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Speaker 1: Hello there, welcome to another Ask Suze Anything. So, before we begin, just going to give you a reminder. On September 29, at 1 a.m. East Coast time, I will be live, tune in to HSN and I'm going to do an Ask Suze Anything show where you can call in and ask me your questions and I will respond to you. So just do me a favor, I've told you if you want, you can write your question now and then I'll tell you when to call in or whatever it may be. Or, you can just watch that show at 1 a.m. East Coast time, adjust it for whatever time zone you are, and therefore you can just call in. They'll probably take it right then and there. All right. Let's begin now, loving the questions that are coming in, quite varied, quite interesting. Here we go from Robin. Hi, Suze, I would love your advice. I am single, relatively successful at a professional services firm, I'm fortunate enough to have a pension for life, and I max out my 401k. I do not own a home yet. I live in Santa Monica, California, which is ridiculous, $1.5 million plus for an OK, two-bedroom, two baths. I need the tax break, but I am reluctant. It has been suggested… This is where I start to get mad. Just sit back, everybody. All right, any idea why I would get mad? What is the one thing that makes me mad? All right, keep listening. It has been suggested to purchase whole life insurance. I do not have dependents, however, I do support my boyfriend of 12 years and help out my nephews and my sister. Not so worried about the boyfriend, but I do worry about my nephews. My question for you, is whole life insurance a good investment… (Please underline that word, investment, as you're listening to me.) investment choice? I finally have saved enough money to put 10% down on a home. Do I double down on life insurance or keep saving for the American dream? Signed, Robin.When are you going to get it? How many times do I have to say to you that whole life insurance, any type of life insurance, is not an investment. An investment is an investment. Insurance is insurance. Let me say it again. An investment is an investment. Insurance is insurance. I have said that over and over again. Robin, you say you don't really have dependents, but you do support your boyfriend of 12 years. First of all, maybe we need to talk about that. Why do you support your boyfriend of 12 years? What is up with that? No wonder he is not your husband, you do not need to support anybody. Why is it that your boyfriend can't go out and get a job and one day possibly support you? Don't you ever think that if something were to happen to you, who is going to take care of you, Robin? Who is going to support you, Robin? Oh, now you have no more money coming in, but what happens? You have to not only support yourself somehow, but your boyfriend. I would always want to know that I was in a relationship with somebody that could take care of me financially speaking, if I needed taking care of. That would make me feel secure again. What is the goal of money? For you to feel secure. But if you're the only one who's making everybody feel secure, what happens if you can't do that? Then how are you going to feel secure? You say you have a pension for life, but a pension is different, a pension is when you have retired. You say you max out your 401k, again, you're 401k is for when you retire. You do not own a home, but yet you say that you have enough to put 10% down now on a home. You say you need a tax break, so what is stopping you? Oh, possibly because you have to be supporting your boyfriend? I'm not going to make any more judgments on that, I just don't like it. And maybe it's not my place to not like what you're doing, but all I know over the 35 years that I've been doing this, all the emails that I've gotten, something normally goes wrong when you can no longer support your boyfriend. So, is he there because he loves you or because you support him? Will he stay there if you can no longer support him? Funny, after 12 years, he's still just your boyfriend, not your husband. I think that says a lot as well.Don't worry about your nephews, your sister and everything. You obviously have money in a 401k. You're going to be buying a home. Just make sure you do a living revocable trust that leaves everything to them upon your death. So therefore, that would be the best way to go. However, no, is whole life insurance a good investment choice, you asked me? It is the worst, it is not an investment. Whoever gave you that advice, don't ever talk to that person again. OK, next one's from Claudia. She says, there is a person I know with an uncommon situation. I couldn't think of any advice to give, so I hope you can. The wife left him about five years ago, and later she passed away. There were no children, he never filed for divorce as he hoped for her return. Now that she has passed, what financial responsibilities does he have for any debts, medical, credit card, etc. that she incurred after she moved away? I would be happy to pass on any advice you can give.This one is a little complicated, Claudia, because they separated. All right. But did she continue to use a credit card, for instance, that was a joint credit card with him? Because if she did, guess what? He is responsible for it. Even if he had gotten divorced from her and she did not close down that credit card altogether, he would be responsible for it. So, we need to take a lesson from what Claudia is asking. If you are out there, you are listening to me and you are separated or divorced. And let's just say you have a credit card that both of you took out together, you both signed for it, and now there's still a balance on that card, and now you are divorced. You want to make sure that your ex-spouse cannot continue to charge on that credit card, you have to close that credit card down. However, there is a balance on that credit card, you owe money on that credit card, you cannot close down a credit card that you owe money on. Sure, you can get rid of the credit cards and whatever, but it's still open until that balance is paid off. So, if you really want to protect yourself from getting a knock, knock, knock on that door sometime in the future, if your ex claims bankruptcy and now they're coming after you for the payments, your ex died, whatever it may be, and they are coming after you for the payments. Whether you are separated or whether you are legally divorced, you have got to pay off their credit card in full and then close it down. Claudia, I can't fully answer this question because I don't have enough information. So, if his ex continued to use credit cards that were in their joint names, he's going to be responsible for it, if not most likely he will be fined.This one is from Jonathan, one of the men smart enough to listen, and Jonathan is married to a man. Hello, Jonathan and his husband. All right, listen, here is the question. Hi, Suze, I am 51 years old and my husband is 45 years old, but we don't have a house yet. I have a question. If I have... Now, listen carefully, everybody. If I have $60k dollars in savings and $70k in a 401k, should I empty my 401k and buy a condo in cash? Now, before I even go on with the rest of this question, here's what you have to understand. Jonathan said he was 51 years old. If he cashes out the $70k in his 401k, that $70k gets added to his income as ordinary income. So, he is going to owe ordinary income tax on the entire $70k which will put him in a higher income tax bracket. So, chances are not only is he going to have to pay ordinary income tax on it, he's going to have to pay a 10% federal tax penalty because he is not 59 and a half years of age or older. Do you get that? So, Jonathan, maybe after taxes and penalties, you'd have $35k left of that $70k, so now you use up all of your savings plus that. So $95k, are you telling me that you can buy a condo for cash somewhere for $95k? Really? The other thing that is important before I go on with the rest of this question is this. If you are working for a corporation, you're still employed where you have a 401k, you can't just empty that 401k, you cannot just close it down. Sure, you could apply for a hardship withdrawal, maybe take some out and do something like that, but it's not like you can just empty it. If that 401k is with an ex-employer then absolutely you can just empty it, but again, if you're not 59 and a half years of age or older then chances are you are going to have to pay a 10% penalty tax on it. Again, you need to think about this. Now, there are exceptions to that 10% penalty tax. Little too complicated to go in right now, but since Jonathan is not old enough to do anything other than pay a penalty, I'm not going to go into it. But here's what gets me. He then goes on to say, I can't work much anymore due to my shoulder pain, and my husband just quit his job two days ago and now he's looking for a new job. I could go on, but I don't want to, because here's the thing. You're looking to buy a house when you're not going be able to work possibly, your husband just quit his job and yet you want to use all your money in retirement, all your money in savings to buy a condo? Are you crazy? Do you understand why I sit here and when I read these emails, I just kind of want to tear my hair out because the truth of the matter is, I have enough hair to tear out? Have you ever seen how thick my hair is? My hair is so thick, it's unbelievable. Unbelievable. But that's not the point here. The point here is, if you're not working, you don't have income, you don't know what you're going to do, you're not feeling well, that is not the time that you put all your money into a home when we don't know what real estate prices are going to do. You have especially if you're going to buy a condo, you have possible assessments that come with the condo, and again, I can go on and on. Don't do it, Jonathan, don't do it. You're not in a financial situation to do so. See, Ask Suze Anything is really, really important. It's really important because otherwise you make mistakes, and when you think about it, who else do you really have out there, really, to ask these questions to? Most financial advisors simply ask you the question, so how much money do you have? And then they say to you, oh, this is what you should do with it. So, it's really important that you have a place like this to come to, ask your questions and then see what I have to say. If your question is chosen again, if you want to do so, send in your question to AskSuzePodcast@gmail.com, S-U-Z-E. When it comes in, I read it and if I've chosen it, it will be answered on the air.Hi, Suze. My husband and I have been wanting to convert our traditional IRAs to Roth IRAs, however, we are super confused as to when is the right time period to convert. Our current tax bracket is high. Should we start converting now or leave the money in traditional IRAs until retirement? Also, should I be contributing to a Roth 401k at work now or continue to contribute to a regular 401k? Annual income is approximately $200k. Signed, Irene. So I want you to listen to me, Irene. When you convert a traditional IRA to a Roth IRA you obviously pay ordinary income taxes on it. I want you to listen closely to what I am about to say. When the markets are relatively high, and you want to convert a traditional IRA to a Roth IRA, when you do so, you pay the taxes on the amount you are converting. Now, if you are converting, let's say you own in your IRA 1000 shares of a stock that's at $200 a share right now and you want to convert and you start to sell it so you can convert it to a Roth, and then you pay taxes on it. But now you own that in your Roth and it goes from $200 down to $150 down to $100. And you're like, oh, my God, I can't believe I paid taxes on a $200 a share stock, and now it's at $100 a share.In the good old days, you used to be able to do something where you re-converted back to your traditional, you didn't owe the taxes and there were all kinds of great things to protect you. That no longer exists today. So, listen closely again, given that these markets are going up, going down, going up, going down, and we probably will go into recession in late 2020, maybe 2021. And who knows what can happen given that nobody is at the helm here, making wise financial decisions with our trade wars, because every time President Trump tweets about trade or something and this isn't resolved, the markets will go down big time. The Federal Reserve not doing what he wants them to do, the markets go down. And so, therefore, given that we are not in rational times, it is possible that anything can blow at any time. Therefore, I would not and I repeat, I would not be converting from a traditional IRA to a Roth IRA until the markets actually do plummet and one day they will. I don't know when that will happen, it could happen in the next year, or the next two years or in the next three years, but it will obviously happen. And when it does happen, that is the time, little by little to convert because as your money has gone down or the stocks have gone down, if you want to keep the same stocks or whatever it may be, then you do not owe as much taxes. And if you have good investments, eventually those investments will recover again. Did that make sense? So, no, I would not be converting right now. However, would I be contributing to my Roth 401k at work right now? Oh, you betcha I would. So just leave your traditional IRAs as they are, make sure you're invested in good quality mutual funds, ETFs and or stocks and what else? Contribute to a Roth 401k. Now, did I just confuse all of you with that? I hope I didn't, but if I did write in and let me know and I'll straighten that out. All right, let's just do one more.This is from Alexis. She says, so I bought your must have documents, I set up my revocable trust and had it and all the other documents notarized. Now I'm trying to transfer my Roth IRA into my revocable trust. I called T.D. Ameritrade and they said if I do that, it will be an early distribution penalty, but they said I could set up my trust as the beneficiary of my Roth IRA. What am I supposed to do, Suze?Alexis? How many times, again, have I said this is why all of you need to go back and listen to all the podcasts over and over and over and over again because you're missing it. I say something that's important and you don't hear it. It goes in one ear and out the other and you just don't hear it, and then you make mistakes. And then you get mad at me, you get mad at me. Are you kidding me? Here's the thing. An IRA, an individual retirement account, whether it's a Roth or a traditional, cannot be held in any name other than an individual's name. IRA is individual. A trust is not an individual. So, you cannot ever change an individual retirement account into the name of the trust like you can your own home. Very different. Same thing with the 401k plan at work, it has to be in your individual name. However, the beneficiaries absolutely can be the revocable trust. Again, just a rule, if you are married, your primary beneficiary is always your spouse. The contingent beneficiary is always the revocable trust. If you are not married, the primary beneficiary is always the revocable trust.All right, I think you probably have had enough for today. This coming Sunday, I want you to really tune in because I'm going to take you all to Suze School and I want to talk to you about real estate and what I think currently is happening with real estate. So, the date of that podcast will be September 1, 2019, if you happen to be listening to this sometime in the future. So, it gives you a timeframe as to when I'm saying this, because, again, things change in the future. So, you need to know the dates of when I say something. But I want to talk to you about real estate, refinancing, what's happening to interest rates and why Treasury bonds, 30-year Treasury bonds, might not be a bad investment. So, until then, be the strong and smart, secure women that you were born to be. See you soon. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information. To find the right Credit Union for you, visit https://www.mycreditunion.gov/. Interested in Suze's Must Have Documents? Go to https://shop.suzeorman.com/checkout/cart/index/.