Podcast Episode - Ask Suze (and KT) Anything


401k, Credit Union, Investing, IRA, Mutual Funds, Retirement, Roth, Roth IRA


December 16, 2021

Listen to Podcast Episode:

On this edition of Ask Suze (and KT) Anything, Suze answers questions from listeners Patty, Florence, Jacqueline, Eric, Tarima and Chuck, selected and read by KT.  Plus, a Quizzie sent in by Joe.


Podcast Transcript:

December 16, 2021. Hi everybody today. It's first of all. This is KT, in case you thought Suze's voice was really changing. This is KT, and it's December 16 and Suze's right here. What year? What year? 2021. Well, you never know. We're 2021, We're almost to the end, everybody but Suze's here. But I'm going to really speak during the whole podcast. She doesn't want me to answer the questions for you. Thank God. But her voice is getting a little bit better. But we're going to head to the mainland and bring her to a doctor to check out this sinus infection. She doesn't have a cold, definitely doesn’t have COVID. She's just really really stuffed with a sinus congestion. That won't go away. Before we go on. I just want to thank everybody. Sounds sexy. Thanks KT. For all your suggestions from um doing the Nevage treatment, from doing pepper from doing, you know, all kinds of things. Thank you so much that so many of you care. Thank you. Your remedies were very well received. Thank you. All right. Are we ready? Well, tell them what today is, KT? Today is December 16th. No, you're supposed to say today is the a Ask Suze and KT anything day. But maybe it should be asked KT and Suze anything. How does this feel to you that you're the one who's introducing everything. I don't like being in the driver's seat. Yes. Whatever. All right, come on, KT. Okay ready first question for well, wait a minute. If you have a question for the ask, KT and Suze podcast on Thursday, just go to ask Suze podcast at Gmail.com. Send me your question. There you go. And if chosen. We'll do it on the podcast. Also, for those of you who write in a question, you have to listen every week because you just never know when it's going to be answered. Okay, now let's start. Our first question is from Patty. I love this question. It's the subject says pay off the house, but I think it's much more than that. Are you ready Suze? I was born ready. KT. Says I have always admired your story, your books and your advice. I'm 59. I have been teaching for 23 years. I'm thinking about retiring at 63. I can try to push it to 65, but I'm getting tired. Now you're ready. Everyone I've been teaching kindergarten for 23 years. I love what I do, but it's getting close. Why are you laughing? I'm laughing cause I'm thinking, oh my God, to be in a kindergarten class. What's that five-year old’s for 23 years? Of course, she's tired, Patty. You need to take a break maybe. Why? Why? Why? Why? Why? Why? Why? Why? All the kids ask is why? And Cola who you know lives with us in Spanish. He said when his kids were that age it was constantly porque? Porque? Porque? Porque? He said they will drive him crazy. Okay, Kt before we even finish this, we have to tell everybody, Congratulations, he did it. He's he got married. Our boys married, he got married. They got married On Monday December 13. Suze. Should we post a photograph of him and Ani his new bride? All right, go to the women and we're not going to tell him he'll get really mad. Go to the women and money app. Suze will post a photograph of cola and Annie and look at his face. He looks so happy. It looks like he was crying. So sweet. Yeah, we're very happy for both of them. And we went to the chapel here on the island to say a prayer and bless them. So, we're very excited. But let me get back to the question. Okay, this is Patty, our kindergarten teacher of 23 years. His here's her question. Do I continue with my 403 B. or pay as much as I can into the mortgage. There you go. How old did you say? She was 60? Oh sorry 59 and thinking about retiring at 63 or 65 patties. It's hard for me to answer that question because number one, I don't have a voice but truthfully, if you are going to keep that home forever, Then yes, invest in the 403 B. up to the point of the match and then stop contributing. If you're putting in more than that and put that towards your mortgage. Now, I'm just going to say this. If you had a Roth 403 B and here you are and you've been putting all this money into a Roth 403 B. And then you retire. You want to keep the house, you want to pay off the mortgage, you would be able to take out that money absolutely tax free and just pay off your house if there was enough in there to do so, if it was a traditional 403 B, you'd have to pay taxes on that money. So that's another advantage of a Roth 403 B. But you don't tell me if you have a Roth 403 B. So up to the point of the match. If they match, then pay off the mortgage. If and only if you are going to keep this house forever. Also, if they do not match and you are going to keep this house forever and you want to have it paid off by the time you retire. Stop contributing to your 403 B and take that money and put it towards your mortgage. Okay, next question is not a question. It's a statement from Florence. When is it more suggestions on what I should do with my voice? No, but it's great. I want to share this with everyone and said hoping KT will pick this and I am Florence because it's a great statement. So here you go. As per your advice in January, Suze. I bought the cheapest car that I could afford, and I think it's January this year. It was no luxury car. But it worked about a month ago. You sent an email about selling cars. I checked my car's value on this occasion when I got your email, I checked it again. And guess what? Suze? I sold my car for more money than what I paid for it new. As always, you were right about selling the car. There you go. I love that. That's from Florence but I Florence. What are you doing for a car now? Just wondering, I go, go on. I was wondering the same thing, are you riding a bicycle? The next question is from Jack in Connecticut. Dear Suze and KT. I'm a 38-year-old single woman. Her name is Jacqueline. At the end of 2020 I lost my job and moved my company 401 K. into an IRA account. I've been living off unemployment and savings since that time. My savings has dwindled to $20,000 since losing my job. I currently have $409,000 in my IRA, but wondered if I should move a portion of this into a Roth IRA for emergency use, should I do this? And if I needed to make a withdrawal, does the five-year marker for penalties apply since it would not be considered earnings. Okay, just to remind she's 38 years old. Yeah. Just get another job. What were you doing at 38? I was working so hard and I was at the top of my game in Hong Kong. I was incredibly successful, incredibly successful. Her face everybody, she is so proud of herself. She asserted that was like a magic year for me. I don't even know what I was doing anyway. Jacqueline. Yes, if you want to you can convert some of this money into a Roth conversion account. But no, you cannot take it for at least five years now. What's important is if you do it right now then this year 2021 will account for one of those years. So then if you did it right now you would be able to access that money 4 years from this date without any taxes or penalties. But that money that you access would only be the money that you converted and you paid taxes hum if next year you convert some more it's five years from 2022. So it doesn't matter whether its earnings or not. When you convert money from a 401 K. to a Roth IRA You must pay taxes on the amount of money that you converted, and you cannot touch the money that you converted until it has been in there for at least five years. This next this is a question and a statement and Suze, you've got to clear this up for everyone listening. Pay attention to this one. Hi Suze and KT. This is from Eric by the way I was telling my mom about the Alliant Credit Union and that she should open an account because she would get more interest in the savings account than her CD. Her immediate response is that it's unsafe because it's not a national bank corporation like Bank of America or Chase. Suze. When I read this, I went whoa! We need to really educate her. You're listening right now everybody that is not true. That's not that's not true. All right so here's what Eric's telling us. Her fear is that if the bank fails how would she get her money back? In 2008? When many banks failed? Like the IndyMac people were in line at the bank and couldn't get their money. This is her concern if something like that happened now how would I or she get the money back? Oh, my goodness, Suze. Let's help eric with this. Yeah. You know it's funny everybody and I don't know if you know this, but it was in 2008 that the FDIC. Which is the Federal Deposit Insurance Corporation which insures banks had me do a $35 million public service announcement. That's how much they spent on advertising me and Sheila Bair who was chairman of the FDIC at the time to explain to everybody how FDIC Insurance worked after that the credit unions when they saw that they wanted me to do the same thing for them and I did. So, let's just do a recap right now. Banks are insured by FDIC like I just said the Federal Deposit Insurance Corporation. However, credit unions are insured by NCUA, The National Credit Union Administration. They work identical up to $250,000 per account. Now what happened at IndyMac? Just so you know, the people who had more than $250,000 in their accounts. Yeah, they were in trouble but if you had $250,000 in your account or less FDIC paid you, so you never really want to have more than $250,000 per account. Whether it's in a bank or a credit union, there is a way around that. I just want to tell you that if you have an account and there are beneficiaries then if each beneficiary has a $250,000 limit as well. But please don't confuse it. That just because Mama says it's unsafe because all Mama knows is about banks. I would feel safer with money in a credit union any day that money in a bank. Are you kidding me? Eric especially if that credit union was Alliant, come on. Hi Suze. This next question is from Tarima. Hi KT and Suze. I love Sunday Suze school. Ha ha ha. They love just me. Yeah, they don't, they love you when you're giving them a lesson. But they love more when we're together. I know it will do a vote on it. Okay. So, I took a look at my state, KT. I love more when we're together. Oh, that's me too. So, I always ask to come on Sunday? But Sunday is like she gets super focused. Everyone, she shuts the door and doesn't like to be disturbed at all when she does her Sunday school. So, when there's a lot in my head. Yeah. And you all know, I just sit in front of the microphone and I just riff. Yeah, she doesn't read things. She doesn't take notes, nothing. It's all in my head. So, if somebody disturbs me, it's like what we call it local knowledge, how to see. All right, ready. I took a look at all of my statements and double checking on my mutual funds, but I don't see any symbol after the name of the fund. However, I have two tell you KT last Sunday school caused more commotion than ever before because I'm getting so many emails with all of you telling me after you heard that podcast for the first time ever. You checked your statements. You all many of you found out your expense ratios are too high in many cases that you have loaded funds. Oh my God, all of you for the first time just woke up and learned about what you've been investing in for God knows how many years. That was one of the first questions you ever asked me if I had loaded mutual funds? I didn't even know what that meant. So, don't feel bad everybody. Let's continue because this is interesting. So, when I searched the symbol of the mutual fund in Yahoo Finance, these are some of the questions I have. Suze. I still don't understand the answers. Do I assume if there's no letter A or B after the name of my mutual fund that I have a no-load mutual fund? No. Okay. Wait for example, my fund, the Franklin Templeton Investments, Mutual Global Discovery Z. has an expense ratio of 1.01%. Alright, okay. Second question is, what does the letter C mean after the name of the fund? All right. So, I guess I didn't go into quite enough detail about all these letters after your name. Let's do a small Suze school right here. If you look up your mutual fund and at the end of the name of your mutual fund, you have an I, X, Y or a Z like Tarima has, those are known as institutional share class funds. What is institutional share class funds? Usually you need a very high minimum, sometimes $100,000 just to get in most of those funds, however, do not charge a load, but they do charge in expense ratio. Right. So institutional share class mutual funds or institutional funds are low expense investments intended primarily for large institutions such as a pension fund or high net worth individuals. And again, these funds also typically have high minimum initial requirements and that's all you need to know. So probably Tarima, you have a lot of money in this fund. As far as your question about what our Class C funds, remember that A shares, you pay the load up front, B shares, you pay it over a five- or seven-year period of time, C class shares, you pay an annual fee every single year. I don't like A B or C Fund shares. Those are your A. B. C’s. Mutual funds don't touch them. However, I do want to say, I do want to say one other thing. There are mutual funds that do have a higher expense ratio of 1%. And if that fund has been performing, they've been outperforming the index funds, then sometimes it's worth paying a little bit more of an expense ratio. You just must know is the fund that you're paying more for in terms of an expense ratio. Is that outperforming what the index funds are doing at a far lower expense ratio and almost all circumstances? I just can't imagine a loaded mutual fund being worth it on any level A B or C. A B C’s. Don't touch them. All right, Next question, Suze is from chuck. Hi Suze and KT. A lot of men KT. I know that's why I'm kind of saving the guys at the end because I like these questions a lot that way. I just have to say something about this. I'm sure KT does not choose questions based on if you are a woman, a man or even nonbinary, right? She chooses the questions based on. Is it a good question or not? Period. Or my theme. My theme could be Roth. My theme this week if you notice everyone is mutual funds and ETFs which is coming up. So, I try to theme it more than anything. I kind of think everyone remembers more that way. All right, ready, Next one's from chuck. Hi Suze and KT, thank you so very much for your wisdom and guidance you've provided over the years. I am an avid fan and I listened to both of your podcasts every week. So now check you're going to hear the answer to your question. I am invested in mostly all Vanguard ETFs, both in my IRA and Roth IRA. I want to rebalance out of a few Vanguard funds that our target date funds, I have about $20,000 in several funds that have a greater percentage in bonds than I would like. So, do I sell all at once or is it better to sell a little at a time? Like $500 a week or a month and then purchase the same amount of V. T. I. Alright. There you go. Suze, you see what could what you chuck do? Yeah, chuck. He's listening. Thank you for listening, chuck. It's a little bit hard for me to totally answer this question because I don't have enough information about you and things like that. What's great however, when you're changing investments within a retirement account, you do not have to worry about tax ramifications whatsoever. What concerns me is we currently are in a period, a very high inflation. And one of the ways that the feds can combat that high inflation is hopefully raising interest rates, but they're afraid to raise interest rates. Why? Because that could absolutely affect the stock market. So therefore, if you are in mutual funds that have exposure to bonds when interest rates go up, the value of those mutual funds go down. So, you have to know that is your exposure. So, if I had mutual funds that had exposure to long term bonds, short term bonds are like one year, two years, longer term bonds are like 10, 20, 30 years. If I had a mutual fund that had exposure to long term bonds that fluctuate more when interest rates start to go up? I wouldn't do it at $500 a week. I would just do it, now in terms of taking that money and putting it all into the VTI ETF I would probably at this point, not put it all into the VTI in one lump sum. I really would dollar cost average into it so that money can just sit in within your retirement account safe and sound, because I really want to see what happens next year. Like what's going to happen with COVID, what's going to happen with inflation? Are they going to raise interest rates and what's going to happen to the market? So, I hope that answered your question. Keep listening Chuck. All right, Suze. What time is it? It's quizzie time now, KT. Only because of my voice. Want me to read it. Let me read it. All right. I want her to take a little sip of tea. Take little so right now I'm going to read it. Oh, this is from Joe. Okay. Ready everybody. This is your quizzie K.T. But it's everybody else's quizzie as well. So, let's think about how you would answer it. Okay, let me read this. This is a little bit long. I have a renewing life insurance question. Both my wife and I are 61 and our semi-retired. Our house is paid off. We do not have any debt. Wait Everybody there, 61 there's semi-retired and they own their home outright and no debt and no debt. All right come on. We have about $600,000 in an I.R.A. And have one nice pension coming in. We have decent savings, and both won't withdraw Social Security until the full retirement age. All right. So that for them will probably be 67. Okay. Alright, so six years. All right. Now the issue is our life insurance policies. They just said a word that you don't like life insurance. Ready? No, I don’t not like life insurance. Whole life. Alright here we go. Almost 20 years ago both my wife and I signed up for both term and whole life policies. I know the whole life was a big mistake, but I was Hoodwinked Suze. So Now wait one second before you go on. This is a very important line that KT just read from Joe. And the reason it is you usually don't understand that you're being Hoodwinked and how much whole life insurance has cost you until 10, 15, 20 years after you have been doing it. So pay attention. And this was 20 years ago everyone. So, each policy is $100,000, so, my wife has a term policy for $100,000 and a whole life policy for $100,000 and the same goes for me, our term policies are now expiring in two years. What should we do? There'll be 63, two years. ready. I thought when the term policy expires, we would stop the whole life at that time as well. But then do we cash out the whole life and re-invest that amount and then just start a new 10-year term or no insurance at all? Since we're not replacing the cost of the home or working salaries anymore. However, we would like to have some insurance to leave for our daughter. Thanks for listening. So, the quizzie is what's the question? Suze want me to say what I think they should do. No, I want you to repeat to everybody, what is the question? Okay, so here's the, what should we do when the term policy expires? That's when they're 63 everybody do, we stop the whole life insurance at that time as well? Then, do we cash out whole life reinvest that amount and just start a new 10-year term or no insurance at all? Right, so that quizzie is KT. Which one of those two should they do? Should they just in two years forget their whole life and their term or at the age of 63, should they cash out their whole life and use that money to buy another 10 years of term. Here's what I would do based on what you've taught me about whole life. They don't need the whole life. They don't need to keep putting money into that at all right now. Get rid of the whole life today. I am so proud of you I can’t even stand it. Wait ready. Yeah, go on. Get rid of the whole life right now, Joe. I would keep the term for the two years. It's going to expire in two years, and it should probably be very little. But boy, what a great you know, you know, I mean very little. The term policy for $100,000 that they each have will expire in two years. I would keep those policies because they expire in two years and then after that, I wouldn't get any insurance. There you go. Is that how all of you would answer? Am I right? Well, first today, you're going to cancel the whole life you don't need. So that's ding ding ding ding ding. Stop paying into that. And don't reinvest that money at all. Keep the term until it's finished in two years, only two years. So, that could be ding ding ding ding. But that could also be ehhh, because all right, let me take over here, Joe. Since you know that you've been Hoodwinked into this policy this whole life policy. What are you waiting for? Yeah get rid of it. If I were you, I would cancel them right here and now and take that money and start a fund for your daughter since you want to leave your daughter money. Now. If you want to leave your daughter something and you're doing it via the way of insurance if you want to get another term policy, don't wait till you're 63 to renew. You could renew right now for 10 years. You know you would be 71 but it's going to be a little bit expensive and chances are when you're 71 if you're healthy right now it's going to expire, and all that money will have been wasted. So, I would not be waiting to number one cancel the whole life. I would do it immediately in terms of renewing in two years. If you really think you want to renew to leave your daughter something even though probably, you're not going to be leaving her anything when it comes to insurance because you're not going to be dead in 10 years. Most likely, then okay. Do it now. Don't wait till you're 63 because it will be that much more expensive. However, I wouldn't be renewing the term insurance policy either if I were you. You want to leave your daughter something starts taking the amount of money that you were investing in these insurance policies and put it away for her, invested for her. You still have a good 20 or 30 years to live. And you would probably over 30 years depending how much money you put in every single month for her. Probably leave her $100,000. That's what I would be doing if I were you. That makes sense KT. Yes, I like that. Alright we made it through. I think my voice is sounding better now. Finally, at the end is oiled up. That really sounds horrible. Well, I think that everybody keeps, instead of them commenting on your advice their commenting on remedies. I know, but just so you know, I feel okay. She looks a lot better and she's been exercising and really eating well. She had no appetite for weeks. I lost a lot of weight, but she's filling out again everybody. Nicely. And the great news is because I know a lot of you are interested in my recovery, my arm is getting better day by day. Right, KT? Day by day. Oh, here she goes. Oh, dear Lord. What was that song from Godspell. Oh yeah. I love that song. It's a great. I'm singing to you. Day by day. All right. So, Day by day, we hope that you are getting educated about your money. We hope you're getting educated about, really psychologically, how you deal with your money. And we hope that this podcast, which is really, the main purpose of this podcast, day by day, that you are getting safer, stronger and most of all secure. See you Sunday. bye everybody. All right, bye bye now.


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Suze's Financial Strength Test

Answer Yes or No to the follow statements.

I pay all my credit card bills in full each month.

I have an eight-month emergency savings fund separate from my checking or other bank accounts.

The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!

I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.

I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.

I have term life insurance to provide protection to those who are dependent on my income.

I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.

I have checked all the beneficiaries of every investment account and insurance policy within the past year.

So how did you do?

If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.

As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!

But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.

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