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Suze: December 1, 2022. Before we begin. Before we say anything.

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KT: Hi Suze.

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Suze: Hi KT, Good morning. I need to thank Sophia and Travis Race my niece

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Suze: and nephew for their surprise, Thanksgiving... I don't know was

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Suze: it a tribute KT? What was it?

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KT: It was a giving thanks to Aunt Suze. Oh my God,

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KT: it was so wonderful.

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Suze: And where did those two decide that they should do that

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Suze: Ms Travis? Did you encourage it at all?

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KT: Yeah, I did. I said you know

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KT: we want you to to say something on the podcast

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KT: to Aunt Suze. Let's make it a surprise. But the

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KT: why those two, we have many nieces and nephews. We

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KT: love them all. But Travis and Sophia grew up with

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KT: Aunt Kathy and Aunt Suze. So they're very special to us.

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KT: It's almost like our grandchildren. They're very, very special. And

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KT: we had Travis I think at the age of three

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KT: and Sophia was just born. So they've been...

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Suze: Tell everybody how old they are.

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KT: Travis is 25 which is makes sense. and Sophia is

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KT: 21 or 22,

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KT: We're getting old. Suze.

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Suze: Is she 22 or 23?

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KT: 23 I think there are three years apart.

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Suze: Well there's something like that, who cares? But

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KT: But they're brother and sisters that also love each other

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KT: so much. And Sophia was always in love with her

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KT: big brother but

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KT: it was really cute and for those of you that

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KT: didn't hear that little Aunt Suze tribute or what it

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KT: was like growing up with an Aunt Suze. You should

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KT: absolutely go back to Thanksgiving Day podcast and have a listen.

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KT: You will enjoy it.

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Suze: What else? Everybody will enjoy KT. They have two weeks

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Suze: left from today for the Suze holiday sweepstakes

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KT: with...

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Suze: Alliant Credit Union. So if you are not part of that yet,

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Suze: just go to my alliant dot com,

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Suze: join Alliant Credit Union. Read about it there. And if

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Suze: you've been a member of Alliant Credit Union with the

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Suze: Suze holiday sweepstakes, this is where in two weeks it

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Suze: will be over where two people will win $10,000 each. Again,

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Suze: you're automatically entered

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Suze: and you should have gotten an email with a link

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Suze: that you could send to friends and family members. And

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Suze: if they open an account at Alliant Credit Union, they're

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Suze: automatically entered into the sweepstakes and you get another entry.

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Suze: If you haven't gotten that email, go to my alliant

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Suze: A L L I A N T dot com

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Suze: slash Suze. All right, KT, we're doing something different today.

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Suze: I chose the questions and I decided that we can

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Suze: do question answer, question answer, question answer or we can

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Suze: do what I do on Sunday

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Suze: Suze School, where I go into real depth about a

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Suze: topic or we can do what I would like to

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Suze: do today, which is do an Ask KT and Suze

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Suze: Anything with like only two or three questions where I

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Suze: can go into depth

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Suze: with the answers of these questions and this is kind

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Suze: of an Ask KT and Suze Anything about the mistakes

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Suze: you cannot afford to make everybody. So get your little

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Suze: notebooks out. Keep your ears perked because you never know

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Suze: when you may fall into one of the situations like

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Suze: one of these emailers by the way, one last thing, KT.

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Suze: If you want us to answer your question, send it

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Suze: in to ask Suze, S U Z E podcast at

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Suze: gmail dot com. Or you can go on to the

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Suze: Women and Money app and you can ask your question

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Suze: there and if you're not part of the Women and

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Suze: Money app, you should be because that's where I am

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Suze: downloading updates on

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Suze: oil, Bitcoin, things that I'm not going to do on

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Suze: the podcast. If I need to say something in between

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Suze: a podcast. If that made sense. Alright, KT!

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KT: I just tried to follow. Okay, ready? The first question that

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KT: Suze selected is from Angela and this may be appropriate

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KT: for many of you out there. So listen up.

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KT: Hi, Suze. First and foremost, I want to thank you

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KT: for your generous dedication to people's financial literacy. Here is

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KT: my situation. My sibling and myself are slated to inherit

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KT: my mom's home upon her death, we are in a

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KT: living revocable trust.

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KT: This is the question now that Angela has, Suze after

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KT: the deed formalities. If we sold the property and split

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KT: the proceeds, would we pay ordinary income tax on monies gained?

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Suze: You know, quizzie. I'm sorry, you know, KT..

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KT: You can call me quizzie.

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Suze: Okay,

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KT: Some people call me the Quizzie Queen

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Suze: Right? So each one of these could be your little

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Suze: quizzie  as well. So on this one, just out of curiosity, everybody,

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Suze: because this is for all of you as well, you

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Suze: inherit a property. The property is in a living revocable

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Suze: trust

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Suze: when you get the property. And because it's in a

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Suze: living revocable trust, by the way, KT, it doesn't have

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Suze: to go through probate. It's not going to take them

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Suze: six months to one year and a whole lot of

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Suze: money to get the deed of this house into their

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Suze: name before they can even sell it.

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Suze: All they have to do is go down to the

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Suze: title company, change the deed from their mother's name to

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Suze: their name because of the trust. It's in the trust

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Suze: and it says to do that. Maybe it'll cost them

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Suze: a few $100 but it's there's within two weeks. All right.

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Suze: So now they have the house and their name and

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Suze: they want to sell it. Are they going to have

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Suze: to pay ordinary income tax on the gain of that house?

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KT: Well, I don't know if it's a yes. I think

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KT: it's a yes that they have to pay but I'm

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KT: not sure if it's on the gain of the house

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KT: at the value that the mom bought it or what.

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Suze: All right. So

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KT: So it's a little there's some layers there

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Suze: There's some layers there.

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KT: I remember that.

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Suze: Which is why everybody I wanted

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Suze: this question to be answered because all of you need

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Suze: to understand exactly how it works because there's no sense

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Suze: for you to be worried about something, thinking you have

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Suze: to pay for something at a time when you've just

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Suze: suffered a loss of a loved one. When that's not

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Suze: how it works

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Suze: because the house was in the mother's name whether or

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Suze: not it was in the mother's name, in a trust

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Suze: or it was in the mother's name and she was

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Suze: going to leave it to her kids via a will.

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Suze: Either way doesn't matter when it comes to taxes

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Suze: the day that the mommy dies whatever that house is

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Suze: valued at at that time,

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Suze: that is the cost basis of the house for the

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Suze: people inheriting it. So let me give you an example.

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Suze: You have this house. Mommy bought it and she bought

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Suze: it years ago and she bought it for $50,000. Maybe

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Suze: she bought it for $100,000. Nobody knows it's possible right

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Suze: that house today all these years later

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Suze: has appreciated in value and now it is worth $500,000.

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Suze: Maybe a million could be worth anything.

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Suze: Because Mommy died and left it to somebody, not just

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Suze: because it's to her kids, anybody that person gets what's

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Suze: called a step up in cost basis. So if the

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Suze: house is valued at $1 million dollars the day that

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Suze: mommy dies

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Suze: and you, my dear Angela turn around with your sibling

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Suze: and you sell it for a million dollars, you do

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Suze: not pay one penny of capital gains tax. However,

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Suze: if you get the house and it's worth $1 million today and you decide to hold that house another year. Now that house is worth

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Suze: $1,110,000 let's just say that's true.

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Suze: You now would owe either ordinary income tax on that

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Suze: $110,000 gain if it wasn't held for a year since

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Suze: you inherit it or you will pay capital gains tax

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Suze: on that $110,000 if you've owned it for over a year.

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Suze: This is assuming you did not take it over as

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Suze: your primary residency. If you moved into that house.

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Suze: Now you want to live in that house as your

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Suze: primary residency and maybe you even want to live in

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Suze: it with your sibling.

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Suze: Your cost basis is $1 million.

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Suze: And now you've lived in it for two out of

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Suze: the past five years as your primary residency. And now

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Suze: you both decide you want to sell it.

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Suze: You each have a $250,000 exemption.

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Suze: Because you lived in it as your primary residency. If

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Suze: only one of you did it, you get a $250,000 exemption.

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Suze: But you then could turn around and sell that house

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Suze: if just one of you did it for $1.25 million

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Suze: dollars

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Suze: and not pay any tax or $1.5 million if you

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Suze: both lived in

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Suze: it with that

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Suze: exemption or if one of you chooses to live in

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Suze: it with a spouse or somebody else and their name

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Suze: is entitle. That will count as well. I went into

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Suze: great detail with that because these are the things that

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Suze: you need to know everybody. Okay good.

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KT: Are there any disadvantages of

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KT: making that your primary residence? And well I guess not

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KT: unless you really stay there way longer and then the

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KT: whole value changes because you can go down.

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Suze: No, there were never KT be a disadvantage of making that

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Suze: your primary residency for a few reasons. Number one think

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Suze: of the emotional connection that those kids would have to

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Suze: that house if mommy had owned it for all those

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Suze: years and they were raised there

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Suze: and it's their home and the memories that are in

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Suze: that home and when they maybe have kids or nieces

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Suze: and nephews and they can say I used to sit

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Suze: in that corner and I used to do this. You

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Suze: know I have this memory of me

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Suze: in the living room of our house that I grew

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Suze: up in

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Suze: on the south side of Chicago. I think my parents,

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Suze: yeah they paid $14,000 for it and years later I

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Suze: don't think they got anywhere near 14,000. I think they

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Suze: sold it for 10 or 12,000. But that's besides the point.

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Suze: There was this little gold like bronze type little bowl,

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Suze: half bowl. And my mother loved that bowl and was

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Suze: so shiny and I would take that bowl and put

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Suze: it on the rug and I would sit in it

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Suze: and spin around so fast, I can't even tell you.

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Suze: And obviously I would bend the bowl out of shape

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Suze: because I kept doing it as I was getting bigger

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Suze: and bigger.

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Suze: And my mother would always say what is going on

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Suze: with this bowl. And I would just kind of look

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Suze: at her because it was like this brass, it was

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Suze: a thin bowl. It was like you know like just

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Suze: a little like that shaped. And so think about the

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Suze: memories that they may have in there. And I think

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Suze: memories are always worth more than money anyway. Yes.

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KT: All right. Next question from Samantha.

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KT: Hi KT and Suze. Oh she put KT first! Hi

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KT: KT and Suze. And you know why Suze picked this one?

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KT: Under the subject, it says "short and sweet email."

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KT: So we have a question about life insurance and whether

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KT: term or permanent is a good solution for our situation.

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KT: My husband age 34 and I age 37 are expecting

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KT: our first child in February 2023 Valentine's Day to be exact.

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Suze: Sweet.

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KT: What do you think of that, Suze? A love baby baby. I

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KT: will be staying at home as a full time mother

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KT: and my husband will continue working. We wanted to get

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KT: your advice about purchasing life insurance. Should we go for

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KT: a 10 year, 250,000 term policy for each of us

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KT: to be used in the event that we need to

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KT: pay off mortgage or any other expenses. We make similar

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KT: income so the surviving spouse would work and pay for

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KT: childcare as needed. Is this a good plan Suze or

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KT: a waste of money?

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Suze: Quizzie for everybody: How would you all answer that? What

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Suze: was the reason that I chose this question for an

232
00:15:27,950 --> 00:15:31,640
Suze: Ask KT and Suze Anything? Was it simply to say

233
00:15:31,650 --> 00:15:34,470
Suze: yeah it's a good idea. Get term insurance.

234
00:15:35,670 --> 00:15:39,270
Suze: Why this question? How would you answer Ms Travis?

235
00:15:39,580 --> 00:15:44,120
KT: Well they definitely should get term insurance having a child now

236
00:15:44,130 --> 00:15:49,850
KT: first child. But she said a 10 year policy now.

237
00:15:49,860 --> 00:15:52,890
KT: I'm just wondering if they could should get a longer

238
00:15:52,890 --> 00:15:55,380
KT: policy because the child

239
00:15:55,630 --> 00:15:59,220
KT: wouldn't be legal till they're 18. Right Suze? 18 and

240
00:15:59,220 --> 00:16:02,330
KT: that's when they could actually inherit or get money or..

241
00:16:02,410 --> 00:16:05,180
Suze: They could get money but could they even an 18 year old

242
00:16:05,180 --> 00:16:06,200
Suze: handle seriously?

243
00:16:06,210 --> 00:16:09,490
KT: Probably not. But I'm just saying that to kind of cut to the chase

244
00:16:10,770 --> 00:16:14,140
KT: they definitely should get term don't get whole life

245
00:16:14,140 --> 00:16:16,420
Suze: And but you're saying the only thing they should changes

246
00:16:16,420 --> 00:16:19,300
Suze: extend from 10 to like a 20 year level

247
00:16:19,300 --> 00:16:22,070
KT: But I think I'd only get it on on one.

248
00:16:22,070 --> 00:16:23,640
KT: I'd only get one policy

249
00:16:23,640 --> 00:16:24,660
Suze: And why is that?

250
00:16:25,000 --> 00:16:27,650
KT: Um why spend the money for both of them?

251
00:16:27,650 --> 00:16:28,540
Suze: Uh Huh. Good.

252
00:16:30,010 --> 00:16:30,530
Suze: Final Answer?

253
00:16:30,530 --> 00:16:31,380
KT: Yea.

254
00:16:31,390 --> 00:16:37,020
Suze: (Wrong Answer Noice) Oh God.

255
00:16:38,120 --> 00:16:42,040
Suze: Oh no you're doing so great.

256
00:16:42,050 --> 00:16:44,800
KT: Then they should both get it. You don't know which

257
00:16:44,800 --> 00:16:45,170
KT: one might pass

258
00:16:45,380 --> 00:16:50,710
Suze: Alright, here is the reason that I chose this question.

259
00:16:51,370 --> 00:16:54,810
Suze: The mistake that many of you are making,

260
00:16:54,810 --> 00:16:55,670
KT: ...and KT.

261
00:16:55,680 --> 00:17:00,250
Suze: The mistake that many of you are making is you

262
00:17:00,260 --> 00:17:07,540
Suze: are making assumptions. The assumption in here. Number 1 assumption was

263
00:17:07,540 --> 00:17:12,160
Suze: that we make similar incomes, so the surviving spouse would

264
00:17:12,160 --> 00:17:15,550
Suze: work and pay for childcare as needed.

265
00:17:16,090 --> 00:17:19,820
Suze: How many times have I had to help people?

266
00:17:20,630 --> 00:17:23,640
Suze: Because they were in a car accident.

267
00:17:24,390 --> 00:17:29,980
Suze: Two spouses, kid is at home, they're in a car accident.

268
00:17:29,990 --> 00:17:34,340
Suze: One of them is killed. The other one is injured

269
00:17:34,340 --> 00:17:41,320
Suze: so badly. Not necessarily not incapacitated but they can never

270
00:17:41,330 --> 00:17:47,440
Suze: work again or emotionally, they're so distraught because they just

271
00:17:47,440 --> 00:17:53,550
Suze: lost the love of their life, that emotionally they can't work.

272
00:17:53,859 --> 00:17:58,660
Suze: They just can't. They're devastated or physically

273
00:17:59,500 --> 00:18:02,640
Suze: they can't and they probably never will be able to.

274
00:18:03,190 --> 00:18:07,560
Suze: And then we assume that since both of these people

275
00:18:07,570 --> 00:18:11,550
Suze: according to what Samantha is saying here is that one

276
00:18:11,550 --> 00:18:15,640
Suze: will work and pay for childcare as needed. Are you sure?

277
00:18:15,650 --> 00:18:19,180
Suze: Are you sure they're going to be able to?

278
00:18:19,880 --> 00:18:24,220
Suze: So you always have to hope for the best but

279
00:18:24,220 --> 00:18:27,810
Suze: plan for the worst. So number one, both of you

280
00:18:27,820 --> 00:18:30,170
Suze: seriously need

281
00:18:30,920 --> 00:18:31,710
KT: a...

282
00:18:31,720 --> 00:18:36,490
Suze: policy, the length of the policy. How long should all

283
00:18:36,490 --> 00:18:38,860
Suze: of you have term insurance for?

284
00:18:39,369 --> 00:18:43,050
Suze: You should have term insurance till your youngest is at

285
00:18:43,050 --> 00:18:49,270
Suze: least 23-24 years of age because by then they're out

286
00:18:49,270 --> 00:18:52,730
Suze: of college, and they could if they had to

287
00:18:53,470 --> 00:18:57,090
Suze: probably support themselves. Obviously now

288
00:18:57,780 --> 00:19:01,010
Suze: there are many exceptions to the rule. If you have

289
00:19:01,010 --> 00:19:04,810
Suze: a special needs child or somebody on the spectrum or

290
00:19:04,810 --> 00:19:09,450
Suze: whatever it may be, you change that accordingly. But in

291
00:19:09,450 --> 00:19:13,910
Suze: the next 20 or 23 years while the child is

292
00:19:13,910 --> 00:19:18,850
Suze: growing older, you now have all of that time to

293
00:19:18,850 --> 00:19:21,930
Suze: pay down the mortgage to get out of debt to

294
00:19:21,930 --> 00:19:24,950
Suze: take the difference of what a whole life insurance policy

295
00:19:24,950 --> 00:19:26,100
Suze: would cost you.

296
00:19:26,760 --> 00:19:31,020
Suze: Which is probably 10 times what a term policy would

297
00:19:31,020 --> 00:19:35,200
Suze: cost you. And you've had the ability to put more

298
00:19:35,200 --> 00:19:39,270
Suze: money into your retirement accounts to save money. So along

299
00:19:39,270 --> 00:19:44,490
Suze: with all of that and hopefully having raised

300
00:19:44,810 --> 00:19:48,720
Suze: a really, you know, strong child that could take care of

301
00:19:48,720 --> 00:19:50,300
Suze: themselves as well.

302
00:19:50,310 --> 00:19:53,260
KT: Let's also put in something else into the equation. This

303
00:19:53,260 --> 00:19:54,670
KT: is child number one.

304
00:19:54,680 --> 00:19:59,619
Suze: Yes. So they may be going on a long time. However,

305
00:19:59,630 --> 00:20:04,600
Suze: they are 37 and 34 years of age. That's not

306
00:20:04,600 --> 00:20:05,540
Suze: why I'm saying that KT

307
00:20:05,540 --> 00:20:06,510
KT: OK

308
00:20:06,520 --> 00:20:09,410
Suze: Right there, 37 and 34,

309
00:20:09,680 --> 00:20:15,920
Suze: They're so young. So even a 20 year level term policy,

310
00:20:15,930 --> 00:20:20,360
Suze: which means a term insurance policy, that's good for 20

311
00:20:20,369 --> 00:20:21,459
Suze: years

312
00:20:22,000 --> 00:20:26,630
Suze: and the premiums are level for all 20 years, maybe

313
00:20:26,640 --> 00:20:32,800
Suze: they're young enough to do a 30 year level term policy. Now,

314
00:20:33,330 --> 00:20:36,270
Suze: the reason why I say that

315
00:20:37,109 --> 00:20:40,950
Suze: is that I want people to number one understand why

316
00:20:40,950 --> 00:20:45,479
Suze: you always want a term policy versus a whole life policy.

317
00:20:45,960 --> 00:20:50,050
Suze: In 99% of the cases you want term. You do

318
00:20:50,050 --> 00:20:54,389
Suze: not want a whole life a universal life or a

319
00:20:54,390 --> 00:20:58,540
Suze: variable life insurance policy. They are not worth it. They

320
00:20:58,540 --> 00:21:04,320
Suze: are not worth it. Remember, investments are investments, insurance is insurance.

321
00:21:04,320 --> 00:21:09,870
Suze: Life insurance do not mix the two. However,

322
00:21:10,260 --> 00:21:14,030
Suze: we now just discussed how both people need it and

323
00:21:14,030 --> 00:21:18,880
Suze: why we discussed how long the term should be for.

324
00:21:18,890 --> 00:21:25,439
Suze: What's really lacking here is the amount of life insurance

325
00:21:25,670 --> 00:21:33,100
Suze: in this particular situation. Their goal is to have $250,000.

326
00:21:33,109 --> 00:21:35,949
Suze: So if one person were to die,

327
00:21:36,510 --> 00:21:40,810
Suze: obviously the mortgage on the house would be paid off.

328
00:21:40,820 --> 00:21:44,980
Suze: Now I'm looking at this email and you didn't mention

329
00:21:44,980 --> 00:21:48,270
Suze: KT cause you were being succinct here. So I get that,

330
00:21:48,480 --> 00:21:55,440
Suze: that their current mortgage is $120,000. So in their mind,

331
00:21:55,640 --> 00:22:03,720
Suze: $250,000 would be enough to pay the $120,000 mortgage off

332
00:22:03,730 --> 00:22:08,369
Suze: and still leave them with $130,000 to do whatever.

333
00:22:09,430 --> 00:22:14,160
Suze: However, remember when I said, we don't know the other

334
00:22:14,160 --> 00:22:17,300
Suze: person will ever be able to work again. We don't

335
00:22:17,300 --> 00:22:20,199
Suze: know if they're seriously injured or what.

336
00:22:20,750 --> 00:22:25,460
Suze: So the true way that you figure how much life

337
00:22:25,470 --> 00:22:27,310
Suze: insurance you need

338
00:22:28,020 --> 00:22:32,760
Suze: is that in this particular case, for instance, they say

339
00:22:32,760 --> 00:22:39,690
Suze: that their monthly expenses are $5600 a month. Now that

340
00:22:39,700 --> 00:22:46,609
Suze: includes their mortgage. So since they only owe $120,000 more

341
00:22:46,609 --> 00:22:51,670
Suze: on that, let's just say their mortgage payment was $1000

342
00:22:51,670 --> 00:22:52,350
Suze: a month.

343
00:22:52,880 --> 00:22:58,040
Suze: So their expenses no longer will be $5600 a month.

344
00:22:58,050 --> 00:23:01,700
Suze: Let's just assume that maybe their monthly expenses will be

345
00:23:01,700 --> 00:23:04,580
Suze: cut to around $4500 a month.

346
00:23:05,340 --> 00:23:12,560
Suze: $45,000 a month is $54,000 a year. Now I just

347
00:23:12,560 --> 00:23:15,300
Suze: want you to put a pin in that for one second.

348
00:23:16,080 --> 00:23:23,230
Suze: Even if they only had a $250,000 term life insurance policy.

349
00:23:23,440 --> 00:23:33,910
Suze: $120,000 goes to the mortgage. That leaves the surviving spouse $130,000.

350
00:23:34,350 --> 00:23:40,000
Suze: This $54,000 a year need will not even last the

351
00:23:40,000 --> 00:23:43,560
Suze: surviving spouse three years.

352
00:23:44,859 --> 00:23:48,720
Suze: So now this spouse is in trouble. Do you see

353
00:23:48,720 --> 00:23:49,720
Suze: that KT?

354
00:23:49,730 --> 00:23:52,010
KT: So there's a formula that you want to tell them.

355
00:23:53,050 --> 00:23:56,160
Suze: Yes. So the formula goes like this:

356
00:23:56,910 --> 00:24:00,310
Suze: Whatever the annual need happens to be and in this

357
00:24:00,310 --> 00:24:07,870
Suze: case it's $54,000. You multiply that by 40

358
00:24:08,770 --> 00:24:10,330
Suze: in this example,

359
00:24:11,170 --> 00:24:24,570
Suze: that is $2,160,000. Why $2,160,000? It's very simple. Listen closely.

360
00:24:25,080 --> 00:24:31,380
Suze: Upon the death of a spouse in this situation, the

361
00:24:31,380 --> 00:24:36,980
Suze: surviving spouse will get $2,160,000 tax free.

362
00:24:37,640 --> 00:24:41,359
Suze: Now the surviving spouse pays off the mortgage because that's

363
00:24:41,359 --> 00:24:44,520
Suze: what they wanted to do and that will leave them

364
00:24:44,520 --> 00:24:56,399
Suze: with approximately $2 million. At this point, because we don't know, can the surviving spouse work? What can the surviving spouse do?

365
00:24:56,410 --> 00:25:00,869
Suze: So let's assume that the surviving spouse can't do anything

366
00:25:00,869 --> 00:25:03,190
Suze: possibly for the rest of their life.

367
00:25:03,930 --> 00:25:25,040
Suze: So they then take that $2 million and they invest it. They can invest it in, Treasury Notes, they can invest it in stocks, bonds, dividends. All kinds of things. But they could easily get approximately 4% on that

368
00:25:25,040 --> 00:25:30,090
Suze: money which gives them $80,000 a year.

369
00:25:30,970 --> 00:25:37,850
Suze: Now remember the need in this case was $54,000 a year,

370
00:25:38,070 --> 00:25:40,590
Suze: but that was after tax.

371
00:25:41,420 --> 00:25:47,130
Suze: Now this surviving spouse is getting 80,000 a year, most

372
00:25:47,130 --> 00:25:49,609
Suze: likely will be taxable.

373
00:25:50,220 --> 00:25:52,900
Suze: So after taxes,

374
00:25:53,730 --> 00:25:56,570
Suze: what you're going to see here is that the surviving

375
00:25:56,570 --> 00:26:01,870
Suze: spouse will easily have $54,000 a year to spend on

376
00:26:01,869 --> 00:26:08,180
Suze: their expenses and have extra money for growth and inflation.

377
00:26:08,260 --> 00:26:12,320
Suze: That is how it works.

378
00:26:12,930 --> 00:26:19,330
Suze: So in this situation they both need approximately $2 million

379
00:26:19,330 --> 00:26:20,250
Suze: dollars

380
00:26:21,010 --> 00:26:26,060
Suze: of a term life insurance policy to cover the what

381
00:26:26,070 --> 00:26:32,190
Suze: ifs of life. Now because they are so young, which

382
00:26:32,190 --> 00:26:34,820
Suze: is what I was pointing out a little bit ago

383
00:26:34,820 --> 00:26:35,939
Suze: to you, KT.

384
00:26:36,270 --> 00:26:39,210
Suze: At the age of 34 or 37...

385
00:26:39,859 --> 00:26:40,379
KT: In good health.

386
00:26:40,390 --> 00:26:44,290
Suze: In great health. It is not going to cost them

387
00:26:44,300 --> 00:26:47,580
Suze: a whole lot on any level.

388
00:26:47,580 --> 00:26:48,540
KT: For 30 years.

389
00:26:48,890 --> 00:26:53,830
Suze: For 30 years. It's something that they need to put in

390
00:26:53,840 --> 00:26:59,100
Suze: to their budget. Maybe it will be $200 a month,

391
00:27:00,210 --> 00:27:04,830
Suze: maybe less, who knows? But here's what you have to

392
00:27:04,830 --> 00:27:09,170
Suze: keep in mind, everybody. I just gave you the formula

393
00:27:09,180 --> 00:27:13,730
Suze: for two young people about to have a baby and

394
00:27:13,730 --> 00:27:17,220
Suze: they don't have any other assets, any other income.

395
00:27:18,119 --> 00:27:24,200
Suze: As you get older, you have to take into consideration,

396
00:27:24,220 --> 00:27:29,580
Suze: if you need $54,000 a year to live on.

397
00:27:30,130 --> 00:27:32,670
Suze: And let's say you're in a situation where maybe you

398
00:27:32,670 --> 00:27:36,970
Suze: qualify for widow's benefits or a pension or Social Security

399
00:27:36,980 --> 00:27:39,100
Suze: or whatever it may be.

400
00:27:40,300 --> 00:27:46,410
Suze: You would subtract from that 54,000 that you need, all

401
00:27:46,420 --> 00:27:49,649
Suze: the income that you know is going to come in,

402
00:27:49,650 --> 00:27:54,320
Suze: whether you work or not. Maybe you have a big

403
00:27:54,330 --> 00:27:59,459
Suze: IRA or retirement account that can generate for you 10,

404
00:27:59,470 --> 00:28:03,899
Suze: 15 or $20,000 a year of income. So therefore your

405
00:28:03,900 --> 00:28:08,630
Suze: true need would only be maybe in this situation $34,000

406
00:28:08,630 --> 00:28:09,310
Suze: a year.

407
00:28:09,930 --> 00:28:15,750
Suze: So whatever your annual need is after all your other

408
00:28:15,750 --> 00:28:20,149
Suze: sources of income that you don't have to work for,

409
00:28:20,190 --> 00:28:26,570
Suze: that is the figure that you multiply by 40 to

410
00:28:26,570 --> 00:28:32,490
Suze: give yourself the correct amount of insurance that you need.

411
00:28:33,010 --> 00:28:35,330
Suze: As you get older,

412
00:28:36,170 --> 00:28:41,120
Suze: again, hopefully you will not need any insurance at all

413
00:28:41,130 --> 00:28:45,350
Suze: because your assets will have accumulated and you would have

414
00:28:45,350 --> 00:28:49,390
Suze: built up equity in your home and everything else. So

415
00:28:49,390 --> 00:28:54,750
Suze: that eventually no life insurance is needed. So this formula

416
00:28:54,750 --> 00:28:57,440
Suze: that I just gave you really

417
00:28:57,910 --> 00:29:02,110
Suze: works well for those of you who are really young,

418
00:29:02,120 --> 00:29:04,810
Suze: you haven't had a chance yet to build up your

419
00:29:04,820 --> 00:29:10,940
Suze: assets and term insurance is still seriously affordable for all

420
00:29:10,940 --> 00:29:14,140
Suze: of you. That's what you need to know.

421
00:29:14,430 --> 00:29:17,850
KT: So Suze, that was a great lesson and I'm glad

422
00:29:17,850 --> 00:29:21,070
KT: you said everyone straight and gave them a formula to

423
00:29:21,070 --> 00:29:24,040
KT: use and think about. But listen to this next email.

424
00:29:24,040 --> 00:29:27,960
Suze: Yes. Now everybody, I chose this next email

425
00:29:28,480 --> 00:29:32,860
Suze: because this is not just happening to this person.

426
00:29:33,850 --> 00:29:34,209
KT: It happens to so many...

427
00:29:34,210 --> 00:29:37,470
Suze: It is happening to so many of you now that it

428
00:29:37,480 --> 00:29:40,520
Suze: actually makes me sick to my stomach.

429
00:29:40,530 --> 00:29:41,110
KT: So let me get to it.

430
00:29:42,280 --> 00:29:45,840
Suze: Wait, wait. If any financial advisor tells you to do

431
00:29:45,840 --> 00:29:49,700
Suze: this and you do it in my opinion, you are

432
00:29:49,700 --> 00:29:53,620
Suze: making one of the biggest mistakes out there, go for it KT.

433
00:29:53,620 --> 00:29:57,090
KT: This is from Joan. And sadly she said

434
00:29:57,420 --> 00:30:00,440
KT: Suze, I just retired at the end of April and

435
00:30:00,440 --> 00:30:05,070
KT: I wish I started listening to you much sooner. Everyone

436
00:30:05,070 --> 00:30:09,430
KT: says that, Joan you're not alone. Anyway, was wondering what

437
00:30:09,430 --> 00:30:14,380
KT: your thoughts are on including a whole life insurance policy

438
00:30:14,510 --> 00:30:19,160
KT: as part of my portfolio. Right there is a big

439
00:30:19,170 --> 00:30:25,290
KT: red flag, Suze. Ready? says my investments are all tax deferred.

440
00:30:25,880 --> 00:30:33,180
KT: A certified financial planner is suggesting I convert $50,000 a

441
00:30:33,180 --> 00:30:38,730
KT: year for 10 years from my IRA into this policy

442
00:30:39,070 --> 00:30:46,010
KT: at year 11, it starts paying me $38,000 a year

443
00:30:46,020 --> 00:30:51,450
KT: for 15 years. Tax free. Which reduces the death benefit.

444
00:30:51,840 --> 00:30:55,340
KT: That would also be tax free, wow.

445
00:30:56,110 --> 00:30:59,660
KT: This is giving me goose bumps and memories of my

446
00:30:59,660 --> 00:31:04,000
KT: mistake Suze. But then then joan says so many options,

447
00:31:04,010 --> 00:31:08,030
KT: so many opinions, I do value yours

448
00:31:08,040 --> 00:31:13,040
Suze: Again, I chose this email because I don't want this

449
00:31:13,050 --> 00:31:15,300
Suze: ever to happen to any of you.

450
00:31:16,000 --> 00:31:17,880
Suze: The red flags here are this

451
00:31:18,680 --> 00:31:25,820
Suze: her certified financial planner which just shocks me because most C. F.

452
00:31:25,820 --> 00:31:29,660
Suze: P.s are so integris, they've had to pass an exam.

453
00:31:29,660 --> 00:31:33,810
Suze: I've had my C. F. P. Designation since the middle eighties.

454
00:31:33,880 --> 00:31:39,140
Suze: A certified financial planner is suggesting to this woman, to

455
00:31:39,140 --> 00:31:39,890
Suze: Joan

456
00:31:40,640 --> 00:31:47,540
Suze: that she take $50,000 a year out of her, IRA.

457
00:31:49,320 --> 00:31:56,260
Suze: That means Joan is going to have to pay ordinary

458
00:31:56,270 --> 00:32:00,740
Suze: income tax on that. $50,000, number one.

459
00:32:01,150 --> 00:32:05,080
Suze: Number two, she says that she just retired at the

460
00:32:05,080 --> 00:32:09,400
Suze: end of April which may also mean that she is

461
00:32:09,400 --> 00:32:15,840
Suze: starting to collect Social Security as well as Medicare. So

462
00:32:15,850 --> 00:32:19,660
Suze: withdrawing $50,000 of income

463
00:32:20,300 --> 00:32:24,710
Suze: from her IRA, is not only going to put her

464
00:32:24,710 --> 00:32:30,540
Suze: in a higher income tax bracket, number one. Number two,

465
00:32:30,550 --> 00:32:34,650
Suze: she's gonna owe income tax on 85% of her Social

466
00:32:34,650 --> 00:32:38,730
Suze: Security and she is going to pay more tax on

467
00:32:38,730 --> 00:32:42,560
Suze: her Medicare B premium. That's number one.

468
00:32:43,140 --> 00:32:48,310
Suze: So even though she is going to be depositing $50,000

469
00:32:48,310 --> 00:32:54,490
Suze: directly from her IRA into this whole life insurance policy.

470
00:32:54,500 --> 00:32:58,880
Suze: Where is she going to come up with the 10,000

471
00:32:58,890 --> 00:33:02,690
Suze: or more of money that she is going to owe

472
00:33:02,690 --> 00:33:06,280
Suze: an income tax? Just put a pin in that for

473
00:33:06,290 --> 00:33:07,410
Suze: a second.

474
00:33:07,840 --> 00:33:09,980
Suze: KT, Have you noticed my new phrase?

475
00:33:10,000 --> 00:33:11,360
KT: Put a pin in it, Put a

476
00:33:11,360 --> 00:33:13,450
Suze: pin in it, Put a pin in. What's that song?

477
00:33:13,450 --> 00:33:13,979
Suze: Put a pin in

478
00:33:13,980 --> 00:33:14,880
KT: it or

479
00:33:14,880 --> 00:33:18,270
Suze: something. Alright anyway, next

480
00:33:19,560 --> 00:33:25,280
Suze: She is going to be doing this for 10 years.

481
00:33:25,290 --> 00:33:27,750
Suze: Then in year 11

482
00:33:28,140 --> 00:33:34,590
Suze: It starts to pay her $38,000 a year tax free

483
00:33:34,600 --> 00:33:36,900
Suze: for the next

484
00:33:36,910 --> 00:33:38,170
KT: 15,

485
00:33:38,180 --> 00:33:39,600
Suze: 15 years?

486
00:33:39,670 --> 00:33:42,460
KT: I just want to give everyone some numbers. Let's assume she

487
00:33:42,460 --> 00:33:46,830
KT: retired at 65, she's going to be 76, 15 years

488
00:33:46,830 --> 00:33:50,960
KT: after that, 91 years old. And she still isn't making

489
00:33:50,960 --> 00:33:51,480
KT: money. Alright. She's still losing

490
00:33:54,350 --> 00:33:56,550
Suze: Wait, wait. So say what you just said again

491
00:33:56,710 --> 00:33:59,550
Suze: All the way from 65

492
00:33:59,560 --> 00:34:00,310
KT: to 91.

493
00:34:00,320 --> 00:34:01,630
Suze: All the way

494
00:34:03,140 --> 00:34:07,930
Suze: All the way from 65 to 76,

495
00:34:08,800 --> 00:34:13,730
Suze: Joan is going to have to be putting $50,000 a

496
00:34:13,730 --> 00:34:15,350
Suze: year into this policy.

497
00:34:16,580 --> 00:34:22,150
Suze: What happens if Joan gets ill? What happens if Joan

498
00:34:22,160 --> 00:34:26,989
Suze: needs home health care? What happens if Joan as she's

499
00:34:26,989 --> 00:34:30,590
Suze: getting older possibly, needs to do what?

500
00:34:31,230 --> 00:34:36,310
Suze: Go  into insist an assited living facility? What happens? Where does

501
00:34:36,310 --> 00:34:40,259
Suze: that money come from? And now she needs more money

502
00:34:40,260 --> 00:34:42,930
Suze: to live on and she can't afford to put the

503
00:34:42,930 --> 00:34:47,790
Suze: $50,000 a year in. Just just think about that.

504
00:34:48,500 --> 00:34:54,440
Suze: So now she's 76. She doesn't have to put money

505
00:34:54,440 --> 00:34:59,540
Suze: in anymore and now for the next 15 years, how

506
00:34:59,550 --> 00:35:00,730
Suze: old will she be at that

507
00:35:00,730 --> 00:35:01,260
Suze: point?

508
00:35:01,510 --> 00:35:03,810
KT: 91

509
00:35:04,910 --> 00:35:12,189
Suze: 91! All she's gotten is $38,000 tax free. Then after that

510
00:35:12,230 --> 00:35:15,450
Suze: it doesn't say what happens but the death benefit now

511
00:35:15,450 --> 00:35:18,770
Suze: is reduced. So Joan,

512
00:35:19,469 --> 00:35:21,170
Suze: just imagine

513
00:35:21,750 --> 00:35:28,480
Suze: that you left that $50,000 a year in your IRA.

514
00:35:28,489 --> 00:35:31,700
Suze: Just let's imagine you did so and you did it

515
00:35:31,700 --> 00:35:34,200
Suze: for 10 years

516
00:35:35,060 --> 00:35:40,900
Suze: Just at 4%. If all you made on it was 4%

517
00:35:40,950 --> 00:35:44,839
Suze: and you could put right now $500,000 which is what

518
00:35:44,840 --> 00:35:48,750
Suze: that adds up to right now into a you know

519
00:35:48,760 --> 00:35:51,950
Suze: Treasury and get 4.5%. But just let's say you could

520
00:35:51,960 --> 00:35:56,660
Suze: easily get 4% for the next 10 years which you

521
00:35:56,660 --> 00:35:59,969
Suze: will be able to do. Do you know that 10

522
00:35:59,969 --> 00:36:01,070
Suze: years from now

523
00:36:01,410 --> 00:36:09,560
Suze: you would have approximately $625,000 in your ira

524
00:36:10,820 --> 00:36:11,779
Suze: Think about that.

525
00:36:12,510 --> 00:36:18,430
Suze: Now if you were to just earn 4% on that

526
00:36:18,430 --> 00:36:26,370
Suze: 625,000 that's like $25,000 a year. That you could easily withdraw.

527
00:36:26,380 --> 00:36:28,080
Suze: Yeah and pay taxes on.

528
00:36:28,590 --> 00:36:32,020
Suze: But you could do that forever and you could probably

529
00:36:32,020 --> 00:36:36,469
Suze: withdraw a whole lot more because really 4% if the

530
00:36:36,469 --> 00:36:39,050
Suze: money was invested in, certain things was done with it,

531
00:36:39,060 --> 00:36:44,719
Suze: you could easily have that generate 35 - 40,000 a year.

532
00:36:45,560 --> 00:36:48,010
Suze: if you wanted to, number one.

533
00:36:48,670 --> 00:36:52,040
Suze: The $10,000 a year that you are probably going to

534
00:36:52,040 --> 00:36:58,250
Suze: have to pay taxes on that $50,000 if you left

535
00:36:58,250 --> 00:37:02,390
Suze: that wherever you would have left it at 4% in

536
00:37:02,390 --> 00:37:08,290
Suze: 10 years, that could be like another $124,000 - $125,000.

537
00:37:09,070 --> 00:37:14,360
Suze: That could easily generate another $5,000 a year of income.

538
00:37:14,370 --> 00:37:17,460
Suze: So you're easily at $30,000 a year.

539
00:37:18,370 --> 00:37:23,730
Suze: But the good news is you haven't touched one penny

540
00:37:23,870 --> 00:37:25,569
Suze: of your principal.

541
00:37:26,360 --> 00:37:32,380
Suze: You could have such a larger income. Who cares if

542
00:37:32,380 --> 00:37:36,839
Suze: you're paying taxes on it or not over these next years.

543
00:37:36,850 --> 00:37:40,690
Suze: If you wanted to you could be converting some money

544
00:37:40,700 --> 00:37:46,930
Suze: into a ROTH IRA investing it there, let it grow there

545
00:37:46,960 --> 00:37:49,299
Suze: over the years. If you wanted to

546
00:37:50,670 --> 00:37:53,300
Suze: and take out money tax free.

547
00:37:54,330 --> 00:37:59,359
Suze: This is one of the biggest ripoffs I've ever heard

548
00:37:59,360 --> 00:38:00,860
Suze: of in my life.

549
00:38:01,540 --> 00:38:07,130
Suze: I have no doubt that the commission on this is exorbitant.

550
00:38:07,140 --> 00:38:11,750
Suze: It would not surprise me if it was thousands and

551
00:38:11,750 --> 00:38:14,590
Suze: thousands of dollars in commission.

552
00:38:15,110 --> 00:38:17,739
Suze: I just want to take a few more minutes for

553
00:38:17,739 --> 00:38:21,070
Suze: you to understand how these work.

554
00:38:21,860 --> 00:38:27,190
Suze: You put money in. It is a life insurance policy

555
00:38:27,190 --> 00:38:32,480
Suze: with a death benefit. Every single life insurance policy. When

556
00:38:32,480 --> 00:38:34,879
Suze: there is a death benefit

557
00:38:35,730 --> 00:38:40,730
Suze: Charges, what's called a mortality charge, they charge you for

558
00:38:40,730 --> 00:38:45,580
Suze: that insurance. They take it from your money. They're not

559
00:38:45,580 --> 00:38:49,850
Suze: giving you insurance for free. Just so you know, in

560
00:38:49,850 --> 00:38:52,560
Suze: most cases anyway, number one.

561
00:38:53,300 --> 00:38:55,830
Suze: As the years go on

562
00:38:56,620 --> 00:39:01,820
Suze: and you now are taking out money tax free. The

563
00:39:01,820 --> 00:39:05,830
Suze: reason that it's tax free is you take it out

564
00:39:05,840 --> 00:39:07,360
Suze: as a loan.

565
00:39:08,070 --> 00:39:13,489
Suze: You are loaning out your own money and because it's

566
00:39:13,500 --> 00:39:18,080
Suze: a loan, there are no taxes on it. But there

567
00:39:18,090 --> 00:39:22,950
Suze: is an interest rate, believe it or not. And even

568
00:39:22,960 --> 00:39:26,760
Suze: if it's at what they call a net 0% interest

569
00:39:26,760 --> 00:39:30,920
Suze: rate if the policy doesn't perform the way that it

570
00:39:30,920 --> 00:39:35,419
Suze: needs to inside, to generate that they've paid you out

571
00:39:35,420 --> 00:39:36,170
Suze: this money.

572
00:39:36,350 --> 00:39:41,370
Suze: The policy starts to decrease and decrease in value, which

573
00:39:41,370 --> 00:39:44,780
Suze: they're already telling you that the life insurance is going

574
00:39:44,780 --> 00:39:46,029
Suze: to go down.

575
00:39:46,850 --> 00:39:49,270
Suze: And they're only quoting 15 years.

576
00:39:50,540 --> 00:39:53,400
Suze: They are making so much money off of you. It's

577
00:39:53,400 --> 00:39:54,760
Suze: not even funny.

578
00:39:55,900 --> 00:40:01,450
Suze: So none of you are ever ever should do anything

579
00:40:01,460 --> 00:40:07,109
Suze: like what Joan was just asked to do. It will

580
00:40:07,110 --> 00:40:10,930
Suze: be one of the biggest mistakes you ever make.

581
00:40:11,670 --> 00:40:15,380
Suze: So in summary, KT, how is that for an Ask

582
00:40:15,380 --> 00:40:17,000
Suze: KT and Suze Anything?

583
00:40:17,000 --> 00:40:20,100
KT: I like it because it was very thorough, especially to

584
00:40:20,100 --> 00:40:23,009
KT: help people with this insurance debacle.

585
00:40:23,020 --> 00:40:28,700
Suze: And little things such as understanding that you don't owe

586
00:40:28,710 --> 00:40:32,879
Suze: any income taxes on a home when you inherit it.

587
00:40:32,950 --> 00:40:37,450
Suze: To understand very briefly why you absolutely need a living

588
00:40:37,450 --> 00:40:41,520
Suze: revocable trust versus inheriting it via probate.

589
00:40:41,680 --> 00:40:44,980
Suze: You know, so many things that all of you need

590
00:40:44,980 --> 00:40:51,790
Suze: to understand and I hope today's Ask Suze and KT

591
00:40:51,800 --> 00:40:56,580
Suze: "elongated version" helped you all

592
00:40:56,850 --> 00:40:59,140
Suze: get a little what KT?

593
00:40:59,150 --> 00:41:03,100
KT: Smarter, stronger and always

594
00:41:03,100 --> 00:41:09,050
Suze: Secure. Alright, everybody see you on Sunday for Suze School.

595
00:41:09,060 --> 00:41:12,500
Suze: I already know what it is, but I'm not gonna tell you.

596
00:41:12,770 --> 00:41:12,890
KT: Don't tell!

597
00:41:14,550 --> 00:41:20,069
Suze: Alright until then you stay safe. Bye bye everybody.