KT: Hello, Suze, and good morning everyone and welcome to the
KT: Women in Money podcast and everyone's smart enough to listen.
KT: This is KT in the house.
KT: And today is a very special day.
Suze: KT. Wait, everybody gotta listen to me. So we're about
Suze: to start the podcast, and I said, You wanna start?
Suze: You wanna do it? And she goes, Yeah, I can
Suze: do it.
KT: What's wrong with that?
Suze: What day is today?
KT: I didn't get there yet.
Suze: That's how you start.
KT: No, I'm doing it KT way. Today's Thursday, January 22nd, and
KT: why did I wait to give you that date? Because
KT: it's Don Race's birthday.
KT: And Don is our brother-in-law, the daddy of Sophia and
KT: Travis that you've heard about for years, and he's on
KT: his way to Oregon to carve wood. Unbelievable.
Suze: You, you, you're cracking me up here already, Travis.
Suze: You know that you forgot to start with January 22, 2026.
KT: Here we go.
Suze: No, no,
KT: Today is January 22nd, 2026, the birthday of Don.
Suze: No, stop, stop, stop. Anyway, Don, we wish you a very,
Suze: very happy birthday. We love you so much. How old
Suze: is he?
Suze: We don't know.
KT: I don't know. It doesn't matter.
Suze: That's how much we love him, everybody. We don't even
Suze: know how old he is.
KT: He never looks old. He's a handsome man.
Suze: Handsome man. Now this is the Ask KT and Suze
Suze: Anything edition. You want to ask a question, just write
Suze: in to ask Suze S U Z E podcast at gmail.com.
Suze: If KT chooses it, oh, we will answer it on
Suze: the podcast. I just have to say something, KT.
Suze: So as you know, everybody, I read many of the emails.
Suze: Sometimes I answer you directly, as you all know. So
Suze: I'm reading this one email, and it says, so I
Suze: asked you a question a few weeks ago. I didn't
Suze: get an answer, right? How do I know what the
Suze: answer to my question is and how do I know
Suze: when it's gonna be on the podcast? Will you let
Suze: me know?
Suze: And I was like, I just wrote back one simple line.
Suze: You have to listen to the podcast. Just that simple.
Suze: All right, KT, go on.
KT: Also, she gets thousands, thousands. Also, you're lucky if she
KT: answers you. It's not something that she ever has to do.
KT: She loves doing that.
Suze: However, I do want to say something to a few
Suze: of you. You wrote, I answered. You wrote again, and
Suze: I answered.
Suze: You wrote again and then I got tied up and
Suze: I get distracted sometimes and whatever if I've been communicating
Suze: with you and all of a sudden you don't hear
Suze: from me, don't just give up write again just reply
Suze: to
Suze: the emails that have been coming back and forth, so
Suze: it will be brought to my attention again. I go,
Suze: oh yeah, yeah, yeah, yeah, so don't give up. All right,
Suze: go on.
KT: I'm starting with a question from Ben and I really
KT: like this and I like you, Ben, for this question.
KT: Hi KT and Suze, I consider myself very fortunate. I'm
KT: debt free. I own my own home. I am consistently
KT: dollar cost averaging into my stock portfolio. I contribute to
KT: my retirement and I have accessible funds.
KT: I feel like I could share some of this with
KT: someone or a cause less fortunate than me, but I'm
KT: unsure how to determine the right amount. Suze, is there
KT: a framework or guideline for deciding what is considered an
KT: appropriate or responsible gift or donation?
KT: Great question.
Suze: How would you answer that?
KT: Do what we do, Ben.
Suze: What do we do?
KT: We, we have charities that we really believe in and
KT: that we like. One of them is St. Jude's
Suze: No, but that wasn't his question.
KT: No. Well, hold on...
Suze: How do you decide on a responsible amount?
KT: 10% is probably a good rule of thumb, like, like
KT: all the tithings that are out there.
Suze: That's how you would answer this question?
KT: Maybe, yea.
Suze: (Suze makes the wrong answer noise)
KT: OK, well...
Suze: Give me this. Give me this. Just give me this
Suze: before we even start. I just got to, before we
Suze: even got into this podcast, I got to do my
Suze: favorite thing. (Suze makes the wrong answer noise again)
Suze: You hate that, don't you?
KT: I do. We need a different noise.
Suze: What should it be?
KT: I don't know, but we don't need a negative noise
KT: at this hour in the morning. Answer Ben's question.
Suze: So Ben, listen to me.
Suze: I'll never forget one of the Oprah shows I was doing,
Suze: and there was a woman, and this is really for everybody,
Suze: there was a woman who was in debt. Her car
Suze: was just repossessed. She had credit card debt, but yet
Suze: she was still giving 10% of her money away. I'll
Suze: never forget this, and I looked at her and I said.
Suze: Why would you want to make yourself a burden on God?
Suze: Why would you want to do that? Because isn't it
Suze: true that you're constantly praying to God and saying, God,
Suze: I just wish I had some more money. And she said, Yes,
Suze: I pray for that all the time. And I said,
Suze: You know what, maybe God is saying to you:
Suze: Listen, I'm OK right now. Maybe you could just give
Suze: me 1% or $10 or whatever, but you have got
Suze: to be responsible for yourself and take care of yourself first.
Suze: And then I went on and I said on that
Suze: Oprah show, sometimes it's harder for some people to give
Suze: $1 because they don't have any than it is for
Suze: some people to give $5,000 because they have so much
Suze: or whatever it may be.
Suze: So, Ben, you have to decide on an amount that
Suze: feels responsible to what you have and really what you feel.
Suze: I would tell you in terms of where you should
Suze: give it, your heart will tell you.
Suze: What happens with me is all of a sudden, sometimes
Suze: even I'll be in the car or I'll see somebody
Suze: and I'll just be compelled to give them some money.
Suze: Other times it will be an organization, sometimes it will
Suze: be a person
Suze: who just needs help. I don't get a tax write
Suze: off for it. It doesn't matter. I just want to
Suze: help them because helping them makes my heart feel better.
Suze: It's not about helping them gets me a tax write off.
Suze: My advice to you would be there's no percentage amount
Suze: that should be dictated.
Suze: You know when you should give and when you don't
Suze: want to give. You know who to give to if
Suze: you simply follow your heart. It will lead you to
Suze: the right place to donate money to. Just that simple.
Suze: Next question, KT.
KT: OK. Next question is from...
Suze: I have a question for you.
KT: Yeah.
Suze: How come when I give an answer, if you disagree
Suze: with it, you don't go: (and Suze makes the wrong answer noise again).
KT: I am not gonna go there.
Suze: Why is that?
KT: This is called the Women and Money podcast. You're Suze Orman,
KT: the money guru of the world, and I'm KT, and
KT: I'm gonna disagree with your financial advice? No, no, no,
KT: I might disagree with your emotional advice, or, but no,
KT: I'm never gonna disagree with your financial advice. It's made
KT: me millions of dollars.
Suze: All right, here you go, KT, if you did disagree,
Suze: you would...
KT: I wouldn't do that noise.
Suze: No, but if you did disagree.
Suze: You would have, you feel like you're powerful enough that
Suze: you would do so, right?
Suze: Yea. Oh, I would, well, we disagree all the time
Suze: off air, so why wouldn't I disagree on air?
Suze: I have absolutely no idea.
KT: Everybody, I, if I disagree with her, she knows. But
KT: I'm not gonna disagree about money...
Suze: Guess what, everybody, there is a saying in our household.
Suze: What is it, KT?
KT: KT is always right.
Suze: Yeah, it just, oh, it irks me. Anyway, go on.
KT: All right, this is from Elle.
KT: Hi Suze and KT, I plan on retiring in two
KT: years at 67 from the federal government. I have a
KT: car that will be paid off within two years and
KT: a mortgage balance of $120,000.
KT: I have a modest TSP under 500,000 and is allocated 50%
KT: G and 50% C. I don't know what that means, Suze,
KT: so you'll have to tell us. Should I maintain
KT: or change that allocation, I may withdraw $20,000 when I retire.
KT: Thank you for all.
Suze: Elle, first of all, you did not say if your
Suze: TSP was a Roth TSP, which makes me believe it's
Suze: a traditional TSP, which means it's pre-tax.
Suze: So for the next two years, do you hear me,
Suze: for the next two years till you are 67, every
Suze: single penny that you put in to the TSP needs
Suze: to be what? It needs to be a Roth TSP.
Suze: That's number one. Number two, you say that you may
Suze: withdraw 20,000 at retirement. Why?
Suze: If you withdraw that the way you currently have it now,
Suze: and even if you open up a Roth TSP it's
Suze: got to be open for at least five years to
Suze: take it out tax-free unless you have a Roth IRA,
Suze: which I don't think you do because you didn't say
Suze: you did, then you could have converted it to a
Suze: Roth IRA at 67, and if you had had that
Suze: open for five years, then you could have taken out
Suze: the $20,000 possibly tax-free, but that's besides the point.
Suze: But you want to withdraw $20,000 at retirement.
Suze: And the question is: Why? Why would you do that?
Suze: It's going to affect so many things. So, I want
Suze: you to number one, immediately get into a Roth TSP. Also,
Suze: if you're not in a very high income tax bracket
Suze: or you can afford it.
Suze: You might want to because you're now allowed to, as
Suze: of January 28 actually, you're allowed to do in plan conversions,
Suze: so you could take some of the money that's in
Suze: your traditional TSP and now transfer it to a Roth
Suze: TSP that wasn't allowed before January 28 of this year
Suze: for the TSPs.
Suze: In terms of your allocation, KT said, so what's a
Suze: G and what's a C? KT, within the TSP, the
Suze: Thrift Savings Plan, there are many different mutual funds or sections.
Suze: The G is like the government one. It's like a
Suze: money market fund. They pay you an interest rate. It
Suze: doesn't fluctuate. It is good. It is solid. It's there.
Suze: The C is like the Standard and Poor's 500 index,
Suze: like a common stock fund.
Suze: So right now, she is divided 50/50.
Suze: The rule of thumb is when you retire you wanna
Suze: make sure that you have at least three years of
Suze: living expenses in your retirement account within a money market
Suze: account or the G fund in your situation. That's because
Suze: if the market starts to go down, you do not
Suze: want to have to take money from a C fund
Suze: or a stock fund
Suze: when the market is down. So. Elle, you're gonna have
Suze: to decide that you may want more if you really
Suze: need money in the G fund than the C fund,
Suze: just so you know.
KT: Right now it's a 50/50...
Suze: 50/50 split.
KT: What would you recommend, 75/25?
Suze: No, I wouldn't. I would either. Well, really what she
Suze: needs to do is figure out what would three years
Suze: of her living expenses really be. That's beyond what her
Suze: pension is gonna be or her Social Security. What is
Suze: that gap between her guaranteed income
Suze: and what she needs for three to five years actually
Suze: of living expenses and whatever that gap is that should
Suze: be in the G fund or if she does an
Suze: IRA rollover, a Roth IRA rollover, then that would stay
Suze: in a money market fund for her wherever it is.
Suze: All right, next, KT.
KT: This is from Cathy. What are some instances when a
KT: spouse would lose a deceased spouse's pension?
Suze: Cathy, the main reason that you would lose your spouse's
Suze: pension when they died is because, number one, they chose
Suze: a pension that was a life only pension, which means
Suze: it's good for his or her life, period. And after
Suze: that there's no more money and normally one chooses that
Suze: because they feel like
Suze: I want more money now. We need more money. You
Suze: won't need as much when I die. So the largest
Suze: pension choice is life only. Then it starts to decrease
Suze: when you want to leave a joint and survivor benefit.
Suze: The biggest decrease is when you get a 100% joint
Suze: and survivor benefit, which means spouse dies, you get 100%
Suze: of what they were getting.
Suze: Many people opt for a 50% joint and survivor benefit.
Suze: I always say that is a serious mistake. If you
Suze: have the option. I don't care how much money you
Suze: have or how much money you need. Always do a 100%
Suze: joint and survivor option unless you know that the spouse
Suze: that you'll be leaving it to
Suze: is seriously ill isn't going to survive you by any means,
Suze: and you know that without a shadow of a doubt,
Suze: and or they have what's called a pop up option,
Suze: but that's a whole other popcast. Next, there are many
Suze: pensions where you know your spouse is going to get
Suze: a pension, but they haven't signed up for the pension yet,
Suze: and they die before they sign up for it.
Suze: There are corporations and places that one can work, that
Suze: if you don't sign up for it and you die
Suze: before that.
Suze: Out of luck.
KT: Really?
Suze: Uh-huh. You gotta know these things.
KT: Oh my, wait a minute, Suze, stop right there. If
KT: you're working for a company and let's say you're, you've
KT: been there 15 years.
KT: And you never signed up or your HR people haven't really nudged you.
Suze: Usually they ask you to sign up at 55 or
Suze: 60 right in there somewhere just depends.
KT: But if you haven't done that...
Suze: If you haven't done that...
KT: Your, your spouse... if you die all of a sudden
KT: you have a heart attack and you die on the job,
KT: let's say your spouse doesn't get a pension, if you didn't sign up?
Suze: That's right. If you didn't sign up, that's why you've
Suze: got to...
KT: Can you dispute it?
Suze: No, not if those are the rules. That's why you
Suze: have to know how does it work? And if you
Suze: can't sign up for a pension yet, that's when you
Suze: have term life insurance to cover yourself in case that
Suze: were to happen. Also, believe it or not.
Suze: There are times when if it's less than a 50%
Suze: joint and survivor option, the spouse has to sign off,
Suze: and a lot of times the spouse doesn't listen and
Suze: they just say, whatever.
Suze: And you should always check what happens in case of
Suze: a divorce, because sometimes that can change. So there's so
Suze: many things that can happen, but the main reason is
Suze: normally they've chosen a life only option which if they
Suze: are married is the absolute biggest mistake
Suze: that they can ever make in their lives unless their
Suze: spouse is seriously ill. All right, KT, next.
KT: So Suze, wait, I have a question. If the spouse
KT: that's working signed off, he or she wants 100%, they
KT: don't leave anything after death to their spouse...
Suze: And the spouse signed off on it, yes...
KT: Can they change their mind like a year later?
Suze: They can't even change their mind a week later once
Suze: they start the pension.
KT: OK. Next question is from Peg.
KT: I am 83. I have been a poor money manager
KT: all my life. I've been able to make some positive change.
Suze: Don't you think that's funny? Poor and money in the
Suze: same breath?
KT: I've been a poor money manager.
Suze: But still, right? Poor money anyway. Go on.
KT: So wait a minute, but here's what I love about the question.
KT: This is where I, I wonder if it's ever too late, Suze.
KT: I'm 83.
KT: I've been a poor money manager all my life. I've
KT: been able to make some positive changes in the past
KT: few years. Ready? I need help getting the basics in
KT: budgeting and learning not to spend. Can you help me?
Suze: Girlfriend, you listen to me...
KT: Wait. 83, is it ever too late?
Suze: Listen to me, Peg, right? If you are now able
Suze: to make good financial decisions, you don't really need help
Suze: getting the basics in budgeting and learning not to spend.
Suze: Right, but she says, Can I help? Here are three rules.
Suze: You follow these three rules, and I promise you, you
Suze: will know exactly how to budget. All right. I don't
Suze: like the word budget. Budgets, KT, are like diets.
KT: Wait, go tell her...
Suze: But wait, do you know...
KT: ...here's the three rules.
Suze: Oh, all right. Anyway, I wanted to tell you why
Suze: I don't like budgets, but that's besides the point.
KT: No. The three rules. Go for it.
Suze: Oh, she's keeping me on point today. All right.
Suze: Is this: you are to live below your means but
Suze: within your needs. What is a need? A need is
Suze: food that you get at a grocery store. It's gasoline
Suze: that you put in your car because either you, you
Suze: really have to go somewhere. You don't go out joyriding,
Suze: although at 83 she probably doesn't do that.
KT: What is the second rule?
Suze: The second rule is how do you do that?
Suze: From this day forward, when you go to spend any
Suze: money at all, Peg, ask yourself the question: Is this
Suze: a need or is this a want? If it is
Suze: a need, buy it. If it's a want, walk away.
Suze: And last but not least, just get as much pleasure
Suze: out of saving as you do spending. It's just that simple.
KT: Now wait, this isn't just for Peg. This, these three
KT: rules apply to everyone, no matter what age you are.
Suze: But don't you wanna ask me why I don't like budgets?
KT: No.
Suze: Why not?
KT: Because you, you think they're like a diet, they don't work.
KT: People start it. It's a, it's a silly thing. A
KT: budget isn't something people follow.
Suze: All right, go on.
KT: The three rules though they will follow.
Suze: Ding ding ding ding ding.
KT: All right, this is from, this is from Carla. She said,
KT: I was blessed to be gifted your books in my
KT: early 20s.
KT: And took your advice to invest in index funds with
KT: a low expense ratio in my first 401k. Now in
KT: my forties I have 1 million plus in investments. Thank you.
Suze: Hopefully in Roth's. Go on.
KT: All right, everybody that we know that's under 30, listen
KT: to that, right? She took Suze's advice. My parents have
KT: named me executor of their will. They are in their
KT: early eighties. They have a reverse
KT: mortgage, a car loan on a 2025 sedan, and credit
KT: card debt. I am told that when they pass to
KT: turn the house and car over to the bank, there's
KT: nothing left for my sister and I. Is it really
KT: this simple? My parents have declared bankruptcy in the past,
KT: maxed out credit cards, and buy a new car every
KT: two to three years. They are disclosing little information, which
KT: is why I read
KT: "The Ultimate Retirement Guide for 50+" to learn more. I
KT: don't want to purchase their home from the bank. I'm
KT: glad they're able to supplement their income through the reverse mortgage.
KT: I don't want to be on the hook for their debts.
KT: Please feel free to edit my submission. I did not
KT: edit this, Carla, because you need to hear Suze's advice.
Suze: And so does everybody
Suze: else who happens to have parents that are as irresponsible
Suze: as Carla's when it comes to money and is willing
Suze: to say here kids you deal with the fact that
Suze: we have been financial screw ups OK just that simple
Suze: and trust me there are many out there. Carla sweetheart
Suze: listen to me number one.
Suze: As long as you don't put your name on anything,
Suze: as long as you don't say you'll take responsibility for it,
Suze: you are not responsible for any credit cards that they
Suze: have in their names. When they both die.
Suze: Then those debts will absolutely go away. However, when one
Suze: of them dies, the other is still going to be responsible,
Suze: and that's what you have to think about, cause there
Suze: is where we might have a problem. They're both in
Suze: their 80s. Maybe one of them has a pension like
Suze: your father. He dies before your mother.
Suze: Now, we've lost one Social Security check, maybe we've lost
Suze: a pension check, like I just talked about a few
Suze: minutes ago, and now your mom
Suze: or the surviving parent has less money available than they
Suze: did with even more and more credit card debt and
Suze: guess what now they've maxed out on their credit cards
Suze: they can't get any more credit and now we have
Suze: problems so you better start to find out right now
Suze: what's really going on with them because it's not just
Suze: what happens when they are dead.
Suze: It's what happens when one of them dies, and you
Suze: might want them to listen to this if you don't
Suze: have the nerve to ask them for this on your own.
Suze: That's number one. Number two, they have a reverse mortgage
Suze: on their home.
Suze: What that means is that the bank owns the house
Suze: and the bank is paying them monthly every month to
Suze: live in that house. Now I don't know how long
Suze: that's been going on. It is possible that the bank
Suze: has already paid out more than the house is worth,
Suze: or maybe they haven't.
Suze: But on your parents' death, what will happen is depending
Suze: on how much has been taken out if they've taken
Suze: out already more than the house is currently worth, the
Suze: bank is just gonna take the house and you don't
Suze: have to worry about it. If they haven't taken out
Suze: as much as the house is worth, then you will
Suze: sell the house, pay the bank back.
Suze: And you get to keep the rest. I have a
Suze: feeling the bank is going to get the house. As
Suze: far as their car goes, the car, just call the
Suze: car company up and say, hey, repossess it. It's theirs, whatever.
Suze: Any car company that is stupid enough
Suze: to really lend people money who have claimed bankruptcy, who
Suze: have probably horrible FICO scores, all the stuff going on
Suze: with your parents, fine, let them repossess the car, no
Suze: big deal. I'm sure that's exactly what will happen. So
Suze: the main thing, however, that I'm worried about isn't so
Suze: much what happens when they've died.
Suze: It's what happens as they get older and older and
Suze: now all of a sudden do they need nursing care?
Suze: What are they gonna need? What if they can't take
Suze: care of themselves? Who's gonna be responsible for that? And
Suze: is that gonna fall on you? So Carla, more than anything,
Suze: don't worry about after they've died. That's not gonna be
Suze: a problem.
Suze: The problem becomes, what are you gonna do as they
Suze: get older and older and older. They keep up these
Suze: bad financial habits, they get more and more into financial trouble.
Suze: Now does somebody... what happens?
Suze: You need to sit down with them. You need to
Suze: be an adult, and you need to say, I don't
Suze: care that you don't want to talk to me about this.
Suze: I need to know these things, and I want to
Suze: know them now, or else, as you get older, if
Suze: you need my help before you've died, I'm not going
Suze: to be able to be there for you.
KT: Now wait, uh, on that same note, Susie, listen to this.
KT: There's always some light at the end of the tunnel.
KT: Her parents, Carla's parents were 83 and a mess, but
KT: listen to this. This is from Sue, who's 80 years old.
KT: She said, Hi, Suze, I'm 80 years old and I
KT: live in New York State. My daughter lives in Pennsylvania,
KT: which I recently read has an inheritance tax of 4.5%
KT: for children of the deceased. I have about 3 million
KT: in a 403B which names my son a New York
KT: state resident and my daughter as the beneficiaries.
KT: If I am reading this correctly, is my daughter gonna
KT: have to give 4.5% of my hard earned money to
KT: the state of Pennsylvania? If so, how would that work
KT: if she withdraws the money over 10 years, since PA
KT: also says that inheritance tax payments are due on the
KT: death and are delinquent after nine months.
KT: Sue lives in upstate. Well, she lives in New York State.
Suze: No problem, Sue. Listen to me. First of all, normally
Suze: this 4.5%, which is true, applies to things like real estate,
Suze: things like that. It never usually applies to a retirement account,
Suze: especially because you happen to be in New York. All right, now,
Suze: if you were a Pennsylvania resident, everything was there, da
Suze: da da da.
Suze: But even then, normally IRAs are not included in this 4.5%
Suze: estate tax. All right, next.
KT: But the reason I wanted you to read that is
KT: here is an 80 year old that's extremely responsible.
Suze: And how does that help Carla?
KT: Well, the Carla, I'm just saying to everyone listening that
KT: because you're in your 80s, it doesn't mean that you,
KT: you know, are bad with money like Carla's parents. This
KT: woman Sue is great.
KT: You don't like that?
Suze: Well, the reason I'm looking at you like that is KT.
Suze: Most of the 80 year olds that are writing in,
Suze: where they're the ones writing in.
Suze: They have money. They've been listening to me for 40 years.
Suze: They are, of course, are responsible. And so the real
Suze: lesson there is if you start early, you'll end up
Suze: with millions like most of our 80 and 70 year
Suze: olds and 90 year olds have multi-millions. However, Carla is
Suze: gonna end up with millions when she's in her 80s.
Suze: But parents who don't listen to the Women and Money podcast,
Suze: they never have. They never listened to me on CNBC
Suze: or any of that.
Suze: What are you gonna do? What this really shows you, everybody,
Suze: is if you start early.
Suze: You'll be just fine. All right, go on.
KT: OK, so this last question is from Richard. I was
KT: saving this for you, Suze. Ready, everyone? Richard, I'm right
KT: there with you. I love this question. Suze, what is
KT: a backdoor Roth and how do I do it?
Suze: Do you want to answer that? Do you want that to be your pop quizzy?
KT: I'll give it a shot. Let me give it a shot.
Suze: Did you plant that?
KT: No, I didn't plant it, but I'll give it a shot.
KT: I don't, I don't maybe have the exact numbers right, but...
KT: The Roth has requirements and if one doesn't meet those requirements,
KT: a backdoor Roth was created for those that have a
KT: traditional IRA.
KT: And they have they're they're not able to open a Roth.
KT: What they can do is convert the traditional IRA.
Suze: No, that's not what a back door is.
KT: That's why the back door is...
Suze: Oh, that was such a good try.
KT: Why... then why that's one of the reasons why it
KT: exists so that you could actually
KT: put money through the back door into a Roth.
Suze: All right, but let me explain it very clearly.
KT: All right, explain it better, please.
Suze: That wouldn't be hard.
KT: It's not nice. (KT makes the wrong answer noise)
Suze: All right. Once you make too much money...
KT: That's what I said.
Suze: You listen to me closely...
KT: But that's what I said. Everyone, OK, go ahead.
Suze: They know what you said.
KT: All right, go ahead. Finish.
Suze: All right, she so hates being wrong. She hates...
KT: No, no, no, you're gonna describe what I'm, what I
KT: think I was correct...
Suze: KT, can you let me do this?
KT: All right, go ahead. Tell everybody what is a backdoor Roth.
Suze: Obviously, there are maximum modified adjusted gross income limits that
Suze: you have to be under to do what's called a
Suze: contributory Roth, and a contributory Roth is where you are
Suze: able to put in up to $7,500 if you are
Suze: under 50 this year, $8,600 if you are 50 or older,
Suze: and you can do that every year.
Suze: However, you can also do what's called a conversion. Which means
Suze: if you have a traditional IRA right now,
Suze: an IRA that obviously you've never paid taxes on, you
Suze: can convert that money regardless of your income,
Suze: into a Roth IRA. You just have to do what?
Suze: You have to pay taxes on the amount that you converted.
Suze: But then a backdoor Roth is very, very different.
Suze: A backdoor Roth is where you do not have a
Suze: traditional IRA already, or a traditional SEP IRA or a
Suze: simple IRA because if you do, you cannot do a
Suze: backdoor Roth, because if you do a backdoor Roth, you
Suze: are going to be subjected to what's known as the
Suze: pro rata rule, which means you're gonna have to pay
Suze: taxes on that money essentially twice.
Suze: So you just don't do it. If you do not
Suze: have a traditional retirement account outside of work of any kind,
Suze: what you do is you open up a IRA but
Suze: you make it non-deductible and you fund it with either
Suze: the 7,500 this year or the 8,600 if you are
Suze: 50 or older.
Suze: And you then immediately convert it to a Roth IRA.
Suze: So now you have gotten money into the Roth IRA
Suze: through the back door, as if it's like a contributory Roth.
Suze: But you cannot contribute more than 7,500 or 8,600 right
Suze: now to a traditional IRA that you make non-deductible. So
Suze: do you understand the difference, KT? It's not just converting
Suze: money you have in a traditional.
KT: I missed out on that part. You're right. The deductible and non-deductible.
Suze: You got that?
KT: I think so.
Suze: All right.
KT: I have to think about it.
Suze: All right, but that's going through the back door. The
Suze: key is, however, you have to make sure that you
Suze: do convert it.
Suze: And the reason is you want it in the Roth
Suze: IRA because if it stays in the non-deductible IRA and
Suze: it starts to grow, if it makes money and then
Suze: you convert it, the amount of money that it's grown
Suze: will be taxed to you, so there you go, but
Suze: you have to be careful with it.
KT: That's the part I missed.
Suze: Yeah, you thought you were so smart, didn't you?
KT: I didn't think I was smart. I told everyone I'm studying
KT: the Roth, so I really know it, and I thought
KT: that I kind of got the backdoor.
Suze: We talked about this. I just wanna say this to you.
Suze: I'm proud that you tried.
Suze: No, I'm not kidding, KT. If you just try, eventually
Suze: you will get it versus I don't know the answer.
Suze: I don't know. It's a back door, side door, inside.
KT: No, no, no, I wanna know the answer to everything
KT: about a Roth.
Suze: Tell me why you wanna know.
KT: Because I should after all these years. I should, and
KT: it's important that I know the difference.
Suze: All right, there we go, everybody. And in the same way,
Suze: KT says she should.
Suze: So should you. So until Sunday, there's only one thing
Suze: that we want you to remember. Number one, we want
Suze: you to go to my YouTube channel, right? Youtube.com/ Suze Orman.
Suze: Please subscribe because again, I am so trying to convince
Suze: KT to do videos of these podcasts, but
Suze: she's not quite into that yet. One day, maybe so
Suze: until Sunday. There's only one thing that we want you
Suze: to remember. What is that, KT?
KT: People first, then money, then things, and maybe, maybe on
KT: Susie's birthday we will come live on video.
Suze: I doubt it highly, but especially given last Sunday's podcast,
Suze: you now know why I say to all of you,
Suze: now you stay safe. Bye-bye.