Podcast Episode - Ask Suze Anything: No Regret

Divorce, Family, Financial Independence, Financial Planning, Financial Security, IRA, Podcast, Retirement, Roth IRA

April 18, 2019

Ask Suze Anything. That's what today is. It's Thursday, and this is the day where you write in, you ask your questions, I choose a few of them, and then they are answered here on the podcast. Our first question today is from Cali. Hi Suze, I am 42 years old and have been a self-employed nail tech for 20 years. I only make around 27,000 a year. I am single. I have no retirement plan in place, and barely make enough money to pay my bills. I worry about how I'm going to retire. I want to invest in a Roth IRA, but don't know if I'm eligible. What kind of options are there for people like me? So Cali, here's what I want to say to you. Of course you qualify for a Roth IRA. And even if you put $10, $50, $100 in there, whatever it is, something is better than nothing. But here's what I also want to say to you. As well as all of you, that happened to be in a profession where you get cash tips. Now I understand very well that most of you think not all of you, but most of you think that cash tips are free money to you. Money that you do not have to pay taxes on. Money that you simply put in your pocket or do something and that's the money that you spend on this and that and that and it's part of your income. I personally think that is the biggest mistake you can be making. First of all, legally you owe income taxes on those tips, but Cali, you're making $27,000 a year, you are in the lowest possible income tax bracket that there happens to be. So it's not gonna cost you that much money. But if you report your tips, if you keep them in a jar, and you put them wherever it is in a bank account, and then you transfer them to a Roth IRA or whatever it may be, if you pay income taxes on it, which will be minimal, that means when you get older, your Social Security will be greater for you, your monthly income when you are no longer making money. You're not able to make money. Because you say in your email, I worry about how I'm going to retire. If you are simply honest, honest and make the most out of your money if in fact you're doing this and I'm not saying Cali that you aren't paying income taxes on your tips, but chances are you're not, you're just keeping the cash, you're probably like, most people that of course would do that. But what you're giving up is how much you're going to get in Social Security 40 years from now. And I'm here to tell you a little bit of money can make a huge difference to you. If you pay taxes on it, and you save it, you would be shocked at how much money you could have. Let me give you an example. So Cali, I want you to think about this. You are 42 years of age, I'm sure with tips and whatever else you could do, is it possible that you could just take $300 a month, alright, just $300 a month and put it into a Roth IRA? And if you did that every month in a good Standard and Poor's 500 index fund, do you know in 25 years when you are approximately 67, which is when social security would also hit in for you, you would have almost, with average market returns, about a quarter of $1 million saved. A quarter of $1 million saved. And that’s with just $300 a month. So I want you to do the following. I want you to save all your tips. I want you to somehow find $300 a month. Open up a Roth IRA at either Fidelity, TD Ameritrade, Charles Schwab. Put your money in a good Standard and Poor's 500 index fund where there are no commissions or fees whatsoever, and do that every single month. Report that income, and just keep going little by little. You will stop worrying as you see your money grow. Our next email comes from Crystal. And she says, I will be getting divorced and will have to pay $140,000 in alimony to my ex husband. I plan to transfer it from my 401k to his 401k. I am 50 years old and will need to replenish the funds. Although I will never be able to get this money back in years, how can I make the biggest impact on replenishing my 401k plan of this big deficit? Well, Crystal. Here's what I would say to you. You don't have to replenish it within your 401k plan, you just simply need to think about this differently and this is how I want you to think About it. You gave him $140,000. All right. Probably a small price to pay for him not to be in your life. Just think about it that way. Here's how I want you to think about the money. $140,000 in your 401k. You did not say it was a Roth 401k. So I'm going to assume it's your traditional 401k, where when you withdraw this money, you would have to pay ordinary income tax on it. So let's just assume that you're gonna work for 15 more years before you touch this money. So $140,000 at just an average annual rate of return of 5%, in 15 years would be about $300,000 that you would have had in your 401k. And now let's just say you have this 300,000 In your 401k, plus all your other money, but I just want you to think about this $300,000. And now you want to make income on this money, and let's just assume at that time like now all you could get safely would be three percent. So before taxes, that would be $9,000 a year of income. But that's before taxes, you owe taxes on it. And again, let's assume that after taxes it is $6,000 a year, or $500 a month. Now one way that you can think about this, is that all you are giving up really, really is $500 a month. That's what this is costing you. That's it. $500 a month. And given that you had to pay him, I'm assuming that you have other money, and that you're doing well, and so that's not that big of a deal. So don't let it eat at you, girlfriend. Don't let it eat at you. If you really want to make up that money, however all you really have to do and again, I'm assuming that you can afford this. For the next 15 years, if you just deposited $1000 a month in like I say always to everybody, a Standard and Poor's 500 index fund or some investment, and you did that every single month for the next 15 years, you would then have approximately $266,000 in that account. Assuming again, a 5% annual average rate of return. Let's say you take it all out at that point in time. Let's just say you do, and then you owe capital gains tax on it. That will leave you about $210,000 after taxes. If you just took that $210,000, and put it in municipal bonds, earning you 3% tax-free, all of which is possible and probable, that would give you $6,300 a year of after tax income, which is equivalent to what you lost by giving him, your ex, the $140,000. So that is how you can make up for it, if that is what you want to do. But either way, a very cheap price to pay for you to have true freedom. You know before I go on and answer more questions, there's something I just want to say here money is money, but your happiness, your happiness, your freedom, your independence, your being able to go to bed at night feeling great about yourself and your situation, is priceless. And I get that sometimes you are going to have to give up money in a divorce, because you may be the main wage earner, you may be the one, like Crystal, who brings in the money and now you're gonna have to pay to get out of this relationship. I had to pay to get out of a relationship that I was in. And it was a small price to pay. Small price to pay. Given how I was living in my life. You know, and I've told you this before, just because I'm powerful with money, didn't always mean or doesn't always mean that I was powerful in my own personal life. And and my past relationships before KT, in my opinion, the majority of them were just the pits in so many ways. And now I'm so happy. So it wouldn't have mattered what I had to pay. You know, and at the time, you know, who knows what the price would have been for me to get out of the relationship that I was in. But when you look back on it, it's a small price to pay for you to have true peace of mind, for you to open up your life. So just maybe you can become involved with somebody who will really love you, and you will really love them. And it's a really relationship where you respect one another and that you're happy in. So don't go freaking out because you had to pay your ex to get out of a relationship. It's a small price to pay. You know, I always say in the end, you're not going to be able to take a penny with you anyway, what can you take with you? You take away your love of life, the memories that are good, how you feel about yourself and how you lived your life in those last years or your last whatever of your life. Don't waste it being upset about the money you don't have. Do you have that everybody? Do you get that? All right. Here we go again. Another one, I'm telling you. I'm in the process of divorce. How do I protect myself from paying alimony? I loved my husband. Notice, she says past tense. I loved my husband for 17 years, but he isn't capable of working, and hasn't worked for years. I worked multiple jobs to pay for all the expenses. I realize that I will soon have to pay for my daughter's car, insurance, and college expenses, which frightens me to my core. Since my retirement savings is almost nonexistent. I took control by making more income and paying close attention to our finances recently. How can I ensure my child and my retirement is protected? Rene. First of all, you ask me, how do you protect yourself from paying alimony? I loved my husband for 17 years. If you loved him, why don't you love him now? Do not love him now, simply because he isn't capable of working, and hasn't worked for years? Is that his fault, or is that your fault that you allowed that to happen? And when you say he isn't capable, I don't know why he's not capable. Is he ill? Is he lazy? Is, what's going on with him? You don't tell me. But it also sounds like you hardly have any money yourself. You tell me that your retirement savings is almost nonexistent. You tell me all of these things, but yet are you talking to your husband about this? Now I get you say that you are in the process of divorce, but if you loved him, I'm assuming and hoping that he loved you as well. So somewhere you can come to an agreement, maybe, maybe not. But if you end up having to pay him, you have nobody to blame but yourself. And I'm so sorry that it sounds like I'm being hard on you, but I need to be honest with you. It's not just you, it's who else is in your situation? Where their husband, or their spouse is not working, and they're not contributing, and you're upset about it. But you're just letting it go on and on and on for 17 years. And now you've just realized that you're gonna have to soon pay for your daughter's car, insurance, and college expenses? Maybe yes, maybe no. You need to talk to your daughter. You need to say, sweetheart, I can't afford the car payments. I can't afford the insurance. I don't even think I can afford your college expenses. And I'm so sorry that you got caught up in this. But you need to learn as well. You cannot go into the financial hole simply to protect your daughter. Because here's what's gonna happen. If your daughter sees that you are miserable in the future because you spent all of the money that you really don't even have on her, and now you're suffering, and she's not making it, she's gonna feel horrific. So you need to be honest with her, and take control, and stand in your truth, and tell her what is going on in your life. Maybe she'll go and talk to her father, which I'm assuming is your ex-husband to be, and maybe he'll go back to work for his own daughter if he won't do it for you, and himself. So you are taking control of your income now. And now you're paying close attention to your finances. But the only thing you can really do is ensure your own retirement is protected. You have to take care of yourself at this point in time. And you can't postpone it anymore. You can't just go out there with blinders on, and think everything's gonna be okay. So you need to sit down with your daughter, and be honest with her, and make a plan that works for both of you. And you need to get this divorce done. And you start saving every penny you can, for your own your own financial future, girlfriend. I know, I know you're thinking oh Suze, why are you so hard on everybody? Why do you do that? Could be compassionate. The poor woman is going through a divorce, and and and doesn't have money, and she wrote to you, and she's worried. I know. Trust me, I know. I read the thousands of emails that come in. But you have got to take responsibility for the situation that you are in. If you have a feeling in your gut, or if you see or just feel that something isn't going right in a relationship, so many of you. You stay in that relationship to protect the children. You don't want to get divorced. You don't wanna do that what you know you should do because you just want to wait till they are through college and they can deal with it. Really? Do you really think the kids don't know when something's going wrong in your life? Do you really think that they are just so not in touch with who you are the mother? Of course they are. They came from you. They can feel you. They know. But yet, you don't talk to them about it. You're not honest with them about it. A 13-year-old or 14-year-old today is not the same as when I was 13 or 14. Now you're 13 or 14 going on 20 or 30. These kids are mature. These kids are online. These kids are reading, and seeing it, and feeling it. They get it all. But yet you're not giving them your all, and you're all is the truth. So when you hear me come down, it's I'm coming down out of love because I'm standing in my own truth. I don't want to make it okay that everything is this and everything is that just so you feel better? It's not about feeling better. It's about being better. It's about being better for you and your family. And that is why I come down the way that I do. Next email is from Jodie. Hi Suze, I have learned so much. I am 57 years of age. My father had a whole life insurance policy. Oh my favorite topic. Whole life insurance. All right on me and turned it over to me ages ago. I have paid $15 per month since my 30s. That means that Jodie has paid 27 years between her and her daddy cause that's just since she's paid. Who knows how long he paid for it. She alone has paid for 27 years. I know you are not a fan of whole life policies. How true is that? It has a $15,000 death benefit, and a $6,000 cash value. What do I do with this policy? I am tired of paying on it. I am divorced, and have three kids. 23, 21, and 18. I do not have a life insurance policy on me, and I cannot afford it. If anything were to happen to me, their father is very capable of supporting any needs. Jodie, you are so right, that in most cases I hate whole life policies and here's why. You say it has a death benefit of $15,000 dollars. And you are not projected to die for another 30 years, girlfriend. So for 30 more years you would be paying that $15 a month. Do you know that if you had simply taken $15 a month 27 years ago, and had invested it in a Standard and Poor's 500 Index fund that like I've always been telling you to do, that today you would have a cash value of $16,000, or $1,000 more than the death benefit. But no. All you have is a cash value of $6,000. $6,000. Do you understand how that makes absolutely no sense at all? But for the insurance company, it makes all the sense in the world. Because they know all they're going to have to do is pay you $15,000, and another few years, are you kidding? They would have made 45, 50 $100,000 off of you. So to pay you $15,000 is absolutely nothing. What should you do? First you should make sure that you are healthy. You never want to cash out a life insurance policy of any kind unless you know you are 100% healthy. As soon as you know you are healthy and you don't need this insurance, according to you, cash it out. Now somebody I'm sure is going to tell you, oh don't cash it out. What a waste of money. You're gonna owe income taxes on it. No, you are not. Because you put in more money over the years, and what your father put in, than what you are going to take out. So just cash it out. And now you know why I hate whole life insurance policies. Okay, Suze Orman tell us how you really feel about those insurance policies. Next one is from Robin, I am 54 years old and have been teaching in the same school system for 31 years. I am now faced with final planning of my retirement, which has brought such mixed emotions. Confusion, frustration and uncertainty. My biggest decision is this. Do I leave my pension with the state, where they will manage and give me a set amount of money each month for the remainder of my life, or do I take my retirement money from the pension, to invest and manage it on my own or with a financial advisors guidance? She goes on, and on, and talks about it, and says that she's not married, there's really nobody else, blah, blah, blah, blah. All right, listen to me, Robin. If you were married, if you had kids, if whatever, it would be a whole different story. But you're not. And therefore, it would be my advice to you, because you tell me, that you have the jitters as you're writing this, you that all these things that you can, you know, you have all these emotions, take the emotion out of it, and simply take the pension with the state. Now, you will take a life only pension, and you will find that it's going to make you feel so secure. What is the goal of money? For you to feel secure. Because you know that you are going to get that pension amount every single month for the rest of your life. And if you happen to die prematurely and whatever, what do you care? Your life was fine. But if you live 50 years, 100 years longer, nobody knows. You will get that pension forever. If you do an IRA rollover with it, it has to be managed. At the age of 70.5, you're gonna have to start taking money out of it. The more you take out of it, the less you have in it to earn money. It's gonna get complicated for you. So just take the pension. If you were married with Children, I might tell you to do something else. But for you, in your situation, just simply take the pension. If you continue to listen on another podcast, I will do an entire explanation of when you take a pension, and when you don't take a pension, and everything you need to know about it. It is not a five minute or whatever discussion. It's longer than that. So this is for somebody like Robin, the answer I just gave Robin is for you, if you don't have a spouse, you don't have children, you are going to get a pension, and you're nervous about investing the money, in most cases, just take the Pension. And for the last one, which is from Shri, and the reason that I want to take this last email is because as you know, one of my passions is about financial abuse. And I just want you to hear an email that was sent in from a woman who was in a financially abusive relationship, but now she is no longer. She says, hello Suze. Hello Shri. I had to respond to your latest news of change in the song. Love It. I had the same thought about one month ago, and meant to write with the same suggestion of using either thrive or rise. I would love your entire podcast until the last survive of the song and then I would cringe Thank you Shri, I love my new theme song with the words, “together we will rise”. And if you like that theme song, you can always go to Spotify and download it. It is by Effie. Shri says however, she has a suggestion. She says, I am divorced from a covert, malignant, narcissist. Tell me how you really feel, girlfriend. I am trying to recover financially still, and trying to overcome all of the damage is done. Your show on financial abuse was so on target for me, and the other women's account of controlling relationships made me recognize quickly that most of these women were recovering from narcissistic partners or spouses, but they weren't cognizant of this. I am now 64 years old, and was married to this man for 16 years before I was able to escape and return to me, and heal myself. I suggest that if you could do some introduction to other women of things to look for in relationships or interactions, so that one could recognize the abuse before it's too late. Any instruction on narcissist, and the typical exploitation scenarios that occur, snd the gaslighting, etcetera would be so helpful. You teach women to think for themselves and rely upon themselves. You teach women to trust their guts. But this is relevant with personal relationships, as well as with the business transactions. They are perpetrators. I am the happiest that I have been in 24 years, and still trying to recover emotionally and financially. I plan to write a book of fiction, and hope that it will empower women via the storyline to save themselves. That's the plan. Please accept my sincere appreciation for all that you do to empower women, and thank you for helping me prepare for the divorce before I was aware that I needed to. You have greater impact than you will ever know. Signed by Shri Row Mayfield. I read this email again to you because this is the goal of everything that I do. My goal, honest to God, from the bottom of my heart, is to empower you. So that if you're in a bad relationship, you can get out of it, and start over. So that you can recognize the signs that are around you. That if somebody won't let you have your own credit card, or somebody won't let you have your own bank account, or if somebody makes you ask permission for every single penny that you spend, can you just look at the signs around you? And as I think about the emails of this Ask Suze Anything, it said somebody was in a relationship for 17 years with somebody who wasn't making money, wasn't contributing, and now they're afraid to death? I am asking you, I am asking you. Do not wait until you are 50, 60, 70, or 80 years of age to take action on a feeling that you had when you were 20, 30, or 40. Don't postpone the truth of what's going on simply to save your kids. You want your kids to be strong, smart and secure like I want you to be? Then you have to be honest with them. You have to have faith that they can deal with anything that you're going to tell them, because they know anyway. So today's Ask Suze Anything was about, don't live a life of regret. Don't live a life of anger. Don't live a life of where you are now saying to yourself, I wish I could have. I should have. Why didn't I? Oh my God. Now what do I do? I'll tell you what you do. You do it now. You do not postpone what you know is true. If you postpone what you know is true, you have nobody. Nobody but you to blame for the situation you are going to be in one day.

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