1 00:00:00,009 --> 00:00:02,960 Intro / Outro: OK, Suze, are you ready for today's podcast? Oh, 2 00:00:02,970 --> 00:00:06,218 Intro / Outro: you bet I am cause I'm unstoppable 3 00:00:07,929 --> 00:00:07,969 Intro / Outro: Music In. 4 00:00:28,989 --> 00:00:35,459 Suze: August 27th, 2023. Welcome everybody to the Women and Money 5 00:00:35,470 --> 00:00:39,369 Suze: podcast as well as everybody. And I do mean everybody 6 00:00:39,380 --> 00:00:44,479 Suze: smart enough to listen today is Suze School. And for 7 00:00:44,490 --> 00:00:48,580 Suze: those of you who listened to last Sunday's podcast, which 8 00:00:48,590 --> 00:00:53,119 Suze: was a doozy. All right, you know that I said 9 00:00:53,130 --> 00:00:55,680 Suze: I would address this one question 10 00:00:55,990 --> 00:00:59,549 Suze: that came in that KT happened to choose to ask 11 00:00:59,560 --> 00:01:03,419 Suze: me on Ask KT and Suze Anything. And I said, 12 00:01:03,430 --> 00:01:07,839 Suze: KT that is one of the more complicated questions that 13 00:01:07,849 --> 00:01:11,500 Suze: you could possibly ask, but it needs to be answered, 14 00:01:11,510 --> 00:01:15,000 Suze: but it needs to be answered in great detail. So 15 00:01:15,010 --> 00:01:17,919 Suze: that is what we are doing right now. 16 00:01:18,629 --> 00:01:23,199 Suze: Last week Joie wrote in with the question that said 17 00:01:23,599 --> 00:01:28,760 Suze: I have an annuity in my ira rollover that I 18 00:01:28,769 --> 00:01:32,569 Suze: am now ready to annuitize. Now everybody listen to me, 19 00:01:32,580 --> 00:01:34,800 Suze: take out your Suze notebooks. You're gonna need it for 20 00:01:34,809 --> 00:01:38,480 Suze: this one. When you hear me say a word such 21 00:01:38,489 --> 00:01:44,039 Suze: as annuity or annuitize and you don't know what those 22 00:01:44,050 --> 00:01:46,739 Suze: words mean, just Google them 23 00:01:47,040 --> 00:01:50,870 Suze: and then write down the definition because that way you'll 24 00:01:50,879 --> 00:01:53,849 Suze: get used to looking up things that you don't know 25 00:01:53,860 --> 00:01:54,930 Suze: what they mean. 26 00:01:55,650 --> 00:01:59,819 Suze: So I have an annuity in my IRA rollover that 27 00:01:59,830 --> 00:02:04,849 Suze: I am now getting ready to annuitize. I'm turning 73 28 00:02:04,860 --> 00:02:09,820 Suze: next year, just like you, Suze. So my question is, 29 00:02:09,830 --> 00:02:16,820 Suze: will those annuitized payments count towards my RMDs? And remember 30 00:02:16,830 --> 00:02:23,019 Suze: RMDs stand for required minimum distributions, I will get $500 31 00:02:23,029 --> 00:02:25,360 Suze: a month from this annuity. 32 00:02:25,788 --> 00:02:31,589 Suze: I put $100,000 in my IRA in this annuity and 33 00:02:31,600 --> 00:02:38,320 Suze: I have another $100,000 in that IRA invested in stocks. 34 00:02:39,589 --> 00:02:43,110 Suze: Now, that was her question. Now, as you may all 35 00:02:43,119 --> 00:02:49,168 Suze: know RMDs or required minimum distributions go like this. Once 36 00:02:49,179 --> 00:02:52,889 Suze: you reach the age of 73 you've got to start 37 00:02:52,899 --> 00:02:58,190 Suze: taking money out of pre taxed retirement accounts ROTH IRAs, 38 00:02:58,589 --> 00:03:02,949 Suze: this doesn't apply to them. So, out of pre taxed 39 00:03:02,960 --> 00:03:08,259 Suze: retirement accounts and required minimum distributions that you take out. 40 00:03:08,880 --> 00:03:13,559 Suze: The amount is according to a specific formula based on 41 00:03:13,570 --> 00:03:15,478 Suze: your life expectancy. 42 00:03:16,360 --> 00:03:19,770 Suze: So as I said, I was going to address this today. 43 00:03:19,779 --> 00:03:24,940 Suze: So here we go, write this down. Joey said she 44 00:03:24,949 --> 00:03:29,538 Suze: had $100,000 in investments in an IRA. Put that on 45 00:03:29,550 --> 00:03:30,130 Suze: one line. 46 00:03:30,899 --> 00:03:35,500 Suze: She has $100,000 in an annuity, which is a contract 47 00:03:35,509 --> 00:03:41,070 Suze: with an insurance company giving her $6000 a year in 48 00:03:41,080 --> 00:03:44,429 Suze: income for the rest of her life 49 00:03:45,380 --> 00:03:49,729 Suze: now because it's giving her that obviously she has to 50 00:03:49,740 --> 00:03:52,929 Suze: pay taxes on it. But that is besides the point. 51 00:03:53,800 --> 00:03:58,970 Suze: So Joie and everybody, if you're in this situation where 52 00:03:58,979 --> 00:04:03,369 Suze: you happen to have an annuity that you are going 53 00:04:03,380 --> 00:04:07,320 Suze: to annuitize, which means you are going to convert it 54 00:04:07,330 --> 00:04:11,550 Suze: from just simply earning interest to paying you a monthly 55 00:04:11,559 --> 00:04:15,270 Suze: income for the rest of your life. If you're in 56 00:04:15,279 --> 00:04:16,969 Suze: this situation 57 00:04:17,540 --> 00:04:20,209 Suze: and it's still going to be there when you are 58 00:04:20,220 --> 00:04:23,959 Suze: 73 years of age or older. When you have to 59 00:04:23,970 --> 00:04:30,200 Suze: start taking required minimum distributions, then you need to hear 60 00:04:30,209 --> 00:04:32,890 Suze: what I'm about to tell you. 61 00:04:33,799 --> 00:04:37,480 Suze: So Joie, the very first thing you need to do 62 00:04:37,820 --> 00:04:43,010 Suze: is you first need to go to the IRS uniform 63 00:04:43,019 --> 00:04:49,070 Suze: Lifetime table, just Google that and it will come up 64 00:04:49,100 --> 00:04:55,649 Suze: IRS uniform Lifetime table and it's there that you will 65 00:04:55,660 --> 00:05:00,450 Suze: find out what your life expectancy is at the age 66 00:05:00,459 --> 00:05:01,750 Suze: of 73. 67 00:05:02,488 --> 00:05:06,540 Suze: Your life expectancy is how much longer 68 00:05:07,320 --> 00:05:13,260 Suze: the IRS on this table expects you to live. Ok, 69 00:05:13,269 --> 00:05:17,489 Suze: whether they're right or they're wrong, doesn't matter. That's what 70 00:05:17,500 --> 00:05:21,609 Suze: they dictate. Now, since I happen to be the same 71 00:05:21,619 --> 00:05:25,459 Suze: age as you as you. So politely called out in 72 00:05:25,470 --> 00:05:26,450 Suze: your email. 73 00:05:26,750 --> 00:05:31,539 Suze: When I looked it up for me, it was at 73. 74 00:05:31,709 --> 00:05:38,099 Suze: My life expectancy was 26.5 years. That is how long 75 00:05:38,109 --> 00:05:40,159 Suze: we are expected to live. 76 00:05:40,820 --> 00:05:48,230 Suze: So Joey write down 26.5 years and all of you 77 00:05:48,238 --> 00:05:53,209 Suze: should maybe pretend that you're Joie for this susie school. 78 00:05:54,350 --> 00:05:58,519 Suze: Now, your next step normally and notice that I said 79 00:05:58,529 --> 00:06:01,700 Suze: normally and I'll explain why I said that in a 80 00:06:01,709 --> 00:06:07,299 Suze: bit would be this. You need to look at what 81 00:06:07,309 --> 00:06:12,779 Suze: the end of this year's in 2023 What the end 82 00:06:12,790 --> 00:06:16,239 Suze: of this year's balances are going to be 83 00:06:16,950 --> 00:06:21,000 Suze: on all the money and investments in the IRA that 84 00:06:21,010 --> 00:06:23,600 Suze: is not in the annuity. 85 00:06:24,299 --> 00:06:29,078 Suze: So you said currently you had $100,000 in investments in 86 00:06:29,089 --> 00:06:34,239 Suze: an IRA. Let's just assume that at the end of 87 00:06:34,250 --> 00:06:42,209 Suze: this year, it's still exactly at $100,000. Why do I 88 00:06:42,220 --> 00:06:46,929 Suze: want you to look at this year's ending balance? It's 89 00:06:46,940 --> 00:06:51,390 Suze: because we aren't required to take our M DS till 90 00:06:51,399 --> 00:06:54,190 Suze: next year or 2024. 91 00:06:54,790 --> 00:06:58,920 Suze: So the IRS says you have to figure out what 92 00:06:58,928 --> 00:07:04,239 Suze: your RMDs are going to be based on the ending 93 00:07:04,250 --> 00:07:08,239 Suze: balance for 2023. 94 00:07:09,100 --> 00:07:15,029 Suze: Now, what you would do is you would divide that 95 00:07:15,040 --> 00:07:20,049 Suze: $100,000 that will be there, let's say at the end 96 00:07:20,059 --> 00:07:25,950 Suze: of this year by 26.5, which is what your life 97 00:07:25,959 --> 00:07:31,119 Suze: expectancy is in this example, at the age of 73. 98 00:07:31,399 --> 00:07:36,920 Suze: And you would get approximately $3774 and maybe a little 99 00:07:36,929 --> 00:07:37,750 Suze: bit of change 100 00:07:38,600 --> 00:07:47,170 Suze: and that would be your RMD on that $100,000. However, 101 00:07:47,250 --> 00:07:53,920 Suze: the $100,000 in the annuity that was giving you $6000 102 00:07:53,929 --> 00:07:56,269 Suze: a year because you annuitized it. 103 00:07:56,970 --> 00:08:00,420 Suze: How do you figure out the RMDs that? 104 00:08:01,079 --> 00:08:04,630 Suze: And the way the IRS used to do it 105 00:08:05,910 --> 00:08:12,799 Suze: is they just figured out that, that $6000 was your RMD. 106 00:08:12,809 --> 00:08:17,700 Suze: Just that simple. So in this case, you would have 107 00:08:17,709 --> 00:08:25,320 Suze: paid $3774 on $100,000. That was in stocks, the ending 108 00:08:25,329 --> 00:08:30,369 Suze: balance of this year and $6000 because that's what the 109 00:08:30,380 --> 00:08:31,720 Suze: annuity paid you. 110 00:08:32,239 --> 00:08:40,768 Suze: So in total, you would have paid $9774 in RMDs 111 00:08:41,948 --> 00:08:44,309 Suze: that if you think about it, 112 00:08:45,179 --> 00:08:54,500 Suze: if you had all $200,000 in your IRA, not in 113 00:08:54,669 --> 00:08:56,030 Suze: an annuity. 114 00:08:56,859 --> 00:08:59,859 Suze: So I wouldn't suggest having annuities with it, an IRA 115 00:08:59,869 --> 00:09:01,989 Suze: if you're going to annuit it. But anyway, 116 00:09:02,669 --> 00:09:09,640 Suze: if you had $200,000 in your IRA, not in an annuity, 117 00:09:10,859 --> 00:09:15,030 Suze: then if you looked at that, you would simply divide 118 00:09:15,039 --> 00:09:22,728 Suze: the $200,000 by 26.5. Again, your life expectancy and your 119 00:09:22,739 --> 00:09:30,789 Suze: RMDs would be 7547 or $48 right around there. 120 00:09:31,700 --> 00:09:37,159 Suze: That happens to be 2000 $226 less. 121 00:09:38,500 --> 00:09:43,190 Suze: Then if you had $100,000 in an annuity 122 00:09:43,919 --> 00:09:49,559 Suze: giving you $6000 a year of income and $100,000 that 123 00:09:49,570 --> 00:09:53,030 Suze: had been invested in stocks or bonds or in a 124 00:09:53,039 --> 00:09:55,309 Suze: money market fund or anything like that. 125 00:09:56,229 --> 00:09:58,880 Suze: So that's not very fair if you think about it, 126 00:09:58,890 --> 00:10:05,159 Suze: that made absolutely no sense. So, the Secure Act 2.0 127 00:10:05,950 --> 00:10:12,909 Suze: was supposedly supposed to change this? And the new rules 128 00:10:12,919 --> 00:10:19,359 Suze: simply went like this where you add together the ending 129 00:10:19,369 --> 00:10:25,280 Suze: yearly balance of the money that was invested in your ira. 130 00:10:25,820 --> 00:10:31,320 Suze: And you add that to the ending valuation of the annuity, 131 00:10:31,830 --> 00:10:35,340 Suze: which just let's say in this case, if you added 132 00:10:35,349 --> 00:10:40,718 Suze: the two of them together, it would be $200,000. Let's 133 00:10:40,729 --> 00:10:42,239 Suze: just say that's true. 134 00:10:43,289 --> 00:10:48,390 Suze: And if you divided $200,000 by your life expectancy, which 135 00:10:48,400 --> 00:10:53,460 Suze: we already just did your life expectancy of 26.5 years, 136 00:10:54,010 --> 00:11:01,159 Suze: all you would have to withdraw is $7547. Correct. We 137 00:11:01,169 --> 00:11:02,200 Suze: just did that. 138 00:11:03,150 --> 00:11:09,239 Suze: But now Secure 2.0 write this down says that you 139 00:11:09,250 --> 00:11:13,719 Suze: can subtract your annuity payments in this case, which are 140 00:11:13,729 --> 00:11:22,330 Suze: $6000 from the $7547 that we figured out you owe 141 00:11:22,340 --> 00:11:28,500 Suze: in RM DS. If all of it was worth $200,000 142 00:11:29,049 --> 00:11:36,969 Suze: once you subtract the $6000 from the $7547 that would 143 00:11:36,979 --> 00:11:40,280 Suze: make it so that all that you had to take 144 00:11:40,289 --> 00:11:45,260 Suze: out of your retirement account, besides your annuity payments would 145 00:11:45,270 --> 00:11:51,640 Suze: be an additional $1547. 146 00:11:52,340 --> 00:11:56,409 Suze: And that is all you would have to pay in RMDs. 147 00:11:57,390 --> 00:12:03,109 Suze: So why is it that I keep saying normally? And 148 00:12:03,119 --> 00:12:05,270 Suze: I keep saying supposedly 149 00:12:05,900 --> 00:12:10,229 Suze: and that is because it is so very, very sad 150 00:12:10,659 --> 00:12:14,238 Suze: that in the same way, the rules for inherited Ira 151 00:12:14,250 --> 00:12:18,829 Suze: S that we talked about are so absolutely confusing 152 00:12:19,690 --> 00:12:25,380 Suze: and that they still haven't clarified them. They haven't clarified 153 00:12:25,390 --> 00:12:31,710 Suze: this rule of RMDs and annuities as well. For no 154 00:12:31,719 --> 00:12:37,039 Suze: one knows exactly what the right way to do an 155 00:12:37,049 --> 00:12:42,109 Suze: end of the year evaluation on your annuity would happen 156 00:12:42,119 --> 00:12:42,699 Suze: to be 157 00:12:42,969 --> 00:12:45,840 Suze: like, it's easy to look at the money that you 158 00:12:45,849 --> 00:12:49,119 Suze: have invested in stocks or whatever it may be. And 159 00:12:49,130 --> 00:12:51,789 Suze: you'll see at the end of the year, this is 160 00:12:51,799 --> 00:12:55,200 Suze: what it was worth. Your ending balance is right there 161 00:12:55,210 --> 00:12:57,559 Suze: on your statement. 162 00:12:58,679 --> 00:13:03,840 Suze: But for an annuity, especially one that has been annuitized 163 00:13:04,580 --> 00:13:09,059 Suze: where money is coming out, even though they are supposed 164 00:13:09,070 --> 00:13:14,609 Suze: to tell you what your ending balance in that annuity 165 00:13:14,619 --> 00:13:20,039 Suze: is after you've taken out your annuity payments, half the 166 00:13:20,049 --> 00:13:24,809 Suze: insurance companies don't do it. They're not exactly sure how 167 00:13:24,820 --> 00:13:26,329 Suze: to figure it out. 168 00:13:27,000 --> 00:13:30,598 Suze: And there is so much confusion about this one thing. 169 00:13:30,679 --> 00:13:32,570 Suze: It's not even funny. 170 00:13:33,260 --> 00:13:41,510 Suze: So until Secure Act 2.0 issues guidelines on how to 171 00:13:41,520 --> 00:13:48,909 Suze: properly evaluate the ending balance of an annuitized annuity. No 172 00:13:48,919 --> 00:13:52,690 Suze: one knows for sure. And the only thing we can 173 00:13:52,700 --> 00:13:58,309 Suze: do is hope that they rule on this sooner than later. 174 00:13:58,669 --> 00:14:02,909 Suze: Now, you know why I waited to answer this question 175 00:14:03,130 --> 00:14:08,229 Suze: in Suze School? So what does this mean for most 176 00:14:08,239 --> 00:14:12,880 Suze: of you? How many times have I said to you 177 00:14:14,280 --> 00:14:21,190 Suze: within a retirement account? It makes absolutely no sense in 178 00:14:21,200 --> 00:14:27,390 Suze: most cases to have an annuity, especially if you are 179 00:14:27,400 --> 00:14:29,349 Suze: going to annuitize it, 180 00:14:30,200 --> 00:14:33,960 Suze: I have said to you, it makes absolutely no sense 181 00:14:33,969 --> 00:14:39,289 Suze: to have a variable annuity within your retirement account. 182 00:14:40,049 --> 00:14:43,840 Suze: And so many of you think, oh, that's where I 183 00:14:43,849 --> 00:14:48,549 Suze: want to own the annuity. No, you don't. You are 184 00:14:48,559 --> 00:14:52,289 Suze: far better off if you are going to own an annuity, 185 00:14:52,359 --> 00:14:55,719 Suze: sometimes they make sense and sometimes they do not. I've 186 00:14:55,729 --> 00:14:59,760 Suze: done many podcasts on this topic, but if you are 187 00:14:59,770 --> 00:15:03,599 Suze: going to own an annuity that you are going to 188 00:15:03,609 --> 00:15:08,239 Suze: annuitize to give you guaranteed monthly income, 189 00:15:08,929 --> 00:15:12,190 Suze: I don't necessarily have a problem with that at these 190 00:15:12,200 --> 00:15:13,729 Suze: high interest rates. 191 00:15:14,559 --> 00:15:20,929 Suze: However, do not do it within a retirement account. Unless 192 00:15:20,940 --> 00:15:25,890 Suze: they really have made the laws clear, you would be 193 00:15:25,900 --> 00:15:30,859 Suze: far better off to do it outside of a retirement 194 00:15:30,869 --> 00:15:35,960 Suze: account with other money that you may happen to have. 195 00:15:36,030 --> 00:15:41,369 Suze: Just that simple everybody so I could go on and on. 196 00:15:41,380 --> 00:15:42,729 Suze: But I'm sure 197 00:15:43,159 --> 00:15:46,690 Suze: that your head is a spin'? Ok, I promise you 198 00:15:46,700 --> 00:15:49,609 Suze: I won't give you another Suze School like I did 199 00:15:49,619 --> 00:15:53,590 Suze: last week or this week. Even though these are things 200 00:15:53,599 --> 00:15:57,469 Suze: that are so important for you to know, you need 201 00:15:57,479 --> 00:16:00,010 Suze: to know it. It would be so great if you 202 00:16:00,020 --> 00:16:02,710 Suze: kept a little log of what each one of these 203 00:16:02,719 --> 00:16:06,549 Suze: Suze Schools is about when it pertains to your situation 204 00:16:06,559 --> 00:16:08,150 Suze: or it may pertain 205 00:16:08,469 --> 00:16:11,559 Suze: and if you're listening to this and you're younger and 206 00:16:11,570 --> 00:16:16,320 Suze: you think this doesn't apply to you, it most certainly does. 207 00:16:16,340 --> 00:16:18,559 Suze: Didn't you learn last week 208 00:16:18,900 --> 00:16:23,039 Suze: when your parents or your grandparents or whoever it was, 209 00:16:23,190 --> 00:16:28,479 Suze: didn't actually know the correct way to designate beneficiaries or 210 00:16:28,489 --> 00:16:31,679 Suze: how it really worked. How many of you were actually 211 00:16:31,690 --> 00:16:36,940 Suze: cut out of being able to easily inherit retirement money 212 00:16:36,950 --> 00:16:41,299 Suze: or you were cut out altogether of getting it at all. 213 00:16:42,200 --> 00:16:45,400 Suze: But if you had known what I taught you last week, 214 00:16:45,409 --> 00:16:48,729 Suze: maybe you could go to your parents or grandparents and say, 215 00:16:48,739 --> 00:16:52,210 Suze: can we just check this out? So I can make 216 00:16:52,219 --> 00:16:56,179 Suze: sure that everything happens to be in order. And if 217 00:16:56,190 --> 00:16:58,000 Suze: they happen to say to you what you want me 218 00:16:58,010 --> 00:17:00,450 Suze: to die, so you can get my money 219 00:17:01,159 --> 00:17:03,729 Suze: and because sometimes they'll say that or they'll think that 220 00:17:03,739 --> 00:17:06,010 Suze: you just want to know because you want to get 221 00:17:06,020 --> 00:17:10,290 Suze: their money, just say grow up, right? You have to 222 00:17:10,300 --> 00:17:14,698 Suze: be a financial adult. I want to know and if 223 00:17:14,709 --> 00:17:17,329 Suze: you want to know why I know, listen to that 224 00:17:17,339 --> 00:17:20,930 Suze: podcast that Suze Orman just did on what could go 225 00:17:20,939 --> 00:17:26,169 Suze: wrong when you don't know how to designate beneficiaries correctly. 226 00:17:26,848 --> 00:17:30,899 Suze: So take down the date that was August 20th, tell 227 00:17:30,909 --> 00:17:34,859 Suze: them to listen to the August 20th podcast and then 228 00:17:34,869 --> 00:17:39,298 Suze: make a date to talk to them and go over everything. 229 00:17:40,030 --> 00:17:46,198 Suze: Also, you may have parents or grandparents that are buying 230 00:17:46,209 --> 00:17:52,270 Suze: immediate annuities within their retirement accounts. You might want to 231 00:17:52,280 --> 00:17:57,319 Suze: have them listen to this podcast so they can understand 232 00:17:57,420 --> 00:18:01,500 Suze: the ramifications of what they are doing 233 00:18:02,020 --> 00:18:08,639 Suze: in regards to required minimum distributions. So, until next Thursday 234 00:18:08,650 --> 00:18:13,129 Suze: with another Ask KT and Suze, Anything. And I'm so 235 00:18:13,140 --> 00:18:18,790 Suze: happy for KT that Spain won. But there's only one 236 00:18:18,800 --> 00:18:23,150 Suze: thing that I really want you to say every single 237 00:18:23,160 --> 00:18:28,910 Suze: day and it is as follows today, wherever I go, 238 00:18:28,939 --> 00:18:31,629 Suze: I will create a more joyful, 239 00:18:32,069 --> 00:18:34,390 Suze: peaceful and loving world 240 00:18:35,060 --> 00:18:38,930 Suze: and I promise you if you do that, you will 241 00:18:38,939 --> 00:18:41,709 Suze: be unstoppable. 242 00:18:47,500 --> 00:18:48,119 Intro / Outro: Music Out.