December 18, 2022
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On the final Suze School of 2022, Suze starts out with a reflection of the many lessons we learned this year.
Suze: December 18, 2022 welcome everybody to the Women and Money podcast as well as everyone smart enough to listen Suze O here and today is Suze School but I have to tell you, I'm a little bit nostalgic about this. Suze School. Wanna know why? Because today really is the last Suze School of 2022
Suze: Now you might be saying, but Suze, we have one more Sunday left. No, we don't.
Suze: Because next Sunday December 25, what happens? We have a very, very special guest now, I know that the majority of you that listen to the Women and Money podcast and everyone's smart enough to listen, loves this person. You love him. Oh, that's your first clue.
Suze: Second clue is he is an extraordinary fisherman
Suze: Now, who could that possibly be?
Suze: Think about it. Oh better than just thinking about it. Make sure you tune in next Sunday, December 25th, which is also a clue to who this person may be. So this is it. So then I started to think we learned so many things this year, didn't we everybody
Suze: And I was trying to think what were the main things that we really took away from all of these episodes over 100 episodes this year. And the first one had to be, I bonds. Don't you agree? I mean, I had to be I bond crazy most of this year.
Suze: Especially just until November when everything changed again. But I was like, I bonds, I bonds, you gotta buy, I bonds, here's a way that you can buy more than $10,000. Here's this, here's that you got to do that. But I have to say I think we were pretty successful with that. It seems as if the majority of you absolutely bought I bonds except for everybody in my family except for Lynn and Tom. But that's another story.
Suze: We also learned a lot about stocks
Suze: and that stocks just don't go up. They can go down and they can go down very very quickly.
Suze: And we learned how inflation
Suze: really set the stage of what was going to happen in the year 2022.
Suze: But we also learned that why we thought stocks might be volatile, that we could be safe in bond funds. We thought that didn't we? And all of you would write in and go. But Suze I'm in bond funds and you know over and over again. I would give a Suze School on why I hate bond funds and if you are in bond funds you should get out. Especially if they are long term
Suze: Now... That's what I was saying at the beginning of this year and I've said it for a while now that doesn't mean if you are in bond funds now, you should get out because I actually think in the long run, you'll do pretty good in bond funds. We also learn did we not about T bills? My God,
Suze: I went as crazy about T bills as I did I bonds and how you build a T bill ladder and notes and all of those things. So we learned about Treasury instruments, How you buy them where you buy them and why you buy them
Suze: And how I really like short term right now, T bills three months, six months up to one year, maybe two years if you must. But I don't want you to buy 10 year and 20 year bonds and 30 year bonds. And we learned that. We learned about how complicated inherited I. R. A. s or retirement accounts can be, especially if you've inherited from somebody
Suze: who has already started required minimum distributions or were old enough to have started them even though they didn't take them.
Suze: We learned about support and resistance levels and how you can use those indicators to really help you make decisions as to what you should and should not do. We learned about tax lost harvesting and especially to do that at the end of the year and you still have time to do that.
Suze: Where you simply offset your losses this year against the gains that you've had in stocks. And then what happens you reset everything. We learned about the 30 day wash rule
Suze: and how to be careful that if you take a loss if you sell a stock and you're going to take a loss on your taxes that you cannot buy it back within 30 days either in a different account or even while however you want to figure it out 30 days before or 30 days after you can't have bought the same stock. We learned did we not about Bitcoin.
Suze: And we learned that Bitcoin train kind of stopped dead in its track. It went all the way up into the 60,000s and now it's all the way back down around 17,000 or so. And I have absolutely no doubt that before you even know it it could very easily be at 13,500, which happens to be a support level for it.
Suze: How long it will take to get there I don't know but it's more on a downtrend than anything.
Suze: But the only good news about that
Suze: you know is that we always said never invest money in cryptocurrencies that you cannot afford to lose. That I've said over and over and over again.
Suze: So we learned about that
Suze: And so
Suze: what else is there really? Have we not almost learned about everything that you need to know when it comes to money? I doubt it. So there is one last Suze School for today that I want to talk about and this is one that really concerns a lot of you
Suze: that are in 401(k)s maybe you want to retire. And should you roll your money over? What should you do? What's the difference between a rollover and a transfer because some of you
Suze: in fact many of you even professionals have gotten it totally confused about rollovers. How many times can you do a rollover? How many times can you do an IRA transfer? So many of you think you can only do it one time a year? That is incorrect. So the last Suze school for the year
Suze: is the mistake you will make. If you do not know the difference between an IRA transfer and an IRA rollover, get your little Suze notebooks out for one last time this year. All right, so let's just begin with what is a transfer. Let's just say you have an IRA at a brokerage firm
Suze: and you want to change to another brokerage firm. Maybe you want to go from Vanguard to Fidelity or Fidelity to Schwab. It doesn't even matter. But you want to take your IRA wherever it happens to be and you want to transfer it
Suze: to another brokerage firm
Suze: That's simply known as a transfer. You open up a new IRA at Fidelity or wherever you're going to do it. They contact Vanguard. And then everything just transfers from, let's say your Vanguard account to your Fidelity account.
Suze: Now when you do a transfer
Suze: your funds get transferred, everything gets transferred in kind. You do not have to sell what's in your IRA, let's say at Vanguard. If you want to get it transferred to Fidelity. All of it has to go from one to the other without you ever touching a penny of it.
Suze: So listen closely because you can transfer your accounts as many times as you want. And as often as you want, you are not limited to doing a transfer just once a year. So let's just say you were bizarre
Suze: and maybe it would be talking about myself, but anyway... and here you are and you want to transfer your IRA from Vanguard to Fidelity. Now two months later from Fidelity to Schwab and then two months later you want to go to E. Trade and then you want to go to another firm all within one year. You can do that as many times as you want.
Suze: a rollover. Now this is where maybe you have a 401(k) at your employer or a 403(b) or a TSP or whatever it may be.
Suze: And now you have quit or you've retired or you were fired and it doesn't matter if you don't work there anymore. So whatever it is, you have money at an ex employers or current employers and now you want to take that 401(k)...
Suze: you want to take it and you want to put it in an individual retirement account.
Suze: This is called a direct rollover. Write it down.
Suze: A direct rollover is where you open up an IRA rollover account
Suze: at a firm wherever you want to do it. And again they contact your ex employer
Suze: and your funds go directly from your ex employer or your current employer. Even though you just want to change it to your IRA, directly to them.
Suze: It does not go to you and then to your IRA. It goes directly from a custodian to a custodian. A custodian being your old employer or your current employer
Suze: to another custodian being the brokerage firm that you are going to roll the money over to or the credit union or the bank or wherever. For whatever reason you want those funds to be held.
Suze: You never ever again want to do what we learned in some of the Suze Schools this year where you have money, you asked them to send you the money directly from your 401k, or 403(b), or TSP.
Suze: And it comes directly to you and then you think you have 60 days to get it from you to the IRA. Now you do, that is true, but it will be a big mistake because your firm where the money is coming from will withhold 20% in withholding tax.
Suze: And if you don't put the amount out of your own pocket that they withheld for tax into your new IRA rollover,
Suze: you are going to owe ordinary income tax on the amount they withheld plus a 10% penalty if you are not 55 years of age or older when you left service from that employer. Got it?
Suze: So you want to do a direct role over. Again, an indirect rollover is what I just said to you, is when you get a check from your ex employer and you have 60 days to get it into that account. Now with an indirect rollover,
Suze: you can only do one in a 12 month period of time. Please underline 12 month period of time. So if you did an indirect rollover which means you had money at an employer, you want to now do an IRA with it and you have them send you that money and you get that money let's just say in December,
Suze: and now you immediately turn around and what do you do? You put it into your IRA rollover and hopefully And added the 20% withholding tax out of your own pocket to that amount.
Suze: You cannot do another indirect rollover for 12 months. So not until December of 2023.
Suze: Many people think it's only once a year. No it's only once in a 12-month period of time.
Suze: So the other thing is and you have to remember this when you have money in an IRA, if you want you can withdraw money from your own IRA.
Suze: Maybe you need a short term fix for something, your car broke down or whatever and you have money in a traditional IRA and you want access to it
Suze: but you want to put it back, you have 60 days from the time that you withdrew funds from your traditional IRA,
Suze: to put it back into the traditional IRA, or you will owe income taxes and a penalty on that if you are not 59 a half years of age or older that you can also only do once in every 12 month period of time.
Suze: So why would one want to do a transfer versus a rollover?
Suze: When you go from like to like it's a transfer.
Suze: Alright so when you go from let's say an IRA to an IRA, that's known as a transfer
Suze: When you go from something like a 401(k) directly to an IRA, they are two different types of entities. One is a 401(k), one is an IRA. So you have to roll the money over. You can't just transfer it. It's called again. What everybody here's your quizzie.
Suze: What is it called when the money goes directly from your 401(k) to an IRA?
Suze: It's called a direct roll over.
Suze: You need to know that.
Suze: Now what happens again? And what is it called when you have a 401(k) or any retirement plan with an employer and they send you money and you put it in your IRA within 60 days. That again is called an indirect rollover.
Suze: Got that everybody because that is your final lesson
Suze: So before we bring this last Suze School to and end, I just want to make a few brief comments on the housing market, paying off credit card debt with home equity lines of credit and 401(k) plans. And I'm sure I'll have something to say about T bills and the stock market as well. But here's what I really want you to know right now.
Suze: Currently there are 250,000 people that are underwater
Suze: in their homes. And what that means is they owe more on their mortgages than they could sell their house for. And you may be saying how is that possible? Real estate has gone up and it's so great and in fact it did. But there was such a rush to buy at the very end there
Suze: with such incredibly also higher interest rates than there were a year ago.
Suze: That people were just buying at any price and they were there and they were buying really at the top. And I do think that we have experienced the top of the real estate market in many areas. Not all but many, there are also one million home buyers that have only 10% equity in their homes.
Suze: So when home sales start to slow and they are slowing so many of you are real estate agents and mortgage brokers and you're all writing me and you're saying to me Suze last year I made $160,000 and this year I'm barely going to make 100,000.
Suze: So everybody can say that the housing market is going to be fine and don't worry about it. But real estate agents, mortgage brokers, they know that everything has slowed down
Suze: and that there are many sellers that are actually taking their houses off the markets because they don't think they can get what they want from it.
Suze: And then buyers have decided, you know what, I think I'm just gonna wait a little and see what happens with interest rates. Why not just keep my money in T bills making 4.7% interest or so.
Suze: So be very very careful with housing. My advice is as follows, if you are living in a home that you want to sell
Suze: and you are ready to move on sell it now. If you are thinking about buying a home
Suze: and you can afford to wait, I would wait and see what happens with mortgage rates as well as the prices that you will have to pay.
Suze: If you are out there and you have credit card debt and you are thinking about doing two things either taking a 401(k) loan to pay off your credit card debt or you have a lot of money in your equity in your home. There are a lot of people who have 70% equity now in their home. So you figure, I know I'll just take a loan for my home equity line of credit.
Suze: It's lower than my interest rates on my credit cards. And
Suze: what can I do I can write off those payments on my taxes in most cases
Suze: Would I do that? If I were you I would not I would not I would not. Number one
Suze: you never ever ever take an unsecured credit card and all credit cards are unsecured, in most cases. If you can't pay the credit card it's not like they can come and take your car away.
Suze: Maybe yes they can sue you or garnish your wages or do whatever if they choose to maybe they will probably they won't. You never know, depends on your situation and if they think you have any money or not
Suze: But you never take an unsecured credit card
Suze: and replace it with a secured home equity line of credit.
Suze: Because if for whatever reason you cannot pay that home Equity line of credit, they have the right to do what? Take your home from you. They can foreclose on it. So number one, you would never want to do it for that reason and
Suze: interest rates on Home Equity lines of credit will absolutely in my opinion be going up.
Suze: You also would never want to take a loan from your 401(k) plan
Suze: to pay off credit card debt. And that is because if you take money from a 401(k) plan,
Suze: that money now is no longer in there. And if these markets happen to skyrocket and they go straight up,
Suze: you've seriously missed out on that.
Suze: That's number one. But number two if for whatever reason you get sick, you lose your job, they fire you. Who knows what.
Suze: If you don't have the money to pay back that you owe, you will owe ordinary income tax on that money plus a 10% penalty if you're not 55 years of age or older in the year that you left service. Got that everybody?
Suze: that's another lesson that we should really take to the bank. Overall
Suze: I still like short term treasury bills as a place to keep safe money.
Suze: Many of you have written and said Suze, should I take all my money out of the stock market and put it into bill's? Not if you are young you have time on your side, you have 30, 40, even 20 years until you need this money. You continue to dollar cost average into these markets. Make sure you're diversified good quality, everything that you're buying
Suze: again. I would want to see you in dividend paying stocks and ETFs. I do not have a problem with short term bond funds. Although I still think you are better off or even intermediate bond funds. I still think you are better off buying individual treasuries than a bond fund, if you can.
Suze: I think that brings us to the end of the last Suze School for 2022.
Suze: So I can say that with all my heart, right, I really enjoyed being your financial professor and I hope we get to continue next year where all of you will feel that you now have graduated to the next level because just maybe just maybe the lessons may get a little bit more sophisticated.
Suze: So until next time there's really only one thing that I want you to remember when it comes to you and your money and it is this for you to be smart, strong and secure. Oh, there is one other thing I want you to remember to watch the World Cup today. It's ending today. I'm gonna be so sad. I've loved it so much. I can't even stand it. Are you gonna root for Argentina? You're gonna root for France?
Suze: I got news whoever wins. I'll be so happy for them. Okay, we will see you soon with another Ask KT and Suze Anything coming up on Thursday. Now you stay safe. Bye bye everybody.
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