Estate Planning, Home Buying, IRA, Must Have Documents, Trust
August 29, 2024
On this edition of Ask KT and Suze Anything, Suze answers questions about buying rental property, IRAs, and protecting your identity. Plus a quizzy about paying for home repairs and more.
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Podcast Transcript:
Suze: August 29th, 2024. Welcome everybody to the Women and Money podcast
KT: And everyone's smart enough to listen.
Suze: Yes. And this is the ask Suze and
KT: KT Anything, anything, anything, anything,
Suze: edition. Now, if you want, you can send in a question to ask Suzie Podcast at gmail.com. That's Suze.
Suze: I know let's do our little cheer for them because I'm going to be on Telemundo September 5th and giving a talk there to especially the Latin American audience in Latin America, right?
KT: But we have a cheer for everyone. She's going to welcome the audience and tell them she is: SUZE (in Spanish) a which is,
Suze: which is how you spell, say Suze in Spanish. I hope we have that right. So it's a soccer cheer, but also guess who's visiting right now.
KT: My sister Lynn and her husband Tom were having a delightful Labor Day weekend here on the island and it's just been a really pleasant visit so far. We have a few more days. To go and then back to work everyone.
Suze: But before we be again, KT, where you ask me questions, I just want to give everybody an update on the Suze story that I did last Sunday and the Peter story. And if you haven't listened to it, go back and listen to it. It's a really fascinating story. But where is Peter now? And what has happened? Well, let me give you all some great news.
Suze: Just last night, I got an email from Peter and Peter essentially said, Suze, first of all, I just want you to know that I listened to the podcast and at the time, it kind of sounded like my kids were greedy. But let me tell you that's not the story anymore. What happened was an old family friend who the kids knew, my father in law, knew I knew sat down with all of us and talked about the wishes of their kids', grandfather and everything and everything is great now and the kids so generously have decided and it is the best way to do it is they will each give me quite a few $1000 every month to go towards my expenses. And if I need anything, I can come to them and we're all back together as a family when I wrote you that last email truthfully, it was a while ago and I was still in a state of shock which I still am having lost the love of my life. The kids were as well. But now bottom line we are all back together happily ever if and happily ever after.
Suze: So see some stories end up just great. Peter, we are so, so happy for you because I know what a loving husband and a loving son in law you always have been. All right.
KT: OK. Are we ready for our first question, Suze?
Suze: You never know with you. Do you?
KT: It's from Corrine ready? Good morning. I've been a follower for years. I will be 60 in August. I have 960,000 in my 401k. Mostly in high risk stock investments. Ok.
KT: So Corrine lives in Connecticut. She said we've always wanted to retire to Florida. My husband wants me to take 300,000 out and buy a condo...
Suze: Out of where? Out of her 401K?
KT: I guess. Yes. Wait, let me finish which we would use as a rent and then obviously use it a couple of weeks themselves out of the year. Then this is the clincher. Corinne said it makes me nervous although I will have a decent social security payment and Jim will have a pension withdraw or not. That should be the question withdraw or I would say definitely not.
Suze: Corrine...
KT: Not for a rental.
Suze: Let me, let me just tell you something. All right, your husband could not be more wrong if he tried for you to withdraw $300,000 right? And buy a condo that $300,000 would be number one, totally taxable to you.
Suze: Number two, if you're still working for this company, for you to withdraw it, you would have to take out a loan, you just can't withdraw that money because you're still working for that company.
Suze: And then you would miss out on possibly some of the greatest growth over the years till you do retire.
KT: And she's only 60.
Suze: You're 60. Has your husband lost his mind to buy a condo in Florida where insurance is over the top condos are having incredible assessments right now to bring all the buildings up to date. That is the worst possible thing you could do. So withdraw or not. You tell your husband he is so denied. I cannot even tell you next question, KT.
KT: Hey, this is from Britney. I inherited my dad's 401k worth 100 and $50,000. My financial advisor is suggesting I move the money into a life insurance retirement plan to avoid paying taxes when I get ready to withdraw. Can you please help me, Susie? I'm not sure how to maximize the potential of my inherited IRA. Is that a, I'm looking at her face, bad decision.
Suze: Did you just pick questions today that are gonna aggravate me?
KT: No, but when I see Life insurance...
Suze: Life insurance retirement plan. KT before I even answer this question, what do you think?
KT: First of all, life insurance should never be purchased for retirement where you go.
Suze: That's not my question to you. What do you think the commission would be
Suze: on 150,001 lump sum life insurance retirement plan for her financial advisor?
KT: 10 grand?
Suze: Guess again.
KT: 15,000?
Suze: It very probably would be at least $75,000. And then a few, it could be 100 and 50,000 some plans, but then two or 3% every year thereafter. That's the first thing. But Britney, you need to get a new financial advisor because first of all, you now have an inherited 401k plan worth $150,000. I'm not sure when you inherited it, but I'm going to assume that it is right now. Number one, chances are the best thing for you to do would be to roll it over into an inherited IRA.
Suze: This question makes me decide absolutely. This coming Sunday, Suze school is going to be a master class on inherited IRAs especially pre-tax ones. You did not say that you inherited a Roth 401k. You said you inherited a 401k. That means if your father died now.
Suze: All right, this year or any time from 2020 till now, you fall under the new rules of the Secure 2.0 Act, which is you are a non eligible designated beneficiary and you have 10 years to wipe this account, clean any money that you take out of this account will be absolutely taxed to you as ordinary income. There is no way in a million years that you can avoid paying tax on this. None.
Suze: It's in a traditional 401k. Hey, if you took money out of this pay taxes and you put it into a life insurance retirement plan. Another story. But even then that would be the worst thing you could ever do on your money because the only reason that you get to take it out tax free then is you do it as a loan... worst investment you could ever make and impossible to avoid taxes on a traditional 401k.
KT: She better invite that advisor to listen to Sunday, Suze school and get it right.
Suze: If your father had already been taking out his RMDs then you have to continue to take out RMDs based. It's just, uh, are you crazy? No, you cannot do this. Listen to Sunday's podcast upcoming and I will do it just in your honor. All right.
Suze: All right.
KT: Oh God. Yeah, it's amazing. Right. People don't understand, but Suze's not a fan of um,
KT: advisers that have...
Suze: Just stay away from this person is...
KT: Ok. Next question from Tamara.
KT: Hi, Suze and KT. Huge. Thank you, Suze for all your wisdom. I've been listening to your teachings and reading your books since I was in my twenties. You ready? She said I'm getting married in October, my partner and I each have our own personal accounts, 401k. CDs . She wrote all of hers are at Alliant, Yeah! And Wealth. We also have a joint checking account for shared household expenses.
KT: They're both women in their sixties. All right. So she's been listening to you for a long time. They live in Michigan and they're asking, do we have to change our beneficiaries on our personal accounts after we are married?
KT: So the question becomes um and I love that you're gonna get married. Yeah, congratulations, girl. It's such a great privilege to be able to do.
Suze: So. Here's the question though for you, Tamara, which is upon your death, would you want your spouse at that time to get the money that's in your CDs and other things? Or do you have enough money each of you that you then want to go to the current beneficiaries? Do you have to change the current beneficiaries? You absolutely do not.
Suze: But you need to sit down and talk with each other and figure out what would happen if one of you were to die? Would the other be 100%? Ok. Normally it's the spouse is the one who is the primary beneficiary. If one of you dies, if both of you dies, then it could be the other beneficiaries who maybe you have now. But that's just a decision that the two of you have to make. But truthfully do you have to. No, you do not, but you may want to.
KT: Now, this next one's really good. Everyone listen carefully...
Suze: Wait KT - what's coming up for us?
KT: Our anniversary.
Suze: It made me think of that. September 8th, 2010, we were married in South Africa in Pretoria and that was before it was legal for any gay people to get married in America. And so that's coming up. Can you believe it? But you want to know what I really like. I get that it's been, it will be now 14 years since we've been married...
KT: But together 23
Suze: 23, 24 years. I like that figure better.
KT: Which one do you like better?
Suze: Larger numbers.
KT: I hope so. All right. Let me read this one. This is important for everyone to listen because Patty got it right. But she didn't listen carefully. This is important. Hi, Suze and KT. I heard you say to get a credit card for your adult child. Mine is 24 but don't give it to them and they will obtain my credit score. Now. She, so, so that's the first part.
Suze: Let me correct the first part I didn't say get your child a credit card. I said if you in fact have a great FICO score and you have credit cards and a great Fico score would be 760 or above. Hopefully above.
Suze: And you put your child's name as an authorized user on all of your credit cards. Don't, don't give him the car. Don't even tell him that you did that. Your FICO score will help his FICO score tremendously.
KT: So the next part of the question is, I love this idea as my son's credit score isn't great, but Suze will his poor choices. He's 24. Remember everyone in his own finances affect my score at all?
Suze: No, because he's an authorized user on your credit card. So anything he does on his own cards or in his life will not affect you at all. However, if you start to go downhill for whatever reason and your FICO score happens to go down, then it will affect his FICO score. So if that ever were to happen to you, take his name off as an authorized user. All right, KT.
KT: So, Suze, next questions from Sarah. Hi, ladies. This is yet another question about putting property in trust versus not. I've heard you say time and time again that trusts are the best, but are they needed when it's only the house?
Suze: Keep going.
KT: I'm a 42 year old single mother of two and my $550,000 house would be the only thing to go to probate. If I passed, I live in North Carolina. I do not have a trust for the house. So the question is, should she get a trust for, for her home? She has two Children, single mom.
Suze: She didn't say whether they were minors or not. But let me just give you,
KT: I think so. She's only 42.
Suze: So, but let me just give you an idea about your home truthfully if all you had was a home. Absolutely. It should be in a revocable trust.
Suze: And let me just give you an idea about North Carolina because I happen to know about North Carolina. Let's say all you have obviously is a will and you're gonna leave that house to them via a will because that's probably what you're saying that you're gonna do.
Suze: First of all, they're gonna have to go to probate court.
Suze: The filing fees will just be $120 not a big deal, but the executor fees in North Carolina can be up to 5% of the real estate value, not the equity you have in it, but the value. So you say that the value of the house is worth 550,000. So that will be about $27,500 in executive fees, attorney fees, some attorneys to do this for you could charge by the hour, but some have a flat fee. So their flat fee could be anywhere from 2000 to 10,000.
Suze: So you can figure out in the state of North Carolina that probate fees will be anywhere from 3 to 7% of the home's value. So in your case, it could be anywhere from $16,500 about all the way up to $38,500.
Suze: I don't know. I don't know. Do you think it's worth maybe an hour or so of your time to get a revocable trust and put it in trust. Go to must have docs.com and take a look at the four must have documents that are offered there that you can do at your home and it will be a whole lot less than 16,000 or $38,000. Trust me on that one and you don't waste all that time. It just, it's, I don't know why there is such confusion over this when it's so easy to do a revocable trust, especially with the to have docs. All right.
KT: Next question, Suze is from Tanya. I'm 51 and my Roth IRA 90,000 consists mainly of stocks, ETFs and mutual funds. I have a bit in CDs that will mature later this year. CDs are around 5%. My question is at my age. Should I have more in CDs than in other assets?
Suze: How old is she?
KT: 51?
Suze: No way, girlfriend. What you want is these still are your growing years that you don't want more in CDs. Interest rates on CDs will be going down and down, in my opinion. I don't know how far but, but no, continue to invest dollar cost average in stocks, ETFs and mutual funds. All right.
KT: So this question, I don't know if you have the answer, Suze, but it's a pretty good question. No. Listen to it. My credit monitoring service notified me. No, you might not have the answer to this. Let me, let me ask you. I was curious, don't this is from Pat.
KT: My credit monitoring service notified me that my social security number was found on the dark web and even provided a name and address of a person using my social security number.
KT: But Pat was smart. She checked her SSA earnings and nothing has been added. All three credit bureau reports are always frozen until I check my score annually. What further action can I take, Suze?
Suze: Well, if they have the name and everybody using this, you could go to the, you know, police or somebody and file a complaint against that person and everything. But the truth of the matter is the number one thing everybody should do today and I don't care who you are is you should freeze all of your credit reports, contact them, do whatever but freeze them. What that means?
Suze: However, is that you are locked out of them as well. You wanna check your FICO score, you have to unfreeze your report. It will take you 10 seconds to do. So after you've checked your credit reports or your FICO scores, you freeze it again. The second thing I would do. Absolutely, I would do is I would make sure that on all your passwords that you have double verification that you just don't put in your password and then you get to get online or do something that you put in your password, they send you a double verification to your phone number or somewhere and that you verify. Yes, this is you that you actually make sure that you have credit cards that every time you make a charge, they send a text to you saying you just made this charge. So you know that that was you, if all of a sudden you get a text saying you just charge something at XYZ, you know, you've been hacked. Those are a few of the things that you can do and I would not just check my credit report once a year.
Suze: I would check my credit report in these times in these times where if you think about it, everybody, these hackers can hack into the government, they can hack into the credit card companies. They can hack everything today. I don't think anything is really protected anymore.
Suze: I'm so sorry to say I would check my credit report once every three months. It doesn't take much time, but I would keep track of everything big time.
KT: Yeah. Well, wait, Suze, what about all those credit monitoring companies and reports that you can get to protect your score?
Suze: The problem with those is that they don't play offense, they play defense. So once you have already been damaged, right, then they go in to help you restore credit and everything like that, but they cannot prevent you right from doing that.
Suze: So do they play defense? They play offense.
KT: I know that it took my sister Barbara three years to restore her name. Credit everything from being stolen.
Suze: So maybe, you know, they can help you and move that along quicker but they can't prevent you, KT from it happening. All right. Go on. Also. Everybody. I would change your passwords constantly on all your accounts and your email account, your Facebook, all of that. I would change. Why are you laughing?
KT: Because Suze does that to me all the time. Everybody. So we have, she, I know her password. She knows mine. She goes in, she changes it when I go online and then I call our office in, in California. I say I've been hacked. I can't get in and Suze says no, KT, it's now this password.
KT: She does it to me all the time, but it's good.
Suze: And I would be very, by the way, I would be very careful about emails and texts that you send people that have very vital information.
KT: This is, I have a few emails here, Suze that are the same issue.
KT: Listen to this. Hi, Suze and KT. I invest in my employer's 401k and Roth. I'm 60 years old. I've been working for 15 years with this company and also rolled over my old 401k from my old employer. I have about $389,000 the company that my employer uses for 401k, sends me messages all the time to apply for investment help for a fee to help grow my portfolio. Is it worth it?
Suze: No.
KT: Well, wait, wait, wait, this is the next one.
Suze: Let me answer that.
KT: Hold on. No. Listen to this one. Same thing. Should I move my old 401k to my new job or to an IRA? I have a financial advisor that wants me to move it under her control and she'll charge me only 1.5%.
Suze: Both of those questions. And let me tell you why. All right, normally within a 401k, there aren't a whole lot of options for you to pick.
Suze: And truthfully if you just pick at this point in time, like a Standard and Poor's 500 index fund, maybe a bond fund, whatever it may be, you'll be fine. But here's the thing, the reason that you want to keep money in a 401k is that if you happen to leave service at the age of 55 or older, you can get any money that is in a 401k without the 10% penalty, you roll it to an IRA, then you have to be 59.5 to be able to take money out without that 10% penalty.
Suze: So either way it's gonna be ordinary income taxes. And so also I don't know how much money you make. But if you happen to make a lot of money and you want to do a backdoor Roth IRA. You cannot have an IRA of any kind and do a backdoor Roth when it makes sense. So, can you just leave your money in your 401? Ks and given that it's in a 401k? You don't need financial advice. All right. What else? You got it? All right.
Suze: So, guess what time it is? KT quizzy time! Do you have a good feeling?
KT: I, I always have a good, I always have a good feeling about quizzy time and I'm always positive and I always, I'm waiting for the ding, ding, ding. So go for it.
Suze: That's what I like to hear it.
KT: So this isn't just for me, by the way, it's for everyone listening.
Suze: So before you take a second, because the reason we do these quizzes is though that you all should be able to answer it. So, are you all ready to answer this question?
Suze: Hello, KT and Suze. I love your show and listen all the time. I have a question on home repairs. My house needs a new roof and some indoor repairs. I got a quote and the handyman said about 13,000 total. Here are my details. I have 6000 in the bank total. My credit score is in the eight hundreds. Hopefully that is a fight. Go score. All right.
Suze: I have about $100,000 left on the mortgage and 7000 on the car loan, which is at 2.9%. Very little other than that 1000 on a credit card. I don't have enough for the repairs. Should I get a HELOC, a home equity line of credit or a second mortgage or use my cash? Think about it, KT. Let others think about it.
Suze: What would you do in Yasmin's situation?
KT: All right. None of the above, none.
Suze: None of the above none?
KT: Nope Yasmin. I wouldn't do any of those suggestions.
Suze: What would you do?
KT: Well, she had, there's a little secret in here what she said she has a very high credit score. So, if I were Yasmin, I would absolutely put that repair on my credit card.
Suze: Yes. But how is she gonna pay the person who does it? No, seriously, KT. So the items that this person has to buy for this, maybe she can put on her credit card. But you have to take into consideration. How does she pay for him or her? So,
Suze: ding, ding, ding, ding, ding.
KT: So you agree? Don't do any of the above that she wants to do?
Suze: Well, wait, listen to me, which is she has a credit card that has about $1000 on it. I would absolutely just leave that credit card alone.
Suze: And what I would do is, given that she has an 800 FICO score, and hopefully it is a FICO score, I would look into getting a new credit card that allows you to make new purchases and gives you a period of time on those new purchases to pay zero percent.
Suze: Then they would also allow you to do a balance transfer from another credit card if you needed to for 0 percent for 21 months. But balance transfers can cost anywhere from 3 to 5 percent to transfer a balance. So why not get a credit card that's a zero percent for 12 months, 15 months or whatever it is, and put all the material that needs to be purchased for this repair on that credit card. So that's what I would do there.
Suze: What scares me, Yasmin is that the handyman said about $13,000. 1st of all, if your house needs a new roof, a handyman should not be the person putting on a new roof, a roofing company that guarantees the roof. And there are all different techniques now that a roof can be repaired, doesn't need to be replaced before you just take that one quote from a handyman.
Suze: You need to do, only do a new roof with a company that guarantees its work number one
Suze: and you need to know that anything that you do. If somebody says 13,000, it's gonna end up as 20,000 or possibly even more. So you really need to think about that. You need to be able to break out what is the labor cost and what is the material cost? The materials go on your credit card, labor, believe it or not, maybe you're going to have to use the $6000 that you have in the bank for that because you can always take out a home equity line of credit if you need it, but not yet. Not now, not at these interest rates. There you go.
Suze: (sighs)
KT: You see so much about roofers and getting guarantees and we've had that experience.
Suze: You know what's funny, KT is sometimes when you're in a situation like Yasmin, the question has to be asked and answered is this about time that maybe Yasmin sells the house and either downsizes or does something else. Right? Because when you're cutting it this tight at this point because I'm reading the breast of this email, she's 62 years old and still working, but she doesn't really know for how long. Right. I'd be very careful at this point. I would probably think about downsizing into something that you could really, really afford truthfully. All right, KT, guess what? That's it. We don't have to labor anymore.
KT: Hey, Suze, let's wish everyone a great Labor Day weekend. Hopefully some barbecues going on a lot of fun at the beach. And before you know, it fall is around the corner.
Suze: Yes. And for all of you, no matter what your situation is, just know that there's only one thing that matters when it comes to your money and it is what KT?
KT: People first, then money, then things.
Suze: And if you live your life like that and you stay safe and stay healthy, you will be unstoppable.
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