ETFs, IRA, Life Insurance, Retirement, Stock Market, Trust, Will
October 04, 2020
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On this podcast, Suze helps us deal with these crazy times. She takes us to Suze School for lessons about dollar-cost averaging,leaving one’s assets to one’s beneficiaries and standing in one’s truth.
Suze Orman’s Women and Money podcast is proudly sponsored by credit unions; a safe home for your money, rain or shine. October 4, 2020. October, can you believe it, it's October 4th? That means October, November, December then we're into 2021. Wasn't it just turning 2020? Wasn't it just turning 2000? Anyway, Suze O. here and welcome to the Women and Money podcasts as well as the men smart enough to listen. With this podcast, I am approaching almost podcast number 200 and I'm sitting there thinking that's a lot of podcasts, especially because if you think about it, really, it's just me and sometimes KT. So it's not like I have a podcast where I interview all these people and you know, you can always find somebody to interview, and maybe they're interesting, maybe they're not? It's me and me alone that sits here in this little room that I'm in right now, thinking about what is it that I want to tell you, what is it that you want to hear, what should this week's Women and Money podcast be all about? And I remember even when I was doing The Suze Orman Show on CNBC that I would come in on a Monday morning and the executive producer, Amy Fellerer, would always say, all right, what are we doing today? Because I never really liked to plan because I always felt like, you know, if you planned, then it was dry. If you already knew what you were going to do before you did it, it was as if it was already done in your head. So usually I just sit down and I see what comes out. But lately, I have to tell you, it's been getting harder and harder because it's almost as if there are so many things that I want to talk to you about. And today it's not an easy day, because yesterday and the day before and whatever we've obviously been watching, almost 210k people we've been seeing them die of COVID, of the virus, and so many of their loved ones have come to me and said, please help me, so and so has died, I don't know what to do. And so, in my own way, I've been dealing with it that way. I personally have not been affected by it, even though my little nephew got it, it wasn't bad at all, so I haven't personally been affected that way. But it's frustrating. It's frustrating when one person dies, let alone 200k, let alone it's going to be a quarter-million or 300k by the time the year is up. And then, of course, we have an entire change of events this week because President Trump and the First Lady and many senators and other people have also gotten it. But it kind of seems like it's different for them because they're going to have everything at their disposal. They have all the tests that they could want, they get to try the experimental drugs, they get to do anything because they're kind of different. And I get that he's the President of the United States and everything. I want that for everybody out there. I want everybody to have access to everything that they need so that they don't have to die unnecessarily. And then I watch the news reports and then all of a sudden all this conflict starts again. What's true, what's not true? Is the President really sicker than he and they say he is? When did he really get it? Did he get it 48 hours ago, 72 hours ago, and all this stuff starts to go on that causes all this confusion in the minds of everybody, and it makes me think, why do we have to make it so complicated? Why can't we all just stand in our truth and tell it like it is? You know, the one thing about me is that they call me an unfiltered talent and that it was always dangerous to put me on live television because you never knew what I was going to say, and it's only because I never knew what I was going to say. But it wasn't hard for me because I always just said what was true, I always told everybody everything about me. It's like I never had anything to hide, whether it was good, whether it was bad, it didn't matter, it was just the truth. And when you stand in your truth and you say everything, it's almost as if you can make the impossible possible. And the impossible is others don't understand something or you don't understand something or the situation just feels impossible. But, if you just stand in your truth, you can make it possible. And then I see that happening with the people that write in and ask questions and I answer them, and this happened just last week on Ask Suze Anything where I answered Fran's question. Actually, it was KT that kind of answered her question about what we thought she should do in a relationship that she wasn't quite clear about. And we said, simple, get out, it's not going to work. Then I hear back from Fran and she says to me, oh, Suze, I get your answer but maybe I shouldn't have used my real name. What if the person that I'm in a relationship with listens to this, then they'll know? And I wrote her back and I said, you know, Fran, I hope she does, because she should know. And you should be proud because you stood in your truth and if you just stood in your truth, everything would be so great and you would really be able to make the impossible possible. And then just this morning, really, really early, I don't even think the sun was up yet, but the phone rang. It was a friend of ours in a different time zone across the sea, and he was telling us how happy he was and we were both on speakerphone, really, our eyes were like, what time is it? And he just needed to tell us how happy he was and it was happy because he finally stood in his truth. He did things that he was so afraid to do. He was in a relationship he needed to get out of it, he was so afraid to do it and he finally just did it. And I've never heard him this happy. I actually thought he was somebody that we would never hear smile again, and all of a sudden he's singing on the phone at some ungodly hour. And I thought, oh my God, he stood in his truth, he made what he thought to be impossible possible. So, are you kind of getting what the topic of today's podcast is going to be? And if you think I planned that I did not. All right, so, I really want us to make what we think is impossible in our lives possible. And we do that by standing in the truth about saying what's true for us, doing what's true for us, taking the actions that we need to take even though we're afraid to do them. And one of the actions that it seems many of you are so afraid to take is investing in the stock market. And if you are afraid to invest, it's going to be very hard for you in many ways to make the impossible possible. Because you want to retire, you want your money to grow. You want to live a life where you own the power to control your destiny, and you think that's impossible, you think you'll never be able to do that, but I'm telling you, it is absolutely possible. But the way that you have to do that is you have to not be afraid to learn. You have to not think that learning is a weakness that you need to learn something, so therefore you're just weak. You need to look at learning as a power, a power to make you stronger, smarter, and more secure than you ever thought was possible. And one of those things has to do with investing. You know, for a while there, when I first started this podcast, I was able to answer almost every single one of your emails that you wrote in. And then, as you all know, and even though I know I said I would never talk about this again, it seems like I'm talking about it again, it's that as time went on, and as you know, I had a health failure, I don't know what else to call it, right? And I wasn't really able to use my right hand or my right side of my body, it was too difficult for me to personally answer your messages and things like that. And ever since I had the operation, now I'm able to use my right hand and answer things even though my left arm really isn't quite working yet. Don't ask me, it's a long story, but I'm just going to have to wait until that happens. But I've been getting such pleasure out of reading your messages and answering many of them personally myself again. And I love that, I love that I've been interacting with all of you, but I've been noticing that you're all saying, "I have This amount of money, what should I do with it?" What should I invest it in? Is it too late to buy the Vanguard Total Stock Market Index Fund? Suze, tell me what I need to know. Should I take money and should I take it from my retirement account because I can get it right now because of COVID and put it into an IRA rollover? Tell me these things that I need to know." So, in order for you to make things that you think are impossible that you would never know how to do possible, let's go to Suze School today because I want to talk to you about a few things that really can make your life a lot different when it comes to investing money. So, to make investing possible, let's talk about dollar-cost averaging. Let's just say you have $5k that you want to invest and you're scared to death to do it. What I would tell you is fine, let's invest it using a technique called dollar-cost averaging and dollar-cost averaging is where you simply take a specific dollar amount every single month approximately on the same date of that month, and you invest it. Just that simple. I'll give you an example. As you all know, I really like an exchange-traded fund by the symbol VTI, the Vanguard Total Stock Market Index Exchange-Traded Fund. And let's say, very first of January, you decided that you are going to take $500 a month every single month for 10 months, which would bring you to right now and you would buy shares of the Vanguard Total Stock Market Index ETF. Now, if you opened up an account at a discount brokerage firm such as TD Ameritrade, Schwab, Fidelity, Robin Hood, I don't care where you do it and you did it online, you would able to do so without any commissions whatsoever. Therefore, alright, January comes and VTI is selling at about $165 a share. You invest your $500 and you're able to buy about three shares. In February, you invest $500 and it's still trading right about $165 a share so now you're able to buy again about three shares. But, as time goes on, it goes from $164, almost $165 a share, and in March, it's trading for $156 a share. So now, you're able to buy more shares, your $500 buys you almost 3.19 shares, it buys you more than three shares. Now in April, it's selling for $122, almost $123 a share. Now, you're able to buy four shares, and as time goes on, it goes down, but then it goes back up again. So now, here we are, almost in August, and it's back at $166 almost $167 a share, and again, you're able to buy approximately three shares. And on October 1, it was trading at about $171.50 a share so you were able to buy again almost three shares. Over those 10 months, because you did that every single month when the ETF went down, you were able to buy more shares, when the ETF went up, you were able to buy fewer shares, but over time you averaged the cost of your dollars, depending on the share price. So, after 10 months, you had 32 shares, just clock that for a second, put a pin in it. Let's say, however, on January 1, January 2, when the market opened, you decided you just wanted to take $5k and in one lump sum by the VTI all at once. Again, it was trading at about $165 a share. So, if you invested $5k all at once, you would have been able to buy 30 shares. So where would you be today? Why does Suze like dollar-cost averaging? Let's just take a look at it. So, over 10 months you invested $500 a month for a total of $5k but you have a total of 32 shares. 32 shares trading at about $171.53 a share brings you to $5488.96. You made $488.96 where you didn't make it until you sell it, but you are up $488.96 on your investment, or that's about a 9.7% return. Pretty good. If you had done lump-sum investing, you would have bought 30 shares. Today, those 30 shares would be worth what? $5155.50. So, you would only be up, on paper, $155.50 or 3.1% on your money. So do you understand, in times where the markets are very confusing and they're going up and down and up and down, and you don't know quite what to do, that if you dollar cost average and the markets go down and eventually the markets start to come back up again, you will make more money, most likely, than if you invested in one lump sum. Now, obviously, it depends on what the markets are doing. If this was back in 2008, 2007, when the markets and everything was crashing, I would have told you to just go in with everything you have. Don't dollar cost average, especially 2008 into 2009, just buy whatever you wanted to buy. But we're in uncertain times right now. So, if you don't know what to do, this is a way for you to invest and in the long run, probably come out further ahead, especially if the markets are volatile. All right, that's our first Suze School. Got that, everybody? OK, the next thing I want to go to Suze School about is who should be the owner and beneficiary of your retirement accounts? For some reason, many of you think because, you know, I just love revocable trusts. I never will think and never have thought that a will is enough. And so, you are getting your Must Have documents, you're doing them, great. But you're trying to change the name of your retirement accounts into the title of your trust. No, you cannot do that. That is something that can never go from impossible to possible. That will always be impossible because a retirement account, an IRA, stands for an individual retirement account. An employer-sponsored retirement plan, such as a 401k or 403b or whatever it may be is you are the employees of that corporation, so it's not the trust, it's you. So a retirement account can never be owned by a living revocable trust, it can only be owned by your individual name. With that said, however, if you are married and this is so important, please listen to me. If you are married, you always want the beneficiary of your retirement account to be your spouse, because your spouse, upon your death has the ability and the legal authority to take over your retirement account as if it was their own. So your spouse is always the primary beneficiary on any retirement account, and the contingent beneficiary would be your trust. If you're not married, the primary beneficiary is your trust. So, many of you have been asking me, but Suze, if I just put my will as the primary beneficiary, isn't that good enough? No, it is not because if you put your will or the estate of your name as the primary beneficiary of a retirement account, it's going to have to be probated. So any account that has a designated beneficiary, a life insurance policy, a retirement account, a pay on death account at a bank, you have named somebody, that account doesn't have to go through probate, it goes directly to that beneficiary. Next, many of you think that how you've left something to somebody via your trust and or will that that will override the designated beneficiary on your retirement accounts or life insurance policy? No, it will not. How you hold title to your home or who you've designated on your retirement accounts as the beneficiary, that will override whoever you have named in your trust or will. So, if you have left an ex-spouse as a beneficiary on a retirement account, but you think you've outsmarted everybody or you've just forgotten to change it and your will and trust say that your new spouse is to get your retirement accounts, wrong, your ex-spouse is going to get them because that is who is named on your actual account. So, how you hold title to something overrides the wishes in your trust and or will. Got that everybody? It's only when you hold title to something in trust like your house is in trust, then it will be ruled according to how the trust wants it to go. But you have to be very, very careful about these things because this is how you make impossible possible the impossible being, oh, you have to go through probate, you have to waste all that money. You have to take all that time, possible being oh, you could avoid probate, you don't have to pay those fees, that goes right to your beneficiaries. You can do things like that. So those are the two things that I really wanted you to go to Suze School with today because too many of you are writing me confused about dollar-cost averaging but also making serious mistakes on how you are using the Must Have documents and how you're taking title to things. All right, now, that was a journey. Where did we start this podcast at? We started with I don't even remember, but I'll tell you where we're ending. We're ending with all of us standing in our truth, all of us not being afraid to say exactly what's going on in our lives, all of us being kind to one another. Because all the commotion, all the theories out there, everything that's going on is going to drive everybody crazy. I could tell you that right now. The next month a lot of violence can happen, a lot of people are going to be fighting with one another. Don't get involved. All you have to do is vote, vote for whoever it is that you want in that office and don't let anybody get in your way of voting. That is how you make the impossible possible. And that is how you have to live your life, especially this next month or two. Be kind. Do what you need to do to protect yourself and everybody else and keep listening to the Women and Money podcast. See you soon. Hi, I'm Sarah, and I'm Robert, and we're back here to tell you that Alloya's member credit unions are so proud to have brought you this episode. You know, Robert, credit unions live by a people helping people philosophy. Absolutely, Sarah. And that means when you bank with a credit union, you can trust that they have your best interest at heart. The fact is, regardless of circumstance, a credit union will have your back and keep your money safe, that's the credit union promise. Go to www.MyCreditUnion.gov to find a credit union that fits your needs. That's MyCreditUnion.gov. 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.
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