Home Buying, Home Mortgage, Mortgage, Social Security
May 11, 2023
Listen to Podcast Episode:
On this Ask Suze and KT Anything episode, Suze answers questions about paying off your mortgage versus taking a tax credit, Social Security after a divorce, the new FICO score rules, moving and more.
Music: (Music In)
Suze: May 11th, 2023. Welcome everybody to the what, KT.. wait,
KT: I don't even recognize you, Suze. I haven't seen you in a week.
KT: Does everyone remember why she has been in lockdown? Studying the economy and everything going on in the world? But what grade do you think you got?
Suze: Oh, it's not a school where you pass a test, right. It was...
KT: She's been enlightened.
Suze: I've listened to maybe 50.. 50 lectures of the most brilliant and they really are the most brilliant economists
Suze: and real estate people in the world. And I'm actually blown away by it.
KT: I listened to one or two sometimes with her when she listens in, in the front porch. And I listened to one the other day with Suze. That was just unbelievably. Yeah. And I said, I don't know where he's from. It seemed like some European country, but
KT: he was amazed. I never heard of this gentleman or professor. But what a lecture I was like, just blown away. I couldn't wait for it. I couldn't wait to ask her questions. Ok. Are we ready?
Suze: So, but wait, now it's my turn...
KT: This is called the Women and Money.
Suze: And they know that I think, don't you? And smart enough to listen. But wait KT, now what do you think I should do with all of this information that I've learned over the past..
KT: Well, you'll dispense it when it's ready.
Suze: Do you think I should do a recap for Sunday?
KT: No, it's very, it was the one I listened to was way over my head most of it. But it was fascinating. I think. How can you recap 50 amazing lectures?
Suze: But I think what I can do is talk about the true trend of real estate where mortgage rates really most likely are going to go where the majority of these people think inflation is going to end up
Suze: Some really dire predictions for the stock market and bonds depending on how long we go out. I think I can recap that for everybody.
KT: All right. But don't recap too much of it because it's very complicated.
Suze: KT do I not have the ability to take the complicated and make it simple?
KT: That one of the, that's one of these um emails I just read, right.
Suze: So you are in case you don't know, listening to
Suze: Ask KT and Suze anything edition of the Women and Money Podcast. And this is where if you write in a question to ask Suze Podcast, that's S U Z E at gmail dot com,
Suze: ask your question there. And if KT chooses it, Bingo, you won the jackpot because we answered here on the podcast.
KT: All right, let's get started because I have a really good lineup today.
Suze: Wait, what was our agreement?
Suze: That you weren't gonna say you had a good lineup because you always have a good lineup. But what would you do? Would you come on the Women and Money podcast with me and have a bad lineup?
KT: This one from Nancy was my first choice. You ready? Everybody? Those of you that listen to the podcast will get it. Here's the subject, this is why I picked it, Nancy to pay or not to pay. That is the question.
Suze: Do you wear to pay toupee? Oh! "to pay" not "toupee"...
KT: That Suze. Oh, she's so corny. So it says KT and Suze love, love, love you ladies. I thought I might get your attention with a little pun on Shakespeare to pay or not to pay. So she said I was listening to your podcast this morning as I do every Monday from Sunday's podcast and Thursday on my 40 minute drive to work. This morning, one of the topics you discussed was the idea of paying off your mortgage.
KT: I just received a very large bonus, 100 and $54,000 after Uncle Sam took his cut. Wow, Nancy got a, a big bonus. I put it in my money market account with the current interest rate of 3.568%. The principal balance on my mortgage is 100 and $45,464 and the interest rate is 2.375%.
KT: The regular payment is about $1300 a month and I'm also paying an additional 750 every two weeks. It comes out to be about 2800 month. I'm 63 years old. I live in Saint Louis, Missouri. I have one. Well, she goes on to tell us all that she's got, she's got quite a bit of money.
KT: Then this is the question. I'm wondering whether or not I should take the bonus money and pay off my mortgage. Suze, What are your thoughts?
Suze: Should that be your pop quizzie?
KT: I think she should. She's 63.
Suze: Is that old?
KT: No, but why not? You know, why not have that home paid for? Bam. You always say that people feel so great when they pay their home off. But right now, after listening to your 50 lectures, you might have a different point of view.
Suze: Actually, my point of view has not changed on that at all, Nancy. And here's the thing, you just received a large bonus that maybe you were or you were not expecting.
Suze: And even after taxes, it is enough to pay off the mortgage of your home. And even though you're earning a little bit more on that money, then you are paying for the interest rate on your mortgage. The truth of the matter is
Suze: what is the goal of money? And you have got to ask yourself that question because there is not a right or wrong answer to this. Either way you would be fined truthfully. However, because you are paying an extra $750 every two weeks
Suze: or putting close to $2800 a month towards the mortgage payment. You know what that says to me, Nancy, that says to me that you happen to be a woman who wants to pay down this mortgage faster because otherwise you wouldn't be putting any more extra money towards it at this low interest rate. You might be doing something else extra with that $1500 a month. Therefore, bottom line,
Suze: if this were me,
Suze: no matter how much money I had, no matter how low the interest rate on the mortgage is, I would pay it off so fast, it's not even funny. And why is that? Because I would look at not the interest rates that things are generating me. I would look at that: I'm paying 2800 and $75 a month towards this mortgage,
Suze: this $154,000 that you could put in at 3%.
Suze: What's it gonna do generate for you 4500 or $5000 a year in interest, which is less than two months of a mortgage payment, paid it off girlfriend and just don't even think twice about it.
KT: Do it. You're gonna feel so great then have a party.
Suze: What kind of party she got? No money left,
KT: Mortgage burning parties, didn't they used to do that back in the day?
Suze: David Ramsey is very, very famous. I think for once you pay off your mortgage, there is a mortgage burning party or something like that.
KT: I remember my mom having a mortgage burning party.
Suze: She did?
KT: when they, when they finally paid off their mortgage on their first home.
KT: Ok. Next is from Valerie. This is again staying on the topic of mortgage. Hi, Suze, my wife and I listened to your podcast on a recent road trip and loved it. In one of the episodes, Steve asked why you keep telling people to pay off their mortgage. He doesn't think he should pay his mortgage off because he'd lose the tax deduction.
KT: Of course, your answer was totally on target as usual. But there's one very important point you forgot to mention.
KT: Now Valerie said Suze as a CPA. It makes me want to pull my hair out when people don't realize they're spending a dollar to get about 40 cents back if it's something they were going to buy anyway, like for a business fine. But so many people are blinded by the mortgage interest deduction and think it's worth spending 15,000 to get 6000
KT: back. Please, please please use your power of financial clarity to help people understand. It's better to have that dollar in their pocket than get 40 cents off a tax bill. So that's from Valerie. So, so do you agree with her?
Suze: Of course, I agree with her. You know, Valerie, what's so funny is that all the time
Suze: when I did the Suze Orman show, which you can watch, by the way, everybody on Freevee which is with Amazon, all 600 episodes of the Suze Orman show on CNBC. But when I used to do that show people all the time would say no. And I want to pay off my mortgage. I love the tax write-off. I love tax write-offs. And I'm like, going, are you all crazy?
Suze: Do you know one seriously wealthy person who are in very high tax brackets that carry mortgages on their homes? I don't think so. Most people, at least that I know whether their home is $5 million, 50 million dollars or whatever it may be. They write a check for it and that's it. They don't sit and think, oh,
Suze: I could get a tax write off for this. That's not usually how really wealthy people think because they rather have that money themselves. And so there you go. So Valerie, there was your 15 seconds of fame on the Women and Money Podcast.
KT: Keep listening. So the next is from Jodie. She said, hi, gals.
KT: I like that. Hi gals.
Suze: You know, wait, wait, we have to tell everybody that on the island we're known as the fishing gals. Yeah, the fishing ladies are the fishing fishing women but lots and lots of people as they pass us go, Oh, it's the fishing gals. So, there you go
KT: So, Jodie said, Suze, I'm divorced when I retire. I was told by a friend I have
KT: to either take my own social security or my husband's not both. But whichever is more. Is that true?
Suze: And so what you need to know is it is true but it's not an or just so, you know...
KT: Wait, can you read just one more thing? Can you read how she signed it?
Suze: Stay at home mom. So he couldn't make it big.
Suze: What does she mean by that?
KT: I know that I can tell it wasn't a very amicable divorce.
Suze: Oh, I see. So, Jodie, here's what you need to know. As long as you were married for at least 10 years
Suze: as long as you didn't remarry, you are eligible to get one half of his full social security. What he would get at full retirement age, you could claim your social security at, let's say 62. If you needed the money, even if it was a little amount,
Suze: then at full retirement age, you could then collect 50% of whatever his would be. So you could do both just depending on your situation. But of course, you would always want to end up with the higher one.
Suze: Just be careful. Don't claim his social security or whatever percent of his social security before full retirement age because then you wouldn't get all 50% of it. You would get a reduced amount. So don't claim
Suze: his benefits, half of them until you are a full retirement age and that would be 67 if you were born from 1960 or later. All right.
KT: Next question. I am concerned. This is from Angela. Everyone. I'm concerned about the
KT: FICO score rule that reduces the score for those with very good credit ratings to make up for those with bad credit scores. Yeah, like when did this happen? So they so that they can get a higher score than what their bad score would normally give them.
KT: This is similar to the 2007 mortgage rules that forced banks to lend money to those that did not have strong financial history. Please advise how to, how, how should we deal with this
Suze: You can't really deal with it. It's one of these hair brain ideas again
Suze: that the administration and I'm gonna call it that because I'm just gonna call it like it is, you know, forget any political affiliation at all. It is a hair brained idea. It is stupid KT because just a few days ago it went into effect and the way that it reads very simplistically, if you have a high FICO score,
Suze: a good FICO score and you now go in and you apply for a mortgage, you're going to get a little bit higher charge on your mortgage or higher interest rate to help those who don't have that good of a FICO score. No, I'm not kidding. It's a stupid, it's just plain stupid. Everybody because one has to,
Suze: I wonder why did they not have a good FICO score? Why do you have a good score?
KT: I think I get penalized because I have a great, what kind of incentive does that give people to want to have a good FICO score?
Suze: Absolutely none! So if I were, you
Suze: don't let it get to you here.
KT: Listen to this here.
Suze: I didn't answer this one.
KT: Listen, I just want to read this one. This is from Paul. This is how people are, this is how it's backfiring everyone.
KT: How do I lower ready, Suze? How do I lower my credit score to get the best mortgage rate now that POTUS changed the law? I mean, see what's happening. Look at that one, right?
Suze: So and with the utmost of respect, right?
Suze: Don't be stupid just because they're being stupid. Really? That's what I would be...
KT: Don't be stupid because the government is being stupid right now...
Suze: and you still wanna have the highest FICO score that you can have and just deal with it. Eventually, they're gonna have to say this is just ridiculous and get rid of it in my opinion.
Suze: But remember a high FICO score just doesn't affect the interest rates you pay on mortgages. It also affects the interest rates that you pay where? On car loans which now average almost 20%, on credit cards that also are averaging up that high,
Suze: on all of these interest factors. On a home equity line of credit. A lot of you are paying 9 10% on HELOCs right now. So therefore
Suze: don't let it get to you. And your goal is still to have the highest FICO score out there.
KT: I remember. I mean, that's just stupidity. All right, ready?
Suze: How do you feel about it, KT?
KT: I think that's just, I don't know who did that and you know what I feel Fair, Isaac and Equifax and Transunion and the whole bunch of you guys out there, you should have gone to Washington and said, what are you thinking? Are you crazy? I mean, why didn't they speak up?
Suze: They don't care.
KT: Oh, well, ok.
Suze: If you ask me, we should get rid of FICO scores altogether because they do not really tabulate the truth of your situations, but that's besides the point. All right.
KT: Ok. This is from Linda. Hi KT and Suze. I'm three years from retirement.
KT: I'm excited about moving into this new phase of retirement planning. I'm also uncertain and need your advice. I've heard Suze's rule that money I will need within the next 3 to 5 years should not be in the stock market probably, especially now, right?
Suze: Well, I didn't quite say it like that.
KT: In this up and down market environment. What is the best way to move money from stocks into cash and save for my first years in retirement?
KT: So maybe you better explain to her right now what you meant and what she should do.
Suze: So here is where all of this started and it started years ago. And somewhere on one of these podcasts of these 400 some odd podcasts, there's a detailed explanation as well as a detailed explanation in the Ultimate Retirement Guide for 50 Plus. Linda, here is essentially what I said,
Suze: if you are in your retirement years and you have money in a retirement account or other places invested in the stock market and in order to live, you know, you need to cash out some of those stocks every year to live, then I'm talking about you in this situation.
Suze: So the formula was very simple. You have to figure out what your expenses are every single month. And let's just say in your situation, it came to $6000 a month
Suze: From that, I wanted you to subtract all of your guaranteed income. So let's just say you got $2000 a month of Social security, you got another $1000 a month for maybe an annuity that you had. Maybe you have another $2000 a month
Suze: from a pension from work that you have whatever it may be. And that comes to a total of $5000. So you have 6000 month of needs and you have $5000 of guaranteed income that leaves you $1000 a month short.
Suze: I want you to then think about where does that $1000 a month come from? If it has to come from you selling stock, that's in your retirement accounts or wherever it may be. I don't want you in a situation where you have to sell stock if the markets are down considerably.
Suze: So I want you then to times that $1000 a month in this example, by three years is 36 months. If I wanted you to have three years, minimum
Suze: of the ability to pay your bills, then I would want you
Suze: to simply sell and have $36,000 in cash or a money market account within your retirement account. Does that make sense? Let's say you wanted a full five years, you know, so it could be three years, four years, five years, let's say you wanted a full five years. That's 60 months.
Suze: And in this case, that would be $1000 times 60 which is $60,000. So I only want you to have like 36 or $60,000 in cash.
Suze: So that besides your guaranteed income, you have a place to go and withdraw that from. Especially if the markets are down. When the markets are up, hey, take it from your stocks. If we go into a serious down market, which I cannot tell you how many of these experts said they expect
Suze: some time here. Right? Then that's when you take it from the cash. Did that make sense KT?
KT: Yea that made good sense Suze always makes good sense coming from you.
Suze: That means she didn't really quite get it. But anyway, KT we're getting late on time. Go on.
KT: This is from Laura and back to your book, Suze, dear ladies. I've been so excited listening to the podcast, reading your 50 plus book and feeling like for the first time in my life, I'm empowered to make financial decisions. On that note, I made a arrangements
KT: to Zoom with both financial groups holding my money. I'm retired. Imagine my shock and my growing anger upon discovering that almost $100,000 that was supposed to be in an account without a time commitment, was put in a 10 year fixed annuity that will cost me 10% if I want to move it. I
KT: did not agree to this action. It was clear by our discussions that I did not want this kind of account, nor was I asked. Suze, Do I have of any avenues to correct this without paying the 10%?
Suze: So you do if you did not sign a discretionary account form, which simply means Laura, that your advisors have the right
Suze: to do anything they want at their discretion, no matter really what you've said to them on some level. However, you also given, if it's a big firm and hopefully it is, you would go in and speak to the manager of that firm along with the financial advisor,
Suze: who will probably back you up and be honest because I doubt highly he or she will have the ability to lie in front of the manager. And then you should say to the manager, I want you to fix this. I want all my money back. I do not want any penalty. I want interest on that money. If it had simply been in a money market account since the time that we did it and see what they will do for you. You obviously could always sue them.
Suze: I'm not exactly sure that it's worth it and whatever, but I would start there and see what you can do. Yes, KT?
KT: So I have one more question and then I think it's quizzie time. Suze, I heard your podcast concerning leaving money in my will to an animal companion.
KT: You did not mention in your advice that the states that have pet trust can be embedded in a will that are legally binding.
KT: We have one in our wills. This is much better than just giving someone a lump sum of money and trusting that it will be used just for their animal companion. Don't you love that phrase, Suze?
Suze: So, is, is this a podcast people are adding to my advice?
KT: Yeah, they are like everyone has like a couple more tips. So in Michigan where we live, the laws protecting pet trust to ensure funds in a trust are used just for the pet.
KT: I hope you can bring this up in one of your podcasts, Suze, Angela.
Suze: Well, Angela... KT brought it up for you.
KT: I love that she said animal companion.
Suze: Everybody listen to Angela. You know, it's difficult because KT and I don't have any animals. We wish we did buy a lot, trust me. But we never lived a lifestyle where it would have been kind to them. And now we live on a private island and it's not actually kind for them to live
Suze: here as well because of many reasons. But anyway. All right. So now you heard it, although Angela just so we're clear, I never said leave a lump sum of money to somebody. I said you can always leave it in a trust with explicit directions of how that money is to be used, which is the same thing that's going to happen truthfully on some level in the pet trust
Suze: that you have embedded in your will. All right, KT we got to go to quizzie time. Quizzie time is where I ask all of you a question
Suze: and you have to think about it and answer it. And this is a little bit different, KT, of a quizzie because you have to think about it. And I decided rather than a purely financial one I chose one that's like so many people I'm sure
Suze: are in this situation.
Suze: Not even emotional. Just what the hell do I do anyway. Hi, Suze and KT, thank you so much for your podcast. So much bad financial advice is out there. I need to
Suze: straightforward and no BS advice like only you can deliver. Yeah, baby. Anyway, I need help figuring out my moving conundrum. I have too many emotions with each option. I got a divorce a couple of years ago, my ex-wife moved with my kid who's nine years old, across the country to Tennessee. I stayed in Oregon due to my job
Suze: I'm legally, not totally blind and now on disability and I'm currently 53 since I no longer have any ties to Oregon. I would like to move to Tennessee to be close to my son
Suze: With the equity from my current house, I may be able to buy a house in Tennessee for cash. My conundrum is I have no place to ship my stuff to. So I could either... One... Here's the question everybody. What would you do? So would you tell Kevin to move his stuff to a storage unit in Oregon until he found a house in Tennessee.
Suze: Two ship to a storage unit in Tennessee, three rent in Tennessee and ship there for a year. Also, I'd like to move before listing my house mainly because I don't like people poking around in my stuff. Thoughts on that. I would still have some savings 401k/Roth after buying a house.
Suze: So, what would all of you tell Kevin to do?
KT: I know exactly what I would do. You do? And I've made some big serious moves from other side of the world. I made a number of major. We, we've made many moves together and we've been in this situation but not, you know, wondering what to do. We've made the right choices. Ok. So here's what you're gonna do, Kevin,
KT: you're absolutely gonna take everything out and put it in storage with the best rate you can right there in Oregon. So you don't have to ship things across the country. Number two, list that house in my opinion, list the house and sell it. Then go and rent for a year to see if you like Tennessee and don't bring anything with you, but what you need bare essentials. Do a bare bones move. Here's why Kevin:
KT: you should live for a year without all that stuff in storage and guess what? You won't miss it. And I can tell you that from real experience, you usually don't miss it. You turn the page. You start af fresh and see if you like Tennessee. There you go.
Suze: Ding, ding, ding, ding, ding, ding, ding.
KT: That's right. We've done that Suze!
Suze: However (wrong answer noise), as well.
KT: What did I get wrong?
Suze: All right. The only thing Kevin, I would tell you is don't pay for storage of stuff that you really don't need
KT: He doesn't want it.
Suze: Yes, he will. When it comes time to you having to do this,
Suze: what I want you to do is I want you to look at everything and the first thing I want you to do is everything that you don't like or it gives you a bad feeling or whatever it may be.
Suze: Have a sale, have a garage sale right in front
KT: Or donate, donate...
Suze: Or donate a nonprofit of your choice. That way you will have paired down what you keep in storage in Oregon. So it would cost you far less because you pay according to the size of the storage unit
Suze: that you have to get. So my only change to what KT said would be get rid of as much stuff as you can before you even put it into storage
Suze: Knowing that if you do go there, the less stuff you have, the less it's gonna cost you to ship it there, you might even be able to, who know would come back and with a friend have them drive you there and haul it all out there yourself. But that's what I would do if I were you. All right KT!
KT: That's it. That's it. Let's go fishing.
Suze: Is it nice out?
KT: Yeah, let's go catch some fish.
Suze: All right, we can do that. But anyway, there's only one thing that we want you to say every single day and it goes like this
Suze: today, wherever I go, I will create...
KT: A more peaceful, joyful, and loving world.
Suze: And if you do that, you will be unstoppable. Bye bye.
Music: (Music Out.)
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