Credit Card, Home Mortgage, Investing, Retirement, Taxes
March 25, 2021
Listen to Podcast Episode:
On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Holly, June, Katie, Craig, Steve, Mark and more selected and read by KT.
March 25th, 2021. Hello, my dear Katie, Hi Suze, this is Ask Suze and KT anything. Anyway, I have to tell you something funny that I realized because I was listening to the podcast. Which one? A lot of them. I was listening because you told everybody that the podcast all about Bitcoin was the January 31st podcast but it was February 7th. Well, the big lesson was in February, but you're right. I made a mistake. But January there was I know. So, I had to listen to all of them to find what I was looking for. However, January was a good place to start. Do you know what I realized as I was listening to them all, what? We have not said in many, many months. If you want to write in and ask a question to Suze and KT, where to do so you know, we haven't said that. They go to the app, well, they can go to the app, the community app that you can download on Apple App store or Google play. Or just go to firstname.lastname@example.org. Yes, but we haven't said that, and you better tell everybody. But we told them. Listen, we have so many questions, but we're happy to get more short ones. If you send me short ones, I'll pick them out and put them right on top of the list. I watch her when she's doing this. She doesn't know I'm watching her. She's going through the questions. And all of a sudden I see her with her little finger on her Iphone going, Yeah, scrolling. And I see surely and then all of a sudden, all of a sudden she goes, it goes to another one, and then when it's a short one, she hits print, and I hear it printing out so that she has all these questions in front of her. Go for it, girlfriend. Hey, my first question is from Holly. Hi, Suze, KT. In this wild year of job transitioning for so many, I'm hoping this might apply to more than myself. That was nice of you, Holly. My question is about a rollover IRA brokerage account I have at Vanguard It's a small amount. I have about $1647. I'm not sure what I should do with this amount. Is it best to transfer my Roth IRA and count it towards my annual 6000? Or should I just leave it in to avoid any withdrawal fees? Or should I relocate the money with the rollover IRA to funds that produce more of a return? Does Holly say how old she is? No. All right, everybody, listen to me closely. When you do right in and you ask a question, can you just tell me how old you are? And then it can help me a lot in answering your question correctly. Holly, first of all, if you take this money the $1647 which, by the way, girlfriend is not a small amount. The day that you start thinking any amount of money is small. A dollar, $100, whatever, I that I don't even know what to think about it. But anyway, here's the thing. If you were to take this money and convert it into a Roth IRA, yes, you would owe taxes on the $1647. Alright, but it probably won't be a big deal, but that does not count towards your annual amount that you can put into a Roth IRA. Now, they will be all one account, but you'll have the converted account along with the contributory account, so you could do the 1600 plus another 6000 if you're under 50 or 7000 a year if you're 50 or older and be okay. So that's what I would be doing if I were you. Alright, next girlfriend. Hey, Suze and KT, I have a question regarding a contribution to a 2020 traditional IRA. And then if I refiled to a 1040 am I eligible for the stimulus? When I was talking to my dad, he said I should contribute to my 403b and I would not be able to contribute to a traditional IRA, but said we could try for my husband. Since he doesn't have a 401K or a 403b, that doesn't sound right to me. I contributed $10,000 to my employer 403b, and my gross income is 125,000. I'm 56 years old. Is my dad correct? Or is his example only for folks who make over a certain amount of money? I love and trust my dad, and he's a fan as well, Suze. But he's not always right. Thanks again. Oh, wait. And she said, P.S> I opened my Alliant Credit Union account. It's right, I know God. Oh, my God. End of the month, keep your fingers crossed, six days left till it officially ends. However, we will know by Sunday if they're going to extend it or not. So, make sure you tune in and find out. Or just open it. Now open it. Open it now. Don't wait. Okay? So, what should she? Is her dad right? Or is he wrong? What do you think, KT? Just I think he's so wrong. Why? I don't know. But I just have a feeling is wrong. Is he wrong? Wait, this isn't your quizzie. I was just curious what you were going to say. Here's the thing. Everybody. Before I even answer this question, it's really important. Just because a parent with such authority tells you something and they've been telling you something forever that that they're right. You don't know that they're right. Maybe they're right. Maybe they're wrong. And in this particular case, Papa Bear, you could not be more wrong. If you tried. But here's the reason. Everybody, you absolutely can have an employer sponsored retirement plan, such as a traditional or Roth 401 k, 403b, TSP. And you can also, in addition, have a traditional or Roth IRA. You could have a SEP IRA besides an employer sponsored retirement plan. So, it's very important that if you contributed $10,000 to your 401K plan, you absolutely could contribute at the age of 56 because she's 50 or older, $7000 to a traditional or to a Roth if she qualified for it on adjusted gross income. But here's the bottom line, Papa, you are wrong. You absolutely can have both, be nice to your daddy that he was wrong. I know why you're not mentioning this woman's name. I know why KT want me to tell you why. Because you don't want her daddy to feel bad because he's a fan and he listens because I'm sitting here going. Why isn't KT saying this woman's name? And the reason is I know you, KT. You're right, I don't want him to be embarrassed. And I had a feeling he was wrong. I have another question. God, this one's from June. This is sad. My spouse recently died. I miss him. So, we were in the process of trying to sell our home of 25 years. We wanted to take advantage of the 500,000 exclusion, but were too late. Now I'm so sad. And now I will have to owe far more taxes. Suze, can you help me? I didn't know what exclusion. Why don't you explain that? Because I don't. I didn't get that. You know what people are writing me. Go, how long has KT lived with? You know, I didn't know this part. Why? All right, we don't sell houses that often. When you go and you buy a house and let's say you buy a house for $100,000 and the house you hold the house and it appreciates, and now it's worth $600,000. If you are married and you go to sell that house, you each get a $250,000. Actually, it's an exemption, right? So, you each get a $250,000 exemption or $500,000 which means if you bought it for 100,000, you get a $500,000 exemption and you sell it for 600,000. You don't know any tax whatsoever. The exemption is the amount that is exempt from being taxed, which is 250 each 250 each. But in June, situation she's saying that she's so sad because she recently just lost her husband while they were trying to sell their property. And now, because she's by herself, she's only going to get a $250,000 exemption. Is there anything that she can do? I guess not, right? I'm sad, too. Can she do anything? You bet she can see. This is why everybody, it's so important that you have a place to come to, to ask questions where most people don't have a clue as to what the answer to that question is. Do not point at yourself like that KT. I'm not embarrassed. I'm not embarrassed to tell people I'm most people. Most people like KT who's very smart don't have a clue, when it comes to a lot of these financial. Do you think I've been too protective of you with money? No. Well, then why don't you know these things I didn't know about? Well, if someone because you just said that she was sad or she said she was sad that she has to pay more. But you're saying there's a way out. What is it? Don't try to turn. Did you hear everybody? What? She just What is it? Tell them what? So, June, here's what you need to know. Since your husband, your spouse, just died, you qualify for all of this. You first of all, if you sell your home within two years of the death of your spouse and you haven't remarried at the time of the sale, which we know you will not have, and neither you nor your late spouse took the exclusion on another home sole, less than two years before the date of the current home sale. These are all things you have to know. Everybody and most importantly, you meet the two-year ownership and residence requirement. What that is KT, is to take this $250,000 exemption per person. You have to have lived in that house as your primary residency for two out of the past five years. Because maybe it's your home and you're renting it out. And you haven't lived in it for five years. And none of this applies to you anyway. They've been in a 25 years, right? So therefore, June, on every single level, you still qualify for your husband's $250,000 exemption. So, you need to go ahead now, sell the house and $500,000. Even though he's no longer here, you're still going to get that entire exemption. So right. So, I know June should sell the house by June. Well, there, that would be very lucky. June go for it. Is that corny? A little bit, But you like things like that. All right, this next one, everybody is something. You see how quickly she we dismissed that? Everybody. The next one is something I picked out because of the title. When you write a subject, and it catches my eye for sure. That's coming on the list. This is an email from Yvonne. But the subject says a brief Thank you from my heart. I love that. So, dear Suze, I used to be petrified of investing in the stock market. Not anymore. And I have you to thank for that. I know I have a lot more to learn, but I also know I've come a long way. You've really helped me. Thank you for everything you do for all of us. I hope it's okay to send you. Thank you. Notes like these sometimes. And I pray you see them because my heart wants to say thank you so much. I love you lots. Blessings to you and your KT. And this is from Yvonne. And I'm KT even. And I want to thank you for sending Suze a little, thank you know, because these lift her spirits and it makes her heart sing. So, thanks for doing that. I like that Yvonne. And you know what I love about that email is that she prayed because, you know, I believe in prayer. More than anything, she prayed that that would come on the podcast and you see your prayers were answered. Okay, Suze. Next question is from Katie. Hi, Suze, I'm 36 going through a divorce. I mainly stayed at home last year. We have a joint income, probably less than 100K. I opened my own accounts. I want to transfer my fidelity 403b plan to a fidelity Roth IRA before April 15th. Does this make sense? So, Katie, number one, what doesn't make sense is why you're rushing to do so. The first of all, remember last Sunday's podcast, the IRS has extended the tax filing date till May 17th, which means you now have until May 17th to open up a traditional or a Roth IRA for the year 2020. But you can do a conversion from a 403B or roll over from a 403B to an IRA or a Roth IRA anytime you want. And it has nothing to do with rushing about the tax deadline. The real question is, what taxable event will it create for you if you convert or roll over your 403b that you've never paid taxes on, to a Roth 403b because that will be totally taxable to you. So, before you do anything, make sure you consult with the CPA. So next one is from Craig. Yeah, man smart enough to listen. Dear Suze, I hope all is well, oh my God, you have such a smile. I love to get the men's emails. Dear Suze, I just think it's fun because you I get lonely without having them around. It's good. We love to see Colo every morning. Both of us. Okay, KT we do what does tell everyone what he does. Every morning he joins us for coffee or breakfast on the front porch. But the first thing he does, he pops his head in the front door and Suze's all the way in the back in her bedroom. And he does what he says. What? Hi, Suze. And what do I do? Hi, Colo. Morning, Colo. But here's the thing everybody. The reason I said Oh, please is KT is happy to see Colo first thing in the morning. Second thing in the morning, for lunch, for dinner in between. Colo, we love you. So, we love seeing you all day long. Are you kidding me? All right, all right. This is from Craig. I hope all is well with you and that you're staying safe. I'd really appreciate some advice on an issue I'm having with my only surviving parent. She is 86 as sharp as a tack with everything except finances. She has retirement money that comes in every month to easily cover her bills like a 2 to 1 ratio. She sent out a cry out for help, as a good son does, I co-signed with her on her house mortgage last go around five years ago, but she doesn't have enough income to qualify. I am on the house title. She is carrying about a 48% loan to value ratio on this mortgage. And over the past five years, despite my advice to pay off the bill every month has created a mid-five figure credit card debt and has enough money in the bank to pay it off with a little bit left over. The interest on this debt cost her $700 a month. That's crazy. Now she wants to refinance the house, take out some additional money cannot justify what she's going to do with it and potentially has found a lender that is willing to create an exception to try to put a loan package together. As you can imagine, we are at odds on this, and I'm not able to get the message across in the right way. That is not a good retirement or any time plan. Suze, do you have any advice? Can I say something before you say what you want to say? I'm going to say the number seven. Go on. Why do you want to say the number seven? You tell me what you are going to say. Throughout this entire email, I noticed one thing. Craig never referred to this only surviving parent as Mom. Never. He sounds so mad that he can't even call her mom or his mother. All he says. Is she she? Do you want to know what seven is the number of times he referred to his mother as she. So, while you were reading it, I was marking down the number of times I kept hearing the word she, we're on the same wavelength. Oh, now she doesn't trust me. She's going through, I’m counting it. You're right, but isn't that isn't it odd? I mean, he just must be furious, and he doesn't know what to do. So, what can he do? But so it's his mom, and he can't even say, Mom, here's the thing, Craig. Your name happens to be on the title to the house, and therefore she cannot refinance that house without you signing on the loan again and there comes a time in life when helping is hurting and hurting is helping. Which KT told you last week is one of my favorite sayings. And there also comes a time when the child needs to become the parent because the parent has obviously become the child and making serious, serious mistakes that you are the one who is going to end up having to pay for. On some level of taking care of her as she gets older or whatever it may be. So, if I were you, I wouldn't worry about it. And the reason yeah, and I'll tell you why she can't refinance the house without your signature. So that's out of the equation, and she's going to find that out sooner than later and when she comes to you and she asked you to sign, you're going to say, Sorry, Mom, I am not going to do it. I refuse to make a bad financial decision with you not going to do it. You don't have to ever talk to me again, but I'm not doing it. What about the $700 a month and dares the thing that's crazy? Here's the thing. She's going to eventually run up her credit cards until she has no credit limit left. At that point, she's going to have to make a decision. Either she's going to have to pay it down with the cash that she has, or she is going to have to do what she's going to have to claim bankruptcy. But what you need to know. Seriously, listen to me now, Craig, if Mama dies, you legally are not responsible for that credit card debt. Credit card debt is unsecured debt. Mommy dies, it dies with her so you can have a talk with her. But obviously you've tried, and she's not listening to you. You just have to now take a stance and at least protect the equity that is in her home, and you should make it clear to any lender or anybody you know she's talking to. That your name is on title and you are not going to sign for her to refinance, take out a home equity line of credit or do anything of the sort. He just has to be hardcore, KT. It's just that simple, all right. Another one from Steve and this again is a situation where he's a little stuck. Hi, Suze. My name is Steve, and I was asked by a friend if I could lend him over $2000 on my credit card, plus $400 in cash for over a year now, he's been paying just the minimum on the credit card. He still owes me the $400 in cash. So far, my credit score is not suffered. He's my friend for 25 years and has been having a very hard time generating income with no steady job. I have a steady job, and I'm doing fine financially. I guess my question to you is, can you give me any advice on how I should handle this situation? I thought about telling him that you need to pay me back by a certain time, but he is very limited income. So, anything would help Suze, blessings from Steve. What can you tell them? Want to know what I find fascinating KT? Is that the last two questions were for men, men asking for help men possibly having made a mistake, having lent money to begin with. It's usually a woman who's lending money. And things are turning here a little bit where women really are learning how to say no, out of love for themselves, and men are starting to really soften up. In many ways, it's very interesting to me, but especially for all the women listeners out there. Just take note that men always don't do the right things with money. Just remember I said that to you, Steve, Boyfriend, listen closely, this is your friend of 25 years. You already know that he's not doing well. You cannot get water from a rock, and you cannot get money from somebody who doesn't have any. The great thing about it is at least he's been honorable and paying the minimum payment due every month on the credit card because he wants to make sure that your credit standing stays in good stead, so he's been responsible in his own way. The problem is, if he's only paying the minimum payment due, I would imagine that the $2000 on the credit card that he originally put on there is now 2500 or 3000 or 4000. It's growing. So, Steve, this isn't just about is he making the minimum payments every month? This is about you making sure. What is the balance that you owe on that credit card? Now you said that you are doing great. You're doing fun. Everything's good for you. I want you if you have at least a 12-month emergency fund if you have money. Besides that, I want you to pay off this credit card in full and then because you don't want it to continue to grow. Because if something happens to him and he can't pay for it at all anymore, you're going to be responsible for that. So, pay it off in full, tell him how much you paid off in full and when he can. When he's back on his feet when everything's good again, then to start paying you as much as he possibly can. However, Steve and everybody who ever thinks about lending money to a really good friend again or family or family member, know that if you lend them that money, you need to think of it as a gift because chances are you are never going to get that money back. And you don't want to lose a 25-year friendship over $2000 or $3000 Steve. You don't want to do that. So, pay it off, have a talk with him, be compassionate with him because he's trying and just say, listen, Steve, when you have the money, you'll pay me back, just that simple. And if you never have the money lesson learned. Okay, I have another boy. We're going to get emails, and you know I have a boy. He's only 34 but I'm kind of intrigued by how smart he is already. Or maybe he's not smart, but at least he's so interested in investing. And I say, Boy, he's 34. Ready, KT, I don't think he's going to take that as a compliment. Go on, Mark, you're just 34 but I think you're doing a lot of good things. So, let Suze be the judge. I'm 34 read about long term bonds. I currently hold about 11% of my retirement funds in long term bonds ETFs. Given the low interest rate environment that we're in today, would you recommend selling and moving to preferred shares and high dividend REITs. I want to tell everyone what REITs, real estate investment. Trust God, given my age, I know I won't need the money for 30 plus years. Ready, Suze? The rest of my investments are 22% in midterm bond funds, 53% in index funds and 11% in stocks. Stocks that he loves Amazon, Apple, Lemonade and Disney. Fabulous Lemonade is a fabulous stock, by the way. Tell talk to mark about what he's asking you. Is he doing the right thing? Mark, I don't know where you got this idea on any level. So, at 34 years of age, who in their right mind would have this much money in bonds? You would have money in bonds, possibly, especially if interest rates were high, about to go lower when you were a whole lot older. But at your age, at 34 years of age, almost 100%, honest to God, of your money should be in individual stocks or exchange traded funds. And just look at it. Look at how much money you made at Amazon Lemonade, Apple, whatever else it may have been versus and the Standard Poor's 500 index ETFs, by the way, versus what you made in bonds. Are you kidding me? So especially at this point in time, long term bonds. Long term. Really? All right, listen to a podcast that I did maybe a week or so ago about why I wouldn’t be touching a long-term bond fund if my life depended on it. Just my advice, Boyfriend. I guess she had an opinion, Mark. I always have an opinion. All right, KT, it's time for your quizzie. But first, what do you think I'm going to say? We have to tell everyone to tune in this weekend. HSN baby, love you love that were just so connected today. HSN baby. So, I'm excited. We haven't been on HSN in a while in a year. KT. Oh my God, a whole year, Everyone, you don't miss it. First of all, she's with two of her very favorite hosts, which I'm not going to disclose. You just have to tune in on Saturday at 9 p.m. Eastern and Sunday at 6 p.m. Eastern and I made a mistake in previous podcast. I said it was two PM but at 6 p.m. East Coast time, or you adjust that because it's live wherever you happen to be. And there will be a sweepstakes of $500 given away. Yeah, for HSN value. Are you allowed to tell them now? I am telling them now so that they tune in on Facebook. You don't have to buy anything, you don't have to do anything, and then you can take that $500 and who knows what you want to do with it, and you know what I would do with it? Here's what I want to tell you about, every time I talk about the must have documents. I get lots of emails because KT forwards them to me and it says, what is the code? And you could see the code is suzeorman.com /offer. And if you want to get the must have documents, that would be $69 with that code. By the way, if you go to my website suzeorman.com, it's $199 there. So, because you're my podcast buddies, we sell it for $69. But this week this weekend, for $63 you're going to get the must have documents. You're going to get a hardback copy of My New York Times bestseller, the Ultimate Retirement guide for 50 plus. You're going to get the audio book, the online book, and you're going to get that offer for Alliant, you know, and we'll see what happens there. But it's that so don't miss that. Don't miss it. It's a great, because that's a great, great offer for $63 to get all of that versus $69 just to get the must have documents. So, if you've been thinking about getting the must have documents, you're to go to HSN, and that's how you are to get them so you can save money. All right, KT, quizzie time for you, all right. Ready? I'm a little nervous. Alright, this one seems a little bit complicated. Why do you even think that? Because it's long I'm looking. What is it? I'm 35 years old and single. I do my own taxes. Now everybody, listen closely because you all have to answer this question as well. For yourself. This isn't just a KT quizzie. This is a women and money podcast quizzie. I'm looking for more ways to save for retirement. I saw on the IRS website something called Catch up Contributions for an IRA. Which is something I haven't heard of before. If I have contributed $19,500 which is the max, KT, to my company's 401 K and $6000 to my contributory Roth, which is the max, KT, this year? Can I also do catch up contributions for previous years for either or both types of retirement accounts? And does that have current and past tax ramifications? Thanks for all you do to help us get better with money, Rachelle. So, the question everybody before KT answers this, can Rachelle having maxed out her 401K as well as her Roth. Can she also do the catch-up contributions? She is, as I said, 35 years of age. I think I think that why wouldn't the government want you to put more money into your retirement accounts? So, I think, yes, you can definitely catch up for the years you missed, but there's no way I don't, I think you're going to slide with not paying taxes on it. Uh, but it's to a Roth IRA, so there's no taxes issue about the same thing. It's into her 401K I think you can catch up and pay into. Can you pay the full amount? Well, let me just put it this way to you, KT. Oh, come on, Wait. Let's ketchup mean then it means what you put on your fries, Suze that's so corny. That's don't say that. So, everybody, what does catch-up mean? Catch-up means this. Once you turn 50 or older. So, Rachelle, for the mere fact that you are only 35 you cannot do this. But if you had written in and you were 50 years of age or older, the government allows you to do catch-up contributions, which means because you're older, you need to maybe have more money put into your account so you can catch up so you could have money to retire. They allow you to put an extra $1000 in a Roth so rather than $6000 a year if you're under 50 you could put $7000 a year if you're 50 or older. So, KT, all these years that you've heard me use those two numbers, the difference. The $1000 is known as a catch-up contribution. You can't put the full amount. only 1000 dollars, 1000 but only if she's 50 or older for a 401K plan. The catch up is, once you are 50 years of age and older, currently, you can put in an additional $6500. So, Rachelle, if you were 50 or older rather than $19,500 that you contributed to your 401K, you could be putting in a total of $26,000. So KT, she just goes on and continues to contribute the max every single year. And when she turns 50 or older, she can then take advantage of the catch-up contributions. Sounds like a plan to me. All right, So, KT, that ends the asked Suze and KT Anything. Where are you going right now that I'm going in? I'm going fishing with Colo. What are you fishing for today? Trying to catch wahoo, one last one. We're trying to catch some Yellowtail because Suze loves ceviche and Colo makes the most delicious Yellowtail ceviche. So, we're going to give it a shot, but it's been really rough, so I'm not quite sure. And I'm going to sit on the loggia and watch them. All right, everybody Sunday tune in Sunday. I actually tune in Saturday and Sunday to HSN and Sunday we're going to find out if Alliant is going to allow us to continue with the ultimate opportunity savings account until the end of this year. All right, talk to you then. Hey, wait, Suze. What? What? I just No, no, no. People first. Oh, I forgot, then money, then things. Now you stay safe. All right. See you next time. Bye bye.
Take advantage of the Ultimate Opportunity Savings Account with Alliant Credit Union by clicking here!
Join Suze’s Women & Money Community for FREE and ASK SUZE your questions which may just end up on her podcast!
To ask Suze a question, download by following one of these links:
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