Podcast Episode - Ask KT & Suze Anything: Can I Afford To Buy A Condo?

On this edition of Ask KT and Suze Anything, Suze answers questions about home buying, special needs trusts, preserving retirement, plus a “Can I Afford It?” quizzy and so much more!

Listen to Podcast Episode:

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Podcast Transcript:

Suze: April 18th, 2024. Welcome everybody to the Women and Money podcast.

KT: And everyone smart enough to listen.

Suze: This is the Ask KT and Suze Anything edition. Want to ask a question? Just go to asksuzepodcast@gmail.com. Send in your question. If KT chooses it, it will be on the podcast. But I just have to say something—thousands of questions have come in. Thousands and thousands and thousands. So just be patient. If you want to send in your question again, I don't know. I'm just telling you.

KT: She's overwhelmed today. She's overwhelmed because there’s so much—she loves to answer all of you, whether it’s on the podcast or in email or any way she can. And she is overwhelmed today.

Suze: Because I want to answer...

KT: Calm down. I’ll help you.

Suze: You can’t...

KT: Just don’t give me a Roth question.

Suze: But you know what I was thinking? Wouldn’t it be great if there was an artificial intelligence Suze that could answer every one of those questions? You never know.

KT: All right, before we begin, want to tell everybody about our anniversary?

Suze: We had the best anniversary this week. It was real. We're celebrating. We’re still...

KT: She made me cry.

Suze: I did. Tell them why.

KT: Really? So for our anniversary, I made Suze a delicious dinner, early dinner. And when it was time for dessert—she usually always gets a little caramel—but this time I did something special. I brought a beautiful plate with a gold candle. And on it were three Kilwins dark chocolate-covered toffees. She loves them so much that I had to actually buy them in Florida, hide them, bring them over. And every time she looked at me—for dessert, I wanted to give her one—but I actually hid them. And she started crying when I brought that out.

Suze: I love those so much. I can't tell you. But I really started crying because of KT’s thoughtfulness.

KT: And my card.

Suze: And what did I give you?

KT: She gave me a voice card. Instead of a letter, she said, "You know, all these years I’ve always written you anniversary and birthday letters, holiday cards. She writes me beautiful letters—one day I’ll publish them and make a fortune. But this year she decided to give me a voice card, and it was fabulous. I said, "Please transcribe it so I can read it because what if I lose it?"

Suze: You won’t lose it. But I think it’s important. I know my voice is on the air and KT can always watch old TV shows and everything of me...

KT: No, this was for me.

Suze: Right. But this was for KT in a voice that I probably wouldn’t use on the air. So that’s what we did. We had a great time.

KT: Suze, my first email is not a question. It’s actually a thank you. Ready?

Suze: Always ready.

KT: Dear Suze, I found myself at home alone this evening, which is a pretty rare occurrence. My husband had gone to pick up our son from work, and I thought it would be a good opportunity to enjoy some TV. So I went to Freevee and put on the Suze Orman Show. So for those of you that don’t know, we have all the episodes from the Suze Orman Show on CNBC available on Freevee TV for free. Just go to Freevee and you can watch all kinds of great Suze Orman.

So in the beginning of that first episode—this is from Lisa—she said, Suze, you started talking about material and financial clutter. She said, I had a large pile of documents that I had accumulated, which needed to be shredded. I actually like shredding—as a receptionist for a law firm, it’s something I do daily. I find it soothing. But for some reason, I had let the pile at my home grow for months.

I paused the show and immediately shredded everything in that pile. By the time my husband and son got home and settled, I was finished, and we sat down and continued watching together. As I'm heading to bed now, I feel so much lighter. I did not realize how much that pile was weighing on me. Thank you, Suze. You inspire me to be better in so many ways. Sincerely, Lisa.

Suze: I love that.

KT: Isn’t that great? It really does feel good when you get rid of clutter, doesn’t it?

Suze: What do I do all the time?

KT: Oh, she throws things away. My things—away—every day!

Suze: I just want to say something, KT. For those of you who haven’t gone to Freevee yet, haven’t watched the Suze Orman Shows—it’s funny to see my outfits, glasses, all the things... haircuts. The contract with Amazon is going to be up shortly, and who knows if we’ll renew or what will happen with that. So don’t miss it. Go now and look at the episodes. They’re actually fabulous. Many of them are timeless and always entertaining.

KT: All right, next one is from Gracie. Suze, I think Gracie needs maybe a little Suze slapdown. All right, here we go.

Hi Suze and KT. I hate to admit that I’ve given up—a bit dramatic, I know. I’ve always heard that people my age will never be able to afford a home. You ready for this, everyone? Gracie is 34 years old. She said, Over the past 12 months, I’m starting to believe it.

I earn a decent salary for my area. She makes $87,000 a year. I own my car, have a fully funded emergency fund. I'm self-diagnosed allergic to debt—so I have none.

She says the average home price in my area is around $450,000. It just seems impossible. I feel bad for complaining because I'm in a good spot in my life. I want to eventually get married, have a family. But overall, I want to have something of my own.

Outside of earning more money, I do not see any light at the end of the tunnel. Any advice would be appreciated.

Suze: Gracie, I think you should take your name more seriously.

KT: Ohhh...

Suze: I have a thing about names. I always look at someone’s name when I answer a question. And your name is Gracie. Grace. You have to look at what you have—not at what you wish you could have.

Gracie, 34 years of age—look at everything you do have. First of all, you're lucky enough to have a career, to be making $87,000, to be allergic to debt, to not have any debt. Therefore, there are so many things that you have. Stop feeling sorry for yourself thinking that it is impossible.

Nothing is impossible in life. Maybe just not right now, but one day—absolutely—it’s possible. How is it possible? Keep saving money. Save, save, save, save. Spend less, less, less, less. Eventually, you'll have more money to put down. If you have more money to put down on a home—not just $90,000 if the house is $450,000 (a 20% down payment)—but $200,000 to put down, $300,000 to put down, then you probably will be able to afford the monthly payments.

If you continue to think you can't, you never ever will. Gracie, your thoughts are more powerful than you have any idea. Your words, how you feel—is what creates your future. Stop thinking this, saying this, and feeling it. Change your ways, and I promise you, one day you will write me and say, “Guess what, Suze? Grace was bestowed upon me—and I bought my first house.”

Now, the other thing that’s funny, KT—eventually, Gracie says she wants to get married, she wants to have kids. Maybe together with her spouse, she’ll be able to do that. And what she always has to remember is she wants to own something of her own—she owns her money, she owns her retirement account, she owns all of those things. Those are assets. So it’s not just a house that’s an asset.

KT: Ok, next question from Kelly. Hi Suze, I have a question about life insurance. We have a $500,000 whole life policy and I’m wondering: should I put this in our trust? Will the beneficiaries have to pay tax on this amount? And if we change the beneficiary to the owner of the policy, will that work for tax purposes? So Kelly lives in Florida.

Suze: Kelly, what you have to understand—it depends when you die, obviously. But currently the estate tax limit is approximately $13 million per person. So yes, whoever is the owner of this policy, if they were to die, that $500,000 will be included in their estate. If you, for instance, are the primary beneficiary of that policy, it all goes to you. And because you're the spouse, there are no estate taxes.

If let’s say you and your spouse were killed in a car crash together, again—you each can leave $13 million right now (right around there) to your beneficiaries. So I doubt highly, highly that you have to worry about this. So no, you shouldn’t put it in your trust. Just leave a named beneficiary so it will go directly to them.

However, let’s just say you were in a situation where you had $30 or $40 million to your name, then the $500,000 whole life policy on death would be added to the estate and yes—estate taxes would be in it. To get around that, you would create what’s called a life insurance trust where the trust owns the insurance policy. Upon death, it’s out of your estate. But somehow I don’t think you’re in that situation.

Remember, in 2026, everybody, estate taxes are deemed to go back down again—maybe to $5 million or whatever they may be. The value of an estate and income tax brackets are scheduled to go back up.

KT: All right, next question. This is from Susan. I have about $53,000 in a regular IRA, about $75,000 in my 403(b). I will have about $24,000 for an emergency fund. I'm 69 and I'll be 70 in December. I've worked as a private registered nurse for the last two years full time before that. I owe $50,000 on my home and I'm retiring this April. I will clear $1,760 monthly on Social Security. I need approximately the same amount—$1,760—for bills and basic needs. My house payment is about $700 monthly, which is included in this total.

So her question is this: Should I pay off my house or transfer money into an annuity or a Roth?

Suze: Boy, Susan, here is what I would say to you. If you had listened to me a long, long, long time ago—starting actually in 1998 when I did a PBS special called The 9 Steps to Financial Freedom and I blew the world away (America, actually) by talking about a Roth IRA and how it works and how it is the best thing out there—if you had listened at any time since then and you had been investing in a Roth IRA or Roth 403(b), now you're retiring, you could take out $50,000 from that account—absolutely tax free—and pay off the mortgage on your home, saving you $700 a month. That would make things better for you.

However, we are short money here. Because to pay off the home at $50,000, you're going to wipe out either your 403(b)—and there isn’t even enough money in your regular IRA. Remember, you take out $50,000—it’s totally taxable to you as ordinary income. So you absolutely would not want to do it this year because you still have income from being a private registered nurse. If you're going to do something like that, wait until next year when you hardly have any income at all. Then, if you withdrew that money, it would not be that big of a tax ding.

However, I have to tell you that if you currently are $1,760 a month short, an annuity isn’t going to do it for you. Transferring money into a Roth isn’t going to do it for you either. So, what is going to do it for you? You're not going to like this answer, but I’m going to tell it to you.

You don’t have enough money to retire. You just don’t. That’s the God honest truth. Because for you to have even $1,000 a month of income and you’ve used up your retirement account simply to pay off the mortgage on your home—where are you going to get that money from?

So possibilities are: do you need to sell your home, take whatever equity is out of that home and either seriously downsize or rent or...? I don’t know. But you need to look at this seriously because your financial situation needs a little bit of nursing—and nobody is better to do that than you. If you can take care of people and nurse them back to health, you can take care of your finances and nurse it back to wealth.

KT: Oh! We need to do a talk to nurses and use that line. That’s great.

KT: All right, next question. Simple one from Sharon. Suze, my husband is 70, I am 68. Is there any point in contributing or converting to a Roth at this point in our life?

Suze: Listen to me and listen to me closely. If you're still working and you have earned income, you're at least three years away from your husband having to take RMDs—required minimum distributions—I would be contributing every penny I could to a Roth, assuming your home is paid off and all of that.

If you have IRA money, 401(k), traditional retirement money—and depending on your income tax bracket right now—and you do not need the money, you are not going to need to take required minimum distributions at all—oh, you betcha, I would be converting at this point in time. Just make sure that you contact your CPA and ask, "How much could I convert to a Roth without going into a higher income tax bracket?"

You know, KT, I've said it once, I'll say it a million times: there is no investment vehicle—none—that is better than a Roth IRA, whether it's converting to one, creating one, doing a backdoor Roth, knowing how to do it. So for next Thursday, I want to do an entire Ask KT and Suze Anything on Roth IRAs—especially for older people who think they shouldn't be doing it as they're getting older. Especially for the CPAs and accountants out there who are advising you not to do them. It doesn't make sense. That is the worst advice you will ever have in your life—bar none.

Please, I am begging you: do not make the mistake of not investing in a Roth. I don't care what your tax bracket is. You cannot pass up the Roth IRAs, Roth 401(k)s, 403(b)s, TSPs, SEP IRA Roths—all of them. Do you hear me?

KT: So next Thursday, a week from today, everybody—tune in. Do not miss it. It's going to be a good one, especially for me.

KT: All right, ready. I like this one a lot. I have a question about stock dividends. For a long time, you've stated that it would be wise to buy stocks that pay dividends. I've done this a lot, but I've recently learned that once a dividend is announced on the record date, the cost of the stock goes down by whatever the dividend was. I'm a little bit confused and I'm having trouble understanding why. That's a good deal. It seems to me like it would just be a wash. Any information on this would be appreciated. This is from Christie.

Suze: Christie, it is true. Let's say you're about to buy a stock and it has a $1 dividend for that quarter—that would be a lot, because that’s $4 a year, but that’s beside the point. So for that quarter, you get a $1 dividend, and let’s say the stock is at $20 a share.

If you buy it before it goes ex-dividend, that means if you buy it on the date that it goes ex-dividend, what happens is they reduce the price of the stock. If it’s at $20, they reduce it to $19 a share—because you weren’t on record before that, so therefore you shouldn’t be able to get the dividend. But you're able to get it a dollar cheaper. So in essence, either way, it would be the same.

However, eventually that stock goes back up to $20 a share—very shortly after that, to tell you the truth. And from that point on, you get that dollar every quarter. So it more than makes up for it. Really, you should just keep doing it and doing it. You can do it on the ex-dividend date, which means if you buy it on that date, you don’t get the dividend, but you get to buy the stock at the price minus that dividend payment.

KT: So the ex-dividend is the day they pay the dividend?

Suze: No. If you buy it on the ex-dividend date, you don’t qualify for the dividend. Because otherwise, you would be getting the dividend and a dollar less per share. You have to buy it before the ex-dividend date so that you can be on record. When they pay the dividend, you get the dividend. But you don’t get both. But really, if you think about it, it's identical. From that point on, every time you own the stock, you get the dividend no matter what.

KT: Does it go down every time a dividend is paid?

Suze: Yes, the stock price goes down every time it goes ex-dividend. But you're still getting the dividend. And you're reinvesting that dividend—hopefully—into that stock. It works out. Trust me. There's nothing greater than having dividends, because the majority of your returns, KT, of a stock over a long period of time, can be attributed to dividends.

KT: All right. Next one, Suze. Would you approve to invest at least $50,000 in a multifamily house—with about 128 units in Houston, Texas? It doesn’t sound like multifamily. Sounds like an apartment building. I was told that I will be able to double my investment in five years.

Suze: No. You’re denied. Anybody who tells you that you’re going to double your money in five years in real estate—especially in Texas, where they've had a lot of flooding, all of that stuff... Who knows what the cost of insurance is going to go to, or if they're even going to insure anymore in Houston. You never know. They've stopped insuring in Florida and California. No. If somebody says that and you're taking somebody else's word for it—I won't touch it with a ten-foot pole. If you yourself knew it, if you did the numbers, if you understood it—OK. But not because somebody else told you.

KT: Okay, this is from Erica. Hi Suze and KT. I have a question about special needs trusts. I have a seven-year-old daughter and a special needs ten-year-old son. Do I need a special needs trust and a separate revocable living trust for both of them?

Suze: Yes. No—not for both of them. What you need is a special needs trust only for your special needs child. You need a living revocable trust for your daughter. However, if you were to die while she’s still a minor, then you need to appoint a successor trustee to take care of that money, and within that trust, you will decide how money can be used or transferred from your estate to the special needs trust if your son needs it.

Your son does not need a living revocable trust. He only needs a special needs trust. Otherwise, he will be disqualified from SSI—Supplemental Security Income—and other benefits.

KT: Next is from Steven. Good morning Suze. Thank you for your great podcast. Do you still recommend dollar cost averaging into 20- to 30-year bonds in addition to dividend-paying stocks in my IRAs? I noticed the bond rates are increasing.

Suze: I do—but do a 30-year instead of a 20. Why? Because 20-year bonds are not very liquid, believe it or not, which is why they pay you a little bit higher interest rate. 30-year bonds are about 4.7% right now. I think it's possible they could go to 5%, which is why I've said little by little. So you might want to put a little into a 30-year bond now, and then if it goes up a little bit more—once it hits around 5%—maybe that will be when you go in with the rest of it.

I absolutely still recommend that—without a shadow of a doubt. And as always, for real growth, dividend-paying stocks are a great way to go.

KT: All right Suze, do you know what time it is?

Suze: Time for Can I Afford It Quizzy! And she is ready. You got your little Suze notebook?

KT: I have a big fat Suze notebook, everybody. I’ve been taking notes for 23 years.

Suze: You know what I’ve been doing for 23 years?

KT: Saving my notes. Every single scrap of paper—we have to explain—I make little post-it notes when I leave or if I’m going somewhere and I leave them around for her to find. It’s like a game we have. And she saves them.

KT: All right, for 23 years, I have saved every single note, letter—everything she has ever written for me.

Suze: Anyway, this is the Can I Afford It for everybody, not just KT. This is where I want you to take notes on: Can this person afford what they want to buy? Because if you can figure it out for other people, guess what? You can figure it out for yourself. So get ready to write this down.

We have a woman by the name of Laurie. She is 66 years of age and she is in good health. She currently owns a home outright that her deceased husband left for her. It’s a home on 30 acres. She actually only lives on two of the acres and leases out the other 28 to a neighbor. She has lived there for 30 years.

She is afraid that as she gets older, she will not be able to continue to live in the house. So what does she want to do? She wants to buy a condo for $300,000. Now, her house is currently worth—along with the land—$550,000 to $650,000. That’s good, because if she sold it, she could buy the condo. However, she doesn’t want to wait to sell it. She wants to buy the condo right here and now because she’s afraid that if she doesn’t buy it right now, it’s going to be sold and it won’t be there for her.

So can she afford it or not?

KT: Show me the money, Suze.

Suze: All right. Her income is comprised of VA benefits of about $1,612 a month, as well as Social Security survivor benefits of $1,628 a month, and two part-time jobs where she makes $2,000 a month—for a total of $5,240 a month. Let’s talk about her expenses: Laurie says that her current monthly expenses are only utilities and insurance, which are $623 a month. Laurie also has a little credit card debt—$3,500 for hearing aids that she bought at 0%. So she pays an additional $475 on that debt as well. So Laurie is telling me that her total monthly expenses are only $1,098 at this time.

Let’s get real. You have gasoline, food, entertainment, maintenance, and more. So let’s say her total monthly expenses are more like $3,000 a month.

Laurie’s assets are: $240,000 in a 401(k), $75,000 between an IRA and a Roth, $10,000 in stocks, and $45,000 in checking and savings. That comes to approximately $370,000 in investments and cash. However, her bank is only willing to give her a $170,000 loan on the condo. They also want an additional $18,700 in closing costs or other fees. That means she needs to come up with $130,000 out of pocket to buy this condo.

Suze: Her intention is to pay off the loan in full as soon as the house is sold. The HOA fees right now on the condo are $125 a month. But remember—and she doesn't include it—she will also have condo insurance and other associated costs. So if we added that to her monthly expenses, now we’re getting close.

The $170,000 loan at about 7.75% interest—because that is the going interest rate right now on 30-year mortgages—comes to approximately $1,454 a month. So if we add that $1,454 to the $3,000 that are currently her monthly expenses, plus the $125 for the condo association fees, that brings us to almost $4,600 a month in expenses. And right now, she’s only bringing in about $5,000.

KT: Okay, so the big question: can she afford it?

Suze: My question to you, Laurie, is—and to you too, KT—where is she going to get the $130,000 from?

KT: She can’t afford it, Suze. She has to sell the house first. In other words, Laurie, you can’t do it this way. If you cash all your stuff in and pay taxes, you're going to wipe yourself out. Your life—it's at high risk because you haven’t yet sold the house. What about the what-ifs? What about storms? What if a twister comes and takes the roof?

Suze: Right. So do you approve her or deny her?

KT: I have to deny her. You have to sell the house first. Then you can do all of this. You don’t want to cash out your retirement funds for this.

Suze: Laurie, you’re asking. I am a first-time homebuyer and I’m nervous. You should be nervous. I do not want you to do this. To just come up with the $130,000, really, Laurie, you would have to wipe out your retirement savings. Your 401(k) is pre-tax. You'd have to clean that out, and after taxes, maybe it would give you $130,000. But that won't leave you with enough money if something happens.

Let’s talk about condos. When you buy a condo, remember, condos do not appreciate as much as homes. Why? You have to know: are the units filled with renters or owners? Because if they’re filled with renters, that brings the value down. Number one. Number two, you’re buying this condo because you want to be secure as you get older.

I’d rather see you do the following. Stay in your home right now for as long as you possibly can. You have enough money that if you need someone to help with mowing the lawn or doing certain things—just hire someone. That will be far cheaper.

Eventually, if you truly need to move, then you sell your home and move somewhere where you can be taken care of—perhaps an independent living facility that also offers assisted living.

KT: And they’re so nice these days.

Suze: So nice. Because I don’t want to see you buy a condo right now at sky-high interest rates, then maybe not like it because of noisy neighbors or issues. It's not like a single-family home. If you end up moving again, now you’ll have to sell it again to go somewhere that can support you in aging. Don’t take the intermediate step of buying a condo. Stay in your home. Enjoy your life there. Fix it up a little if needed. You can afford that. But do not buy the condo—you are denied.

One more thing, Laurie: I know you think this condo won’t be there later. But I’ve got news for you—there will always be another condo. So the rule for all of you: sell before you buy. Do not buy and then hope to sell. Because you never know when you won’t be able to. And then you’re stuck with two places.

Suze: All right, everybody, Suze School is coming up on Sunday. Do you know what I’m going to do?

KT: What are you going to do?

Suze: I don’t know either—but I’ll figure it out. But there’s only one thing that we want you to remember when it comes to your money. And what is that, my love?

KT: People first, then money, then things.

Suze: And if you do that, what’s going to happen?

KT: You will be unstoppable.