1 00:00:32,979 --> 00:00:37,390 KT: Good morning Suze. Are you ready for a big walk today? 2 00:00:38,550 --> 00:00:43,320 Suze: I love when Robert says, are you ready? And I go, yeah, 3 00:00:43,330 --> 00:00:45,620 Suze: because I'm unstoppable. 4 00:00:46,460 --> 00:00:51,110 KT: She's been unstoppable everybody for the past three days. She's 5 00:00:51,110 --> 00:00:55,940 KT: been clocking in at least 10,000 steps every morning on 6 00:00:55,940 --> 00:00:57,970 KT: our walk. Usually after we do 7 00:00:57,980 --> 00:01:01,890 KT: the podcast or after coffee, a light breakfast. And I'm 8 00:01:01,890 --> 00:01:04,550 KT: loving it. I'm loving it, loving it. Loving it. 9 00:01:04,560 --> 00:01:12,009 Suze: I'm I'm totally back. Alright, where are all of you? 10 00:01:12,010 --> 00:01:15,770 Suze: Let me tell you you are at the Women and 11 00:01:15,770 --> 00:01:19,860 Suze: Money Podcast and everybody's smart enough to listen and today 12 00:01:19,860 --> 00:01:22,010 Suze: you have the incredible pleasure 13 00:01:22,150 --> 00:01:26,050 Suze: and it really is to hear KT ask me... 14 00:01:26,050 --> 00:01:30,040 KT: That's me, I'm KT. And this is the ask... KT 15 00:01:30,040 --> 00:01:33,590 KT: will ask Suze anything you want podcast. 16 00:01:33,600 --> 00:01:37,819 Suze: And if you want KT to ask Suze anything, then 17 00:01:37,819 --> 00:01:41,910 Suze: send in a short question to ask Suze podcast at 18 00:01:41,910 --> 00:01:43,029 Suze: gmail dot com. 19 00:01:43,230 --> 00:01:46,120 Suze: And if she chooses it, it will be on the podcast. 20 00:01:46,130 --> 00:01:50,200 Suze: Also you can download the Women and Money app and 21 00:01:50,200 --> 00:01:53,080 Suze: usually what happens there, you can do that by the 22 00:01:53,080 --> 00:01:56,570 Suze: way at Apple Apps or Google Play is that I'll 23 00:01:56,570 --> 00:02:00,960 Suze: go through your questions on that app under this segment 24 00:02:00,960 --> 00:02:03,840 Suze: here because all the podcasts are on the app. 25 00:02:04,290 --> 00:02:08,450 Suze: And I usually answer you directly, just so you know. 26 00:02:08,460 --> 00:02:13,329 KT: Lucky you. So and I want everyone to know lately... 27 00:02:13,330 --> 00:02:15,120 Suze: Was that a sarcastic, lucky you? 28 00:02:15,130 --> 00:02:19,060 KT: Lucky you, lucky you. 29 00:02:19,060 --> 00:02:19,180 Suze: Wait, you did not answer my question. It sounded sarcastic. 30 00:02:22,720 --> 00:02:27,359 KT: It was not, lucky you. So I want to tell 31 00:02:27,360 --> 00:02:31,070 KT: everybody that today, February 23 I decided to do a 32 00:02:31,070 --> 00:02:32,990 KT: little Roth theme. 33 00:02:33,250 --> 00:02:37,480 KT: So many of these questions, most of them pertained to 34 00:02:37,480 --> 00:02:38,980 KT: Roth IRAs, 35 00:02:39,480 --> 00:02:43,060 KT: one of my favorite and Suze's favorite topics. 36 00:02:43,060 --> 00:02:45,630 Suze: I love that you chose that because you know we're 37 00:02:45,630 --> 00:02:49,600 Suze: getting really close to April 15th when most people will 38 00:02:49,600 --> 00:02:53,500 Suze: be opening up their IRAs. And of course I want 39 00:02:53,500 --> 00:02:56,040 Suze: them to open up a Roth IRA if they qualify 40 00:02:56,040 --> 00:03:00,920 Suze: income wise. But anyway Miss Travis go for it. 41 00:03:04,350 --> 00:03:06,989 KT: Okay, first question from Susan and this is kind of funny. She said my question 42 00:03:06,990 --> 00:03:11,060 KT: is about a Roth IRA. I can hear Suze screaming. 43 00:03:11,060 --> 00:03:12,989 Suze: Yeah baby yeah baby yeah baby. 44 00:03:13,000 --> 00:03:16,270 KT: She said I can no longer open a Roth IRA 45 00:03:16,270 --> 00:03:20,140 KT: since I earned too much money. So what are my 46 00:03:20,150 --> 00:03:25,050 KT: other options? Also I contribute to both a Roth 401k. 47 00:03:25,060 --> 00:03:28,310 KT: And a traditional 401k through work. 48 00:03:28,885 --> 00:03:33,345 KT: My financial manager says I should put all my contributions 49 00:03:33,355 --> 00:03:38,925 KT: moving forward into the traditional 401k, since I'm currently in 50 00:03:38,925 --> 00:03:43,325 KT: a very high tax bracket and Susan lives in California everyone. 51 00:03:43,620 --> 00:03:47,620 KT: So it said Suze, I'm confused, can you please explain 52 00:03:47,620 --> 00:03:51,760 KT: one more time So I don't make yet another mistake, 53 00:03:51,770 --> 00:03:55,690 KT: I regret. Explain one more time about the Roth. 54 00:03:55,700 --> 00:04:01,130 Suze: So Susan, here's the problem. You say you live in California. 55 00:04:01,140 --> 00:04:05,220 Suze: So obviously right now you're in a very high federal 56 00:04:05,230 --> 00:04:07,500 Suze: and state income tax bracket 57 00:04:07,800 --> 00:04:10,920 Suze: But you also say that you expect to be in 58 00:04:10,920 --> 00:04:15,010 Suze: a lower one when you retire. How do you know 59 00:04:15,010 --> 00:04:15,900 Suze: that for sure? 60 00:04:16,480 --> 00:04:19,290 Suze: I don't know, I retired there for a while and 61 00:04:19,290 --> 00:04:21,969 Suze: I was still in equally as high of a tax 62 00:04:21,970 --> 00:04:25,200 Suze: bracket because of how much money I saved and the 63 00:04:25,210 --> 00:04:27,969 Suze: income from it and that's what I was living off of. 64 00:04:27,980 --> 00:04:31,219 Suze: I wish I had been able to put all of 65 00:04:31,220 --> 00:04:36,039 Suze: my money in a Roth retirement account because here I 66 00:04:36,040 --> 00:04:39,510 Suze: am now, one year away really from when I have 67 00:04:39,510 --> 00:04:43,200 Suze: to start taking required minimum distributions at 73. 68 00:04:43,900 --> 00:04:46,570 Suze: And I'm gonna have to pay taxes on it and 69 00:04:46,570 --> 00:04:49,900 Suze: I'm still in a high income tax bracket. So given 70 00:04:49,900 --> 00:04:53,250 Suze: your 64 we don't know how long you're going to 71 00:04:53,260 --> 00:04:59,870 Suze: absolutely work. I still like Roth IRAs. I like Roth 401ks. 72 00:05:00,070 --> 00:05:03,630 Suze: You don't qualify for a Roth IRA who cares, you 73 00:05:03,630 --> 00:05:05,900 Suze: can put a whole lot of money in a Roth 401k. 74 00:05:06,860 --> 00:05:09,510 Suze: I just like them. I always will. I don't care 75 00:05:09,520 --> 00:05:13,910 Suze: about saving taxes today because when you save taxes you 76 00:05:13,910 --> 00:05:16,100 Suze: usually just waste that money. 77 00:05:16,990 --> 00:05:21,289 KT: Next question is from Marie. Hi Suze, I encouraged my 78 00:05:21,290 --> 00:05:26,140 KT: grandson who is 18 to open a Roth IRA. My 79 00:05:26,140 --> 00:05:31,589 KT: suggestion is to invest in the Vanguard target retirement date fund. 80 00:05:31,850 --> 00:05:35,609 KT: Is this a good choice for him? Any other suggestions 81 00:05:35,610 --> 00:05:39,190 KT: would be appreciated. Suze, remember when Travis open his first account? He's doing great now. 82 00:05:41,230 --> 00:05:46,359 Suze: Doing great now, but I did not have him invest 83 00:05:46,400 --> 00:05:51,150 Suze: in a target date retirement fund. Because at 18, he's 84 00:05:51,150 --> 00:05:54,640 Suze: not going to be retiring, my dear Marie for a 85 00:05:54,640 --> 00:05:59,089 Suze: good probably 50 or 60 years. Who knows by then. 86 00:05:59,310 --> 00:06:05,460 Suze: Therefore I'd rather see him invest dollar cost averaging into 87 00:06:05,460 --> 00:06:10,849 Suze: like the Vanguard Total Stock Market Index fund or ETF. And 88 00:06:10,850 --> 00:06:12,890 Suze: just have him put in a small amount of money 89 00:06:12,900 --> 00:06:15,940 Suze: every single month for the rest of his life. And 90 00:06:15,940 --> 00:06:20,660 Suze: oh my God, bingo! He'll hit the jackpot. Go KT. 91 00:06:23,430 --> 00:06:27,150 KT: Nice,  The next question is from Scott. Suze, I have a question about my Roth IRA, I'm 92 00:06:27,150 --> 00:06:31,070 KT: 12 years older than my wife. If I pass away 93 00:06:31,080 --> 00:06:36,859 KT: and she is the beneficiary, can she immediately access that money? 94 00:06:37,210 --> 00:06:38,730 Suze: Yes. Next question, KT. Let's go, let's do a rapid roth. 95 00:06:47,620 --> 00:06:50,339 KT: Roth, rapid Roth, rapid Roth rapid Roth. I can say 96 00:06:50,339 --> 00:06:56,160 KT: it forever. Rapid Roth, rapid Roth, rapid. Ok, this is from Sam. Hi ladies, would 97 00:06:56,160 --> 00:06:59,390 KT: I be creating any problems if I put my converted 98 00:06:59,390 --> 00:07:03,990 KT: Roth IRA into my existing Roth IRA? 99 00:07:04,120 --> 00:07:08,810 KT: My existing Roth IRA only has money that I contribute 100 00:07:08,820 --> 00:07:13,740 KT: into it or should I open a separate Roth IRA 101 00:07:13,750 --> 00:07:15,730 KT: for my converted Roth? 102 00:07:15,740 --> 00:07:18,880 Suze: No, you won't get into any trouble at all. Put 103 00:07:18,890 --> 00:07:23,620 Suze: your converted Roth into your contributory Roth. That's absolutely fine. 104 00:07:23,630 --> 00:07:28,800 KT: Next one, Donna, I opened my first Roth RA over 105 00:07:28,800 --> 00:07:31,600 KT: 20 years ago with Fidelity. Since then, 106 00:07:31,915 --> 00:07:35,455 KT: I've transferred it multiple times. All the while adding to it. 107 00:07:35,495 --> 00:07:39,765 KT: Does the five year rule reset each time I move 108 00:07:39,765 --> 00:07:43,345 KT: to a new financial planner or a new company? 109 00:07:43,425 --> 00:07:45,085 Suze: No it does not. 110 00:07:45,095 --> 00:07:48,865 KT: Oh there you go. Next question. So this is from Rhonda. 111 00:07:48,865 --> 00:07:52,275 KT: Hi Suze. When I retire fully at 67, which will 112 00:07:52,275 --> 00:07:56,555 KT: be 2027. The year 2027. How much will my social 113 00:07:56,555 --> 00:07:59,130 KT: security and retirement be taxed? 114 00:07:59,320 --> 00:08:04,230 KT: I just cannot imagine working until age 70. I'm an 115 00:08:04,230 --> 00:08:08,350 KT: RN and nursing is cruel to the body. Also my 116 00:08:08,350 --> 00:08:12,030 KT: life insurance is through work. She said that she's concerned, 117 00:08:12,040 --> 00:08:13,270 KT: will she 118 00:08:13,570 --> 00:08:17,440 KT: have enough insurance to cover her after retirement? 119 00:08:17,450 --> 00:08:19,880 Suze: So you gave me easy ones and now you give 120 00:08:19,880 --> 00:08:23,410 Suze: me kind of a hard one which is... So Rhonda, 121 00:08:23,410 --> 00:08:27,110 Suze: here's what you need to know your retirement account. If 122 00:08:27,110 --> 00:08:31,470 Suze: it is not in a Roth retirement account, it's absolutely 123 00:08:31,470 --> 00:08:34,650 Suze: going to be taxed as you withdraw it according to 124 00:08:34,650 --> 00:08:38,520 Suze: whatever your income tax bracket is at that time. 125 00:08:38,690 --> 00:08:43,709 Suze: Social security is taxed if you make over a specific 126 00:08:43,720 --> 00:08:47,819 Suze: amount of money like currently for 2022 and they haven't 127 00:08:47,820 --> 00:08:52,360 Suze: come out yet with the 2023 figures. But you would 128 00:08:52,360 --> 00:08:56,310 Suze: take half your social security plus your adjusted gross income. 129 00:08:56,320 --> 00:08:58,280 Suze: And if that adds up to more 130 00:08:58,300 --> 00:09:03,550 Suze: than 25,000 to 34,000 and you're just filing single, you're 131 00:09:03,550 --> 00:09:07,630 Suze: going to owe up to 50% tax on whatever your 132 00:09:07,630 --> 00:09:12,790 Suze: social security is. If you make above 34,000 then 85% 133 00:09:12,800 --> 00:09:15,920 Suze: of your social security will be taxed. So if you 134 00:09:15,920 --> 00:09:17,910 Suze: are married filing jointly 135 00:09:18,300 --> 00:09:24,520 Suze: and you make between 32,000 and 44,000, then up to 50% of 136 00:09:24,520 --> 00:09:30,130 Suze: your social security will be taxed. Over 44,000, 85% will be taxed. 137 00:09:30,250 --> 00:09:34,140 Suze: The second question actually is far more interesting. I'm sure 138 00:09:34,140 --> 00:09:39,180 Suze: for everybody. You're unsure which insurance company will cover you 139 00:09:39,179 --> 00:09:42,809 Suze: after retirement. What you have to know is once you 140 00:09:42,809 --> 00:09:44,010 Suze: retire 141 00:09:44,470 --> 00:09:48,520 Suze: you're going to even before you retire if you want, 142 00:09:48,520 --> 00:09:54,410 Suze: you can be covered with what? Medicare and Medicare obviously 143 00:09:54,410 --> 00:09:57,880 Suze: will cover you no matter what your pre-existing conditions happen 144 00:09:57,880 --> 00:10:00,730 Suze: to be as long as you sign up for Medicare 145 00:10:00,740 --> 00:10:05,309 Suze: A and Medicare B. Then you will also sign up 146 00:10:05,320 --> 00:10:07,670 Suze: for Medigap insurance. 147 00:10:07,809 --> 00:10:13,750 Suze: Now in some cases, Medigap insurance can refuse to cover 148 00:10:13,940 --> 00:10:18,120 Suze: your out of pocket costs for those pre-existing health problems, 149 00:10:18,179 --> 00:10:22,320 Suze: but only up for six months and so therefore after 150 00:10:22,320 --> 00:10:25,640 Suze: that you can be totally covered. 151 00:10:26,000 --> 00:10:28,929 Suze: So you have to look into all of this and 152 00:10:28,929 --> 00:10:32,250 Suze: there's many, many companies that will just cover you from 153 00:10:32,250 --> 00:10:36,440 Suze: day one with pre-existing conditions. However, I just have to 154 00:10:36,440 --> 00:10:38,110 Suze: say this and I know this is supposed to be 155 00:10:38,110 --> 00:10:42,170 Suze: rapid fire if you go from Medicare 156 00:10:42,530 --> 00:10:45,469 Suze: and now you decide to go to Medicare advantage for 157 00:10:45,470 --> 00:10:50,700 Suze: whatever reason Medigap does not have to take you really 158 00:10:50,700 --> 00:10:54,809 Suze: and if you switch from Medicare advantage back now to 159 00:10:54,809 --> 00:10:58,360 Suze: Medicare now you are not automatically elligible 160 00:10:58,675 --> 00:11:04,005 Suze: for Medigap. So you should under no circumstances do anything 161 00:11:04,015 --> 00:11:07,495 Suze: other than Medicare part A and B. 162 00:11:07,645 --> 00:11:10,575 KT: Next is from AJ. This isn't a rapid fire because 163 00:11:10,575 --> 00:11:12,834 KT: this one I want you to think about. I don't 164 00:11:12,835 --> 00:11:14,214 KT: like this question. 165 00:11:14,720 --> 00:11:17,330 KT: He says Hi KT and Suze. I love love love 166 00:11:17,330 --> 00:11:20,720 KT: all the videos and updates. I'm living vicariously through you 167 00:11:20,720 --> 00:11:25,550 KT: these days. So AJ says I'm expecting to inherit some 168 00:11:25,550 --> 00:11:29,329 KT: money from my father's transfer on death account 169 00:11:29,490 --> 00:11:33,589 KT: which is at a full service non discount brokerage firm. 170 00:11:33,760 --> 00:11:38,239 KT: Listen carefully what AJ says Suze. It's my understanding that 171 00:11:38,240 --> 00:11:41,970 KT: I must open an account at my father's full service 172 00:11:42,210 --> 00:11:47,820 KT: non discount brokerage firm in order to receive the money. 173 00:11:48,230 --> 00:11:52,230 KT: If that's the case can I just transfer those securities 174 00:11:52,230 --> 00:11:56,540 KT: to my own account at a discount brokerage. My father 175 00:11:56,540 --> 00:12:01,949 KT: has two accounts, a traditional IRA with beneficiaries and an 176 00:12:01,950 --> 00:12:05,010 KT: investment account. T. O. D. 177 00:12:05,020 --> 00:12:06,240 Suze: Transfer on death. 178 00:12:07,100 --> 00:12:10,050 KT: Okay, so AJ is a little confused, but I don't I 179 00:12:10,050 --> 00:12:11,910 KT: never heard that you have to open it. 180 00:12:11,910 --> 00:12:15,120 Suze: Well what happens if it's at a transfer on death 181 00:12:15,120 --> 00:12:19,650 Suze: account then it transfers on death. And the brokerage firm 182 00:12:19,650 --> 00:12:22,120 Suze: of course wants to transfer it into 183 00:12:22,135 --> 00:12:27,155 Suze: an account at their place. Once it transfers then AJ 184 00:12:27,155 --> 00:12:30,165 Suze: can take it and transfer it to any place that 185 00:12:30,175 --> 00:12:35,665 Suze: AJ wants to. And that also applies to your inherited 186 00:12:35,675 --> 00:12:37,165 Suze: IRA as well. Next one, KT. 187 00:12:39,620 --> 00:12:44,189 KT: Next question I have is from Laura. Hi Suze and KT. 188 00:12:44,200 --> 00:12:49,750 KT: My husband had bought two Prudential policies in 1985. 189 00:12:50,000 --> 00:12:54,550 KT: He's still paying them both. He is 58. I am 54. 190 00:12:54,550 --> 00:12:56,640 Suze: This is not going to be a short answer just 191 00:12:56,640 --> 00:12:58,160 Suze: so you know go on. 192 00:12:58,170 --> 00:13:02,850 KT: He's 58. I am 54 and I am the beneficiary. 193 00:13:02,860 --> 00:13:07,829 KT: A whole life policy with a death benefit of $100,000. 194 00:13:07,840 --> 00:13:11,890 KT: Ready for this Suze. No no don't comment yet. We 195 00:13:11,890 --> 00:13:16,870 KT: pay $976 a year. Wait Suze. 196 00:13:17,040 --> 00:13:23,170 KT: As of now we have $198,000 as a death benefit 197 00:13:23,170 --> 00:13:26,900 KT: and a cash value of 90,000. 198 00:13:27,550 --> 00:13:28,979 Suze: That sounds good to you, right? 199 00:13:28,980 --> 00:13:32,130 KT: No 1985. Do the math. 200 00:13:32,140 --> 00:13:33,550 Suze: I'm going to do the math. 201 00:13:34,450 --> 00:13:39,099 KT: ...And a variable life policy with a 30,000 death benefit. 202 00:13:39,110 --> 00:13:45,390 KT: We pay $474 a year. Don't have the cash value. 203 00:13:45,550 --> 00:13:51,610 KT: My husband currently has... ready for this... $350,000 of term 204 00:13:51,610 --> 00:13:55,569 KT: life insurance with his job until he retires. 205 00:13:55,730 --> 00:14:00,069 KT: Do we keep both policies or cash one or both? 206 00:14:00,080 --> 00:14:03,920 KT: We want to have some life insurance after retirement. 207 00:14:03,929 --> 00:14:04,910 Suze: And why is that? 208 00:14:04,910 --> 00:14:07,559 KT: I don't know I was going to say. Why what 209 00:14:07,559 --> 00:14:10,290 KT: do you think? Thank you both. So you've got to 210 00:14:10,290 --> 00:14:13,100 KT: do some math here first explain. 211 00:14:13,110 --> 00:14:16,440 Suze: So here's the thing Laura. Why do you have it 212 00:14:16,520 --> 00:14:21,440 Suze: in your head that you want to die with life insurance. 213 00:14:21,450 --> 00:14:25,570 Suze: I want you, when you die and when you live 214 00:14:25,910 --> 00:14:29,380 Suze: forget dying. Let's talk about living here for a second. Alright. 215 00:14:29,390 --> 00:14:35,060 Suze: I want you to have money. Money to live on. 216 00:14:35,070 --> 00:14:37,490 Suze: I mean why do you want to have life insurance 217 00:14:37,490 --> 00:14:41,340 Suze: when you die? What is that all about? So anyway, 218 00:14:41,350 --> 00:14:43,580 Suze: let's just do the math here. 219 00:14:43,930 --> 00:14:47,320 Suze: Your husband was 20 years of age and I'm only 220 00:14:47,320 --> 00:14:50,080 Suze: going to deal with the whole life insurance policy because 221 00:14:50,080 --> 00:14:54,400 Suze: I don't have enough info on the variable life insurance 222 00:14:54,400 --> 00:14:56,590 Suze: policy that you have. But I can tell you I 223 00:14:56,590 --> 00:15:00,390 Suze: don't like them. Okay. But I can actually do the 224 00:15:00,390 --> 00:15:03,790 Suze: numbers because you gave me the numbers that I need 225 00:15:03,790 --> 00:15:05,680 Suze: to tell you what you need to know. 226 00:15:06,040 --> 00:15:10,850 Suze: First your husband who's 58 now has owned this for 227 00:15:10,850 --> 00:15:15,460 Suze: 38 years. He was 20 years of age when he 228 00:15:15,460 --> 00:15:16,540 Suze: bought it. 229 00:15:17,630 --> 00:15:25,400 Suze: If he had simply taken $976 and invested it every 230 00:15:25,400 --> 00:15:30,990 Suze: single year for 38 years, even in a savings account. 231 00:15:31,040 --> 00:15:35,470 Suze: And let's just say he got 5% for it. That's 232 00:15:35,470 --> 00:15:42,050 Suze: all right. He'd have $110,000 today. But yet you only 233 00:15:42,050 --> 00:15:46,790 Suze: have $90,000 of cash value. 234 00:15:47,400 --> 00:15:52,750 Suze: But over 38 years, your husband probably would have been 235 00:15:52,750 --> 00:15:56,740 Suze: smarter than just leaving it in a savings account and 236 00:15:56,740 --> 00:16:00,180 Suze: he probably maybe would have put it into the stock 237 00:16:00,180 --> 00:16:06,210 Suze: market or something. Let's just say he earned about an 8% 238 00:16:06,220 --> 00:16:08,460 Suze: annual average rate of return. 239 00:16:08,750 --> 00:16:11,980 Suze: But I can tell you over all those years, it 240 00:16:11,980 --> 00:16:15,740 Suze: probably would have been more like 10, 11 or 12% 241 00:16:15,750 --> 00:16:21,180 Suze: annual average rate of return. But just let's say 8% 242 00:16:21,190 --> 00:16:29,540 Suze: annual average rate of return, you now would have $232,000. 243 00:16:29,970 --> 00:16:34,650 Suze: Do you understand why insurance is so profitable for the 244 00:16:34,650 --> 00:16:39,920 Suze: insurance company? Because even though they increased your death benefit 245 00:16:39,920 --> 00:16:46,140 Suze: from 100,000 to $198,000. Number one, you have to die 246 00:16:46,150 --> 00:16:50,430 Suze: to get that death benefit. Alright. Number one. But they 247 00:16:50,430 --> 00:16:54,630 Suze: made far more than an 8% annual average rate of 248 00:16:54,630 --> 00:16:57,210 Suze: return over all of those years. 249 00:16:57,480 --> 00:17:01,070 Suze: So even if they were going to give you 198,000, 250 00:17:01,100 --> 00:17:06,380 Suze: they made probably 3, $400,000. So they doubled their money. 251 00:17:06,390 --> 00:17:07,690 Suze: Do you understand that? 252 00:17:07,700 --> 00:17:09,200 KT: So that's why you don't like whole life. 253 00:17:09,800 --> 00:17:13,470 Suze: But here's the way I want you to look at it. 254 00:17:14,020 --> 00:17:14,730 Suze: All right. 255 00:17:15,359 --> 00:17:20,760 Suze: Another thing is if he simply invested $976 256 00:17:21,300 --> 00:17:24,390 Suze: over his entire lifespan and let's say he's just gonna 257 00:17:24,390 --> 00:17:28,240 Suze: live till 85, he'll probably live longer. But just let's 258 00:17:28,240 --> 00:17:33,740 Suze: say that was true. And over all those 65 years 259 00:17:33,930 --> 00:17:39,710 Suze: he invested $976 at 8% annual average rate of return. 260 00:17:40,180 --> 00:17:45,140 Suze: Do you know that he would have $2 million, 261 00:17:45,910 --> 00:17:51,640 Suze: $2 million. I just want you to think about that. 262 00:17:52,880 --> 00:17:55,450 Suze: And what are you going to get as a death 263 00:17:55,450 --> 00:17:57,369 Suze: benefit at that time? You're not going to get close 264 00:17:57,369 --> 00:18:00,879 Suze: to $2 million. So here's what we need to think 265 00:18:00,880 --> 00:18:05,129 Suze: about over the years, the 38 years that he did 266 00:18:05,130 --> 00:18:11,850 Suze: put in 976, that would come out to $37,000. If 267 00:18:11,850 --> 00:18:18,550 Suze: your cash value today is $90,000 and you cashed it out, 268 00:18:18,920 --> 00:18:24,280 Suze: assuming he's healthy, you don't have any pre-existing conditions. Everything 269 00:18:24,280 --> 00:18:27,350 Suze: is good and you decide to cash it out. 270 00:18:28,140 --> 00:18:32,580 Suze: You would owe taxes on $53,000. So you have to 271 00:18:32,580 --> 00:18:37,109 Suze: take that into consideration because the $37,000 that he put 272 00:18:37,109 --> 00:18:40,609 Suze: in grew to 90,000. Okay. 273 00:18:41,270 --> 00:18:46,159 Suze: Let's assume that he would pay 25% on that. 274 00:18:46,500 --> 00:18:54,380 Suze: So that would be $13,250 in taxes. So that would 275 00:18:54,380 --> 00:19:01,800 Suze: leave you $76,750. Okay. Have you all taken out by 276 00:19:01,800 --> 00:19:04,570 Suze: the way, your Suze Notebooks? Are you writing down all 277 00:19:04,580 --> 00:19:07,470 Suze: of these numbers? Because go back and listen to this 278 00:19:07,470 --> 00:19:10,340 Suze: again and write the numbers down and you'll see why 279 00:19:10,340 --> 00:19:13,889 Suze: I don't like whole life insurance. Alright, so 280 00:19:14,530 --> 00:19:21,460 Suze: You take out $90,000, you will owe taxes on $53,000 281 00:19:21,480 --> 00:19:28,470 Suze: which is $13,250 in taxes at the 25% tax bracket, 282 00:19:28,480 --> 00:19:34,830 Suze: which leaves you with $76,750. 283 00:19:35,820 --> 00:19:40,410 Suze: You add $976 a year to that for the next 284 00:19:40,410 --> 00:19:44,170 Suze: 30 years. Why is that? Because that's when maybe he'll 285 00:19:44,170 --> 00:19:47,840 Suze: probably die around 88, 90 if he's healthy. That's his 286 00:19:47,840 --> 00:19:51,890 Suze: average life expectancy at this point in time. Alright. At 287 00:19:51,900 --> 00:19:55,730 Suze: an 8% annual average rate of return, which you will 288 00:19:55,740 --> 00:20:00,000 Suze: absolutely somehow be able to get over the period of time, 289 00:20:00,670 --> 00:20:07,929 Suze: You will have accumulated $891,718. Now 290 00:20:08,859 --> 00:20:12,980 Suze: you wanted to have a life insurance policy. Maybe you 291 00:20:12,980 --> 00:20:15,550 Suze: wanted to have that life insurance policy because you want 292 00:20:15,550 --> 00:20:18,609 Suze: to leave money to the kids. Let's just say that's true, 293 00:20:19,200 --> 00:20:21,820 Suze: let's say you invested that money 294 00:20:22,430 --> 00:20:27,640 Suze: and now your husband dies and now you inherit it 295 00:20:27,650 --> 00:20:29,800 Suze: or your kids inherit it. 296 00:20:30,400 --> 00:20:33,460 Suze: Because it was just in his name. You get a 297 00:20:33,460 --> 00:20:37,390 Suze: step up in cost basis on it and therefore you can 298 00:20:37,390 --> 00:20:40,770 Suze: sell everything and not pay one penny of income tax 299 00:20:40,810 --> 00:20:50,869 Suze: so that $891,718. Do you really think that your life 300 00:20:50,869 --> 00:20:54,730 Suze: insurance policy is going to pay you anywhere close to that? 301 00:20:55,350 --> 00:20:58,690 Suze: So you can keep this if you want. But if 302 00:20:58,690 --> 00:21:03,449 Suze: it were me and he currently has a $350,000 term 303 00:21:03,450 --> 00:21:10,580 Suze: policy and he is totally healthy and you don't really 304 00:21:10,580 --> 00:21:16,540 Suze: need the death benefit because you would be okay financially speaking. 305 00:21:16,550 --> 00:21:20,300 Suze: If he were to die right now, 306 00:21:20,590 --> 00:21:24,070 Suze: then I would be putting this money to work for me. 307 00:21:24,080 --> 00:21:25,630 Suze: Big time. 308 00:21:26,150 --> 00:21:30,070 Suze: Big time by doing what? Cashing it out, paying the 309 00:21:30,070 --> 00:21:34,730 Suze: income tax on it, then investing it and keep putting 310 00:21:34,730 --> 00:21:40,100 Suze: the $976 a year into it as well. That's what 311 00:21:40,100 --> 00:21:43,260 Suze: I would do. If I were you, I'm sure if 312 00:21:43,260 --> 00:21:46,320 Suze: you did the numbers on your variable life insurance policy, 313 00:21:46,480 --> 00:21:51,109 Suze: they would be the same. But KT, guess what time 314 00:21:51,109 --> 00:21:51,590 Suze: it is? 315 00:21:52,150 --> 00:21:52,560 KT: Quizzie Time. 316 00:21:54,990 --> 00:21:55,430 Suze: Now this is a long quizzie. 317 00:21:55,430 --> 00:21:59,949 KT: Wait, tell everyone what the quizzes are. If you're tuning in for the first time. Okay, so at 318 00:21:59,950 --> 00:22:03,350 KT: the end of the podcast, Suze finds a question and 319 00:22:03,350 --> 00:22:05,890 KT: she makes it the quizzie, and sees if I can 320 00:22:05,890 --> 00:22:10,310 KT: get it right or wrong. Whatever happens, she mostly wants 321 00:22:10,310 --> 00:22:13,110 KT: me to get it right. But she said all of 322 00:22:13,109 --> 00:22:16,930 KT: you listening also play along to see if you can 323 00:22:16,930 --> 00:22:18,149 KT: get it right.  Getting it right is not easy everyone. 324 00:22:20,880 --> 00:22:27,730 Suze: And sometimes the quizzies are factual. They're can you put 325 00:22:27,740 --> 00:22:31,290 Suze: Roth converted the money into a contributory Roth? Yes or no, 326 00:22:31,290 --> 00:22:36,640 Suze: very easy. Okay, sometimes they require a little bit of 327 00:22:36,640 --> 00:22:41,430 Suze: thought because they're more ethical in nature and emotional in 328 00:22:41,430 --> 00:22:45,330 Suze: nature and that's what this one happens to be. 329 00:22:45,330 --> 00:22:46,810 KT: I usually get them right. 330 00:22:47,430 --> 00:22:48,530 Suze: The emotional ones? 331 00:22:48,540 --> 00:22:49,369 KT: Yea. 332 00:22:49,369 --> 00:22:55,540 Suze: Hi KT and Suze and chickens. That's why I loved it 333 00:22:55,550 --> 00:22:59,040 Suze: because every morning we get up really early and the 334 00:22:59,040 --> 00:23:01,570 Suze: first thing we do is we go run to feed 335 00:23:01,580 --> 00:23:03,090 Suze: our little chickens? That we have. 336 00:23:03,100 --> 00:23:05,260 Suze: Yeah, they're now eating out of my hand. 337 00:23:05,260 --> 00:23:07,200 KT: They eat out of her hand. And then she wears 338 00:23:07,200 --> 00:23:10,350 KT: sandals and if she sits down on a little stool, 339 00:23:11,300 --> 00:23:14,689 KT: her toes like come on feed us mom and they 340 00:23:14,690 --> 00:23:17,379 KT: pick on Suze's little toes, it scares her. 341 00:23:17,390 --> 00:23:22,080 Suze: Anyway, Hi KT and Suze and chickens. I have a 342 00:23:22,080 --> 00:23:27,580 Suze: question that involves ethics and math. I really need your help. 343 00:23:28,460 --> 00:23:31,540 Suze: My mother is 72, get out your notebooks, write these 344 00:23:31,540 --> 00:23:37,420 Suze: things down. My mother is 72 and retired. She owns 345 00:23:37,420 --> 00:23:42,080 Suze: her home. She has about two million in savings and 346 00:23:42,080 --> 00:23:46,400 Suze: the interest from that account, combined with social security is 347 00:23:46,400 --> 00:23:50,100 Suze: enough for her to live on comfortably. She's in good 348 00:23:50,100 --> 00:23:55,580 Suze: health and is a very lovely person. I'm 38 and 349 00:23:55,580 --> 00:23:56,179 Suze: married 350 00:23:56,540 --> 00:23:59,260 Suze: In the next few years. I would really like to 351 00:23:59,260 --> 00:24:04,010 Suze: move so that my kids can attend a better school district. 352 00:24:04,970 --> 00:24:08,960 Suze: The problem is that the mortgage we have now is 353 00:24:08,960 --> 00:24:15,610 Suze: at 3.375%. And at the current mortgage rates, that would 354 00:24:15,609 --> 00:24:18,420 Suze: mean that buying a new home at the new rate 355 00:24:18,430 --> 00:24:23,330 Suze: would make our monthly payment almost double. We can't afford it. 356 00:24:23,960 --> 00:24:28,040 Suze: I asked my mother if she would consider selling us 357 00:24:28,050 --> 00:24:32,379 Suze: a mortgage. She said yes before I could even finish 358 00:24:32,390 --> 00:24:38,230 Suze: asking the question, like I said, totally lovely. But here's 359 00:24:38,230 --> 00:24:43,030 Suze: my question, what should the rate on that mortgage be? 360 00:24:43,550 --> 00:24:47,000 Suze: I'm not sure what she's earning at her current bank, 361 00:24:47,310 --> 00:24:48,929 Suze: maybe 4%. 362 00:24:49,260 --> 00:24:52,760 Suze: Does that mean that our mortgage should be at that rate? 363 00:24:52,830 --> 00:24:57,359 Suze: What if interest rates increase? And it turns out she's 364 00:24:57,369 --> 00:25:01,020 Suze: earning less from our mortgage than she would have earned 365 00:25:01,030 --> 00:25:05,350 Suze: in a savings account. Does that mean I should change 366 00:25:05,350 --> 00:25:09,910 Suze: the interest rate every year? But changing numbers might make 367 00:25:09,910 --> 00:25:13,180 Suze: it hard for me to budget. Help. Thank you so much. 368 00:25:13,190 --> 00:25:16,980 Suze: I love you guys, your friend Lee. So what should 369 00:25:16,980 --> 00:25:18,149 Suze: we tell her? 370 00:25:19,270 --> 00:25:25,910 Suze: Everybody think about it. Mommy is only 72. Mommy is 371 00:25:25,910 --> 00:25:32,890 Suze: essentially my age. Mommy is retired. She owns her own 372 00:25:32,890 --> 00:25:37,590 Suze: home outright, has two million in savings and lives off 373 00:25:37,590 --> 00:25:40,780 Suze: of the interest of that account combined with social security. 374 00:25:41,330 --> 00:25:47,100 Suze: Again, the reason Lee wants to move everybody for a 375 00:25:47,100 --> 00:25:51,580 Suze: better school district totally get that right. However she has 376 00:25:51,580 --> 00:25:55,290 Suze: a great rate on her mortgage right now. Probably in 377 00:25:55,290 --> 00:25:57,530 Suze: a year or two seriously more 378 00:25:57,700 --> 00:26:01,929 Suze: rates could very easily be at 7 7.5% because interest 379 00:26:01,930 --> 00:26:04,740 Suze: rates are still going up if you ask me and 380 00:26:04,740 --> 00:26:07,960 Suze: I don't think real estate is in many areas is 381 00:26:07,960 --> 00:26:11,760 Suze: still going down. There are many areas, San Francisco um 382 00:26:11,770 --> 00:26:14,880 Suze: you know all kinds of places that real estate is 383 00:26:14,880 --> 00:26:20,280 Suze: going down but maybe not for Lee. So Mommy wants 384 00:26:20,280 --> 00:26:24,310 Suze: to do this. Mommy wants to help her daughter. 385 00:26:26,200 --> 00:26:27,590 Suze: But lee is worried... 386 00:26:29,140 --> 00:26:31,100 Suze: What if interest rates go up and mommy could be 387 00:26:31,100 --> 00:26:33,170 Suze: making six or seven or 8% on her. 388 00:26:33,170 --> 00:26:35,710 KT: I wonder if she could go like do halfway. 389 00:26:36,580 --> 00:26:38,889 KT: You know, why does she have to sell like the 390 00:26:38,890 --> 00:26:40,230 KT: whole mortgage? 391 00:26:40,240 --> 00:26:43,629 Suze: Well, you know obviously Lee's got to have some money, 392 00:26:43,990 --> 00:26:46,720 Suze: you know, she's going to sell her house obviously who 393 00:26:46,720 --> 00:26:49,300 Suze: knows what the mortgage amount will be, but it's going 394 00:26:49,300 --> 00:26:52,800 Suze: to have to be for the entire amount. Most likely. 395 00:26:54,720 --> 00:26:57,260 KT: I don't know what I would do. I think that 396 00:26:57,260 --> 00:27:00,369 KT: Lee wants to be responsible and not want to... 397 00:27:00,510 --> 00:27:04,630 Suze: Let me make it easy for you. The question is 398 00:27:04,630 --> 00:27:07,490 Suze: as you know, should she do this? Yes or no? 399 00:27:08,090 --> 00:27:10,030 KT: Should her mother do this? 400 00:27:10,030 --> 00:27:12,280 Suze: No, her mother wants to do it. Should Lee do this? 401 00:27:12,290 --> 00:27:16,120 Suze: Yes or no. What are you all saying? Everybody, if 402 00:27:16,119 --> 00:27:19,090 Suze: you're in the situation, Lee was your daughter? 403 00:27:22,240 --> 00:27:25,740 KT: I would say no.  I just don't think that she wants to risk money 404 00:27:25,740 --> 00:27:30,660 KT: coming between her and her mother's security while her mom, 405 00:27:30,660 --> 00:27:34,740 KT: who's only 72, that's really young. She's living off the 406 00:27:34,740 --> 00:27:40,870 KT: interest of her $2 million savings and social security, right? Yeah. She 407 00:27:40,869 --> 00:27:44,220 KT: owns her home outright. But um, I would say no. 408 00:27:46,369 --> 00:27:50,020 KT: (Suze says Ding Ding Ding!) Good. Yeah, I think we both agree on that. She's 72. 409 00:27:50,030 --> 00:27:53,440 Suze: Obviously, I agree since I just dinged you. So here's 410 00:27:53,440 --> 00:27:56,180 Suze: the question. Everybody. How did you answer that? 411 00:27:56,730 --> 00:28:00,660 Suze: Now Lee, let me answer it for you directly. And 412 00:28:00,660 --> 00:28:06,120 Suze: here is the reason why: Mom is still very young, 413 00:28:07,430 --> 00:28:11,760 Suze: Mom's going to get older and as mom gets older 414 00:28:11,770 --> 00:28:15,190 Suze: it is very possible that Mom may need to go 415 00:28:15,190 --> 00:28:18,770 Suze: into an assisted living facility. She may get sick. Maybe 416 00:28:18,770 --> 00:28:21,720 Suze: she has to go into a a skilled nursing home 417 00:28:21,720 --> 00:28:22,810 Suze: we don't know. 418 00:28:23,260 --> 00:28:28,270 Suze: And nursing homes or in home care can become very, 419 00:28:28,280 --> 00:28:33,960 Suze: very expensive to the tune of possibly $10,000 a month. 420 00:28:34,369 --> 00:28:36,129 Suze: Then all of a sudden 421 00:28:36,760 --> 00:28:40,870 Suze: there's not enough money because Mom may need the principle 422 00:28:40,870 --> 00:28:46,470 Suze: that she lent you to buy this home and now 423 00:28:46,480 --> 00:28:51,070 Suze: you're freaking out, she's freaking out, you're feeling bad and 424 00:28:51,080 --> 00:28:57,460 Suze: or you my dear Lee get sick, you are in a car accident, 425 00:28:57,800 --> 00:29:01,080 Suze: something happens to you and you no longer can earn 426 00:29:01,080 --> 00:29:05,680 Suze: money so you can't afford to pay mom back the 427 00:29:05,690 --> 00:29:09,730 Suze: interest anymore through the money that you were making, there 428 00:29:09,740 --> 00:29:13,570 Suze: are too many unknowns here. If you had simply 429 00:29:13,580 --> 00:29:16,230 Suze: said that she has about two million in savings, she 430 00:29:16,230 --> 00:29:19,460 Suze: doesn't need the interest on it. It just sits there. 431 00:29:19,460 --> 00:29:22,820 Suze: She has enough income from other places and she's totally 432 00:29:22,820 --> 00:29:25,720 Suze: fine and everything and maybe you are going to do 433 00:29:25,720 --> 00:29:28,670 Suze: it for like you know 2 or $300,000 I'd say 434 00:29:28,670 --> 00:29:29,420 Suze: okay 435 00:29:30,260 --> 00:29:35,800 Suze: but not in this particular situation. So are you better 436 00:29:35,800 --> 00:29:40,860 Suze: off like really starting to save right now? So you 437 00:29:40,860 --> 00:29:45,130 Suze: can put more money down or you stay where you 438 00:29:45,130 --> 00:29:45,890 Suze: are 439 00:29:46,080 --> 00:29:48,850 Suze: and your kids go to the school that they go 440 00:29:48,850 --> 00:29:50,030 Suze: to now. I just have to say... 441 00:29:50,570 --> 00:29:54,480 KT: Wait, Lee I have an idea Suze. Stay where you are let 442 00:29:54,480 --> 00:29:57,880 KT: the kids finish school and grandma can afford to maybe 443 00:29:57,880 --> 00:30:01,720 KT: help them in a great college which might be... 444 00:30:01,730 --> 00:30:05,230 Suze: Yeah or maybe it's easier for granny to pay for 445 00:30:05,230 --> 00:30:07,640 Suze: a private school for them or something. 446 00:30:07,780 --> 00:30:11,010 Suze: That's what I would probably do if I were you. 447 00:30:11,020 --> 00:30:15,460 Suze: But I would not be... because you have too many questions. 448 00:30:15,470 --> 00:30:18,310 Suze: You care too much. You love her too much. And 449 00:30:18,310 --> 00:30:20,740 Suze: if anything goes wrong, I'm telling you because I've seen 450 00:30:20,740 --> 00:30:28,200 Suze: it go wrong will break your heart. Not in this situation. 451 00:30:28,240 --> 00:30:30,500 Suze: But I also just want to say something to you 452 00:30:30,500 --> 00:30:34,470 Suze: about school systems. I grew up on the south side 453 00:30:34,480 --> 00:30:36,990 Suze: of Chicago. As many of you know, 454 00:30:37,460 --> 00:30:40,120 Suze: I would probably venture to say I did not have 455 00:30:40,130 --> 00:30:40,840 Suze: a great 456 00:30:41,880 --> 00:30:47,310 Suze: education by any means in my opinion. For many, many reasons. 457 00:30:47,360 --> 00:30:52,350 Suze: Grammar school was not that great. High school was actually horrific. Truthfully. 458 00:30:52,360 --> 00:30:56,750 Suze: Um for many reasons as well. And look at me today. 459 00:30:58,340 --> 00:31:00,950 KT: Look at KT. Public school baby. 460 00:31:00,950 --> 00:31:04,130 Suze: Yeah. Just know that I know as a parent you 461 00:31:04,140 --> 00:31:06,640 Suze: always want to go and give your kids the best 462 00:31:06,640 --> 00:31:11,090 Suze: schooling and the best education. But if you can't afford 463 00:31:11,090 --> 00:31:15,750 Suze: it then don't. It's just that simple. 464 00:31:16,140 --> 00:31:19,130 Suze: Alright that does bring us to the end and all 465 00:31:19,130 --> 00:31:20,890 Suze: of you know, I'm just going to say something here. 466 00:31:20,900 --> 00:31:27,540 Suze: You have got to tune in to Sunday's podcast. Because 467 00:31:27,550 --> 00:31:32,940 Suze: the certificates of deposit from Alliant Credit Union will be available, 468 00:31:32,940 --> 00:31:35,790 Suze: but there will be a special URL 469 00:31:37,040 --> 00:31:41,310 Suze: for you to use. You are going to love the 470 00:31:41,310 --> 00:31:44,610 Suze: interest rates on the three and six months. They are 471 00:31:44,620 --> 00:31:49,860 Suze: exactly what you want. And so just stay tuned for 472 00:31:49,860 --> 00:31:53,010 Suze: a few more days and I will tell you exactly 473 00:31:53,020 --> 00:31:56,940 Suze: how you get them and you're gonna you're just gonna 474 00:31:56,940 --> 00:31:57,520 Suze: love it 475 00:31:57,760 --> 00:32:01,220 Suze: because I can tell you I love it. So, for 476 00:32:01,220 --> 00:32:04,350 Suze: those of you who are looking for certificates of deposits, 477 00:32:04,360 --> 00:32:08,900 Suze: I helped create them for you at Alliant Credit Union. 478 00:32:08,900 --> 00:32:13,210 Suze: So stay tuned. Alright, KT, are you ready to take 479 00:32:13,220 --> 00:32:14,190 Suze: us out? 480 00:32:14,200 --> 00:32:15,420 KT: Yes. 481 00:32:15,430 --> 00:32:19,210 Suze: So here's what we want you all to say 482 00:32:19,420 --> 00:32:26,490 Suze: every single day. So say it with us today, wherever 483 00:32:26,490 --> 00:32:33,360 Suze: I go, I will create a more peaceful, joyful and 484 00:32:33,360 --> 00:32:41,600 Suze: loving world. Remember when you do that, you really are unstoppable.