Credit Score, Home Buying, Investing, Retirement, Roth IRA, Saving, Student Loans
September 02, 2021
Listen to Podcast Episode:
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.
Annie- Should I sell my house because of it's raised value to pay off all my debt?
Dyanne- Is there such a thing as over saving for retirement?
Kathy- Should I pay for work I need done on my house?
DeAsha - How can I fix my score after falling behind on my student loan payments?
Cathay & Jay - What are the benefits of a donor advised fund?
Janet- Why can children not inherit money?
Elizabeth - When you leave a company can you roll over the Roth portion of the 401 or, 403 B into a Roth IRA? Are there any drawbacks?
Lisa - Should I do a pre-tax or after-tax plan?
April/Quizzie - I just found out my Roth IRA is actually a fixed annuinty, should I continue investing in it?
Ready Suze. See you in September. All right, KT, I love that song. I do too. It's September 2nd. Do you believe? 2021. There's only four more months left in 2021. Amazing. Right? Where did the year ago? You say that every year. No, I don't. Where did this year ago? This was supposed to be the year that everything was going to be back to normal. Yeah, I think normal is not doing anything anymore. Anyway. Hi, everybody. Here we are. Actually. We're in a very good mood this morning and I don't even know why. We're about to start an incredibly perfect day. You want to know why we're so happy really, Colo’s home. I don't want to say anything to people because we get so excited. It's like your boy’s home from school. But want to know what's great everybody, and again, for those of you who don't know Colo works with us here at our home in the Bahamas and he is really he's 42 years old. But he's like our son and he's this big man. He's 240lbs. Although he did probably come back from his vacation about 250, but that's besides the point. And he came home on last Tuesday and we're so happy, but I want to know it's great. He was so happy to come back to us. And we felt like, yeah, we did something right. All right, KT. Let's get serious. So, I have a first question. No wait, I want to say something to you. What is it? People who are so happy that you read that letter, that email last Sunday. They loved, they don't know. It took me like seven or 8 takes, seven or 8 times, because I kept crying and made me leave the little studio that we have. I couldn't look at Suze and get through the first paragraph without crying. So, I said please relieve and let me just give it a shot. And I and even Robert. Robert, thank you for being such a great editor. He had to edit out all my all my crying. I was really, really, really struck by that. If you all haven't realized by now when Mrs Travis is moved, she cries very easily. And I love it because you know, tears usually don't come very easy to people. And when tears come easy to somebody, it's because their heart is so accessible and I love that your heart is so accessible. Isn't that sweet? Yeah, that was very nice, Suze. Thank you. And do you know what else this month is? Our anniversary? Yes, we have three. This is the anniversary is the wedding and wedding anniversary in September 8th. Yeah, we got married now, 11 years ago. Was it? What do you mean? Was it? Yes, it was right because we got married 2010. Yeah, 11 years ago we got married. But we like telling everybody were to get together far more than that. 20 years, 21 years. I don't know not good with numbers. All right. Let's do what we're supposed to do here. Okay, so Suze also, let's remind everyone, September 13th is the sweepstakes for the Alliant big sweepstake wins. Yes, but all those who already have an account or you're going to open up one before September 13. Your name is added twice to that sweepstakes and if you listen to the beginning of this podcast, it tells you everything you need to know. Now can we answer questions? I'm ready to go. Suze, I have a great first question Ready. This is from Annie. Hi Suze, I'm 66 years old with no dependence and I'm at a crossroad. Yeah, matter of fact Suze, I'm calling this podcast, season of decisions, this is ask Suze and KT anything podcast, but this is called this is season of decisions. Alright, ready? It said I'm 66 years old, no dependence and I'm at a crossroad Suze. I'm wondering if I should sell my home. I'd like to hear your opinion. I purchased my home in 2017 for $53,000. Currently I owe $42,000. A realtor did a comparable and my home would list between $100 and 200,000. I have not had it appraised, there is stiff competition for properties in the neighborhood where I live. My neighbor bought their home in July 2020 for approximately $91,000. They put it on the market in June 2021 and it was listed for $235,000. They sold it in two weeks for $250,000. Mm. So, Annie goes on to say, my thoughts are depending on the offers. Should I sell my property and pay off all my debt totally $95,000? That includes her mortgage, car and credit cards and may be moved to a senior building or depending on the sale, purchase another property in the small town where I grew up and pay cash. Suze, I'm in a season of decisions. What are your thoughts? Well, Mrs. Travis, you may not know this, but as you know, I look through the emails and I wrote Annie back. Alright, and I asked her a whole bunch of questions I asked Annie if she was healthy, was she still working? How much he had in savings? When is she going to get Social Security? How much is she going to get and to tell me everything about herself? Because it's only then KT, really, can a financial advisor give you the answer or give Annie the answer because I needed to know more about her. So, I actually took the time Annie, did I not, to contact you and find out the information that I needed and I have to tell you, I myself have been going back and forth. Should Anne sell, should Anne stay there, should Anne refinance the mortgage that she currently has, take out another $50,000 from that mortgage, pay off all your debt? Then you could be paying your mortgage, paying about what you're paying right now at a lower interest rate and have a tax deductible and on and on and on. And that is one possibility for you, Annie to stay there. But given where real estate is, given where I think real estate is going to be going. Yes, Annie, I would sell the property if I were you. I would pay off my debts if I were you. And I would absolutely decide where you want to live, how you want to live and start all over again. I have a feeling in my gut. After having read all the answers to all my questions that you gave me the decision is made, sell it girlfriend. Okay, next question, Suze is from Dyanne. Dyanne spells her name really cool. Dion? Oh, I don't know, I was just playing with you. All right. I'm in such a playful mood this morning, KT play with me, ready for this? This is the question, is there such a thing as over saving for retirement? I don't think so. There you go. I don't think so. She has a long explanation and really Suze. What it boils down to is that she saved. Diane has saved a lot of money. I'm very proud of how well I saved and I know the purpose of money is to make one feel secure, but I'm starting to feel like I am limiting how much I can enjoy my life in the present. How old is she? I would love to hear your thoughts and recommendations. She's 46 but I mean it's a long email, let me look at, just summarize it. She has quite a bit of money. All right, so I'm looking at this very quick, 46. Yes, you're married. I see that your spouse has the same amount of money you say as you do. So, a quick adhere with the equity in your home, what you have in cash, in retirement accounts between both of you. I totaled that you have about $3.3 million. Much of which however is pre-taxed. Like in your account alone $720,000 of it is in a pretax retirement account. So, Dyanne that is not what you have because it is so important. Everybody what you see your account statement saying is not the money that you have, especially if it's in an IRA an IRA. Rollover, a 401K, a 403 B, and anything other than a Roth IRA or a Roth 401K or a Roth retirement account period. So, after taxes and everything as you start taking this money out whatever it is you're not going to have as much as you currently have. So, I have to tell you no, I don't think you have enough to do this. And I think that are at least to retire right now and when it comes to retirement, I just want to say this to you and to everybody. We always think that when we're younger it's not going to cost us a lot of money to live, because when you're younger you can do certain things on your own, you're not on a lot of medication, your body is still really healthy and it's really a lot less more expensive when you're younger and 46 is a lot younger. Than it is when you get older, when you get older things happen and that's when you really need money. So no, I don't think there's such a thing as over saving for retirement. Believe it or not, KT tell them do I still save for retirement? Oh, my goodness. Yeah, she saves like every day. I save because I get tremendous pleasure out of saving. I get more pleasure out of saving than I do spending. And that's the key here. That's the key to always having more money than you will ever need. Get more pleasure out of saving than you do spending. And so yeah, I you have a few years left to go in my opinion. Okay, all right, next question is from Kathy. So, this is an interesting, this is first, it says hi KT and Suze. She said I'm putting KT's name first. Since I heard it gets me a better chance of having my question chosen. You are right Kathy, from KT to Kathy, you are correct. So ready. I have a question about wants versus needs. I have some costly improvements that need to be done to my home. It's on the verge of being a safety issue. Now stop there one second KT. Read that line again. I have some costly well improvement. That what that need. This is a need girlfriend. This is a need, she answered her own questions, right? I have some costly improvements that need to be done on my home. It's on the verge of being a safety issue. I think the cost will be upwards of $10,000. Now, then she goes on to give me all this information about. Here's the bottom line, regardless of the information. I just want to say that she's 49 divorced and she's living alone. So, even more of a reason. If you own a home, your home is usually your biggest asset of all and your most precious asset. And it's an asset that if you don't keep up meaning if something happens and you let it go, it's not just that happens, and that leads to something else. And it's really not good. You yourself said that you needed to do it, girlfriend do it, do it now. Yeah. Okay. Next one is from DeAsha. Hi Suze. I've had bad credit ever since I got married. Mhm. I don't mean to laugh. But this is really, that's true for most people. You know, this is kind of amazing. Wait one second, years ago before I was with KT and in a relationship with her. And even though I was in other relationships with people, I never shared money, never had a, it just wasn't like that. And I would always say to people as I was standing onstage, listen, I didn't inherit money, right? I didn't marry money. In fact, that's why I have money today. So, I would always make a joke of that. Okay, sorry, that's true. You can listen to her on stage. And she always says that. Then I got married to you and now I have even more money because I'm a good saver I'm a big saver. Everyone I don't spend, I don't really ever ask for anything right or want anything. I know. I wish she did Okay, ready for this. Hi, Suze. I've had bad credit ever since I got married before I got married. I had a good credit score of 700. Very good. When I got married, my husband wanted to take care of me and said I no longer had to work. I was a self-employed hairstylist. So, I quit my job, decided to go back to college and do what I always wanted to do and that was to be a doctor. My husband encouraged me to take out federal student loans and I think she took out about $31,250 in loans that we really did not need, but he said that we would pay them later. 11 years later, I have never finished school now. I have loans that are behind and then she writes, never listen to a man. Suze, what is my first step to repairing my credit? Who do I call and who can I trust? Please help me? DeAsha. First of all, DeAsha, I'm sorry to hear this. However, I do want to say something to everybody right now when you get in a relationship and your spouse says to you, you no longer need to work. Give up your job. Be very careful everybody, because believe it or not, that is one of the first things that happens in a financially abusive relationship. That is one of the traits that you're no longer working. You no longer have access to people at work and you no longer have your own money, which makes you dependent on your spouse. So, just be careful there. What's important for you to understand DeAsha is that to get your credit back, you have to start paying on these loans, you have to, they're probably in default and as long as they are in default, they're going to be a big ding on your credit scores. So therefore, you should contact the bureaus or the federal government, wherever it is that you have these loans and ask for them to be put on an income-based repayment method. Which will be a very low amount since really, you're not working and just start paying them now. What's great is their federal loans and for the past year or so, federal loans have been on moratorium and you haven't had to pay them and it's been in a 0% interest rate. And you never know with $31,000, it is possible that these loans may be dismissed. Remember they're still deciding should they dismiss $10,000 of federal student loans or $50,000? It's possible. But in the meantime, all you have to do is get these loans out of default. What really concerns me though DeAsha isn't about your student loans. Just somehow, I just hope you're in a relationship that's healthy for you. That's all I'm going to say for now. Well, that was a message. Mhm. All right. Next question. You know, I can read between the lines. You know it. All right. Let's hope for the best. All right. Ready. This is from Cathay and Jay, hey Suze and KT, please help us understand a donor advised fund better? Are these new? I read that this was a way to offset taxes for a larger IRA conversion to a Roth but I don't see how it offsets if coming from the IRA. I see the donor advised fund just bypassing taxes. Can you help explain that? So, let's start here. A donor advised fund is simply, and KT and I have one by the way. And what we use it for is a place where if we have substantial gains, especially if they are short term gains, in stocks that we have purchased. And let's say this is very possible with us, we invest in something and all of a sudden, we have $100 or 200,000 gain and it's a short-term gain. Meaning that we haven't owned the stocks for at least a year or longer and I want to take the gains. I'm like no this went up way too fast, I'm out. However, I don't want to pay ordinary income tax on that gain. And KT and I also give a significant amount of money away every single year, charitable donation, charitable donations. So, what we do then is that we donate that stock to a donor advised fund, where the donor and where the advisor and it goes in a fund. Let's say it's worth $500,000. Let's just say that's true. We then put that stock in a donor advised fund and we immediately that year get a $500,000 income tax deduction. So, it's a deduction on the income. Not a tax credit where we get a $500,000 tax credit. No, It's just simply a $500,000 tax deduction period. Now, what's great about a donor advised fund, is that stock can stay in this fund and if we want to sell it to give money away, we can and just advise the people that are in charge of it or who distribute the money, that's what we want to do. However, we also can keep it and if it then starts to go up more, we have more money to give away. And if we sold it within the donor advised fund there's no more taxes but we have more money to give away to charity. If it goes down when it's in the donor advised fund, it doesn't hurt us on taxes but we have less money than to give away for charity. So, I hope that explained it. Do you think it explained it? Yeah. Just know that. The first question I asked Suze was can we use this money back? We get the money back? She said no. Just know that, it is a commitment to make donations, give donations whenever you want. It did not have to be right away but you never can have access to that money again. So bottom line Jay, it really doesn't make a lot of sense when you're using money that's in an IRA to convert to a Roth IRA and that's the money that you're using to then put into a donor advised fund. That doesn't make sense on any level. If you're going to do a donor advised fund, do it the way we do it. Next question Suze is from Janet, I was watching you on PBS a few nights ago. If any of you have not seen Suze's PBS special, the current one, please watch it whenever it's on or airing for the pledge shows because this is not only a great special, but it's been the number one fundraiser for PBS for how many years? Well, this particular one for the last seven drives, but my PBS specials for the past, well forever been the number one special, having raised over $250 million dollars for public television. That's besides the point. But this is a great show. I love this show. All right. So, this woman Janet was watching you a few nights ago on PBS and she said you mentioned that children cannot inherit money. Can you explain this better? Or did I misunderstand? Can I answer it? That should have been your quizzie. No, let me answer it. Of course you misunderstood children that are under the age, the legal age of 18, can never inherit money. Yeah, because they're minors and minors can't inherit money. That's all they're 18 or over, it’s theirs. All right. All right, Suze. Next question is from Elizabeth and I picked it because under the subject she wrote KT's favorite a Roth question. Very funny Elizabeth. So, it says hi Suze and KT. My understanding is that upon retirement or if and when you leave the company, you can roll over the Roth portion of the 401K, 403B into a Roth IRA. Is this correct? Yes. If so, it seems like there are only benefits to doing this, such as no required minimum distributions, possibly a wider selection of holdings, inheritance, etcetera. My question is, are there any drawbacks? Is there anything I'm missing or not thinking about, nope, no disadvantages on any level whatsoever, Libby. Go on, KT, do a few more. Let's keep going. All right. Hi Suze. I often hear financial experts say that you should factor into the equation whether you would be in a lower or higher tax bracket when determining if you should contribute to a pre-tax or after-tax plan. How is anyone supposed to know with any certainty is anyone's guess? But what if you anticipate being in the same tax bracket? I'm currently in the 12% bracket and imagine I'll be in the same retirement In the next 7-8 years. Just do a Roth. Do a Roth. Do a Roth, Lisa. Hands down to a Roth. Don't even think twice about it. Go on. Hey, I have one more great Roth question, Suze. Thanks for the opportunity to ask you anything. So KT September 14 at six p.m. East Coast time, I'm doing alive. Do you even know this? Yeah, but it's at six p.m. Yeah, Great. That's dinner right now. Is that a good time? It's the time I'm doing a KT. So, it's at six p.m. East Coast time live and it's where you're going to be able to ask anything and interact with me. You'll be able to see it blah blah. I don't have the registration number yet, but listen on the podcast and maybe in a few days I'll give it to you where you go and you will tell everyone. It's for free fun. Can I pop in and say hi? Oh please. I might, I know like I can stop you from doing any might pop in and say hey is Reed with you. Oh, I love Reed. Reed loves me, Suze. Reed is not gonna say anything. All right, go on. Say hey KT, where you been? All right? Ready? Reed is the CEO of hay house, by the way, we love him. Love brilliant. Alright, next questions from April it said hi Suze. Thanks for the opportunity to ask you anything. She said I'm now 48 years of age when I was young and knew nothing about finances. I opened what I thought was a Roth IRA with my insurance agent. I have since learned that it is an annuity labeled as a Roth IRA. I maxed this out and have just over $100,000 in it. I received a guaranteed rate of 4% on it. Should I continue contributing to this or do something else with my $500 each month ready for me to shock you. That should be your cuisine. Let's make this your quizzie. Wait, everybody, this is now KT's quizzie. This is all of your quizzie. Here's the question. Years ago, must have been 20, some odd years ago, maybe 25 years ago right, April started to put money into an annuity within a Roth IRA. So, now you can do that. It is a Roth IRA. But what they bought for April was an annuity, and this annuity is guaranteeing April 4%. So, it's obviously a fixed annuity. Should April continue to put $500 a month into it as she has been doing? That's what it pays her. Right or should she do something else with it? I'd keep it. You would for 4%. Yeah, I keep it because yeah, and that that is, she's 48 years of age. You would still keep it? Wait, that's a question here as we go. Should she keep it? Should she not, should she open another Roth IRA? What should she do now? You're asking me too many questions. I would just keep it, set and forget it. Come on. Come on Suze. You do that all the time because you asked another question you just said, should she keep know the truth of the matter percent is a good, we should continue to put $500 a month in this. She really should, however April 4% is absolutely guaranteed to you. That is an incredible return. So, the truth of the matter is very shortly here you will be 50. And once you turn 50, you're going to be able to put $7,000 a year into a Roth. At that point, seriously, I would divide it where you put $3,500 a year into your Roth that you currently have $3,500 a year into a different Roth for growth. Because I think over the long run, because you're only 48, you can get far more on your money than just 4% a year. So, I would go for some growth as well as some guaranteed return but 4% is fabulous. Yeah. Great. Do you know we have that? Do you even know that? So, years and years ago When I was maybe in my 20's I signed up for this annuity because they were offering, I think it was a minimum guarantee of 5% at the time. But they were paying a whole lot more. So, I decided to just as a place to save to put a little amount of money in every single month. And then over the years, interest rates have gone down and down and down and down over all these years now it's still paying a guaranteed interest rate of 5%. So, the maximum they allow us to put in KT, every month is $3,000. So, every single month I put $3,000 in there, just to save, save, save. Which is where we kind of started this, and get that 5%, absolutely guaranteed. And now we have some good pocket change in that annuity. Wait, real quick. The story about we're out of time. We're so out of time. It's not even funny cause were having a good time. What are we going? What are we gonna do today? You think Colo will take you out fishing? Maybe because we quarantined him. Right? I keep forgetting. We can only see him from a distance. We give him air kisses and hugs. But we quarantined him. We have to be really sad because he was he was on a plane in Mexico. He had, you know, two planes. He's been on many planes and it was like uh yeah, you got to be safe. I have to keep them safe. All right, everybody until Sunday. Until Sunday. What do we want to tell everybody, KT. Have a great day. You want to come on. You can see you in September. All right. Everybody stay safe, stay strong, stay smart, and most of all stay secure. See you soon. Bye, bye, bye.
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