Investing, Mutual Funds, Roth IRA
April 05, 2020
Listen to Podcast Episode:
In this podcast, Suze talks about many aspects of the ongoing COVID-19 crisis.
April 5, 2020. So, here's what I want to say. Today's podcast is going to be like a grab bag of all these things that are on my mind. Today's podcast I want to talk about how long do I think this will last about unemployment, what you need to know about your stimulus, I want to talk a little bit about dividends. I want to talk about companies that are no longer matching your 401ks, I want to talk about landlords, I want to talk business loans, and I want to talk about a new way to look at loss. So sit down, take pens and paper out, or just continue to listen to this podcast over and over again, and here are the things that I think you need to know. This situation, as I said to you almost over a month ago now, really started as a health crisis that turned into an economic crisis. The good part about that is it's not like 2008 yet, where our economy was really, really weak and because our economy was really, really weak it affected all of us. Again, I'm repeating this, but this started as a health crisis during a time when our economy was really, really strong. And because of that, we are starting this from a lot stronger place than we were in 2008. In 2008 we needed to help the banks from collapsing. Now, the banks, on some level, can help us from collapsing, and they are stepping up to the equation here that we have, to this situation. Banks and credit unions are really making offers to all of you that are fabulous right now. And this is one of the reasons as well that a credit union is so incredible because you can go in, well not personally anymore, but you can call in and talk to them and they are more willing to work with you than most major banks. And this is the time that you need some financial institution to work with you. Now, many, many banks there are saying, yep, you don't have to pay your mortgage for three months, but after three months, you owe us that money in full and you know, and I know, that that's an impossibility. You're not going to be able to do that. If you have a mortgage payment of $2000 a month let's say, or $1500 a month. So, in three months, where are you going to come up with $4500? If you can't pay the mortgage monthly now, where you going to come up with $4500 to pay them back in full? So, financial institutions really need to be working with you, where they simply take your mortgage payment or your whatever payment, car payment, and they do what? They add it on to the back end or amortize it into what you already owe them. So you need financial institutions that are more than willing to do that, and a lot of credit unions are. However, with that said, no matter how you look at it, no matter what you're trying to do to make ends meet, I'm going to tell you this situation gets more and more serious as every day passes. And the reason that it gets more serious is, we are not finding the solutions that we need to solve this health crisis. We are not finding mandatory closing down of the entire United States, which would help. We are not finding a system that is helping individual states do what they need to do. And again, a lot of you think that I'm saying this because it's a political thing. Listen, if you think this is political, and I mean this when I say this, just stop listening to my podcasts. Go listen to somebody else because this is a podcast that is grounded in reality. There's nothing about this podcast that is fake, and I don't care what anybody says, you have got to pay attention to what is going on out there. And the hospitals need help, and they have no place to get help from. So, because of that and many other things, it's a serious situation, and financially, it will not be solved until we have solved the health crisis. And you just have to know that. You're all writing to me and saying to me, how long? How long do you think it is that this is going to last? And I can give you my best guess, but you'll know as soon as you see all the cases with this virus start to decrease rather than increase. And we're not even close to that at this point in time. It is very silly for us to even think that any time in April this is going to be over. This is more likely not going to be over on any level until at least June, and most likely September, where things will seem relatively normal again. And until things seem relatively normal, where you're not afraid to go out, you're not afraid to go to a dentist and have somebody put their hands in your mouth, until the fear that we are all experiencing goes away, things aren't going to return to normal, and you just have to know that. And I have to tell you, everybody, I'm not sure what normal is going to look like, really, when we emerge from this, because this has had a different effect on all of us than anything in our lifetime. As far as the stock market goes, you are going to be in for a rocky ride. You're going to see it go up, you're going to see it go down, you're going to see it go up, you're going to see it go down. And eventually, probably, I know you're not going to like what I'm about to say. But, in about the end of February 2021, it will, in my opinion, settle in. It will be one year, it will take about one year for this market to settle in, to know what's happening and then probably start its ascent from there. But, that doesn't mean that this is the time that you should absolutely be selling, getting out. And the reason is, there's really nothing more to do with your money. Where are you going to put it? You know, there are Treasury bills, bonds, and notes out there, and some of them recently, a week or so ago, if you bought one for let's just say, $1k at maturity, you would get back like $950. That's what's called negative interest rates. So where are you going to put your money? So on some level, and I know you're going to think I'm crazy with this, your money may just be far safer sitting exactly where it is. So, when this market decides to turn around and come back up, you'll recoup some if not all, and make more than the money that you've already lost, in my opinion. Again, so many times I've said to you that if you need your money within one year or so, this is not money that belongs in the stock market. So when these markets rally a little bit, they go up 1k points or 2k, or whatever, you need to just sell. And it's just that simple. Because do I think these markets are going to retest their lows again and go way back down? I do. I told you that before, but again, nobody knows for sure. If you don't need your money for four, five, 10 years, preferably longer, you're going to be OK. But if you need your money, you need it for whatever reason, then it's really important that you think about coming out of this stock market. Do you hear me? As I'm recording this, we're currently down in the stock market, overall, about 29%. Many of you may be down less, many of you may be down more, but I want to give you an interesting way to look at a loss. And I know you're all going to think I'm crazy about this, but it is true. Why do you have money invested? You have money invested normally so it can generate income for you for when you retire. Let's say you're down $100k in your portfolio. I want you to think about how much income today that $100k would generate for you. So, if you took that money and you invested it for income today, you'd be really lucky to get 2% on that right now. 2% on $100k is $2k a year, or $166 a month. So one way to look at this is, would you be able to make it without that $166 per month? And I know a lot of you would be able to do so. So, look at the big picture and the small picture, so that you all stop freaking out about oh my God, I just lost $100k, I just lost $50k. Number one, you don't lose money until you sell. So, if you don't have to sell and you are invested in good quality stocks or exchange-traded funds, or bonds, or mutual funds, eventually you will be OK. If you have to sell, you have no choice, you have got to sell. Then that's one way for you to look at it. And I know you're probably rolling your eyes and everything, but it is true on some level. You need to write down what was the goal of this money? Was it there to generate income for you? And if it was there to generate income for you later on in life or even now, that's the difference about $166 a month that $100k would have generated for you. Just something for you to think about. But again, your game plan has to be that if you have time on your side, you stay put. If you need this money, you need it for whatever reason, you have to come out of the market. However, with that said, if that money happens to be in a 401k or a retirement account, it doesn't mean that you sell and you come out of everything from the retirement account. Because if you do, if it's not a Roth retirement account, remember, you will owe ordinary income taxes on that money. So, just be careful about that, all right, everybody? The other thing I want to talk about is unemployment and the unemployment rate. You know, you may have seen that we went up in the unemployment rate from 3.5% to 4.4%. Not bad, right? Please remember, that rate refers to the first week of March. At this point, you are now seeing approximately 10 million people in the past two weeks apply for unemployment. You are probably going to see that number double next week. Do you know, in the entire financial crisis of 2008, only about 27 million, I don't know the exact number, this is off the top of my head, but about 27 million people in total for all that time applied for unemployment. You now have the exact same amount of people applying for unemployment in two or three weeks, so our unemployment system cannot handle it. So, the unemployment rate will most likely go up to 12% or 13%, easily. It could go a lot higher, some project it could go as high as 30%. It is possible that we will see unemployment rates the same as we were back in the Depression, and things are really rough, but again, you don't need me to tell you that. But, here's what you do need me to tell you. Many of you are calling the unemployment office or writing to them or communicating with them, and they are telling you, sorry, you're self-employed, you don't get unemployment. Sorry, you're a gig worker, a part-time worker, you don't get unemployment. Our state doesn't have to do what the federal government tells us to do. Wrong, wrong, wrong, all right? They do have to follow and they will follow. The problem is, many of the people that you are talking to because they are so overwhelmed with misinformation, they themselves don't know, and they're telling you things, and then you're getting very upset. So, I have a suggestion for all of you. You all need to be writing to your state senators and state representatives right now because I'm telling you, the people that you're talking to, if they're saying to you, you don't qualify if you're self-employed, a gig worker, or part-time, they are 100% wrong. So, you have to stay on it. You have to really become that warrior and not turn your back on the battlefield that I told you all about. That's who you have to be now. And I understand how frustrating this is. You call, you get halfway through it and then you get disconnected. They say they're going to call you back, they call you back six hours later, you answer and they hang up on you. Just remember, the system was not built to hold as many people as it needs to be holding and hosting right now. So, the system is breaking down and therefore, maybe the best time for you to try to get in is in the middle of the night where not everybody is doing it. But you have to just keep trying. Now, the main reason that I'm telling you that is that many of you are counting on this money. I have too many of you writing me saying it's all right, Suze, I'm going to get unemployment, I'm going to get my stimulus check, everything's going to be fine. So, I'm going to use my cash right now to pay off my credit cards. And I write you back, and I say, do not, do not use your cash now. You are to only make the minimum payments due on your credit cards. And why is that, Suze Orman? Because when are you going to get unemployment, everybody? You're only going to get it once you get into the system, and if you can't get in the system, or if you get into the system and they say you don't qualify because they're not up to date on the laws yet, you can't count on those checks. Also, let's talk about the stimulus check. Unless the government has your direct deposit, your bank information, unless they have that, you're not going to possibly see your stimulus check for at least four or five months until about August. Because they are so backed up and the government does not know how to handle this. This is important that you don't count on oh, it's going to be OK because I'm going to get this $1200, then I'm going to get $4k a month and blah blah, blah, blah. OK? Please don't count on it. I want to go back to unemployment for a second here. You only get the federal $600 a week if you qualify for state unemployment. At this point in time, many of your states have different rules for you to qualify. So it's not just a simple as, oh, you're self-employed. You're, you know, a part-time worker, you're a full-time worker, you're a gig worker. So, therefore, you qualify. Every state unemployment agency from the Department of Labor has its own rules, and many of them require that you worked for two years. And if you hadn't worked for two years at that job, they are not going to pay you unemployment. So, you have to know the rules of every single state and what it involves for you. So, this is your homework. You have to know, and if you don't know, you need to at least call-up and find out or do something. You know, I've told all of you that you could easily go to www.CareerOneStop.org, and from there you'll tell them what state you're in and you can go to unemployment at that point. But it's hard. I wish we had universal rules and I know everything's according to the state, according to the state, nobody wants big government involved in things. Well at this point, I would really like big government involved, I have to tell you. I wish the government would come in and say, listen, it doesn't matter what your state requirements are, everybody, if they work for at least 40 hours, whatever it is, they should qualify for unemployment at this point in time. So, I need you not just to assume that, of course, you're going to get unemployment because you were told you were going to get unemployment. The state dictates who gets unemployment in terms of how long you need it to work at your job. That, they do have control over, so, you need to find out about that. I don't want to be a Suze Downer here, I'm not trying to do that, but I'm not liking the emails that I'm getting that are saying it's all right, I'm going to be OK. I know I'm applying for unemployment, so I'll get it. Can you just not spend the money until it's in your house? All right, now, you don't have money to spend, you don't have anything, so what are you going to do? You're going to not spend it, and you're going to not freak out about it. After you have made calls to everybody and you've tried to postpone everything that you can, if you still don't have the money, then you're just not going to be able to pay the bills. And you're just going to have to be a warrior and see what happens, and it's to no fault of your own, so you shouldn't feel like a failure. You should just know that it is the situation because if there is no money, there's no way to get water out of a rock, people, there's just no way. So when dealing with your landlords, if you are renting, here's what I want you to remember is that they have problems too. They have big problems right now because most landlords don't own their homes outright that they're renting to you, or their apartment buildings. They too have mortgages that they have to pay, they have to pay property taxes too. They have to do all these things and they don't have any money unless you pay them your rent. So don't be harsh or don't be mad at them. Talk with them, see what you two can do together on some level. So, just remember that you know, there are words. And you know, I may have done a podcast on this a year or so ago that the six greatest words in life are: "I admit that I was wrong." The five greatest words are: "You did a great job." Four greatest words are: " What do you think?" The three greatest words are: "Could you please?" The two greatest words are: "Thank you." And the one greatest word is: "We." Not I, but we. Because we, it takes two people really, in most cases to make things happen. So whenever I really want something to happen, or I want somebody to do what I want them to do for their own good as well as mine, I always start with, Could you please? So in talking to your landlords or people that you really want to help you, can you just start your sentences with, Could you please? It just might help. Um, I want to talk now for a second about 401k plans. What's so sad to me, and I just can't even believe this happened, a new rule has been passed that 401ks now, your corporations that you work for, your businesses, they no longer really have to match your contributions. They can take it away. So, if you are working for a company and you most likely now will be getting an email or a letter saying we're no longer going to match your contribution, then at that point, if you are still going to put money into a retirement account, now many of you really will be eligible for Roth IRAs because you might not have that much income this year. So, I would much rather see you put money into a Roth IRA than a 401k that does not match. I would rather see you put money into a Roth IRA than a Roth 401k that does not match because again, any money that you put into a Roth IRA, you can withdraw your original contributions without taxes or penalties, regardless of your age, or how long that money has been in there. OK, so it's something you need to look at. I want to talk about business loans for a second because many of you are writing to me and say, Suze, you always talk about personal finance, but you never talk about those of us who are in business. Well, I'm actually talking to you all the time because if you're in business, you're in business to make money for yourself. And I'm talking about what you do with the money that you make and many of you never take any money because you just put it right back into the business. And now, personally, you don't have any money, and now you don't have a business. So, here's what you need to know. The U.S. Chamber of Commerce has a detailed factsheet on how all of this works, but a very quick synopsis of it is that if you happen to be a business with under 500 employees, then you can go into most banks that have partnered with the SBA. They opened this up on Friday, this last week, and you can apply for a loan. Now you can get a loan up to $10 million. Obviously, it depends on your expenses and how many employees you have, and the name of this loan is called the Paycheck Protection Program, and it's done so that you get money and a certain percent of it has to go to your employees. So, you keep your employees with a paycheck, so this protects their paycheck, as well as your expenses. And if you do that, then the loan turns into a grant that does not have to be paid back, except for possibly the interest on that loan. Now, there is all kinds of confusion about how this really works. What if this happens, what if that happens? But if I were you and you want to do this, I would go and apply for it right away. On Friday alone, over $22.5 billion at Bank of America was applied for in just one day. So, the entire budget right now for this program is $359 billion and I don't think that's going to last very long. So, this is something that you might want to look into. I just want to say something briefly about dividends. Please don't go chasing yields. If you see a stock that you want to buy, that has a really high dividend yield, I would skip it. You are writing to me and you are asking me, Suze, if you were to choose between AT&T and Verizon, which one would you choose, Suze? For those of you who have been writing in, I would choose Verizon over AT&T any day. I think Verizon has a far more solid dividend than AT&T. Normally, I don't talk about individual stocks, but the number of emails asking me that one particular question is really just overwhelming. So, I thought Suze Orman, just answer it on the podcast. Also, some of you are still not believing that it's me writing you back and I'm doing my best. I'm doing so good at trying to answer all of your emails and questions that my thumb on my right hand has gone numb. Really, I can't even feel the tip of it anymore. However, there's a woman who wrote in and said, Suze, please give me some indication that it was really you. Marta, it was really me, all right? I just wanted to get that out of the way.The other thing, I want to ask you a favor. If you write and I happen to answer you, please don't write back and say thank you to me. I know you're grateful, I believe you're grateful, but every time you write back, that's another email in the inbox added to the thousands that are already there. So, if you really appreciate that I answered your email, just know that I know you appreciated it, and you don't need to write back saying thank you so much, I can't believe you answered my email. Again, you can write to AskSuzePodcast@gmail.com, and I am trying to answer as many emails as I can and some of them I will choose to answer on the podcast that I drop on Thursday, which is known as the Ask Suze Anything podcast. So just know that, all right? I thank you, however, for you wanting to tell me how much you love me. So, I hope these things helped you today. Again, just a very quick recap of your attitude of life. You really need to be strong right now. You need to be stronger. And I'm going to repeat this over and over, maybe on every podcast. You need to be stronger than you've ever been before in your life, and you need to really have your priorities in order. And right now, your life and your health are far more important than your money. But I understand very well without money, it can really make you sick as well. I've told you that I really thought that maybe this is a time that you start keeping a journal about lessons learned. I think I've said this to you. I'm not sure, I've given so many interviews over the past week, I can't remember what I've said to who. But one of the ideas is, you might want to start a journal called Lessons Learned and really how you learn from this. What do you wish you had done? What do you wish you hadn't done when it comes to your money, just so you can be reminded. So, I hope this podcast helped you a little bit in a way to think about things and what you need to do. I hope you all somehow have faith in that this will end and that you will be OK and that it will happen exactly as it's supposed to. But until next time, be strong, stay strong, you can do this. You're stronger than you have any idea. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information. To find the right Credit Union for you, visit https://www.mycreditunion.gov/.
Credit & Debt, Saving, Investing, Retirement