January 21, 2024
In this episode of Suze School, Suze reviews why you need a Roth retirement account, why you don’t need whole life insurance and she shares a personal story about the importance of dental savings plans.
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January 21st 2024. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen, Suze O here and today is Suze school. I guess you all knew that, right? So you best get out your Suze notebooks today.
It's not that today is going to be that complicated, but you never know when I'm going to say something and you hear it and you think you're going to remember it and you just forget it for some reason, kind of like KT, but do not tell her. I said that, ok,
Today is also the game between the Kansas City Chiefs and the Buffalo Bills. In case you're wondering, I am for the Kansas City Chiefs. I had the great pleasure of a week ago being able to be on the interview with them, right as the game was starting with Dan Israel who broadcast from the stadium and there we go. And I got to tell everybody what I thought and what I thought was going to happen and thank God I was right. So let's hope they win tonight. I'm not as sure tonight as I was last week I want today to be a day where I clarify things and I tell you about things. I really, really, really want you to know about.
It seems that last week when I did a Suze School on investment accounts versus retirement accounts, a few of you got confused. So I would like to just clear things up today.
Obviously, as you all know, I love Roth retirement accounts of any kind. Bar none.
So what should be the order of how you invest in a retirement account?
Are your Suze notebooks out? You should all write this down. I don't care how much credit card debt you have, how little amount of money you have in an emergency savings account. I don't care about your situation that way when it comes to investing in an employer matched retirement account at work, it will be either a 403b if it's nonprofit 401k, if it's for profit or a TSP for a federal or military worker, there are two different types of retirement accounts that employers should be offering. One is a traditional retirement account that is funded with pre-tax money. The other is a Roth retirement account that is funded with after tax money.
A lot of you wrote in saying " Suze. I understand very well that you want us to fund the Roth retirement account at work. However, my employer matches the traditional 401k and puts money into there." And by the way, when I say 401k, I'm now referring to all the retirement accounts at work. Ok. Just so, you know, therefore you are afraid or you don't want to fund a Roth retirement account at work because you don't think your employer will match.
That is not true. So let's clear this up once and for all, if you are funding and putting money into your Roth 401k plan at work and they match your contribution to whatever point they do, they will put that in a traditional 401k for you. It's not like they will not give it to you at all. Also starting this year, an employer does have the ability to put that match into your 401k Roth at work. And if they're not doing that, you should talk to your HR people and get them to do that for you, your employer should change how they're doing it and they really should put their match in the Roth 401k 403b or TSP. If for whatever reason they choose because it's voluntary on their part, they choose, they don't wanna do that, ok?
But you still have to sign up for the point of the match.
Now, listen to me closely under all circumstances. You should be choosing the Roth retirement account at work for yourself. If your employer matches up to the point of the match.
Besides having a 401k at work, you can also have an IRA for yourself as well.
And that could be a traditional IRA or a Roth IRA.
If you qualify for a Roth IRA, you should absolutely. After the point of the match at work, if you don't have a whole lot of money, you should then do what you should be funding a Roth IRA up to the max. It is $7000, if you are under 50. $8,000 if you are 50 older, because a Roth IRA is so fabulous.
You can only fully fund a Roth IRA if your modified adjusted gross income is under $146,000 a year. If you are single, $230,000 a year, this is for 2024 $230,000 a year. if you are married finally jointly and only $10,000 a year, If you are married finally single. Now it is true. The full amounts that you can put in the seven or $8000 depending on age will go down the more you make. So you can only put in the full amounts if you make under what I just said, once you make over $161,000 are you writing this down? $161,000 of modified adjusted gross income as a single or $240,000 of modified adjusted gross income as married. Finally and jointly, you no longer qualify for a Roth IRA.
If you happen to be in that situation and you do not qualify for a Roth IRA. Listen closely, but your company offers a Roth 401k 403b or TSP. You are to fully fund the Roth at work up to the max as much as you can possibly put in it.
That's $22,500, if you are under 50 $30,000 if you are 50 or older, you actually can put more in it than that. But just let's leave it at that for now.
If you can afford to fund both a Roth 401k at work and a Roth IRA for yourselves, you absolutely should do it. Bar none. Again, there is no better way to save money for the future than a Roth retirement account.
Now, many of you are confused because you keep saying to me, "but Suze, I make so much money. I really enjoy the tax, write off and on and on and on." I get that everybody.
I am forever going to stand by. I believe that in the future, given the debt that we carry in the United States of America, that we are coming to a really serious point with it.
And therefore you want to know what you see is what you get and what you see in your Roth retirement accounts when you go to take it out, that is what you are going to get because you get to withdraw it tax free. You die, your beneficiaries get to withdraw it tax free. So if you really care about preserving that boy, that's what I would be doing if I were you for those of you. Let me clarify the next thing you have been contributing to a traditional 401k at work.
And now you're wondering, should you be transferring the traditional 401k to a Roth 401k in one lump sum? And the answer to that is no, because when you convert from a traditional 401k or even IRA to a Roth retirement account, you will pay ordinary income taxes on any amount that you convert. So if you have a lot in there and you convert all at once, it's gonna put you in a higher income tax bracket. So therefore leave the money in your traditional 401k like it's there right now. But your new contributions, tell your HR person, they should start going into your Roth 401k 403b or TSP. I hope I have made that clear to you
If you are still young and you are working. So maybe you're in your forties, maybe early fifties that's still young. And you have money in a traditional 401k or even a traditional IRA consult with your tax advisor to see how much of that money you could convert to a Roth without increasing your tax bracket because you could do it little by little over the years when you are converting, you do not write this down, have to convert everything you have all at once. Now, obviously, if all you have is maybe 1000 or 2000 or even $5000 maybe you convert it all at once.
But it's just something for you to consult with a tax person about.
Next - whole life insurance.
A lot of you are new listeners to the Women and Money podcast and I welcome all of you with all my heart and you are now just learning about why I don't like whole life insurance.
And now you're confused because many of you have whole life insurance policies that either your mother took out for you when you were younger or you thought you should do it because an insurance agent happened to talk you into it and you don't have anybody that's dependent upon you and you really don't know what to do with it or you do have people who are dependent upon you, but you're paying way too much for it.
So let's just clear up what you do with an insurance policy that you do not want anymore. First of all, insurance, as you have heard me say, many times was never meant to be there for your entire life.
It was meant to be there during your younger years. So before you had time to save up any money. You could protect those that were financially dependent upon you, your spouse, your kids, maybe even possibly your elderly parents.
But it was only supposed to be there for a specific period of time.
So many insurance companies offer what's called whole life, which is there for your whole life. But if the insurance company is going to pay you a death benefit and they know you're expected to live X amount of years because they all have actuarial people that figure it out. Exactly.
You will pay them monthly, whatever it is that they have figured out. So that by the time you do die, they will have made 2 to 3 times on you versus the death benefit. So if your death benefit is $100,000 over all the years that you're projected to live, they will probably have earned $300,000. So that when they pay you out, they have still made money on you whole life insurance, variable life insurance, universal life insurance are all insurances that just let me go on record. I do not like in the majority of cases, the premiums that insurance people get are astronomical.
They usually will get 80 to 90% even if it's 70% of what your first year premiums are. So there is much in terms of financial incentives for you to be sold this policy. Now there are some times where it will make sense. But the majority of the times it does not.
My favorite life insurance policy is term insurance. It is good for a specific period of time. It can be for one year, five years, 10 years, 20 years or 30 years. And during those times, your premiums remain the same if you lock it in for like 30 years or 20 years or whatever, it may be.
Normally one only carries insurance until their younger kids are about 23 to 25 years of age when they can then go out and be financially independent on their own. Or at least until maybe you're 65 years of age. But it is usually 10 times cheaper than what a whole life insurance policy will cost you. So you get a term policy maybe $25 a month, maybe $100 a month versus maybe three or $400 a month for a whole life. And then what you would do is rather than buying a whole life, take the difference because if you can afford the whole life premiums and the term premiums are 100 and the whole life premiums were 400 then invest the $300. Where in a Roth retirement account pay down your credit card debt, put it in an emergency savings account dollar cost average into the stock market. But get your money to grow for you versus the insurance company. Now, what happens if you already have a whole life universal or variable life insurance policy.
If you still need insurance because you have somebody financially dependent upon you before you cancel any insurance policy, go and get a term policy and get it in place and issued. I personally like select quote.com. They'll give you the quotes for the five cheapest insurance premiums that will cover you just something you should check out. But once you get your term insurance policy in place, that is when you cancel your other whole life universal or variable life policies. Not before that your insurance agent might say to you if you cancel, it's going to be taxable to you. I doubt highly that your cash value of your insurance policy is worth more, then the premiums that you paid in.
So therefore, that's not gonna be a problem for the majority of you. What do you do with the cash value that you may get from your whole life insurance policy? Well, depending on how long it's been in force, that could be money that goes into a Roth IRA that could be money that pays down your credit card debt. That again can be money that goes into an emergency savings account. Maybe that allows you to buy an Alliant credit union CD at my alliant.com where you can get depending on the maturity 5.3 to 5.4%. Are you kidding me at times like this? So I hope you are clear now about thoughts on retirement accounts as well as insurance policies. Now, one other thing that I do need to talk to you about many of you who are members of the women and money community app, which is free. You download it on Apple Apps or Google Play. You will know that a few days ago I was on the island.
I woke up at 430 in the morning with this horrific toothache. We flew off the island on last Wednesday, went immediately to my dentist to where he took x- rays and said, oh my God, Suze, you have a serious infection in there and you need a root canal. The very next morning we go and we get a root canal at one of the most fabulous Dennis. I forget what they're called, ordonis or whatever they are in. Boca. Fabulous. He does it. And we go to pay the bill. Now, I have been talking to you forever about dental savings plans and dental savings plans are not dental insurance. They don't work like dental insurance, but they are issued by most of the companies that also offer dental insurance. So they are offered by reputable companies for years. Now, KT and I both have carried a dental savings plan from Cigna.
It sells for approximately $180 a year. For both of us. We chose Cigna because at the time, that's what our dentist was taking. That's what the dentist who did my root canal also takes so Cigna because we had it, when we would get a dental procedure, we would save approximately 50% on every procedure we had, whether it was x-rays, my root canal, teeth, cleaning, you name it a cap, a crown, all of it. So the savings are about anywhere from 10 to 50%. They also do braces, they do dentures, they cover everything.
KT and I as you know, are very wealthy women, but it matters. You are never too rich to save money. Do you hear me? So if you go on to the women and money community app, you will see a picture of me in the chair about to get a root canal and you will see the actual credit card slip of what it cost me in Boca Raton, Florida at a really exclusive place.
What it cost me to get a root canal and you will see that I paid $1166. And the reason that I paid that was because I had a dental savings plan when we asked, what would it have cost us if I didn't have a dental savings plan?
And you'll see that it was written right on there. It's $2025. So the dental savings plan for this one trip alone saved $859 which is approximately 4.7 times what the plan costs.
Now, KT also, last year chipped a tooth, she had to go get work. We have saved thousands of dollars this year on our dental work because we have a dental savings plan.
And so I'm going to reiterate that you may have dental insurance, but you better look closely into it because again, it's usually $150 a month. Maybe they pay max $1500 a year for your coverage. But you need to make sure that your dental insurance makes sense for you with a dental savings plan.
Obviously, when you get the work done, you have to pay for it out of your own pocket. The savings comes from the fact that you're not paying more than you would have had to if you didn't have a dental savings plan. Now, dental savings plans, one of the best things about them and you need to remember this if I woke up with this toothache and I needed a root canal and let's say I didn't have a dental savings plan in place.
There is no waiting period with a dental savings plan. So I could have gotten one that day and I could have seen the dentist the next day and I still could have saved $859. Now, not all dentists carry dental savings plans, many of them refused to take it because why should they do a service when they could get paid $2000? But if you have this little plan they're only gonna get $1000 recently. My own dentist, who we love so much. And I've been with now for over 20 years, he stopped taking dental savings plans because he decided, well, I might as well just not take em any more and make more money.
You are never too rich to save money because he is no longer taking dental savings plans. Katie and I are switching dentists and we'll find another dentist who does take a dental savings plan.
So a lot of you, if you just went to dental plans.com, dental plans, that's plural D-E-N-T-A-L-P-L-A-N-S .com.
If you just go there, you can find out if your dentist happens to take it or not, you can also look for other dentists in your area that do take it and just see if it's a good dentist if it's not and if it's worth it.
Now, I posted all of this on the Women and Money Community app and I suggest that all of you before you ever have any procedure done that when you go in or you call up and you say I need this done. I have a dental savings plan. How much is it going to cost?
They need to tell you and if that amount makes sense, then you go ahead and do it because a lot of dentists say they take it and then they make up their own numbers and whatever ask before you do something you need to be aggressive with it. KT and I easily could have stayed with our dentist and paid what he was going to charge. But it's just, I can't do it. I don't have what it takes inside to pay more when I know we can pay less.
And so I ask you just to look into it. I am not being paid to say this to you people. You will go on to Dental plans.com. You will see my picture there. But that's because I believe in this so much. I can't even tell you because as we all get older, our teeth start to need more and more work. When you are on Medicare, it doesn't necessarily provide for dental treatment and it can be expensive, insurance can be expensive. So a dental savings plan absolutely will save you money. Now, when I posted this on the Women and Money Community app, obviously, a lot of people started to buy a dental savings plan with dental plans.com and they realized, oh my God, this is coming from Suze. So they wrote me and they said, Suze, we see now that you've posted on your app. Why don't you tell your people that if they want to buy a dental savings plan? Because they're coming from you.
If you go to dental plans.com and you decide to buy one and you just type in Suze, Suze 30 it will save you 30% on what the annual cost will be again for KT and myself annually, not per month, but annually, the plan that we have cost $180 a year.
It's a family plan. If we had children, it would have covered them as well. So, really, it's $90 for me, $90 for KT. Are you kidding me? I actually brought them back and I said, does that mean I get the 30% off too next year anyway, we'll see what happens. But I'm telling you about this because this just happened to me and
I know it's gonna happen to all of you one day. It just happens, especially as you get older and root canals are expensive, broken teeth and replace scene. Bridges are expensive. So let's make this a year that we know how to save efficiently in our retirement accounts.
We know how to save efficiently in life insurance policies and we know how to save seriously efficiently on dental procedures. All right, everybody until next Thursday, when Miss Travis will join us again on Ask KT and Suze Anything. There's really only one thing that I want you to remember when it comes to your money and it is this people first that means you, you do what's best for you for you, not what others tell you to do, but what's best for you. And you know it's true for you, then money then things and if you do that, you will be unstoppable.