1 00:00:45,909 --> 00:00:48,129 Suze: February 1st 2024 2 00:00:48,139 --> 00:00:50,159 KT: The month of Love. 3 00:00:52,310 --> 00:00:55,040 Suze: Does that give you an idea of what this podcast 4 00:00:55,049 --> 00:00:55,990 Suze: today is going to 5 00:00:56,040 --> 00:00:57,299 KT: The Month of Love... 6 00:00:57,930 --> 00:01:00,619 Suze: And that's because why Valentine's Day, right? 7 00:01:00,849 --> 00:01:04,819 KT: Yeah. And I'm in love with my little Hot Island 8 00:01:04,949 --> 00:01:08,220 KT: where we're back today. We're so happy. 9 00:01:08,930 --> 00:01:11,209 Suze: So, as all of you may not. Well, first of all, 10 00:01:11,220 --> 00:01:12,019 Suze: KT 11 00:01:12,279 --> 00:01:15,768 KT: Yeah. Welcome to the Women and Money Podcast. Everybody. This 12 00:01:15,779 --> 00:01:19,589 KT: is where you ask KT anything and she's gonna ask 13 00:01:19,599 --> 00:01:23,760 KT: Suze and we're gonna answer your questions with advice you 14 00:01:23,769 --> 00:01:26,419 KT: won't believe is gonna change your life. 15 00:01:28,610 --> 00:01:30,379 KT: I'm in a happy mood. 16 00:01:32,199 --> 00:01:36,690 Suze: She's happy, she's happy, but welcome everybody like she said 17 00:01:36,699 --> 00:01:40,410 Suze: to the Women and Money podcast. But also everybody smart 18 00:01:40,419 --> 00:01:44,809 Suze: enough to listen. We welcome you all here on the podcast. 19 00:01:44,819 --> 00:01:47,150 Suze: It is Suze O and, KT 20 00:01:47,489 --> 00:01:54,690 Suze: And KT, what did you think about last Sunday's game, with the Kansas City Peep? 21 00:01:55,169 --> 00:01:58,639 KT: Oh my God. First of all, it was so exciting. 22 00:01:58,809 --> 00:02:01,989 KT: I'm so happy that the Chiefs won. And if I 23 00:02:02,000 --> 00:02:05,349 KT: were those Chiefs, I would hightail it back to Kansas 24 00:02:05,360 --> 00:02:10,619 KT: City and go right to Bryant's barbecue. Baby, Arthur. You 25 00:02:10,630 --> 00:02:14,589 KT: and I went to Arthur Bryant's Arthur Bryant's barbecue and 26 00:02:14,600 --> 00:02:16,210 KT: Suze had a slab. 27 00:02:18,445 --> 00:02:21,595 KT: We got real dirty there. We were on our bus tour, 28 00:02:21,604 --> 00:02:22,913 Suze: We got dirty, meaning how? 29 00:02:22,925 --> 00:02:26,044 KT: meaning we got really sticky and gooey and 30 00:02:26,335 --> 00:02:28,875 Suze: Well you get, when you eat BBQ. 31 00:02:29,074 --> 00:02:32,285 KT: It was so good. I had chicken 32 00:02:32,940 --> 00:02:33,529 KT: because I don't eat... 33 00:02:33,538 --> 00:02:37,970 Suze: KT, let's get back to it now. All right, we've 34 00:02:37,979 --> 00:02:40,008 Suze: got a little bit of time till the Super Bowl. 35 00:02:40,020 --> 00:02:44,130 Suze: So I can't wait. Now, why I can't wait for 36 00:02:44,139 --> 00:02:47,669 Suze: the Super Bowl. Who do you think's gonna win? 49er 37 00:02:47,960 --> 00:02:51,339 Suze: Kansas City, you know who I'm rooting for, but I 38 00:02:51,350 --> 00:02:51,679 Suze: hope 39 00:02:51,770 --> 00:02:55,429 Suze: you didn't wait to take advantage of the 18 to 40 00:02:55,440 --> 00:03:01,270 Suze: 23 month certificates of deposits at Alliant Credit Union because 41 00:03:01,279 --> 00:03:07,339 Suze: as of today, they absolutely lowered their rates. So they're 42 00:03:07,350 --> 00:03:14,720 Suze: currently at 5.15% or for deposits of $75,000 or more. 43 00:03:14,729 --> 00:03:17,910 Suze: It's 5.20%. 44 00:03:18,179 --> 00:03:20,720 Suze: Now, there are still great rates, especially if you go 45 00:03:20,729 --> 00:03:22,759 Suze: out to 23 months. 46 00:03:23,639 --> 00:03:27,019 Suze: But right now I'd have to tell you my favorite 47 00:03:27,429 --> 00:03:31,259 Suze: really is the 12 month, but you would get it 48 00:03:31,270 --> 00:03:36,029 Suze: to go out to 17 months and lock in that 49 00:03:36,039 --> 00:03:43,979 Suze: 5.4 or 5.45% for deposits of $75,000 or more. 50 00:03:44,399 --> 00:03:48,500 Suze: I knew it. I had a feeling but either way 51 00:03:48,509 --> 00:03:50,979 Suze: if you want to take advantage of what's out there now, 52 00:03:51,029 --> 00:04:00,350 Suze: go to my alliant. That's myalliant.com. All right. KT, let's 53 00:04:00,360 --> 00:04:01,839 Suze: get to those questions. 54 00:04:01,850 --> 00:04:04,889 KT: We have quite a few still about 401ks 55 00:04:05,429 --> 00:04:09,820 KT: retirement. All based on that big fancy Susie school you 56 00:04:09,830 --> 00:04:11,339 KT: gave a couple of weeks ago. 57 00:04:11,350 --> 00:04:16,890 Suze: No, KT, I actually gave another one last Sunday. Obviously she did 58 00:04:16,899 --> 00:04:19,190 Suze: not listen to it. That's besides the point. 59 00:04:19,220 --> 00:04:22,570 KT: I don't think it was relevant for me. The 55 right? 60 00:04:22,579 --> 00:04:24,209 KT: The 55 61 00:04:24,238 --> 00:04:26,369 Suze: KT. It doesn't matter whether it was relevant 62 00:04:26,459 --> 00:04:28,760 Suze: to you or not, you need to learn these things 63 00:04:28,970 --> 00:04:32,209 Suze: in case you have a younger niece or nephew or 64 00:04:32,220 --> 00:04:34,839 Suze: a younger. Who knows that asks you a question. What 65 00:04:34,850 --> 00:04:35,989 Suze: do you mean? It's not relevant? 66 00:04:36,000 --> 00:04:37,880 KT: Oh, I thought you meant I need to know the 67 00:04:37,890 --> 00:04:41,279 KT: answers in case you were out sick or played hooky 68 00:04:41,290 --> 00:04:41,760 KT: one day. 69 00:04:41,820 --> 00:04:43,799 Suze: Will you just asked me a question all ready! 70 00:04:43,809 --> 00:04:46,369 KT: Here we go. Everybody. Let's get this, let's get this 71 00:04:46,380 --> 00:04:47,420 KT: show started. 72 00:04:47,738 --> 00:04:49,428 Suze: Like I'm the one stopping it? 73 00:04:50,089 --> 00:04:52,390 KT: This is a good one. This is from the wall. 74 00:04:52,399 --> 00:04:55,750 KT: I believe it says hi, Suze. I know you recently... 75 00:04:55,820 --> 00:04:57,928 Suze: When KT says the wall. 76 00:04:57,940 --> 00:04:58,868 KT: Oh, tell everyone. 77 00:04:58,940 --> 00:05:02,940 Suze: So I have a women and money community app and 78 00:05:02,950 --> 00:05:07,070 Suze: it has a Suze Wall where people ask questions and 79 00:05:07,079 --> 00:05:10,589 Suze: every once in a while we choose a question, KT 80 00:05:10,600 --> 00:05:13,709 Suze: looks at the wall and chooses a question from there. 81 00:05:14,140 --> 00:05:16,768 Suze: And I guess that's where she's choosing this. If you 82 00:05:16,779 --> 00:05:19,029 Suze: want to be part of the women and money community app, 83 00:05:19,290 --> 00:05:23,149 Suze: just go to Apple Apps or Google Play and Search 84 00:05:23,160 --> 00:05:27,019 Suze: for Women and Money or Suze Orman and you'll see it. 85 00:05:27,029 --> 00:05:27,549 Suze: All right. 86 00:05:27,559 --> 00:05:31,109 KT: Ok. So from the wall, this question came up. Hi, Suze. 87 00:05:31,119 --> 00:05:35,109 KT: I know you recently covered the order in which contributions 88 00:05:35,269 --> 00:05:40,589 KT: should be made to 401ks, Roth IRAs and Investment Accounts. 89 00:05:40,790 --> 00:05:44,869 KT: But where does long term care insurance fit into that order? 90 00:05:45,359 --> 00:05:49,380 KT: In my case, if I contribute to my employer's match 91 00:05:49,390 --> 00:05:54,799 KT: for my 401k and contribute to a Roth IRA, there's 92 00:05:54,809 --> 00:05:58,690 KT: nothing left for long term care insurance. I do believe 93 00:05:58,700 --> 00:06:01,359 KT: it's important, but I'm just not sure how to swing it. 94 00:06:01,940 --> 00:06:03,118 KT: What do you think Suze? 95 00:06:03,130 --> 00:06:05,558 Suze: I'll tell you what I think. I think the most 96 00:06:05,570 --> 00:06:07,839 Suze: important thing to understand 97 00:06:08,250 --> 00:06:12,868 Suze: is that you only buy, in my opinion, long term 98 00:06:12,880 --> 00:06:17,349 Suze: care insurance if you know, you could afford the premium 99 00:06:17,359 --> 00:06:22,209 Suze: now all the way into your mid-eighties or possibly even 100 00:06:22,220 --> 00:06:28,019 Suze: nineties because as time goes on and you can't afford 101 00:06:28,029 --> 00:06:30,940 Suze: it and therefore you have to drop it. All the 102 00:06:30,950 --> 00:06:35,750 Suze: money that you put towards it previously is just wasted. 103 00:06:35,980 --> 00:06:40,799 Suze: So for this particular question here is what concerns me 104 00:06:41,529 --> 00:06:44,149 Suze: and I think her title is, I want to be 105 00:06:44,160 --> 00:06:48,980 Suze: Money Smart. So if you want to be Money Smart, 106 00:06:49,200 --> 00:06:51,269 Suze: you have to look at reality here. 107 00:06:51,920 --> 00:06:54,339 Suze: You're saying to me and I don't know how old 108 00:06:54,350 --> 00:06:58,618 Suze: you are, but you're saying to me that you're only 109 00:06:58,630 --> 00:07:02,000 Suze: investing up to the point of the match in your 110 00:07:02,010 --> 00:07:06,169 Suze: 401k and then you contribute to the Roth IRA and 111 00:07:06,178 --> 00:07:11,329 Suze: then there's nothing left. And truthfully given that the contribution 112 00:07:11,339 --> 00:07:15,579 Suze: level to a Roth IRA is either seven or $8000 113 00:07:15,589 --> 00:07:18,540 Suze: this year, depending on how old you are. 114 00:07:18,790 --> 00:07:20,750 Suze: And up to the point of the match in your 115 00:07:20,760 --> 00:07:26,440 Suze: 401k isn't that much either if you really are that 116 00:07:26,450 --> 00:07:30,049 Suze: tight and there's nothing left now, even for long term 117 00:07:30,059 --> 00:07:33,230 Suze: care insurance now is not the time for you to 118 00:07:33,239 --> 00:07:37,230 Suze: be buying it. Do I think it's important? Absolutely. Do 119 00:07:37,239 --> 00:07:39,690 Suze: I think all of you should be looking at buying 120 00:07:39,700 --> 00:07:42,010 Suze: long term care insurance, especially when you're in, 121 00:07:42,084 --> 00:07:45,894 Suze: in your fifties because premiums are more affordable than you 122 00:07:45,904 --> 00:07:50,165 Suze: are still healthy at that point in time. Absolutely. But 123 00:07:50,174 --> 00:07:53,005 Suze: you have to be able to afford the premium all 124 00:07:53,015 --> 00:07:56,674 Suze: the way from in your fifties up until your mid 125 00:07:56,684 --> 00:07:59,584 Suze: eighties and possibly early nineties. 126 00:08:00,640 --> 00:08:04,100 Suze: And it's, it's pricey and you have to be able 127 00:08:04,109 --> 00:08:08,149 Suze: to factor in probably a 10 to 20% increase in 128 00:08:08,160 --> 00:08:12,420 Suze: premiums over those years, if not more. So, in this 129 00:08:12,429 --> 00:08:17,380 Suze: particular case, I wanna be smart. I know it's important, 130 00:08:17,390 --> 00:08:20,399 Suze: but if you have to swing it, it's not something 131 00:08:20,410 --> 00:08:23,540 Suze: that's for you at this point in time. All right, KT. 132 00:08:23,549 --> 00:08:25,649 KT: Ok. Next question is from Chris. 133 00:08:25,989 --> 00:08:29,170 KT: Hi, Suze and KT I'm a 40 year old manager 134 00:08:29,179 --> 00:08:35,409 KT: that makes about 84,000 gross annually. My employer provides a 4% 135 00:08:35,419 --> 00:08:39,729 KT: match to our 401k in reviewing my finances at the 136 00:08:39,739 --> 00:08:42,580 KT: start of the new year and taking into account what 137 00:08:42,590 --> 00:08:45,520 KT: I've learned from you. I think it makes sense to 138 00:08:45,530 --> 00:08:51,000 KT: change my 401k contribution to 4% to meet the match 139 00:08:51,010 --> 00:08:53,049 KT: and move the remaining 4%. 140 00:08:53,299 --> 00:08:58,030 KT: I was contributing over to the Roth IRA. Would you agree? 141 00:08:58,500 --> 00:08:59,530 Suze: Should that be your quizzy? 142 00:09:01,289 --> 00:09:02,950 KT: Yeah, you... this can be a quizzy. 143 00:09:03,469 --> 00:09:05,869 Suze: No, I have another quizzy for you. But do you 144 00:09:05,880 --> 00:09:07,150 Suze: want to, what would you answer? 145 00:09:08,260 --> 00:09:13,590 KT: Yeah, I would do that. I think any time you 146 00:09:13,599 --> 00:09:15,750 KT: can put money in a Roth, do it. 147 00:09:17,330 --> 00:09:21,919 Suze: Obviously, if you are contributing 4% over 148 00:09:22,260 --> 00:09:26,478 Suze: the point of the match in your employer's 401k, that 149 00:09:26,489 --> 00:09:31,880 Suze: isn't even a Roth 401k. You absolutely should only contribute 150 00:09:31,890 --> 00:09:34,760 Suze: up to the point of the match and whatever remaining 151 00:09:34,770 --> 00:09:40,090 Suze: money you can put into an individual Roth IRA. Next KT. 152 00:09:40,099 --> 00:09:43,390 KT: I got another Roth coming up. It says, hi, Suze and 153 00:09:43,400 --> 00:09:47,510 KT: KT from Rachel. My question is how to proceed with 154 00:09:47,520 --> 00:09:48,699 KT: growing my money, 155 00:09:49,349 --> 00:09:53,989 KT: Suze. I'm gonna ask you this. How do I grow? 156 00:09:55,390 --> 00:09:59,030 KT: I grow. I have a Garden Rachel. Now when it comes, 157 00:09:59,640 --> 00:10:03,960 KT: when it comes to money, that's Suze's green, not mine. Now, 158 00:10:03,969 --> 00:10:07,130 KT: she said my income is too high for a Roth Ira. 159 00:10:07,140 --> 00:10:11,289 KT: So I was planning on contributing the IRS allowable maximum 160 00:10:11,380 --> 00:10:13,979 KT: to a non-deductible IRA 161 00:10:14,520 --> 00:10:18,859 KT: and doing a backdoor. Roth and my company's 401k, even 162 00:10:18,869 --> 00:10:21,469 KT: though my company only matches 1%. 163 00:10:21,750 --> 00:10:26,750 Suze: So, so far KT this woman works for somebody. They 164 00:10:26,760 --> 00:10:30,419 Suze: have a 401k. She's contributing to it. But she also 165 00:10:30,429 --> 00:10:35,419 Suze: wants to do a backdoor Roth IRA at the same time. Ok. 166 00:10:35,429 --> 00:10:36,039 Suze: Go on. 167 00:10:36,049 --> 00:10:39,340 KT: Ok. I realized that due to the pro rata rule 168 00:10:39,349 --> 00:10:41,929 KT: on the back door, IRA conversions 169 00:10:42,520 --> 00:10:46,580 KT: that moving all of my old 401ks into IRA rollovers 170 00:10:46,590 --> 00:10:48,218 KT: now limits my ability... 171 00:10:48,530 --> 00:10:52,190 Suze: To do a backdoor Roth IRA, KT because of the pro 172 00:10:52,219 --> 00:10:53,299 Suze: rata rule. 173 00:10:53,309 --> 00:10:55,570 KT: So she obviously wants to know what to do. 174 00:10:55,580 --> 00:11:00,859 Suze: Correct. I can tell KT is looking at this and going, 175 00:11:00,909 --> 00:11:03,590 Suze: this is not. Why did I pick this one? Did 176 00:11:03,599 --> 00:11:03,700 Suze: you pick it 177 00:11:04,054 --> 00:11:05,385 Suze: because you couldn't understand it? 178 00:11:05,515 --> 00:11:08,964 KT: No, I'm trying to understand what she's getting. 179 00:11:08,974 --> 00:11:13,344 Suze: KT just handed me, Rachel, this email that you sent 180 00:11:13,565 --> 00:11:15,994 Suze: and it's quite lengthy. So I can see KT was 181 00:11:16,005 --> 00:11:16,984 Suze: trying to shorten it. 182 00:11:16,994 --> 00:11:20,103 KT: I grow gardens, but when it comes to growing Roth money... 183 00:11:20,114 --> 00:11:23,674 Suze: She just doesn't, not. Here's what all of you need 184 00:11:23,684 --> 00:11:24,955 Suze: to understand 185 00:11:25,260 --> 00:11:28,479 Suze: is that Rachel now is saying she makes too much 186 00:11:28,489 --> 00:11:34,599 Suze: money to qualify for a Roth IRA - contributory one where 187 00:11:34,609 --> 00:11:39,760 Suze: you can contribute seven or $8000 a year depending on 188 00:11:39,770 --> 00:11:41,119 Suze: your income. All right. 189 00:11:42,489 --> 00:11:45,460 Suze: In the past, she worked for an employer 190 00:11:46,159 --> 00:11:49,689 Suze: where she had 401ks with maybe one or two or 191 00:11:49,700 --> 00:11:53,219 Suze: three or five, whatever it may be. And she rolled 192 00:11:53,229 --> 00:11:57,210 Suze: all of them, which was a total of $60,000 from 193 00:11:57,219 --> 00:12:02,580 Suze: a 401k into an IRA rollover. And because she did that, 194 00:12:02,590 --> 00:12:06,109 Suze: she did not owe any income taxes on it yet. 195 00:12:06,119 --> 00:12:12,020 Suze: She has $60,000 in an IRA that's still with pre 196 00:12:12,030 --> 00:12:12,900 Suze: tax money. 197 00:12:13,549 --> 00:12:16,700 Suze: Now, what she wants to do is she still wants 198 00:12:16,710 --> 00:12:20,689 Suze: to contribute to her current employer's 401k, 199 00:12:21,619 --> 00:12:26,809 Suze: but she also wants to do however, a backdoor Roth 200 00:12:26,820 --> 00:12:32,119 Suze: IRA as well. The problem is everybody and take out 201 00:12:32,130 --> 00:12:34,319 Suze: your little Suze notebook for this one 202 00:12:34,830 --> 00:12:39,929 Suze: when you have any money in a traditional IRA, which 203 00:12:39,940 --> 00:12:45,479 Suze: means a pre-tax IRA and, or an IRA rollover a 204 00:12:45,489 --> 00:12:50,929 Suze: SEP IRA, a simple IRA. Any individual retirement account that 205 00:12:50,940 --> 00:12:53,280 Suze: you have never paid taxes on, 206 00:12:54,130 --> 00:12:58,789 Suze: if you go to do a backdoor Roth, which simply 207 00:12:58,799 --> 00:13:04,109 Suze: means you put money in a non-deductible IRA 208 00:13:04,909 --> 00:13:08,469 Suze: and then you convert it because there's no income limitations 209 00:13:08,479 --> 00:13:13,400 Suze: on conversions. If you do that while you have money 210 00:13:13,409 --> 00:13:18,969 Suze: in traditional IRAs , you then get penalized by what's 211 00:13:18,979 --> 00:13:23,210 Suze: called the pro rata rule where they will take the 212 00:13:23,219 --> 00:13:26,419 Suze: amount of money that is in all of your IRAs 213 00:13:27,500 --> 00:13:30,218 Suze: and they will then divide by the money that you're 214 00:13:30,229 --> 00:13:32,669 Suze: going to put into the backdoor Roth 215 00:13:33,020 --> 00:13:37,039 Suze: and you will have to pay taxes on whatever percent 216 00:13:37,049 --> 00:13:41,270 Suze: that comes out to be. So you cannot and you 217 00:13:41,280 --> 00:13:46,159 Suze: should not be doing a backdoor Roth IRA, if you 218 00:13:46,169 --> 00:13:51,000 Suze: have money in traditional IRAs but Rachel, here's what you 219 00:13:51,010 --> 00:13:54,830 Suze: can do. You can take the money that's in the 220 00:13:54,840 --> 00:13:56,049 Suze: traditional IRAs 221 00:13:56,919 --> 00:14:01,580 Suze: and you can roll it back into your employer sponsored 222 00:14:01,590 --> 00:14:06,159 Suze: 401k plan where you currently work. So now all of 223 00:14:06,169 --> 00:14:11,080 Suze: your money is in a 401k and now you qualify 224 00:14:11,090 --> 00:14:17,890 Suze: for a backdoor Roth. Why? Because you don't have any 225 00:14:17,900 --> 00:14:23,119 Suze: money in traditional IRAs anymore? All right, KT. 226 00:14:23,539 --> 00:14:28,960 KT: I have another Roth this one stumped me too. You ready? This? 227 00:14:29,409 --> 00:14:31,729 KT: I don't, I never heard this in my life. So 228 00:14:31,739 --> 00:14:34,359 KT: I picked it. I'm 61 years old... 229 00:14:34,390 --> 00:14:38,359 Suze: Before you go on. Everybody, I just gave you a tremendous 230 00:14:38,369 --> 00:14:42,030 Suze: Suze School there in that. If you really want to do 231 00:14:42,039 --> 00:14:45,919 Suze: a backdoor Roth and I have many podcasts on the topic. 232 00:14:45,929 --> 00:14:48,440 Suze: You can just search for them on the app and 233 00:14:48,450 --> 00:14:49,159 Suze: find them. 234 00:14:49,679 --> 00:14:52,500 Suze: But if you really wanna do a backdoor Roth and 235 00:14:52,510 --> 00:14:56,020 Suze: you have money in a traditional IRA of any kind. 236 00:14:56,200 --> 00:14:58,890 Suze: And you're working for a company that has an employer 237 00:14:58,900 --> 00:15:03,780 Suze: sponsored retirement plan, like a 401k. Just roll the money 238 00:15:03,789 --> 00:15:06,140 Suze: from your traditional IRAs back 239 00:15:06,640 --> 00:15:10,960 Suze: into the 401k and then you will qualify. It's something 240 00:15:10,969 --> 00:15:13,030 Suze: you should really think about. All right now. 241 00:15:13,039 --> 00:15:16,590 KT: OK. So Suze, I chose the next question because I never, ever, 242 00:15:16,599 --> 00:15:19,710 KT: ever in all the years we've been together doing this. 243 00:15:19,849 --> 00:15:21,390 KT: I've never heard this. 244 00:15:21,840 --> 00:15:25,590 KT: So the question is, it's also about Roth ready? I 245 00:15:25,599 --> 00:15:30,630 KT: am 61 years old and recently declared disabled. I would 246 00:15:30,640 --> 00:15:34,900 KT: like to try to start an internet based business and 247 00:15:34,909 --> 00:15:38,739 KT: have it all through my Roth IRA. So my Roth 248 00:15:38,750 --> 00:15:39,500 KT: will grow. 249 00:15:40,210 --> 00:15:42,690 KT: I don't quite understand this. I have heard it can 250 00:15:42,700 --> 00:15:46,030 KT: be done. I've also heard there are problems. 251 00:15:46,039 --> 00:15:49,710 Suze: Yea, when it comes to a disability. You have to be very, 252 00:15:49,719 --> 00:15:54,669 Suze: very careful because possibly you're on SSI or you have 253 00:15:54,679 --> 00:15:58,690 Suze: disability coming into you from somewhere and maybe you've read 254 00:15:58,700 --> 00:16:02,330 Suze: somewhere that you could make money within a Roth and 255 00:16:02,340 --> 00:16:05,820 Suze: it won't count against disability and you can make your 256 00:16:05,830 --> 00:16:08,950 Suze: money grow that way. I don't play games. 257 00:16:09,369 --> 00:16:12,000 Suze: I don't play games with what the rules are, 258 00:16:12,799 --> 00:16:18,299 Suze: but I wouldn't be doing something to go around disability 259 00:16:18,909 --> 00:16:21,929 Suze: and possibly one day somebody finds out and then you 260 00:16:21,940 --> 00:16:26,640 Suze: are disqualified from it. It is not worth it, my friend. 261 00:16:26,650 --> 00:16:28,140 Suze: All right. Ok. 262 00:16:28,679 --> 00:16:30,750 Suze: I really am a stickler. Aren't I KT? 263 00:16:31,039 --> 00:16:35,340 KT: Oh my God. She does not break a rule. Bend 264 00:16:35,349 --> 00:16:37,710 KT: a rule or even challenge a rule ever. 265 00:16:38,400 --> 00:16:43,549 Suze: Ask me how many dinners, wardrobes, whatever it may be. 266 00:16:43,559 --> 00:16:48,429 Suze: I have taken off my taxes over all these years 267 00:16:48,440 --> 00:16:52,950 Suze: and I've had many, many work lunches. None, 268 00:16:53,539 --> 00:16:57,440 Suze: not one because really we discuss a little bit of 269 00:16:57,450 --> 00:17:01,119 Suze: business and then we have fun and we talk so 270 00:17:01,130 --> 00:17:05,180 Suze: I am a stickler with sticking to the rules. All right, KT. 271 00:17:05,430 --> 00:17:07,879 KT: Ok. Next question from Jasmine. 272 00:17:08,510 --> 00:17:11,989 KT: Hi KT and Suze. We are close on making an 273 00:17:12,000 --> 00:17:15,770 KT: offer on a home in Delaware that will eventually be 274 00:17:15,780 --> 00:17:19,680 KT: our retirement home. Hopefully within the next two or three years, 275 00:17:19,839 --> 00:17:25,239 KT: the purchase price is 800,000. Our FICO scores are 820. 276 00:17:25,650 --> 00:17:31,250 KT: You rock. We own, we own our primary home outright 277 00:17:31,260 --> 00:17:35,130 KT: and our annual income is 350,000, 278 00:17:35,479 --> 00:17:40,609 KT: which is the better option. One pay outright. We have 279 00:17:40,619 --> 00:17:43,540 KT: the funds to pay the home outright for from our ladder CDs... 280 00:17:44,040 --> 00:17:45,160 KT: ta ta ta ta... 281 00:17:45,689 --> 00:17:48,250 KT: get a 5 and 1 arm. Is it... 282 00:17:48,260 --> 00:17:49,849 Suze: A 5 and one arm 283 00:17:49,859 --> 00:17:53,680 Suze: and one for five years? And then it changes, right. 284 00:17:53,900 --> 00:17:56,439 KT: So she said, and then she said any other option... 285 00:17:56,530 --> 00:17:59,739 Suze: You know what's funny, KT, what's that is as all of, 286 00:17:59,750 --> 00:18:02,359 Suze: you know, I go through all the emails just to 287 00:18:02,369 --> 00:18:06,188 Suze: see if anybody needs immediate help. And I wrote Jasmine, 288 00:18:07,430 --> 00:18:09,579 Suze: and I answered her question for her 289 00:18:09,900 --> 00:18:14,129 Suze: right now. Most people would think that she could pay 290 00:18:14,140 --> 00:18:19,459 Suze: it outright by cashing out her ladder CDs. However, she may 291 00:18:19,469 --> 00:18:23,500 Suze: end up paying penalties on some of them for early withdrawal, KT. 292 00:18:24,040 --> 00:18:26,079 Suze: So that would mean that she would lose 3 to 293 00:18:26,089 --> 00:18:29,978 Suze: 6 months of interest just to take that out. And 294 00:18:29,989 --> 00:18:33,329 Suze: if she has all of that money, she has 500,000 295 00:18:33,339 --> 00:18:37,140 Suze: in CDs. That can start to be a whole lot 296 00:18:37,150 --> 00:18:38,099 Suze: of money. 297 00:18:38,819 --> 00:18:43,260 Suze: You could get a five and one arm and absolutely 298 00:18:43,270 --> 00:18:44,859 Suze: finance it that way. 299 00:18:45,959 --> 00:18:49,900 Suze: Or there really are no other options. So, here's what 300 00:18:49,910 --> 00:18:53,079 Suze: I told her I would do, I would get a 301 00:18:53,109 --> 00:18:57,429 Suze: five and one arm right now, which means that the 302 00:18:57,439 --> 00:19:01,260 Suze: interest rate would be fixed for five years and that 303 00:19:01,270 --> 00:19:04,750 Suze: interest rate would probably be right around. I'm sure 5% 304 00:19:04,760 --> 00:19:06,540 Suze: or so at this point in time. 305 00:19:07,130 --> 00:19:11,790 Suze: But as those CDs come due and I'm sure they're 306 00:19:11,800 --> 00:19:15,349 Suze: gonna come due within the next 12 months, maybe 18 months, 307 00:19:15,359 --> 00:19:20,089 Suze: maybe two years at max when they come due, just 308 00:19:20,099 --> 00:19:23,790 Suze: take that amount of money and pay off that mortgage 309 00:19:23,839 --> 00:19:27,869 Suze: with it so that it's totally paid off. Obviously, within 310 00:19:27,880 --> 00:19:32,129 Suze: five years. Remember, she also gets a tax write off 311 00:19:32,479 --> 00:19:37,010 Suze: on that five and one arm of her taxes and 312 00:19:37,020 --> 00:19:38,579 Suze: that may be more 313 00:19:38,930 --> 00:19:42,069 Suze: than the interest that she's making on money in the CDs, 314 00:19:42,400 --> 00:19:46,229 Suze: believe it or not because of how it's done. So 315 00:19:46,239 --> 00:19:50,688 Suze: that's what I told her to do. Ok. 316 00:19:50,699 --> 00:19:54,119 KT: We're going back to Roth everybody. I threw that one 317 00:19:54,130 --> 00:19:55,969 KT: in because I thought we needed a break from that. 318 00:19:56,550 --> 00:20:00,040 KT: So KT and Suze, my employer allows for a Roth 319 00:20:00,050 --> 00:20:05,540 KT: 457 B which I contribute $200 per pay period in 320 00:20:05,550 --> 00:20:05,859 KT: order to 321 00:20:05,930 --> 00:20:12,510 KT: receive the matching contribution of up to $1500 annually. However, 322 00:20:12,599 --> 00:20:17,659 KT: the employer's match is deposited into a traditional pre tax 323 00:20:17,670 --> 00:20:23,150 KT: 457 B account. So Suze, should I only contribute up 324 00:20:23,160 --> 00:20:26,020 KT: to the point of the match and take the remaining 325 00:20:26,030 --> 00:20:30,569 KT: amount of money and open my own Roth IRA with Fidelity? 326 00:20:31,160 --> 00:20:32,030 Suze: Absolutely. Next question. 327 00:20:35,410 --> 00:20:36,969 Suze: Go on KT. 328 00:20:37,040 --> 00:20:40,589 KT: People, I love questions like this: Suze, where do I 329 00:20:40,599 --> 00:20:45,869 KT: find rule 55 in the IRS code question? 330 00:20:46,079 --> 00:20:50,160 Suze: So the reason this person is asking this question again, 331 00:20:50,170 --> 00:20:53,589 Suze: this is, looks like it's from the wall KT. Is 332 00:20:53,599 --> 00:20:57,750 Suze: because of the Suze school that I did last Sunday. 333 00:20:58,270 --> 00:21:01,760 Suze: And I talked all about it and it's something you 334 00:21:01,770 --> 00:21:05,410 Suze: all really should listen to. So an answer to this 335 00:21:05,420 --> 00:21:09,349 Suze: question and it's funny again, KaT, that you picked this 336 00:21:09,359 --> 00:21:11,369 Suze: one because I saw this on the wall and I 337 00:21:11,380 --> 00:21:13,639 Suze: did answer it directly. 338 00:21:13,949 --> 00:21:17,170 Suze: So I'll answer it again here. But if you really 339 00:21:17,180 --> 00:21:19,010 Suze: want to look at the answer to this, go to 340 00:21:19,020 --> 00:21:21,050 Suze: the wall and look, let me just tell you something 341 00:21:21,060 --> 00:21:24,699 Suze: great about the women and Money app. There's a community 342 00:21:24,709 --> 00:21:29,069 Suze: there and they all answer one another's questions and it's 343 00:21:29,079 --> 00:21:31,199 Suze: a place that you can ask and other people will 344 00:21:31,209 --> 00:21:31,729 Suze: help you. 345 00:21:32,064 --> 00:21:35,094 Suze: And if somebody answers and it's wrong, sometimes I'll go 346 00:21:35,104 --> 00:21:38,064 Suze: on like I did a few days ago and say no, 347 00:21:38,074 --> 00:21:41,474 Suze: that's not how it works. Everybody, this is how it works, 348 00:21:41,484 --> 00:21:44,364 Suze: but it's a sweet little place for many of you 349 00:21:44,375 --> 00:21:49,604 Suze: to find a community that's interested in financial information. 350 00:21:49,880 --> 00:21:53,869 Suze: For those of you who are looking for specific regulations 351 00:21:53,920 --> 00:21:58,270 Suze: related to rule 55 you can find them in the 352 00:21:58,280 --> 00:22:05,459 Suze: IRS publication 575. It's called pension and Annuity income. 353 00:22:05,770 --> 00:22:11,109 Suze: And this document will provide you detailed information about the 354 00:22:11,119 --> 00:22:16,199 Suze: rules and regulations for qualified retirement plans, especially the ones 355 00:22:16,209 --> 00:22:20,469 Suze: that I talked about last Sunday. All right, KT, what 356 00:22:20,479 --> 00:22:20,719 Suze: do you got? 357 00:22:21,280 --> 00:22:24,109 KT: My last question, Suze is from Audrey. 358 00:22:24,829 --> 00:22:29,500 KT: She said, Hi, Suze and KT. My question, a whole 359 00:22:29,510 --> 00:22:33,550 KT: life insurance policy was opened for me under the strong 360 00:22:33,560 --> 00:22:37,449 KT: encouragement of my mom back in my mid twenties, 361 00:22:37,800 --> 00:22:43,739 KT: she passed away. Um She is 36. She's about to 362 00:22:43,750 --> 00:22:47,640 KT: be 36 until about 11 years ago. Ok. So, so 363 00:22:47,650 --> 00:22:50,989 KT: mom encouraged her to do this and sadly, her mom 364 00:22:51,000 --> 00:22:56,708 KT: passed away unexpectedly in 2017. And since then I took 365 00:22:56,719 --> 00:23:01,099 KT: over her payments of 7950 a month, Suze, there's about 366 00:23:01,109 --> 00:23:05,979 KT: 7000 cash value on the 100,000 currently. 367 00:23:06,260 --> 00:23:09,640 KT: Do I keep investing in the policy and take advantage 368 00:23:09,729 --> 00:23:12,479 KT: of the locked in rate in case I do have 369 00:23:12,489 --> 00:23:16,930 KT: dependents someday or would it be wiser to invest in 370 00:23:16,939 --> 00:23:18,160 KT: something else? 371 00:23:18,170 --> 00:23:22,170 Suze: So, Audrey, first of all, our love always goes out 372 00:23:22,180 --> 00:23:25,959 Suze: to anybody who loses a mommy, a puppy, a child, anybody. 373 00:23:25,969 --> 00:23:30,680 Suze: It's always so sad. Right? But here's a little number 374 00:23:30,689 --> 00:23:33,880 Suze: thing that you should think about, which is, 375 00:23:34,979 --> 00:23:38,889 Suze: and here's what's funny, KT wanna know what is it? 376 00:23:39,189 --> 00:23:42,420 Suze: I read this as well and I answered Audrey directly. 377 00:23:42,449 --> 00:23:44,979 Suze: So do all of you get the idea that if 378 00:23:44,989 --> 00:23:50,199 Suze: you write in to ask Suze Podcast at gmail.com. It 379 00:23:50,209 --> 00:23:53,979 Suze: is pretty likely that if you ask a question that 380 00:23:53,989 --> 00:23:56,310 Suze: maybe KT's gonna pick it and I'll answer it on 381 00:23:56,319 --> 00:23:59,530 Suze: this podcast or chances are I might even answer you 382 00:23:59,540 --> 00:24:00,319 Suze: directly 383 00:24:00,969 --> 00:24:03,689 Suze: and then chances are it won't be answered at all. 384 00:24:03,699 --> 00:24:06,688 Suze: You just never know. All right. Anyway, Audrey, this is 385 00:24:06,699 --> 00:24:11,609 Suze: what I wrote. You and everybody should understand this. Audrey 386 00:24:11,619 --> 00:24:16,979 Suze: doesn't have any beneficiaries right now. Anybody really to leave 387 00:24:16,989 --> 00:24:24,510 Suze: this to if Audrey had invested $79.50 a month, every month, 388 00:24:24,520 --> 00:24:28,430 Suze: either into a Roth IRA or a savings account or 389 00:24:28,439 --> 00:24:29,770 Suze: whatever it may be. 390 00:24:30,079 --> 00:24:33,698 Suze: And all she earned on it was 4% as an 391 00:24:33,709 --> 00:24:36,219 Suze: annual average rate of return. Now, I have to tell 392 00:24:36,229 --> 00:24:39,140 Suze: you over the last 11 years, she easily could have 393 00:24:39,150 --> 00:24:43,359 Suze: earned close to 10% annual average rate of return and 394 00:24:43,369 --> 00:24:45,780 Suze: you don't even want to know what that would be 395 00:24:45,790 --> 00:24:49,979 Suze: in comparison to her $7000 that she has in there. 396 00:24:50,579 --> 00:24:53,679 Suze: But even if that's all she did at 4% she 397 00:24:53,689 --> 00:24:59,270 Suze: would have a little bit over $13,000 right now. That's 398 00:24:59,280 --> 00:25:02,399 Suze: a $6000 difference 399 00:25:03,270 --> 00:25:09,978 Suze: on just $79.50 over just 11 years. It's like $500 400 00:25:09,989 --> 00:25:10,889 Suze: a year difference. 401 00:25:10,900 --> 00:25:13,969 KT: Suze, What was, what, what about 10% what would it 402 00:25:13,979 --> 00:25:14,569 KT: have been? 403 00:25:14,579 --> 00:25:16,929 Suze: Oh my God. It probably would have been like almost 404 00:25:16,939 --> 00:25:26,329 Suze: 18,000 $19,000 but her cash value is only $7000. So 405 00:25:26,339 --> 00:25:29,899 Suze: my advice to Audrey was you absolutely cash that out 406 00:25:29,910 --> 00:25:30,889 Suze: right now 407 00:25:31,390 --> 00:25:33,819 Suze: and put that... let's think about it, Audrey, you could 408 00:25:33,829 --> 00:25:38,619 Suze: take that $7000. You're gonna be 36 you could put 409 00:25:38,630 --> 00:25:41,489 Suze: all $7000 as long as you have at least that 410 00:25:41,500 --> 00:25:43,770 Suze: earned income into a Roth IRA 411 00:25:44,109 --> 00:25:47,790 Suze: and let it grow. Oh my God, are you kidding me? Absolutely. 412 00:25:47,869 --> 00:25:51,800 KT: Alright. Wait I have another question. That policy was 100 grand, right? 413 00:25:51,810 --> 00:25:54,650 Suze: Her death benefit. So it probably wouldn't have paid out 414 00:25:54,660 --> 00:25:58,969 Suze: to her KT for another let's say 50 years. 415 00:25:59,270 --> 00:26:03,160 KT: So if she takes the 7000 opens the retirement account, 416 00:26:03,770 --> 00:26:05,079 KT: she's gonna be 36. 417 00:26:05,775 --> 00:26:08,454 KT: She doesn't need that money for like another 30 years 418 00:26:08,464 --> 00:26:13,584 KT: for retirement and put the 79.50 in every month. Would 419 00:26:13,594 --> 00:26:15,484 KT: that be more than that cash? 420 00:26:15,594 --> 00:26:19,224 Suze: That would probably even just a 6% annual average rate 421 00:26:19,234 --> 00:26:23,344 Suze: of return over all those years? She would have probably 422 00:26:23,354 --> 00:26:28,385 Suze: about 100 and $18,000 and it would be in a 423 00:26:28,395 --> 00:26:31,794 Suze: Roth IRA. So it would be tax free to her, 424 00:26:31,814 --> 00:26:35,314 Suze: tax free to her beneficiaries and 425 00:26:35,869 --> 00:26:40,920 Suze: save the 79.50 every month for another 20 years to 426 00:26:40,930 --> 00:26:42,609 Suze: just get $100,000. 427 00:26:42,829 --> 00:26:46,449 KT: Now, the next question is, should she get term insurance? 428 00:26:46,650 --> 00:26:47,760 Suze: Not yet. 429 00:26:47,770 --> 00:26:48,849 KT: She's still 36. 430 00:26:49,520 --> 00:26:52,170 Suze: She's still young enough that if all of a sudden 431 00:26:52,209 --> 00:26:55,689 Suze: she's married and she has kids. She has to be 432 00:26:55,699 --> 00:26:59,510 Suze: in it. Very affordable, very, very affordable. All right, KT. 433 00:27:00,609 --> 00:27:01,489 KT: Quizzy time. 434 00:27:01,520 --> 00:27:03,859 Suze: Quizzy time. Although you should have been asking me a 435 00:27:03,869 --> 00:27:05,219 Suze: lot of quizzys here. 436 00:27:05,229 --> 00:27:06,319 KT: It's been a quizzy day. 437 00:27:06,329 --> 00:27:09,530 Suze: All right. This one I also got from our wall. 438 00:27:09,569 --> 00:27:12,760 Suze: It said, good morning Suze. Is it true you get 439 00:27:12,770 --> 00:27:15,400 Suze: the best protection against anyone 440 00:27:15,474 --> 00:27:19,834 Suze: suing me if I leave my money in an employer 441 00:27:19,844 --> 00:27:25,584 Suze: retirement account rather than an IRA, especially if you have 442 00:27:25,594 --> 00:27:29,094 Suze: a substantial amount of money? 443 00:27:29,104 --> 00:27:30,354 KT: I know the answer. 444 00:27:31,219 --> 00:27:35,780 KT: You can't be sued in your retirement accounts. They cannot 445 00:27:35,790 --> 00:27:40,369 KT: sue you and take money out of your retirement accounts. Now, 446 00:27:40,380 --> 00:27:45,520 KT: whether it's an employer or a, or the IRA, that 447 00:27:45,530 --> 00:27:48,349 KT: I'm not quite sure if there's even an advantage one 448 00:27:48,359 --> 00:27:50,839 KT: over the other. But right now I think you can't 449 00:27:50,849 --> 00:27:53,319 KT: take that money from her. Right? 450 00:27:53,660 --> 00:27:56,199 Suze: Or him or, I don't know who this was actually. 451 00:27:56,209 --> 00:27:57,119 Suze: But anyway, 452 00:27:58,459 --> 00:28:00,579 Suze: can you choose if it were you? You had a 453 00:28:00,589 --> 00:28:03,150 Suze: substantial amount of money in a 401k... 454 00:28:03,160 --> 00:28:04,659 KT: I'd go for the IRA. 455 00:28:04,810 --> 00:28:05,449 Suze: You would? Final answer? 456 00:28:07,770 --> 00:28:10,729 KT: Yea (Suze makes the wrong answer sound) Oh, come on, come on, come on. 457 00:28:10,739 --> 00:28:16,859 Suze: All right. So here's the answer everybody. It is true 458 00:28:17,430 --> 00:28:21,410 Suze: that money in an Ira and a 401k, an employer 459 00:28:21,420 --> 00:28:27,939 Suze: sponsored plan absolutely protects you against bankruptcy and things like that. 460 00:28:28,459 --> 00:28:32,760 Suze: However, money in a 401k, it would not matter. Now, 461 00:28:32,770 --> 00:28:36,639 Suze: this person said they had a substantial amount of money. 462 00:28:37,880 --> 00:28:41,520 Suze: They have 10 million in their 401k, a billion dollars 463 00:28:41,530 --> 00:28:43,660 Suze: in their 401k. It's protected 464 00:28:44,400 --> 00:28:53,250 Suze: In an IRA, It's only protected up to approximately $1.3 million. 465 00:28:53,810 --> 00:28:58,069 Suze: Until Sunday when we have another Suze school 466 00:28:58,540 --> 00:29:00,800 Suze: and we have to wait a little bit for the 467 00:29:00,810 --> 00:29:02,760 Suze: Super Bowl. What, KT? 468 00:29:02,770 --> 00:29:08,140 KT: You got to put people first, then, money, then things. 469 00:29:08,390 --> 00:29:14,770 Suze: Now you stay safe and hopefully I'll always stay unstoppable. 470 00:29:14,780 --> 00:29:16,140 Suze: Bye bye everybody.