Podcast Episode - Ask Suze Anything

Bankruptcy, Retirement, Roth IRA, Taxes

May 21, 2020

Listen to Podcast Episode:

In this podcast of Ask Suze Anything, Suze answers questions from Women & Money listeners Keith, Denise, Janae, Jennifer, Jean, Lagrimes, and Maria.

Podcast Transcript:

May 21, 2020. Can you believe almost half a year is up already? I can't believe it. But anyway, markets up markets down all over the place. Welcome to the Ask Suze Anything edition of the Women and Money podcast, as well as the men smart enough to listen. So today I'm going to answer your questions, and I'm going to get right to them. By the way, if you want to send in a question, just go to the app, my new app that you have to download, it's absolutely free. Just go to Apple Apps or Google Play, search for Suze Orman. Download the app, and that is where you ask your questions. So the very first question is from Keith and Keith says, Dear Suze, I'm 26 years old. Since discovering your podcast, I have started contributing up to the company match in my 401k as well as opened a Roth IRA into which I contribute $100 a month. I was really loving what you were teaching me, Suze. It scares me when, did you notice everybody because he said: "I was?" That means he's not now. OK, where do we go from here? I was really loving what you were teaching me, Suze, but then the virus struck and everything I thought I knew about money was flipped upside down. I make $45k a year at my job currently as an essential worker. That's about $870 a week before all taxes and deductions. Did you know that there are people collecting unemployment at home making $1k a week? I risk my life going to work every day, and yet, if I were to just get fired, I'd get an instant pay raise. It makes me mad, Suze. I thought money was fair. I thought if you worked hard, you made more. Why am I being penalized for being an essential worker in this situation? Signed, one of the feisty men smart enough to listen. Here's the thing, my dear feisty man. You know, I'm glad that you're smart enough to listen to me, but where did you get the idea that money was fair? Where did you get the idea that if you work hard, you know that that you're going absolutely make a lot of money? Do you know how many people are out there that work so much harder than me? Yet I make more money than they do. There's nothing about money that's fair and there's nothing that ever said it was fair. But what concerns me is that you are so mad. You are so mad at this person that staying at home and collecting $1k a week when you are working and getting $870 a week because you're an essential worker. Here's what I really need you to understand. Never stand in judgment of anybody. You don't know that person's situation, or is that person having to stay at home to take care of elderly parents, or to take care of their children? Maybe they're a single parent and they have to stay at home to take care of the kids because the kids aren't in school. But, you don't ever want to stand in judgment of anybody. What you want is you want to live a life where you are grateful for what you have, not where you judge others for what they have or what you could have had if you just got fired. So do you really, for $130 a week difference, really, do you want to get fired just to collect unemployment for a few more weeks? You told me at the beginning of your email that you're contributing up to the match. So if you got fired, guess what? You wouldn't be allowed to contribute up to the point of the match. So, Keith, don't live your life like that. Wish others well. You know, on one of the podcasts I do the Five Laws of Money and one of the laws is, "May every wish that you wish another be a wish that you wish for yourself, for in fact, it is." Don't wish others to fail or anything to go wrong with them. If this person decides that they want to stay at home and make $1k a week, that's on them, it's not on you. So really, just don't do that my little feisty man. And again, money is not fair. You know, I'll never forget the time, and it wasn't that long ago, it was in 2002. I was in the hospital on May 2, 2002 to be exact, and I was in the hospital for 10 days, actually. And there was a man who every day would come in and he would clean the room and he would have a bucket and he would do whatever he would do, and I would watch him. And I was so fond of this man. I don't even know why I'm telling you this story, but I just decided I wanted to. And the day that I was leaving, I was sitting in the wheelchair, and KT had gone down to get the driver to make sure everything was set for me to come down. And he was talking to me and he was saying, oh, you know, I wish I had a job like yours. I wish my son could be proud of me, I'm just a janitor, I don't really make very much money. And I said to him, are you kidding me? It's like, I've watched how hard you work, and if you were my father, I would be so seriously proud of you. How much you make what you do doesn't make any difference in life, it's how you carry yourself and how you walk through life. And I've been in this room now for all these days and I've been miserable in here, and you were my high point. You were my high point every day wondering, I wonder if he's going to come in. And yet, you never looked up, you acted like you never wanted me to talk to you. And I just wanted to know your name, I just wanted to know more about you because you brought me such joy. Now, I don't know why I wanted to tell that story, except that it does go back to money isn't fair. You have people who work 24 hours a day and they never have money, they don't have money because they're not paid for their work. So I don't know. Sorry, Keith, you got me off on a tangent. All right, Denise says hi, Suze, I would like your advice on a financial situation. I'm a single mom with no financial help from my ex and I own my home, but I owe $20k on credit cards. I wanted to get a personal loan to pay off my debt and just have one payment. I just refinanced my house because I had to pay off my ex. So, I just want to know, is this a good idea, or should I just call the credit cards and try to work it out with them? What would you suggest? Oh, Denise, I wouldn't do a personal loan. Usually a personal loan could mean two things. It's a loan from a person, so they're personally lending you money or you go into a bank and for a somewhat higher interest rate, they'll lend you unsecured money that you would then pay off your credit cards. The reason that I would not pay off my credit cards and I would simply call the credit card companies right now and try to negotiate with them, or better yet if you have a good credit score, which you probably do because you just said you refinanced to pay off your ex, why not do balance transfers to credit cards at a 0% interest rate for like 21 months? That's what I would be doing if I were you, so you could go to www.Bankrate.com or www.nerdwallet.com, or one of those sites. Find some great balance transfer cards you can transfer or go to a credit union and see what kind of deal you can work out there, but I would not be taking out a personal loan. The other reason that I would not be paying off my credit cards with another loan is that now you have that loan, you have credit cards, and now you have available credit on those credit cards. And I've noticed that after there's been a divorce or a death or something, you will tend to go and spend money to ease your emotions, your fear, your shame and your anger, your sadness, or your loneliness. You'll go out to eat more and before you know what, the credit cards will be all charged up again. So, if I were, you don't do that. Next one is from Jenae. She says, Suze, I heard you say wait to buy a car, but my dealer just called me and said they have sold more cars in this past month than they have sold in years. So, if I'm still looking for a car, now is the time to buy it. So what's up, Suze? Well Jenae, I'll tell you what's up. Do you know why everybody is going to buy a car right now? People who didn't have cars, people who Ubered, took public transportation, do you know why they're doing that right here and right now? They're doing that because they are afraid of the virus. I have more of you sending me emails saying, Suze, I live in New York City, I live here, I lived there. I used to take public transportation all the time, I don't want to take public transportation anymore, so now I am going to buy a car. Just because something is going up right now and cars are moving quickly now, and that's why I personally think they're moving so quickly right now, is that people who don't own cars want to own a car right now so they don't have to get involved with being close to somebody or socially distancing. However, just because it's happening doesn't mean it's always going to be that way. If you are going to buy a car, can you just wait until about September? Like I said to you, I think between now and September we're going to see a lot of things going on in this economy. How many times do I need to say it, but I'm going to say it again? That the economy is not the stock market. Just because you see the stock market going up, then down, then up. But it seems like it's so close to where it was, it's just like 5000 points away from where it was. You're all like, oh, my God, everything's coming back. The economy is not coming back yet. Let's see what happens. And so no, I wouldn't be buying a car right here and right now if I were you. Jennifer asks, hi, Suze. Do you think now is a good time to switch from a Target date fund to an ETF with another company? I would withdraw all the money from one company and open an index fund with another company. This Target date fund is in a Roth IRA and I would open a Roth IRA with another company. Jennifer. Wait, you've got to listen to me. You say I would withdraw all the money from one company and open an index fund with another company. You have not told me how old you are, number one. You have not told me how long you have had your Roth IRA open for. Remember, when you have a Roth IRA, a contributory Roth IRA, which is obviously what you have, you can only withdraw the amount of money that you originally contributed without taxes or penalties, regardless of your age or how long that money has been in the account. Anything above your original contributions if you take out prior to 59 and a half, and prior to that account being opened for five years, you're going to pay ordinary taxes on that and a penalty. So, I don't want you withdrawing money from one company and open up an index fund with another company within your Roth IRA unless you meet all the qualifications to do so. You are far better off doing a custodian to custodian transfer. If you don't like the company that you're currently with and you want to transfer to another company, OK, I don't have a problem with that. But open up the Roth IRA at the company you want to be with and then have them contact your old company and do a custodian to custodian transfer. If you are then going to go to cash and you have this money in cash in your new Roth IRA, I do not want you to take all the cash and put it in, in one lump sum, into an index fund. I would like to see you invested over a four or five-month period of time. So, if you're going to be transferring $8k when this transfers, I want you to put in $2k in June, $2k in July, $2k in August, $2k in September, and now you're invested. Let's just see what happens but hopefully you'll continue to contribute to your Roth IRA. I hope that answered that question. By the way, do you all know what a Target date fund is? A Target date fund is simply a mutual fund where you target the date that you want to retire. So, let's say you would want to retire in 20 years from now, the target date fund would be Target Date Fund 2040. And as you get closer to the year 2040, the managers of that fund start to get more conservative with your investments. And that's how a Target date fund works. If you want to find out why I don't like them, on the app search for Target date funds and all the podcasts that I've done talking about why I don't like a Target date fund and you can read it, a transcript will come up as well, will come up for you. Let's see what else we have. The next question is from Jean. Hi, Suze. My husband and I both retired in June of 2019. I am thinking about our 401k and 403b accounts and taxation. I know that federal tax rates are low in comparison to the past, and I'm concerned that they will be going up in the future since the federal deficit is so high. Is it wise to start pulling money out of our retirement accounts so that the federal taxes won't be as high in the future? We have about $400k liquid. It would be nice to be able to pay cash for a home in a retirement community without worrying about selling the home we are living in now. The amount that we pull out of a retirement account would be put aside to buy a home, possibly in a state that taxes retirement income. I have to tell you, Jean, I wouldn't be doing that if I were you. Not here, not now. First of all, I do think that you're going to see the money in those accounts start to go up next year. I think there is a lot more room in this market to run as soon as things settle down, possibly by February of next year. You are still very young, you're 59 and a half and then what would you do with that money? So you take it out, you'll have to pay ordinary income tax on it, and even though you're not in that high of a tax bracket right now, you know, you tell me that in the email because I didn't read all of it, that you both have pensions, you own your home outright and you're doing fine. Don't get tricky here, I wouldn't be doing that. If you ever have to buy into a retirement community, believe me, you're going to want to sell the house that you currently have, and take that money to do so and leave the money that's in your retirement accounts, regardless of the tax brackets, and for you then to be able to withdraw from it as you need it. But I would definitely be leaving it in, look for good quality dividend-paying stocks, places that you could make more growth and income on your money. Because outside of a retirement account, especially if you don't invest it, I don't know, I don't know where you're going to get a good return. So I have to tell you, I wouldn't be doing that if I were you. This next one is from Legrimes. I think that's her name. Hello, Suze. I have a company-sponsored account in E-Trade. I need to know what to do with the account when I retire on my 70th birthday in October. I got separated from my job recently and I'm waiting for benefits from unemployment, hopefully. I have a traditional 401k, a little Roth 401k that I started last year, and a rollover IRA from a former job. I have an advisor from Vanguard where my accounts are, but I'm very anxious to learn from your advice. Please help me decide on what to do to make my finances last longer. I have a will kit from you, but I am not done that yet. I also have the book on The Ultimate Retirement Guide but I have not read that yet. Please advise. Lagrimes, what good has it done you to have gotten the will and trust kit that we offer and my book and not have read it and then call me to ask me what it is that you should do when if you simply read that book, I am telling you, everything that you want to know is in The Ultimate Retirement Guide. It's there for you in far more detail then I could go in right now. And why haven't you done the will and trust kit? What good did that do you? So it concerns me and yeah, I'm yelling at you right now, that I'm just going to tell you what to do and then you're going to sit on that advice. First of all, remember, the law has changed. You don't have to take required minimum distributions now, until April 1 after the year you turned 72. So you're fine, you can let the money just sit there. I can't tell you what to invest in because I don't know how much money you need. I don't know any of that. Now, this question was chosen not so much that I could yell at you, but it was chosen because this is how all of you get yourself in trouble. You just ask a financial advisor, well, I have this money. What do you think I should do? And then you leave yourself open for a financial advisor to say, do this, do that, do that, do this. Anything that that advisor may tell you so that what? So that they could possibly make money off of you. So again, I need more detail from you. But that is why I wrote The Ultimate Retirement Guide for 50+: Winning Strategies to Make Your Money Last a Lifetime. And this is not a pitch for my book, everybody. If you want the book, all you have to do is go to www.SuzeOmanAudio.com and download it or stream it for free. It's there for you, 12 hours and 30 minutes of me ranting at you, that's all you have to do. So, you don't have to buy the book, although if you wanted to buy the book, the publisher will sell it to you directly at www.SuzeOman.com/WomenAndMoney, and that's $10 and they ship it to. But, hey, I'm telling you, why not try it on for size first and go to www.SuzeOrmanAudio.com and let it stream for free, 12 hours and 30 minutes. So really, really, my dear Lagrimes, just read the book and I promise you, you will get the information that you need, exactly what to invest in and why. You know, and I just want to say, since she mentioned the will and trust program, I wasn't going to do that in this podcast, but we have started an Ambassadors Program, the Suze A's I call them. And actually, tonight is going to be at 7 p.m. our first Zoom meeting with all of you that signed up to be an ambassador, simply to make sure that you've done the Must Have documents, that you then have completed them, and then you are going to get to refer people to purchase the Must Have documents. And when you make a referral, a qualified referral, and a qualified referral is simply somebody who purchases it, and then they keep it for at least 30 days, they cannot return it after that. Then you will be paid $10. But actually, tonight, and I'm going to give you a little secret. You're going to find out how you could make $15 for every single referral that you make if you meet just four referrals a week. I got news for you, you guys could make a lot of money with this. A few thousand extra dollars a year. So tonight is our first ambassadors' meeting where I will be having a Zoom to talk to all of you about what I want you to know, and all the tools we're going to provide for you to help you make honest referrals. But to make an honest referral, you have to understand why these documents are the most important documents any of you can have. You want to check out the documents yourself, you can just look on the app and you will find them there. All right, one more question here, let's see which one. I just twirl these, and whichever one comes up is the one I answer. And the last question is from Maria. Hi, Suze. I just started listening to your show a couple of months ago. (Welcome, Maria!) I have found it very eye-opening. I have a question regarding pension plans. My older brother works for an airline and he's 51 years old. He is currently being offered an early retirement package that includes a payout for his pension. He is debating whether he should take the pension or take the monthly payments. He's afraid if the company files for bankruptcy, he will lose his pension. How can we know if pensions are protected from bankruptcy? Thank you for your time. There is the Pension Benefit Guaranty Association that really protects pensions so it will really depend, Maria, how large his pension is, believe it or not. Because if a company goes bankrupt, they will usually protect up to X amount of money. If he's getting $10k a month, I doubt highly that he would be protected, believe it or not, if the company claimed bankruptcy. Sometimes, depending on the company, I've seen them guarantee a few thousand dollars, $4k, but not really large amounts. But he says that he is afraid and remember, fear is the main internal obstacle to wealth. He also is only 51 years of age and if he doesn't need the money from his pension right now, he probably would be far better off rather than taking it, his pension, that to take that money, do an IRA rollover with it and dollar cost average and invest it over the next 19 years until he turns 70. So again, without knowing the exact numbers in everything I have to tell you, I would take a lump sum. All right? He should take the payout most likely at his age and do an IRA rollover with it and dollar cost average back into the markets. All right, that went fast, didn't it? I'm in a little bit of a rush today because last week an article came out on me in The New York Times, saying America's favorite financial advisor is back. And it was a large article, and ever since then, my phone has been ringing off the hook with everybody all of a sudden wanting to talk to me again because now they've just found out that I came out of retirement. And everybody thought that I was just on this little island and I wasn't doing anything, but I'm doing a lot. I am doing this Women and Money podcast, which is really the love of my life, and I just want to thank all of you because it has grown tremendously. We now are over five million downloads since this podcast went under my individual company. So, that is a tremendous amount of downloads for such a short period of time. So again, thank you very much for listening. I hope that you are enjoying this podcast. Keep asking questions. Sorry, I'm in a little rush today to go off into an interview, but I wanted to get this out to first thing in the morning. And then maybe I could go fishing, but I think I did a pretty good job today. But I hope you're getting stronger, smarter, and more secure with every podcast you listen to. Talk to you on Sunday. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information.

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