Debt, Insurance, Investing, IRS, Retirement
January 28, 2021
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On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Karen, Deborah, Jackie, John, Bryson, Lisa, Jen, Deb, and Desiree selected and read by KT.
January 28th what year KT, 2021. No more Happy New Year, right? Stop with the happy New Year. Still, but it's still January. Oh, my God. Right. So anyway, this is asked Suze and KT anything. We weren't here last Thursday because why all of you wanted to hear the webinar that you all missed. So we missed getting to do this for you. Are you happy to be back, KT? Yeah, They missed me a lot. Many people wrote in KT where are you? You are lying. She's 20,000 times. KT, where are you? Come back! Come back! Chiba, Come back! Come back! Here we go. Are we ready already? Hi, Suze. The whole first part of this question is praising how much she loves you and listen to you. However, Debra's 51 she has two adult kids. And here's the question, Suze, I've lived in my home for a year and I owe 554,000 on my mortgage. I have about 200,000 inequity. So although I have some savings about 65,000. I still have 35,000 credit card debt and my IRS bill is over 60,000. I took a 30,000 loan from my 401 K, oh dear, to pay the tax bill, but ended up using it to buy a piece of property. I feel so stupid. I'm so ashamed of myself. And I feel like a failure. I've wasted so much money and I don't even know where to start to get things back in order. Suze, where does she begin? So, my dear Debora the first thing that you need to do to begin is stopped feeling so horrible. We all make mistakes, but we all have the ability to start over again. You just have to be willing to let go off the things that got you in trouble. So it's very simple. Sell your property that you bought. You bought it for $30,000. Sell it and use that money to pay off your credit card debt. You say that you have $200,000 of equity in your home, take out a home equity line of credit. Listen to me now, all the way through this, just in case you need money, then I want you to use in its entirety your emergency fund to pay off your IRS bill done. You are now totally out of debt and you have a home equity line of credit at your disposal, If you need cash, you can use it, and then you just start from there. Just stop feeling like you're stupid, you wasted money and that you're a failure. No, you are a warrior, and you're not gonna turn your back on this battlefield and you are going to win your own personal financial war. Nice. The next question. I actually picked this question because I love your name. It's Jackalina. Jackalina. Jackalina. I'm Italian girl to Jackie, but this is a beautiful name, Jackalina. But you signed it, Jackie. So, Suze, here's Jackie's question. I am 29 years old. I'm currently working on my retirement savings Since I spent the past three years in law school. I am currently contributing to and maxing out my Roth IRA for 2020 but I won't qualify for a Roth IRA for 2021 since I'm getting married and the combined income from my fiance and I will put us over the $208,000 limit. So my current job does not have any retirement benefits. It's only a yearlong position. When I start my next job, I'll have retirement benefits. But I'm not sure how to save for retirement for the remaining 10 months I have left in 2021. How should I go about saving when I don't have retirement benefits and cannot contribute to my Roth IRA? You, Miss Travis, are not going to like this answer I'm about to give. All right, Jackie, get ready. Jackie, If you really love the benefits of a Roth IRA and I have to tell you, you should then I know, I know. Get ready for this. I would simply postponed my wedding for 10 months and get married next year. When hopefully people could come to your wedding, it could be covid free. It could be really ah, joyous occasion, because you could hug everybody versus distancing. If that's not an option, and maybe it's not. Then just do a back door Roth IRA. Go to the past podcast and find out how they work. She's not gonna postpone that wedding. You postpone it for 10 months more. I would postpone it because of your second point, the covid Sure. Jackalina, do it. Listen to Suze. Get to kiss and hug each other. You know those Italians? They're never going to stay away. Next question is from John. Hi, Suze. I love your podcast and listen. Often I have a question concerning my parents, My parents are 79 and 83 years old and live on Social Security at about 30,000 per year. They live in Nevada in a condo worth approximately 135,000, and it's paid for. We're trying to bring them home to Maryland, where we have lots of family and young grandchildren. The covid isolation and health problems makes this a high priority. My question is, how can they best use the money from the sale of their condo to pay for living expenses for the remainder of their life? We have found a 62 and over condo near us that rents for $1380 per month. And thats from John Suze. John Boy. Listen first, let's look at the approximately $30,000 per year that they have in income number one. If they have this condo that you found for $1380 a month, that rent alone for 12 months a year's about $16,500. That leaves you approximately $13,500 a year, or about $1120 a month. Are you impressed, KT? That I did all that in my head? Yeah. You're fast. You're good with numbers, right? Anyway, about $1120 a month that you can pay for other expenses. So you're sitting in a really great situation. The 135,000, If I were you at this point in time, I would not get fancy. I would simply let them adjust and see. Do they like living there? Do they miss Nevada? Let's just see how they do moving to a new environment. So I simply would keep that 135,000 or whatever you're going to get from the sale of the condo it in a high yielding savings account. And I can tell you that Aliant Credit Union really is one of the highest interest rate credit unions or banks out there right now at 0.55%. And by the way, do you know 135,000 at 0.55% would be about how much, KT, I'm not a genius. So about $750 a year, which adds more for the fact that they have a little more money. So if I were you, that's exactly what I would do. It's amazing. Why is that? No, not not that. What? That you could do that calculation your brain so fast. Okay, we're gonna have to check it and just make sure I was right. Okay. She's always right. So this this question is… no I’m not always right. What is the same around the house? That's that. That's us. KT is always Well, therefore, I'm not always right. Okay? This is from Bryson. And this is a sadly Suze This I have to classify as a financial abuse question and that's why I selected it. Because it's really people. This happened. So this is from Bryson. Hi, Suze. My hubs and I hear super fans. We gave your new book to our parents. Unfortunately, my mother is being financially abused by her husband. He won't let her have access to any money, including what she earns. I opened a credit union account with her and now he stole her debit card. My mother's working, but the husband will not let her keep any money. All the money goes into an account for him and his, son, If widowed, the house goes to his, son. And then my mother can pay the mortgage and live there. What the heck should I do? And he signs it a man smart enough to listen. Bryson sad, sad story, but one that isn't unusual. So what is it that makes your mother stay in this relationship? She has absolutely nothing to gain. She has everything to lose. And it is probable that all the money that is there he has and will never give to her anyway. So if I were you, I would seriously encourage her to leave and to get a divorce. And if so, move in with you just so you can keep her safe and sound. But you need to get her out of this situation. Number one. Number two. I would also open up another account for her. Another credit union account. Hopefully, maybe even at Alliant. But send everything to your address. It could be in her name. But you keep the debit card for her. Them when she wants money or she wants to buy something using that card. Then she can call up or she could tell you what it is that she wants to buy. You can order it for her, but all mail and everything needs to come to your home, not to her address on any level. Again, the main point of this is I would seek professional help. Um, there are resource is on the app, the women and money app for you to take advantage of for her. But I would really, really, really encourage her to leave this relationship now. Financial abuse always leads to physical abuse, and I am sure things are happening to her that she is not telling you about. So, given the fact that she's earning money and she has a job, just leave now and start a new life. It's to KT. It's so sad, right? It is. And and I feel for you as the son, but thank God she has you so help her get her out of there. All right. Next question is from Lisa. I wanted to ask about fixed annuities. I'm 57. My husband is 56. We have a pretty good net worth, but we won't have any income in retirement. Social Security doesn't start for 10 years, and we have been looking into annuities. We like to put a million dollars into two annuities and start taking about 70,000 K in income in about six years. The insurance companies can't guarantee any money will be left for our heirs. And I feel pretty bad that this may be depleted although our kids will have an inheritance from other sources. It's been drilled into my head not to ever buy an annuity? So I'd like to know if this makes sense. And if it doesn't, how do people generate a decent income prior to enduring retirement? I've loved you for a long time, Lisa. Are you jealous KT? No everyone loves you, Suze. Not everybody. Lisa. So let's talk about fixed annuities first. I happen to like fixed annuities. A fixed annuity normally is like a certificate of deposit where the interest rate is fixed for a specific period of time. The problem is, not all fixed annuities guarantee you in interest rate for the entire time of the surrender charge. What is the surrender charge? That is a charge that you will have to pay if you want your money before a specific period of time. So that's number one, number two. However, I would imagine that interest rates today in a fixed annuity, given that interest rates are so low across the board really don't really give you any benefit whatsoever. Many people went into fixed annuities because the income was deferred and you didn't have to pay income tax on it. Problem is that the interest rate is so low across the board, there's not a big income tax that you will need to pay if you did not do this. So at this point in time, I have to tell you I would not lock up my money in a fixed annuity. I think you would be far better off taking that $1 million and if you really want it to grow or for you to see it generate income for you, find a fabulous financial advisor, seriously, that could take that money and invested in dividend pain stocks that could easily generate for you 3, 4, 5 or 6% a year. Even at just 3% a year over six years, you're looking at $1.2 million. Now that 1.2 million in six years, even if you averaged a 5% return on that money and dividend paying stocks at $60,000 a year or 72,000 year at 6%. And guess what, you wouldn't be eating into your principal at all. Okay, Suze. Next question is from Jen. She's a smart cookie, Suze. She has a cool company in Raleigh, North Carolina. Okay, Ready? Hi. We have $300,000 saved in a money market account at a rate of 0.5%. We have a personal home purchased at 2.85% interest and an investment property, 4.45% interest. Can you guess what Jen does, Suze? No. Real estate. I'm weary of the stock market, as I feel it may have peaked and may slump for a while in 2021. Should we completely pay off the investment home with the balance of 213,000, pay down our personal home so the balance is lower from 510 k to 300 or do something else. We're not sure what to do would appreciate the opinion. She just told us that she has 300,000 in a money market at 0.5%. Alliant is paying 0.55% that's besides the point, however, but she has two properties. One that she's paying 2.85% on the other 4.45%. So the way that you, Jennifer, would make the decision on this is that what is the difference between 0.5% and 4.45%? A lot. So if it were me, I would pay off the investment property in total as long as you're going to keep it. And that way you can guarantee yourself over a 4% return on your money because you don't have any debt. Yeah, I picked that same answer. Yeah, Ok. Do you like these new glasses on me? Yeah, I do I like when they're everyone. She wear sunglasses like 24/7. But these are clear. I could see her beautiful blue eyes. All right. Ready? Debra? Debra asks. Hi. I would like to save money for my grandchildren. CDs used to be a good way to do this. I understand that giving money for a 529 is not a good idea for a grandparent. We have our own story on that, right? Suzy? How can I set up some kind of fund for them? There you go. Right. So, Deborah, it's not a good idea for a grandparent to open up a 529 plan in your name in the grandparents name. But there's absolutely nothing wrong with you giving money to the parents of these kids and have them open up a 529 for the benefit of the Children, your grandchildren. But it's owned by the parents. Just that simple. Hi, Suze. My name is Desiree. I'm 39 years old. I work full time. My fiancé also works full time. I have three kids who are still in the home, one who is in her third year of college. I love my baby Suze, and this is why their needs have always come first as they should be. Mm. I have seriously let so many of my needs go in taking care, but it's now affecting me physically and emotionally. Suze, I've gained so much weight. My teeth are falling apart. I hate smiling. I hate looking at myself in the mirror. I've tried to save a little money to start dental work in the hopes of something besides dentures. But every time I do, something more important comes up. Please. Any advice would be greatly appreciated. I know what you're going to advise. We're gonna help you Desiree .All right. Go on. KT. No. Tell her about dental saving plan. Right? Right. Really? This is the absolutely what? She should do the story. So first of all, dental work is expensive. Many people have dental insurance, which I think I have to tell you in most cases, is such a waste of money. It's not even funny. So Desiree go on the women and money app, and you could do that by going to Apple APS or Google Place. Search for Suze Orman, and then you'll see where it talks about dental savings plans. You or you could go directly to dentalplans.com and just look at that. Because if you get a dental savings plan, maybe right, it'll cost you $100, 120 dollars a year for you and your family, and it can save you 10 to 60% off of all dental procedures. So that's number one, and you should check that out. KT and I have one, and we use it all the time everybody, all the time. And we we just I mean, this is great savings huge. However, there comes a point in every mother or father's life where they really need to put their emotional needs first, they need to put themselves first, and you are now at that point. So you, even though your kids are still living at home, one who is in their third year of college. You have to sit down and have a talk and make finances of family affair. And you need to say, I love you kids so much, but I need your love back. I need you to help me to help myself. Talk to them about it. And little by little, things will change. The first suggestion that I would make for you is take a walk, take a walk and try to walk 20 minutes in one day, 30 minutes in another. See if you can start clocking 10,000 steps a day. That's all. Just make that time for you. Walk around the block, walk somewhere, but start walking. When you start putting physical energy out, things start to change in your life. So besides the dental savings plan, start to exercise and just do that. KT, are you ready? All right, Suze, make me give me an easy quizzie. It's quizzie time everybody and she tries to stump me. I don't try to stump you, all right? This one is from Amy and she says, Hi, Suze. I'm 33 finally trying to take control of my financial life. My mother opened a couple credit cards for me when I left for college years ago. Come to find out a few years down the road, she racked up $6,000 worth of debt on one card and $1,000 on a second card in my name. Both cards have an interest rate of around 24%. My parents have given me everything and even paid for my college education so I have zero student loans and I still live at home rent free because I don't feel confident enough with my personal finances. Here's the quizzie. Does Amy use her savings that she tells me that she has $16,000 saved up? Does she use that $16,000 to pay off the debt in full or does she transferred the debt to a new credit card with lower interest rates and start to pay it off there. Alright, so, KT, which one would you do? Absolutely payoff both cards in full. 24% interest is insane. Get rid of the debt boom. Are you positive? I’m positive. Yea baby. And she did get it right, Amy And I hope all of you out there got it right. Why? It's not just about getting rid of the debt. Amy has tremendous emotional baggage at this point in time. She doesn't even feel financially secure enough to go out and live on her own. Even after she pays off this debt of $7000 she'll still have $9000 in her savings account and she can continue to build from there, but more important than money, Amy, and how to get out of debt. I just want to tell you one other thing that I want you to do, I want you to go up to your mom, and I want you to tell her that you paid off this debt. Number one and number two. How much you love her and appreciate all she sacrificed for you to be able to graduate college without any student loans and to allow you to live in their home. And that you respect her, you love her and you have such gratitude for all that she's ever done for you. Make sure you say that to her, Amy. Because trust me, she feels bad that she had put that money on those cards in your name. Great advice, Suze. Alright, KT. Guess what this means. Time for another farewell. How should we do it this time? See you Sunday, everybody.
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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