December 07, 2023
On this episode of Ask KT & Suze Anything, Suze answers your questions about understanding investment terminology, managing your retirement accounts and more.
Listen to Podcast Episode:
KT: Good morning, Suze. How is that? How is that cup of coffee? Did you tell everyone, I make you coffee every morning.
Suze: They know you make me coffee every morning,
KT: But really early,
Suze: We normally get up really, really early. But anyway, it is December 7th 2023. Welcome everybody to the Women and Money podcast and everyone's smart enough to listen. Today is the
KT: ask Suze, anything with KT as your host? And wait, wait, today's a big day for all of our friends. We have so many birthdays celebrating out there. We do. We have Mel in England, our beautiful bright Mel. We love you so much and we wish her so much good health. We also have Peter Roth, our friend Peter
Suze: Who was CEO of Warner brothers.
KT: Dear Peter... and our friend Anneline here on the island. She's from Norway.
KT: She turns 80 today. Wow, she's wonderful.
Suze: And I got news for you.
Suze: To see her be on the treadmill or the elliptical or riding her bike. You would honest to God think she was 35 it's an amazing thing. Now, that's what it does.
KT: Ok. Let's get started because I've got a whole host of great questions.
Suze: But before you start my love. for those of you who would like to possibly have your question answered on the Women and Money podcast. All you have to do is write it in to ask Suze podcast at gmail.com.
Suze: And if KT likes it and chooses it, guess what, we will answer it on this podcast. But be patient because even if you wrote in a while ago, you never know. We may still get to it. All right, KT. All right.
KT: So the first one I've selected kind of made me feel like you're not alone out there. Everybody, this is from Nancy and Nancy said, hi, KT and Suze O, and when she said, Suze O, I had an inkling that she was a fan from the past and she was, and she is.
Suze: But the truth is KT every day I say, and this is Suze O, every time I just do it without you, I go Suze O, here.
KT: But everyone called her Suze and, and listen to what she said, I am an avid listener going back to your talk radio days.
KT: So, what, what any of you let me segue for a minute, Suze and tell them we started with a radio show we did and that radio show Suze would get really mad at me. It was four o'clock every afternoon.
Suze: Premiere Radio, I had a two or three hour, what was it? It was like three hours radio show from 4 to 7, 5 days a week. Besides everything else that I was doing,
KT: And I would sit behind a glass screen that was in the control room and Suze and, and where I would sit and wait and watch and at four o'clock, I would fall asleep in the middle of her show and she would get so mad. She looked through the glass and see me nodding off. But it was fun. It was a great show. And that's how we met our wonderful producer of many years on the Suze Orman television show...
Suze: Because I had this idea. Oh, I know. Let's take the radio show to TV.
Suze: And somehow we got to do that. And that was the beginning of the Suze Orman Show. But we stopped doing radio and then just did TV.
KT: Ok. So back to Nancy, she said, Suze, I'm so glad I found you again on this podcast. I've read your book about retirement plans for 50 plus. And I thank you.
KT: So my question is after all my research, Suze, what are you talking about?
Suze: Oh, that's why you chose this.
KT: I chose this because it's funny. She says, I know from you that I need to have a good mix of stocks and bonds. But then I see terms like mutual funds versus index funds versus ETFs and then I look at my 401(k)s and IRAs and I see things like Vanguard Trust, Equities, real estate, fixed income, cash, money market. Oh, I can't even tell by these terms. What mix of stocks or bonds I have. Is there a secret handshake in the investment club? And I don't know it. Which is which?
KT: So Suze, let's set Nancy straight. You tell her and by the way, her topic is types of investment terminology, she can't figure out what this all means. Tell her what to do.
Suze: So thank you, KT for choosing this one. What do you want me to say to this person? No, truthfully, Nancy. And I say this with the utmost of respect. If you really, really, really want to know, then you can't give up and just saying, what are you talking about? What you can do is go on Google or any search website. And all you have to do is put in what's a mutual fund?
Suze: What's an index fund? What's an ETF?
KT: It's a glossary...
KT: but more important, Nancy just listen closely if you listen to Suze's explanations. You won't have to wonder what the terms mean and what they are. Suze tells you better than any glossary or Google
Suze: But she needs to understand the difference between a stock, a bond, an ETF a mutual fund, equities versus real estate versus fixed income. She needs to understand the differences of all of those terms. And here's what I really want to tell you, Nancy.
Suze: So many times you think you can't understand, you think that it's complicated, you think that there's no way that you can do this and that there is a secret investment club there isn't. I promise you,
Suze: I promise you that if you keep listening and, or look up these terms, listen to what I tell you to do and things like that, you have what it takes and how do I know that? Because you've been smart enough to listen to me since the radio show days, which was 2001. So girlfriend just stick with me, but more important. Stick with yourself. All right. OK.
KT: Next question is from Jim, Dear Suze and KT. I listen to your show every Thursday and Sunday on my walks and I love your podcast. Thanks, Jim.
KT: My question is why can we not have our trust be the beneficiary of an IRA account is with Charles Schwab. It gives me the option to fund the trust. So that's what I did. But I've been told it's not the right way to do it is he, can you tell him the right way?
Suze: So, Jim, it's a little confusing to answer this question because I'm not exactly sure when you say, why can't you have the trust be the beneficiary of an Ira account. There's no reason you can't, I don't know where you got that information from. So whoever is giving you information and they told you that stop listening to them because they're 100% wrong. A trust can't own an IRA, but a trust can most certainly be the beneficiary of an IRA account. So whoever told you that's not the right way to do it.
Suze: They're probably 100% wrong. However, normally the best way to set up a beneficiary of any retirement account. If you have a trust is your spouse should be the primary beneficiary and the trust, the secondary beneficiary, the contingent beneficiary. If you're not married, then the trust can be the primary beneficiary. All right. Are you wondering why that is KT?
KT: Why the trust can be the primary?
Suze: Why aren't you wondering?
KT: Why not. I listened to you and you said it can be. So who cares?
Suze: I'll ask you again. Are you wondering why the trust shouldn't be the primary beneficiary if you're married?
KT: Is that right?
Suze: That's, that's a good response.
Suze: Are you listening? Can that be your quizzy?
KT: Tell us stop laughing. This is serious business here. Are you ready?
Suze: No (laughing)
Suze: It... I don't even care. Just know that it can't be. All right. Go on. Should be alright.
KT: You got tears coming out of eyes, while laughing.
Suze: If you could have seen her face when she said, why?
KT: We should put this on TV. I'm telling you.
Suze: I know we should. But you and I...
KT: All of you that want to see Suze and I at like 3 or 4 in the morning with our coffee doing our podcast. She's in her robe. I have on my garden clothes already ask her to put us on television. I'm happy to do it.
Suze: She sees my hair this morning. What do you say, KT?
KT: I said, hey, Suze, your hair looks great. You should see it sticking out all over, all from both ends.
Suze: So the, the thing is here... we're gonna have a podcast with just us laughing.
KT: If they saw us laughing. If they saw us, I think they would like it.
KT: Why would they like it?
KT: because it's so authentic. All right, ready? Next question's from Gabe. Hi, Suze. Question for you. I am already retired and would like to do some remodeling on my home.
KT: If I was to take a withdrawal from my Roth IRA account, would this be considered income or be taxed on the amount withdrawn? Please advise Gabe.
Suze: Obviously, this is gonna be a hard podcast everybody to get through because Miss Travis is just too cute this morning. I can't even stand it. All right. So, Gabe, you say in here that you are already retired? So I am going to assume that you are 59.5 years of age or older. So if that is true and the account has already been open for at least five years, you can take any amount of money that you want out without any taxes or penalties whatsoever. If it hasn't been open for at least five years, anything above your original contribution, you are going to pay income tax on and if you're not 59.5, you're also gonna have to pay a 10% penalty.
KT: All right, Suze. Next question really caught my eye because it's called Gold Digger. Woah ready for this one?
KT: My father in law who's a widower wants to marry a woman who just arrived from a foreign country. His kids, including my husband thinks she will inherit my father in law's home that's paid for and be entitled to all of his financial assets.
KT: We feel she's looking to inherit all that he has. He's 83 and she's in her late sixties. Is there anything my husband and his brothers can do to prevent her from inheriting anything from my father in law? It's a little tricky, this one.
Suze: Well, it is and it isn't. The father in law has to have a say in it, doesn't he? It depends on how close your father in law is to his kids. So if he really wants to protect his kids more than this woman, then the easiest way to do so is to put the kid's name on the title of the house as joint tenants with right of survivorship. It's also his bank accounts and everything should be entitled with the kids because how you title an asset overrides the wishes of a will and, or a trust. So it does not matter what your will or trust says if you own a home and join tenancy with right of survivorship and your kids names are on there, it's going to go to your kids, even if your trust and will says it's to go to my wife. What KT?
KT: I just have a question. Joint tenancy means you live together in it.
Suze: It does not. Absolutely.
Suze: So your joint tenancy with right of survivorship, you can own it with anybody you want just that simple. So that's what I would do. However, if papa doesn't want to do that and he then owns it in his own name and he takes out a will and a trust that leaves it to her. It's gonna be very difficult for you to contest that. So I would go and be very honest with him and say dad, can we do this if you change your mind in the future? Ok. But can we do this just now to not only protect you but also to protect all of us? I would be very honest with him. Yeah. OK. What do you think he's gonna say?
KT: So who knows? Love, love may...
Suze: It's not love. You can't love somebody like that when you've just met them, right? It's lust. I'm telling you it's lust.
KT: All right, lust is expensive.
KT: OK. Ready. So next question is from a woman who had a very long story and I kind of shortened it for you for everybody. But it was a very long story says, hi Suze. When I got divorced many years ago, I found you read all of your books, watched all of your shows and you saved my life. You became my money guru. And I thank you so much for this in those dark divorce days. The only thing I was panicked about was money. Nothing else with you. As my guide, I started realizing I had made all the classic mistakes growing up. My father bought the paycheck home. My mother managed the books. Dad stayed out of it. We were poor -ish. I say that because my parents are also poor minded. They didn't invest and the only thing that ever mattered to them was the paycheck. Sad. Anyway, back to being me.
KT: So after my divorce, I was able to buy my ex out of the home. Years later, I eventually bought another home and moved into that, selling the original home and now I own my home outright. At 61 I recently lost my job due to the COVID layoffs. My question is I have $220,000 sitting in cash in a Roth and traditional IRA.
KT: Do you have any suggestions as to how I should invest this?
Suze: Here's the key though, before you invest it, it's really, really important that if you don't have income coming in. Right? Now you're 61 years of age, so you're still too young for social security. How are you going to support yourself?
Suze: Are you going to sell the house that you're currently living in? And if you are, then where are you going to live? So you have to make some really important decisions before you even decide what to do with your money. The money that is in the Roth and traditional IRA, before you go ahead and you invest it right now, at least make sure that it's in a money market account within the Roth and the traditional Ira making you about 4.5 or 5% in interest. That's number one. But that will just be for short term because once you have decided, what is it that you need from this money?
Suze: Is this money, your security, especially the Roth one so that you can take it out tax free to meet your bills or while you're not making a lot of money, why not take it out from the traditional IRA if you need to withdraw it because you're not gonna pay a lot of taxes on it while you're in such a low tax bracket, you also may start to make the decision as to how much money in the traditional IRA you could convert to the Roth IRA so that eventually it's all tax free. But you would see a tax person for that.
Suze: But you need to get very very clear and this is for everybody. What do you want from your money? What do you need it to do for you? And as far as I can see in this particular situation, you probably need it to generate income for you. So if you're going to invest some of it, you might wanna listen to last week's podcast last Sunday where I talk about some dividend, paying stocks that I really like and just go slowly with it.
Suze: But in the meantime, while you're figuring all of this out, if I were you, I would be putting it in a short term money market fund right now, like I said, paying four or 5% and possibly looking into longer term treasury bonds, 20 or 30 year treasury bonds um for some of it as well as dividend paying stocks and some money for growth. But you're going to keep a lot of it liquid until you know how you are going to be paying your bills.
Suze: I say that KT because I so wish I could go right through this microphone into their home and go do this, do that, do that. But I can't because I don't know enough about her, her risk tolerance, all of that stuff. But you know, maybe we're just gonna have to do a program one day where people can sign up and where it tells them what to do with their money. Huh? Not a bad idea. What do you think should I do it.
KT: They would love, people, would love that.
Suze: If you would love me to do something like that. Write in on the community app and let me know, right, go on to the wall and I'll post a little thing that says, would you like me to start like an investment program for you?
Suze: You know, or team up with somebody and do that or bring one to you from somebody? I respect well, you'll answer me yes or no.
KT: Ok, next question says love the show. Thanks for all the information and all you both do for women. I'm retiring and I want to roll my 401k over into a traditional account.
KT: My money is with Fidelity. So I figure I'll keep it there. I have a regular pre tax and a Roth account when I roll the money over. Should I put it in a money market account to begin with and slowly purchase index funds and ETFs in order to have a better dollar cost average or just put it all in those funds to start.
KT: Also, Suz won't need the money anytime soon. So there you go. What should she do?
Suze: See, here's another situation that I need to know more about you. Your needs, your income level, what do you want from this money? You have to answer that. However, you know, it's funny you can dollar cost average into something, but that doesn't always mean you're going to be buying it every month at a lower price. So sometimes if we find ourselves in a market like we have recently, that's been going up and up and up. If you dollar cost average, you're gonna buy it one month, that may be $10 a share in the next month at 20 you're gonna be averaging up, which isn't necessarily a great thing to be doing.
Suze: But what dollar cost averaging does do is it protects you in case the markets start to go down so that you don't invest all at once and get seriously hurt. So when you convert this money from a traditional IRA to your Roth, you make sure that you consult with a tax person and you only convert that, which won't put you in a higher tax bracket and kill you in taxes. So yeah, you would roll whatever amount is that you have over. You could possibly put it in a money market fund and little by little go into the ETFs that you want. But remember, you might be dollar cost averaging up and if that's ok with you, which it probably should be because what goes up usually does come down as well. That would be a great way to start, but I would not just put all of it into that into the funds to start. No way.
KT: It's quizzy time. Everybody.
Suze: Why are you so excited to have a quizzy?
KT: Because it's quizzy time, everybody.
Suze: Is that because you're hungry.
KT: No. Come on. What's, where's my quizzy I haven't done a quizzy. I'll tell you why. I'm excited. When's the last time I did a quizz? Can you remember? Before Thanksgiving?
KT: That was in November. That's the, that's the last time I did a quizzy. Everyone. I'm sure all of you remember, but Suze doesn't remember. So I am raring and ready to go. All right. Ready for my quizzy?
Suze: Quizzy time is I asked KT a question versus KT asking me the questions that you've written in to see if KT has learned anything from the podcast. And can she answer this correctly?
Suze: And the goal of this is that it's your quizzy as well. You need to answer this question because it is a question. All of her quizzy questions I choose. It is a question that I have talked about on a previous podcast. So let's see.
Suze: Are you a good listener or not? Hi, KT and Suze. I have a substantial amount of cash that is earning next to nothing in a low interest savings account.
Suze: What is wrong with you, first of all? But that's besides the 0.5 plus interest sounds really good if I put 250,000 or more in a CD, by the way, you should be taking advantage of the 18 month certificate of deposit at 5.3 or 5.35% at Alliant Credit Union. Anyway, if I put 250,000 or more in a CD?
Suze: And when the interest slash dividends hit, putting the balance over 250,000, would the earned money be covered?
KT: When they say earn money, it means the FDIC and NCUA. Would it be covered insurance wise? I have to, I have to make an assumption here that if I were the FDIC or the NCUA and I'm encouraging people to have money in, you know, my bank or credit union, then of course, it's got to cover the earned money from that investment.
Suze: Is that your final answer?
KT: Yeah. Is it, is it... (Suze makes the wrong answer sound)
KT: All right. So then I wouldn't keep that much in.
Suze: Well or remember everybody while it is true that $250,000 is the limit.
Suze: That doesn't mean that you can't have different accounts. You could have an individual account, you could have a joint account, you could have a trust account and have $250,000 in each one. Or remember for every beneficiary after the first beneficiary that you name on your certificate of deposit, your pay on death account.
Suze: If you have two beneficiaries or three beneficiaries or four beneficiaries, you can get an extra $250,000. So if you, let's say you have three beneficiaries on your POD account, then you would have, ok, $500,000 of FDIC insurance.
KT: So the insurance for both FDIC and NCU A which is credit unions is for the account, not the individual. So as an individual and I'm banking at Alliant, my credit union, I can have multiple accounts and they can absolutely surpass 250 they're all covered them each one.
Suze: But you have to be very, very careful that you as a, as an individual. KT you don't open up three accounts at Alliant Credit Union.
Suze: Right. It has to be one account in your individual name. You could have another account with me, let's say, as a trust account or a joint account or whatever it may be. But really, Karen, um the person who wrote in on this, what really concerns me is that you've had so much money just sitting in a regular bank account for those of you out there that are like Karen and you're letting your money sit at a bank paying you 0.8% or 0.5%. Why in the world would you be doing that on $250,000 over the past year, you easily could have earned $12,500 on that $250,000. So it's like you just doing what? Throwing that money away? Are you kidding me?
Suze: So again, you all know that I'm a tremendous advocate of the 18 month certificate of deposit at 5.3% for deposits under 75,000 or 5.35% for deposits of 75,000 or more at Alliant Credit Union. Fabulous rate. Far higher than a two year treasury note. Go to my Alliant - alliant.com. Check it out.
KT: So, so Suze December 7th is also a very significant day.
Suze: Are you going to quiz me on what today is?
KT: You should know what, you know what else today is? It's Colo's favorite holiday.
KT: It's Hanukkah and the candles are ready. We set, by the way, everyone, Suze and I love to celebrate everything and Hanukkah's super early this year. It's usually closer to Christmas, but we've got her grandma Goldy's menorah polished and ready. Colo and I get that thing ready every year and he polishes it up really nice. It's brass and it's very old. We put the candles in and at sunset tonight, Suze will sing, we'll say our prayers, we'll say our prayers...
Suze: For everybody out there who's going through a lot of hardship right now. And then in just 18 days we celebrate Christmas, right? So whatever holiday you happen to be celebrating with whatever religion you happen to be. We really hope that wherever any of you go, that what you get to experience is a world that is more peaceful, more joyful and full of love. That is our wish for all of you. And when that really happens in this world, this entire world will be unstoppable.