December 22, 2022
Listen to Podcast Episode:
On the final edition of Ask Suze and KT Anything for 2022, Suze answers your questions about teaching young children about money, buying T-bills from a broker, bankruptcy and more.
Suze: December 22nd, 2022. Look how many 2s. It's 2, 2, 2, 2, 2. There are five twos in what I just said, that's
KT: besides the point,
Suze: that's good.
KT: It's 10, I know my numbers.
Suze: You're so good with numbers. Wait, welcome everybody to
KT: The Women & Money Podcast and everyone smart enough to listen. This is the end of 2022.
Suze: Ask Suze and KT segments. That's what it's the end of, its not the end of 2022,
Suze: KT. This is our last
KT: Ask KT and Suze Anything
Suze: for 2022.
KT: Can you believe how fast that year went?
Suze: I know, but KT, can you believe that Argentina won the World Cup? We did it
KT: Goal! Let's do it together.
Suze: Goal! That's the one thing
Suze: that KT seriously learned from watching the World Cup with me and Colo. Colo, where's Colo?
KT: He's in Colombia with his wife in Colombia having a great time. Right.
Suze: And with his three kids. And now one thing that's important to know is Colo listens to every one of these podcasts.
Suze: Even when he's here with us and he'll sit down with me and I'll say I learned something the other day. What was it that he said to us the other morning
KT: Oh, about paying for funerals in advance.
KT: He said that he, he and his wife were somewhere in Colombia and a neighbor came and knocked on the door and tried to sell them, gave them an entire presentation and he looked at his wife he said,
KT: I'm not buying this.
Suze: But now he feels validated for not having done so. But Colo since we know you are listening, Ani, since we know you are listening. Hello, we miss you. So we just hope you're having a really
KT: Feliz Navidad Ani and Toby.
Suze: Yeah Toby we all know Toby little doggy. Alright KT.
KT: Ok, first question is from Regina.
KT: I want to instill good money habits to my great niece who is one year old. What toy or tool can I buy her?
Suze: So Regina, do you see how you even ask that question you wanted to know what toy or tool could you buy for her? And I'm underlining the word buy.
Suze: I've noticed over all the years that I've been doing this many of the mothers with their young children, that kids learn about money at a very very very young age and they learn about it
Suze: from you. You think a kid gets up and they're like you know one year old, three months old, whatever it is and they care about what they look like. Think they care about what they look like when they're one year old or two year old. But no, parents care what they look like, particularly the mother believe it or not. And we start to teach them
Suze: in a very strange way how what they have around them, what they're surrounded with really is important more than any toy that you could buy for your great niece is kids do what you do. They will watch everything that anybody around them does with money
Suze: So it's not about buying them a toy or a tool.
Suze: It's about you being their tool, you being their example. And rather than giving them gifts every single birthday and every single holiday, love them. Have experiences with them. Keep them close that way.
Suze: And it's it's a very fascinating thing that they might just turn out to be somebody that really does have good money habits. Remember what I've said. Everybody kids don't do what you tell them to do.
Suze: They do what you do when it comes to money. So don't go buying or anything if you ask me, Go on.
KT: Alright. Next email is from Lucy. Hi Suze and KT, thank you so much for sharing your knowledge.
KT: I heard you mention a couple of times in your podcast about purchasing Treasury bills go to a brokerage rather than Treasury Direct. So Suze, why is it better to go to a brokerage to buy Treasury bills than Treasury Direct?
Suze: The reason is truthfully, Treasury Direct is still such an archaic and old system.
Suze: And you know once you open up a Treasury direct account, you have to have a bank and you can't change that bank because if then you liquidate the Treasury bills, they have to go to that bank. And if now all of a sudden you're at a different bank, they won't know where to send the money. It's just too old fashioned, truthfully
Suze: And the only good thing about buying T bills at Treasury direct, is that the minimum is $100. Anywhere else, like a brokerage firm, it's $1000. But the truth of the matter is if you're gonna buy Treasury bills, you want to buy $1000 worth of $5000 worth or whatever for just $100 there might be something better that you can do with that money. That's number one.
Suze: But I just want to say something.
Suze: I don't know for sure.
Suze: But if you just wait till next year, some time,
Suze: I'm going to tell you a better way of how to buy Treasury bills. That doesn't exist yet. That's even better than a brokerage firm because the only downside of buying them at a brokerage firm is this: now the people who are watching over the accounts or they'll see that you have money in that account
Suze: and they will eventually probably contact you and say, hey, your Treasury bill is going to mature. Would you like to go into an exchange traded fund or would you like to do this or would you like to invest in that?
Suze: I want you safe and sound that if you are going to do Treasury bills,
Suze: that nobody entices you to do anything else unless you want to. All right, KT.
KT: Sit tight. Everyone. 2023
Suze: Is our year.
KT: Our year! Okay, next is from Valerie. Hi Suze,
KT: season's greetings. About two years ago you suggested TSP investments as 70% a C Fund, 25% an S Fund, and 5% an I Fund.
KT: Since the economy has drastically changed, do you have an updated suggestion for fund options for someone that will possibly retire in four years? So Valerie is probably the person retiring, right?
Suze: Let me see that Valerie, the reason that you hear me sighing is that two years ago, those were fabulous suggestions. But as things change
Suze: and a lot changed in two years, if you think about it.
Suze: As things change you have to kind of keep up with it. Like I wished you had written me this email as soon as everything started to go down within your TSP. And for those of you who don't know a TSP is a thrift savings plan which is identical to a 401(k) or a 403(b). It's just for federal employees as well as the military
Suze: The C Fund just so you know, KT as well, stands for common stock fund. So at that time I was like yeah two years ago you wanted to invest in that because it went up dramatically. The S Fund was for small cap and even that did really great a number of years ago and I Fund was for international.
Suze: Now what's interesting is that if you look at it over three, let's say we go back three years because I've been saying this not just for two years. I said it for three years over a three year period of time you would still be up 8% on the C Fund. You would be up 3.59% on the small cap and you'd be up 11.45% on the International Fund.
Suze: If however you look at this year, KT, and what those three funds did, you'd be down 16% on the C Fund, 23% on the S Fund and almost 16% on the I Fund. So the truth of the matter is now at this point just a few years, four years away from retirement,
Suze: what I would be doing now is I would be coming out of the funds that you are in. And the two funds that I would go into are the G Fund which is a stable fund everybody. So this is for all of you that have TSPs. And you're just a few years away from retirement. The G Fund which is your stable fund, it's like a money market account. Currently paying about 2.82%.
Suze: Put some of your money in there and then the L Income Fund is the bond index and all of you know that I am liking bonds big time and since that's the only choice you have in the TSP, I would be going into that as well. I mean this year alone the L Income Fund is up also 2.82% which I find fascinating since the G Fund is as well.
Suze: So that's what I would do if I were you.
KT: So next question is from Romana. Hi Suze and KT. First, thank you for your podcast which has been a huge comfort
KT: as I learned to grow my knowledge since the shocking death of my mother who died from COVID in 2021 at the age of 58. My mother died July third. She had no trust will or even a list of assets. We never had the financial conversations we should have
KT: and the last year has been a terrible whirlwind Suze.
Suze: I bet. When you die, everybody, I just have to say something. When you die without a will, a living revocable trust, an advanced directive, a durable power of attorney for healthcare as well as a durable power of attorney for finances. You
Suze: are going to leave a mess behind you.
KT: Listen to this. She said, I just finished probate in February 2022.
Suze: That was actually a quick probate, believe it or not, in the state of California. It could be one year, two years. Really sad.
KT: From July 21 to February 22. That's still a considerable amount of time and she said I was finally named the sole heir. So
KT: Romana has inherited from her mom her retirement fund, Suze. And she said in a podcast, you talked about the guidance if we have to cash out 10% a year versus waiting and taking one big hit in year 10. So then she said, I'm not clear, I'm scared I'm going to mess up and have a 50% penalty. What can you advise her.
KT: How can you set her straight.
Suze: Our hearts go out to you
Suze: for having lost your mama at such a really young age, such a young age. But Romana, what you hopefully have learned from this
Suze: is that... does she saying here she's a mommy or not?
KT: She and her husband ready Suze. She and her husband are still don't have their own will and trust in place but they're doing it now because of this experience.
Suze: So all of you, the greatest gift that Romana could give you by writing in this email is don't think that the only time you die is when you're older.
Suze: It's not, can we just look really, at the news lately, of all these actors and musicians who are dying at 40 years of age are dying at 60 at 70. And you know it's like it can happen at any time. So Romana is not going to want to do this to her family now because of what she went through. Don't
Suze: make your family go through it, get the must have documents or go to a lawyer do and will and trust whatever it is but get your affairs in order. Romana, here's what you need to know.
Suze: It became very complicated at the end of 2019 there was the Secure Act was passed and it changed the guidelines of inherited IRAs, big time.
Suze: What you need to know is that those guidelines are still not written into law. They're still trying to figure out exactly how it's going to work. Especially for people
Suze: who died while they were taking required minimum distributions from their retirement account. Or they were supposed to take required minimum distributions because they were of age but hadn't started them as of yet.
Suze: But you, your Mama died when she was 58 so she wasn't even close to having to take required minimum distributions. You now are guided by a whole different set of rules than if she had died also prior to 2020.
Suze: You now have 10 years to wipe the inherited IRA clean. You can do it before that if you want but you have a maximum of 10 years if you happen to have a large sum of money that you inherited. And I'm looking down at your email because it was long KT kind of cut it and went right to your question.
Suze: It says here that you've inherited roughly about $500,000 in an account managed by financial advisors in an IRA that's not a Roth you have additional accounts to like $50,000 in a. 403 B. That should also be going into your inherited IRA. So think about it if you just left $550,000 in your inherited IRA.
Suze: At you know approximately let's just be conservative 4%. Do you know in 10 years that will grow to $814,000. Now in 10 years you would have to take out in one lump sum, $814,000 possibly more, if you made more than 4% on it.
Suze: You would lose a good half of that because that would be taxed as ordinary income and depending on what state you live in very easily between federal and state-income taxes, $400,000 could be gone.
Suze: What you would be better off doing in my opinion is deciding how much money can you take out per year,
Suze: figuring out if you do withdraw let's say $50,000 a year and then it's the rest of the money is making 4%. How much would you take out the first year, the second year, the third year. So that in the 10th year maybe you'll have 50 or $60,000 that you can take out. Also you never know you may very well want to change the amounts that you take out based on the income that you're making for that year.
Suze: So in years between now and 10 years that maybe you're not working. Maybe something's happened. Maybe your income has dropped considerably, that would be the year that you took out even more money
Suze: so that you didn't have to pay as much tax on it so that if you were in a high wage earning year
Suze: you may be then wouldn't have to take out as much. I hope that made sense. But that is what you are to do. For anybody
Suze: who doesn't have to take out a percentage every year because the inherited IRA was not already taking required minimum distributions or they weren't supposed to do not wait to the 10th year to take everything out unless you have inherited such a small amount,
Suze: 10,000, 15,000 and maybe 10 years from now it would be worth 20 or 25,000 or whatever it would be and then you're withdrawing it and it's really not going to affect you because you're still not going to be in a high income tax bracket. Something for you to think about. Next question my dear KT.
KT: OK. This is from Annie, ready?
KT: I'm 60 years old. I'll be 61 in January next
KT: I have over $100,000 in student loan debt and approximately 60,000 in debt. We make an income of 50,000 a year together. I'm not sure how long I can work due to many health issues.
KT: We considered, I guess we as she and her husband, considered filing bankruptcy, but it does not include my student loan debt. Can you give us any suggestions? She said we really want to pay our bills and do the right thing. Thank you in advance for any suggestions that you might have.
Suze: You know, Annie, There's a rule of thumb and all of you... have you gotten out your Suze notebooks by the way,
Suze: are you writing all of this down? All right, get them out, get them out right. You know, there's a rule of thumb that when you make less than what you owe,
Suze: you're essentially bankrupt anyway. So I don't want you to feel like doing the wrong thing would be doing what? Claiming bankruptcy
Suze: When something is legal and you can do it. There's nothing wrong with doing it if and only if you learn from it the other day, I was reading an email that came in and I do read these. Besides KT, I just never know which one she's going to choose. And this person had claimed bankruptcy 2.8 years ago
Suze: and now they've gotten themselves into even worse trouble and I just skipped it. I was like, listen, if you didn't learn what you needed to learn from claiming bankruptcy almost three years ago, I don't have what it takes to teach you because you didn't learn.
Suze: And then it's not right that all of us have to pay somehow for the fact that you know, you didn't pay for this, you didn't pay for that. It always comes back because why? Creditors just raise prices across the board. Here's what I want you to do. Currently, and I don't know if there's $100,000 is federal or private student loan,
Suze: but there's still a moratorium. We'll see what happens on student loan payments. I have a feeling that you probably haven't been making payments on it even before everything went into a moratorium. So maybe you go into forbearance or deferment on this. And this is the reason why
Suze: Even though in the past it was very difficult to claim bankruptcy on student loans. And in fact, I remember I had a while ago, a lawyer write in and she said Suze, please stop telling people that it's impossible to claim bankruptcy on student loans. I know a way to do it. So she wanted me to stop saying it that much. And God I wish I knew her more. I could recommend her because then I would just send everybody to her
Suze: right, because of how many of you really needed your student loans dismissed. But because it was during the moratorium of the student loan payments,
Suze: it was like, okay, let's just see what happens in case when we come out of this, the student loan payments are dismissed. Now we still don't know if that's going to happen. And again, it's only federal loans and it's only up to $20,000 if you have a pell grant or $10,000 if you don't, but here is new news that I think you will enjoy listening
Suze: the student borrower, I can't say that name, say it for me, borrower
Suze: Bauer. See I can't say it.
Suze: Yeah you
Suze: see everybody, I still have my speech impediment that I can't pronounce R's, S's or Ts. So those ours together, don't
Suze: The Student Borrower Act. That's good. So it's called the Student (KT Says: Borrower) Relief Act of 2022
Suze: and it was introduced I believe in October, KT, of this year
Suze: and it is a bill that is eliminating the section of the bankruptcy code
Suze: that makes it possible for student loan debt, whether it is federal or private to be discharged in bankruptcy. Now I remember back, I have to tell you in 2005, I don't know if you remember I was doing many shows and I was so upset how dare they, the Congress, passed a bill that made it impossible
Suze: to claim in most circumstances at the time any student loan debt. I was so mad. I was ranting and raving anywhere I could but it was too late, it was passed and now they're coming to their senses and they're trying to pass this bill. Now
Suze: it was just introduced, it hasn't gone anywhere yet. The other good news is Elizabeth Warren, Senator Warren is also wanting to introduce a bill or maybe she already has that does the exact same thing. So I just think it's absolutely fabulous. So it goes and I think it might, I think it might because it needs to, because if we were to look at truthfully
Suze: how much student loan debt makes up of all the debt besides mortgage debt, KT, do you know that student loan debt is the next highest amount of debt that is owed. And in most cases it's at a higher interest rate than almost anything else. When mortgages were low, student loan interest rate was higher than a mortgage.
Suze: And so we're taxing our kids were like, are you kidding me? Why would we do that to them? So just wait and see what happens. As far as the $50,000 that you have in credit card debt,
Suze: I did read other parts of your email. I've been scanning it as I've been telling you and you do have some serious health problems. Oh, KT just showed me you have $60,000 of debt. Sorry about that. So you have two choices here.
Suze: You can claim bankruptcy if you want on that 60,000.
Suze: Because you don't make 60,000. So you should feel fine about claiming bankruptcy on that 60,000 if you can and just wait to see what's happening with the bills that have been introduced.
KT: On student loans.
Suze: On student loans. The other thing you can do with the 60,000 if you don't want to claim bankruptcy contact the NFCC dot org.
Suze: It's a consumer credit counseling service for you that you go to them. They put you on a five-year plan, they lower your interest rates to 0% and you pay it if you can, you pay them they pay the credit cards.
Suze: But I think in your particular case I have a feeling given what I've read bankruptcy is the way for you to go. Um And mainly because of your health. Everybody just know right that as I'm reading this Annie has some serious, serious health problems
KT: and so
Suze: does her husband. So they really need help and I wouldn't doubt it. That a lot of that debt is because of medical bills. Alright.
Suze: It's it. This is it KT...
KT: Okay, this is the last quizzie I get to answer in 2022 all of you listening.
Suze: But KT for the rest of the year can I just walk around going (Wrong answer noise)?
KT: No. Should we continue quizzies or just get rid of them next year? We should have a vote. Well let let them right in. If you want to continue,
Suze: Why don't you want me to continue?
KT: Maybe not. Maybe we should do something different
Suze: Like what?
KT: I don't know. Maybe I should do something different. Maybe I should ask you a quizzie.
Suze: Like I would fail it. Oh my God, we're gonna do quizzies next year. Don't worry. Everybody.
KT: Make it a good one, make it a good make it a good exit.
Suze: All right.
Suze: Again, everybody this quizzie isn't just for KT. It's for all of you with the goal that you know how to answer these questions. I don't want you sitting there and just listening to me answer and it goes in one ear and out the other. Or maybe you've written it down and then maybe you forget about it. I want you to think how you as well as KT would answer this question. So let's pretend all of you are me.
Suze: Oh God. Anyway, alright. Dear Suze, I have followed you and your advice for many years and as a result I was doing great financially. Recently though I had a true emergency I needed to drain my emergency fund down to $1500. Thank God that you had an emergency fund+
Suze: because really Catherine, otherwise whatever it is that you withdrew from that would be on credit card right now or possibly payday loans.
Suze: Now Catherine goes on to say, I have about $150 per month of discretionary money in my budget to do what with? That she can use to replenish her emergency savings account. Now all of you know my rule of thumb
Suze: that I want all of you to have an 8 to 12 month emergency savings account. So again Catherine has $150 a month that she can put in to her emergency fund. However here is the question:
Suze: Catherine also puts $500 a month into her Roth IRA. The question is: should she stop contributing to her Roth IRA and add that $500 to the $150 that she's putting in to her emergency savings account to build it back up.
Suze: Think about it.
Suze: Think about a KT. She has $1,500 right now. If anything happens and she needs more than that.
Suze: what is she going to do? Should she stop, everybody, putting that $500 into a contributory Roth. That would mean in six months she would have $6,00
Suze: built back up in her emergency savings account plus the $1800 from her $150 a month. She'd have $7800 in one year. KT, what should she do?
KT: Definitely continue on contributing to the Roth IRA. Definitely
Suze: Are you telling...
KT: With the $500
Suze: So are you telling me that...
Suze: Here we have Catherine who has only $1,500 in her emergency account. So that's 1800 that will give her after one year, $3,300. That's it. Better than nothing. But yet she will have $6,000 in a ROTH. And if she had put it in here with the other money,
Suze: she would have $9300 as an emergency fund. So that if anything happened
Suze: she would have a place to go to get that money. So once again, final answer is what should she do?
KT: You don't stop contributing to the ROTH. She should do that as a priority. I don't really know why, but my gut tells me Suze, you just don't stop doing that.
Suze: All right, so are you ready for your answer?
Suze: So you have a 50-50 here. It's
Suze: It's Ding Ding. Ding Ding ding. However, the fact that you didn't know why. I'm sorry, my love. It's like (Suze makes the wrong answer noise)
KT: Ok, so whats the reason?
Suze: So here's the thing Catherine. What you have to remember about a Roth IRA, you can take out any money that you originally contributed without any taxes or penalties whatsoever.
Suze: So Catherine, if you put $6000 into a Roth IRA
Suze: and let's say you put it somewhere where it's making a high interest rates or it's in short term Treasuries. So you're only doing something for like three months or six months. So, relatively, it's always becoming available to you and you don't risk it in the market.
Suze: Then you have taken advantage of being able to put $6000 this year in a Roth IRA and use that $6000 as what as your emergency fund as your emergency fund outside of your Roth IRA continues to grow and it goes back up there. Now, you will have all this money. Hopefully because you haven't come into an emergency. You didn't have to use it.
Suze: That's in your Roth IRA, that you now can start investing. So that is the reason you don't want to stop. But you have to understand,
Suze: you can take out this money that you originally contributed anytime you want without taxes or penalties whatsoever, regardless of your age or how long it has been in there. Got that. Just don't invest that money. Just put it to work like in a savings account or a short term treasury bill. And again, I just have to say
Suze: next year, we're gonna have another surprise for you. That would have absolutely solved this problem. 100%.
KT: So that was the end of 2022 Suze
Suze: That was a 50-50 ending. What's important everybody is that you,
Suze: you have to not just guess as to what you should do. It's really important that you have to know why you are doing it. And that's the only reason, KT
KT: So let's go for dings next year. 2023 ding ding, ding ding ding.
Suze: And you have to listen
KT: Do my homework better.
Suze: Three days.
KT: Three days. Three days for the big reveal. Actually, Christmas Day is the best podcast. I hope you all enjoy it. It's really great
Suze: It's different.
KT: It's different. It's great. It's original. It's fun
KT: and very revealing and someone so special to us.
Suze: And to all of you, the majority of you, by the way, you know...
KT: So don't give any more hints. Don't give anymore. Don't tease it anymore.
Suze: So tune in.
KT: We have the best Christmas gift of all.
Suze: At least we thought we did.
KT: We do!
Suze: Alright anyway, until next year, KT.
Suze: Until next year because Robert does the 29th
KT: Oh yeah, we don't know what he's gonna do.
Suze: Listen everybody until next year. What do you want to say to them?
KT: I want you all to not only stay smart strong and secure, but please please, this is the season to stay extra healthy. Really, take care of yourselves. Take care of your health
KT: and make the New Year one that makes a difference.
Suze: You want to thank them at all for anything?
KT: Yeah, thanks for listening
Suze: and part of our family. Right? And for me, I just want to leave you with one final thought.
Suze: The greatest greatest gift
Suze: that you could give anybody including yourself is the gift of honesty, to stand in your truth and the gift of love. It is not a gift
Suze: that money could buy at any price. Got that everybody. So we wish you all a very happy New Year, a very Merry Christmas and a very happy Hanukkah. Alright, there's only one thing that we want you to remember when it comes to your money and it is what KT?
KT: Be smart, strong and secure.
Suze: And now you stay safe.
KT: Happy New Year.
Suze: See you next year. Bye bye.
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