401k, Financial Independence, Financial Security, Money Management, Podcast, Retirement, Roth, Roth IRA
May 02, 2019
Ask Suze Anything, and you absolutely do. So you know it's difficult because I try to decide should I have themed Ask Suze Anything, should they all be on credit cards? Should they all be on retirement account, should they all be on insurance? And then I get afraid I get afraid that maybe you'll get bored, maybe. No, no, you want a variety. You want some emotional stuff, you want some financial stuff and then I decide, oh who cares, let me just read you the ones that I happened to pick. Just that simple. By the way, if you want your question possibly chosen to be asked and answered on the Women & Money podcast, send in your email to firstname.lastname@example.org. That's Suze, S-U-Z-E. Better be learning how to spell it by now. You can also call in at 1-877-545-7893. That's Suze and leave a question. This one is from Ashley. She says I've been listening to your podcast as I'm sitting at home with my new baby girl. One in particular has brought me to tears. Just one Ashley? Just one has brought you to tears? Oh you say one in particular, I got it. Alright. I listened to your podcast about how anger is an obstacle to wealth and I cried. This was the problem all along. I was angry at myself. Angry that I wasn't making the money I wanted. Here is where I need your help. My greatest fear is that I won't live up to my greatest potential career rise, and in turn won't have plenty of money to be comfortable. So I created a new truth. Like you said to create. And here it is. I have my dream career I'm proud of, and make at least $5,000 a month. I know I meant for big things, but I'm not sure what I want to do yet. I'm currently not making money and that makes me feel powerless. How do I move forward? I love my daughter more than life itself, and I love being with her, and, I also want a career to show her what it is to be a strong independent woman. How do I take steps to get my life on track? Ashley, listen to me. You cannot do this for your daughter. You cannot want to get your career back on track simply to show your daughter what it is to be a strong and independent woman. You have to want to do that for yourself. You cannot create a new truth that says I have a dream career that I'm proud of and I make at least 5,000 a month. You can't say that, and then in the next line in your email to me say, but I'm not sure what I wanna do yet. I'm currently not making money and that makes me feel powerless. Either the truth makes you feel powerful, or your mind after you've spoken these simple words allows you to feel powerless. So listen to me. When you say something, you have to say it, think it, and feel it with every ounce of your soul. You can't just say words and say, I have my dream career that I'm proud of and I make at least $5,000 a month. Because then they're just words. When I told you to conquer your fears, to silence your fears by creating a new truth, I meant a new truth. Every word that you spoke, every word that you thought. Every word that you wrote down was a truth. It wasn't just a meaningless word. It was the truth where you believed it. Where you do have your dream career and you are proud of it. And you make at least $5,000 a month. But that's not what you did. You just wrote a new truth made up of words, and words are never going to change your life. Your thoughts will change your life when you believe in what you're thinking. Your feelings can change your life, if you take actions based on the feelings that you're having, as long as those feelings are true. So you ask me, how do I move forward? You move forward for yourself. You move forward in honesty, and truth and integrity, and desire for you to be more so that you can have more. So your daughter sees you as the example. And how can she see you as an example when you don't even know how to get your life on track? And it's not about you don't know what to do. It's you don't know how to think about who you are. So Ashley, the answer to your question is this. Learn who you are. Learn what you think. Learn and feel what's going on inside of you. And only speak in truths. Alright, let's go on to the next question. I just I just let her have it, didn't I? Anyway, Ashley sorry about that. I got wrapped up in it. Anyway. Hi Suze. I'm proud to be one of the men smart enough to listen to your Women & Money podcast and I love it. Thank you, my dear Joseph. Because that's who this email is from. My question is, do you have a general rule for how much life insurance you need? Actually Joseph, I do. The first question you have to ask yourself is why do you need life insurance if you're single? If you don't have any children. If you don't have anybody that is financially dependent on you, then you do not need insurance. Next question is, what kind of life insurance do you need? Insurance, and you're gonna hear me say this over and over again until you get it. Life insurance was never meant to be a permanent need. It was never meant to be there for your entire life. It was only meant to be there during your younger years until you had a chance to accumulate wealth so that anybody who was financially dependent upon you, if something happened to you, they would be financially okay. So the only type of life insurance that you should be getting is called term life insurance, which is good for a specific period of time. A term. When you have people that come to you, and they say you should buy a whole life, universal, or variable life insurance. Where you can invest, you can also get regular life insurance with it, and they tell you all of these things. If I were you, I would stay as far away from that type of insurance because it is far too expensive. I want you to remember insurance is insurance and investments are investments and you do not in my opinion mix. So don't do it. So term insurance is the type of insurance I want you to get. Where do you get term insurance? There are many different quoting services out there. I personally would never want to buy term insurance from what's known as a captured agent. A captured agent is a person that works for one company. And the only type of insurance that they can sell you is the insurance that their company sells. Period. I would want to know the term insurance that I was buying was the most cost effective out there. So the best way to do it is through, as I mentioned earlier, a quoting service. Term quote, select quote. You go to a quoting service, you simply put in your information, and up will come the five term insurance policies that are the cheapest for you in your particular situation. You should choose the one that is least expensive, because they're all good companies. How much insurance should you purchase? Which really was the only question that you asked me, but I got carried away with this so why the heck not? I personally think you should have 25-30 times the amount of annual income that you need to replace. So for instance, let's just say you need to support, people those that are financially dependent upon you, let's just say you needed $50,000 a year. Alright. Take that $50,000, and times it by 30. That will give you $1.5 million. That is the death benefit that you should get. Why? Because when you die, and your beneficiaries get $1.5 million, if they were to invest it at approximately 3%, which is about what they can get easily today, 2.5 to 3%, let's just say they don't know about stocks, they don't know about anything and that's all they can get, that's going to give them their approximately $50,000 a year of income that they may need. Now. I know there are a lot of people out there and they go, why do they need so much? If all you need to do is replace $50,000, why don't you just get like $200,000 of life insurance and then for four years they'll be okay, and then they can go back to work again or whatever it is. Because you never know the situation that somebody is going to be in. Listen closely. You and your spouse. Your spouse who is dependent upon you, are in a car crash together. You die, your spouse is seriously injured, and maybe can never work again And your spouse needs $50,000 a year to live on. With $1.5 million, your spouse could live on $50,000 a year for quite a number of years without depleting the $1.5 million that's there. You never know the situation. So plan on the money being invested, and that wherever it's invested the income that's generated from that money is what your spouse or your family or those dependent on you should be living on. Did that make sense? I hope so. How long should the term be for? Because you can buy term insurance for one year, for five years, for 10 years, for 15 years, 20 years, 30 years. And when you buy insurance for a specific term, let's say 20 years, the premium what you pay for it is the same for all 20 years. So you want to have term insurance, especially if you have minor children, until your youngest is about 23-25 years of age. Because by then, your kids should be able to take care of themselves. So if you're buying insurance for the kids, or you have a spouse and you have young kids, whatever it may be, that's how you know the term. The length of the policy, how long it should be for. So now Joseph. You have learned what kind of insurance, how much insurance, where to buy the insurance, everything you need to know about term insurance. And now you're even a smarter man that listens to the Women & Money podcast. Next question is from Alexa. And here's what she asked me. She says, how do I get my mom to control her spending? You know it's so funny before I go on with this question. Years ago, I used to get all of these questions from Moms, saying to me Suze, how do I get my kids to control their spending? They won't listen to me Suze, but they'll listen to you. Now I am getting so many questions from the kids that used to watch the Suze Orman show, and they grew up watching the Suze Orman show, and now they're writing into me and asking me about their parents! To go on with this email to keep it brief. My mom spending is out of control. She has numerous credit cards and a line of credit. She does not receive advice well and will not listen to your podcast. If she does, she does not think it applies to her. Alexa’s Mom. If you are listening to this right now, girlfriend, this is all about you. This is you. You better be listening to this because when your daughter is worried enough that she has to write in to the Women & Money podcast to ask me how to help you. We got problems Alexa’s mom. So you better listen. Alexa goes on to say, I worry about her financial future, and also my financial future when it comes to having to take care of her in the future. I've asked myself, what would Suze do? Have a heart to heart with her? It doesn't seem to work. Advice please Suze. Alexa, I don't know why, especially when some women get older. You would think that they would get afraid. That they would realize that reality is setting in, and they have less years left to live than they have lived. I mean I think about that almost all the time. In almost two years I'm going to be 70. And my dad died when he was 71. And my mom died when she was 97. It's not that many years. So I've already lived the majority of my life, so I have less time to live. And it starts to get to you. I will be the first to tell you. It's kind of cool when you turned 40. I remember always wanting to turn 40 because then I thought my clients would take me more seriously because I was older and I was telling them what to do with their money. And then when you're 50 you really think you're cool or at least I did because now people would really listen to me. And then you're 60 and you're like, well 60 isn't so bad. 65, all right now you can start Medicare. Well that's kind of cool because it saves you a lot of money. But then 70, and then 80, and then 90 starts to freak you out. I'll be the first to tell you at least it does me. But it's not natural that when a woman is getting older that she is in such denial and your mother is in total denial, she's not being rational. And what I have learned over all my years of doing this is you cannot rationalize with somebody who is irrational. You know on the Suze Orman show, I always used to say sorry, I just can't fix crazy and you're crazy. And on some level, it is crazy that as you're getting older that you're spending is out of control. Now eventually she will max out her credit cards, she will absolutely run out of her line of credit. And when she finally hits rock bottom financially speaking, that is when she most likely will turn around. Can you change her? I've told you before. We can't change anybody but ourselves. But what you can do is not have a heart to heart with her. Because obviously you have done that before. Because you say it right here in your email and you say it doesn't work. But what you can do is write her a letter, a contract. That you have her sign, and that you keep one and she keeps one, and you sign it as well Alexa. And it goes like this. Mom, I love you more than life itself, and I would do anything for you. But I will not ruin my own financial future simply because you refuse to be an honest, strong and integris woman when it comes to your money. So right here, I want you to sign. So if you get into financial trouble in the future, do not come to me. Either we work on this together now and we change it now, or you do not ever come and ask me for help. You choose Mom which one you want to do. You date it, you sign it, you sit down with her, you have her sign it, and you give it to her. And you ask her to read it. To take it out. And every once in a while just read it and understand that if Mommy wants to turn her own back on her own life, okay. But Alexa is not gonna be the one to save her. Okay now. I'm kind of laughing at myself um because earlier today as I was recording, I recorded another Ask Suze Anything session, I had recorded one and then I decided I needed a break because it was heavy. And I went outside to get some air and I was Facetimed by my niece Alexis. And she was laughing at me because she said Suze Orman needs a break from Suze Orman. She just thought that was so funny, she just thought that was so funny and it kind of is. And and I don't know why I just have to say I don't know where I go to within myself when I answer some of these questions. And maybe it's because for all these years I've seen what can go wrong. I've gotten more emails than you would ever want to read in your life from women in particular when it's too late and there's nothing I can do to help them anymore. It's just too late and I so don't want that to be the case for anyone. I don't want that to be the case for you. I want you to have a life that you enjoy and that you love and that you have the money to pay your bills and do what you need to do. So yeah, that passion that you hear in my voice especially when I start to go off it's because I know the pain, I've seen it, I felt it in you, I felt it in myself in my own parents and I just don't want to feel that pain for you anymore. Next question comes from Brittany. Hi Suze. My father in law passed away and he had a Roth 401k. His wife is the beneficiary and is under 59 a half year old. We are wondering if we cashed out the whole thing, all $138,000, would this be added to her income tax? And the answer to that is no it will not. Why? Because Brittany, it was a Roth 401k. Do you understand? That's why I want you to have a Roth 401K. A Roth IRA. Anything you can do is Roth. Let's all roth and roll everybody! Because when something happens, maybe mom needs the $138,000 in one lump sum, and now she can get it totally tax free. If this was a traditional 401K, and then she wanted the money in one lump sum, it would be totally taxable to her as ordinary income, and that could put her, depending on her other income, that could put her in one of the top tax brackets! So it's perfect now. It's absolutely perfect. So she absolutely can take it out income tax free. Let's do one more. And this one is from Keshan. I'm 47 years old with a full-time job that does the company match of 4% on my 401K, and I recently discovered that they also offer the Roth 401k. Before I go on with this email, I love that all of you are going in and asking your HR people when you work for a corporation, or a nonprofit, whatever it may be, and you're asking, do I have a Roth 401k? do I have a Roth 403B? Do I have a Roth TSP? And you're finding out that you do and you're taking advantage of it. Back to the email. So I maxed out my contributions by splitting them this way 4% to meet the company match, and the other 11% in the Roth 401K. Is that the right thing to do? Keshan, it is not the right thing to do. And let me tell you why. When you work for a company that matches your contribution, again, if you don't know what that means, you put in a dollar and they put in either 50 cents or 25 cents or 75 cents or a dollar or whatever it may be. And they match your contribution up to a specific percentage of your base pay. Sometimes like in Keshan, in your particular situation, up to 4% of your base pay. Some corporations do up to 5%, or 6%. Just depends on the corporation. On your company. Whenever a company matches your contribution, their match automatically goes in to a traditional 401K. Why? Because they get a tax write off! They get a tax write off. But they still match your contribution, even if all of your money goes into the Roth 401K. So you Keshan, do not have to put 4% of your money into a traditional 401K as well, simply because that's what your company matches. You can put all 15%, which is what you are contributing, into your Roth 401k, and the company will put the 4% that they match into a traditional 401K. So don't go wasting money and putting it into a traditional 401K, simply because you think if you don't they will not match Alright, I think that's enough for all of you for today. Remember, you want your questions answered? You can send them in to email@example.com, and as always do me a favor and go to Apple podcast, scroll all the way down when you're on this podcast, and give this podcast a star rating. Thanks for writing in.
Credit & Debt, Saving, Investing, Retirement