January 04, 2024
For this episode of Ask KT and Suze Anything, Suze answers questions about student loans, callable CDs, what to put in your trusts, whole life insurance and more.
Listen to Podcast Episode:
Suze: January 4th 2024. Can you believe it? 2024. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. This is...
KT: Ask KT and Suze anything.
Suze: And if you write in your question to ask Suze Podcast at gmail.com and KT happens to pick it, then we will answer it right here on the podcast. What do you think that we're in 2024? How does that make you feel?
KT: I love that. I like this year. I'm actually looking forward to it because 2024 adds up to an 8. 224.
KT: Adds up to an eight.
Suze: You had a little trouble with numbers there for a second, did you? Ok. No problem. Everybody, if you don't know eight is KTs lucky number. My lucky number is nine. So next year 2025 is a nine. But the truth is neither of us can imagine being luckier than we all ready are.
Suze: So, we hope you all had a fabulous New Year's. For me, I'm so happy. It's all over. I can't even tell you.
KT: Well, do they all know that? It's not your thing to like, do these celebrations? And everybody knows that Suze likes simple and holidays for some reason. Give her little angst.
Suze: I'll tell you why. Because especially when I was a financial advisor. Not that I'm not a financial advisor now, but seeing clients and we would work all year KT seriously on getting them out of debt and doing these great things with them and then would come the holidays and between Thanksgiving,
Suze: Christmas, Hanukkah, whatever it may be and New Year's, they would end up in January in the exact same place. They were one year before because of all the money they would spend on gifts and all of these things. I started to spend my holidays truthfully going because, you know, there were a lot of times I was all by myself on holidays as you know. Right. And so I would, on Christmas, I would go and I would serve at certain churches or whatever and all these people that didn't have the money to buy things or to eat or to. And so for me, I think about all the sadness that it also brings about and all the families that really can't afford to give their kids and everybody money. So I think about that. But we had a good one regardless.
KT: I think about, I think about our traditions and festivities and gathering with family and friends... and gooch making our gooch our traditional Christmas. Um, and year end, I just have to tell you this. And maybe you saw the pictures on the women and Money App.
Suze: We spent maybe 5 to 7 hours.
KT: We spent the whole day. What day was that? It was a football game.
Suze: I don't know. But Colo KT and myself made 100 and 20 little things of gooch. And if you want to know what they are, you have to go on the women and Money app.
KT: Well, let's tell them it's a pastry in the shape of a fish and it was not my favorite thing to do. I can just tell you that.
Suze: And it's like, KT, wait...
KT: Suze whined about this episode and adventure for about four days until the day that we distributed right before the New Year when all of our friends and, and neighbors here in, in the island came back for, to celebrate New Year's Eve, which they traditionally did. We distributed all these little tins with gooch with notes and cards.
KT: Well, the next day, Suze received a million emails. People coming by. I love the gooch. One of our Spanish friends said KT, Suze make us more gooch empanadas.
Suze: But I never, and even one person...
KT: Tell them it was Fernando. Fernando wanted seconds. It's like these are really coveted pastries and very hard to make labor intensive.
Suze: Because remember everybody, we don't buy gifts for people, make them, but they're super healthy. But to make this many, it was like, really?
KT: It was the whole day but it was fun. Suze made the best ones, the best fish, best looking.
Suze: But anyway, so she was right. I was wrong and you know what, the gratitude that everybody showed us about these gooches did what they do for me is. I know whatever it is,
KT: But it made you realize, it made you realize that tradition does count and that everyone said, make me more next year, Suze...
Suze: And KT. All right, sweetheart. Let's get started.
KT: Everyone will get bored with our, our gooch story. OK. First question is from Joe.
KT: Hi, Suze. Hope you had a wonderful New Year which she did, Joe. I have a question regarding back door...
Suze: Wait, let's tell the truth about New Year's Eve at midnight.
Suze: Right? So all these fireworks went off because the island does an incredible firework display
KT: A Bahama tradition.
Suze: And KT tried to wake me up.
KT: Suze, Suze and I both said we got, we're well, first, we were waking up at the crack of dawn to go fishing on January 1st.
KT: So we decided we'll take a little nap and then we'll see the fireworks. We always go on our front porch, get wrapped up in a big blanket and watch the fireworks show.
KT: Well, this year, Suze was next to me
Suze: I was tired from making all that gooh and didn't hear the fireworks go off. So there you go. We won't tell any more stories.
KT: Ok. So Joe, here we go. Joe said to Suze, we both want to contribute to a Roth Ira via a backdoor conversion. Would it be possible to do so? After January 1st for 2023 contributions or did we have to convert it before January 1st, 2024?
Suze: You had to do it beforehand by friends can't do it. So here's the thing that you have to understand everybody when you are making a conversion and a conversion in a retirement account is where you maybe have money in a traditional IRA and you want to convert it to a Roth IRA. And when you do a conversion, there are no income limitations, but all conversions have to be made by the last day of the year.
Suze: So Joe, you can do that now, but it won't be for tax year 2023. It will be for 2024. All right, KT.
KT: OK. Next question is from Maria. So Maria said, Suze, thank you for taking the time to read my email. I've been an avid follower of yours for many years now. I love your show, especially Ask KT and Suze Anything.
Suze: Now, do you have any idea everybody
Suze: why she chose that one?
KT: I am right here she goes. I'm 56 years old. My husband is 62. I'm still working while my husband retired due to a medical condition. We have two boys, ages 24 and 21. We have a revocable living trust that was dated in 2005.
KT: We've added the names of the children to all of our bank accounts. However, I'm still confused as far as the 401k and life insurance is concerned. Should we put the name of the trust or the spouse as the primary beneficiary of our retirement account? And then she says, how about the life insurance?
Suze: Yeah, in terms of a retirement account, everybody, you would always, always, always, especially if it's a traditional retirement account. Meaning pre-tax, in my opinion, you would make your spouse always the primary beneficiary and the trust, the secondary beneficiary. Now, the reason that I say that is because a spouse has benefits to do things with that traditional ira more than anybody else, the same holds true really for a Roth, but a spouse has benefits that everybody else doesn't.
Suze: And given that I don't know if you have the right type of revocable trust. Is it a see-through trust? Is it not just to play safe? Make your spouse the primary beneficiary of the retirement account and the trust, the secondary beneficiary, especially if you have children, everybody
Suze: As far as the life insurance policy goes, make the trust the primary beneficiary, I would do it that way because again, remember minors really can't inherit money. So therefore, I don't know, you know, if you're listening to this and maybe you have kids that are minors, it does make a difference. So that's what I would do.
KT: Ok. Next question, Suze is from Alex Happy New Year, Suze and KT. When might it make sense to invest in a taxable account instead of a 403 B that charges fees?
Suze: That was a great question you picked there.
KT: I know because I'm wondering who wants to invest in a taxable account? Wait, then he said I already max out a Roth IRA. Thank you for your time.
Suze: Well, you may not know it, KT... but
KT: When might it make sense?
Suze: We stopped investing a long time ago in pre-tax accounts like a 401k or a pension or whatever. Because the growth of that money when you take it out would have been taxed us as ordinary income because of that, I gave up the tax write off then because I always knew our tax bracket would be really high. And I started to invest in a brokerage account where as long as we held the account for one year, the investments when we sold, it would be at the capital gains tax rate.
Suze: So sometimes it does make sense, Alex, in this particular situation, it does make sense if you have a 403 B, especially a 403 B that does not match your contribution, which means you put in a dollar and maybe they put in 50 cents. If they do not match your contribution, you would be far better off just taking that money and doing onewith it, putting it in an investment account and investing it there for the long run. So that when you do go to take it out, it will be taxed at the capital gain rate rather than ordinary income. Right. My little lucky one.
KT: No, I'm your lucky charm.
Suze: But you're a lucky one this year because it never mind. Go on.
KT: Ok. Next question is from Arlene.
Suze: Even though it's a New Year, some things stay the same.
KT: Dear Suze and KT. I have been religiously listening to your podcast every Thursday and Sunday. I am one of those women who had to learn quickly about finance after my husband died, leaving me with two teenage sons.
KT: And yes, I have a little Suze notebook. I love that. I love that You said that Arlene. my question is about Allian's CDs and whether or not they are callable. What is your opinion about callable CDs DS versus noncallable?
Suze: So, Arlene...
KT: First tell everyone what callable is.
Suze: I will. But I wanna say, did you see where you said that you needed to learn this the hard way and needed to learn it quickly I think. Were your exact words? Everybody listen to what Arlene said. Don't be one of those women as she also said that finds yourself in a situation that something happens, that is unexpected. And now you are left not knowing about money, not knowing where things come from, you have to raise kids and now your whole world has fallen apart.
Suze: This is the time, this is the year that I want you to be smart. Everybody be smart and make the right decisions and that you can stay smart because otherwise things can dramatically go wrong. And the time to learn about your money is not when you have suffered a serious emotional loss. I can tell you that much.
Suze: Now, in terms of Arlene's question here about Alliant's Certificates of deposits, whether they are callable or not, they are absolutely not. So what is a callable CD? Usually a callable CD is a certificate of deposit that you buy at a brokerage firm and they're selling it to you on the secondary market sometimes. And the issuer of that certificate of deposit has the right to call it back and pay you whatever it is that you paid for it and give you your money back. Why would they do that? They would do that because maybe they issued a certificate of deposit to you when interest rates were at five or 6%.
Suze: Now, interest rates are at one or 2% and they don't want to pay you five or 6% anymore. So they have the right to call it back. Give you back your money, but then they can then reissue certificates of deposits at one or 2%.
Suze: So no, never ever, ever buy a Callable CD. That's my opinion about it. But not Alliant. They do not do callable CDs.
Suze: But they have great rates. Everybody really good rate. I'm just gonna tell you tomorrow because I can't tell you yet. But on the fifth of January, there will be a rate change at Alliant for the on your CD. And you're going to be very shocked at it.
Suze: So um be happy, happy, you'll be happy. I not down, I'm happy, happy, but I can't tell you, can't tell you yet. Can't say anything.
KT: OK. Ready? Dear KT and Suze.
Suze: And I'll tell you that Sunday unless you find out yourself before that go on.
KT: This is from Angelique. She says dear KT and Suze, Angelique. You got the order right? Happy New Year. I hope you're doing well. I love the updates on the women and money app. Feel free to keep them coming. We talked about...
Suze: KT, you don't know because you don't go on the app.
KT: What did you do? What you update now? Did you put a picture in me?
Suze: I put lots of pictures of our dinner.
KT: You put one of Colo and me dancing, right?
Suze: I don't know. But anyway, go on.
KT: OK, so we talked about things when people say, oh KT I saw that cute photo of you wrapping up a Christmas tree with like rolls of garbage can..
Suze: Want to know the cute thing. I don't care that we're talking about other things today. I just feel like it, right. Which is so I did post a picture of you, KT, Colo and me dancing, right? Dancing around the tree. That a really short one.
Suze: All these people on the island came up to Colo who knew they were all on the women and money community app came up to Colo and said, I didn't know you ciud
KT: We didn't know you can dance because he's Latino and what a great dancer and he never dances with us but he danced. I mean,
Suze: I didn't post that picture. I didn't post that video. I posted the one of the three of us.
KT: But not the one of him and me in the he was doing merengue.
Suze: Now they're all going to write in and ask me to post it.
KT: No, no, no. We have to wait until next year.
Suze: Oh God. OK. Are we ready?
KT: OK. So I'm gonna start over for Angelique. Happy New Year. I hope you're doing well. I love the updates on the women and Money app. Feel free to keep them coming. We talked about the need to reinvest your dividends. But do you need to reinvest your dividend in the stock that generated it? How about buying something else with it that also generates dividends? So I I I didn't know the answer to that. I asked Suze, what do we do with ours.
Suze: So normally what happens is when you buy an individual company or even an ETF especially if you're doing it online. There's a little thing that says, do you want to reinvest dividends or not? If you click that and say yes, which I always do, then that dividend goes directly back into the company that you're in buying more shares.
Suze: If you were to say no, that dividend will be paid out to you in money. And then if you wanted to, you could take that and buy more of a different stock with it or a new stock. But truthfully the way that it's meant to really work for your advantage is just reinvest the dividend in the company that you already own. So I would do that if I were you, but you can do the other if you want but let's not be smart and that's not staying smart just saying.
KT: Ok, next question from Donna. Hey Suze and KT, my son received some money for Christmas a few thousand dollars. He's wondering if he should use it for paying down some of his student loan or use it to pay off his auto loan.
KT: So he mentioned that his student loan interest could be used as a deduction on his tax return. And he would like to pay off the auto loan, which I think will be done in May '24 is what he said.
KT: So that he has one less loan to worry about. I kind of agree with him, but I'm not sure. So they're wondering, should he pay off the highest interest rate or not?
Suze: Well, he's absolutely right. Number one, I was gonna say he's absolutely right. In terms of a student loan, the interest of a student loan up to $2500 everybody is tax deductible so the interest can be taken off against your income. But that's only true for people who are single and they're making KT under $80,000 a year of adjusted gross income. It phases out, I think for 2024 at 95,000. And if you're married finally, jointly, it's 165 to 195.
Suze: You know, so you could do that if you had $2500 of interest, if all you had was $600 of interest, that would be the max you could take off them. So he's right. He can do that.
Suze: But the truth of the matter is he's also right about his car loan. Let him get rid of that car loan. It's gonna be paid off in a few months. Anyway, chances are his student loan goes on and on for probably 10 years, maybe 20 years or longer. Who knows? And he would then take that money however, and he would take it and rather than saving it or doing something like that, I would take that money and I would put it towards my student loan to get me out of student loan debt. Because remember in most cases, student loan debt is not dischargeable in bankruptcy.
KT: So he's young. It's good. It's a good move. He was right.
Suze: He's right about that. But chances are KT in his mind, he's thinking, oh, I don't have a car payment anymore. So I'll take that car payment and I'll do this with it or I'll do that with it. But the correct advice is when you have student loan debt, you've paid off another debt, whatever you could afford to pay on that other debt. Now take that and put it towards your student loan and get rid of that student loan as fast as you can.
Suze: Well, because you know, a lot of people KT think, but I can afford the payment on the student loan. It's not that big of a deal. Then all of a sudden they get sick, they're in an accident, something happens, they lose their job, they can't afford to pay their student loan payment anymore. So they think that's not a big deal. It just goes into deferment or forbearance or you know, or default whatever it may be and then it doubles and doubles and doubles and then it's mandatory. So, no, get rid of that student loan debt. All right.
KT: And it follows your family too, doesn't it?
Suze: Depends on the type of they have. Ok.
KT: Next question from Christina dear Suze and KT I am a weekly listener. I've learned so much from you in the past few years. Thank you for sharing your immense wealth of knowledge with your community. My beloved sister in law recently lost her battle with cancer in August last year.
KT: She said my brother in law has twin teenage girls and they inherited money from a life insurance policy after the mom's passing. He visited us during Christmas and he told me,
Suze: Go on...
KT: he told me that his financial advisor, you ready everybody? This is, I know this is so sad. The financial advisor invested the girls, their teenagers, the girl's inheritance and whole life insurance policy.
KT: Christina said, Suze, it was a recent decision. I'm hoping it isn't too much of a loss to cancel the policies and reinvest in something else. Can he cancel the whole life policies without large penalties? And then you know, they have college funds, those costs are covered but there's so many other great things for the teenage girls. Right?
Suze: The main thing again, I'm gonna say to all of you and you need to write this down.
Suze: You are to do nothing other than keep your money or your kids money. I don't care whose money it is but you are to absolutely do nothing with inherited money after you have suffered the loss of a loved one. I don't care if it's death or divorce. Just keep the money safe and sound if you have debt. If you have things like that. Ok.
Suze: Pay it off, but you never make a decision right away because you may think that you're in your body and you are not shame, shame, shame on this financial advisor. Why do I have a feeling that this financial advisor also is the same person who sold the insurance policy to your sister in law.
Suze: Just have a feeling on that most whole life policies and insurance investments like thathave what's called a free look, period, but it's only 10 to 30 days and that's it. So if you are listening to me now, you are to go to papa bear here who suffered this loss.
Suze: And I want to talk to him directly. Now, your kids are young and that money if invested properly could grow and grow and grow and really take care of them possibly for the rest of their lives.
Suze: But it will never ever do that in a whole life insurance policy.
Suze: It is a travesty that this financial advisor, in my opinion. Absolutely took advantage of your teen age daughters, the twins because they do not need an insurance policy on them. Nobody is financially dependent upon them and I'm sure you just went along with it because this person seemed like they knew what they were saying. Whatever.
Suze: Did you ever ask him? What kind of commission he or she made on that? You might want to ask them that question if you go to them and they say your past your free look, period. If you took the money out now, there's nothing we could do. You might suffer a 25% loss of everything you gave them.
Suze: I would go to that person's manager. I would go wherever I could and say I suffered the loss of my wife and this is what you do to me. I would absolutely make them give me my money back and again, just put it in a money market account for now. Interest rates are ok. You want to secure it in a CD or whatever? Ok.
Suze: But just sit on it and be safe for a right now.
Suze: I hate things like this. I know. I know. And I think the best advice to listen to that you give that over and over again is when you suffer a loss, regardless of what kind of loss don't do anything right away other than keeping your money safe and sound, I'm so so sorry. Yeah.
KT: Ok. So my last question is from Gigi. She said dear Suze, I love you. Ok, Gigi, I, I love her too. I am 66 and a half.
Suze: How much do you love me?
KT: A lot. But Gigi really loves you too. I'm 66 and a half and single. She wants you to know that when I begin to take RMD, starting at 73 I believe I can take the required amount in kind. That is move VTI I tock in the correct amount from Fidelity traditional IRA to a Fidelity taxable account, paying tax on the amount transferred. Rather than moving the in kind distribution to a Fidelity taxable account. Could I move it to my Fidelity Roth IRA?
Suze: No. Ok. So for those of you who don't have a clue what KT was just saying. First of all, VTI is an exchange traded fund that stands for the Vanguard Total Stock Market Index ETF and it's where we have been saying to invest money now for the past three years, especially if you don't know how to pick individual stocks, but there's about 2000 stocks in there. So it gives you tremendous diversification. Although there are some arguments right now that say not being so diversified will give you more money than being that diversified. But that's still an argument that has been yet to be settled.
Suze: Required minimum distributions mean once you turn a specific age, it's 73 and this year I will be 73. So I will have to take required minimum distributions and required minimum distributions are simply if you have a pre taxed retirement account.
Suze: According to a life expectancy table, we all have to take out a specific sum of money every single year that they determine that the life expectancy. It's all figured out for you. What Gigi is asking is she has her money within her retirement account currently invested in the Vanguard Total Stock Market Index ETF she wants to know if she can take her required minimum distribution in the amount of VTI that she needs to withdraw and put that as shares of VTI in her Roth IRA.
Suze: And the answer to that is no, you cannot, she could. However, if she wanted to take it in kind and put it into a regular investment account, paying taxes on it and it could stay in there as that, but you cannot do it to a Roth IRA.
KT: OK. Is it quizzy time, Suze?
Suze: All right, KT it is quizzy time. So we're starting out with 2024...
KT: Now this isn't just for me. Everyone listening. It's for you too. So she's gonna ask a quizzy. I usually get it wrong. Let's see if I get it right starting this lucky year of mine. But listen up, see if you, you know the answer. What is it?
Suze: I'm asking all of you, especially KT because I can hear her answer a question that all of you may have that you need to know the answer to.
Suze: All right, this is from Joanne. She says right now I have a three year treasury note at 2.625% that matures in April 2025 for $25,000. Ok?
Suze: She would like to get an Alliant CD with the money.
Suze: But if she sells the note right now, she's going to take a loss.
Suze: So is it worth it for her to sell a three year treasury note that she got a while ago that matures right in April of 2025. So it matures in about another 455 days, something like that. But it only pays her 2.625%.
Suze: Should she sell it and reinvest that money in an alliance certificate of deposit at about 5.3%.
Suze: Now, remember KT, when interest rates go up as they have right now, the value of what you bought goes down. So the treasury note that she bought is worth less than what she put into it. Should she sell it or not?
KT: Well, if she's only getting 2.625% in 2025 right?
Suze: All the way till 2025. So she's making about $656 a year in interest on that. Now, all of you need to figure this out because a lot of you happen to be in this situation.
Suze: So the first step would be what KT, if this were you, what would be your first step you would do?
KT: I'd do a little calculation here.
Suze: The first step should be, you would call your finance person or whoever you bought this from and ask them, what is that Treasury note worth? If I were to sell it, then you would be able to figure it out from there. Which one made more sense. But just going on your gut.
KT: My gut, my gut says, go for the CD at Alliant... 5.3%.
KT: Why wouldn't I?
Suze: The New Year bells are ringing for you. Ding, ding, ding, listen to me, everybody. KT is correct. What would you have done?
Suze: So I happened to answer Joanne directly because I saw this particular email when I was looking for a quizzy for KT and I asked her to please call and find out what would they pay her for the three year treasury? And it turned out that they would pay her the $25,000 that she invested. She would get back only $24,360. Ok?
Suze: But if you did the math right, if she then took that 24,360 let's say, and put it into an 18 month at Alliant Credit Union at 18 months or hopefully, I asked her to lock it in for 23 months at that. She would be making $1291 a year versus $656 a year, which is what she's making in the current treasury that she's in right now. Given that it's such a small penalty. She should do this faster than a New York minute. And you will come out seriously ahead in the long run. A lot of you may be thinking about Suze, why doesn't she just stay there until it matures?
Suze: And because if she waits another 455 days or whatever it is, interest rates may be even lower. So when it matures and she comes out of it, then what is she gonna do? So lock in again? Remember, you can lock in at Alliant Credit Union by going to my alliant.com and you can lock in for 18 to 23 months. You choose the maturity anytime in between there for currently 5.3% or 5.35% for amounts of $75,000 or more. A two year treasury is a full 1% under that.
Suze: So don't even bother talking to me about if you're in a high income tax bracket in a state that you live in, you're still better off with the CD at Alliant.
Suze: All right, KT... what do you think?
KT: Tell us about the year you think? Give us a little bit of a thought of the year ahead.
Suze: I'm not gonna do that today. I'll do that on Sunday for Suze school, but we do have the end of the podcast and this is how we're going to be ending the podcast for this year.
Suze: This is the year that when it comes to your money. We want you to...
KT: Be smart and stay smart.
Suze: And if you do that, we promise you you will be unstoppable.