Podcast Episode - Ask KT & Suze Anything: Is My Daughter a Miser?

On this episode of Ask KT and Suze Anything, Suze answers questions about fixed annuities, callable CDs, and teaching your child to save money.  Plus, learn what a margin account is and more.

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Podcast Transcript:

Suze: January 23rd, 2025. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. Today is Ask KT and Suze Anything, and this is where you can, if you want, write in a question to the Ask Suze SUZE podcast at gmail.com, and if chosen, we'll answer it on the podcast. Now, KT, did you notice what I just said? We, we're gonna answer.

KT: All right. Here's KT's first question to Suze. Who's gonna win the Super Bowl?

Suze: Well, truthfully, I hope, The Commanders are... from Washington KT are part of the Super Bowl. Who's gonna win it will depend seriously on who wins between Kansas City and the Bills.

KT: I thought you want the Bills.

Suze: I love Josh Allen. I think

KT: the most valuable player, baby.

Suze: Well, he's up for it, right?

KT: He'll get it.

Suze: We'll see. But the truth of the matter is we'll have to see. They have to get by Kansas City. And I hate this because you know how much I love Kansas City.

KT: She loves Patrick, her boyfriend.

Suze: If I were a betting woman, I would not be betting against the Buffalo Bills at this point.

KT: The Bills, the Bills really want this, and...

Suze: They both want it KT.

KT: And they're good in cold weather. They were playing in snow, so I'm not a big football person, everybody. But I have to tell you it was fun watching these guys slipping and sliding all over the snow. I felt bad though they were getting hurt pretty bad. 

KT: All right, so first question we have is from Cathy. She said, Suze, I just discovered you had a podcast. She said, I was a caller on your TV show maybe 14 or 15 years ago. I've lost track of time. I must have been about 36 years old. I'm now 51. My husband was awful back then about finances. For example, I discovered he put my engagement ring on a credit card.

Suze: Oh, I remember this.

KT: Yeah, this was a great show. I remember this too.

Suze: Did they get divorced?

KT: Wait, wait, wait, she said I paid off the balance. He paid me back within a year. I called in because I suspected my husband was not paying his credit card and other bills on time.

Suze: And she was right.

KT: So wait, she listened to this, everyone, she said, so I opened his mail and I was right when I confronted him about this and told him his bad financial habits would prevent us from getting the best interest rates on car loans or mortgages and that he could be ruining both of our futures. He kept this up and his only reaction. Listen to this, everyone. Her husband's only reaction was telling me that opening his mail was illegal. Wait. And then she said, so Suze, your only advice, if I remember correctly,

Suze: Oh you remember correctly...

KT: Was to divorce him.

Suze: Divorce, divorce, divorce.

KT: I have to admit I was stunned and angry at you at the time.

Suze: I'm sure you were.

KT: Right? Truth prevailed. She didn't want to hear the truth.

Suze: Most people don't.

KT: So then Cathy said, however, friends and family had also seen the episode, and he was basically shamed into permanently changing his behavior, his credit card score is now consistently around 830. That's great. And while our net worth was around 600,000 when I was on your show, mostly in equity in our condo and retirement accounts, no real savings, it is now about 3.7 million. We bought a house in 2015. We'll probably have it paid off at the 15 year mark. We also hope to retire in our fifties. Watching your show started me on the path to financial responsibility and independence, and my husband being shamed on TV for his poor financial habits and behavior and that they were grounds for divorce gave him a really big kick in the butt that he needed to change his ways. He is now obsessed with budgeting and knowing our investments, balances, returns, interest rates, etc.

KT: And then Cathy goes on to say, so Suze, thank you for that long ago encounter on your show. Do you love that?

Suze: I love that, but it is true. So like Oprah would call it, the Suze smackdown.

Suze: And sometimes you have to be smacked down in public, believe it or not, in order to pick yourself up, because as long as you are able to live a lie, as long as you're able to make others think something about you, you have the money, you can do this, you can put it on your credit, whatever, and they think that you're doing better than you're doing, you continue to deceive yourself and others as soon as others know the truth about you, guess what? It helps you stand in your own truth, which is why KT, I always tell people who have credit card debt, tell everybody you know, tell everybody you know the truth about yourself, because once you do that, it's hard to lie anymore.

KT: It's freeing.

Suze: It's freeing. All right, next, KT.

KT: So Giselle wrote in, Hi, Suze. I've recently learned about fixed income annuities. What are your thoughts on them and which, if any, do you think are worth investing in? I'm thinking about opening one up within my Roth IRA.

Suze: Yeah, so Giselle, here's what you need to understand and everybody else as well. What is a fixed income annuity? Remember, an annuity is a contract with an insurance company, and because it's with an insurance company, even though you're not getting any insurance, the investments in an annuity are tax deferred. You do not pay taxes on them until you take the money out. But when you take it out, it's taxed to you as ordinary income. If you pass it down to your beneficiaries, they take it out. It's taxed to them as ordinary income.

Suze: And there's usually a 5, 6, or 7 year surrender period where if you take the money out of the annuity before the surrender charge is up, it could cost you 4, 5 or 6% and you have to be 59 and a half years of age to take out money from the annuity or you're gonna get a penalty from the federal government so annuities are usually for those people who are in retirement years. A fixed income annuity is where the interest rate is fixed.

Suze: Now it can be fixed for 1 year, 3 years, 5 years, 7 years, but most of the time it's fixed for the first year to sucker you in. And then in years 2, 3, 4, 5, and so on, the surrender period years, it goes down and down to make up for that first year of high interest rates, so there are what's called CD fixed annuities where the interest rate is fixed like a CD for 4 years or 5 years or the amount of time in the surrender period, which are the ones that I happen to like if you want a fixed annuity. 

Suze: Now I know I'm going long into this, KT, but I think people should know. Remember the interest that the annuity will pay you, you're not paying taxes on it because it's in the annuity. You, however, Giselle, want to put an annuity within a Roth IRA, which is a tax-free account in most cases. Therefore, I would not be doing it within a Roth IRA. Why not just buy a CD at Alliant Credit Union with a Roth IRA or why not? If you have a Roth IRA open somewhere already, why not do a 5 year Treasury note or a 10 year Treasury note and lock in that interest for that period of time and you're not gonna pay taxes on it anyway. So therefore I would not do an annuity within any type of retirement account.

Suze: However, at your age, because KT just gave me this, you're in your early 50s. Why do you want an annuity? Why don't you want to take some of this money and dollar cost average into good paying dividend stocks that could pay you 4, 5, or 6% and also give you growth? So that's probably what I would be doing in my Roth IRA if I were you. All right, KT.

KT: Right, on the same topic of CDs, I just want this next question from Jennifer is good. I want you to clarify it. She said, I've heard you be quite emphatic about never buying a callable CD.

Suze: Wait, KT, can you imagine me being emphatic about anything?

KT: What am I missing in this scenario, she said. I bought a 2 year callable CD via Vanguard with a major bank. The rate is 4.6%. It's callable in 6 months. If I just bought the 6 month CD, it would have only been 4.2. So even if the bank calls the CD in 6 months I've earned more than I put in the 6 month or kept the money in my settlement fund.

Suze: Yeah.

KT: So, and now she's saying clearly, if my intent with the money is not long term retirement saving but a more short term saving in my brokerage account, is this such a no no? I still get the interest on the 1st 6 months it was held, right? She must be missing something.

Suze: Well, here's the thing, you don't know that they're gonna call it in 6 months, right? So it's callable, so they can call it any time.

KT: Tell everybody what that means.

Suze: Right, everybody, so first of all, what is a callable CD? Obviously you all know a certificate of deposit. You put money in and the certificate of deposit has a maturity date. And for that entire maturity date it is fixed at the interest rate that you bought it at so you know for like 2 years if it's a 2 year CD for all 2 years you're going to get that interest rate. A callable CD simply says we'll give you this interest, but we can call it, any time we want or in the 1st 6 months or after that or for the entire period because if interest rates happen to go down, then we can call it back from you because we don't want to pay you a higher interest rate when interest rates have already gone down so if interest rates then go down. And the CD is called from you, then it's difficult to reinvest that money at a higher interest rate if interest rates have gone down. That's what a callable CD is versus a fixed rate.

Suze:  You're not missing anything, Jennifer. You can do that if you want. But you also could have simply put your money in a money market account, gotten that kind of interest rate, maybe in a treasury, so you didn't have to pay interest on it in terms of the state bracket you may be in, so you can do that if you want for short periods of time. Now I'm assuming that it's callable in 6 months, meaning that they can't call it for 6 months. But can they call it after 6 months? So if this CD goes on for let's say a year and a half and now they decide to call it when interest rates have gone down significantly. Then were you going to reinvest that money at that rate, so I still don't like callable CDs. I just don't. Why not lock in for the period that you want and not play with it? 

Suze: That's just my opinion, but you can do that if you want. All right.

KT: My next question, it's not even a question. It's a, I picked this because the subject line said, have we created a monster? So it, it grabbed my attention.

KT: And this is from Julie, who's a mom. She said, Dear Suze and KT, we've been living below our means our whole married lives and now have a net worth of over $6 million. My husband constantly stresses to my adult daughters the necessity of saving and investing early. My 23-year old daughter is a full-time graduate student and has a Roth IRA and non-retirement investments of over $250,000. She has accumulated this through jobs she's had for years, as well as our annual gift of a match to what she contributes to her Roth. In my opinion, ready for this, everyone? This is from Mom: In my opinion, she has a toxic attitude towards money.

KT: She constantly says she cannot afford things and never offers to pay for anything when she's on a date with her boyfriend or when she's with friends or family. She studies very hard, always looking for ways to make more money, and even though she's stressed with her schoolwork, what can we do to shift her miserly ways.

KT: Mom thinks her daughter's a miser.

Suze: This is your quizzy.

KT: All right. Oh, this is my quizzy

Suze: Pop quizzy.

KT: Oh, so what's the, what's the quizzy here?

Suze: The quizzy is what should she do to

KT: I wouldn't do a thing. I wouldn't do a thing, Mom. I don't think she's miserly. I just think she's super conscious of wanting to accumulate savings and have a very secure lifestyle and future. I don't think she's miserly at all, but I do think that maybe, you know,

Suze: Mom's saying she's miserly because she never, she never pays for anything because she doesn't think she can afford it, yeah.

Suze: So what do you think about that?

KT: I think the daughter's 23 years old. Any kid that's 23 that wants to work and earn money and save money and accumulate money is a good thing. I don't think that she's miserly, but maybe, mom, you ought to say, OK, we're all going out and everyone's chipping in. And if you can't afford it, don't come with us.

Suze: Ding ding ding ding.

KT: That's what I would do

Suze: Here's the thing, Julie, is these younger years of your daughter in their twenties, anybody that's in their twenties, these are the financial foundation years that you cannot pass up because these are her compounding years which means for every dollar she saves over the next 40 years when she's in her 60s is gonna multiply so much because of compounding the growth of the money at 23 gets to earn money. The earning money on the growth of the money gets to earn money, and it compounds to magnificent amounts of money far beyond your $6 million that I think you say you have a net worth of. Your daughter is on the path of being far wealthier than both you and your husband, just so you know that's Number one. Number two, don't try to change her.

Suze: You have to let her change herself. Somewhere she picked up the desire to want to have money to be secure. I don't know where she learned that from. It doesn't even matter. The wise do not matter. You need to respect her decision and not make her feel that it is miserly. Her boyfriend, her boyfriend has the ability to say, Listen, girlfriend, you're going to pay this time. Let them decide that between themselves. But if I were you truthfully, I wouldn't reward. I'd reward her, but here's how I would reward her Stop matching her money.

KT: Yeah.

Suze: Obviously she has enough. Obviously you've helped her do whatever, so you don't have to match her anymore because you can simply say, you know what, you're doing so great. We're not gonna match you anymore. You're on your own and doing it and we're gonna keep that money for ourselves so she can at least feel what it's like not to be given money by mom and dad. And let's just see what that does to her. Does that make her even more miserly? I don't know. But now let her be on her own, and you have not created a monster. You have created a money maven, if you ask me.

KT: That's a good one, Suze. Next question's from Karen.

KT: She said, Suze, I'm 55 years old, single woman with two grown kids and one 12-year-old son. I used to have money in a couple Roth IRAs, but an insurance agent was trying to help me with retirement. He had put my money in a margin account. I don't understand anything about it. And I have authorized him to make trades for me.

Suze: Stop for one second.

KT: Yeah, tell everyone what the heck is that? A margin s

Suze: Should that be your quizzy?

KT: No, it sounds like he was able to trade her money.

Suze: No.

KT: I don't know what a margin...

Suze: There we go. That's the truth. Now. I already knew that, but that's besides the point, right, which is, first of all, before we even go on with this email, 99% of you out there, should not ever, ever, ever have a margin account. KT, you and I have never in our lives traded on margin. What does that mean? That means that let's say you have $100,000 in an account and you're on margin. They'll allow you to borrow from the brokerage firm. Like $50,000 or some amount of money so that you actually can invest more money than you than you have if the stock starts to go down they can have what's called a margin call, which means you have to come up with that money that it's gone down if it goes up, all right, you can make more money because you bought on a loan, so to speak, but it is seriously seriously dangerous.

Suze: And I don't ever want to hear any of you be on margin, and you are to never let a financial advisor or so-called insurance agent tell you that trading on margin makes sense. All right, go on.

KT: Well then, Karen, you're gonna get a big slap down.

Suze: Did I hear you say there that she authorized him to make trades for her?

KT: It said I don't understand anything about it. I have authorized him to make trades for me. And then she said it's only about $50,000. That's the part I don't like. Karen was a victim of the loss, she said around 5 months ago, I guess it took a huge plunge, and he said all accounts did. It went super low and slowly it's making its way back up. My question is this trading stuff seems awfully risky, but he said I can make a really good return to greatly multiplying my money by the time I retire. She's 55. I wonder if I should just move it to a Roth IRA, please. What is your advice?

KT: So listen up, everybody. Suze's going to tell Karen the truth of what she should do.

Suze: Listen, the first truth is you should never have done a margin account. Second truth is you are never, ever, ever to give somebody authorization to make trades for you without your permission.

Suze: So there's something called a discretionary account where a financial adviser, a broker can buy and sell at their own discretion. Do not do it. Do not do it, do not do it. Even our accounts KT, if John, who is our financial adviser and who I talk to every single day,

KT: Suze advises him every single day.

Suze: That's besides the point, right? But even when he has an idea that he wants to discuss with me, he doesn't just buy it. He has to get my permission.

KT: I have to tell everybody something funny. Suze talks to John every day or twice a day, three, yeah, a couple times a day, and, and then he, he might come up with something and she says, oh that sounds really great. Let's do it. Let's put in X amount of money and then on the background I hear him say on the speaker, what about KT?

KT: Meaning what about KT's account money and Suze said, no, just leave it. Suze knows I do not like to lose a penny, right?

Suze: But what I do say is this is a good idea, but you have to call KT and talk to KT.

KT: He always says to but Suze's my personal Financial advisor.

Suze: But still, he personally needs her permission even if I like the idea, he can't do it because I'm not authorized, nor is he to make a trade in KT's account, buy or sell anything without KT's permission.

Suze: So that's first of all. Second of all, when you say it's only about $50,000 50,000 dollars on margin could be gone before you even know it. And if he was an astute financial person over these past few months, rather than its slowly making its way back, you would be up a fortune right now if he had invested on margin in the correct stocks. I don't like this person's advice. I don't like this person telling you to do these things. 

Suze: I want you to cut just like I did with that person divorce him and then look what happened. I want you to divorce this financial person or insurance agent. An insurance agent should not be telling you what to do with anything other than insurance. It is incredibly risky now whether you can move it all to a Roth IRA or not, I doubt because I don't know if this money is in a retirement account or not, so can you convert it, but I would put it out of his hands right now. And just put it either in a money market account or somewhere just to make sure that you are OK. All right.

KT: All right. Next question is from Sue. She said, Suze, I've been listening to you and watching you for over 20 years, and I am shocked that I did not get this very important point about Roths please, and KT probably didn't get it either, so don't feel alone, Sue. Please confirm and share with all since others may need this information. Is it correct? There are no income requirements when contributing to a Roth account when it is connected to your job?

Suze: Another pop quizzy.

KT: Oh, OK. So I don't think there is any. I don't think there is any,

Suze: Any what?

KT: Income requirements.

Suze: You're positive on that?

KT: I'm not positive, but I think with a Roth, you know, you can, um, I think I'm OK with that. There's no income requirement with a...

Suze: Roth at an employer?

KT: When it's connected to your job, yeah,

Suze: Yeah, ding ding ding ding ding.

Suze: So again, everybody...

KT: Sue, I got that one right.

Suze: Then after I answer this, I'm gonna yell at you for a second here, Ms. Travis.

KT: OK.

Suze: Are you ready for it?

KT: All right.

Suze: You sure? I can shame you in front of everybody.

KT: I'm never shamed.

Suze: All right, so but here's...

KT: I'm wrong, but I'm never shamed.

Suze: But here's the thing, everybody, which is this.

Suze: There are income requirements to qualify for a contributory Roth, so to do a full contribution into a Roth IRA that you contribute 7000 or $8000 a year to depending on your age, you cannot make over $150,000 a year if you're single, a modified adjusted gross income to put the max in or if you're married filing jointly $236,000 a year of modified adjusted gross income when you have a Roth 401k, 403B or TSP, there are no income limitations at all. So Sue. You missed it, but now you understand it. But KT.

KT: What did I do wrong?

Suze: I don't ever want to hear again in the year 2025 and beyond that you don't get Roths, that you don't understand them. I think you have placed it in your mind that you don't have the ability to understand them or how they work when you are one of the sharpest, shrewdest, most intelligent women I have ever met in my life and therefore you have the ability, you're going to understand them you do understand them and I never want you to think again, that you can't because you are actually convincing yourself when you see the word Roth it's beyond you.

KT: So that's my New Year's resolution. I'm gonna conquer the Roth.

Suze: It is now your life. You have conquered it. You're gonna do like...

KT: I'm gonna conquer the Roth, everybody. I'm gonna learn front door, back door, side

Suze: go on to the next question lil rascal you, but I'm not joking.

KT: I, I'll do it. I can do it.

Suze: And all of you out there, you are never to tell.

KT: We'll do a podcast in about 6 months where you can all write into KT and ask me questions about a Roth. Let's try that.

Suze: Let's try that in 2 months, everybody.

KT: No, no, no, no,

Suze: You're giving me too much time. No,

KT: I need 6 months.

Suze: No, you don't. You see the excuses you all give yourself. You're just like KT, everybody. You're just like her.

KT: All right, I'll try in 3 months.

Suze: What?

KT: Next is from Sheila. She said, My mother's distributing shares of stock to my sister and me. I am inclined to sell approximately half of the stock she's giving me and reinvest it in a broader market index fund. I do not need the money. It's part of my retirement fund. Please let me know if you have any thoughts of what to do with the stock.

Suze: Yeah, well, here's the thing...

KT: So it's a single stock, I guess, and she wants to put it in.

Suze: Yeah, but here's the thing, Sheila, which is I don't know how old your mother is, and I don't know how long she's held the stock that in fact she wants to give you. But by giving it to you, listen to me closely, she is giving you her cost basis on that stock. So let's say she bought this stock 20 years ago at $10 a share. Let's just say that's true. And now it's at $100 a share. If she gives it to you and you turn around and sell it, you're going to owe taxes on the difference between $10 which she bought it at and $100 of where it is possibly today. If she's older and you don't need the money and it is a good quality stock, you might ask her to just keep it and let you inherit it because if you inherit it from her via a trust, for instance, so there's no probate fees on it.

Suze: Then what will happen there is you will get a step up in cost basis. So if she bought it at 10, it's worth $200 when she dies and gives it to you. That $200 will be tax free to you if you turn around and sell it. So that's what I would be doing since you don't need the money and it's kind of part of your retirement fund if it's good quality stock maybe your mama, depending how old she is in her health, should absolutely keep it and leave it to you via her trust.

KT: That's great advice.

Suze: Well, KT, that's a wrap.

KT: So I did my quizzy. I did a couple of quizzes. All right, good. Well, that was a that was a nice mix up of, um, lessons.

Suze: Let me just give you a little piece of news here, KT whether people write in or not, I myself, am going to create a Roth quizzy just for you...

KT: A whole podcast of Roth...

Suze: I am going to make sure that I have asked you everything that I want you to know. And for you to get and I am going to be testing you to see in 2 months how you do on that quizzy. So very shortly in 2 months, everybody, we're gonna have an ask KT anything

KT: I can do it.

Suze: I love that.

KT:  I can do it.

Suze: You're so cute.

KT: I can do it.

Suze: We got haircuts yesterday, everybody. How do they look?

KT: Yours doesn't look like you got much cut, but mine is kind of curly. Well, I, I have very curly hair in this weather.

KT: It's kind of in between whether it's like winter and summer in Florida. 

Suze: What you all don't know is that we're in Florida right now, and we sit in front of this big mirror,

KT: huge wall mirror, we look at each other's hair.

KT: I sometimes

Suze: look at her teeth and wake up while we're

KT: talking in the if we were on the camera, it would be hysterical for you to see us,

Suze: right?

KT: Suze has on her pajamas still, and I got dressed a long time ago. It's like really early and I got dressed because I was cold, so I'm on a fleece and

Suze: Yeah, I've been running hot lately.

KT: Suze has on her like little sleep, sleep shirt,

Suze: My little sleep shirt. Anyway, all right, everybody, so until Sunday when we will have another Suze School, I have no idea what it will be about. However, there's really only one thing that we want you to remember. Now there's many, many ways, KT, that we have been ending our podcasts. We've gone from long endings to short endings...

KT: Suze, you know, no matter what, I always like your very original credo in life, which is people first, then money, then things.

Suze: And if you do that, everybody, then together we will rise.