June 08, 2023
Listen to Podcast Episode:
On this Ask Suze and KT Anything episode, Suze answers your questions about dividend paying stocks, emergency funds, when to take social security, mortgages and more.
Music: Music (in).
Suze: June 8th, 2023. Welcome everybody to the Women and Money podcast. As well as everybody smart enough to listen. This is the KT and Suze Ask us anything and we got it. Do you want to ask us about my birthday?
KT: We had a great birthday. It was so simple.
Suze: Tell him what we did.
KT: OK. So we came back to Florida and Suze and I had planned a very elegant, beautiful date night at a very special Japanese restaurant. We love Japanese food and sushi. So as we were here, she was getting like, you know, KT I think I'm going to change my mind. Let's just stay home.
KT: I said, all right, I said, I'll make something and we'll enjoy just a quiet evening at home.
Suze: I had my bathrobe on until like three o'clock...
KT: and then, then she looked at me and she said, you know, I'm hungry. I said, ok, I'll make dinner early. She said, you know,
KT: I think I want to go to Charm City burgers. If, if you don't know what Charm City is. It's a incredible burger joint. Literally a burger joint in Florida. In South Florida. There's only one, it's not a chain and they make really grilled burgers. Like there's smoke. Always coming out of the can smell it, it, places
KT: and both I don't eat meat. Suze wanted a burger and I wanted a turkey burger
Suze: I hardly ever eat meat.
KT: So it was so delicious. We got fries, we got onion rings, a diet Coke and burgers and you know what we did, we sat in our car and went into a little parking lot that was very shaded and empty
KT: and we enjoy those burgers and sitting in a car having a date on her birthday more than you can imagine.
Suze: How much was that bill?
KT: Um $13 for all of that.
Suze: So you see $13.00 for all of that... So what do have for me?
KT: I have an assortment of questions, but many of them are still about retirement.
KT: People are as confused as I am with that. Roth. Here we go. Hi, Suze and KT. I'm definitely a late bloomer. This is from Elizabeth. Everyone when it comes to investing for my future. I'm a teacher with seven years left until retirement. I'm finally in a much better position to start contributing more to my financial future. This brings me to my question. It sounds like a teacher, right?
KT: I opened a Roth IRA through Fidelity last year, I'm working on building my portfolio myself with you, Suze, as my guide, you talk a lot about investing for dividends and or investing for growth, but to know what you want, I'm only able to contribute on an average $100 monthly to my Roth.
KT: So I'm dollar cost averaging into the stock and ETFs I currently hold my balance today is $9000. And with seven years before I retire, should I be focusing on great dividend paying stocks? So that maybe by the time I retire, I will have bought enough shares to make that worthwhile.
KT: So, Suze, what do you say to Elizabeth, our teacher?
Suze: You know, Elizabeth, it's easy to say, all right, just do dividends, do growth. I always say, why not do dividend stocks that also are expected to grow. Like Pfizer
Suze: for instance, or even Chevron or stocks like that. So I would just continue to do what you're doing and not get so caught up on, are they growth stocks? Are they things like, you know, and video or everything? Because what's starting to concern m
Suze: is that because all we're ever hearing about right now is the fact that this stock is going up, oh my God, look at Amazon, look at Apple and many of you are probably thinking, oh, I can't believe I didn't invest in them and then you're imagining if you had invested in them, how much money you would have made if you had just simply done that, stop doing that. People, you have a plan, your dollar cost average every single month
Suze: and you just invest in the areas you want to be invested in. Now, if you don't have a lot of money, stick to your exchange traded funds that specialize in dividends and then you'll be fine. But you'll see
Suze: if the market start to go down over these next seven years, you'll be happy, at least that you're getting dividends. Make sure by the way that you always reinvest your dividends to get the biggest bang for the buck. One other thing I just want to say ETFs like the Vanguard Total Stock
Suze: Market index or the Standard and Poor's 500 index, they pay a nice dividend and you can get growth there and diversification with seven years. You might want to be dollar cost averaging into those. Why are you smiling at me?
KT: Because that's homework. Elizabeth is a teacher. So you just gave her a lot of homework like that.
Suze: She has the cutest little smile on her face.
KT: We love teachers, by the way,
Suze: They're still so underpaid.
KT: We're on your side, teachers. All right. Next question from Georgina. Suze, I listened to your podcast on I Bonds the other day, I bought an I Bond in May last year 2022. Now I am getting an interest rate of 4.3%. Suze, I'm confused of what you said.
KT: You said if I cash it out now, my surrender charge would only be 0.85%. Can you please explain how you got to that amount?
Suze: You know, it's funny, Georgina and I was thinking to myself as I was doing that podcast, I bet you somebody is gonna write me and say, how did you get to that 0.85%? I don't get it. Listen to me closely everybody. The current I Bond
Suze: that's paying 4.3% for many of you is made up of two parts. Remember, I Bonds have a fixed rate and a variable rate. Well, the variable rate is 3.38% and the fixed is 0.90%.
Suze: If, Georgina, you wanted to cash out. Now, let's say, you know, you're in a month or two from now and you just want to cash out and that is your interest rate because you've owned it for at least three months now, into this second period, May, June, July. So you would not want to cash it out until at least August. Just remember that because even though you just renewed, it's the last three months.
Suze: So if you were to cash it out right now and it renewed in May, it's May and June. So you would also pay at the higher rate. Remember that everybody?
Suze: Because it's the last three months. And if three months ago, one of those months, KT
Suze: was paying a higher interest rate, which it was than this one right now, which is 4.3%, it would be figured on that. But anyway, just listen to me, Georgina, you wanna wait till this new interest rate is in effect for a full three months. All right. So for you, that would be May June, July. So you would not cash it out before August. If you did cash it out in August,
Suze: they would go back three months and the interest penalty is based on the current interest rate of 4.3%. However, as I just said, that is made up of the 3.38% variable and the 0.90% fixed, the .90% fixed does not figure in to your penalty. So
Suze: you would then look at only the 3.38% variable rate. And remember this is a APY annual percentage yield. So you only are really gonna get half of that, which is 1.69% for six months,
Suze: but half of 1.69% is 0.85. And that's how you get it. KT is looking at me like what the heck...
KT: I'm looking at her like who the heck is gonna want to figure all that out? That's why we have you Suze. Well, I would not sit there and try to figure this out.
Suze: It's easy. You know, everybody gets confused because you think you're getting 4.3%. But remember it's an annual yield. So, in, in actuality, if you divided that for six months because it changes every six months,
Suze: KT, that's really only why am I even doing this? What is the next question? Oh God.
KT: Next question. I know you're all thinking the same thing I am. I'm not gonna sit there and figure that out. I need six calculators. All right. So next question is from Brent. Hi, KT and Suze. You are both most amazing people. And I just love how much your podcast has changed my life.
KT: I stupidly... don't call yourself stupid, Brent. I stupidly took out a $30,000 loan against my 401k prior to listening to your podcast last year.
KT: Your podcast has inspired me so much so that in the past 18 months, I've managed to eliminate all credit card debt, fully fund my Roth IRA open a three and six month, uh, certificate of deposit with Alliant, and save 40,000 by working overtime side jobs and selling unwanted items online.
KT: I'm slightly worried the industry I'm in will start to do layoffs in the late summer. So, although I'm comfortable, Suze, with the $500 loan payment. Now, here is my question.
KT: Is it better for me to pay off the loan with my current savings depleting my 12 month emergency fund or do I just chalk this up as a mistake to not make again and keep my emergency fund safe.
Suze: Basically. Brent, here's what I would do. Just keep doing exactly what you're doing right now. Since interest rates are so high,
Suze: you know, hopefully your 12 month emergency fund is equal if you did lose your job to the amount of money that you would owe on the loan at that time. Because again, remember you lose your job, whatever you owe to
Suze: the company in terms of your loan is due and payable. Usually within a month, if you don't have the money to do so, it will be taxed to you as ordinary income. And if you are not 55 years in age or older in the year, that that happens, then you would also have to pay a 10% penalty. So just keep that
Suze: emergency money safe and sound. And if this happens, then you know, at that time, you will use that money to pay back the outstanding balance of the loan and then start all over again. Next question, KT
KT: Ok, this is from Lisa. She said, Suze, I haven't contributed to my retirement fund for about seven years. Then she says they have sold it several times. I have to assume
KT: that this is definitely a 401k that's in her company that's been sold several times, but she didn't elaborate. She did say Suze, I have a bunch of funds. This is sweet with an A at the end of all of them.
KT: And then she said, where or who should I go to, to help me get on the right track. I'm 43. My husband is 50.
Suze: Lisa, it's a little bit hard for me to answer this question. Only because
Suze: I have a feeling KT is wrong that, that you have an individual retirement account and within that individual retirement account, your advisors have been buying and selling your mutual funds a lot. What's wrong with that? Is that an A share fund
Suze: means that you are paying the load on that fund or the commission on that fund up front? That's what an A share is and an A share fund usually is at about a 4.75% load.
Suze: So do you have a financial advisor that buys a mutual fund for you. Gets almost a 5% commission a little bit after that sells it and buys another one and gets another 5% commission. Is that what is going on here? Because if that's what is going on here,
Suze: right, then you, you really need to contact the manager of that office because you have a crooked financial advisor, they cannot do that, especially if you have a mutual fund that has an A on the back of its name. So where do you go to for help to get you on the right track. First of all, you find out where the money is
Suze: you go and ask for back statements. You look and see if that is, in fact what your advisor has been doing. If they have been doing that, you should be talking to their manager, they should be giving you your money back, believe it or not.
Suze: And the first thing you would want to do is transfer that money out of that firm into another firm that you could probably manage on your own such as Schwab or Fidelity. But you do not want to stay with an advisor who keeps buying and selling A share funds. In fact,
Suze: you want an advisor who want let you buy an A share or a B share. You want no load funds. So keep listening to the Women and Money podcast and one day here, I'll do a Suze school on the difference between A shares B shares C shares and no load funds. All right, KT.
KT: Ok. I like this, Catherine. Hey, y'all
KT: wonder where Catherine's from? Hey, y'all, I have a question. I have roughly four years of living expenses in my emergency fund. Good for you. Suze, I'm thinking of taking roughly half of my emergency fund to pay off my mortgage. I took advantage of the three and six months CDs at Alliant ,
KT: the I Bond and also have two annuities in IRA disability payments, a small pension, social security income and a little invested with Robin Hood. I have no debt based on this info. I'm assuming both you and KT would advise me to pay it off. Am I correct?
Suze: Quizzie, KT?
KT: Yeah. Go for it. Pay it off, girlfriend.
KT: So next question from Sandra. Suze, my husband is turning 70 I'm turning 67 between his social security and my pension, we have about $5460 a month. Our home is paid off. We have half a million dollars in a 403 B plus other investments and we have no debt.
KT: We do not want to start RMD until we need to. Should I wait to file for social security until I'm 70 or take it now and invest it. So she's... she's...67...
Suze: I get it. So this one's easy, Sandra, between the ages of 67 and 70 your social security payment will be guaranteed to go up 8% a year. Sandra, can you tell me where you could take that money from social security starting now? Most likely have to pay taxes
Suze: on maybe up to 85% of it by the way and get an 8% return on your money guaranteed nowhere. So you are to wait till you are 70. Next one. KT.
KT: Next question, Suze is from Tyler. Hi, KT and Suze. I'm wondering if buying a mobile home is ever a good idea.
KT: My partner and I are in our late twenties currently saving up for a home. We've always heard that mobile homes are a bad idea since they only ever go down in value. Is that true? Ok.
Suze: But that doesn't mean they're a bad idea. But what isn't mobile that goes, that doesn't go down in value. Anything mobile, a boat, a car, they all go down in value.
KT: But what if we're, we are looking at the home as an investment. Suze, what if we're looking at it as our home? Like they want a tiny house?
Suze: Let me tell you something, Ty... I would do this so fast. I can't even tell you
Suze: because what's happening in the United States right now is that the price of homes have skyrocketed, all right. Interest rates have skyrocketed to purchase a home. So therefore you need more money saved to put down. So you have at least 20% when you do buy the home as a down payment. But here's the other thing that has happened, property taxes. All right. Going up a little, not a lot,
Suze: but the insurance for the homes are so off the charts right now. I can't even tell you. Here in Florida, our insurance on our condo went up almost five fold. My liability insurance went up almost, I wanna say, you know, from like 5000 year to almost 20,000 year,
Suze: Flood insurance is up 20%. You have places like in California where State Farm and Allstate don't want to accept new policies anymore.
Suze: So the cost of owning a home right now is also skyrocketing in your late twenties. If you can get a little mobile home and you can live in it, your expenses will be nothing. Do you know how much money you'll be able to save? Oh, my God. That's exactly what you should do.
KT: I was thinking about something else.
KT: It'll be real cozy for you and your partner. Wait, I have one more question and by the way, we love tiny houses. You know, we always say Tyler that if God forbid we get a hurricane and we lose our island home and our Florida
KT: home, we look at each other. She said, where should we go? And I said, let's just get a little piece of land and make it get a tiny house. We look at, we look at them all the time. We love that and we like being really close to each other. All right. Next question is from Lisa. Help Suze.
KT: These are the best ones. Help. I need some advice. I love following you so much great advice. Everything I hear is to put savings into a Roth IRA and cash value life insurance.
Suze: You're not hearing that from me...
KT: You're not hearing that from Suze, not the life insurance part. I want to do both. My dilemma is that I have a 401k that I started over 30 years ago. A good part of it is in stock. So I have increased the value over time from about 20 K to now just shy of 300,000. Good for her. I'm about to turn 55. I haven't found any advice about what to do with this money.
KT: Do, or can I move it into a Roth account? It's investing aggressively and now that I'm older, I think a good portion should come out of the stock portion. Help. What is your advice?
Suze: Oh, girlfriend... I want you to listen to me closely.
KT: That's my quizzie.
Suze: It was going to be your quizzie. Where did you pull that from?
KT: Your quizzie file.
Suze: How did you get into my quizzie file?
KT: Just thought I'd take a peek.
Suze: So that you would be right and look up the answers.
KT: This one was complicated. So I just made it a question for you. Not for me.
Suze: What am I gonna do with her, everybody? Anyway, Lisa here's the thing. Whoever is giving you this advice about cash value life insurance, you are never to talk to that person again. Ok? You're to run, not walk away from him or her. You don't have a dilemma.
Suze: You have a really great situation. You have $300,000 in a 401k plan. That's fabulous. 55 is not old by any means. Trust me, given that I just turned 72.
Suze: So what's important is you could if you wanted to convert this money from a 401k, if you're no longer working where the 401k happens to be into a Roth IRA, but I would never want you to do that because if you did that, all $300,000 would be taxable to you as ordinary income.
Suze: So, what you would do is you might, if you want to move it from the 401k, because you can always leave it there as well, you would want to transfer it to a discount brokerage firm such as Schwab or Fidelity and do it into an IRA rollover. Within the IRA rollover, when you do that, you're not gonna owe any taxes on that transfer or on that rollover,
Suze: Then little by little start to convert it
Suze: or transfer it to what? A Roth IRA. Just that simple in the meantime. However, just know that you're young, I would not get conservative at this point in time
Suze: I think the markets are showing us that they're strong, they want to continue to be strong. They may not go down this year at all as I was expecting. And so were most of the people, they may seriously continue up for 2024. And so, so get yourself invested into good quality ETFs and or stocks that pay nice dividends so that they're paying you a dividend even if the market goes down
Suze: and you should be just fine. Do not and I repeat, do not even think about cash value life insurance.
Suze: KT, is that everything for you?
Suze: That's it Suze.
Suze: Now, KT, we kind of did a little quizie at the beginning of this. Do you want another quizzie or have you had enough?
KT: I've had enough.
Suze: You have, you don't want another quizzie that I have right here. Since you stole one of my quizzies.
KT: We'll wait, we'll wait. We'll do another one next, we'll do maybe a couple of them next week.
Suze: Oh, my goodness, listen to that...
KT: Maybe we'll do a quiz day.
Suze: A quizzie day?
KT: That would be interesting...
Suze: Because you know what happens to everybody when we do a quizzie? KT gets queasy.
KT: No, you get... no Suze, you're so corny. I don't get queasy. You should read, you get to read them all. You get to do the hard work and I get to answer.
Suze: No. People love to hear your voice. They don't necessarily love to hear mine. Although
Suze: I do have to say somehow I was listening to some talk that I gave years ago.
Suze: I actually can't believe how low my voice is in comparison.
KT: You mean now, as you're older?
Suze: Well, no ever since I had the surgery.
KT: Yeah, it's got, your vocal cords are very low.
Suze: I don't even know if people know I had a surgery about that, but that's a whole nother story. Everybody I had quite the year this year and last. All right. Anyway, so since Miss Queasy doesn't want to do a quizzie
Suze: that will bring us to the end of another edition of the Ask KT and Suze Anything podcast. This coming Sunday,
Suze: I think I'm gonna do a very very different Suze school than I've ever done before. And so you're just gonna have to tune in.
KT: What is it?
Suze: I'm not gonna tell you.
KT: Well, what's so different about what you've never done before?
Suze: I'm going to give them advice that I've actually never given them before. Really.
KT: On what topic?
KT: She's, she doesn't usually do that. She never does that actually.
Suze: Well, no, that's what this whole podcast is about, but more specifically what to actually invest in.
KT: I don't want to miss that one
Suze: Right. And where that advice can come from.
Suze: It's mysterious anyway, until then there's only one thing that we want you to say every single day. And it's this: today, wherever I go, I will create a more joyful, peaceful and loving world. And if you do that, we promise you you will be unstoppable.
Music: Music (out).
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