February 08, 2024
For this episode of Ask KT and Suze Anything, Suze answers questions about investing for the first time, taking money out for retirement, how CD rates are set, starting over saving money, and so much more.
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Suze: February 8th 2024. Welcome everybody to the Women and Money podcast. As well as everybody smart enough to listen.
KT: Why are you giggling?
Suze: Because Miss Smiley face, she has the hiccups. She's like her coffee isn't quite agreeing with her that yet this morning said, can you do this podcast?
KT: I can try if I drink coffee really fast and we had such a nice morning already.
KT: I, I get the hiccups or something
Suze: You do get the hiccups. All right. So right before we begin, is there anything we want to say?
KT: I love the Grammys this past weekend, weren't they? Great? I said to Suze, I said I, it was the first time I not only didn't know like 90% of the new artists, but what I enjoyed was that it was very, um fashionable. It was very exciting. I love Trevor as the host. I love Laverne as the, um, I guess greeter on the red carpet. It was great. I liked it more than the Oscars and Golden Globes way better.
Suze: We have to see what happens with the Oscars. I just, not that any of you care about this. But so what? No, but it's like so in love with Miley Cyrus. I've been in love forever and ever and ever.
Suze: Right? So great. I love a woman.
KT: She's a free spirit.
Suze: I was just gonna say that I love a woman who has such free spirit and not caring what anybody thinks about her
KT: She's a free spirit.
Suze: What a singer. Anyway. All right. This is the Ask KT and Suze edition of the Women and Money podcast. If you have a question that you would like Miss Travis to possibly choose for us to answer on the podcast, write it to Ask Suze podcast at gmail.com and she chooses it. We will do it now. I just want to say something.
Suze: The emails are growing and growing and growing. Don't be impatient because you never know when KT may choose one from three months ago or four months ago. And hey, if you really want your question answered, maybe send it in again, just copy and paste it and see what happens.
Suze: But I do have to say one thing, please don't send questions that say "I have $200,000. I have $100,000. I have 20,000 or 2000. What should I invest it in?" I wish I could answer that question, but I cannot because I don't know enough about you. I don't know. Are you afraid? Do you need dividends? Do you need whatever it is? Just wait because sooner than later, I am hoping that something will be revealed for all of you might be quite a few months from now that will help you out. But please don't write that because those are not questions that KT is going to choose, ask away girlfriend.
KT: Or, she can't answer them either.
Suze: Wait, wait, let's get something straight here girlfriend. This is not about you answering them.
KT: It's ask KT anything you want and then I'll ask Suze. So my, my first one is from Ruth and here's the subject, everybody, it's called life. So that, that kind of sparked my interest and I picked it and listen to this one. She said today I was moved perhaps by intuition to listen to your podcast. It was interesting.
KT: A woman wrote in to say that she and her older siblings were going to have to put her mom in a nursing home. You gently chided the other siblings. They were all retired. Why couldn't they have made more time to make an effort to keep mom out of the nursing home? I found myself agreeing with you when my mom and dad were getting older and less able to manage their own affairs. I was the only person in town to help them.
KT: I basically gave up work. My social life was nil but you know what? I'm so glad I was able to do that. My dad required less care than mom, but he was consistently being harassed by telemarketers and my dad could not answer the phone. My mom had Alzheimer's subtle at first and then more intense. She was sweet though. And I was so grateful that I was helping her I was able to get and I love you ruth at least twice a day. It was well worth the sacrifices I made. Anyway, Suze, I don't really have a financial question. I just wanted to share and say hi.
KT: Isn't that, great everybody?
Suze: You know what I've noticed about you lately, KT, you're liking to start to Ask KT and Suze Anything with stories.
KT: I love stories. I've always preferred a story more than anything.
Suze: More than a question?
KT: Yea. I love stories.
Suze: Maybe, maybe we need to do a different called Suze stories.
KT: Suze Story hour.
Suze: No, Suze Stories.
KT: KT's Story Hour.
Suze: Oh, go on. Ask me a question...
KT: Ok. Next is from Helene. I've lived this one. Made you laugh.
Suze: Wait, wait one second.
Suze: If you're going to read it, you have to have a comment on it and the comment about Ruth's story really, really has to be everybody that in life, honest to God in life, no matter what your relationship really is with your parents, actually, they're gone. Don't find yourself in the situation of saying I wish I had. Why didn't I, I should have understood better what it's like to get older.
Suze: So, learn from these stories. Because even myself, I say, why didn't I with my mom? Why didn't I spend more time with her? Why didn't I, why didn't I? And so it's a, it's a regret that I have and I revisit often.
KT: Ok, Suze. So our first question is from Helene. And this one made me laugh because I read it so fast. When I was looking at all of these, I, I made myself chuckle. It said I've lived in a "coop" for 30 years
KT: and I realized it was a co op but she spelled it coop and I'm thinking this is a chick.
KT: So she said I've lived in a co op for 30 plus years. Two miles from my sister, we're both planning on buying separate single family homes in New Jersey, which are in a 55 plus community and their new builds. She said I retired in 2022 with two pensions. Small one from my company. I left in '95 after 16 years, larger one from a company I worked for, for 25 years.
KT: I always wanted to wait until I was 70 as you recommended to receive Social Security. But my investment counselor advised me to start taking it in August when I turned 68 as opposed to taking out any 401k. Now, an IRA money that will be heavily taxed. He also recommended a larger mortgage so I don't have to utilize all my liquid money along with the money I get from the sale of my co op, by the way, which is paid in full and no mortgages. She has no debt. So that will allow me to pay taxes, my mortgage and other monthly bills I don't pay now.
KT: So basically Suze, she's saying in a nutshell. Do you agree with this advice?
Suze: Well, well, well, well, you know, I always say that you never ask a question like this that you don't already know the answer to. Helene, in my personal opinion, if you really trusted your financial advisor, if you really felt in your gut, that this was the absolute correct advice you would not be writing in...
KT: It's true.
Suze: To ask Suze Podcast at gmail.com. So you whether you know it or not have already answered this question and the answer is from me, are you crazy?
Suze: Is he or she crazy this financial advisor you are to take out a mortgage right now at today's interest rates just so that you can pay certain bills and da da da da. Absolutely not over my dead body.
Suze: Now, why maybe does this person want you to do that? The more of a mortgage that you take out? Guess what happens, the more money they have to invest for you that they continue to make income off of you? Absolutely not. When you have a mortgage, you have got to make payments for it. Why is it that you own your home outright currently?
Suze: Because no doubt it makes you feel secure and what is the goal of money it is to make you feel secure. Listen, no matter when you take money out of your 401k, it is going to be taxed. So you have a choice here and I'm not going to give you the answer to that choice. I want you to be a woman who owns the power to control her own destiny.
Suze: So I want you to be somebody who makes the move because either way you're not gonna make a mistake here, truthfully to choose what makes you feel more secure, taking social security now or waiting to take social security, withdrawing money from your 401k now or waiting to withdraw money from your 401k. You make that decision, girlfriend.
KT: Ok. Next question. This is from Rissa.
KT: Hi Katie and Suze. Both of my Children have UTMA accounts. They are both now over 21. Should I slowly have them transfer the money to their Roth IRAs. I had them open this year.
Suze: That's how you end it?
KT: Yeah, that's the, that's the question.
Suze: You have again, a look on your face like...
KT: Well, tell everyone what a UTMA account is. I didn't understand what that was.
Suze: It's usually either people refer to it two ways. It's either a Uniform Transfer to Minors Act account or a Uniform Trust to Minors Act account.
Suze: That is an account, everybody, there's also a UGMA Uniform Gift to Minors Act account when your children are minors and you want to invest money for them in their name. That is theirs and you can never take it back. You usually do it that way because there's really no other way for them to do it since they are minors. Here is the answer my dear Larissa.
Suze: In order to have a Roth IRA, you need to have earned income. You cannot just transfer money from a UTMA into a Roth if they don't have earned income. So obviously, of course, you can take money out of their UTMA with their permission because this is now their money and legally you can't do anything with it without their permission, but you can open up a Roth IRA. But if they don't have any income, you cannot fund it.
Suze: But there's one thing that you all should know, even if the kids have earned income, they can only put in up to 7000 a year or the amount of earned income they have, whichever one is less, even if they only have $1000 of earned income. That's all they can put in there and you can use the money from the UTMA to do so.
KT: Ok. Next question from Kayla. Hi, Suze. I'm a 29 year old new grad nurse who just landed my first big girl job. Congratulations, Kayla. Any advice on where I should be putting my money?
Suze: Kayla, the first thing you should be doing is finding out if your employer offers an employer match to either the 403 B or the 401k.
Suze: If they do not offer a match, then forget about those retirement accounts and open up a Roth IRA for yourself. Aim to put $7000 into it. That will be the max for you this year and do it. Hopefully at a discount brokerage firm number two, you should find out if your employer offers a Roth version of those retirement accounts if they match and they offer a Roth version, sign up for the Roth version, period if they do not offer a Roth version, but they do match your contribution sign up anyway, but only up to the point of the match. After that, you are to either open up a Roth IRA on your own to fund. But you would only do that if in fact, you have no credit card debt, you have an emergency savings account and so on and so forth. But the very first thing you should do is exactly what I told you.
KT: Ok. So Suze, this next question from Lil is because I have no idea what this means. And I, I would love...
Suze: Oh really, KT. How surprising.
KT: She says, hi, Suze and KT. I'm a new listener, but absolutely loving your podcast.
KT: I'm slowly making my way through all the previous podcasts. So I apologize if you've addressed this before. My question is when purchasing stock, I have a Roth and traditional IRA through Schwab. In addition to selecting my option quantity, et cetera, it asks about timing. Now, this is the part Suze that I need a little help myself. It said day only, day plus extend, fill or kill, et cetera. The default is day only, but I'm wondering if this is the best option as they don't really understand the timing compltely.
Suze: So this is something, this is a good question you picked here because a lot of you are starting to invest on your own through companies like Charles Schwab or Fidelity or whoever it may be any discount broker out there when you place an order to buy stock or an exchange traded, whatever it may be, but it's usually just stocks or exchange traded funds. You have a choice. Sometimes a stock may be trading at a specific dollar amount and maybe you don't want to pay as much as it's trading for at the time.
Suze: So rather than entering a market order, which means no matter what it's trading at, they're gonna fill it right away for you. You'll get your trade, you decide to enter a limit order which is at a specific price that's under what the stock is currently trading at and what they want to know is and who is they? I know KT will ask that question.
Suze: So in this case what Schwab wants to know. How long do you want that limit order to stay in place? Do you want it to stay in place for just the day that you entered it, period? Do you want it to stay not only for the day that you entered it, but possibly for another five days? Whatever you choose.
Suze: Do you want it to be fill or kill means you want it to be filled right away as soon as you enter it at that price or just kill the order, you don't want it executed.
Suze: The reason the default is day only is that they are assuming you only want that limit price for that day, period a day only order is the absolute choice that the majority of you should make. So, don't worry about it.
KT: Hi, Suze and KT last year, my employers started offering a Roth option with a 401k plan. Prior to then I had been investing in the regular 401k option and was so excited to have an option. I've been looking at pivoting to the Roth option for my contribution,
KT: but my spouse and I are struggling with accepting the tax implications of switching. Between state and federal, we would owe another 10,000 in federal and state taxes, should we not get the 401k deduction.
KT: This would impact our additional savings and investment amount. Is it truly always the right option regardless of a tax bracket?
Suze: So here's what's really important and by the way, everybody, if you hear thunder in the background, that's because we have a tremendous storm that has just happened. But that's what that is. That's not my stomach gurgling anyway.
Suze: It will forever be a disagreement between tax deferred, tax free with the Roth, whatever it may be. If you do not choose the Roth version of a retirement account, you are making one of the biggest mistakes out there. Now, KT just handed me your email and it says that you're only 42, hubby is 46. And you also say that you currently have $1 million in 401k retirement accounts. Let's just project out.
Suze: Oh, for 29 years, when your hubby will be 75 and you'll be 71. Do you know that even at just a 6% annual average rate of return over 29 years for that million dollars that you have in there, it's going to grow to approximately $5.5 million.
Suze: And you will have to, as you take money out, pay taxes according to whatever tax bracket you're in. But also according to the RMD schedules, and when you are both having to take RMDs out, you're looking at having to take out approximately a quarter million dollars a year. Now, is that going to put you in a high income tax bracket? Maybe? Yes, maybe, no. But let's just say over the next 29 years, you continuously add just $50,000 between the two of you to these pretext 401ks in 29 years, you're gonna have approximately $9.3 million in there at a 6% annual average rate of return. And then your RMDs will be about a half a million dollars a year.
Suze: Now, think about it, you're thinking you don't want to give up $10,000 more right now in federal tax savings just so you can save it, save it for what you have enough money right now. You need to project out to the future. What that $10,000 in savings is going to cost you.
Suze: So just think about it. If you just started right now and over 29 years averaged $50,000 a year into the Roth 401k, you would have approximately four or $5 million totally tax free at that time that you don't have to take RMDs from that you could leave to your beneficiaries totally tax-free. If you wanted to take out all $5 million at once, you could tax-free. Are you kidding me? You are thinking small here. You are thinking like you don't have any money and that, that $10,000 would impact your additional savings and investment amount. What about the future taxes that you absolutely are going to owe on a traditional 401k.
Suze: Hands down, I would be putting, especially in your situation, every penny I could in the Roth 401k section of my retirement plan.
KT: This is from Yvonne, Suze. A financial planner told a friend of mine that when the Feds cut rates, the CD interest rates go up.
Suze: I answered her and I hate this one.
KT: No, wait, wait, wait, wait, wait. I thought when the fed cuts rates, mortgage rates go down, saving rates go down and CD rates also go down. Can you please just confirm for me? Don't listen to your friend.
Suze: Now, let me tell you why I said I hate this one. Not that I hate this question, but I hate the fact that a financial planner told a friend of mine. So now we're two people removed. Did the financial planner really say that? I cannot believe that there is a financial planner out there? That is that dumb,
KT: Even I know the answer.
Suze: But does a financial planner tell a friend of yours who totally gets it mixed up and then tells you and then you have to take your time to write in to the women and Money podcast. Absolutely not everything is contingent on the fed funds rate and that controls everything. Mortgage rates go down when the 10 year treasury goes down because mortgages don't follow the fed funds rate.
Suze: They follow the 10 year treasury, but savings accounts and everything like that follow the Feds. So please maybe don't listen to your friend anymore. Ok. Go on.
KT: This is from Marjorie and it said, Suze, I need your help. I made the biggest mistake of my life, taking money out of my 401k. Now, I'm 52 years old with no savings. (laughs)
Suze: Why are you laughing?
KT: Well, because that's the question. It's like you did make a mistake. Now, what should she do?
Suze: But you want to know something?
KT: It's never too late to start over.
Suze: No. You know what, Marjorie? I don't even like that you think this was the biggest mistake of your life. This is only money. You are only 52 years of age. May I remind you at 45, I wrote my very first book, just seven years younger than you are now. So if you keep having the state of mind that you made the biggest mistake, what should you do now? You simply start over and you can absolutely rebuild, spend less, save more, put money into your 401k. Make sure it's a Roth. You can do this, but to do this, you have to change your attitude. That's really the answer. Be a warrior and don't turn your back on the battlefield and that's your own personal battlefield about how you feel about what you did. Next question, KT.
KT: OK. So Suze, this is from Betty and you printed this out because you said you would read it.
Suze: And I told Betty, I wrote Betty back and I said, ok, listen to Thursday's podcast today is Thursday. Betty, I am dedicating this entire podcast to you, girlfriend!
KT: Ready? Hi, Suze. Can you please take a break from Roth IRAs and Roth 401ks.
KT: How about helping those of us who need help with upcoming RMDs when to take them and what to do with them. Your podcast is forgetting about the retired people who can't do Roths now that they are not working. I am confused about when to take my RMD out and not have to pay twice in one year. Oh, she's mad at you, Suze. I will turn 73. She's your age too. I will turn 73 in December of this year.
KT: Yea so don't
Suze: think I'm forgetting about people our age Betty.
KT: I don't need the money to live on any good suggestions were to move my small Roth too. It has not done any good. Oh, she's in a mood, Betty.
Suze: Let me tell you and let me tell you, Betty, why I do all of these podcasts on Roth retirement accounts. Because girlfriend, you don't have to take money out of a Roth retirement account. You don't have any RMDs. So if you listened to all of these podcasts that you are pissed at that I am doing for everybody who you think is younger than you, girlfriend. How many times have I said, the reason that I like Roth retirement accounts is that there are no, RMDs.
Suze: If this were a traditional retirement account, it would be different, but I am not going into that right now because RMDs do not apply to you.
Suze: So, any good suggestions where to move my small Roth to... Yea, if you don't want to take a risk with it, if you want it to be safe and sound, take advantage of the Alliant Credit Union 12 to 17 month CDs at 5.4%. And then just let it sit there for a while, girlfriend.
KT: Oh, you're mad at Betty too.
Suze: So, the reason that I responded to that Betty, the way that I did is that you're not really listening. You're thinking most of the things that I'm saying are for younger people and what you best start to realize is that I am your age. And most of the things that I do on this podcast are for people like us, older people. And if you listened to the podcast with that open attitude, you probably would also know what to do with your small amount of money as you say in your Roth. Just saying. So I don't mean to yell at you, but on some level, I did. All right. Go on KT one more.
KT: Suze is a single mom I racked up a lot of credit card debt. I wanna get rid of my credit card debt as soon as possible. My total debt is $20,000. I have 17,000 in investments outside of my 401k and roll over. I want to cash out all of those investments and pay off the majority of my credit card debt. The interest on three cards range between 20..ooh 21 and 24%.
KT: The question Suze is, is this a good idea?
KT: I think it's a great idea.
Suze: To take money out of her 401k?
KT: No, no, no, no, no, no. Outside of the 401k she has $17,000 outside of it. Go for it. Get rid of the debt. She really wants to get rid of it. And what's the, what's the full, what is it? Feel safe? Feel secure, be happy outside of her 401k.
KT: So she wants to know, is this a good idea?
Suze: So, do you think she should do that?
KT: Absolutely, if this is a flash quizzy without a doubt? Absolutely. Take the 17,000 in the investments outside of your 401k and your rollover. Just take that money and get rid of the debt. She wants to get rid of the debt and rip up the cards.
Suze: That's your final answer?
Suze: You want this to be your quizzy?
Suze: How sure do you feel about this answer on a scale of 1 to 10?
KT: Probably 8.
KT: 8 That's it. Not a 10?
KT: I'm not a 10
KT: because I'm not Suze Orman.
Suze: Yeah. Well, you're not even a one here. (Suze makes the wrong answer noise)
Suze: Not good advice because it's not thoroughly thought through. We do not know the taxes that she will owe on the 17,000. We don't know if it will be ordinary income tax and, or capital gains tax. That is number one, number two, we don't know if she has a good FICO score or not. If she happens to have a good FICO score, then she would be far better off doing a balanced transfer to a balance transfer card where she could lock in 0%, KT, for either 18 to 21 months while leaving the $17,000 absolutely growing because the markets are still performing right now. We don't know if the $17,000 is invested in such a way that's giving her income.
Suze: We don't know those things. So how can you just say "Absolutely do it." You see how superficial that answer was?
Suze: Well, KT ready for this one, as many of you may know I do scan or go through depending on how many are there, the emails that come in, not knowing which one KT is going to choose. But chances are she's going to choose one that I've already read on some level.
Suze: And I read this once I wrote Dorothy and I said, what's your FICO score? She wrote back and said, 753. I wrote her back and I said, you should do a balance transfer card for at least 21 months at 0% interest. She said, oh, I tried that but I could only get it for 18 months.
Suze: And I'm like, who cares? 18 months, 15 months, 21 months do a balance transfer and pay it off that way and do not sell your stocks. And she wrote back and said, yeah, I don't want to sell them. So then don't everybody before you sell an investment to pay off credit card debt, check your FICO score and if it's high... should be hopefully 760 or above. You can then do a balance transfer card and deal with it that way. Ok KT, you already had your quizzy.
KT: I did.
Suze: And I really liked the quizzy that I had for you, but...
KT: Save it for next time.
Suze: You'll just have to wait right. The next one will be after the Super Bowl has gone off, which is this Sunday, everybody.
KT: Chiefs go Chiefs, baby.
Suze: It's so hard, you know, because I'm from San Francisco. It's not actually
KT: You want your Mahomes.
Suze: Oh you bet I do. I love it. I'm getting emails from everybody and all my friends in San Francisco.
KT: Don't tell them.
Suze: How can they... I not... everybody knows I'm for the Chiefs and I'm actually really thrilled to see Taylor Swift there.
Suze: It's her first Super Bowl.
KT: It's she just won. She just made history and the Grammys let Travis make history at Super Bowl.
Suze: For those of you who don't know Taylor Swift just won for the first time in history. The album of the year for the fourth time nobody else has ever in the history of the Grammys did that.
Suze: So, girlfriend, I'm so congratulations. You've done something that nobody else has done. So go to the Super Bowl. Have a good time. Get back on the plane and continue that tour and we all look forward to your new album coming out in April. But until then, there's only one thing that we want all of you to remember when it comes to your money. What is it, my love?
KT: It's people first, then money then things.
Suze: And if you can just do that, put yourself first, understand the strength that you have inside. You understand that you have the ability to trust yourself, have the understanding that you can all do this and you put yourself first, then money will follow and then you'll have enough money to do all the things or buy all the things that you want. So until then you are to be what KT?