Podcast Episode - Ask KT & Suze Anything: When Is The Right Time To Self Insure?

For this Ask KT & Suze Anything episode, Suze answers your questions about withdrawing from an IRA, fear of the markets, renting versus buying and so much more!

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Podcast Transcript:

Suze: February 6, 2025. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. Guess who's in the house this morning?

KT: KT!

Suze: Why are you saying it like that?

KT: Because why wouldn't I be?

Suze: I, I don't know actually.

KT: It's Thursday.

Suze: Well, sometimes it was,

KT: no, no, no, no, no. KT and Suze are always Thursday. Occasionally I join you for Suze school.

Suze: However, Ms. Travis,

KT: You're gonna change it up?

Suze: You asked.

Suze: And people answered on the email...

KT: They want me all the time.

Suze: They want you all the time.

KT: OK, you got me you got me all the time. I'll do it Sunday, Thursday, and I won't charge overtime.

Suze: Oh well it's a deal. I'll take it. All right, sweetheart.

KT: Suze, it's almost Valentine's Day.

Suze: What are we gonna do?

KT: I don't know. I was gonna ask you, do you have anything special in mind?

Suze: Well, we're gonna be in Florida because if any of you care, maybe you want to come out, we're going to see Kathy Griffin on February 15,

KT: Miami.

Suze: And I think it's at the Jackie Gleason Theater, and as you know, Kathy is a very good friend of ours,

KT: An old old friend

Suze: And she said, You better be there. So KT and I will be there. Are you going to be there too? If so, you best say hi to us, all right, KT.

KT: OK, so here we go. My first question is about...

Suze: Wait, we didn't tell anybody what this really what happens today. She's looking like what?

KT: What happens today?

Suze: This is where you write in.

KT: Oh, you write in, but don't they know that by now? Do all of you listeners, OK, so the new listeners, here you go. Ready, go, Suze.

Suze: So if you have a question and you want KT to possibly choose it, so that I can answer it on this podcast. Just write into Ask Suze podcast. That's S U Z E podcast at gmail.com. All right.

KT: OK, I picked this one because this one is a little bit. They, they don't agree with you, which is very rare. I'm not gonna mention the name,

Suze: Why? Because I'm gonna yell at them.

KT: No, I was asked, and, and it's, uh, I don't...

Suze: So there's somebody...

KT: It's a woman, and

Suze: she said, please don't...

Suze: Wait, stop. She disagrees with me, and yet she's embarrassed to use her name.

KT: Yes, because she's embarrassed probably to disagree with the great Suze Orman, but here you go, Suze and

Suze: Just use her name.

Suze: Come on KT, use her name.

KT: I'm being respectful, but I will tell everyone she's from Staten Island.

Suze: All right, go on.

KT: Hi, Suze and KT. Thank you for always having an interesting podcast regarding podcast number 644.

Suze: Do you even know what that one was?

KT: I know who remembers numbers, but if all of you are wondering why Miss Staten Island disagreed. Go to podcast 644, have a listen and then listen to this. I disagree with you about home ownership as a senior.

KT: So I wanted to say something. She's she's writing to us saying as a senior, does she know that we're seniors, like really senior? We're older than senior, yeah, we're older. What are we? What category are we? Senior plus.

Suze: Senoritas.

KT: (Suze and KT sing a little bit) All right, as a senior, I would be terrified if I was a renter watching uncontrolled rents unpredictably go way up with the housing shortage and the cost for moving to a cheaper apartment is high.

KT: So folks are stuck, Suze. At the time my partner and I bought a townhouse in Staten Island, New York in 1984.

Suze: Are you kidding me? She's comparing 1984 to now. Are you just kidding me? She's Staten Island.

KT: She's a senior. My rent for one bedroom was about to be raised to $400 in a nearby neighborhood. His in Brooklyn was around the same, maybe 450. So we would have wasted so much money in rent over the years. Yes, we've had big surprise maintenance costs, but at least it's not rent going to someone else's property and we, and this is in bold, everyone, and we can't be evicted, which is as close as one can get to security. You might disagree with that, Suze. And now, so Ms. Staten Island said you suggest one might save a million dollars in Roth investments over 40 years. That implies one with no home ownership has unsecured money he can afford to lose. A million is barely a backup now for old age in 40 years it will be a pittance. I don't know, a million dollars in 40 years. What would it really be, Suze?

Suze: Well, probably at about a 2.5% inflation rate around $375,000 right around there.

KT: Well, there you go.

Suze: All right, so wait, so let's get realistic here. All of us who are older lived in a very privileged time. We lived in a time when real estate was really so inexpensive I can't tell you. I remember when this incredibly large house in Berkeley, California was $17,000 yeah, and then the next year it was $34,000. KT, I bought that huge home. 97 Tunnel Road for $40,000.

KT: I remember you showed it to me.

Suze: I bought my house up in the Oakland Hills for $65,000 and then it sold for what, 900,000 whatever so the thing is, Miss Staten Island is that you have to also as you've gotten older now, you have to appreciate the fact that all of us were able to buy things at a time when they were far less expensive and that it just made sense to own real estate. Today, I can't even imagine what is your house worth. What are you going to sell it for? And is anybody gonna be able to even buy it? So we were privileged.

Suze: So while you may be able to disagree with me and I respect that. Today for those who are younger, the millennials and all of them, it's incredibly difficult to buy a home that average prices are $400,000 that means at least $80,000 down. Insurance is through the roof, property taxes are through the roof. The jobs aren't stable. They're being displaced by artificial intelligence. If you're working for the federal government, well, you've just been laid off. There are tens of thousands of jobs that are going away.

Suze: So while you get to enjoy the fact that you own it outright and you can't be evicted, you also have to be understanding of why somebody like Suze Orman says it's OK to just rent. It's OK. Because with insurance and things like that, it just might be too expensive. Now you're in Staten Island. I just have to say this...

KT: It's expensive.

Suze: You're in Staten Island. There are people in Florida who own their homes outright, and they have to sell because their insurance has gone up so much they can't afford their insurance payments even though they own the house outright.

Suze: So don't be too judgmental. It depends on who you are, where you live, their income, and everything like that next,

KT: OK.

Suze: I suggest that a million dollars in a Roth investment over 40 years, right, implies with no home ownership. No, I didn't imply that. But what I was trying to do is make a point with the woman who was interviewing me. Simply, it's better to have something than nothing. And if you can't afford a home, all right, at least start saving for the future. The example of $1 million was $100 a month over 40 years. And that would give you a million dollars. What if it were $200 a month or $500 a month?

Suze: Something is better than nothing, and to understand compounding helps you no matter what, so don't be so snippety. That a million dollars will only be a pittance. $376,000 even 40 years from now is not a pittance. There are people who would love to have just $10,000 so be more gracious, my dear one. Next KT.

KT: OK, this is from Marilyn, and the subject said in the same boat as Juliana.

Suze: Oh, so wait, let me remind everybody about

KT: Juliana.

Suze: A week or so ago I asked all of you who might have advice for Juliana because she was actually the quizzy. I think anyway um to write in and give her advice why because she is in this abusive relationship she's been separated and she's so confused. Should she divorce him? Should she not? And she's just scared to make a move so I thought maybe all of you could help her and she's gotten about 50, by the way, responses to her situation, but obviously KT chose

KT: I like to read to you. This is important. It said, hi Suze. This past summer...

Suze: Juliana, I hope you're listening. All right, go for it,

KT: KT. Hi Suze. This past summer you advised me when I went through a very ugly and contested divorce from a similar man.

KT: So she her man, her husband was similar to Juliana's. It was very hard emotionally and financially as it cost me $174,000 in legal fees. I am now on the other side and am in a much better place. I promised Juliana it will get better. I even started dating, which I never thought I would. It feels amazing to go out with a man who values and respects you. My children are very happy to see me out of a bad marriage as well. Please tell Juliana she can reach out to me if she needs support or has questions about my experience. Don't go through it alone. Reach out to those who love you and ready, this is the finale and get a therapist.

KT: So Marilyn, thank you so much for being kind enough to take the time to send that into Juliana.

Suze: And to all of you who took the time to do so. I'll try my best to get all of them to Juliana, right? And I, I do have to cross out all your names and everything to protect all of you, but anyway, I'll try my best to do so, but.

Suze: Thanks everybody seriously. You know, KT...

KT: Supporting each other

Suze: The people that listen to the Women and Money podcast and everybody smart enough to listen. The majority of everybody really are so kind and good and supportive, and we appreciate that so, so very much. OK,

KT: OK, next is from Suzanne. Good morning, Suze and KT. You mentioned last Sunday that you will self insure your home.

Suze: You bet.

KT: Please teach us what to look at to know when it's right to self insure. Thank you for everything you do. Now Suzanne's from Texas, so she's interested obviously in self insuring.

Suze: So Suzanne, here's what you have to take in consideration. I'll just tell you as far as we go. To pay $28,000 a year for a really 2000 square foot condo. That's all it is. It is just ridiculous... in Florida is ridiculous because they also let you know if you make one little claim, even if it's a little claim, they're gonna cancel you. So my looking at it is all right... If something happens to the condo, the outside and everything will be protected by the condo insurance for the building. The inside is what we will be responsible for, so I look at everything and I just think, all right, I'd rather come up with whatever it's gonna cost to fix everything than have to pay $28,000 a year.

Suze: Now my big fear is hurricanes, so it's possible that we could get hit this summer after I've canceled. It's also possible that for the 20 some odd years that we have lived there and we've gone through many hurricanes, can you believe we've lived there? How long have we lived there? 20, 21 years,

KT: 21...21 maybe going on 22 years.

Suze: Oh, can you believe it? Anyway, and we love it there. We've never been hit by a hurricane yet.

Suze: So if I were to say, OK, can I go 5 years maybe and not being hit, and that would be a $150,000 savings, which would probably be enough to fix everything, but regardless. It's right for us to self insure because the truth of the matter is no matter what happened in that condo we can easily afford to fix it and it will not on any level affect us financially in terms of our security or anything so that's kind of how when you know it's right is if you drop your insurance and this next week or whatever the place is destroyed. Can you afford to replace it totally on your own, and it's easy to do. All right, KT.

KT: All right. Next is from Ashley. It's about a Roth, all right, so ready... everywhere I go I'm told

Suze: By the way, I have to say something, everybody. So I told KT today was supposed to be a Roth quizzy just for her.

KT: I'm not ready.

Suze: She kept saying I'm not ready. I said, When are you gonna be ready? What did you say?

KT: 2 weeks.

Suze: You said 2 months. You said 2 months. So don't think I forgot everybody, but no way. I have the quizzy right here. I've done the quizzy. I looked at her and she said, I'm not doing that, right? I'm not doing it. I'm, I'm not doing it.

KT: I'm letting Suze answer this Roth question, but I'm not doing a quizzy. So here's what Ashley said.

Suze: She put her foot down.

KT: She said, everywhere I go, I'm told I will have to pay penalties and possibly taxes if I withdraw contributions from a 403B Roth before I am 59 and a half years of age and if the account hasn't been opened for at least 5 years. So then she said, and I just tell them that Suze Orman says that you can take out contributions. On my post-tax contributions, not by employers pre-tax at any time without penalties. Suze, am I wrong? Did I misunderstand you?

Suze: You did misunderstand me.

KT: Ashley. All right, let's Suze explain.

Suze: When it comes to a Roth 403B.

Suze: When it comes to a Roth IRA, please everybody understand the difference. A Roth IRA is an individual retirement account that you yourself open up usually at a brokerage firm or whatever it may be. When that is the case, you can take out any of your original contributions that you put in.

Suze: Regardless of age or how long the account has been open without any taxes or penalties, it's the earnings that have to stay in there for at least 5 years, and you have to be 59 and a half years of age. But in a wroth you have the ability to just take out contributions. In a Roth 403B, that is not how it works, my dear Ashley, because they do a combination. You just can't take out contributions from a Roth 403B. So what happens is they do a calculation. Let's say you had $50,000 in your Roth 403B. 30,000 were your contributions. 20,000 were growth. So if you were to divide 30 by 50,000, that's 60%, 20 by 50,000, that's 40%. So if you wanted to just let's say take out $10,000 of your contributions, 60% of that $10,000 would be considered contributions totally tax free, no problem. The 40% or $4000 of that $10,000 is going to be considered earnings if it hasn't been in there for at least 5 years and you're not at least 59 and a half years of age or older, you're not only going to have to pay ordinary income taxes on that $4000 you're gonna have to pay a 10% penalty as well. 

Suze: So you have mixed up a Roth IRA with a Roth 403B or 401k or TSP. There you go. All right.

KT: OK, we straightened her out.

Suze: That should have been your quizzy.

KT: It should have. I would have would have never gotten it.

Suze: That's why my voice has gotten so hoarse over the years. I'm always going like this (Suze makes the wrong answer sound) to KT.

KT: OK, this is from Beth. I like this one because it's so many of us are in the same boat here.

KT: As my dad's power of attorney for finances, I may soon need to decide which investments to redeem so he can receive the care he needs. He is 95 years old. He has a good daughter. Most of his assets are in mutual funds, with only a small portion in an IRA. He does not have long term care insurance. Number one, I'm guessing, should I use his regular investments first, but how do I decide which ones to use the best performing, the worst performing? Number two, should I liquidate a sum of money now for easy access, a year's worth, more or less?

KT: So Beth wants to do the right thing and, and ask you, your advice.

Suze: If you remember, um, I think it was last week I answered you picked a question very similar

KT: Similar to that which had, yeah, numbers, amounts of money.

Suze: How come you're picking the same type of question because it's stuck in your heart.

KT: Yeah, I think because, um. Many people that we know are in this situation of taking care of elderly parents. The decisions and just the conversations are so awkward and difficult.

Suze: Yeah, but this one isn't about an awkward or difficult one for. This is, this is for you to do something just that simple. So here's the scoop, my friend, which is if I were you. I would not just do little by little because anything can happen at any time to the stock market and therefore your father is 95 now he could live another 5 years. My mother lived till 97. And it was because she didn't really want to live any longer or she really would have lived till 100 or she'd probably still be alive today, KT.

KT: Probably

Suze: Right? Anyway, so if I were you and I were in this situation, I would figure out a lump sum of money that I know I'm going to need for my dad for at least 3 years and depending on where his investments are. I would look and talk to a tax person and I would look especially if it's outside of a retirement account. I would cash out of the ones that were the best performing he has gains in, and I would sell the ones that he has losses in if there are any, and I would offset the two so he doesn't owe any taxes on it if it's outside of a retirement account and he doesn't have any gains to offset.

Suze: Then I would do only the ones really that had the losses in it and let the winners continue to go so he doesn't have to pay taxes on it because I don't know how large of a capital gain or an ordinary income he's going to have but if I were you, the best advice I could give you is I would actually sit down with either a financial adviser or a tax person, look at everything your dad has. And do the ones that make the most sense. Also, I just have to say this, remember upon his death, when you get this, especially if it's outside of a retirement account, if he's gonna leave it to you, you get a step up in basis. On all the stocks and anything else he has where he has a tremendous gain and then if you sell it there's no taxes so you have to figure it out but probably I would start with getting rid of his worst performers first if I didn't wasn't able to offset things, OK.

KT: All right, Suze, next question is from Rachel. This kind of made me chuckle because the subject says fear and politics.

KT: I'm not gonna do. We don't do politics. I'm not making any comment, but obviously, Rachel said, Suze, I'm freaking out about all the political stuff. I'm worried about the money I have in the market. I'm worried about the money I have in the banks. I'm worried they will invalidate my marriage. I'm worried about so many things right now and I don't know how to feel OK about the future. Will the must have documents cover me and my same-sex spouse if they overturn recognition of my marriage?

Suze: So you know, KT, she's asking two different questions.

KT: Oh, she's just scared to death.

Suze: Financially, you're asking, is the market gonna be OK? Is money gonna be OK and all of that. I would tell you I wouldn't worry about it. I wouldn't because I think this year in particular is gonna be a really great year for the stock market, possibly into 2026, believe it or not. The money that you have in banks are FDIC insured hopefully if you're the uh with the $250,000 or many beneficiaries, so I wouldn't be worried about those things.

Suze: Would I be worried about gay marriage being invalidated, which obviously kind of affects KT and myself, but we were married in South Africa, so we don't even have a license here in the United States.

KT: What we have is acknowledged and recognized worldwide.

Suze: But anyway, more important than that. But here's what everybody is writing me who's worried about the invalidation of gay marriage or same-sex marriage. Truthfully, the only way to completely ban same-sex marriage nationwide would be through a constitutional, KT, amendment where they would be defining marriage as a man and a woman. Now what's interesting about this because KT's looking at me as if I should know this, right, but anyway, is this would require 2/3 KT of Congress and the ratification of almost I think it's 38 states.

Suze: To get rid of it, which in my opinion is highly, highly improbable and why is that? Because the current public support of same-sex marriage is 70%, so I don't think a lot of these states are gonna really jeopardize everybody voting them out next time, however, will marriages that are existing become null and void? I don't think so. However, it may be that marriages in the future won't be allowed to happen, and that is an absolute possibility. Therefore, if you're out there, if you're gay, you've been thinking about getting married, I would do it - stop thinking about it, right? Wait, I just have to tell a little story even though I know we may run a little late. We were on that cruise ship, Olivia, remember, and there were two women and I was speaking there and two women stood up who had been together forever and essentially they said to me this was after same-sex marriage was legalized in the United States and I said oh so you're gonna get married? They said no, what for?

Suze: I said what do you mean what for? They said we love each other. Everything's OK. I said, do you know how hard all of us worked to get same-sex marriage legalized? I gave talks to senators. I did so much. It was like it was essential, especially when you love somebody like I love KT. Of course you want to be able to get married. And they said, no, it's all right, and I said don't wait, don't take something for granted because you never know when it will go away. And here we are today with I've gotten over 50 emails like this KT asking this question.

Suze: So don't take it for granted if you're out there and thinking about it, go ahead and do it, but don't do it just to do it and then you're going to have to get divorced and then you're going to be like all these other people that write in and go, you're fighting and just cost you $176,000 in legal fees. All right, next KT.

KT: I'm done. I'm done. Do you have a quizzy?

Suze: Of course I have a quizzy.

KT: All right, give me my quizzy.

Suze: Wait, you're just done.

KT: I'm quick. I'm finished. Yeah.

Suze: That's all you picked? All right then quizzy time ding ding ding ding dingy. Oh look, I have my marriage ring on everybody. Look KT, yeah, because, yeah, because yesterday I had to do a webinar and I wanted everybody to see that I was married. So do you hear it banging on the desk?

KT: I hear it. That's why I keep looking at her. Don't bang your rings.

Suze: I, so that that's what that noise is in case you hear it. Now ready.

KT: What's my quizzy?

Suze: This is from Brent. All right.

Suze: Good afternoon, Suze. I'm now all of you know Quizzy isn't just for KT. This is for you to be able to answer this as well.

Suze: Good afternoon, Suze. I'm reaching out for your guidance regarding my parents' financial situation which has been weighing heavily on me. My mother is already retired and only has Social Security as her retirement plan. My father, who is 68, is looking to retire soon. They are still married. Unfortunately, they've never been strong with managing money. And have a history of on again off again credit debt often resolved through bankruptcy in the past. However, they no longer qualify for that option. Obviously that's KT because they filed just a few years ago, so they can't do it again. Currently they have approximately $60,000 in credit card debt and they owe about $110,000 on their mortgage. Remember they're only in their 60s. They are about to receive $98,000 as a tax-free inheritance from the sale of my grandmother's home. Additionally, my father has around 250,000 in his 401k.

Suze: My question is, should they use the inheritance to pay off their mortgage, or should they use it to pay off their credit card debt? Think about it 98,000 tax free. Daddy has $250,000 in a 401k. Should they use the inheritance to pay off their mortgage, or their credit card debt?

KT: I'm ready with my answer.

Suze: What is it?

KT: I think they absolutely should pay off the mortgage, but there's gonna be some money left over, right?

Suze: No, they're not gonna have enough, right? Their mortgage is $110,000. They only have $98,000...

KT: Coming in?

Suze: Yeah, so they're gonna owe still $12,000.

KT: Pay off the mortgage.

Suze: Absolutely your final answer?

KT: I think so.

Suze: You sure?

KT: Yea, yea.

Suze: Oh, I'm so happy to be able to do this to you. Are you ready? My hoarse voice, are you ready? Ding ding ding ding ding ding. Absolutely the correct answer. The reason, everybody that it is the correct answer is that you never want them to get in a situation where they're not able to pay their mortgage and then their house is taken away from them remember credit card debt is, you know, it's just credit card debt it's not attached to anything so given that they're not gonna have any income or anything, what are the credit card companies going to do? 

Suze: All right so if I were you, my dear Brent, I would take the 98,000 and I would pay the mortgage on the home. Then, I would withdraw as soon as your father retires. I would withdraw at least $12,000 to pay off the mortgage totally. Then they own the house outright. Now the question is they still have $60,000 in credit card debt.

Suze: Well, I don't know. What do you do with that now? Do you take the money that they were paying towards the mortgage, and now they put that towards the credit card debt, and sooner than later they will be out of credit card debt. That is how I would do it if I were you and then be very careful about how they use that money in their 401k. And because I'm telling you it could be really difficult if they just take it all out. I would, however, take the money that's in the 401k and do an IRA roll over with it. And then maybe if they don't have a lot of income. Maybe just start converting some little by little to a Roth IRA if they're not gonna need it to live on.

Suze: All right, KT, that's a wrap. What are you doing today?

KT: Fishing

Suze: You've been... KT, you have been fishing every single day.

KT: I'm trying to catch something special and I haven't been able to.

Suze: And what is that

Suze: KT?

KT: A really nice tuna.

Suze: That is why everybody every single morning she is out the door by 6 a.m. With Colo, I on the other hand can't go because somebody in the family has to work, but and she doesn't get back usually until when KT?

KT: No, lately I've been going out very, very early, but coming back midday, you know what the tides...

Suze: Or 2 or 3 or 4...

KT: The tides are 6 hours, everybody, so you fish a tide.

Suze: Anyway, so you're gonna go do it again. Maybe I'll go with you.

KT: Oh yes, when Suze comes, it's so lucky we catch, catch, catch, catch,

Suze: All right, but until Sunday when I am going to do a Suze school to hopefully try to explain to all of you the difference between lump sum investing, dollar cost averaging investing, and value cost averaging investing, which Mr. Keith Fitzgerald taught me about.

Suze: I hope that you will listen because it's really a fascinating thing.

KT: I'll be there. I'll be there. And if I don't get, if I don't understand what she's saying, I'm gonna ask her to explain it again and if KT gets it, all of you will get it.

Suze: All right, so until Sunday there's really only one thing we want you to remember when it comes to your money and is what people first,

KT: then then money then fishing then and things

Suze: and things and if you do that you stay safe and strong. You will be KT wants to say it, unstoppable, but you all still will rise together. Bye-bye.