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Suze: February 22nd, 2024. Welcome everybody to the Women and Money

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Suze: podcast

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KT: And everyone smart enough to listen.

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Suze: This is the KT and Suze ask us anything edition.

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KT: It sure is our favorite Thursday podcast.

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Suze: So, KT, what have I always said to you were the six

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Suze: greatest words in life?

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KT: Oh, that's easy. I admit that I was wrong.

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Suze: So everybody, I'm going to be using those words with

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Suze: you right now on last Sunday's podcast. There were two

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Suze: things that I was wrong about. So you might want

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Suze: to go back and listen to that podcast because I've

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Suze: updated it with all the correct information. And the two

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Suze: things are this: number one,

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Suze: a spouse's retirement account, an individual retirement account for a

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Suze: spouse does not count towards your pro rata rule when

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Suze: it comes to a backdoor Roth IRA. That's number one,

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Suze: number two, the actual formula to figure out how much

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Suze: taxes you will owe on the pro rata rule is

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Suze: calculated a little bit differently. So just go back to

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Suze: that podcast last Sunday and you will hear everything and

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Suze: now it is 100% correct.  Alright KT.

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KT: How's that feel, Suze?

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Suze: Feels much better.

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KT: No. Wait, how does that feel? I never get it right.

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KT: When it comes to that Roth. Now, you, now you

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KT: sound like a KT

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Suze: Do it. KT come on, do it, (KT makes the wrong answer noise) KT. We can

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Suze: do it together, right? (They both make the wrong answer noise).

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Suze: Alright. So before we begin, everybody, after I've just been, (makes the wrong answer noise again.)

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Suze: If you do have a question and you want it

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Suze: to possibly be chosen to be answered on the podcast,

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Suze: simply write to ask Suze Suze podcast at gmail.com. And

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Suze: if KT chooses it, we will answer it on this podcast.

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Suze: All right, my dear, what he got for us.

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KT: Ok. Well, I'm going to address what you just said

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KT: you were wrong about that. You fixed. All right, Katherine

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KT: wrote. Hi, Suze. Thank you so much for your Susie

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KT: school on backdoor Roth confusion,

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Suze: Which I confused you more about.

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KT: It was very helpful. My husband and I do not

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KT: qualify for a traditional Roth anymore because our income is

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KT: too high. We do participate in our employer, Roth though.

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KT: We are both in our early fifties.

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KT: We would like to maximize our Roth retirement savings and

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KT: we've been looking into the back door Roth. My question

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KT: is that my husband has a small traditional IRA that

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KT: was a rollover from a previous employer more than 20

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KT: years ago. If he rolls it into his current employer,

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KT: traditional 401k, could we then avoid the pro rata rule?

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Suze: Yes, that's always, and that I've always been very clear on. Yes. If

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Suze: your company that you work for allows it, you absolutely

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Suze: can take the money that you did a roll over with.

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Suze: It's in an IRA right now and roll it back

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Suze: into your new company or your current company, 401k. All right.

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Suze: Next KT.

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KT: Ok. So Suze, next question is from Diane. She said, hi, Suze.

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KT: Thank you so much for your Sunday, Suze schools.

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KT: I have a backdoor Roth. My husband has a traditional IRA,

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KT: but I do not. My understanding is that my husband's

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KT: IRA does not affect my backdoor Roth conversions whatsoever.

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Suze: And that is correct. And so you have it 100% again,

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Suze: a spouse's individual retirement account, no matter what kind they

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Suze: have does not affect your individual retirement account moves, especially

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Suze: if it is a backdoor Roth. All right, KT.

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KT: One more Roth question.

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KT: And I'm going to go to a different topic.

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Suze: That's good. I'm now going to join the KT camp. Roth, what does that mean? How

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Suze: does that work? I'm not sure.

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KT: I'm glad I didn't answer any of these. All right. Hi,

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KT: Suze and KT. I wish you had first time question submitter here.

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KT: Congratulations Emily. You have courage to submit a Roth question.

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KT: I don't,

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KT: I am 49 with a July birthday. I'm excited about

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KT: turning 50 this year as I can contribute more to

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KT: my Roth IRA. Since the contribution max for under age

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KT: 50 is 7000 in 2024. Would I have to wait

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KT: until 2025 to contribute the amount for over 50?

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Suze: And the answer is no,

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KT: Wait, wait, wait, wait. She's gonna turn 50 in July.

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Suze: So no girlfriend, because as long as you're gonna turn

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Suze: 50 anytime this year,

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Suze: right? You can make an $8000 contribution. Remember when it

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Suze: comes to an IRA of any kind, truthfully, you have

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Suze: the ability to open up a 2024 IRA or Roth

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Suze: IRA all the way till April 15th of 2025. So yes,

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Suze: contribute it now and you'll be absolutely fine.

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KT: So next question isn't really a question, Suze, it's a

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KT: comment and it's one that I think all of us

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KT: should listen to and, and ponder it's from Janine. She said, Suze,

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KT: your advice people first then money, then things is golden.

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KT: I have heard you talk several times about helping aging

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KT: parents and keeping them at home. After the passing of

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KT: my father, my brother and I cared for our mother

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KT: in her home for several years

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KT: until she was close to 90. We were blessed that

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KT: she was in good health and mobile, but she was lonely.

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KT: She didn't want to go to a senior citizen center

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KT: even though we offered, she joined some church group. But

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KT: she was still lonely, seeking friendship and companionship from people

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KT: closer to her own age. She wanted to live in

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KT: a community with other people in her age and stage

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KT: of life.

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KT: She would come to our home to visit but was

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KT: eager to get back to her own place. So all

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KT: of this is to say, when you talk about caring

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KT: for elderly parents,

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KT: don't forget that they have socialization needs that children cannot

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KT: often meet. So while it's good to encourage your listeners

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KT: to value the precious time they have with their parents,

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KT: please also consider these other aspects. She also explained that

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KT: as the mom was aging, she and her brother couldn't physically give her the right care.

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Suze: But here's what confuses me, confuses both of us. I

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Suze: would imagine both of us had to take our mothers

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Suze: and put them in a, in an assisted living, when

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Suze: it came to that when it came time. So, Janine,

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Suze: I hope I've never given the impression that we all

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Suze: have to take our parents in and that's the best

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Suze: way to take care of them.

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Suze: And I've never meant to do that if I did

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Suze: because both KT and I understand very well what you're

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Suze: talking about and both of us had our parents for

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Suze: years in assisted living facilities. What I really mean

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Suze: is that whether they're at home with you or at

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Suze: home in an assisted living facility or an independent living

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Suze: facility or wherever they may happen to be all of

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Suze: us need to make it a priority to go and

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Suze: visit them wherever they are living to go and spend

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Suze: time with them wherever they happen to be because that

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Suze: time is precious and priceless. All right,

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Suze: I hope Janine, you feel better now. Ok.

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KT: Next one is from Kathy: Comments, Hello. My question is

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KT: about paying and saving for my daughter's college education. She

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KT: will be attending college in the fall of 2027. I'm

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KT: not sure if a 529 plan will even be worth

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KT: opening since college is a mere three years away. But that's,

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KT: that's a great question. The reason I picked it, Suze,

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KT: every question I get on a 529 plan is when

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KT: a baby's born and now her daughter is three years away. So,

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KT: is it good?

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Suze: Kathy. You chose it, KT because that was your name Kathy. Right?

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KT: Maybe. It's a good question.

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Suze: Maybe... you never know why KT chooses it. Here's what you

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Suze: need to understand. She's not just three years from college,

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Suze: she's seven years till she is through with college.

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Suze: That is a long time. So, in my opinion, a

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Suze: 529 plan absolutely is still something that you should consider

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Suze: and do if you can afford it. Because even though

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Suze: she's just three years from beginning, you have four years,

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Suze: four more years of possible growth,

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Suze: good growth for that money, good tax free growth for

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Suze: that money for your daughter to be able to utilize.

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Suze: All right, girlfriend. Wait, wait, before we go on. Right.

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Suze: That one about turning 50 she was gonna turn 50

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Suze: in July. Right. It reminded me of you.

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KT: Yeah, my birthday is July

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Suze: And when we both turned 50, really - That's when KT

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Suze: and I came together as one. So

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Suze: I like that. I don't know. I just thought of that.

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KT: What a great year that was for both of us. Ok.

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KT: Next questions from Michael said, hi, Suze. I'm in my

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KT: mid thirties and I'm struggling to understand if it's better

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KT: to keep contributing to my traditional 401k given the compounding

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KT: interest or if I am too late to do a Roth,

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KT: any clarity would be deeply appreciated.

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Suze: So Michael, here's the thing, what confuses me is why

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Suze: you think your money will compound in a traditional IRA

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Suze: and not in a Roth IRA unless you're talking about

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Suze: the traditional IRA giving you a tax write off and

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Suze: the tax money that you're saving is compounding

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Suze: and either way you're figuring it. I am telling you

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Suze: at the age of 30 in my opinion, you should

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Suze: be doing a Roth retirement account of any kind. A

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Suze: few Suze schools back. And I think it was a

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Suze: Suze School. I gave the example of how money can

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Suze: compound in a Roth IRA over time

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Suze: and how you would have possibly millions of dollars, especially

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Suze: if you're starting at 30 my dear, that you'll be

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Suze: able to access absolutely tax free. And the chances of

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Suze: you taking the actual savings from your deduction of a

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Suze: traditional IRA or 401k and investing it and doing things

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Suze: like that is nil people usually just spend it and

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Suze: it goes right down the, "I wanna do this river."

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Suze: So do a Roth and trust me, 40 years from now,

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Suze: you will be so happy that you did. All right, KT.

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KT: Suze. I have a couple of questions that came in

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KT: about HSA. I guess this was a, um, a thought

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KT: from one of your Suze schools and this is from Katie.

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KT: She said, hi, Suze and KT, a friend of my

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KT: husband recommended using

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KT: non HSA money for medical expenses. He thought there was

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KT: benefit to saving the HSA money for later down the road.

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KT: Could you please speak to this.

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Suze: For everybody who doesn't know, an HSA is a health

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Suze: savings account and it comes with a high deductible health

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Suze: insurance policy.

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Suze: And within the HSA, that's where your money goes, you

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Suze: fund it every year and when you have a health expense,

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Suze: you get to use that money, that number one you

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Suze: got a tax write off for. When you put it

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Suze: in there, you get to use that money tax free

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Suze: for a qualified medical expense.

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Suze: If you don't need that money in there, you then

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Suze: have the ability. Usually once you have at least $1000

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Suze: in the HSA to actually invest it.

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Suze: And if you invest it over the years, it can

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Suze: grow to a really nice sum of money. When you're older,

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Suze: you can use that money at that time. For medical

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Suze: expenses that are qualified, you can even use it for

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Suze: long term care in some cases. So if you have

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Suze: the money to be able to save it

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Suze: and let it grow and still just pay for your

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Suze: expenses right now with after tax money. Go ahead and

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Suze: do so. Your husband's friend is correct. Not many people

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Suze: have that luxury because it can be a lot of

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Suze: money and expense today. But if you have that ability

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Suze: do so, remember once you reach 65 if you go

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Suze: to take any money out,

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Suze: that isn't a qualified medical expense, you will pay ordinary

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Suze: income tax on that money.

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Suze: So the HSA, one more time is the only double

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Suze: tax free retirement account out there. You get a tax

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Suze: write off when you put the money in and it's

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Suze: tax free coming out when you use it for a

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Suze: qualified medical expense. There is no other retirement account that

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Suze: does that.

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Suze: Why do you look like that?

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KT: Well, an HSA - I always think of only a health savings account,

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KT: but you're, you're calling it a good retirement account.

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Suze: Well, I'll tell you why, KT, what is our biggest

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Suze: expense right now in retirement?

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KT: Medical always.

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Suze: What if you have the ability to take money from

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Suze: an account while we're in retirement to pay for those

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Suze: medical bills.

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Suze: The deductibles, all those things tax free. Wouldn't that be

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Suze: a really wise way to use the money that's in

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Suze: a health savings account?

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KT: Sounds good to me.

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Suze: And aren't we spending more money on medical bills now

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Suze: that we're in our seventies than we did in our

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Suze: fifties in our forties and our thirties?

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KT: Always, we always get older. He ain't gonna get younger.

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Suze: So officially, it's not a retirement account,

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Suze: but given your biggest bills in retirement happen to be

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Suze: medical bills. It's not a bad idea if you have

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Suze: the money to pay for those medical bills, not from

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Suze: your HSA but from your own money while you're younger

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Suze: and let that money stay within the HSA, growing tax free.

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Suze: If it's used for a medical expense that's qualified when

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Suze: you are older,

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Suze: that's how many people use it.

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KT: Next question is from Liz. Hi Suze and KT does

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KT: it make much of a difference to work on increasing

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KT: a credit score once it's reached 800?

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KT: Wait, this makes me laugh because Liz, you already have

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KT: like a great credit score but why wouldn't you want

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KT: to just keep it? So of course you want to

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KT: keep working on it, right? (Suze makes the wrong answer noise) Ok. So does it make

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KT: a difference to it?

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Suze: No it does not. When it comes to a FICO  score, they

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Suze: have certain areas, certain sectors and anything

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Suze: from 800 truthfully all the way up to 850 which

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Suze: is the highest

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Suze: you're going to get the exact same interest rate. So

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Suze: it really doesn't matter. If you simply want to do

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Suze: it because it's a game that you want to play

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Suze: with yourself. Ok. But really, I want Fred about it

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Suze: as long as your FICO score is above 800.

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KT: Ok. My last question is from Diana. Hi, KT and Suze.

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KT: So grateful for your podcast and listen often, but don't

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KT: think this question has come up. Ok. Let's see, Diana,

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KT: I have an IRA with my trust as the beneficiary.

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KT: My three kids are beneficiaries of that trust. Does that

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KT: mean there is $750,000 insurance on that Ira?

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Suze: Not necessarily girlfriend, because normally when you have an IRA,

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Suze: a lot of times you have that money invested in

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Suze: mutual funds, exchange traded funds and things like that. All right.

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Suze: And so the insurance that you're talking about $750,000 of

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Suze: insurance is usually considered FDIC insurance for certificates of deposits

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Suze: at banks or NCUA which are certificates of deposits at

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Suze: credit union or anything that you have invested there in

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Suze: a bank or a credit union.

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Suze: If however, you have money within an IRA invested in stocks,

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Suze: mutual funds, um, corporate bonds, whatever it may be, then

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Suze: that $750,000 does not apply. However, if the trust is

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Suze: the beneficiary of a CD or whatever it may be

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Suze: depending on the numbers of beneficiaries that you have.

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Suze: Then, absoutely, each one has a $250,000 limit. There you go.

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KT: I said that was last. But I just want to

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KT: do this one from Dee because it's about New Jersey

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KT: where I'm from. Ready for this one.

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Suze: There you go. That's a new reason.

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KT: No, no, no. Listen, it's a short one, but it's important, Suze.

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KT: I bought a home last year in

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KT: in a New Jersey suburb at $125,000 over the asking price.

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Suze: And she did that a year ago?

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KT: And yeah, last year, hold on... due to high demand

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KT: and market values. I'm concerned I may not get my

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KT: money back when I'm ready to sell in about 5

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KT: to 8 years.

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KT: So this is a good question. What's the best way

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KT: to mitigate this potential loss? Given the high selling cost?

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Suze: What makes you think that you are going to have

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Suze: a loss, especially 5 to 8 years from now? All right.

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Suze: So ask yourself this question, Dee, why did you buy

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Suze: the home when you bought it?

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Suze: A home isn't necessarily an investment. A home happens to

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Suze: be where you live, where you love to live, where

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Suze: you feel secure, where you feel safe. You don't even

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Suze: know in five or eight years if you're even gonna

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Suze: sell it or not. But I don't think you're going

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Suze: to see homes depreciate in value.

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Suze: So I have a feeling you don't have to worry

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Suze: about a potential loss because I just don't think it's

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Suze: going to happen in this situation.

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Suze: All right, KT, you ready? Tell everybody what quizzy time

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Suze: is all about.

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KT: Quizzy time is when Suze asks KT and everyone listening

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KT: a question.

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Suze: And why do we do that, KT?

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KT: So that we can all learn more?

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Suze: Yeah, I think

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Suze: it's really important, everybody, that, you know the correct answers

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Suze: to questions, you know, when something is wrong and then

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Suze: you correct it. It's, that's very important even when you

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Suze: correct me. Fine. No problem. But you have to know

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Suze: when something's wrong because we all make mistakes. So this

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Suze: is all of us being given a chance to answer

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Suze: questions correctly.

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Suze: Hi, KT and Suze. This is from Ellen. I'm a

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Suze: longtime fan and faithful podcast listener. I am 67 and

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Suze: retired for about two years. Luckily, my social security covers

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Suze: most of my daily living expenses. The only time I

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Suze: need to draw from my savings is for extras, like

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Suze: travel or unusual expenses.

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Suze: I have all my money in several buckets. Regular savings accounts.

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Suze: A traditional IRA, a rollover IRA and Roth Ira accounts.

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Suze: Here's your quizzy KT.

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Suze: My question is which bucket do I draw from? 1st, 2nd,

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Suze: et cetera.

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Suze: Do you understand the question?

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KT: I think the easiest one to withdraw from without any

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KT: penalties or dings or concern.

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Suze: She's 67 so penalties do not matter ok.

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KT: Regular savings would be the first one I would take

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KT: money out of if I need it. Like, if I

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KT: wanna go on a travel, you know, I wanna go

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KT: see my kids or something, regular savings would be one

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KT: and then the second choice probably would be the Roth.

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Suze: Final answer?

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KT: Yeah.

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KT: (Suze makes the wrong answer noise) Ok. All right. Everybody see the goal of the quiz

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KT: is to get the ding, ding ding, which is very

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KT: rare in, in my neighborhood.

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Suze: So Ellen here is why I went (Suze makes the wrong answer noise)

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Suze: to KT, which is: you are lucky enough to be

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Suze: living simply on your social security. All your other buckets

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Suze: except for your regular savings, which may not have a

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Suze: lot of money in it at all.

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Suze: Are your traditional IRA, your rollover IRA and your Roth

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Suze: IRA accounts, your Roth IRAs are growing tax free. So

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Suze: you should allow them to grow tax free for as

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Suze: long as you possibly can and do not touch them.

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Suze: You are not making that much money. Seems to me

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Suze: the only income that you really have is from your

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Suze: social security and given that you don't really have any

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Suze: income from anywhere else, your social security is tax free

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Suze: to you as well.

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Suze: So given that you're not really in a very high

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Suze: income tax bracket, if at all, why not take the

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Suze: money out of the traditional IRA or the rollover IRA

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Suze: that is taxable to you,

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Suze: because you could take out again if you're single. If

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Suze: you're not married, you could take out 15,000 a year

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Suze: or whatever it may be. Take the standard deduction off

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Suze: your taxes and guess what? You're not going to owe

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Suze: any taxes on that at all. So, the answer to

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Suze: this question would be

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Suze: your choice: Traditional IRA, rollover IRA, then the Roth IRAs

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Suze: and the last, your savings accounts because it's so easy

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Suze: to get at. That's how you would do it. All right, KT,

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Suze: what do you want to say to everybody?

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KT: I would have never got that right. I think to

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KT: go for the easy one first.

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Suze: That's true, KT, you go for the easy one first.

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Suze: That's how you got me because I was easy. I

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Suze: was like KT KT, pick me, pick me! All right. Guess what?

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Suze: We're only a few, like two weeks away from going

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Suze: to Abu Dhabi. How does that make you feel?

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KT: Pretty excited? Yeah, I can't wait.

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Suze: All right. I'm a little nervous everybody. That's why I

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Suze: always say it, but it's ok. We're going for it anyway.

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Suze: Until next time. There's only one thing that we really

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Suze: want you to remember when it comes to your money.

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Suze: And what is it KT?

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KT: People first, then money, then things

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Suze: And if you do that and stay safe, we promise

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Suze: you you will be unstoppable.