Bankruptcy, Credit Score, Life Insurance, Roth IRA, Social Security
October 22, 2020
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In this podcast of Ask Suze Anything, Suze answers questions from Women & Money listeners (as read by KT) Susan, Jenna, Megan & Brian, Aisha, Carol, Regina, Mihala, Marisha, Anonymous, and Lisa.
Suze Orman’s Women and Money podcast is proudly sponsored by credit unions; a safe home for your money, rain or shine. Just come on, try it. Just try it. Alright? Alright, I'll give it a go. How do you do it? Hi, everybody. This is KT, and we're going to ask Suze's some questions. We're wasting people's time right now. Look, I got news for you, I am recording. Zip it up. All right, everybody, let's try this. It is October 22, 2020, and welcome to the Ask Suze Anything podcast with KT, who laughs a lot. KT asks Suze the questions. I select them too, everybody. So the ones that say hi KT and Suze are the ones that are on the top of the list. All right, but anyway, here's what I want to tell you. If you do want to possibly have your question asked and answered on the air, all you have to do is go to the Women and Money app, download it on Apple Apps or Google Play, search for Suze Orman, S-U-Z-E, and there you go, just that simple. And again, if chosen, KT, if KT chooses it, it will be answered on this podcast. But I do just want to say something. I really am trying to answer as many of your emails, personally, as possible. But I have to tell you the truth when I open one up and I see that it's like three pages long, I kind of just close it and go on to one that I can really answer. So, if you want to have a good chance, not a guaranteed chance, but a good chance of me answering your question, can you just keep it really short? Don't you agree, KT? Yeah, KISS theory, keep it simple. I just have to tell everyone, she really spends all night sitting there answering these emails. Sometimes I'm like Suze, turn out the light, turn off your phone, the lights bothering me. And she's sitting there at like 1:00, 2:00 in the morning answering emails. She does this herself, and she's very, very dedicated. Truthfully. Yeah, so, one other thing, you know, this is October 22. If you happen to be listening to this early in the morning, at 10 a.m. today, I will be on Hoda and Jenna so tune in and see. I always love being on with them. All right, Miss Travis, should we start this? Let's go for it, everybody. Let's do it, OK, the first question is a short one from Susan. Suze, where can someone rent a place to live if they filed for bankruptcy, and how can a person build their credit after filing bankruptcy? You know, Susan, it's not very easy, because today a lot of landlords actually check your credit score or your FICO score and/or your credit report and if they see that you have filed bankruptcy, they get afraid to rent to you. However, what I've always suggested in the past, and this isn't easy, I understand what I'm about to say isn't easy to do. But, if you could somehow just gather six months or one year of rent so that you could go to a landlord and say, I'll pay you six months of rent upfront, can you just rent to me? And you say to them, I fell on hard times, the pandemic or whatever it is the reason that you had to claim bankruptcy, but I am responsible and I just want to tell you that, and I'm honest, and I'm not trying to hide it. So, could you please help me? It's just something you might want to try in terms of increasing your credit score. That just comes in time. All right Suze, the next question is from Jenna and I picked this one right away because it says hi, Suze and KT. I've been listening to you since I was 18 and Jenna now is 35, everyone. She said, I've built great financial habits, I feel strong, secure, and empowered. I'd love for you to dedicate a podcast to your habits and practices. I'd be interested in yours too, KT. And then she said, what daily or frequent habits and practices helped you become you in your life profession and your money? Thanks for all you do. Now, Suze, can I answer this one? Oh like I have a choice? Are you going to answer for you or are you going to answer for me? No, I'm going to tell everyone and Jenna, what your daily habits and practices are. You could do that, but only if I could tell them what your daily habits are. I don't have any. All right, so, Suze, every morning before she does anything, and I've been watching this now for 20 years, and she started this long before she even met me. Suze listens to her ritual of mantras, it's her like, little prayers, and they're very important for her and they're very beautiful and they take maybe 20 minutes, 30 minutes. 32 minutes to be exact. Not that long, 32 minutes, alright, so that's not that long. But, this is the way she starts her morning, regardless of whether we're traveling, on our way to an engagement, sitting around on a day off, whatever it is, that's what she does every morning and has been doing for the 20 plus years that I've been with her. KT, I just have to ask you a question now that you're saying that I'm thinking about it. Do you even know what those are? They're all in Sanskrit, by the way, everybody. As many of you may know, I am a student of Eastern religion and Sanskrit. Do you even know what those prayers say? Yeah. What? Well, you told me a number of times and I listened to them too, everybody. I like them. Um, the Brahmin priest, the priest who actually recites these prayers. It's not like these are a catchy tune. Wait, everybody, do you understand that she is absolutely... This is not a political debate where you are going to not answer the question, yes or no. Do you know what those prayers say? Come on, KT, we only have 30 minutes for this podcast. Alright, you tell everybody. I don't remember. Ok, that's a no, everybody. You see how it is. See, whatever. So it's basically what those prayers are asking for is the protection of myself as well as the entire world. And that really is the main goal of those mantras, and they also are blessing this world. So, I try to bless the world and the earth that I stand upon before I stand on it. So, before you get out of bed, I bless the Earth that really carries all of us to where we all need to go. And that really, in Sanskrit, is the meaning of those three mantras. Just very quickly, KT's habits are every single morning are she wakes up at about 5 a.m. and what do you say to me? Hi, Suze. What else do you say? Come on, sing it. It's a beautiful morning. And then I have to say, ah-huh. And if I don't say that right, for whatever reason, she keeps singing it until I say it. Now, that's an interesting habit of hers because she starts with beauty. So, I start by blessing the world and being grateful for everything that we have, and protecting everybody and everything in this world. And she starts with really invibing that this world is beautiful. Alright, girlfriend next one. All right, this is a trick question. This is an interesting podcast today, go on. I wanted to change it up a little, everybody, and if you like this, let us know. So this is hi, Suze. This is from Megan and Brian, another man smart enough to listen, Suze. So, I'm calling this "Can I afford it?" It's not what Megan's calling it, but that's what this question is about. She's been a listener for over 10 years, loves your podcast, it said, my husband and I are in our early 30s, both of us work with reliable jobs and steady income. We both work remotely. We're looking to expand our passive income and rental property portfolio and purchase a condo or townhouse in Naples, Florida. So the question is, do you think we can afford it? We have done a lot of research on the area. We could rent it out the next year for about three times the mortgage amount in the winter months, thus paying for itself for 12 months if we rent it out three to four months in the high season. Ready Suze? We have $8300 in monthly income, $6500 in expenses, including their mortgage, $50k in savings, $87k in stocks, and $90k in retirement. I'm wanting to sell some of the stocks to cover the mortgage for January through December 2021 so it won't come out of our monthly income. What do you think of that idea? You are so denied, Megan, as well as Brian, and the reason is you tell me that you have $6500 a month in expenses and you only have $50k in savings. Don't I want you to have a least an eight-month emergency fund? Then, if you're going to take some of this money and you're going to use it for a 20% down payment on a property and you need an emergency fund, where is that going to come from? And you're going to take out money from your stock? No, you're not going to do this, and the main reason you're not going to do this is whenever you have a rental property, that rental property alone needs to have a working capital fund in case something goes wrong. You're going to do it in Naples, Florida. Hurricane. All of a sudden, a hurricane comes and you can't rent it out. No, I could go on and I but no, you are so denied. Next. Alright, everyone. You know when I do a "Can I afford it?" look how riled up she gets. I'm going to throw some more of those in, she gets all excited. Keep going. The next one is from Aisha. Hi, Suze. My husband and I are 45 and 43, we don't have any children, and we are both in good health. Should we get term life insurance? We have also been looking into long term insurance for the future. When would be the best time to get LTI? Aisha, so listen to me. The question is, do you need insurance? And the way that you know you need insurance is if your husband were to die, would you be financially OK? If you were to die, would he be financially OK, assuming, this is the clincher here, listen to me closely? Let's say both of you were in a car accident together and one of you dies and the other is seriously injured and you could no longer work anymore, but you're still alive so you don't have any income coming in whatsoever. Would you be OK, financially speaking? If not, then you absolutely need term insurance, and at the age of 45 or 43, you should look into getting a 20-year level term policy. In terms of long term care insurance, I still think the perfect age to get long term care insurance, if there are no health problems within your family or yourself that you see coming up, would be 55, right in there. But what's important is for you to know that you can afford long term care insurance at 55, 57, 60, 75, 80 since the average age of entry into a nursing home is 85 years of age right around there. So, it makes absolutely no sense whatsoever to get a long term care insurance policy and then, at the age of 75, have to drop it. If you're interested in long term care, the nation's expert, in my opinion, is a woman by the name of Phyllis Shelton, and I talk about her in my Ultimate Retirement Guide for 50+: Winning Strategies To Make Your Money Last a Lifetime, and you can get her at Phyllis@GotLTCI.com. OK, the next question is from Carol. Hello, Suze and KT. When my husband retired many years ago, we as a married couple, opted for the monthly annuity with 100% survivor benefit. If we were to divorce, would I still be entitled to that after he dies, or does that change because of a divorce? Or, is this something that is negotiated in divorce proceedings? Sounds like Carol is about to get a divorce. You got that right. So, here's the thing, KT. Ready? Time for a KT test. Now, last week we talked about 2/3. All right, so what does that mean that she gets when she says that she gets 100% joint and survivor annuity, what does that mean for her? If her husband dies, she still gets 100%, she gets his share. I remember. That's my girl, that's right. Alright, so that's good. Carol, yes, you still get it because you're already taking it. You know, by law, let's say you were going to get divorced before you started the annuity and before he chose the option. By law, the least he can take is 50% joint and survivor benefit. Which would mean, if he gets $3k a month on his death, you would get $1500 a month. That would be the least he could ever take. However, since he's already taking it and you're already down as 100% joint and survivor benefit, and you're going to get divorced, yeah, guess what? You will still get it. However, I would absolutely check with a divorce lawyer and make sure that that's exactly how it would work with the company that he and you are getting your pension from. All right, go on. Suze, this next question is from Regina. Dear Suze, I'm 47 years old and recently realized I contributed $1k more to my Roth IRA than I am allowed to by law and I'm freaking out. I've read up on how to fix it, but nothing makes sense. Can you give me some advice on what to do? Then, wait, Regina said, I appreciate you and KT so much. So, Regina, if you happen to over-contribute to a Roth IRA, for instance, because the maximum, if you are under 50, is $6k a year. Let's just say you contributed more than that to a retirement account. If you haven't filed your taxes already, which I have a feeling you have not because we're at the end of the year, all you have to do is withdraw the money. It's just that simple. So just withdraw the $1k, contact the administrator wherever it is that you opened up the account, and ask them for a $1k refund. Just that simple. OK, go on. So, Suze, what's the penalty if you don't take it out? The penalty, if you don't take it out, is that they will charge you 6% interest on that over-contribution every single year for a long as you leave it in there. All right, so unless you think that you can make 10%, 20%, on that $1k and so you pay 6%, who cares? But you should just take it out. So, the next question is from Mihaela. I just don't know where to start, Suze. I'm divorced for a long time, a single mother, and I'll be 41 on October 27 with two kids who are 14 and 19. I'm starting over and looking into life insurance now. I just opened a Charles Schwab account and I want to start one for each kid as well. Please help me, what do I do first? Well so, first of all, it's OK to start over at 41. Now, do any of you know my story? Have you read my story about how, in 1987, I was ripped off by an employee and all these things, and I didn't write my first book until I was 45 years of age? So, don't, please don't, think that 41 is like, oh my God, I'm so old, I'm never going to be able to do anything. You have your whole life ahead of you yet, so please don't get depressed. I love that you are going to have a life insurance policy to protect yourself, but it needs to be a term life insurance policy. Do not buy a whole life universal or variable life policy. At 41, you should be able to purchase for very little money a 20-year level term policy. OK? You might even be able to afford a 30-year level term policy where again, your premium is level for 30 years and it won't be that big of a deal. And then, you continue to invest and invest and save money so that by the time you reach the maturity of that policy, you don't need insurance anymore. OK? Just something for you to think about. I would not be taking money out in insurance on my children because if something happens to one of them, you wouldn't suffer a financial loss. An emotional loss? You betcha, but not necessarily a financial loss. All right, everybody? So that's my advice. It's never too late to start over. No, seriously, at 41, oh my God, don't be freaking out here, you got it, girlfriend. You know, what's interesting is she sounds sad, and it's because she's all alone. And the truth of the matter is, how many thousands of women, in particular, have come to me over the years? Maybe tens of thousands? They got a divorce, they've lost their husband because he died, something's gone wrong. And while you may, especially if it's due to death, you may never get over that hurt, but there really is a life after suffering the loss of a loved one. It just takes time. All right. OK, the next question is from Marisha. Hi, I've just discovered your podcast and I love it. My question is regarding seriously delinquent and derogatory credit. All of my credit is in derogatory status, including my school loan which is in forbearance. I've tried to tackle my credit in recent years by seeking out settlement offers and came to a halt because it is so overwhelming. I could just not see my way out of it. I have over $100k in school loans and about $20k in accumulated medical bills and other debt. Most of this debt is three years old. I want to be responsible and pay the debt, but I can't afford to pay that much as I live paycheck to paycheck. I'm struggling. What can I do, Suze, to increase my credit score? I want to do the right thing and pay off some of the bad credit I owe, but it's just so overwhelming when I look at this as a whole. Please advise. Marisha, you know, you've got to listen to me here, all right? You have to know that you're not a bad person because you have debt. You're simply a person who managed your money poorly or badly, even though that's not a word, it's bad, but that's beside the point. What I want to say to you is this. Once debt, other than student loan debt, has been on your credit report for more than 90 days as being delinquent, even if you paid it off, it does not help your credit score at all. And I understand your desire to want to pay off the debt and to do what's right versus what's easy, but when you owe more than what you make, you are technically bankrupt. And so, you're going to have to just stand up and go, all right, I made a mistake, I don't want to make this mistake anymore, and you just have to face it. And the fact that you have to face is you can't afford to pay this debt. Now, what's important for you to understand is that every state has a statute of limitations. And the statute of limitations on credit card debt and certain kinds of debt is that once the years have passed, where on your credit report it's already been, you know, and it's derogatory, it's already been discharged or whatever the word is on your particular credit report, they legally cannot come after you anymore. So, if in your state the statute of limitations is four years, at the end of four years you're scot-free from those debts. However, if you tell somebody who picks up the phone and calls you and says, you have got to pay this bill now or we're going to sue you, and they scare you and you tell that person that you'll send them money, the clock starts ticking all over again. So, do not send in money, do not tell people you're going to send in money, if any collector calls you, and as soon as you're near the statute of limitations, your phone will start ringing off the hook. And just be honest with them and say you can do anything you want, I do not have the money to pay you, I doubt I will ever have the money to pay you, so I'm not going to pay you. And that's just what you have to do. It's legal, and it's honest because you don't have the money to pay them. It's not as if you have this money and you could pay them, and you just want to find a way out of it, that's not what's going on here, because KT is shaking her head at me, saying I don't like this advice. I can see her right now. But KT, it is a reality in life that people run up bills and they cannot afford to pay them. And they can't afford to do bankruptcy because they can't afford a lawyer for bankruptcy. And it's already been a long time, but I just have to finish saying this to you. In terms of your $100k of student loan debt, that debt is not dischargeable in bankruptcy in most cases, and therefore that is a debt that you need to focus on. Because $100k will turn into $200k will turn into $400k, and you will be in serious trouble. So, forget the other debt and concentrate on your student loan debt. All right, where can she go to do that? Well, the way that she really would do it is she would be on an income-contingent payment program where, according to whatever her salary may be, or her income, that if she needed to pay $1k a month on this student loan under the standard repayment method, because most likely if you have $100k in student loan debt your payment would be $1k a month on the standard repayment method. She would then be out of student loan debt in 10 years, and really, that is the best way to pay off your student loan debt. But when you don't have $1k a month, you can go on an income-contingent program, and maybe she would have to pay $50 a month towards the student loan to get it out of forbearance and off her credit report. But then that additional, let's just say $950 a month plus interest gets added onto the back end of her loan and in 20 years, when it's forgiven, she will owe ordinary income tax on all of that money. However, KT, saying it's too long but this is a good lesson for everybody, KT. However, if at that time she owes more than she makes, she's technically bankrupt, and that will then be forgiven by the I.R.S. Here's another, sadly, divorce question. I'm going through a divorce, and it's pretty bad. I would like to get some advice as to how I should handle the separation of finances. Neither one of us has seen an attorney yet, but this is inevitable. What should I do? I'm so alone since my kids are ticked off that I'm not making this marriage work, forgetting that there are two of us in this relationship. There is a lot behind all of this and it cannot be fixed. Any advice on how to begin the financial separation would be helpful. Thank you, Suze. Oh, it all makes me so sad that you feel so alone. And, I have a feeling what's probably hurting you even more than the divorce, is the children are mad at you for not making this work, right, but obviously don't understand why you can't make it work and they're taking the father's side. So, you maybe just need to sit down and explain to them seriously what happened and why you can't make this work and how hurt you are that they're not interested in your side of the equation. Just something for you to think about. What's really important, especially when you're divorcing and you're a woman, a lot of times you will tend to just say I'm out of here. Whatever he wants to give me, fine, I'll settle for it, I just want out and I want this to be easy. And then years go by and then you're actually upset that you did that. There are laws in your state, and I don't know how long you've been married, but you deserve a certain percentage of everything that is in that marriage, and I am begging you to stand up for your rights and go for it. To not go for more than you deserve, but to not just give in and be easy about it. If you don't think that you can do that without the aid of a lawyer, then you need to start interviewing lawyers now. Now, I'm going to tell you all something that KT is not going to like when I'm about to tell you. But this is something if I were ever going to divorce KT that I have to tell you, I would do. Well, wait, wait. Where are you going? Wait, listen closely, KT, because that's what you should do too. So, if your husband or wife is one that is going to come after you with everything they have and make your life miserable and go for more than what they deserve, and maybe they've hidden something, who knows? Obviously, they're going to go and try to get the best lawyer out there. If I were you, or KT, or me, I would make sure that I found out the best divorce lawyer in your area. Every single one of them. And I would make an appointment, and I would go and interview every single one. I know why. Why? Once you go see a lawyer like if KT went and saw 10 of the best lawyers and then we want to get a divorce, those lawyers could not handle your case if I already made an appointment with them. Even if you don't hire them, just go make the appointment. I know that trick. And saw them, right, bingo. That's a conflict of interest. Why do you know that trick? All right, I won't go into that right now, but that would be a conflict of interest. And that would be a very interesting position because nothing is more aggravating than when he goes to the best lawyers and they say, I'm sorry, I can't take you. The next one, I can't take you, I can't take you. He then realizes oh, my God, I'm dealing with somebody here who's smarter than I've ever given her or him credit for. All right, go on KT, one more. All right, one more question, this is from Lisa. I've been laid off three times in the last seven years. At 61, I'm ready to throw in the towel and take Social Security at 62. I have your retirement book. Care to direct me to the best answers? Well, Lisa, I have to tell you here, you have to look within to see why you are doing without. If you've been laid off seven times in the past few years, the question has to be asked and answered, why? What are you doing to get people to lay you off? Now, I know you're not like in this answer right now, but the truth is you are not a victim to your circumstances. You cannot take a victim role here, you have got to take a victor role and go, what did I do to get them to lay me off? That's the type of attitude you need. And sure, you can throw in the towel and you can collect Social Security here at 62, and you could make one of the biggest financial mistakes you will ever make. It makes absolutely no sense whatsoever taking Social Security at 62, do you understand that? So, it's really, really important that you become a warrior and don't turn your back on the battlefield. Get honest with yourself about why you created this in your life and then go out there and get a job that they not only don't lay you off, but they give you a promotion, they give you a pay raise, and they understand what an incredible resource you are to their organization. All right, Miss Travis, that brings us to the end of the Ask Suze and KT Anything hour. And don't forget to watch Hoda and Jenna today at 10 a.m. today EST on The Today Show. Until Sunday, here's the thing, you end it, KT. Take us out, girlfriend. No, I don't do the opening and I don't do the close. All right, everybody, you stay safe. Hi, I'm Sarah, and I'm Robert, and we're from Suze Orman's Women and Money podcast team 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. 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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.
Credit & Debt, Saving, Investing, Retirement