Emergency Fund, Interest Rates, Must Have Documents, Stock Market, Student Loans, Trust
March 02, 2023
Listen to Podcast Episode:
On this episode of Ask Suze & KT Anything, Suze answers questions about dollar cost averaging, rebuilding an emergency fund, remaining financially independent, secure and more. Plus, KT gives us an update on her purchase of Alliant Credit Union CDs.
Suze: March second, 2023
Suze: What do you want to say, KT?
Suze: She can't say anything because she's chewing on a gummy. Everybody. Alright, so Suze O here and just keep chewing away KT, you just keep doing that.
KT: And I'm hydrating my throat. Doesn't it sound a little dry? I am.
Suze: Are we going to have everybody listen to you gulp water again?
Suze: Oh, she's blocking the microphone. Anyway, welcome everybody to the Women and Money podcast as well as everybody smart enough to listen. This is the Ask Suze and KT edition, where you can write in a question to ask Suze S-U-Z-E Podcast at gmail dot com. And if KT selects it, we will answer it, or at least try to on this podcast. May I warn you that Miss Travis is extremely feisty.
KT: I'm very feisty. But I have, my first question is made me smile. You ready?
Suze: We're just going right into it?
KT: Does my throat sound a little bit horse?
Suze: No, It sounds like a little cat.
KT: That's not funny. Okay, ready everybody. First question is from Courtney. Hi KT And Suze, I'm 36
KT: just to get to that first line, made me...
Suze: What were you doing at 36 KT?
KT: 36 was a great year for me, Suze.
Suze: What were you doing?
KT: Oh my God, I was in Hong kong on top of the world. Probably at the pinnacle of my success as a, you know, managing director of an advertising agency. Very very very exciting times. Very exciting.
Suze: I love that. I just left being a vice president at Prudential Bache Securities. And I started out on my own the Suze Orman Financial Group. But what was so funny it was just me.
KT: No and Mary and I loved her business card.
KT: Suze she had one employee, Mary who used to be the receptionist at her dentist and she liked her so much. She said you want to come work with me, I just opened a company? And Mary said yeah and she joined Suze. But Mary was the best and her business card had a title that said Mother Superior. Mary, Mother Superior.
Suze: We had the best time. Mary was my Savior all those years. She went everywhere with me.
KT: And then with us. When Suze met me, Mary was like the threesome. She went everywhere with us now she's happily retired in the mountains with... no in Arizona. In Arizona with her husband. And um we miss her. We always miss Mary. But this is from Courtney who's 36. She said Suze,
KT: should I buy treasuries, CDs right now or should I continue to dollar cost average into the stock market. This money is for long term growth. And that made me smile too Suze. 36 years old.
Suze: Long term, you have long term, you have at least 40 years.
KT: Let's tell her about our certificate of deposit.
Suze: No, I don't want her to do that.
Suze: Because I want her at this age of 36.
Suze: I want her to take advantage of the downward movement in the stock market. So I want you to dollar cost average every single month into dividend paying stocks or dividend ETFs. Because really you can get as much growth out of a good dividend paying company as you can these growth companies so start doing that now and I tell you
Suze: 40 years from now you'll thank me. Although I'm sure you'll have a hard time finding me anyway. Alright.
KT: And this next one is from Travis and his husband David.
Suze: I know why she chose this one, Travis.
KT: Yea, my name is Travis. Travis.
Suze: That's not why you chose it.
KT: Because of my nephew Travis?
Suze: Of course your little golden boy.
KT: My little Golden boy. Okay ready. Travis said, Suze. I love your podcast.
Suze: Yeah thank you Travis.
KT: He's going back listening to every episode since 2019. So he's going to be super smart.
Suze: Are you watching by the way all the Suze Orman shows on freeVee TV? Yeah you would love you would love that more than anything because it's there that you'll find the very infamous "Can I
Suze: Afford It?" segments where I say you are so either approved or denied but I don't quite say it that way. Ok go on.
KT: Ok. So says my husband and I don't know if we should prioritize paying off our student loans there at 5.7% fixed and they have about $67,000. Or should we establish an emergency fund?
KT: Now. Suzy listen to this. This is very sweet. We had an emergency fund but due to an emergency it's now empty. And then he said we're both 28.
KT: We have no consumer debt. Just a mortgage, a car payment. And he said thanks for all your help. Travis and David.
Suze: Boys. I want you to listen to me imagine that you had whatever emergency that you happened to have just a little bit ago. And what would you have done if you didn't have an emergency fund? Oh you say that you have no consumer
Suze: debt. You know just a mortgage and a car payment. But if you hadn't had that emergency fund, oh you would have had a serious amount of credit card debt right now and the interest rate probably would be very high because if the Fed funds rate continues up. So does interest rates on credit cards. So therefore let's see what happens with Biden and the administraton
Suze: and what they do with student loans and all of those things make the emergency fund your number one priority. Especially because interest rates are as high as they are. You might. I'm very serious about this. Start your emergency fund at the Alliant Credit Union. Both of you can do this in the Ultimate Opportunity Savings account go to My Alliant dot com.
Suze: You each put in $100 a month you do so for 12 consecutive months at the end of those 12 months they'll give you $100 and you're earning currently 2.95% interest. Do it that way boyfriend. All right, KT.
KT: Okay. Next is from Jill.
Suze: Oh your voice is sounding better.
KT: Is it? Does it sound a little hoarse?
Suze: No, it sounds like a little kitty cat.
KT: She's so corny. Alright ready. Dear Suze and KT. My mom and stepdad have currently listed me on their bank accounts as payable on death to pay for things after they pass. Then, I'm to divide the leftover money amongst my siblings and step siblings. My mom asked if there's any tax consequences to me if they do this.
KT: I want her to just put the accounts in the name of their revocable trust instead. What do you suggest? And then she's asked, Jill's asking you Suze are their tax consequences to her if her mom puts her as a P. O. D. on their account.
Suze: No because you're inheriting money. I doubt highly. You have to remember there's two kinds of taxes. There's income tax and then there's
Suze: Estate tax. And estate tax, they can leave you... You know mom can leave you up to like $12 million right now. That drops to $5 million in 2025. But that's you know... that's estate tax. So we'll see what happens there. But you're gonna have to pay that one way or the other if they leave you more than that amount of money, income tax. Now there's no tax ramifications for you to do that. However,
Suze: the main reason forget the pay on death account that this should be in the living revocable trust, is what happens if mom doesn't die. Let's say mom becomes incapacitated at the same time, Dad becomes incapacitated. Don't think it can't happen. I've seen it happen more than you could imagine.
Suze: And now you need that money to pay their expenses because they can't write checks. They can't pay their bills. You can't touch that money because you don't get to use it or help anybody with it till they die. If it's a pay on death account with a living revocable trust that has an incapacity clause. If anything happens to either one of them or both of them, you would be the successor trustee and could sign for
Suze: for everything and take care of them. So just make sure they do it that way. All right, KT.
KT: Okay. This is my favorite favorite email so far of the day. They love the way Stacy wrote it. It's from Stacy. She writes Suzeee and KTeeee!
Suze: Are you sure it was like Suzeeee, and KTeee!
KT: Post divorce recovery and mom of three teens. I decided one day I needed to face my financial fears. I started listening and simply absorbing your podcast. I've learned so much and I cannot thank you enough. My first husband was a very nice guy, a great dad, a financial disaster and phenomenal liar.
Suze: Wait wait that's how things go together?
KT: It doesn't wait, so ready? Stacy said now I'm remarried to a wonderful man. But Suze I feel my heart race. I get nervous every time we talk about co- investing.
KT: My question is how do I maximize our joint savings potential together while maintaining some feeling of financial independence?
Suze: Stacy, did you ever watch me on the Suze Orman Show? And if you had
Suze: I ended every single one of those 600 and some odd shows with a statement that was people first then money then things now when I said people first so many people took it the wrong way.
Suze: They thought that that meant generosity and you should always just help people and blah blah. I meant it that you you need to put yourself first before anybody and anything. Just that simple.
Suze: What is the goal of money? The goal of money is for you to be secure.
Suze: It is not necessary to combine finances or have joint accounts for true love to emerge true closeness and true growth. Because ask Miss Travis, how many joint accounts do we have KT?
Suze: How many are we ever going to have?
Suze: Right, Now why is that?
Suze: It's because it makes me feel more secure. It makes her feel more secure and that is all your new sweetheart should care about. Is that you are secure. He should be putting your feelings first because you're putting them first and not about let's combine money
Suze: and we can make more that way. No, you can't keep it separate. Your little voices telling you not to do it. So I just don't do it. That's what I'm saying. And I just want to remind you...
KT: And we're madly in love!
Suze: What does that even mean madly?
KT: Madly in love. I don't know. It's a great expression though. You know, mad.
Suze: Do you know the expression that Colo has been saying that just is like...
KT: I know you love this when I hate him with all my heart. Something like he says this when he watches sports.
Suze: Yeah, hates the Dallas football team with all of his heart. Alright. Don't ask me why he would even hate a football team, but he does. Right. So I go how do you hate something with all of your heart? But anyway, that's besides the point we got it. But anyway, right. I just want to remind you Stacy of a line you wrote here. My first husband was a very nice guy, a great dad
Suze: and a financial disaster and a phenomenal liar. Okay, so
Suze: who knows how things turn out. So therefore all I'm saying to you is you don't have to figure this out. You stay independent. He should want you to stay independent and don't you ever not trust yourself. You got that? If that's how you feel, that's what you want, that's what you do, KT!
KT: All right. This next email again addresses the what ifs in life
KT: My wife had to retire early due to a total and permanent disability. Probably everyone's nightmare right, Suze.
Suze: We were close to that.
KT: She is taking her employer provided pension early at age 55 due to this disability.
KT: So here's here's her husband's question, Suze, since her disability pension is reported as earned income in Box 1 on a W2, is it considered earned income also according to the rules which allow my wife to purchase an IRA? May I also contribute to a spousal IRA, as a non
KT: wage earning spouse. We file a joint federal income tax return and fit the income limits.
Suze: Yes. So it depends here truthfully because I know that he said, right, that her disability pension was reported on their earned income in Box 1 on their W2.
Suze: But whether it's considered earned income for IRA contribution purposes, Katie depends on the nature of the disability pension. So if the disability pension is considered taxable compensation.
Suze: So if they are going to pay taxes on it, then it will count as earned income and then she can have an IRA or a Roth IRA. Which is what she probably should have more than a traditional IRA and he can have a nonworking spousal IRA. However, if the disability pension is considered unearned income or non taxable, then it won't
Suze: count as earned income for an IRA. So therefore it's important to consult with a tax professional to determine whether her specific disability pension is considered taxable compensation for IRA purposes period. Now we know. Next KT don't throw me anymore like that.
KT: What if I would have said, I don't know?
KT: You know the answer to everything, pretty much. This is from Fariba. Good morning and thank you both for providing such great education and empowering all of us. I have a dear friend who is 63 years old and retiring friend, this is my dear friend,
KT: She has $700,000 in a portfolio that will be managed by her financial planner of several years. His fee is around 1% of the portfolio total.
KT: Is that a fair fee? She asked me to find out from you since I am a loyal listener, reader and follower. This is from Fariba. So what should Fariba advise her friend?
Suze: To start listening to the Women and Money podcast. Are you kidding me? Because, do you know how many times I have addressed this exact question. So depending on my mood, I might say to you have her just search it
Suze: and see if she can find the answer. But then again, since I'm in such a loving mood today because Miss Travis told me she was madly madly, madly in love with me. Right, here's what you have to know. I find this curious only because she's been with this financial advisor already for several years. Think about that. And now she's asking
Suze: after she's accumulated a $700,000 portfolio, is his fee of 1% too much. What is making her now ask that question when for several years she hasn't. So that's number one. Number two,
Suze: 1% is a fair fee. If and only if and everybody listen closely to me, if you go to a financial advisor
Suze: and they make their money by investing your money for you. They don't get any commissions whatsoever. They get 1% of whatever the portfolio value is worth. So if it goes from 700,000 to a million now they get 1% of a million dollars. If it goes from 700,000 to 300,000 now they're only getting 1% of 300,000. So if they make you money, they make themselves money, however,
Suze: if you're gonna pay somebody 1% they really need to be managing your money. So what does that mean? That means they don't simply put it into mutual funds or exchange traded funds where you're also paying an expense ratio within those mutual funds or exchange traded funds for some portfolio manager to be managing those investments, they don't charge you 1% on
Suze: cash that you may have sitting in your portfolio and they do not charge you 1% on any individual bonds that you may buy. So for KT and myself we have a portfolio of just stocks. Then we have a portfolio of just bonds. We have different portfolios. And the registered investment advisory fee that we pay
Suze: is only paid on the individual stock portfolio. The money that we have in bonds when individual bonds are purchased, there's a commission built into the bonds. Therefore the advisor should not also be getting 1% on a bond portfolio that you already paid commission on.
Suze: And that there really is no trading or management to be done because most of you are just going to be holding those bonds till maturity.
Suze: So that is the answer to her question. How is the money invested? Is she paying 1% on a bond portfolio? And is she paying 1% for the advisor simply to buy mutual funds or exchange traded funds?
Suze: If he or she is she's paying too much. But something else is going on for her to ask this question after several years of her being with him. All right, KT.
KT: Okay. Next is from Brenda. Hi Suze. My question is whether we should draw out of a 401(k) for a few years to
KT: delay taking Social Security, retiring at 62. Would wait for three years to 65 to start Social good or bad idea?
Suze: Pop Quizzie. That's your pop quizzie!
KT: Bad bad, bad, bad, bad. No, this is not a pop quizzie. This is just a bad idea. First of all I took mine at 70 years old Brenda.
Suze: Yeah but your situation is a differnt. Don't talk to her like...
KT: It's a bad idea. Ok, Suze is going to give you advice. Bad idea.
Suze: It is a bad idea because number one, even if you wait till you are 65, is full retirement age. So for most people who were born 1960 or older. 67 is full retirement age. You would never ever, ever ever unless you had an illness, you didn't think you were going to recover from it. Start Social Security earlier ever.
Suze: But if you're healthy if everything's okay, you're not gonna start Social Security at 65. And this is not the time when you would want to be taking any money out of a 401(k) for a few years because you want that money in the 401(k) to continue to grow and grow and grow. So no you wouldn't want to do that my love. But here's what you would want to do. You're not gonna retire at 62
Suze: maybe you'll leave the job that you currently have. But then you're gonna have to find another job
Suze: in order to make money so that you do not touch your 401(k). And you do not touch your Social Security. If you do you will be making the biggest mistake you have ever made.
Suze: Why are you looking at me like that?
KT: Because I think Brenda should meet my next question. My next email from Rachel.
KT: Ready Suze? I'm obsessed with saving money.
Suze: Wait, KT, wait, Do you remember that one talk I gave in Atlanta?
KT: Oh my God, I do. What was that university? It was great.
Suze: I fixed two people up that were in the audience.
KT: There were, it was a great talk. I don't remember why you got them both together, but they were both divorces or single...
Suze: Well, just like now, one person way up in the balcony asked me a question, I answered the question. Another person way down in the front of the place downstairs asked me another question and I go
Suze: oh my God, they would be the perfect, perfect couple and we got them together and I think they're still together but...
KT: You and Rachel and Brenda. Suze, I'm obsessed with saving money. I think I saved to the point of not enjoying my life, I have no debt, no mortgage. My children and my parents are financially self sufficient.
KT: I have about $1 million, which includes a pension plan. So Suze, why do I agonize about going for a manicure once a month?
KT: Well I love this email, Rachel, live it up a little bit.
Suze: So Rachel, wanna hear something funny, which is on the Suze Orman Show, I was trying to figure out ways between 2007, 2008, 2009, during the depression, how could people save money?
Suze: So I came up with this idea that if you want, you can get a manicure but don't put polish on because if you don't put polish on, you don't have to go back every week or even once a month, you're okay for like six weeks or maybe even two months. Well that didn't go over very well with the manicurist but that's besides the point. But here's the thing:
Suze: Somehow you have a fear about not having enough money, you say you have $1 million dollars invested for retirement, which includes a pension plan, but you don't know for sure... I would bet you any amount of money how it's invested, how it works, what your pension is going to be.
Suze: I'll bet you any amount of money that you've turned that money over to some financial advisor or it's in your 401(k). And you really don't have control over it. You know, you have the money
Suze: but you don't know what the money is invested in and how it actually works. Because I have found that when you're not in control of your money and understand it, that's why you're afraid. Because somebody else has the power over your money versus you. Even though it's your money, you don't have power over it. And Katie, do you remember what my favorite saying in life is, when it comes to money and power? What is it?
KT: If you'll... you'll feel... if you're if you don't have the power over your money...
Suze: I guess you can you call Barbara and have her help you with that. You are never powerful in life until you are powerful over your own money. How you think about it, feel about it and invest it.
KT: And spend it. Rachel needs to spend a little.
Suze: No she does not need to spend KT you're wrong here. What
Suze: Rachel needs to do seriously, KT is get control of her money by understanding it. Knowing about it, investing it herself. And I promise you, if you do that girlfriend, you might be going for a manicure once a week. Next question, KT, KT, I got news for you, spending money never solves the problem of being afraid to spend money.
Suze: It only creates more fear because you haven't done anything to get rid of the fear or understand why you are afraid. You know, everybody, I do have a course called concrete your financial fears that all of you might want to take. I think if you go to Suze Orman dot com, I think it's there. I don't even know where we sell it to tell you the truth, but many people have taken it recently and they're writing me their new truths and what their fears are. It's kind of interesting anyway.
Suze: It is that time is it not KT?
Suze: But KT, before we do the quizzie, how did you do investing in your certificates of deposit with Alliant Credit Union?
KT: I bought three.
KT: I got two six months certificates and one three month.
Suze: Why did you get to six months?
KT: I just wanted to, because they came... I took money from different accounts that I had and then I decided I was going to transfer.
Suze: You just did right now when you said "I did," did you do it?
KT: No, Barbara did it. My financial business manager.
Suze: See that everybody. I'm not even her financial business manager.
KT: You're my financial advisor. Barbara just follows the instructions based on the request. She does a great job.
Suze: Ok, let's do your quizzie. If you don't know what the CDs that KT is talking about.
KT: You cannot resist this and everybody that's why I bought all and I took all the spare money that I had that wasn't earning a great interest rate.
KT: And I transferred it into the Alliant Ultimate Opportunity Savings CD... Certificates of deposit three and six months. The six month is giving me 5%. Suze. I was getting like nothing in one of my accounts. I said to Barbara, why was it in there?
Suze: All right KT sorry I asked what was wrong with me anyway. So everybody it is quizzie time and this is where I ask KT a question, but I'm also asking it to all of you because you need to learn how to answer every question that's ever asked
Suze: on the Women and Money podcast. That's how you start to get control over your money. This one is from Tammy,
Suze: Are you ready? I'm ready. Hi, Suze and KT. In your past few podcasts, you have been focusing on the dividends of stocks rather than the price.
Suze: If we are investing for the dividend, would you suggest reinvesting the dividend or taking it in cash during the volatile time? Cannot thank you enough for all that you do. I feel unstoppable. KT don't answer right away. I just want to make a comment to Tammy. You would only buy a stock for the dividend when you knew the dividend was solid.
Suze: The earnings of the company itself was solid. The free cash flow of the company was solid
Suze: and that the company was growing. You would never, ever, ever just buy a stock that was a horrific stock. Even though it was paying you a good dividend, you only want to buy good quality growing stocks. KT, have you been thinking about this? What would you do? Would you reinvest now think about it carefully, the market's going down. She could get that dividend
Suze: and she could reinvest it in
Suze: a money market account or the Alliant Credit Union at 2.95% or whatever it may be. So she could be earning interest on it and it could be safe. Or should she be reinvesting that dividend, where it's possible that the market could continue down? Because we've seen that happen now with some of the energy stocks,
Suze: right? And the market could go down. So the dividend has gone down in value to what should she do? Reinvest it or in markets like this, take it and invest it somewhere else.
KT: I think that she is unstoppable. Look at her last line, I think she should take that dividend and invested in more stocks.
Suze: So she should do a dividend Reinvestment program. What's that called?
KT: Dividend Reinvestment program.
Suze: You don't remember this? It's a DRIP.
KT: Yea, a DRIP. (sings) I'm unstoppable.
Suze: Yes, I know. Don't sing for people now. So, the true thing, I would do it. Yeah. Ding ding ding Ding Ding ding. So listen everybody,
Suze: as you're reinvesting the dividend, the dividend itself is making whatever percentage right now that company is paying you. Plus it is buying you more shares as the company goes down, the more shares you're able to buy of that company. And then in the long run, when it turns around, you are going to be really, really happy.
Suze: So that's what you should be doing. All right, KT, that's it.
KT: It's really called a DRIP huh?
Suze: Yeah. The Dividend Reinvestment Program. Dividend = D. Re = R
Suze: Investment= I. P = program. All right. What do we want to tell everybody, KT?
KT: I get a kick out of that drip thing. We want to tell everyone that wherever you go, whatever you do, whatever you say, you will create a more peaceful, joyful and loving world. Every drip.
KT: Drip by drip.
Suze: All right. And and if you do it drip by drip, you will be unstoppable.
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