Investing, Saving, Saving Money
January 12, 2023
Listen to Podcast Episode:
On the first Ask Suze and KT Anything for 2023, Suze answers your questions about making the right investments now, inherited properties, avoiding crypto scams and more.
Suze: January 12 2023. Welcome everybody to another edition of the Ask Suze
KT: and KT
Suze: Anything podcast. Alright Miss Travis. How's it feel?
KT: Pretty good? I like this new year Suze.
Suze: I see that. Tell everybody why you like it.
KT: Well one of the first reasons I really love it is that we're walking together on the beach in the sand
KT: and we're able to get Suze out and about. Which means I get to have a playmate again.
Suze: I love that as well. All right shall we get right to it?
KT: Yeah let's I have lots of questions but I think this year is also going to be a better year than last year.
Suze: In what way?
KT: In many ways it feels different. It feels like it's going to be a more challenging year I think financially but everything else...
Suze: More challenging than last year?
KT: Yeah I do think that
Suze: Wow. I don't.
KT: What do you think? (Laughs)
KT: I think what matters is what you think.
Suze: You know I think...
KT: It feels like...
Suze: I think last year was one of the more challenging investment years I've almost ever experienced in my career
KT: Because you were in a roller coaster mode and people like you look at it every day
Suze: But nothing made sense if you want to know the truth in many ways. So I think this year it will be very different.
Suze: More predictable. Believe it or not.
KT: But not necessarily calmer.
Suze: Well not necessarily the first quarter but maybe after that but I'll tell you all more about that Sunday on Suze School. All right.
KT: Suze, First question is from Kyle. Hi Suze, with rising interest rates. Do you think one should buy I bonds for 2023 new year or look for other
KT: CD or Treasury options?
Suze: So Kyle, I have to tell you that's a great question because I myself am pondering, KT if we should be investing $30,000 each like we do almost every year into these I bonds, because interest rates on Treasury bills are so fabulous right now. Here is my answer to you, Kyle. If I were you, I would wait
Suze: because around March or so we will know what inflation is doing. We will know what the renewal rates on I bonds will probably be. 00:03:04
Suze: And is it good enough to just lock in another 6.8% for one year? Which you could do right now if you wanted to but then watch it go down and down and down. I'm not exactly sure. So if I were you, I would take whatever money you were going to put into an I bond and I would buy a three month Treasury bill with that money, lock in about 4.675%.
Suze: And at that point we will know where I bonds and inflation are heading. And then we can make a decision if we still like I bonds, you can do it then.
Suze: So let's wait till March. But in the meantime by a three month treasury bill. Next question, KT.
KT: All right. Next is from Mandy. Hi Suze. Panic mode over here. Panic mode. I like this one. It said are we really going to lose another 60% of our investments over the next year?
KT: Should we withdraw everything we have. Right Mandy is truly in panic mode. Mandy,
Suze: Mandy. What the heck were you invested in, that you lost 60% of your investments?
Suze: I mean really, you must have been invested in something so speculative and you just kept it and kept it and kept it. Like did you have Netflix and you rode it all the way down? Did you have things like that? Because that's a serious loss because most people really only lost if they were truly diversified they really only lost maybe 20 or 30% at most.
Suze: So you need to really look at your investments. However, for those of you who are diversified, why are you smiling?
KT: Because if that's a panic mode question I would just say one answer: No you're not gonna lose everything for 60% and you shouldn't withdraw everything.
Suze: But we don't know what they're invested. And that should have been your quizzie KT. Because I would have been able to go (makes the wrong answer sound) Mandy, first you need to look at your investments and make sure they are diversified across the board
Suze: so that you're not all in high tech or something like that because otherwise you could not be having a good year this year again. However for those of you who are diversified and you are invested in equities and things that are paying you dividends etcetera.
Suze: I do not think you're going to have as bad of a year as we had last year again. I will go into that on Sunday on Suze School. So just make sure you tune in at that time. Alright,
KT: Okay, next question is from Barbara. Suze, when do all the updates for the new 2.0 Secure Act kick in? And you all, everyone, Suze talked about this on the last
KT: School. So if you haven't heard that, listen to it and then you'll understand her answer right now.
Suze: Barbara I wish I could tell you that. Legally they're able to be done. It's in the hands of your corporations that you work for when they decide to implement it. So you need to ask your HR person. Next question, KT.
KT: Okay. Next question is from Kat,
KT: it's a K a T Cat.
Suze: Aren't you going to compliment me on how short that answer was?
KT: I love when Suze gives a short precise answer and you know why everybody? Because then I can remember it. All right. Ready. This is from Kat. Hi Suze and KT, Are there any...
Suze: What does that mean now that you can, that...
KT: No, that you can remember like a single answer like a yes or a no.
KT: It's easy to remember what to do.
Suze: But KT, what if the answer isn't yes or no?
KT: Then you have to listen to it a few times or listen really carefully.
Suze: Can you tell what we have going on here?
KT: Hi Suze and KT. Are there any rules to who is eligible for doing catch up contributions, aside from having to be age 50 or older?
KT: Since age 25 I've always contributed the max to my employer 403 B. Does that mean I'm not eligible to do a catch up at age 50? Tell everyone what a catch up is? I forgot. But I remember...
Suze: A catch up is simply like this year you can put let's say $6500 a year into your ROTH. However
Suze: if you are 50 or older you could put $7500 in. That means the catch up is $1000 now. They really shouldn't even call it a catch up because the truth of the matter is, Kat anybody can do it once you are 50 or older you just are allowed to put even more money into your 401k
Suze: or into your ROTH or into your traditional IRA just that simple.
KT: All right from Cynthia, Suze, could you please explain the yield and dividend yield. For instance; B. T. I. is showing a yield of 4.04 and a dividend yield of 2.13%.
KT: I don't understand the two numbers or how they're calculated.
Suze: Yeah. So Cynthia first of all V. T. I. is the symbol for the E. T. F. of the Vanguard Total Stock Market index fund. And the dividend, when you see it's showing a yield of 4.04. It's not showing a yield to that, that is the dividend that you are saying and I'm not exactly sure that's the correct number but that is the dividend that they pay out per year
Suze: on the V. T. I. - E. T. F. that you own. And that dividend, that amount of money converts to a 2.13% yield, when you wrote this question. Again, those numbers have changed at this point in time because V. T.
Suze: I. The price of E. T. I has changed but they're not both yields. One is the amount of the yearly dividend, the other is the amount that dividend actually yields you on the price that you paid for V. T. I. Did that make sense, KT?
KT: Yea but it's always a little complicated.
Suze: Well the truth of the matter is the price of any E. T. F. or stock changes every day.
Suze: And depending on what you buy the stock for, the dividend is usually pretty stable. But the dividend will yield you more if you paid less for that stock or E. T. F. than if you paid more since the dividend is stable. So it all depends on what you paid for it.
Suze: Do you want me
KT: you want me to
Suze: give you an example?
KT: I think that was really clear.
Suze: But let me give you an example. Seriously. You buy something for $10 and the dividend is a dollar, let's just say that's true, you have a 10% yield. You by that same stock for $5 and the dividend is a dollar. You now have a 20% yield. So depending on what you paid for it
Suze: determines what your actual yield is. Now, even though that stock may go up and may go down what you paid for it still is... You're getting that
Suze: yield. So
Suze: now you get
KT: Yea, I do!
Suze: All right, so good. Go on.
KT: So this next question.
Suze: Usually when somebody answers the thing with. Yeah, I do...
KT: Want me to explain it to everyone?
Suze: No, it's alright, go on.
KT: All right. Next question
Suze: After this podcast. Trust me I'm going to ask her to explain it to me. Alright.
KT: Alright Judy asks this question based on a podcast we did a couple of weeks ago when we talked about the adult Children that continue to live in a house after their parents died
KT: and you mentioned the 250,000 capital gains exemption on the sale of an inherited property that they held greater than one year.
Suze: Well that's not exactly what I said but I'll explain.
KT: So does this only apply to inherited
KT: property or does that exemption allocate to all benefactors?
Suze: Everybody I want you to listen to me very carefully Judy and everybody else, every single one of you who owns a home and you own that home and have lived in that home as your primary residency for two out of the past five years. If you were to sell that home,
Suze: There is a $250,000 exemption, which means that when you sell that house, $250,000 of gains, you do not have to pay taxes on. If you own that house with somebody 00:12:32
Suze: else, you each get a $250,000 exemption. As long as both of you lived in that house for two out of the past five years as your primary residency. Judy what you need to understand is that when you inherit a home from somebody who left it to you, you get a step up in cost basis on that home.
Suze: So even if your parents paid $100,000 for that home and now they left you that home, you now have inherited that home and on the date when you inherited that house is worth $1 million. You never lived in that home, it was your parents home.
Suze: Your cost basis on that home now is $1 million. So you could turn around and sell that home and not pay any tax on it whatsoever. To pay capital gains tax, you have to own the home for at least one year.
Suze: And then if you sold it, you would only pay capital gains tax on whatever gain there was above that $1 million. If you moved into that home and lived in it for two out of the past five years as your primary residency,
Suze: you would only have to pay taxes on anything above $1,250,000 because you get that exemption. If you sell that house before one year after you have inherited it, you will only pay ordinary income tax on everything above $1 million. Next question, KT.
KT: Suze, next question is from Janice. Hi, Suze and KT, I devour your podcast and follow your advice. So Janice is in a little bit of a situation, Suze, she said over the past two months, I'm not able to decide if I should stop my dividend reinvestment in my IRA held at a brokerage and let the money accumulate or buy short term treasuries? So
KT: she said that she's 60 years old, she's probably in the last 10 years of full time working career and not sure when she's either going to be, you know, let go or whatever. So she's asking your thoughts should she reinvest while the market's down or take the cash and buy short term treasuries.
Suze: So here's the problem. I don't know what you're invested in.
Suze: And so Janice, is it possible that, you know, maybe you're invested in something that's actually giving you a higher interest rate than a Treasury?
Suze: And if that's so then you're probably if it's a good quality stock or exchange traded fund, then you would probably be better off at this point in time reinvesting the dividends. If however you're in stocks and they're only paying you a half a percent in dividends or whatever it may be, then maybe you're better off not reinvesting it. However, 00:15:57
Suze: remember in a brokerage account, the minimum you need to buy an individual Treasury bill is $1,000. So would you even have enough money if you didn't reinvest the dividends 00:16:16
Suze: to do what? To buy a Treasury bill. That I don't know because I don't know also how much money you have in there. But assuming that you have good quality stocks, they're paying you a decent dividend of 2345% or even more. If you own things like Devon
Suze: And you have 10 years until retirement, I have to tell you, I probably would stick with reinvesting my dividends at this point in time.
KT: That's great 00:16:47
Suze: Why? You're happy for her?
KT: Well, I thought you would actually say to buy the Treasuries. But...
Suze: Do you
Suze: see though, KT why some of these questions and all of you listen to me
KT: They are all very individual.
Suze: They're all individual things. I wish I could talk to you. Maybe we need to change. They Ask Suze podcast and KT podcast where people can call in and ask, but then we would be having like a radio show. So I'm not sure that would actually work, don't go. You are, I can, I can tell...
KT: Wait. If you all want to see Suze on TV again vote
KT: yay or nay as they did in the house.
Suze: Well we have to put up a poll for them to do that. Maybe I will, right. B ut I know she has been working on something and I'm not
KT: My secret. Everybody. My secret.
Suze: Oh my goodness. Anyway, so when you write in
Suze: and I just want to say to all of you that have been writing in and you write in a question to ask Suze podcast at gmail dot com or on the community app that you can download on Google play or Apple apps.
Suze: You're writing such long ones and we're getting thousands now and I really can't get to them. So when you write in, just know that maybe they'll be chosen. Maybe not, but just be patient and hopefully will answer your question with somebody else's question if that made sense. Okay, go on KT.
KT: Okay. Suze. I like this one because this is from Sarah.
KT: Sarah's 21. Listen to this everybody, She's 21. I've been contributing small amounts to a ROTH 401k 5% since I was 18.
KT: My mom listens to you and taught me well, then Sarah wrote this past year. I got a full time job as a flight instructor. Wait a minute but wait, I'm kind of proud that she's 21 she's a flight instructor
Suze: Fabulous, but I think I know where this is going.
KT: Sarah continues, I've begun contributing to a ROTH IRA as well. I max out, I work at a community college and I have to pay 15
KT: into a P. E. R. A pira defined benefit. You know what that is? It's a pension plan,
Suze: A public employee retirement system, Yeah, it's going okay.
KT: It's a pension plan. My retirement contributions and savings take up 60% of my paycheck.
KT: But my rent will be doubling in six months. Now Sarah goes on like most 21 year olds to say I also want to buy a house and a car in the next five years. So let's start with, first of all this is a goal oriented young woman, congratulations Sarah. Just for that.
KT: But Suze, what do you think she should be doing here? So I love that she's investing in her retirement now.
Suze: Alright, so girlfriend, first of all, I love that you are a flight instructor. Oh my God. If I could turn back the hands of time, KT, I so would have wanted to do that. We have a really great friend by the name of Rita Case and maybe a lot of you see her on television of Case Auto. Right. She's so
Suze: so brilliant. I can't
Suze: but she flies her own plane
KT: and she's our age. She is younger than Suze and I but...
Suze: I'm not even sure how old she is to tell you the truth, KT, but the
KT: fact that she flies, these phantoms and
Suze: these jets incredible, incredible.
KT: And she looked at me, she said KT is easy. It's actually kind of easier than driving
Suze: and she's like but she's such a brilliant because
KT: she's everything.
Suze: I wish I could do that but I can't anymore because I just can't maybe because I really don't want to because I guess there's nothing I can't do if I wanted to do it. But that's besides
KT: the point.
Suze: But anyway Sarah...
Suze: When you are this goal oriented. The very first thing truthfully though I would cut back if your community college is not matching your ROTH 401K contribution is I would cut back there
Suze: If I were going to cut back at all. I would not cut back on my ROTH IRA on any level because it's the money that you originally put in to your ROTH that you could access at any time without penalty or taxes. So years from now you could take money out of your ROTH that you originally put in for a down payment on a home or something like that.
Suze: But here is my true advice to you, you're 21. Your rent is going to double either move back in with your mother. I am not kidding. If she will allow you to do so you could pay her rent. Maybe that would help her. But if rent is so exorbitant now,
Suze: I rather see you cut back on rent or get four roommates or do what our niece does, where she lives in this tiny little apartment with two roommates. At one point she was living with four or five roommates so that they could afford it. But if you're living by yourself I kind of think that you are because you say your rent is going to double.
Suze: That's how I would tackle this more than cutting back at this point in time at 21. Because these are your compounding years. These years are the years that you must not stop
Suze: investing to the max in your retirement accounts. But if you have to choose one I would choose the ROTH 401k. Unless they match that contribution then you can't afford not to do that.
Suze: So bottom line get yourself some room mates. Alright
KT: And ride a bicycle.
Suze: I'm sure she's riding a bicycle. But really talk to your mom and think about maybe moving back in with her. You never know.
KT: All right, next question. This is actually my final question from Susan. Hi Suze and KT. Please help my poor mom. Oh ready this one. Everybody get ready. My mom was convinced by her friend
KT: to invest in a Cryptocurrency which she put in her life savings. $30,000 into crypto.com
Suze: Scam scam scam keep going. I can hear it. I can feel it.
KT: This makes me sad. Then into an exchange called COMEX to buy USDs .
KT: Initially she made money that was able to take out 15,000 before there was suspicious activity with money laundering when 10BTC was put into her account. 10 Bitcoins.
KT: Now her account is frozen. Unable to take out her funds. She was asked to put an additional... ready for this. Everyone 60,000 to repair the credit. So her account can be unfrozen to take out the money she put in.
KT: You tell everybody why we're sad we're getting more and more of these and tell them this is
Suze: We actually had a friend who was over and told us how her mother,
KT: Her sister...
Suze: Oh, it was her sister twice, twice,
KT: Twice, two times smart girl too.
Suze: Like 20,000 and then another 25,000 into this. And then obviously it was a scam.
Suze: So Susan...
KT: Wait, I have to tell everyone and it was exactly the same model. They say it's frozen. But don't worry we're going to secure this for you but we need some money to be put in so that we can unfreeze it. That's the big carrier, that's the scam everybody.
Suze: Because mom is
Suze: looking at how much 10 bitcoins are worth and 10 bitcoins right now even at like 17,000 each is like 170,000. So yeah I'll do 60,000 so that my account could be unfrozen. It is a scam. It is a scam. It is a scam.
Suze: At least your mother put in 30,000, her life savings at least she got back 15,000. And so if she loses 15,000 then it's lost. But do not do this. Do not do this.
Suze: Do not let her do this. None of you should do this on any level and let alone make sure that you advise your parents and everybody else and this includes you. You do not invest in Cryptocurrency of any kind
Suze: unless you can afford to lose it. Again on Sunday, I will update you on where I think Bitcoin and Ethereum is going do not get suckered in right now that you see it increasing at this point in time. I do not think that's what's going to happen to it in the long run. So do not touch it. If I were you. Go on.
KT: All right, I have a big question, Suze. We've been getting these emails, everyone and also friends calling
KT: and Susie unfortunately says there's nothing that she can do. But
KT: is there a place people can report this?
Suze: These are criminal acts. So they really need to be reported. I'm serious to the police, to law enforcement, to the better business bureaus. But most importantly, probably to the District Attorney to press charges the FBI whatever it is, this is a serious scam. KT, it is quizzie time for you.
KT: We haven't done one of these in a while you did the last quizzie.
Suze: And I got it
Suze: right. I was
Suze: so proud of myself.
KT: Now, you know how I feel.
Suze: I don't know how you feel.
KT: I never get it right. So
Suze: I don't ever get it wrong. So how would I know how you feel?
KT: That's what I mean. You felt so great that you got it right?
Suze: No, KT, you're not hearing me.
KT: You never get all right. Go ahead. Ask me,
Suze: I never get it wrong.
KT: Get ready. Everybody. This is for you too.
KT: This quizzie is for you too.
Suze: And KT is right. I really want all of you to know how to answer almost every question that is asked on the Ask KT and Suze podcast. Because it's when you can do that,
Suze: then you've learned and then you don't have to ask questions because you yourself know the answer. Hi Suze and KT, thank you for all you do. You are most certainly welcome my love. I am single and about 7 to 10 years away from retirement.
Suze: I have two mortgages totaling approximately $200,000, write it down everybody so that you know right, this person is 7 to 10 years away from retirement and they have mortgages of $200,000, the majority which is on an investment rental property at 6.7% interest.
Suze: But she has been putting in the maximum every year in to her ROTH IRA and employee retirement account. Almost half of her income, KT goes in to these retirement accounts, which depressingly took a big hit in 2022. The question is this:
Suze: Should she pay off her two mortgages or keep contributing to her retirement accounts? She says at the end, all the best in 2023 and she loves us. Let everybody think about it.
Suze: $200,000 in mortgages. The majority is at 6.7%. She has money in her retirement accounts. However, 50% of her salary is what she puts into those retirement accounts. Should she stop doing that and pay off the two mortgages instead? What should she do? 10 years away from retirement.
KT: I wish I knew of the 200,000 which one was if they're equal mortgages because there's two properties. I'd pay off one of them and keep putting my money in retirement, I'd pay off that rental one.
Suze: So she would pay off...
KT: Then I would gain, you know, all that rental income and also sell it. If I had to see what I mean?
Suze: You wouldn't pay off both?
KT: no, because I think if she pays off both, she won't be able to keep putting money in her retirement. So I would pay off that rental one first because that's eating up the majority is it's a high interest rate, get rid of it.
Suze: So are you ready for your answer? I hate to start this year off doing this to you.
KT: Come on, give it to me
Suze: Seriously, are you prepared for it? Ding Ding Ding!!
KT: I knew I had a hunch that that would be the way to go.
Suze: Right. So what I really?
KT: Are you kidding or is this a joke or... I got it?
Suze: You got it.
KT: Yes. Everybody see, all you have to do is think what would you do? And that's what I would do.
Suze: There you go!
KT: Great. That's my first 2023 yea yea yea!
Suze: Yeah. So anyway I really wish I knew were you going to keep your primary residency or not?
Suze: But I also wish I knew how many years you had left and the interest rate on your primary mortgage for your home. Because are you going to have it paid off in 10 years if you keep paying it? And it is a tax deduction. Obviously the rental property is also a tax deduction. However, KT is absolutely right.
Suze: At a 6.7% interest rate that is really high.
Suze: So therefore one of the best ways for you to tackle your retirement 7 to 10 years from now is to have the highest interest rate mortgage paid off. Especially if you are going to keep that rental property for a long time. So that's what I would do if I were you. Alright everybody, what does that do? It brings us to the end
Suze: of Ask KT and Suze Anything and Sunday I will do Suze School on what I really think is happening in these markets, how they could be going up here down here but I will give you really what I think and what you should be doing in terms of how to think about investing for 2023 not only in the
Suze: stock market, not only in real estate, not only in possibly Series I bonds but in crypto currencies as well. Regardless. I can tell you. I still really, really love short term treasury bills. I love them, I love them. I love them.
Suze: And I love you so much. My dear KT.
KT: Thank you Suze. What do we want to tell everyone?
Suze: So there's really only one thing that matters when it comes to your money and your life and that is this: today, wherever we go, we will create a more
Suze: and loving world. Alright, everybody now you stay safe and secure.
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