401k, Credit Card, ETFs, Investing, Life Insurance, Roth IRA, Stock Market
January 07, 2021
Listen to Podcast Episode:
On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Logan, Jeff, Will, Shaina, Michelle, Alicia and Kaitlin, selected and read by KT.
January 7th, 2021. Hi, everybody, Suze O. Here and before we begin as Suze and KT, anything podcast today. I just want to say something and it's this. Yesterday, January 6th, was maybe one of the saddest days in America's history. And I just want to remind everybody that, as I said in last Sunday's podcast, this is going to be a time that is very, very turbulent and it's not going to end yesterday. It's gonna go on and on. Don't be shocked if January 20th is even worse than yesterday, but I just want to say it's really important, it's really important that you never, ever forget that adding anger to a situation is like adding wood to a fire. If you're angry, okay, just work it out by yourself somehow. If others that you know are angry, don't let them get you angry. This really is a time that I want all of you just to stay solid. Stay to yourselves. Stay in word here. Just be careful but just come from a place of love. This world needs your love and your prayers more than it's ever needed it before. And so therefore I want you all to come from that place and not get caught up in the things like we all saw yesterday. So I just wanted to say that to everybody before we began the women and money podcast. January 7th, 2021. KT, can you believe it? Can we still say Happy New Year? No, it's over. No, but we I still think it's kind of new. There's so many people haven't said Happy New Year to tell everybody Everybody, everybody. KT here on KT's First Thursday with Suze in the New Year. Happy New Year here we go everybody, it is, Suze O and KT here, welcome to the women and money podcast as well as the men smart enough to listen? This is Ask Susie and Katie, anything. She's getting her cue, right, everybody? What? What? It's ask Suze and KT reads the question. They know that because I don't answer them. You think you try to answer them sometimes, But let me start by saying, before you even start, What did you think about our laughing, laughing podcast? That was a week ago. Well, first, we'll Robert you did such a great job and it made me laugh again. Robert is our editor, and he put he took all the outtakes of Suze and I'm messing up because we get into these laughing fits over the past year. We didn't do that just in 1 day, and he put them and sliced them all together and edited into a really funny little 15 minutes of us laughing. I enjoyed it. I don't know if you all enjoyed it because it was I don't know what we did it again learning and you learn how to laugh. You learn how to be a little happy. Alright girlfriend ask me a question. All right, so I chose a couple of questions to start this new year with, based on the repercussions of last year, and I think that everyone's going through this and we're going to continue going through it for a while so this is from Logan. Suze. I'm a recent college graduate who moved home during the pandemic when my company switched to tell-a-work I used this time to build my eight month emergency fund, which you champion and have invested in my 401 K since day one. I told myself I would move out once my company ordered us back to the office. However, my job has switched to permanent work from home status. What should I do? Move out and be on my own? Or is it wise to continue saving a little while longer? Wait, can I say something? Our nephew is in exactly the same situation. But you know what, Logan? If your mom and dad or whoever you're living with, love you there, just stay. Didn't we all just start the podcast with KT saying she asked the questions and I answer and see. Didn't I tell you? She goes right ahead and answers. Don't. Don't you agree? He should just stick it out if they're not kicking your mouth. Come on. Save the money, boy. Well, there's your answer, Logan. You heard it from KT herself. No, you answer for him while he wrote to you. All right. So, really, Logan, here's what I would say to you. You say that you have an eight-month emergency fund. Well, guess what my new advice is I want all of you to have a least a 12-month emergency fund So you better tune in this coming Sunday, January 10th, to learn about the one that I want you to have. But even more important than that, you say that you have a 401 k at work. You did not say you have a Roth 401 k at work, and you also did not say that you have a Roth IRA besides your Roth 401 k at work. So I want you to stay at home at least until you have fully funded a Roth IRA. Assuming that you qualify for and I have a feeling that you do and you make your new contributions to the 401 K at work to the Roth 401 k, The more money you can save right now, the better off you are going to be. And I know you're thinking, Well, if I move out, I'll be independent again. Listen, you made yourself a deal, and what was the deal? The deal was you were going to stay at home until you had to go back to work at the office. Well, guess what? You don't have to go back to work at the office so stay at home. That's what I would tell you to do. That's great advice, Suze. Great year to you know how much money you could say. Oh, my God. And his family probably likes having him around. Okay, This one. Would you like having Travis around all the time? Yes, I I would. I mean, not forever. Travis is the name of our nephew. Okay. Okay. So, Suze, this this is really a heartfelt situation, and this is from Jeff, who lives in Greensboro, North Carolina, with his girlfriend of six years. They've been there for about two years, and then covid hit. And when this hit it all hell broke loose for these kids. And he said when I started to receive unemployment, we would combine our money together, pay the rent bills, but it was not enough to pay the full amount of rent every month while paying every other bill in terms of just surviving. So Suze, Jeffs company is still shut down. He doesn't receive unemployment. He's behind in rent, like really behind in rent. And when they saw you on the Today show, they both listen to you comment on maybe if you're in a situation where you really can't make any ends meet, possibly move in with friends or family members. And this is just one option where you've really got to help each other. So I think that this is an opportunity, and above that, listen to this. Deborah the girlfriend lost her dad and they they're from Puerto Rico. The mom lives in Puerto Rico. Her dad died in the middle of covid as well. You've gotten caught up in Jeff's life, but what's Jeff's question? OK, so Jeff is going to get a stimulus payment and before he starts working again and they don't know when they're going to start working again, do they pay down this rent and try to, stick it out and make ends meet and still owe money and get evicted? Or, you know, with the pressure of what's happening, what do they do? I mean, he wants to keep his I got marriage or his girlfriend. I got it girlfriend. Alright, I feel so bad for them to tell the K T. Totally got involved in this man and I want to call him or you can call him. All right, so tell them what to do, right? So, Jeff and Deborah, here's what I would tell you if your mom Debra, lives in Puerto Rico and the truth of the matter is you lost your dad, which means she lost her husband, which means she's probably really, really lonely. I personally would take the stimulus money, and if you get unemployment again, or whatever it is and I have to tell you, I would not pay the back rent, believe it or not, And I would take whatever money I had and I would buy airplane tickets and go back to Puerto Rico and live with Mama because, you know, and I know that she would love to have you there. And you and Jeff there, of course, right, and then just gather your wits about you because maybe you could get a job. And if your job comes back again, you could always move back. You'd have money to do so. But while this is going on and all you have coming in is the stimulus check and no other money or anything like that, I would pack up and use the stimulus checks that I get and I would go to Mama in Puerto Rico. Oh, KT, KT, you look so sad. You'll be sad. The only upside is that could have a great time getting part of good sun tan. I go. Alright. So next question is a fun one. It's a little bit interesting cause I can't answer it, but it says hi Suze and KT. It brightens every weekend to hear you on my phone. I had a question about terms you would hopefully be interested in covering on the women and money podcast. So, Suze, this is a question from Will. These are all men that you’re choosing. I I love it, though. But listen to this. We'll is asking. Do you know that somebody a friend of ours who knows us obviously was with somebody else and their friend asked them to? Suze Orman hate’s men. Can you believe? No, I didn't I didn't hear this story, right? Why? I don't know. I have I ever given any of you the impression that I hate men? I don't think so. So that isn't that interesting. And so see, Here's KT picking all men right now, but anyway, go on. And Suze has lots of boyfriends. Believe me. I'm going to share who? I'm gonna tell them all who your morning boyfriend is. Morning, Joe. She is in love with morning Joe. Don't tell Mika his wife. Okay, everyone. So here's the terms that they're trying to figure out. These are the terms. They don't know what they want to Suze school. Everybody's going to Suze school okay? The first one is margin balance. The second one is mat. requirement. Maintenance requirement. I figured it was maintenance, Non marginable funds and stock buying power. Right. So these are words that will come into play when you open up a brokerage account. Margin is when your stock firm that you have your account with lends you money to buy stock that you don't have money to buy. Why would they do that? Because maybe you've opened up on account with them. You've invested a $100,000 with them where you've already purchased stock. You've purchased it, you've invested all 100,000, and now you want to buy another stock, but you don't have any more money. So now they will lend you money based on the value of the stock that you already own, so they'll give you a loan up to 50% of the value off the stock that you already own. That's known as margin. Maintenance requirement is if the stock that you bought or the stocks that you have margined start to go down, they're going to sell that stock from under you in order to fill the maintenance requirement because they're never going to be below 50% of the value off your portfolio. Those are really the two main terms you need to know when you open an account, however, you don't want to go on margin. You never, ever want to go on margin unless you are a sophisticated investor and I just doubt that's happening here. So you never want to go on margin? You don't care about margin and you don't care about having a margin account. There you go Will, she answered it for you. We'll just to make you feel good. I didn't know what they meant, either, but that's no surprise to anybody. All right? Okay. Go on. Okay. Next ones from Shana. So Shana has said, Hey, Suze, I'm 30 years old and I opened my Roth IRA This year. Wahoo! She wrote Wahoo. I'm only investing in ETF’s to start out as I continue to listen to you… And what is ETF KT? exchange traded funds. That’s my girl. All right, now. All right. Okay. So I only invest in ETFs to start out. As I continue to listen to you and educate myself on long term investing. I dollar cost average $100 a month, and then we'll make up the difference in April to max it out. I've been hearing a lot about the index fund bubble, and it bursting soon. Is that something investors should be worried about? Would that potentially be good news for me as I could buy more ETF’s at a cheap price to hold for longer? I plan to hold all of my investments for at least 30 years. Thank you Suze loved the show. Yeah, Shana girlfriend. It would be really, really great news for you if this market started to go down, down, down and down. Because you got it right. Especially with an index fund or index ETF. The more the market goes down, the more the shares of the ETF. The price of it goes down, the more the price goes down, the more shares you're able to buy. The more shares you have in the long run, the more money you make when the markets go back up again. So I think that would be a really great thing to do. I just want you to be a little careful here because you say that you're going to make up the difference in April to max it out. It's March or April of this year. I don't know if it's gonna happen or not. So you're going to just have to see that I'm expecting that these markets should start to go down for quite a long time. Could be wrong. Hope I'm wrong, but it's possible. So I would not be taking, if you're doing $100 a month and let's say you're doing this in your Roth IRA and now comes March or April and you're now going to put in another 4000 and invested all at once. Uh, don't do that. I want you to continue to dollar cost average every month. No lump sum investing in March or April. Okay, there you go. So next one is from Michelle. Suze, I'm completing your must have documents. However, I have a question on what to do about insurance. I'm 69, 70 next month. I worked up until five about five years ago. Outside of the home, I work part time from the house. All those years I had life insurance through my employer and term life insurance. It ended due to my age and no longer working. I am healthy. No medications. I do have a lot of credit card debt. Do I buy term insurance, which they say ends when I'm 80. I cannot afford whole life due to the high cost. Or should I just put the money in a savings account and forget buying insurance altogether? There you go. Forget by insurance altogether. Yes, at the age of 70 she doesn't need insurance. Her kids, if she has kids, are all grown at this point in time. She has credit card debt, so she needs to be dealing with her credit card debt and getting out of debt. And of course, you know, rather than buying insurance for who, right, she should absolutely either save that money, tune in on Sunday. A great place for you to save right or really pay down your credit card. But no, do not by any more insurance. Over. Okay, Suze. Another insurance question from Alisa. Hi, Suze. Were a healthy married couple with two young Children were in our late thirties and forties. We have a three-year-old and an infant. Which life insurance policy is best for us. You should make that the quiz. I know the answer. All right, answer it. Alright, alisa, If I were Susie, she'd say, What do you mean? Life insurance policy? The only insurance you need is term insurance. That's pretty good, KT. So how long of a term insurance policy should? Until the until the kids air are of legal age? No, to the kids are about 25. So how many, what kind of term policy should she get? Oh, I don't know. What do you mean? What kind of term? Do you see everybody. There's only one term insurance. No. So here's what. Here's the question, Alisa, which is you say that you have two young kids, three and an infant. So if I were you, I would get at least 20 year level term insurance, which means that the premium will be level for 20 years. However, if you can find a 30 year level term policy, which would still be affordable for you because then you know you would be in your late thirties so 40 so you would be, you know, in your sixties, almost 70. That's fine. That's fine. And that's when it would expire, right but that's what I would do. And then your kids would absolutely be covered. So I personally would go to selectquote.com. And I do not get paid to say that everybody and I would look up what it would cost me to get a 20 or 30 year level term policy. They will give you five quotes. Just choose the cheapest. Alright, great. Okay, Next one is from Caitlin. Suze my husband and I are both 34. I have a work sponsored 401 K that has been contributing 6% until April this year when my company decided to stop contributing. Under normal circumstances, the company will match you up to 3%. I listened to your podcast and you said open a Roth IRA and we fall under making less than $150,000. So I assumed opening the Roth in my name with my husband as the beneficiary was a good idea. My husband does not have any type of retirement account. I just listened to your podcast on December 17th. You said married couples filing taxes separate can't open a Roth IRA if you make over $10,000 a year and I do. Why are you looking at me like that? Oh, no. Why are you looking at me like that. You should see her face every look at the next. Listen, I'm just reading what Caitlin wrote she wrote because of what she wrote. She wrote. Oh, no. What have I done? Did I make a big mistake or when filing taxes is there something special I will need to do? You need to do you need to withdraw the money. It's just that simple. If you file separately, even though you are married, the most that you can make is $10,000 a year. And obviously you're way over that. By the way, just so all of you do know the new modified adjusted gross income limits for the year 2021 is $125,000 a year if you are single, if you make 125,000 year of a modified adjusted gross income or less, you can put in the full amount to a Roth IRA, which is $6000 if you are under 50, $7,000 if you are 50 or older, you no longer can contribute once you start making more than 140,000 year of adjusted gross income. However, if you are married finally jointly, the new numbers are, if you make under 198,000 of modified adjusted gross income, you then can put in the full amounts into your Roth IRAs. You can max them out, once you make over 208,000 you no longer qualify. But no matter what year were in it, if you make more than $10,000 and you are married finally separately, you do not qualify. This is from Gina. Hi, Suze. How are you? My husband and I are both 61 years old. I was getting ready to apply for my pension to be sent monthly, but my husband said maybe we should use part of both our pensions to pay off the house. We owe $149,000 on our home. Do you think this is a good idea? He makes over $18,000 a year. Let's make this the quiz. all right. This can be the quiz. All right. This is the question. Do you think it's a good idea? He makes over $80,000 a year so will he be penalized for taking out all his pension? Can he leave some funds in his pension? All right, so the quizzie is everybody. Should Gina and her husband take out money, they're about to retire from their pension plans versus getting a monthly income, should they take out a lump sum to pay off the mortgage on their home? Yes or no? KT, what's the answer? I always tell people I want them to own their homes outright when they retire. Take it out. Your such a sucker. That's not fair Suze Orman. Here's the thing everybody and Gina, please listen to me with this one. All the money that you have in your pension is pre tax money. If you go to take a lump sum out now to pay off the 149,000 that you owe on your home, you're going to have to take out almost 300,000 so that after taxes, you have, like, $149,000 left to pay off the mortgage. Whatever you take from the pension plan is absolutely going to be taxed to you as ordinary income. So I have to tell you, I so disagree with your husband, right? I'm actually KT just handed me your email, and I'm seeing that later on you say that you're going to be 62, and you and your husband are both going to take Social Security at 62. Girlfriend, you are doing this everything wrong. Do not take Social Security at 62 you are not to take social security at least until your full Social Security age, which possibly could be very close to 67. And you should absolutely not take the pension as a lump sum in order to pay off the mortgage on your home. Oh, please don't do that. You got a rocket? Sorry, KT. That wasn't fair. What do you mean it wasn't fair? Gina. I know Suze gave you the right advice, but that was my best guess you should. I can't believe she set me up for the etcetera. Everybody that's brings us to the end of another asked Suze and KT anything. What's really important is that I want all of you to tune in to this Sunday's podcast. Seriously? So great. Don't miss. And what's great about it is the offer that is going to be put on the table for all of you to hopefully take advantage of, and I need you to take advantage of it because I have a feeling it's not gonna be around for very long. So I wanted my podcast people, really, to get the first crack at it. So tune in on Sunday and listen to what I have to tell you and until then, what do you want to say, KT? Have a great new year. Everybody here she goes back to the new year. I knew it. Stay safe and we'll see you soon.
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Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
I have checked all the beneficiaries of every investment account and insurance policy within the past year.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.
Credit & Debt, Saving, Investing, Retirement