Podcast Episode - Suze School: What Else Can I Do to Save for a Home?

College, Home Buying, Home Loans, Home Mortgage, Mortgage, Retirement

July 20, 2023

Listen to Podcast Episode:

On this KT Birthday Eve Ask Suze and KT Anything episode, Suze answers your questions about ROTHs, HELOCs, paying for college and more.

Podcast Transcript:


Music: Music (in).


Suze: July 20th, 20th KT...


KT: Guess what? That is? 24 hours from today is what my birthday baby. Don't tell them how old I'm gonna be.


Suze: Why not?


KT: Because I think it's important.


Suze: Are you upset that you're going to be 71?


KT: What did I just tell you? All right, Robert. Erase it.


Suze: No, you leave it. So all of you know.


KT: I like saying 70.


Suze: Well, that's nice. I used to like saying 60. Remember we said, I remember when we said 50. That's some story we should tell.


KT: Oh my God, Suze's 50th and my 50th. Unbelievable.


Suze: But anyway, July 20th, 2023. Everybody.


KT: Happy birthday to all the Cancers out there and all of our...


Suze: My brother's birthday is today...


KT: And I think it's my niece's birthday, Amy.


Suze: Happy birthday, everybody. Anyway, this is the Women and Money podcast and everybody's smart enough to listen. This is the KT and Suze edition. I love these. Do you know how much easier it is to do this.


KT: Why don't we just do this instead of Suze School?


Suze: Oh, people will get upset. But you never know. Maybe, maybe next year that's what we'll do.


KT: I could be the one that, that introduces Suze School.


Suze: What would that mean?


KT: Then we only do one podcast a week.


KT: We do one really long, one, like a great one. Like a thorough part A and B, but do it right.


Suze: Let's just get to the ask questions part.


KT: The first question is from Emily. Hi, Suze and KT. I am an avid listener of yours and have been for my whole adult life almost exactly 10 years


KT: years ago. I was on the Can I afford it segment of the Suze Orman show. And I was approved so fast forward. 10 years later, I'm now 33 still feel just as empowered with managing my money as I did. Then within the last year, our income has now exceeded the Roth IRA threshold.


KT: We both already fully fund our Roth 401 case. I think Suze, she's referring to both as her and her spouse. So we already fund our Roth 401k through our employers. We've started reallocating the Roth IRA money into an after tax option with a Roth conversion


KT: that fortunately both of our companies currently offer. Would I pass a quizzie with my solution or do you suggest I consider something different?


Suze: Do you want that to be your pop quizze?


KT: No way. No. This is an opening Roth question you answering, girl.


Suze: So listen to me, my dear Emily.


Suze: So by the way, everybody, the "Can I Afford It?" segments on the Suze Orman show are so popular. It's not even funny. And you can watch the Suze Orman show on FreeVee. It's the free version that Amazon offers for all of you. All 600 episodes are there and people are writing saying they love watching them again, especially my expressions as I'm answering things.


Suze: So just so we're clear everybody on what Emily is asking. Obviously, Emily and her spouse make more than $228,000 a year of adjusted gross income. So they no longer qualify for a Roth IRA. They're making too much money good on you girlfriend.


KT: She's approved again.


Suze: Not necessarily, not necessarily Emily. So what Emily is saying everybody is that the company that she works for allows her to fund her traditional 401k


Suze: with after tax contributions. Most corporations allow you to do that by the way. And therefore she can put money in her traditional 401k with after tax contributions. And then they are allowing her to take that amount of money and convert it to a Roth 401k if I am reading this correctly


Suze: and she wants to know, would I passed the quizzie? And you absolutely would Emily Fabulous. However,


Suze: you also, even besides that if you wanted to,


Suze: you could absolutely. If you don't have a traditional IRA or a SEP IRA or a simple IRA. You could also, besides that, do a back door Roth IRA. So you could have your cake and eat it too where you simply take the same concept and you fund your traditional ira with after tax money.


Suze: So you make it non-deductible. So after tax money is just simply money that you have and therefore what do you do with it? You put it in a traditional IRA but you make it non-deductible and then you convert it to a Roth Ira because there are no income limitations to convert.


Suze: So that's what you should also be doing as well. Next question, KT.


KT: OK. This is from CD. Hi, Suze KT. I was in a lengthy high conflict divorce which was finalized a couple of years ago since then, I paid off 50k of debt and increased my emergency safe


KT: to 25,000.


Suze: CD, you might not think I remember you, but I remember you writing me in the year 2019 and you were in the most horrific relationship with $50,000 of debt and all of these things, horrific abuses of horrific relationship.


Suze: And do you remember CD? We wrote back and forth to each other and from being now to be seen that you are out of $50,000 of debt, everything KT will continue to read. I am so proud of you. I can't even tell you CD. Oh my God. And everybody listening to this, if you could have read that about the situation that CD was in all those years,


Suze: you would know that anything and everything is possible in life to correct your situation. All right, let me hear what CD is up to. Ok.


KT: So she paid off the debt. She has an emergency savings of 25,000. I've saved up a few 1000 in cash vehicles for my young son's future educational expenses. And she increased her work retirement contributions to 8%


KT: and increased her monthly Roth IRA contributions to $100.


KT: So she said I also started very small investing in ETFs and stocks at a discount brokerage to dip my toe in the investment world. Well, she's brave.


Suze: You have no idea how brave this woman is.


KT: I don't know.


Suze: No, her situation was so horrific... oh, CD, you did it


KT: But she still needs your advice. This is the, this is the the end hopefully of her journey and the beginning of a new path.


KT: I am still renting due to living in a high priced area. She lives in southern California. She said, Suze, I'm unable to move due to shared custody and do not live near any family or friends. I desperately want to buy a home for me and my son.


KT: I'm worried it will take me over 10 years to save up for a deposit on a home. So my question is what else can I be doing to save for a home? So, her son's relatively young, I guess he'll be with her for a while.


Suze: He'll be with her for a little bit. So she says here that she needs it because KT just handed me your email CD, that you'd have to save up over $100,000 for a deposit on a home. All right. First of all, CD,


Suze: here's the true bottom line. You are capable of doing anything and everything that you want to do.


Suze: And if it's true that it's gonna take you 10 years plus to save up for $100,000 to put just a deposit on your home.


Suze: All right, you start now you do everything that you've done. Look at, look at what you did in just four years since 2019


Suze: that you paid off $50,000 you save $25,000. You have all this money. Don't tell me that a woman like you cannot save enough money and figure it out just like you did a few years ago and put it towards the home. Obviously, put it somewhere where you can get the highest interest rate possible.


Suze: You know, if you want to just start saving little amounts of money, even take advantage of the $100 a month at Alliant Credit union and the ultimate opportunity savings account because even just $100 a month, you put that in and you do that every month for 12 months. At the end of those 12 months, they'll give you $100 if you do it right away and you keep doing it every single month.


Suze: The reason that I would want you to do that rather than putting $100 a month in a money market fund or something that will pay you four or 5%. Because if you really did the calculation of where you put in $100 a month


Suze: and you're making 3.10% and they give you $100 at the end of the time that calculates to be between a 16 and 18% return on your money. Do you hear me? And that type of return? You can't get anywhere. So everything you can do like that is fabulous. However,


Suze: there are a lot of single mothers out there


Suze: and a lot of you are faced with this exact same problem


Suze: that you can't afford a home. You can't leave the area, whatever it may be, but you want to provide a home, you don't want to be trapped to these rent increases and what rents are going for right now. There is an organization and I think all of you that are in that situation where you are a single mother with a child, maybe even two Children.


Suze: I want you to check out an organization called Co Abode. You would go to Co Abo That's Coabode co abode dot com. And what they have done is for single mothers, it's home sharing and a friendship network. So mothers who especially have kids


Suze: that all of a sudden are in a situation where the kids are young, they can't afford rent. They're really struggling.


Suze: They all get together and they live together and form a new family and bone matches you to the other women and kids that would be perfect for your situation. And it's really something that all of you should look into. Maria Schriver just did an entire piece on it. And I'm sure you could find it on the Today Show. I'm sure it's in their archives.


Suze: But it's, it's something I'm telling you as a single mother,


Suze: you're struggling, you're renting, you can't afford these rents, check it out. The women that have been doing this are loving it. But CD,


Suze: I'm telling you this, you were a warrior. You did not turn your back on the battlefield, girlfriend. You can do anything and everything that you desire. So if you want to do this, I know you will find a way to do. So. KT next question.


KT: This is from Summer. I love that name...


Suze: Because you love summer.


KT: I love summer


Suze: everybody. It's like 100 degrees here. It's, you can barely go out now. That's true throughout the entire United States. KT is in her glory. I come out the other day. And what is Colo doing? He's trimming trees that are like 50 ft, coconut trees. Tall. KT is pulling the leaves


Suze: huge, huge to the front. It's 100 degrees out there. We are sweating up a storm. Loving, loving it. Oh, my God.


KT: All right. So this is from Summer, Summer is a teacher, by the way, Suze. And I love teachers. She teaches English. So, hey, Suze, and I don't know what I love more about you too. Your financial advice or your banter, do we banter?


Suze: Yes, we banter all the time. And if you think we just banter on the Women and Money podcast, we seriously banter when we're not on this podcast, it doesn't last long. The bantering. Well, bantering isn't bad. Bantering is like we're talking right now, we're bantering.


Suze: So I just telling everybody, you, you take things and you're, you're taking those big palms out in 100 degree. That's bantering. Not big green. We're bantering.


KT: Ok. I just listened to Suze's podcast that focused on the difference between 401k and Roth Ira. I would love your advice about how to pay off my HELOC.


KT: I currently owe $5000 because interest rates are likely to rise. I'm wondering if I should take $5000 from my Roth is ok.


Suze: No.


KT: There you go. There's your answer. I answer short and sweet.


Suze: I answered this on one of the previous podcasts. It's not gonna take you long to pay off $5000. In fact, KT just handed me your email and it says it's gonna take you about 6 to 8 months to pay off. No, you don't take money out of a Roth IRA. And the reason that is once you take it out, it's not in there anymore and then you miss that and no, just, no, you're not gonna do that. It doesn't make any sense. Ok.


KT: This is from Maria. KT and Suz...


Suze: She chose because her name is first.


KT: I listen to you faithfully every week. Thank you for empowering women with money. I am 53. I have two children, 20 and 16. I am the sole provider for the three of us.


KT: I chose it because of this. Their father is a knucklehead and I'm happily divorced. I don't mean to laugh at that description but I haven't heard that in a long, long time.


KT: I now have an extra $3000 a month in take home pay. My question is what to do with that extra money. I have a 12 month emergency fund. I have money saved for college, although not enough because who could ever afford these prices? And I have a 3% mortgage which I'm paying down and have another 16 years to go, Suze. I know you say take care of yourself first and every financial planner says to plan for retirement first.


KT: I am a first generation, my parents were factory workers. I paid for my own college education and law school. I went to school and worked and had no fun because I had no money. I don't know if I agree with that.


KT: I think you can still have fun without money. So in any event, she said I want what every parent wants. I want to give my kids a leg up. I really am trying to do the right thing, especially since I'm the only functioning parent my kids have right.


Suze: You listen to me now, my love and you listen to me. You know..


KT: I have to just say something to you. Um Well, to her to Maria, I didn't have any money in college and I worked three jobs. I had more fun


KT: in those years that in my lifetime and I worked three jobs and I didn't have any money.


Suze: I only worked two jobs.


KT: But didn't you have fun in college?


Suze: My God, I loved college and a lot of, but that's not the point. Maria and everybody. I really want you to listen to me.


Suze: And here's what I wanna say, Maria. May you for the next 16 years, which is what you said you have left on your mortgage. May you stay healthy? May you always be able to work? May everything always go the way that you need it to, may you never suffer in any possible way. I wish that for every single one of you, I can't even tell you how much I wish that for you.


Suze: However, KT, how old was I? Right, when my life changed, I was 69 with the tumor they found. And the truth is you never know what can happen and when it can happen you just never know.


Suze: So, if I were you, I would not be worrying about my kids. It's not about them having fun, Maria. It's about them learning responsibility and learning how to make the most out of whatever they do have.


Suze: So don't do that to them. Sometimes when you make things easy, you actually hurt them. A lot of my friends whose parents paid for them and everything to go through college. Oh, please. They never made anything out of their lives to tell you the truth.


Suze: So it can go either way just so, you know.


Suze: So therefore if you have an extra $3000 a month in take home pay, I would put it and start investing it for myself in regular investment accounts, I would probably take $1500 of that $3000 a month. And I would put it towards the home and pay off the mortgage on the home


Suze: so that you can own your home outright before you are 69 years of age. Why not own it outright when you're like 60 when you're 55 whatever it may be. And then you'll have a whole lot of money that may be, then you can help your child pay off the loans that they take out.


Suze: But no, don't put your kids before you. Do you hear me? It's really just that simple. Yeah.


KT: Ok. Next question is from Psy, here's the question Suze. If I contribute to 401k, am I eligible to contribute to a traditional IRA?


Suze: Ok. There's the answer and yes. Are three letters simple. Now, why is it that all of you think that if you max out your retirement plan at work that disqualifies you from a Roth IRA or a traditional IRA, it does not. Can you all finally understand that you legally can have


Suze: a 401k A 403 B or a TSP at work and you can have either an IRA a Roth IRA. You can have both if you want, but you cannot contribute more than the maximum allowed, which is 6500 this year, if you're under 50 7500, if you're 50 or older and a combination of the two, whether it's a traditional or a Roth and truthfully, I don't know why you would ever have a traditional.


KT: Ok. Next question. Under the subject, it said KT pick me KT pick me. So this is from Chris. Chris, I'm picking you. Hi, Suze and KT huge fan. I have NY 529 plans, I guess New York, 529 plans for my kids.


KT: We got a notice that the age based portfolios are automatically going to be switching on July 27th, 2023 to a target enrollment portfolio unless I say I don't want to switch.


KT: I'm wondering, should I go along with it or what, Suze, the oldest kid is seven, any advice? That's from Chris.


Suze: So just so you know, Chris, age based portfolio is usually based on the age of the kid and they simply just, you know,


Suze: now invest according to age and when maybe the kid is expected to go to college, a target enrollment portfolio is really when that kid is actually going to go, when are they going to enroll in school? The truth of the matter is I don't like any of them.


Suze: Don't you have another choice within the New York system? Why don't I like it? I'm gonna say this over and over again. You don't invest according to how old you are or what you're going to do


Suze: when it's so many years away, you invest according to what the economy is doing. If you had an enrollment portfolio back just a year or two ago, when interest rates were going up so much. And therefore before they would have been mainly in bonds, that portfolio would have gone down significantly and you would have been hurt.


Suze: So I like you invest in what you should be investing according to what the economy is doing. Just my two cents. However, if you have to choose between one or the other I don't have a problem with you going with the target enrollment if you have to choose.


Suze: Are you ready for your quizzie?


KT: Yeah. What is it?


Suze: All right. So everybody, this is a quizzie for KT and this is a quizzie for all of you. By the way, if you want


Suze: to write in a question for the Ask Suze and KT anything you write it to Ask Suze Podcast at gmail dot com? Got that. That's Suze ask Suze podcast at Gmail dot com


Suze: and put in the title something that will attract KT's attention because that me pick me pick because that's how she kind of chooses them. And if she chooses it, we're gonna answer her just like we're doing right now. Good afternoon, Suze, I do not understand what to do with my 401k or 403b KT, you are on a 401k kick.


Suze: I'm trying to learn. I still don't get it. I want to know something. Somebody wrote me and said how difficult this is for her and she's trying her best but she just turn tunes out. She can't do it. And then she says, look at KT,


Suze: you've been trying to teach her for 20 years for all these years and she still doesn't get it. So that makes me feel good. I'm serious. I'll show you this email that I just got. So I'm gonna really try, I'm gonna try, but I just so don't like it


Suze: and to all of you, you gotta learn to like it. But anyway, I do not understand what to do with my 401k or 403 B. I am 44 years old. This person is married with two kids. I have these accounts from old jobs. I just got a letter that the 401k plan from her old job, KT is being terminated


Suze: and she has three options. All right, everybody. So I imagine that there are many of you out there that have 401k plans with old employers and for whatever reason you've left them there, although you probably should have done an Ira rollover. But that's besides the point. And all of a sudden you get a letter from your old employer saying we are terminating the 401k plan and you have three options. You can do a direct rollover with it.


Suze: Do you know what that is? KT, a direct rollover?


KT: It can be rolled over from her 401.


KT: (laughing)


Suze: Here she goes again.


Suze: Don't ask me those questions.


Suze: All right. So, since KT doesn't know what a direct rollover is...


Suze: All right. So what's a direct rollover?


KT: What's a direct rollover? You, you just do it, you just do it.


Suze: Never mind. I'll just, I'll just try this on my own. A direct rollover. Where is, where it goes from the company, the old 401k company directly to an IRA rollover that was set up at a brokerage firm or discount brokerage firm somewhere and it goes directly from


Suze: the ex-employer to that direct rollover or a cash distribution wage where they just simply send her the cash or a combination of them both.


Suze: Wait a little more complicated here. Now, I have $15,000 in debt with credit cards and my vehicle, my mother in-law said I could cash out and put it all in a CD. I was thinking, pay off debt and save $400 a month in a savings account and put the rest in a different plan.


Suze: Now, she doesn't tell us how much money is in this ex employers' 401k plan, but obviously it's enough to pay off $15,000 in debt and put more money into a savings account. What should she do? Go with your, what you wanna do, Dara?


KT: That's why she wrote, like go with it, do that. So you want her to cash out the 401? What are the tax implications? I think that you don't even have to do a combination. Can't she just do the direct rollover and then do all that and she does a rollover and you do a combination, but she has to pay taxes, right.


Suze: Well, what do you think she should do, KT? This is your quizzie.


KT: Don't take the cash distribution. If you do a combination.


KT: I don't know how much money is in there. I don't know. She wants to get rid of the debt, right. She can do I would do a combination. So you feel good about getting rid of your debt on the vehicle and the credit cards and maybe this will give her an opportunity to really be smart and, and kind of, and then if you do a combination, just do enough to get rid of the debt.


Suze: All right. What, what should she do? All right, you listen to me, Dara, you are 44 years of age. Any money that you withdraw from this traditional 401k is not only taxable, but there is a 10% penalty on it as well. Direct rollover, direct rollover, direct roll over to like KT you got dinged.


Suze: All right. So let me answer her. Ok, listen to stop bantering with me. Now, I'm not, I'm just trying to go back to my original because you want to be right. All right. Go for,


KT: I knew that taxes have to come into...


Suze: So listen to me, Dara. Let's just say since I don't know how much you have in there that all you had in there was $15,000 because obviously you have at least that since you say it will pay off your debt with credit cards and everything like that.


Suze: And you took that $15,000 and you listen to me versus your mother in law. Don't you dare listen to your mother-in-law about money at all because she obviously doesn't know what she's talking about, but that's besides the point, don't tell your spouse that I said that ok. If you put that $15,000 you listen to me and you do a direct rollover with it. Number one, if you wanted to, you could start to convert it to a Roth IRA little by little


Suze: and without having to pay any taxes or penalties if you just did little amounts. But let's just say you left it in a traditional IRA rollover. Do you know in 26 years when you would be 70


Suze: which is the current age of KT today, not tomorrow but today. Right. Right. Do you know at just an 8% annual average rate of return, which is nothing, you would have 100 and $11,000. So you want to give up essentially 100 and $11,000


Suze: simply to do what? Pay off $15,000 today? Of debt? No. And do you know that most people who clear up their credit card debt now you have all this available limit on your credit cards. You, you rack it right back up again. So therefore you are not to do that. You are not to do that. You are not to do that, girlfriend. Hi Kat.


KT: Take us out.


Suze: You want me to take us, take us out?


KT: Suze, Suze. Wish me a happy birthday.


Suze: KT, I don't even know how to wish you a happy birthday every day is like a birthday with us. Right. Only because I don't have words.


KT: Look, are you getting emotional?


Suze: Because I'm a master of words. I don't have any birthday wish. I don't have words. Grand enough, grand enough to express my love and gratitude for your birth.


Suze: You have made this world


Suze: a fabulous place. Not just for me KT but for every single person that listens to you on this podcast, for every single person that meets you that comes just even glances at you because your smile can light up somebody's heart.


Suze: I don't have words to explain the magnitude of your birthday. All I know is your birthday


Suze: is the greatest gift because your birthday has given you to me that those words are, I'll take them, Suze, I'll take that. That's enough. She's getting all choked up every year. What do I do on your birthday? KT what do I write for you?


KT: She writes me the most beautiful letter and I keep them and I keep them close to my heart. But these letters are just unbelievable one day. I hope I can publish them.


Suze: And I, and may I wish all of you to everybody. So may I wish all of you that you all have a love in your life


Suze: that you feel that way about. And if you don't have a love in your life, which is somebody else. I hope you feel that way about self. May you always be your own greatest gift? So what all of you would be so great. If you could say on KT's birthday, say it birthday girl.


KT: Wherever I go, I will create a more


KT: joyful, peaceful and loving world.


Suze: And the truth is that is exactly what KT does. And if they do that, they will be what? KT unstoppable. Happy birthday, baby doll.


KT: And Lena.


Suze: Happy birthday, Lena. Bye bye.


Music: Music (out).

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