Family, Home Mortgage, Investing, Roth IRA, Saving
October 28, 2021
Listen to Podcast Episode:
On this podcast of Ask Suze (and KT) Anything, Suze answers questions from Women & Money listeners Carolyn, Ashley, Leigh, Amy and more selected and read by KT. Plus, a Quizzie sent in by Jen.
Carolynn - How should we handle my mom's money, now that she can't?
Ashley - Should I pay off my debt or investment the money I just recieved?
Leugh - Should I do an IRA rollover? Can I do a backdoor roth IRA?
Anonymous - Should I stand in my trutth, and risk financial hardship?
Amy - Can I buy my vested ISOs into my roth IRA?
Anon- Should I allocate a percentage of my income to purchasing series I bonds?
October 28th, 2021. Ask Suze and KT, KT they always write, and that's Suze and KT anything. They always tell me they write and I read, you know, a lot of emails as well and they say we Mrs. KT on Sunday. See everyone, I told you Suze, I know the Suze schools are really valuable and I don't add much value by just sitting there, don’t ever say that about yourself. But all I can say is that maybe if she included me, we could learn even more. Because we all know KT. How are you this morning, KT? I'm great. I feel pretty good. How come? I think that first of all, I'm thrilled that my brother is back from his malta Patsy john Travis. Oh, well, let's tell them we've been on pins and needles since last Saturday because john entered the Rolex Malta Mitzi race in the Mediterranean. It is one of the most challenging, difficult sailboat races in the world. It's like a life and death race truly. He and the crew were on a boat for four nights in the Mediterranean and it was just treacherous weather. And they got in, and they came in and I think 1:00 AM and all we know is we were on pins and needles, waiting to hear his voice back on land and he did it. And I think he plays 2nd. Anyway, we're so proud, so proud of Captain John. We love you so much. Alright, ready. Wait before we begin it dawns on me that we haven't told anybody. If they want to ask a question how they can ask a question. So, if you want to ask a question and sometimes I answer them personally, just send an email to firstname.lastname@example.org. That really is the best way to do so. All right. So, all of you do it. Okay, go on. Okay. Our first question is from Caroline. And Carolyn said, my question is this my mom is 74 years old in very poor health. She owns a small home in Myrtle Beach, South Carolina and does not have a lot of money. We transfer the title of her house into my brother and my name and we pay taxes on the house. Is there a good way to take over her money affairs, Suze? She tends to buy things on the internet and keeps getting in trouble financially. Is a good way to talk about these things with her? Also, did we do the right thing by moving the house into our names. Do we have to claim it on our taxes? So, basically what the family, the siblings have a power of attorney, for health care, but they're really concerned about all the financials that go with it. I have to say that, you know, it depends. I never ever would suggest that anybody ever transfers a house that they already owned and they've owned for a long time, into the name of the children. For two reasons, number one, when you do that, you also are transferring or gifting them that house and you're giving them also your cost basis in that house. So, years ago, maybe you paid $100,000 for that house. Now that house is worth $500,000. Not unlikely, could be even worth more than that. Your cost basis, now my dear Caroline, is $100,000. You and your brother go to sell it, you're going to owe income tax if you haven't owned it for at least a year or capital gains tax, if you've owned it for more than a year on the difference between $100,000 and $500,000 in this example. Are you all following me? If mommy simply had kept it in her name, she passes away and you inherit that house. Then you get a step up in basis to $500,000. You turn around and sell it, you don't pay any income taxes on it whatsoever. So first of all, tax wise, it's not a smart thing to do. Second reason, it's not smart in my opinion, when you own a piece of real estate in your name, it's a public record, you're driving down the street, there's an accident and you seriously injure somebody or kill somebody. I never meant to do it just happened. Now we have some lawyer who finds out that you own a house in your name and guess what? They come after it and all your other assets. Is it possible that mom could lose the house that she's living in? Simply because it's in your name and that happened. It's possible. The best thing all of you can do seriously is if you had that in a living revocable trust and in the living revocable trust, there was an incapacity clause, and the incapacity clause calls for one doctor to be able to declare that your mom maybe is incompetent on any level. Then you could also step in as successor trustee to that trust and take over her finances. So, she stops doing things that can hurt herself. So, there are things that you and your brother can do. But I don't think truthfully that you've actually done it the right way. Can they fix it? Well, I suppose they could give it back to their mom. It becomes very complicated at this point because I don't know how long ago that happened. And if they could re-gift it back to her, just make it null and void. I don't know. But it's um, for those of you listening to this question, which is why the ask Suze and KT section is so important. Please take everybody's question as something that could happen to you, and that you need to know the answer to. So, I don't know Caroline, you really need to look at it in terms of should you be talking to your mother about these things. Oh you betcha you should, absolutely you know because you have to just protect them. Which means maybe you take the checkbook away. maybe you do certain things, maybe you close down certain credit cards with her and her permission, you know? Because sometimes they just don't know. It's a tough one. It's a tough one, but a necessary when everyone is going to end up, you know making having to make these decisions. Okay. Suze. Next question is from Ashley. Hi Suze and KT. I love your podcast and I never miss an episode but I need your help. I'm joking with you. I love your podcast today. I Never miss an episode but I need your help. She needs your help. I'm going to receive about $100,000 from the sale of a home, and my dad ready for this everyone, my dad is telling me to put all of the money in the stock market. Of course, Ashley said that they owe $100,000 on her house and, $20,000 on a car and camper which she and her and her family love. I want to pay off everything, but the interest rates are very low 3.5%. I don't want to waste an opportunity to have a comfortable retirement, but I also wish to be debt free. Suze, I can't mess this up. Please help. So, this feels very easy. I should have made that your quizie, of what she should do. I'd say follow her gut and pay everything. That's my girl, ding Ding ding ding because she has time. She should just follow her gut. But here's how she should do it. Here are your direct instructions my dear Ashley. Kiss your father, thank him for the advice. Don't hurt his feelings. However, pay off your debt. Now when you've paid off your debt you've done what you wanted to do and now you feel more secure. But what you've also done is you've reduced your monthly expenses by probably a few $1,000 a month. I want you to take that few $,1,000 or whatever it is that you were paying towards your mortgage, car payment, and combine those amounts of money. I want you to dollar cost average into the stock market. Just simply open up an account for yourself, you can buy the vanguard total stock market index ETF or the standard and poor's ETF. Whatever you want, but just every single month dollar cost average, which simply means you put the same amount of money every month into a diversified investment and do that every single month, until you've done at least $100,000 in there. That way you have time and you have growth and you're also not taking such a big risk because why your father may be right. Listen, the truth of the matter is everybody look at the stock market. Crazy, we are at the all-time high and some stocks go up. Some stocks go down. Are you really getting anywhere? Do you see your 401k statements going up? Whatever that is? I would not at this point in time under any circumstances take $100,000 and put it in as a lump sum into the stock market. I think that's one of the biggest mistakes out there. But you should be in the stock market, but do it the way that I said. That way, she gets her own desires, KT met and can please and listens to dad. She listens to daddy. Okay, so this next question, Suze is from Lee. Lee just got a new job. The salary will be $140,000. So, I will no longer be allowed to contribute to my Roth IRA. I understand backdoor IRAs will no longer be allowed. Let me stop you right there, that law has not passed. It didn't. No, it didn't. No, it did not. It was a bill that was introduced, it has not passed yet. So just know that. All right. So, we don't know what's going to happen. That's the question. So, here's the question should I do an IRA rollover with my Roth 401K, currently in Fidelity, and keep it with Fidelity and regarding the Roth IRA, is it possible to do a back door before the year ends or what should I do with that account, which is at Merrill. And then Lee plan is to open an individual investment account and continue saving for retirement. So, what should Lee do? How much money is in these accounts? Yes. $55,000 with fidelity. So Lee, first of all your question, should you do an RA rollover with my Roth 401K currently in Fidelity. Yeah, I think you probably should. So, that you have more diversity and all kinds of things that you can buy. You will be doing a Roth 401k rollover to a Roth IRA rollover, no taxes will be needed whatsoever. In regard to your Roth IRA, and is it possible to do a back door before the year ends? I imagine that it still is. I don't know for sure. But at this point, I don't see if the bill is going to come to congress before next year? If you want to try a backdoor Roth IRA before the end of the year, why not go ahead and do it. And if they change the laws, you'll just take the money out and it will be just fine. But everybody, I want you all to be very clear on this, to simply convert money is not on the table to be done away with. What's being done away with our, the backdoor Roth IRAs, as well as the mega conversions. But none of that has passed yet. So, you just need to keep watching to see if it's going to pass or if it has passed until then you should go ahead and keep doing things just like you always have. All right, KT. Okay. So, I like to mix things up everybody and this, this is tell me about this says please read me. It's actually please help KT and Suze please read me. So, this is really hard. That where it said, please help KT, Suze No, no help her with what. No, this is this is very sweet and it's very important and something all of you should listen to because if you know people that are in this situation, open your heart. It says, Dear KT and Suze, I'm a closeted gay man. I have had two dreams. He's had two only two, of meeting both of you now. So, I think God wants me to send this. I love the podcast and I keep hearing, stand in your truth, live the life you love, fear is the main internal obstacle to wealth. Very interesting. Right? So, it said, what can I do, it breaks my heart hearing homophobic comments from my family. I'm 19 years old and rely on my parents financially for some of my expenses like insurance and then he said I felt so alone for the last 10 years hiding the truth. I recently started seeing a counselor at college. I'm afraid of losing my family but also afraid of regretting not being out and authentic in college. And then this part this part makes me really sad, Suze. Oh he said you are, you two are like the loving LGBT great aunts. I don't have. You know why I'm crying? He said great aunts, that means we're really old, not just aunties, but we're really old. And our friend said is it really worth coming out if it risks my financial safety? Oh my goodness, Suze. So, all right. Does he say his name? No, no name. It said please feel free to answer this on the podcast but please do not use my name, which makes it even more sad. Alright, so my friend 19 years old and your great aunties have some good advice. Here's what I want to say to you, there is no amount of money in the world that is worth you not being able to stand in your truth. Family, what is family.y.y.y. Family are people and they don't have to necessarily be related to you by the way are people that stand by you through thick and thin,,,, tttthey care about you and your needs and what you are more than they care about their own opinions and how they feel about things what you want. And they never, ever, ever stop loving you eeeever, ever remember that. They'll never stop loving you. And if you think that your parents don't know in this day and age, I doubt that highly. They've had to have some suspicion. They have to be thinking something like that. But here is the true advice. Don't be afraid of losing financial support. Don't be afraid that they'll turn their backs on you. The only thing that you should be afraid of is that you're not living the life that you were born to live. That you're not standing in your truth, that you don't feel good about who you are. You know, it was a long time ago when I was becoming very famous and nobody really, even though I thought everybody knew I was gay.... NNNNot everybody that I was going to do a business deal,,,, knew that I was gay. And so what would happen is it would be the very first thing that I would tell them. I would say, I just want you to know if we're going to sign this contract and you're going to put this kind of money behind me,,,, that I am a lesbian and that if you don't want to do business that way. Because if I'm ever asked, I'm going to say yes, then just don't do business with me. I have never lost one business deal,,,, because I stood in my truth never.. SSo,, sweetheart yyou can't let fear of loss keep you from gain. You can't keep that you imagine is going to happen to keep you from finding out exactly what will happen. So,, if I were you this is what I would do,, I would summon all the courage that I had and faith in myself that I had what it took to really do what I needed to do to be the person I was born to be. And I would either write a letter telling my parents, my family everything I wanted them to know and I would let them read it before I got there so that they're just not hit blindsided by it. And then I would say can we talk about it.. OOr if you don't feel you want to do that, then just go and talk with them from your heart, from your heart. Now, it might not be easy for them to understand or get it. But you have to take that step. If you don't do it now, you're going to have to do it in a few years from now or whatever it is, do it now. And if that means that they take away financial support from you, trust me that money will come from somewhere and you don't have to worry about it. Money should never be the reason that you don't stand in your truth. I completely agree. This is from Amy. So, Amy said Suze, I really appreciate your podcast and I find it very valuable. I'm a new listener. I've been listening to the full catalog of back episodes, which is hundreds and hundreds and hundreds devouring all of the fantastic insight. So, here's her situation. My company is a tech startup, currently valued at $5 billion with a goal of a $15 billion valuation within three years. I have $7,500 ISOs available at a strike price, ISO is an incentive stock option right, at a strike price of $3.34. The company is not yet public. And here's Amy's number one question, is it possible to buy my vested ISOs, just under 2,000 of my options are vested in my Roth IRA. How do I do that, and is it a good idea? No, no, no sorry Amy. The only thing you can do when it comes to investing in a Roth IRA, is to deposit actual cash in a Roth IRA. And within the Roth IRA, purchase something that the brokerage firm or the custodian offers and they're not offering ISOs. So, no, you cannot do that. Alright, there's the answer. Next one is from anonymous. All right it's and again, it's about a series I bonds. Hi Suze, love love your podcast. I've had this question since I first heard you mentioned series I bonds, who should buy them. I max out my Roth IRA with $7,000 each year. And I'm contributing about 17% of my income to my jobs 403B. Instead of putting 17% in my 403 B, should I allocate some percentage of that to a series I bonds or is that a mistake? You know, I have to tell you at this point in time, I would allocate some of that to a Series I bond. I personally think inflation is here to stay for a while. And if you're looking for a place that you do not need this money within five years, because remember a series I bond, I stands for inflation. There's two components to a series I bond the fixed interest rate that they give you which is currently 0% and then whatever inflation happens to be, and it's a combination of all of that. You know, it is very possible that as of November 1st the new rate for the next six months is going to be about 5-7%. That's a pretty great rate, but you cannot touch that money for the first year at all. And then that money is locked up for a total of five years. And if you touch it within five years there's a three-month interest penalty. So, this is money kind of like a retirement account where you do not plan to touch it for a long period of time, but after five years if you want to touch it, alright so, you pay taxes on it at that time? I don't know. I would allocate some money at this point to a series I bonds whether it's from the 17% from your 403B or any extra money that you can have. Remember everybody, the maximum is $10,000 a year per person. All right, KT. It's quizzie time, quizzie. All right. What do you have this week? This is a little bit of a combination to test you, KT, in terms of did you listen closely to a Sunday or two ago about recasting mortgages versus refinancing mortgages or prepaid the mortgage? So, here's what it says. Hi KT and Suze. This is from Jem. I loved Sunday Suze school and have a quick question about recasting mortgages. Do you know what we're casting a mortgage is KT? Come on. No, you have to tell me. No, I don't. I did not pay attention. That's what I love about you. If I was invited to be there, maybe I would have paid more attention, but I did not, I'm telling you the truth, standing in my truth. I didn't. Alright, I'll read this and then explain the difference between the two and then all of you can decide because remember this quizzie, is not just for KT, it is for all of you. Suze, you said that recasting a mortgage is a great way for those who want to reduce their monthly payments and that it will save you on interest over the life of the loan. What about those who don't necessarily need a lower monthly payment but still want to fast track paying off the mortgage. Is recasting better than making additional payments on principal as far as saving on interest? So, is it a good idea or is it not? Now, let's be clear on what recasting is again. Okay, okay. You have a mortgage and you took out that mortgage a few, quite a few years ago and maybe you have, you know a 30-year mortgage and you have 25 years left to pay. And the payment, as you know on a fixed mortgage, your monthly payments are the same every single month regardless of how low the actual mortgage goes. So, you're stuck with that same amount of mortgage every single month. And now you're in this situation where you are having a hard time making those mortgage payments but you also have anywhere above $5,000. You need at least $5,000 in most cases sometimes $20,000, but you have a lump sum of money beyond your 8-12-month emergency fund. That's just been sitting there making you know .55% interest or whatever it is. And recasting is where you take let's say $20,000 or $30,000 or $50,000 or $10,000, some amount of money and you apply it to your mortgage, but you do it in such a way where you talk to your mortgage company and you re-casted the mortgage, so rather than your mortgage payment continuing to be the exact same. What happens is the length of the mortgage stays the same, but the amount that you pay every month goes down depending on how much you deposited because they re-casted it. That's just what it's called. So, maybe it could save you $200 a month on your mortgage, $300 a month on your mortgage. But you're still going to have to pay it for 25 years. But they're just taking that money. And rather than, you know, just letting you stay the same, your payments, KT. And you're going to pay it off sooner. They apply it by doing what? Reducing your actual mortgage payment. When you put money towards your mortgage, you're not re casting. You're just putting more and more money every single month towards your principal or you make extra payments every single month, or add more money every month to your mortgage payment. Your mortgage stays the same, that extra amount of money reduces the length of your mortgage, so that you will be paid off. I know the answer. All right. So, this is for me, I absolutely want to reduce the length of the mortgage. That's my girl Ding Ding Ding. Absolutely. Without that, without a doubt, I want to know why. Why I'll never forget, I'll never ever forget my mother's face when they paid off the mortgage in the little itty-bitty house that eight of us grew up in. How many bathrooms? Well, there was only one and then my father added another addition. You know, added, added a little bathroom. So, there was two and it was only a half bathroom that they added. They couldn't afford anything. I'll never forget my mom's face. She wanted to have a party and celebrate. And, and we were kids. We didn't understand. I was like a young teenager. I didn't get it, I didn't know why she was so happy and I didn't understand what the word mortgage was. So, in your case Jennifer, truthfully, I would just be putting, I would not be recasting since you don't have a problem making those payments. Your goal would be to reduce the length of time of your mortgage. For those of you who are having trouble making payments and meeting those payments every single month, and you happen to have a nice lump sum of money sitting doing nothing. Then re casting is probably something that you should look into. I'm so proud of you, KT. Well that I would never want to extend or keep a mortgage till you know, for years. Well, sometimes, sometimes you have to, people can't make ends meet, they can't. But for this case, I absolutely would get rid of that and you are absolutely right. Right. Yeah baby. Okay. That sets our day up because when KT gets a quizzie right, she is in a good mood. I'm gonna go celebrate. So, until Sunday which is Halloween. Suze Halloween. We've got to do something scary scary Suze, scary Suze school. What could that be, the scariest money situations you've ever been in? Really, let's do that. Are you going to do it with me? I'm going to do it with her. I'll deal with Are we going to dress up in costumes? No, no I don't think it's not at that hour in the morning. I already look like a costume and then. No, you're so beautiful. Okay, scary Halloween Suze. So common everybody. So, until then there's really only one thing that matters and that we want for all of you, we want you to stay safe and strong and most of all secure. See you on Sunday. Bye, bye.
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