump on that money increasing and increasing and increasing and it may be that no money has to be added to that at all, to fund their college educations. How fabulous is that? Of course, if you wanna just withdraw it, you will pay taxes on any amount above what you originally put in plus a 10% penalty. And I know a lot of people are gonna say to you, oh, why don't you just put it into a Roth IRA you can do. So, first of all, the maximum that you can do in a Roth IRA is only $35,000 in total. That's less than half of what you already have left over at $75,000.

Suze: It's so complicated. It's not even worth it. So either take it out, pay the penalties and taxes or leave it in for the grandkids.

KT: I'd go with the grandkids. Papa.

Suze: Why not? Obviously they don't need the money. So, why not? What a fabulous idea.

KT: All right. This next one's from David. And David, you are so clever. I picked this right away. It said 401k, but he wrote 401 "Katastrophe.

Suze: Is that why you picked it?

KT: Yeah. 401 catastrophe. I loved it. Hello, KT and Suze Happy New Year. I love seeing the pictures of you posted on the women and Money app. David, I'm afraid to ask you what she posted there.

KT: Do you love that? She doesn't look? I don't look. And I'm always afraid like, what is she putting up here of us?

Suze: And by the way, for those of you who don't use the women and Money app and you can download it in Google Play or Apple apps, you can download it for free.

Suze: I do give advice on there. I will tell you sometimes what I think about things financially and sometimes it's entertaining by, I post pictures that I really don't post anywhere else. All right.

KT: Ok. So David said Suze for 14 years, I've been consistently putting money into my employers 401k, evenly distributing it across four different funds with each paycheck.

KT: I've wondered if this is a wise approach. Am I genuinely diversified is for funds too few or too many? So David's asking similar to individual stocks where it's advised not to let one stock surpass 4% of your portfolio. How does this guideline apply to funds in a 401k?

Suze: So, truthfully, David, it doesn't apply to funds in a 401k at all because in a 401k, you have mutual funds and you usually have index funds that can have 500 stocks in it, 3000 stocks in it. And you're already diversified. The reason that you don't want more than 4% of your money in one individual stock, which means if you had money to invest, you would need 25 stocks with 4% in each one to be truly diversified. A lot of people think you even need more than that. You should have 50 stocks to be truly diversified. So it doesn't apply to mutual funds in terms of your 401k and the four different funds, it would depend which funds you have chosen. But you could do the total US stock market index fund and be totally diversified. That way you could do a mid cap fund, you could do a small cap fund, you could do things like that and if you happen to work for a good company and they are offering you their stock, you absolutely could take advantage of that as well. All right.

KT: Hello, Suze and KT. I absolutely love your podcast. I am 50 going through a divorce. But I have a question about some life insurance I carry besides the life insurance I have at my job, I have a term policy 300,000 on myself 50 on the soon to be ex husband.

KT: And this policy has 10,000 on each of our grandchildren. And I don't need insurance on the grandkids, but they said it was free with our policy. I have had this policy for three years now paying $154 a month. Should I keep this or drop it? I'm so confused and would appreciate your advice. Thank you so much. So it's a term policy.

Suze: So, Rebecca, here's the first thing you have to ask yourself if something were to happen to you.

Suze: All of a sudden you aren't here anymore. Is there anybody who is financially dependent upon you that will suffer a financial loss? If the answer to that question is no, you do not need any term life, whole life, any type of insurance. What so ever period.

Suze: So that's the answer to your question.

KT: All right, next one is from Mark. Hi, Sue and KT.

KT: I just printed my Suze checklist to make sure that 2024 is in focus. Vintage Suze advice was that if I did not invest the contributions, a Roth could do a double duty as an emergency fund with interest rates temporarily inflated. I was wondering if I could put my contributions safely into a money market fund within my Roth. What are your thoughts?

Suze: Do it.

Suze: Next KT.

Suze: That hasn't changed everybody. Remember in a Roth IRA, you can take out your original contributions, the money that you put in at any time, regardless of your age or how long it's been there without penalty or taxes.

KT: I love this, Mark and I didn't tell Suze this extra bit that you wrote. His mom and dad were both are, are our age. You and me actually born the same year as you, Suze. And they passed when Mark was very young and his mom was a Citibank executive and he said if she were here, I imagine that your advice would be similar to what his, his mom

Suze: Oh, see now she's crying. Yeah, Mark, I hope on some level I can always serve to be your financial mama.

KT: That's sweet. Ok.

KT: Hi, Suze and KT. 40 year old mom here who loves you both. Thank you for your amazing podcast. Is it possible and advisable to dollar cost average into a backdoor Roth? For background, we already contribute the match in my husband's 403 B and max out my TSP 50% Roth, 50% traditional. Thank you so much. Oh, wait, I forgot the rest of the sentence.

KT: It said, is it possible and advisable to dollar cost average into the backdoor Roth Ira? Or should we just wait until we save the combined 14,000 over the course of the year and do the backdoor conversions in a lump sum transaction. That's from Chelsea.

Suze: Yeah, Chelsea, here's the first thing I would say to you: Why do backdoor Roth? And for those of you who don't know there are income limitations for a Roth IRA and once you exceed those income limitations, you no longer qualify for a Roth IRA. But there is a legal way to go through the back door and get money into a Roth. And that is what Chelsea is asking. However, Chelsea, you just said in here that your husband contributes 50% to his Roth TSP and 50% to a traditional TSP. Why in the world would you not contribute 100% to your Roth TSP? Why would you not take advantage of that? So there are things that are easier to do than a backdoor Roth. However, remember the way that you create a backdoor Roth is you deposit money into a traditional IRA that you say is non deductible. So you do not get a tax write off for it.

Suze: You could dollar cost average and put money into that every single month and then at the end of the year, do a backdoor Roth with the entire amount at once. There you go.

KT: Ok. So this is my last question and I think it's important, Suze because sometimes I'm concerned that our listeners give each other advice and it may not be the right advice. And here's an example that you might agree with me. I gave a beloved family member some advice that I am now worrying will cost her a penalty. She's 72 years old, a widow for almost 20 years. She owns her home, is receiving a pension as a surviving spouse and is working off the books and not declaring that income on her taxes.

KT: This job should only last about another year. She lives on her savings, IRA and surviving spouse pension. It'll be tight but doable. I encouraged her... Here's the advice... to open a Roth IRA and last year we funded it with the maximum contribution is her pension recognized as earned income for the purpose of a Roth IRA.

KT: Will she be subject to a penalty because of my mistake?

Suze: So it's funny you pick that because everybody as you know, I do read these and go through them. I don't know which one. KT will pick. Sometimes I read one and I say to her, can we just do this one? It's important I happened to write this person directly and answered her. But...

KT: Did she make she made a mistake?

Suze: Yes, she made a mistake. A pension is not considered earned income earned income is when you work you pay taxes on it and you've earned that money and you claim it and you claim it, just start by claiming it. How do you fix this? So, your beloved family member has until April 15th of this year to file income taxes. If she wanted to, she could claim this year the money that she made last year that was off the books and pay taxes on it and it's not gonna be that much because it's obvious that she doesn't make that much money. But then she can qualify for a Roth as long as she's made at least $7000 in taxable income or whatever amount of income she did make is the amount that she can put in legally up to $7000. However, she doesn't want to do that, have her withdraw all the money, do it sooner than later and just pay taxes on any interest or money that it made just that simple.

KT: Call it, call it a day. Do you have a quizzy for me?

Suze: I do have a quizzy for you. And it's interesting. Ok, let me, it's a different one. So I'm not even going to talk about what quizzy are. So, are you ready? Dear, Suze and KT, doesn't the song lyric... she is talking about Unstoppable by Sia, doesn't the song lyric strike you as defensive and arrogant? Just wondering. Wait, wait. Yes, I do believe in strength but truly strong women can be vulnerable too.

KT: Oh, my goodness. So is the quizzy to ask KT, what do I think of that comment? All right, here's my answer. It's Sia are we crazy? That's an amazing song. It's an unstoppable uplifting, huge song that is being used everywhere in the world. Suze has Sia's blessing to have this as our theme song on the podcast.

Suze: So this isn't a ding, ding, ding or incorrect, but here's just what I want to say to you about this comment.

Suze: There's nothing about the song or what the song says that encompasses all of life. Of course, strong women are vulnerable. You hear KT cry, you hear me cry a lot of times both of us get afraid. However, when we can feel vulnerable, when we feel like we don't really know what to do or whatever, it's really important to have something that lifts you up and ties you to your strength within that allows you to show the world who you are that allows you to be as strong as you are meant to be because more than women being vulnerable and whatever, they're also not as powerful in many cases as they were born to be.

Suze: So nope, it's not arrogant. It is a necessity that women and men and anybody smart enough to listen, take that stance. So to end this podcast in our new way for the year, there's really only one thing that we want you to remember when it comes to your money. And what is that, K

KT: People first, then money, then things.

Suze: And if you can just get the correct order of money,

Suze: I promise you you will be unstoppable.

Suze Orman Blog and Podcast Episodes

Suze Recommends

Suze Orman Blog and Podcast Episodes


Here's Why Your Teen Should Open a Roth IRA

Read Now

Suze Orman Blog and Podcast Episodes

Podcast Episode - Ask KT & Suze Anything: Should We Buy or Rent When We Retire?

Read Now

Suze Orman Blog and Podcast Episodes


Your Ultimate Savings Opportunity Starts Now

Read Now