Podcast Episode - Ask Suze Anything

401k, Life Insurance, Retirement, Roth IRA, Saving, Trust, Will

September 24, 2020

Listen to Podcast Episode:

On this podcast of Ask Suze Anything, Suze answers questions from Women & Money listeners Sandra, Melinda, Millagros, Amy, Angeline, Shelly, and Sheri. Today’s questions are read by a special guest!

Podcast Transcript:

Suze Orman’s Women and Money podcast is proudly sponsored by credit unions; a safe home for your money, rain or shine. September 24, 2020. Suze O. here and welcome to the Women and Money podcast and what else, everybody? What else? As well as the men smart enough to listen. This is Ask Suze Anything, and that's exactly what we're going to do today. This is where you write in and you write in by going to the Women and Money app, which you can download on Apple Apps or Google Play. Send in your question and, if chosen, I will answer it on the podcast. All right, before I begin, however, I want to answer a question that was not sent in that way but was on the Community app where people were talking about what is Suze's deal when it comes to emergency funds versus credit cards? Years ago, she used to say pay off the credit cards before you have an emergency fund. Now, she says to do the emergency fund before the credit cards. Now I'm so confused, I hear all different kinds of information. Suze, can you just tell me what it is? And so I will. And here is the scoop. True, true. In normal times, I would absolutely say to you first pay off your credit cards and after your credit cards are paid off, then start an emergency fund. And if you get in trouble during that period of time, then you still have an available credit limit on your credit cards that you could use to charge for gasoline or food or something like that. Absolutely, that's what I've told you in the past during normal times. But, do you really think that we're in normal times right now? Does anything out there really feel that normal to you? Most of us are walking around with masks on our faces, most of us still are afraid to do anything with anybody. We're watching football games and basketball games with fake audiences, we're seeing the Emmy Awards and the different types of talk shows with fake audiences. Well, fake meaning Zoom audiences. Nothing about right now is normal, especially when we just passed over 200k people that died because of the virus. I've said to you before, the economy is not the stock market, the stock market is not the economy. And even though the stock market is going up and down and all over the place, even though many of you are starting to still feel really great, as if COVID is over and you're just free to go and do whatever you want. The truth of the matter is, the economy is not doing well, and it may not do well for a long period of time. Your personal economy may not be doing very well because possibly you haven't gotten your job back. You're still on unemployment, you still don't know what you're going to do, how you're going to pay for things, and you're totally confused. It's in those situations, everybody, that, yes, first save an emergency fund and forget about the credit cards for now. And why is that? That is because if the economy gets into trouble even worse than it is now, if people really aren't able to pay their credit cards and everything starts to go downhill, don't think that the credit cards are not going to close down your credit cards, reduce your credit limits, or whatever it may be that they need to do to keep their business afloat. So, if you have used all of your money to pay down your credit cards now, you have an available credit limit. And you think, oh, it's great, if I get in trouble, I'll just use my credit cards. Then all of a sudden, you get letters saying, sorry, your credit card has been closed down. Sorry, we've reduced your credit limit to $100. And why do I think that could happen? Because that's exactly what happened in 2007, 2008. That's what was happening, everybody. So, it happened once and it can happen again. So now, now while we're still in normal times, this is the time that you have an eight-month emergency fund. This is the time that you really prepare so if everything does go wrong that you'll be OK when we return to normal. Normal meaning the economy is solid again, jobs have come back, your jobs have come back, everything is flowing again and there will be a day when that happens. Then what you do is simple. Then credit cards go, and then you save for an eight-month emergency fund. However, I'm just going to say this one thing. Just because everybody else is doing well and the economy may be doing well again doesn't mean that your own personal economy is doing well. So, if you ever find yourself in a situation where you don't have a job, you don't know what to do, you don't know where your next dollar is going to be coming from, even though everything around you is doing great, then you go into Suze mode -- minimum payment due on the credit cards, save for an emergency fund with whatever money you do have. That I hope has straightened out that question. Now, on today's Ask Suze Anything, I have a surprise for you. It's not going to be just me reading your questions and me answering them. We have the one and only KT here who's chosen the questions. She said, Suze, let me just choose the questions that I want to ask you and you just answer them. And all day long, honest to God, I'll tell you the truth, I've been saying OK, I'm just going to go do this, I'm just going to do it like I normally do and she said, but I really want to do it with you, Suze. Weren't you saying that? I want to help you. And I'll tell you, it's not easy to do this, it isn't easy because these questions are, they throw you for a loop. They're not, they're not the happiest, but it's real. It's real. All right, so let's get into it. So here we go, we're going to give that a try today. All right, KT, so, go for it. OK, the first question is from Sandra. I am 62 and waiting for a judgment on my divorce from an abusive man of 33 years. I left a year and a half ago. I stayed in an abusive relationship because I was told I had nothing and would get nothing if I left. Not true. I live in Arizona, which is a no-fault divorce state, so, upon the judgment from the courts in Arizona, I will have to sell my house that I've lived in for 26 years. It's not in the best condition, but no mortgage, it's free and clear. I'm hoping to get half of the $230k value out of it. The courts will require a QDRO lawyer. Suze, tell them what that is. Are you saying tell them what that is because you don't know what that is? I don't know what a QDRO lawyer is. Somehow I knew that. So, when you go through a divorce and there is a retirement account at stake here, a qualified domestic relations order is where a lawyer puts a judgment or gets a judge to put a judgment on your retirement account so that half of it, or some percentage of it, goes to the spouse. So, that's what that is. All right so go on? So, I will require a QDRO lawyer so I can get half of his pension and half of an annuity. I'll need to look for a place to live for me and my adult son but houses in Arizona are not cheap. I believe that after it's all said and done, I should receive about $1200 to $1500 a month. I need to find health insurance. My question to you, Suze, is should I find a fixer-upper or spend all my money on a new home? What is the best thing to do with my money? Ah, Sandra, listen to me. You shouldn't do either of those things, really, because now you're in a position, really, where you're going to have some money, things are expensive, I get that in Arizona, but you have to decide what does Sandra's life look like now? And have I not always said to all of you, you are to do nothing other than keeping your money safe and sound for at least six months to one year after suffering the loss of a loved one? And a loved one can even be a loved one that you used to love and now you hate. It's still an emotion, everyone. So it's really important, Sandra, that you really rent, just rent for a while and see how you feel, see if you even want to stay in Arizona. And really, I have to ask you at 62, why are you still living with your adult son? Is he helping you? Is he going to contribute or are you just taking care of him as well? And you have got to be careful not to let your son possibly imitate some of the actions that your husband was doing with you. Because I've seen it before where an adult child takes on the behavior of the abusive father or mother, for that matter. So, can you just take it easy for right now? Get whatever money you can, see how you feel, rent for a while, and then you'll be able to make the decision. OK, girlfriend, next one. This is from Melinda. I'm 44 years old, single with two teenage kids. I have only contributed to a traditional 401k through my employment. I'd like to start contributing to a Roth IRA. Do I start a new account or transfer my current 401k? I'm not sure what to do, Suze. So, first of all, Melinda, what you should also be doing is this. Can you please check with your current employer where you have your traditional 401k and I'm assuming it's a traditional 401k, which is a pre-tax 401k because you just call it a 401k. Can you see if they offer you a Roth 401k at your place of employment? If so, you might want to just do a Roth 401k there. However, it is very important that the Roth 401k or the 401k that you have where you work, are they matching your contribution? Which means you put in a dollar, they give you 50 cents or some amount of money. If they do that, then yes, you always contribute up to the point of the match, and after the point of the match you then, especially if you qualify, you do a Roth IRA. If they do not match, then I have to tell you, I would be funding a Roth IRA before I was funding a 401k or a Roth 401k at an employer that does not match. Now, there are many reasons that I would be doing this. You might want to listen to a past podcast, you can search that for Roth IRAs on the app, the Women and Money app. But that's what I would be doing. If you want to stay with the 401k that you're currently at, you would never, ever take money out of your current 401k. In fact, you can't when you're working for an employer, you would just leave that there and in addition to your 401k or Roth 401k, you would open up a Roth IRA. You can have both, everybody. I personally would open up a Roth IRA at Fidelity, Schwab, TD Ameritrade. I'm now starting to favor, believe it or not, Fidelity more than TD Ameritrade, because at Fidelity you can buy slices of stock of any stock that you want. TD Ameritrade, they don't allow you to do that. With Schwab, you have to have, you know, just stocks that are on the Standard and Poor's 500 Index. I don't like that either, I want to be able to buy any stock I want to buy, and if all I have is a little amount of money, $5, $10, I want to be able to buy any stock, Amazon, Tesla, whatever it may be. So, that's what I would be doing. So right now I'm liking Fidelity more than any discount brokerage firm. Next question. OK, Suze, next question is from Milagros. My first question is about a 401k. My husband works for a company and has been there for 15 years. He's part of their profit-sharing program and I've been asking him to invest in something more substantial in terms of a retirement account. Now his company does not match anything in the 401k, however, if an employee opened a 401k with them, they did put money in the account. I worked there a few years back and joined the 401k. When I left and went to take it out, there wasn't much, but it was almost $2k. I was excited, but the company said no, all of it was not mine and that the company had put some of their money in it and now needed to take their portion out. I have never heard of this and was wondering can they do this? Is this legal? So I don't know if my husband should only open his Roth IRA and forget about the company 401k? You should have seen her face, everybody, as she was reading that. It was like, no way, they can't do that. Oh, yes, they can. That is called vesting. Very, very different than a match. When a company, a 401k you have, a 401k and they match your contribution, you put in a dollar, they give you 50 cents. That's your money whether you work there for three days or you know, 30 years, doesn't matter. However, when they don't match and they simply give you money, they're giving you money to hold you there so that you stay there and you don't leave. And that's called vesting, which means that money is not yours until you've vested. Most accounts don't vest for five years, three years, and maybe they vest with 10% the first year, 30% the second year so that it's an incentive for you to stay there. But normally, after about five years or seven years, whatever they've given you is years. So really, the answer to this question is, how long does your husband think he's going to stay working there and is it possible that he could do both? If you think he's going to be working there for a long time, then I would absolutely have him contribute to the 401k and get the money they're going to give him. However, at the same time, as I said a second ago, I would absolutely also do a Roth IRA especially if he qualifies for it income-wise and then you could have your cake and eat it, too. This is from Amy. I'm beginning to experience divorce. I'm 38 with two kids, age 12 and seven. My house and retirement plan were both created and funded solely by me through the entirety of the 12-year marriage. We have kept all finances separate, he never paid a dime into the house. In Indiana, I'm learning that he is entitled to 53% or more because I make more money. The recommendation is to give him my $100k retirement if I get to keep my $250k house. I'm smart enough to know about compounding interest, and I've saved, Suze, from the moment I began working. I can't sleep anymore. To lose or share both assets is about to kill me. Help! Again, you should see her face, everybody. So, Amy here is the best help that I could give you. It's this. You're going to just have to start over again. And you say to me you're 38 years of age. If you start now, you'll be fine. What will make it so that you're not fine is your attitude. If you're angry that you have to do this, remember, anger is the main internal obstacle to wealth. If you're afraid to do this, fear, one of the main internal obstacles to wealth. And if you're ashamed that you have to do this oh, my God, you had so much, and now you have nothing. You're ashamed, because why didn't you figure this out way long ago or whatever it may be? Those emotions are going to keep you from being more and having more. Lesson learned, Amy, next time because you're still young enough. Remember, I didn't meet KT until I was 50. Alright, lesson learned, what did you learn from this? Oh, do I hear you saying it? Oh, before you get involved, again, if you get serious about that person and the day that you even think about marrying, again, because M stands for "money." It stands for money, not just marriage. So, the day that you're even contemplating that, that's the day that you sit down and you talk about, you know, I'm interested in this, but I'm going to ask you for a prenup. You better find out everything that you need to know about prenuptial agreements because if that agreement had been drawn up correctly, if certain things had been in there, you might not be in the situation that you are in right now. It's extremely important when doing a prenup that you and your spouse-to-be have separate lawyers that you do it at least six months, preferably one year or longer before you go to the chapel and say, I do. You absolutely, when you get a prenup, you want to make changes to it, so his or her lawyer will present it to you and vice versa. Make a change in it so you can prove that you read it. That's the lesson learned here. All right, you're starting over. I don't know if you've read my books, remember, I had to start over at what age? About 43 I had to totally start over again, I didn't write my first book until I was 45. Remember that? And look at me now. So, do not let this get you down. You are a warrior, you are not going to turn your back on the battlefield, you're going to have faith that everything happens for the best and you are going to enjoy your life. Because don't tell me that this is a surprise. Don't tell me that you've been loving everything for the past five years with this person. Of course, you haven't. So, now you have your freedom. What is the cost of your freedom? What is the cost of your happiness? What is the cost of your future? That's priceless. This was a very small price for you to pay for all of that. So, this is from Angeline and it's a question regarding her trust account. Dear Miss Orman, since I keep my trust binder at home as well as with my trust attorney, I was wondering if it would be unwise for me to blacken out the distribution amounts on the copy I keep it home. I'm pondering this since my niece is my executor. She knows where the binder is kept, and I do not want her to have access to the distribution amounts before I die. Hoping to hear from you, thank you so much. Angeline, listen to me. The only documents that matter, especially upon death, are the original documents. The ones that have the original notarization stamp, the original witnesses. No copies matter. So the one that you have at home in the binder, if it's a copy, it doesn't even matter. What matters is is that she knows who has the original. And you better know that if something happened to your lawyer, if your lawyer happens to have the original, how do you get it from your lawyer's files? So, I personally wouldn't be keeping the original with the lawyer. I would be keeping the original with who? Myself or in a safety deposit box where you would make whoever is your executor be able to go in there to get it. So, I don't know if that answered the question, but blacking out the amounts concerns me because does that mean if she were to read it beforehand, she would be mad because you didn't leave her anything and she would be angry at you? And if that's true and she is your executor, I'm not sure I personally would want an executor who is mad at me. So, you better really think about all of this twice. I'm serious. Next one KT. I have a couple of questions here about your favorite topic, insurance. So, this is a question from Shelly. Hi, Suze. I hear you say to cash in universal life insurance and buy term. So here's my question. We recently found out that my 91-year-old grandmother has a $100k+ universal life policy that's paid up, so she won't technically be paying for it anymore. Redemption value is about $18k. Should she still cash this in or let it ride? At this point, she loves reading your books, therefore, I think she is thinking of cashing it in, but I feel at this point, she should leave it alone. What are your thoughts? Thanks for your advice. Who's this from? Shelly. Shelly. Hi, Shelly. Oh, I love that your Granny... Grandma, she's 91, Suze. I love that. Listen, here's what you need to find out. Many insurance policies at a particular age, at 95, or at the age of 100, turn into what's called an endowment policy which means the insurance is over and they just pay you out, whatever money is in there. You need to call this particular insurance company and find out if that is true. If it's true, let's just say the endowment is at the age of 95, that's four years away from where your granny is right now. I would personally be letting it ride for another four years. And what do you have to lose? Do you see what I mean? And if they are going to pay her out the endowment at $18k or whatever in four years or five years from now, whatever it may be, all right, it's the same. But if something were to happen to her between now and then, just make sure that you get that $100k death benefit. So at this point, what I would be doing is calling the insurance company and find out exactly how does her policy work, but remember most policies at a particular age they endow, so you need to find out more about that. You know, KT when I usually tell people to do that, and if you think about it, I told you to cash out a universal life insurance policy. Remember that when we first met? Yeah, when you met me, every year on my birthday I paid, what did I pay in, Suze? $15k. $15k, boy, I was taken for a ride. And over 10 years, everybody, she had put in $150k. I almost died when she told me to call in to cancel it. Yeah, everybody, because she would have gone on spending $15k a year, really not making any money off of her money. And this was way back now in the year 2001. So what happened was KT called, she surrendered the policy, she got a check for $50k and we invested that $50k. How much is that $50k worth now? I'm not going to tell everybody. I made a ton of money. All right, do you understand? Yeah, really, that was the worst investment she had ever made in her life, but that's beside the point. OK, KT, give me another one. OK, here's another term insurance question. So this is from Sheri. Hello, Suze. I've just reached the 20-year mark with my term life insurance policy. I've been paying $28 a month for the last 20 years. I've just received a letter from my insurance company that my future premium payments will be $159.65 a month beginning in October. I suspected that the premium would increase, but this amount totally caught me off guard. I'm 57 years old and I have a college-age daughter that still lives at home with me. I still owe quite a bit on my mortgage as well. What are my best options to have affordable life insurance coverage now that I'm older? You know what's interesting on this, Sheri, is that it concerns me that you think that $158 or $159, whatever it is, is not affordable for life insurance. You're 57. You obviously had probably a 20 or 30-year level term policy. Maybe you took it out when you were 27 years of age, and 27 years of age to 57, no way are you going to die, actuarially speaking. So, term insurance always gets more expensive the older you get. The reason that you want a specific period of time, like a 20-year level term or 30-year level term is that your premium is level for that entire period of time. When you have annual renewable term insurance every single year, the premium goes up. So the insurance company figures out what are your odds that you're going to die within the period of that term? And if they figure out she's healthy, doesn't smoke, no illness in her family, chances are she's not going to die, your premium is really cheap for that period of time. You're now 57 however, and let's say that you want another 20-year level term that brings you to 77. Now your chances of death have absolutely increased. So, that's why the premium goes up so much. It's far cheaper still, at 57, to have a 10-year level term policy or a five-year level term policy or whatever it is that you need instead of a whole life, or universal life, or any other type of life insurance out there. So, if I were you, I would figure out why do I have insurance? How much insurance do I need and how long do I need that insurance? Once you start going past the age of 65 with any type of insurance, your premium is going to be far more expensive. So you're 57, see what a five-year level term policy is, and then really think about it. Can you really not afford $159 a month? You're shocked that it went up that much? You shouldn't be because that is how insurance works. You know, KT, how many times have I said that insurance has never meant to be a permanent need? Well, you say it all the time, but I think she's only doing this because she still has a college-age daughter that still lives with her. Yes, but then how many more years before her daughter is independent? I've always also said you only really need term insurance to protect your kids until they're 23 or 25 years of age, and then they're OK, they're out on their own. They're going to be making money, they have to figure it out and make it work for themselves. And as far as your home goes, listen, if you still have a mortgage on that home and you happen to die, not your problem, Sheri, because you're dead. And at least your daughter gets the house and if anything, she can sell it or now she's working and she can figure out how to pay the mortgage on it if she's going to keep it. But if this amount of money is a big deal for you, then really, you should think twice about it because there's something better that you could be doing very shortly here other than spending $1800 a year or so on life insurance. Well, KT, you got through it, how'd that feel? Pretty good, I like doing this, I think I can help you a lot. Help me with what? Get through these questions. I don't know everybody, I think I've been doing pretty well now for almost the 2.5 years. It's nice to have variety, they like to hear my voice. They just listen to you for 30 minutes, Suze, Suze, Suze. A little KT goes a long way. You're telling me. All right, if you liked KT reading the questions to me, let me know. Go on the app and take the poll. We're going to have a poll there, did you like KT, or do you like me by myself? And we're going to find out for sure right now. All right, everybody, that brings us to the end of another Ask Suze Anything. Come on, send in your questions because your questions, as you can tell, you need the answers that I have to give you. See you on Sunday. Hi, I'm Sarah, and I'm Robert, and we're back here to tell you that Alloya's member credit unions are so proud to have brought you this episode. You know, Robert, credit unions live by a people helping people philosophy. Absolutely, Sarah. And that means when you bank with a credit union, you can trust that they have your best interest at heart. The fact is, regardless of circumstance, a credit union will have your back and keep your money safe, that's the credit union promise. Go to www.MyCreditUnion.gov to find a credit union that fits your needs. That's MyCreditUnion.gov. 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.

To Become A Must Have Documents Suze Ambassador, CLICK HERE.

JUST LAUNCHED! Join Suze’s Women & Money Community for FREE and ASK SUZE your questions which may just end up on her podcast!

To ask Suze a question, download by following one of these links:



To find the right Credit Union for you, CLICK HERE

Suze Orman Blog and Podcast Episodes

Suze Recommends

Suze Orman Blog and Podcast Episodes


Even Big Retirement Savers Are at Risk

Read Now

Suze Orman Blog and Podcast Episodes

Home Ownership

Podcast Episode - Ask KT & Suze Anything: How Do I Choose a Financial Planner?

Read Now

Suze Orman Blog and Podcast Episodes


Your Ultimate Savings Opportunity Starts Now

Read Now