Divorce, FICO, Fico Score, Financial Independence, Retirement, Social Security
May 18, 2023
Listen to Podcast Episode:
On this Ask Suze and KT Anything episode, Suze answers questions about financial empowerment, Social Security after divorce, FICO scores, inflation and more.
Music: (Music In)
Suze: May 18th, 2023.
KT: I'm so excited... hi, Suze, Good morning. I'm so excited today. You know why...
Suze: Here we go again, you know why we go, I do know why
KT: Our niece and nephew and their parents, my little sister and her husband are coming today
KT: at about 1:30 to the island and I can't wait. And for those of you that, that will listen to something fun. Suze when her Starlink went down and she wasn't able to record and was sitting around waiting and learned some card tricks. I said, what are you doing? And she was learning these really complicated mathematical card tricks. I said, why are you doing that? And she looked at me and I said, I know why...
KT: Travis. Travis is our nephew who's 25 but he's been spending almost every summer with us since he was three. And when he was a little boy, he would sit with his aunt Suze and learn magic tricks.
KT: So she decided to have a little nostalgic reunion with our Travis. So we're excited. They'll be here in this afternoon.
Suze: You must be excited because you didn't even let me say welcome to the Women
KT: and Money podcast and Ask Suze...
Suze: and KT Anything. Do you see how excited she is?
KT: Yeah. And I, I miss, I miss you all. Who do you miss the audience?
Suze: You mean the podcast people? Why do you miss them?
KT: Because I was gonna do Sunday with her. And she said, no, no, no, I have to do something really important. I said, OK,
Suze: KT is wanting to do every single podcast with me.
KT: Let's vote.
Suze: All right, you can write in, right? So we might just have to make every podcast, Ask KT and Suze Anything. And then...
KT: Well, we're starting today with something a little different.
Suze: What do have that's different?
KT: I have all of my questions today for you from the wall. I decided... Yeah. And it's kind of cool because the people on the wall
KT: wrote questions that related to the Sunday podcast that I was not participating in.
Suze: But KT you never participate in Suze Schools. So I don't understand what the problem is here. But wait, wait, I just need to wait, wait,
Suze: everybody. Let me try to calm her down. So I can just tell you a few things here. When KT says the wall, we have an app called The Women and Money app and you can download it on Google Play or Apple Apps and on the Women and Money app.
Suze: There is the wall, we call it, and that's where everybody posts. And lately people have been posting their questions or comments. And what's fabulous is that many people have been answering them. Now, I watch what goes on there and if somebody is wrong with their answer, I'll let them know.
Suze: But KT... I didn't know you were even on the app.
KT: Yeah, I like it. I like the wall is really cool.
Suze: Why don't you post?
KT: Do you know why? It's the same reason why I'm not on Instagram or Twitter or any of those? The same reason..
Suze: Tell everybody she's really bad at it.
KT: I'm so bad at it. And when Suze and I were first learning how to use all of this social media and all of these apps and
KT: programs, I was the worst and I made a few big mistakes. I was like, well, I'd write something to Suze and I'd want her to see it and I'd hit the wrong thing or do the wrong and the world had all this information or my message. I'm not good at it. Alright.
Suze: Anyway, so,
KT: but I love reading the wall...
Suze: What's happening on the Ask KT and Suze Anything podcast is if you have a question,
Suze: you can either post it on the wall or you could send it in via Ask Suze, S U Z E podcast at gmail dot com. And, or you can go on the Women and Money app as well. And there is a special section that allows you to send in your questions. And if KT chooses it, we will answer it on this podcast KT.
KT: Ok the first... are you ready? Are you ready, Suze?
Suze: Obviously. Tell everybody what we're dressed in today.
KT: Well, it's morning we have on our bathrobes and they say Purnata, they're embroidered with a gray silk,
Suze: which is the name of our home and our boat and wine or the, you know, the wine that we have and everything.
Suze: And Purnata in Hindi means perfection, which KT absolutely is.
KT: So are you Suze. And so is this podcast and we're going to start with our first comment, not a question, a comment, but I want to share it with all of you. So this says I have always paid off my home early.
KT: I've been listening to you Suze for years. Why? Not because I stay in the house all my life... that's made me laugh. But because I came from a family of 10, with a mother that had a cerebral hemorrhage when I was eight, I was the oldest daughter.
KT: So Suze, that sense of security has been life changing for me. I'm now 67 divorced and on my own and I feel happy and secure.
Suze: Why did you choose that, just out of curiosity.
KT: I think it was an interesting comment to remind people that listening or learning and becoming financially
KT: empowered is really, really important and it does set you free in a way.
Suze: You know, I think it's very important to really get that anything can happen at any time.
Suze: And I know that we all make these plans and the plans are, we're gonna work till we're x years of age. We'll have enough money. We'll pay off our house then. But we never stop to think, Oh my God, what if something happens? What if I can't work all that time? But I wanna stay in my house. How do I make my mortgage payment if I don't have income
Suze: and examples like that of what can happen to a mother or you or even what happened to me or whatever it may be. You just never know. So I will always think that the number one goal if you know you're going to stay in the house forever
Suze: should be to pay the house off as soon as possible. All right KT, that was a nice comment.
KT: The next question. Um and again, these are all from the wall and as I read them, when you're listening, you'll find a common thread. This is from a community
KT: and this community feels very safe with each other. So, Suze, the next question says, hi, Suze, loved this podcast. I am a divorced woman...
Suze: Alright and this woman was talking about last Sunday's podcast.
KT: Yea because listen, loved this podcast. I'm a divorced woman and was born in 1960. I believe that I'm not able to start with my social security at 62
KT: and then take half of my husband's when I'm 67. I think this has changed for people born in 1960 later, please clarify.
Suze: Yeah, it was actually the podcast before this last Sunday. Last Sunday was, you know what I learned when I went to all those courses. So here's where everybody is getting confused.
Suze: There is a big difference when you collect social security as to how much social security you can collect when you are married with a spouse and you want to collect your spousal benefit because your half of your spousal benefit would be more than yours versus you are divorced. You have an ex spouse
Suze: and therefore you want to collect your own and then possibly switch to collecting your ex spouse's at your full retirement age. So there are very different rules and then it's even different if you happen to be a widow or a widower survivors benefits. However, for these two different types of situations,
Suze: it really is very simple if you are divorced. Ok. And this woman says I am a divorced woman. All right. So as a divorced woman, she could absolutely take her social security any time she wants, starting at the age of 62.
Suze: But if you take it at the age of 62 there will be a deduction. It could be as much as 30% depending on age as to when your full retirement age is. In most cases, it will be now 67 but she takes it at 62. She gets a deduction. Now she is 67
Suze: and she wants to take her ex spouse's social security. She will be entitled to 50% of what her ex spouse's social security would be at her ex spouse's full retirement age. If however, she wasn't a divorced woman, she still was married
Suze: and she started her social security at 62 then, which would be possibly a 30% reduction from what she would have gotten if she had waited to full retirement age. And then she switches over to her husband's when she is 67 when that would be, let's say her full retirement age,
Suze: she still gets that 30% reduction of what half of his social security would be at his full retirement age. So it works very different. So you're not subject to the reduction if you are an ex spouse of what your ex spouse is taking, you are if you are still married,
Suze: was that a very confusing explanation?
KT: It was a little bit confusing. But um, remind everybody that she's only entitled to the ex-husbands while she's still single if she gets married, if you get, that's really important, but everyone has to remember that.
Suze: So don't get remarried or if...
KT: ...you're, if you get remarried, all those benefits are gone.
Suze: ex-husband, right. Go on. All right.
KT: So next question is Suze, what exactly can happen if your treasury bills mature in June and debt ceiling isn't lifted? Is this suggestion that you don't get any of your money back at all?
Suze: So, here's what everybody really needs to understand.
Suze: Nobody knows for sure.
Suze: However, the one woman who probably knows as much as anybody could possibly know when it comes to this topic. What happens if we don't raise the debt ceiling? Is Sheila Bair the right who was the chairman of the FDIC and she was on this podcast and she also is a very, very good friend of mine.
Suze: So just yesterday, I wrote her and I said, people are going crazy. Can you just tell me what can really, really happen? And then, you know, I wrote her all the things that you're asking and everything and here is exactly, and I am quoting her. She says, hi Suze,
Suze: I hate that all of this drama around the debt limit is scaring people. I don't think our government will default on its debt. At the 11th hour, they will reach some kind of agreement,
Suze: Should that not happen, yes, I believe this administration will invoke the 14th amendment to keep financing the government and make good on its obligations. Now, remember everybody, I talked about the fou
Suze: 14th amendment just in last Sunday's podcast. She then goes on to say in my view, there would be a strong legal argument to support that action. She's talking about the 14th amendment. I hope it doesn't come to that because it would likely result in a long legal battle. But that would be better than a government default. However, bottom line,
Suze: they will not lose their money in treasuries. I don't think again that the government would default on any of its obligations, but I am sure it would never default on its obligations to investors in US treasuries. So that is exactly what Sheila Bair says.
KT: So just um the question that came in has so many responses on the wall that say, hey, I have the same question. I have two T bills that mature in June. Another one said, watching this question. Thank you. I have the same question too. Many, many people responded.
Suze: So and I know that many of you are afraid and the truth of the matter is it isn't looking good everybody. I'll tell you that it's not
Suze: and it's not looking good because President Biden very shortly has to leave for the G7. When are they gonna negotiate all this? You know, June is right around the corner. So we'll see what happens. But the one person that I put 100% of my faith behind that really knows. Not a pundit, not a news person, not even me
Suze: is somebody who has had to work with this for a long, long time during the 2007, 2008 and so smart. All right, Next KT
KT: OK, Suze, thank you so much for the synthesis of what you learn.
KT: I have to say it's a little tough to swallow one percenters claiming that a new normal of 3 to 4% inflation is actually good for the economy.
Suze: Alright, stop for one second there, KT. What KT is referring to that this poster is referring to, is last Sunday in Suze's school,
Suze: I was doing a summary of just a few of the things that I learned in this conference that I took where there were over 50 speakers that were the... not just speakers, they were economists, they were just all brilliant. Number one, right? And one of the people laid out, why
Suze: not only do they think that our normal now inflation rate will be 3 possibly 4% but more likely 3% and laid out a scientific study as to why that would actually end up being good for the economy versus bad.
Suze: And this poster did not like it at all, obviously.
KT: Let me finish why... ready? Do these folks understand what it means for retirees or those of us saving for retirement? Those of us who buy groceries every week, let Powell raise rates and get inflation down to 2%.
KT: I'm really really tired of talking heads who care more about their portfolios, let's be honest, than about the cost of living for the rest of us trying to assuage us. Inflation is good. Don't you worry. That is utter nonsense and capitalism at its true worst. So that's a very strong statement.
Suze: It's a strong statement and I just want to tell you,
Suze: it's a very, very inaccurate statement.
Suze: There is nothing... you may say let poll raise the fed funds rate to get inflation down. But if you saw all the evidence that was provided not to make these, these people richer, but to really save the economies so that everything doesn't crash,
Suze: right? But that if Powell continues to raise the fed funds rate
Suze: we very probably will go into a deep recession and inflation will come down. But so will the stock market so will jobs so will everything. So it's a very, very delicate balance. And I think you cannot take just a very simplistic view of, oh, we'll be fine if there's no inflation. You talk about retirees,
Suze: where did retirees get to put their money when inflation was almost at nothing and interest rates therefore were at nothing. They were making 0% on their retirement in terms of savings, money market accounts. I mean, I remember with Alliant Credit Union when we offered all of you 00.6% you just couldn't believe it.
Suze: There has to be a place for people to be able to put money and get 4% on it or 5% so they can earn income and not have to be forced to go into the stock market to get dividends and take risk with their money.
Suze: Also, you don't want everything to be in a situation where people are losing their jobs. Everything is crashing because why? The feds raise their rates, inflation comes down and everything, you know, isn't that simple. So I ask you to have fait
Suze: that you may say the one percenters you have to know I am a one percenter. KT is a one percenter. So do not put me and certain other people into a category that we don't care and we only care about our own portfolios and everything like that. I just want to say you're really off base there, but I honor your opinion, which is why obviously KT read it
Suze: but it's not as accurate as you think, KT next.
KT: So Suze, this is a great one. I, I really like this and I'm curious to hear your answer, Suze on your Sunday podcast. I do want to hear what your idea would be to rate people's credit worthiness if there was no FICO score. It's a great question.
Suze: Let me tell you why
Suze: I think FICO and credit scores. Remember FICO stands for Fair Isaac Corporation, the company that created the credit score and it is the legitimate credit score that almost 80% of the lenders look at when they decide what interest rate they are going to give you. The higher your FICO score, the lower your interest rate, the lower your FICO score, the higher your interest rate.
Suze: All right, I'm gonna tell the story.
Suze: I'm on the Suze Orman Show, which by the way, you can go to Freevee and watch all 600 episodes. I'm on the Suze Orman show and we have a caller
Suze: and the caller is telling me that they have a really great FICO score, but in order to have a good FICO score, they have been taking out payday loans in order to pay the minimum payment due on their credit cards. And I said, what did you just say?
Suze: And they said, yeah, that's how I do it because I have to keep my FICO score up so that when I apply for credit, I can get credit, but they were paying for their credit cards from where from payday loans. Then another caller, same thing
Suze: I'm keeping my FICO score up by taking money out of my 401k plan as a loan just so I could pay the minimum payment due, Suze on my credit cards. That's when I started to realize that FICO had no way of knowing where was the money coming from
Suze: that people were using to at least pay the minimum payment due and be on time with their credit card payments and other credit payments. They didn't have a clue.
Suze: And then it came to pass that there were many people that didn't want a credit card because they'd rather pay in cash
Suze: and because they were paying in cash, they were actually penalized because they didn't have a FICO score because the only way for you to have a FICO score would be to have some type of credit that you paid on.
Suze: So if you didn't have any credit, you didn't have a FICO score. If you didn't have a FICO score, Well, now you couldn't get anything. You couldn't get a telephone, you couldn't get Direct TV. You couldn't get a car, you couldn't rent a car, nothing. And then I started to realize that people were punished for pain in cash,
Suze: but they were rewarded by paying the minimum payment due on their credit cards, even if the interest on their credit card was 20 some odd percent.
Suze: That made absolutely no sense to me whatsoever. So therefore, I really think that the system doesn't make any sense. I just have to say one other thing about this that you got me started... During the pandemic and KT was my witness here. I called the FICO people
Suze: and I said to them, listen to me, you need to put a freeze on everybody's FICO score as to what it was before the pandemic hit
Suze: because nobody should be penalized for having lost a job, not being able to make payments and all the things that the pandemic would have brought on to households they absolutely wouldn't listen to me. And I was like, what is wrong with all of you? So while it's true, we live in a FICO world.
Suze: There's got to be a better way to do it. Do we do it by you make a mortgage payment with cash that gives you credit, you pay your rent with cash meaning you send in a check or whatever it is. So when I say cash, I mean that you get credit for that when you just use cash as much as you use credit,
Suze: that you get a reward for not having any debt, not carrying anything like that and you still get to see your ability to pay. Do you pay your utilities on time? Do you pay your Direct TV bill on time? Do you pay everything on time? Even if you pay it in cash? I just think FICO is totally outdated.
Suze: Next question, KT.
KT: Well, I still have, I'm still a FICO on my mind. Here's another one. I think we should get rid of the FICO rating. Do you think it's a good idea to check your score every time your financial institution allows you to on the monthly statement? I never do because I do not know if it affects my FICO score or not. What are your thoughts, Suze?
Suze: So, here's the thing, I think it's great that you have a financial institution
Suze: that allows you to check your FICO score for free every month I would do. So, you know when you check a FICO score, they know very well. Are you checking your own score just to make sure that it's ok? Or are you a financial institution that's checking your FICO score? Because maybe you want to take out a loan with them and they look at, for instance, you go to shop for a mortgage,
Suze: you want to make sure that you get all your mortgage checks within a two week period of time
Suze: because then FICO knows that you're shopping for the best rate for a mortgage. If you start having businesses, you know, check your FICO score all the time. They know that you are applying for a lot of credit and then they get scared and then yes, it hurts your FICO score. But when an individual checks their FICO score, it doesn't hurt it at all.
Suze: Why should you check it all the time? Because we happen to live in a day and an age when identity theft is rampant. And one of the easiest ways for you to know if somebody has stolen your identity is if your FICO score all of a sudden goes down for absolutely no reason,
Suze: then you go, oh my God. And then you check it and you find out what's going on. So that's why it's not a bad idea to check it all the time.
Suze: Although KT, I can't remember the last time we checked our FICO scores. The truth of the matter is the reason we don't check our FICO scores, now, all the time is our credit is frozen. It is locked down. So, even if we went to check our FICO scores, we wouldn't be able to check it ourselves at all without unfreezing our credit.
Suze: But do I think it's better to have frozen credit than check your FICO scores all the time? Oh, you bet I do. All right.
KT: Ok, Suze. You ready for next... Now, we're going into the Roth world.
Suze: I'm not going to have a quizzie for you.
KT: All right. Are you ready?
KT: Are there significant disadvantages to using contributions to a Roth IRA as a one year emergency fund versus housing an emergency fund in a high yield savings account and, or laddered CDs? Are the savings account and CD options significantly better than using Roth IRA contributions.
Suze: All right KT... pop quizzie!
KT: Absolutely. Yes.
KT: Yes. Yes.
KT: Are you asking me which one's better?
Suze: Kind of...
KT: Ok. Go.
Suze: Right. That was your answer to this question? Yes? (Wrong answer noise)
KT: No. Yes. It's better to use the ladder CDs.
Suze: All right. Everybody listen to me closely. You too, Miss Travis. Right.
Suze: The first part of the question, this is a quizzie... Are there significant disadvantages to using contributions to a Roth IRA as a one year emergency fund versus housing an emergency fund in high yield savings accounts? We'll just stop it there? Yes or no.
Suze: Is there...
KT: Use the Roth.
Suze: That's your answer there...Why?
KT: Well, you don't want to break into a, um, a high yield.
Suze: No, no, that's not the reason. It's the right answer. Wrong reason again. So... (wrong answer noise)
KT: Well wait a minute, let me, let me think about it because with Roth, you can take money out and put it back in
Suze: No you cannot, I don't know where you got that idea.
KT: All right. So, tell me the, tell me what to do. Me and that Roth... That guy named Roth. All right, tell me what to do.
Suze: All right, everybody listen to me closely. Any money that you originally put into a Roth,
Suze: you can withdraw without any taxes or penalties whatsoever.
Suze: Within a Roth IRA, you can invest your money in a high yield savings account or a money market fund that pays you a 4% rate or whatever. And that could be like your emergency fund. Now, obviously
Suze: you cannot take the interest out of a Roth IRA until you've had it for at least five years and 59 a half for it to be tax free.
Suze: But one of the reasons that I like using a Roth IRA as an emergency fund,
Suze: especially if you invest it properly where it's safe. It's sound, there are no penalties. You can get your money out whenever you want, but it's earning a high interest rate
Suze: is because there's a maximum that you can put into a Roth every single year.
Suze: And if you were able to, let's say you were under 50, put in $6500 this year, you put in whatever the limit is next year. But let's just say it's 6500 and 6500 and you haven't needed to use it. And at the same time, possibly, you're also building up an emergency fund outside of a Roth IRA by saving money.
Suze: Eventually, maybe you have enough savings outside of a Roth IRA as well. But you didn't miss all of those years of being able to put $6500 into a Roth. And then you have all this money that's in a Roth that you then can actually invest. What you would never want to do. However, is within a Roth,
Suze: invest in a certificate of deposit if you are using the Roth as your emergency fund. Why? Because there is usually a 3 to 6 month penalty to get your money out. However,
Suze: it is possible that you could, if you knew that you had at least three months of an emergency fund somewhere, you could do a three month CD, a four month CD, five month CD, six month CD, seven month CD. So you did have money coming to every single month, right? That's the ladder.
KT: That's what's great about Alliant.
Suze: Now, what's great about Alliant Credit Union that many of you may not realize when we say a 3 to 6 month CD. If you read it closely, you can get that rate, which is currently 4.5% for three months, four months, five months up to you. So you could buy $1000 let's say, in each one, then you got a six month at four and three quarters percent.
Suze: It would be six month, seven month, eight month, nine month, 10 month, up to one year, you can do a little in each one of those as well. So it's not, it's just a three month CD or a six month CD. Then if you wanted, you could do a one year and so forth.
Suze: However, I really think for an emergency fund within a Roth IRA, if you are going to use it that way, you really are better off in a high yield savings account and, or money market fund just for the simplicity of it.
Suze: All right.
Suze: But I do want to say one other thing, the interest rate on the 12 month certificate of deposit and the 18 month certificate of deposit. So 5% for the one year, 5.15% for the 18 months at Alliant Credit Union is really something I want all of you to look at.
Suze: It doesn't mean that you can't have three months and six months. But as I said, last week I have not had one person write me and say to me, I'm worried about my money that's in a certificate of deposit.
Suze: And I'm just gonna say this, there was a woman at the conference and there were only four women who spoke at the conference. Danielle was one of them who is so brilliant, it's not even funny. You can look up her bio. I posted everybody that spoke.
Suze: She said the following... right after this conference was over, she was going to go and open up certificates of deposits at seven different places.
Suze: Right. So it's interesting. She chose to actually do certificates of deposits within the $250,000 limit to keep her money safe and sound. I will forever tell you, I believe at this point in time, credit unions are still far more conservative in what they do with money right now, especially Alliant Credit union
Suze: than many banks. Although there are many incredible banks out there like Stern's Bank in Minnesota. Oh my God, Kelly, who is the CEO, cares about all of you. So, when you know your bankers or you know your credit unions and they are offering you really great
Suze: interest rates right now with what's going on, you might want to take advantage of it.
KT: OK Everybody, this is KT, I'm gonna take us out.
Suze: You are, you never do.
KT: Yeah. But you know what I want you to all vote. Do you want me Sunday with her or not?
KT: Do you want me like two Sundays a month? The first Sunday of the month, the last Sunday of the month...
Suze: Are you woman enough to take their answers?
KT: Yes. if you don't want me, that's fine. I'll go fishing. Ok. Everyone, we just want you to remember one thing
KT: every day when you wake up.
Suze: You are to say the following today, wherever I go, I will create...
KT: a more peaceful, joyful and loving world.
Suze: And if you do what's gonna happen?
KT: You will be unstoppable.
Suze: All right, see you Sunday and say hi to KT's family. That's come in. All right, bye bye, everybody.
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