Podcast Episode - Ask KT and Suze Anything: Can My Spouse Help Me Fund My Roth?

On this episode of Ask KT and Suze Anything, Suze answers questions about IRA rollovers, savings accounts, Medicare and more.

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Podcast Transcript:

Suze: December 20, 2024. Welcome everybody to the Women and Money podcast,

KT: and everyone's smart enough to listen.

Suze: Right on cue, girlfriend. So we're back one day late. Tell everybody why we're late.

KT: The island power was just gone.

Suze: For the entire day. They're putting in new cables, high voltage cables, because when you live on an island.

Suze: That's old. All the wiring that was 50 years old was blowing on itself. So therefore,

KT: now it's all new. Now we should have like really fast internet, fast everything.

Suze: Everything, it should work now, although I was told that they have to do one more island shutdown in February. But anyway, oh, we'll worry about that then. Now I just want to say something, KT. Because two days ago on Wednesday, it was a very big day. As I kept telling you, the markets are going down, KT and markets are going down. KT, these markets are going down. Look at this, look at this.

Suze: And the other news also is, is the government going to shut down or not? And we'll know that sometime today or tonight or who knows what will happen. So therefore, on Sunday's podcast, I will be doing a Suze School on what happened, why it happened, and why do I think about it?

KT: Wait, I'm going to tell everyone what I said to you, she said, Oh my God, KT, the markets are crashing. And I said, did you sell? And she said, You know what, KT, it's a great time to buy.

Suze: Yeah, it was all right.

KT: All right, so ready? Are we ready to start?

Suze: Right, so today is ask KT and Suze anything. This is where you write into As Suze podcast, S U Z E podcast at gmail.com. Ask a question and if KT chooses it, she'll ask it and I'll try to answer it.

Suze: What, what are you looking at me like that for?

KT: Nothing. You're a little jittery.

Suze: I am jittery.

KT: Because Santa Claus is coming.

Suze: No, cause you just gave me a cup of coffee.

KT: I did a little pick me up anyway, we'll go morning pick me up. OK, ready. First question we have is from Valerie. Suze, can you celebrate with me? I like this question, she said. I just paid off my mortgage. I have no debt and Fidelity projects I'm 150% funded for retirement.

KT: Ding ding ding ding

Suze: Ding ding ding ding ding ding ding ding ding.

KT: Thank you for your advice, education, and support. I do the can I afford it exercise as a routine habit to avoid regrets and separating my wants from needs. It's a standard part of all the decisions I make, no matter how small. I'm single, Bay Area homeowner at 59 and a half years of age, yeah, for me.

KT: So that's all I wanted to share, Suze. Valerie, let's tell everyone to be a Bay Area, meaning San Francisco homeowner at 59 and a half is something else.

Suze: And own it outright. That is a big deal, Valerie. We celebrate you, your achievement, and could not be happier for you if we tried.

KT: Keep listening.

KT: OK, next is from McKenzie. Suze, please help. OK, ready? She said, we just made a huge mistake. We did a rollover old employer 403B to a new employer Roth 403B on December 2nd.

Suze: How much, how much did they say?

KT: $275,000. She said she canceled it, but they said they couldn't cancel.

KT: Now she's gone over the contribution limits for the year by a lot. My understanding is we'll now be hit with a 6% fee until we remove the money. Anything they can do, Suze?

Suze: Yeah, is first of all...

KT: Tell people how to avoid this mistake.

Suze: Yeah. How many times have I said be very, very careful because when you go from a pre-tax retirement account to a Roth retirement account of any kind where you convert it, the amount of money that you convert in that year is totally taxable to you as ordinary income.

Suze: What Mackenzie did here is she took $275,000 from an old employer 403B, rolled it into her Roth 403B, and now is going to owe ordinary income taxes on $275,000. Mackenzie, you're about to make another mistake.

Suze: You did not go over the contribution limit, because this isn't a contributory Roth. This was a conversion where you literally converted from a pre-tax retirement account to an after-tax retirement account, so there is no money that you have to withdraw. You did not go over the contribution limit. That has nothing to do with what you did. So you're, you're tending to mix a lot of things up here, so I need for you to just slow down. What are you going to do?

Suze: And hopefully you have the money to do so, you are going to pay ordinary income taxes on the $275,000 as ordinary income. So it will probably...

KT: Once and done, right?

Suze: It's once and done and done. So now it's over there. Now you didn't tell us your age, so hopefully you're young, you'll be able to recoup that. And who knows, maybe in the long run it was the best thing that ever happened to you in the long run. All right, go on.

KT: OK, next question is from Susan. She said, Hi, Suze, I listened to your Women and Money podcast and find them very valuable and a great resource. Now I need to take action. All of your podcasts start with the recommendation of opening an account with the Alliant Credit Union. This has honestly always been a bit of a turn off for me - because ready for this, because it comes across as an advertisement for some group who I assume is a sponsor.

Suze: That's true they are.

KT: They are. Maybe I'm wrong, and perhaps opening such an account is a smart move.

Suze: We'll find out. One second. Keep going.

KT: And then she said, I already have a decent emergency cash account and I still earn money. Should I open the Alliant savings account or should I perhaps put this money into an ETF mutual fund? I'm 69 years old. Thank you, Susan.

Suze: All right, KT, you chose this question. You answer Susan.

KT: Susan, so yes, Alliant absolutely is the sponsor of the Women and Money podcast, proud sponsor for the past 3 years. We love Alliant, and let me tell you why. Everyone wants to sponsor this podcast. I have to decline over and over again many, many requests, but here's the deal with Alliant. Suze asked Alliant to create something really unique and special for her listeners, which is the ultimate opportunity savings account, unheard of, and the return on this account is also unheard of. It's the best out there. Suze's goal is to have a sponsor and a partner that is there to help people and there for the people and to really protect their money. So that, yeah, we love Alliant.

Suze: So, so we just want you to know that. So I'm sorry that it kind of makes you feel like whatever, but you shouldn't

KT: And they're the only sponsor.

Suze: That's right, and it's the only one we really want at this point in time.

KT: So now she's asking what's best for her to open.

Suze: So now here's how you know that we're also totally honest all the time. You're asking, should I open the Alliant savings account or should I perhaps put money into an ETF or mutual fund since I'm still earning money, I'm 69 years of age.

Suze: Given that you have a decent emergency cash account and you're looking for growth because you're looking to buy an ETF or a mutual fund account, when that is your goal, what I would be doing if I were you is I would be opening up a Roth IRA at Fidelity or Schwab since you're earning money.

Suze: And investing within the Roth IRA, that's what I would be doing if I were you.

KT: OK, great. Next question Suze, is from Laurie. She sounds a little perturbed. Why is it that a few...

Suze: Wait, somebody else is perturbed?

KT: Yes, ready for this one? Why is it that I heard a few podcasts ago a woman who had a Medicare Advantage plan. That was discontinued was able to switch to an original Medicare plan plus a Medicare supplement even though, right, even though she had a health problem. I remember this one too and now Laurie's saying I have a health problem too, and I tried to switch from Medicare Advantage to Medicare plus a new supplement. But the Medicare supplement denied me.

Suze: Yeah.

KT: Why was that woman then she says, why was that woman able to do it and not me? So can you answer this? I don't know if you can answer this. Does it have to do with their illness or what?

Suze: Listen closely, everybody. The question that this woman is referring to, Laurie is referring to was from a woman like she said who had a Medicare Advantage plan that had been discontinued. Right, do you remember that, everybody, she even said that when a Medicare Advantage plan is discontinued. Then you're able to apply for Medicare, regular Medicare, plus a Medicare supplement, and they have to take you because the Medicare Advantage plan was discontinued.

Suze: If KT, because she's looking at me, everybody, she's giving me a look like, what if you have a Medicare Advantage plan that isn't discontinued, but you want to switch from a Medicare Advantage plan that has not been discontinued to Medicare. The Medicare supplement plan does not have to take you if you have a health problem. That's why when you originally apply for Medicare, you have to be accepted no matter what's going on with you health wise to a Medicare supplement plan when you first apply for Medicare. .

Suze: But if you choose a Medicare Advantage plan over Medicare, and then you end your Medicare Advantage plan and want to go back to Medicare just like your sister did - KT and remember she was having trouble now getting a Medicare supplement plan. That's because she voluntarily discontinued her Medicare advantage. Did that make sense now?

KT: Yeah, now it makes sense, but I thought originally it might have been because someone was had more of an illness than another.

Suze: No, it's when, when...

KT: All I know is all these plans are complicated.

Suze: Oh, just like Roths.

KT: Yes, now I have a Roth question coming up.

Suze: Wait, wait, just answer this to me.

Suze: If you had to choose one or the other, which one complicates you more, Medicare, Medicare Advantage, or Roth's?

KT: Roth.

Suze: Roth still?

KT: Yeah, they still do, Suze. There's back door, front door, side door...

Suze: All right. That's your normal thing with them. Go on.

KT: All right. I have a ready for this.

Suze: I think I am going to do a song by you back door, side door, front door, Roth. Come on, Suze. Anyway, go on.

KT: That was pretty good.

KT: So this is from Barbara. She said, not another Roth question, trying to understand spousal Roths. I work on call only and over the past several years have been called to work less and less. My husband still works full time with a salary of around $80,000. We have individual Roths fully funded annually, but I would likely not get to the $8000 in 2025. Barbara's asking, can my husband fund me only if I make zero income or can he cover the shortfall of my earnings?

Suze: Should that be your quizzy?

KT: That's a great question.

Suze: Oh, quizzy time.

KT: That's a great question. I, I think that he cannot.

KT: I don't think he can he can cover her shortfall.

Suze: Barbara's question, everybody is - You have to make at least $8000 a year - if you if you're 50 or older to put $8000 into a Roth IRA. If all you make is $3000 a year, that is the maximum that you could put in then. So it's $8000 or whatever you earned, whichever one is less, OK? Barbara's saying she's not going to make $8000 next year.

Suze: Can her husband make up the difference so she can fully fund it? Can he or can he not? And KT, your answer is...

KT: I don't think he's allowed to.

Suze: (Suze makes the wrong answer sound) I got you. I got you.

KT: I thought you can put in earned income.

Suze: That's right, but she's married.

KT: All right, so that's a loop. See what I mean, Suze. Roth has so many different rules regulate. Who knows that? Who knew the answer, everyone out there? Did any of you get it right?

KT: If you got it right, I want to know because I did not know that.

Suze: KT

KT: Suze always said you need to fund your retirement with earned income.

Suze: Stop, stop now. Do you see how defensive she gets? She will go on about this for at least another hour after this podcast ends just so you know.

KT: So tell us the rules.

Suze: When a spouse is not working, it's called a non-spousal IRA. It could be a Roth IRA or a traditional IRA.

Suze: Then the spouse that is working is allowed to fund their own and their spouses even if the spouse doesn't make any money. So yes, absolutely, your spouse will be able to fully fund it for you or make up the difference. It does not matter. All right,

KT: That's another benefit of marriage. Right.

Suze: Wait, KT, I was, I'm so glad you said that.

KT: OK.

Suze: Right, it was, we were talking to a friend, remember we were talking to Kevin the other day, right? And I said, Kevin, because recently, about a year or two ago, he married his husband, and I said, Kevin, do you like being married?

Suze: And he said, Yeah, I really do. There's something about it that I like. And then I was thinking, KT, do I like being married?

KT: We love being married.

Suze: And...

KT: Do you love being married?

Suze: I love being married to you.

KT: Yeah, that's what I mean.

Suze: But what I was thinking is that it's not about loving being married.

Suze: The truth of the matter is you love being married when you love the person that you married.

Suze: Because there's a lot of people out there who are married who can't wait to not be married. Is that all? I don't even know why I'm telling you all this story. Forget about it. Next question, KT.

KT: OK, so I have a question, and it's an anonymous one. It said, good afternoon, Suze and KT. I have a quick question, but I am praying that you answer it.

KT: I work for the county and for the last 18 years I've been participating in my company matched 401k. Within the last few months they've also added an additional Roth 401k to the plan as well, so I've been doing the minimum contribution in that plan.

KT: In the in the new Roth, my question is, should I roll over the traditional 401k into the Roth 401k or just keep the two accounts? I'm hopeful that you will answer my email. Thank you.

Suze: Well, how would you answer that based on one that we just answered a few minutes ago?

KT: I would do it.

Suze: Oh Jesus,

KT: No, wait, wait, wait, doesn't it matter your age and everything and pay taxes and

Suze: I'm gonna, do you understand everybody?

Suze: Did I just not say be very careful about rolling over money from a traditional 401k to a Roth 401k because you're gonna owe ordinary taxes what any amount of money that you transfer KT, you roll over. So should this person, right, roll the money that's been in her traditional.

KT: Just keep, just keep to make it easy.

Suze: Is that what you would say again? (Suze makes the wrong answer sound again)

KT: Yeah, just all right, wait, what is it? Should they do it? Just keep both. So yeah, of fact, open another open another Roth.

Suze: Yea you could have a Roth IRA as well.

KT: Yea go for gold.

Suze: That true answer to this question is it depends how old you are, number one. Wait a second. Can you let me answer?

KT: Make your life easy?

Suze: I want you to just sit there and say nothing.

KT: I say nothing.

Suze: You promise me?

KT: Nada.

Suze: Come on.

KT: No, I was gonna say it in Chinese.

Suze: How would you say it in Chinese? How would you do that?

KT: Keep reading.

Suze: Come on, KT. KT, here's the question, everybody, here's all of your quizzies. Can KT sit here and say nothing for me to be able to answer this question, can you?

KT: I'm zipping it up. Ready, zip.

KT: Zip it up.

Suze: Can you, KT.

KT: We should have a video so they can see my mouth zip.

Suze: Oh God. So anyway, it really depends how old you are and close you are to retirement.

Suze: Even if you were just let's say 10 years away or so, you would and could, if you want to convert little by little into your new Roth 401k so it doesn't affect your tax bracket, just that simple, but don't do it all at once, especially if there is a large amount in your traditional 401k - and there should be since you've been working there for 18 years.

KT: Suze, ready for one more question?

KT: Oh, come on, you got it in one more one more. OK. This is from Mary. My three siblings and I inherited traditional IRAs from my mom when she passed 6 months ago. We understand we need to take RMDs, required minimum distribution based on each of our life expectancies starting 2025.

Suze: That is correct.

KT: So the question they have is, do we need to take her year of death RMD this year that she had not taken?

Suze: And the answer to that is yes, you do.

Suze: So if Mom had already started taking required minimum distributions and she had not taken her RMDs for 2024, you have got to take it based on her life expectancy, all right, KT. That brings us to the end of another Ask KT and Suze Anything podcast. Take us out, girlfriend.

KT: OK, so there's only 3 things we want you to remember, and that is this: people first, then money

Suze: then things. And if you do that, you stay safe and you stay healthy. You will be what KT?

KT & Suze: Unstoppable.