KT: Hi everybody. Welcome to the Women and Money podcast, and
KT: everyone's smart enough to listen. This is KT here, and
KT: I'm opening this on March 13th for Suze, who is
KT: in the studio with me, but she's still suffering from
KT: sinuses and who knows what else. Listen to this nose.
KT: Listen to her.
Suze: Hello, hello.
Suze: So we thought we would get through this podcast if
Suze: I saved my voice some because it just now came
Suze: back after a while of me not even having one.
Suze: Don't ask me why.
KT: I'll answer
KT: the questions for everyone.
Suze: Oh, I love that.
KT: All right, so...
Suze: Anyway, before we start though, KT, with question and answers,
Suze: which is very important, everybody, cause your money is far
Suze: more than what's happening in the market. It's these little
Suze: things that you also need to know about like converting
Suze: a Roth, not converting it, all kinds of things. So
Suze: we have to deal with those things as well. They're
Suze: equally as important.
Suze: But I told you that last Sunday I was going
Suze: to tell you my interpretation of what's going on with
Suze: the market. Wasn't able to, God willing, I will do
Suze: so this Sunday, but here's the bottom line. Yeah, we're
Suze: in for a rocky road, and I don't know which
Suze: way that road is going to lead, and the reason
Suze: is this the incredible uncertainty.
Suze: Of making a decision, then it's unmade. This is going
Suze: to happen and then it's not gonna happen on and
Suze: off causes confusion and when not only investors like you
Suze: are confused, but businesses are confused, governments are confused, everybody's confused,
Suze: everybody just stops and does nothing.
Suze: And when you do nothing it's because you're afraid. And
Suze: what have I always told you? Fear is the greatest
Suze: internal obstacle to wealth. So it's best to do nothing
Suze: than something you don't understand in many cases. So I
Suze: have no problem with just briefly saying if you're in
Suze: good quality, everything, as I've told you, just stay put,
Suze: but some day we'll go into greater detail after we
Suze: figure out what happened
Suze: this week in the market all the way through Friday.
Suze: All right, KT.
KT: OK, so I've got some great questions here and this
KT: one says, hi Suze and KT, I've been listening to
KT: you for a year and a half, and you have
KT: made me feel much more control of my situation. And
KT: this is from Michelle. She said, Suze, we bought our
KT: forever house in May 2023.
KT: To be in a better school district, we went from
KT: a 2.5% interest rate to now having a 6% interest rate.
KT: Our new house costs significantly more than the old one,
KT: so our mortgage payment has more than doubled. We did
KT: plan for this, all right, that's the key to this email, Suze.
KT: We did plan for this. We saved to comfortably
KT: staying afloat and figured we would be able to refinance
KT: in 1 to 2 years. My question for you is,
KT: at what point would we refinance when rates get to 5%
KT: or lower? What would make a difference?
Suze: It all depends seriously, and what it depends on is this,
Suze: so listen closely. Many people make the mistake
Suze: of they do a mortgage at a specific interest rate
Suze: for let's say 30 years like you probably did at 6%
Suze: and then you think, all right, when interest rates go
Suze: down you'll refinance and let's say that happens 4 or
Suze: 5 years from now.
Suze: Then you refinance for another 30 years. So these 4
Suze: or 5 years that you have been paying on it,
Suze: you've just lost all of that. So you think that
Suze: you're ahead, but the truth of the matter is you're not.
Suze: So rule number one, if you ever do refinance.
Suze: You have to make sure you don't have the mortgage
Suze: term longer than the current amount of years left on
Suze: your mortgage. So if you have only 26 years left
Suze: on your mortgage that you're refinancing, then refinance your new
Suze: house for 25 years, all right, not another 30, something
Suze: like that. That's number one, number 2.
Suze: It's hard for me to answer the question because I
Suze: don't know if you're going to have points involved, not
Suze: points involved, what the closing costs are going to be.
Suze: So the way that you would figure this out is
Suze: what is it going to cost you to totally refinance
Suze: this house.
Suze: And what will your current mortgage payments be? And what
Suze: will the savings be if you were to do that
Suze: between your new mortgage rate and your old?
Suze: Then you divide that number, the difference into the cost
Suze: of refinancing.
Suze: And then you'll know how long it's gonna take you
Suze: to make up for that figure. If it's going to
Suze: be 5, 6, 7 years and you don't think you're
Suze: going to be in the house that long, then it
Suze: makes absolutely no sense to do it. If it's gonna
Suze: be like 2 years and you know you're gonna be
Suze: in the house that long or longer, then you refinance.
Suze: So that is how I would answer that question. In fact,
Suze: that's how I did answer it. All right, next, KT.
KT: Next is from Pamela, and it's not a question but
KT: it's something I want. It's a lesson and Suze, you
KT: taught her this lesson ready.
KT: Hi KT and Suze.
Suze: Have I
Suze: taught you any lessons?
KT: Me? Oh my God, we don't have enough time and
KT: podcast for the rest of our life for me to
KT: answer that.
Suze: Because people sure like my Roth IRA podcast.
KT: I don't want to talk about March 6th.
Suze: All right, fine, no problem.
KT: So I left your Suze school on March 6th.
Suze: Oh, that's
Suze: fascinating because I'm sitting here thinking about how did KT
Suze: even know that the Roth IRA quiz was on March 6th.
Suze: I went, did she listen to it?
KT: I listen to that over and
Suze: over. Honest to God, everybody, I had no idea she
Suze: was just gonna say what she was because I don't
Suze: know these questions
Suze: she's reading.
KT: I loved your Suze school on March 6th. I only
KT: got one question wrong, so I was like showing off Pamela.
KT: Pamela got one question wrong. KT got like 50% wrong.
KT: Now she said, I also want to..
Suze: KT, behonest, you got, you got...
KT: I got like 70% wrong.
Suze: Yeah, you got 3 right out of 18.
KT: That's not true.
Suze: It is true.
KT: It is not. Don't listen
KT: to
KT: her. I also wanted you to know that when I
KT: was getting my taxes done a month ago, the CPA
KT: told me I couldn't withdraw from my contributions in my
KT: Roth
KT: IRA without a penalty. I've had my Roth IRA for
KT: 10 years. I will be 58 in June. I told
KT: him that is not true. I didn't want him doing
KT: my taxes, Suze, so I walked out the door.
KT: She left. I'm so proud of her. She said, I
KT: can't even take credit. I learned this all from you.
KT: I want to help my 28 year old son and
KT: 31 year old daughter with everything I've learned from you.
KT: Thank you so very much, Pamela. Is that great? She
KT: had the courage, everyone, to get up and walk
KT: out he was so wrong.
Suze: And
Suze: the lesson from that is just because somebody is in
Suze: a suit sitting behind a desk with some plaque that
Suze: says they're this or that doesn't mean they know what
Suze: they are talking about. Just a quick story, KT. I
Suze: did a PBS special, the very first one ever.
Suze: And that is when I said and introduced Roth IRAs
Suze: for the very first time and told everybody that they
Suze: could take out their original contributions any time they want
Suze: without taxes or penalties regardless of age or how long
Suze: it's been in there.
Suze: All these people after it aired wrote in to PBS
Suze: and said that's absolutely wrong. You have to take that
Suze: off the air, blah blah blah blah. Ha, I was right.
Suze: They were wrong. Just because they have a few initials
Suze: after their name
Suze: doesn't mean squat.
KT: The, the point of that whole experience is that you've
KT: got to really know and you can't just trust one...
Suze: You have to check, double check, be clear, be crystal
Suze: clear and no and no, and hey, if you didn't
Suze: believe him or her, go to another one and see
Suze: if they agree, but it's written everywhere.
Suze: So he's just whatever. Ok, go on.
KT: OK, this is from,
Suze: Wait, aren't you proud of me? I didn't call him
Suze: what I was going to say, he asked.
KT: Yes, thank you, especially with that nasally nose of yours.
KT: The next is from...
Suze: Do I snore with it?
KT: No.
Suze: Oh, that's good to know. OK, go on.
KT: All right. The next question is from Deb Johnny. Don't
KT: you love that name? Deb Johnny?
Suze: Do you think her mom's name is Deb?
Suze: And her daddy's name is Johnny, and they named her
Suze: Deb Johnny.
KT: Maybe I just think it's a pretty name. She said, Hi, Suze,
KT: I hope this is a quick one. I'm in my mid-50s.
KT: I've recently retired. I have about $3 million in assets.
KT: I'm single with no dependents. I have $650,000 in my 401k.
KT: Of which 500,000 is traditional, the rest is Roth. What
KT: do you think about using my traditional 401k balance to
KT: purchase a single premium immediate lifetime annuity to get some
KT: predictable income before I become eligible for Social Security? She's
KT: planning on taking that at 70.
KT: I'll get about 2.8k per month, which will cover more
KT: than 50% of my monthly expenses. She's doing this, Suze,
KT: because she said that way she can let her brokerage
KT: account grow without starting to draw down too much. So I,
KT: you know, what do you think
KT: about that?
Suze: I think it's a really, really bad idea.
KT: Why?
Suze: And the reason is this, Deb, Johnny.
Suze: Right now you're in your mid-fifties and KT just said
Suze: you want to do this cause $2.8k a month is
Suze: going to pay for 50% of your expenses. That's your
Suze: expenses today, girlfriend. That 2.8 is not going to change
Suze: for the rest of your life. So what do you
Suze: think it's going to be worth 20 or 30 years
Suze: from now? What do you think your expenses are going
Suze: to be 20 or 30 years from now?
Suze: You need to keep up with inflation and you need growth.
Suze: At this age, you do not need more income because
Suze: you already have $3 million in assets.
Suze: So the goal here is number one to protect your assets,
Suze: but keep up with the income for when you really
Suze: need it that you have it invested in something that grows
Suze: dividend paying stocks if I were you. But no, I
Suze: would not be taking it now for my 401k. I
Suze: think it would be the biggest mistake you could ever make.
Suze: If you told me you were 69 and you wanted
Suze: to do it. I'd think about it.
Suze: But not in the 50s. No, go on, KT.
KT: OK, next question is from Maria. She said, hi Suze
KT: and KT. I've listened to your Sunday podcast on questions
KT: about Roth. This is another March 6th. It was so informative.
KT: Thank you so much. I want to ask if I
KT: could use my money in my savings account,
KT: after tax, to transfer to an IRA and then convert
KT: it to a Roth through the back door. I already
KT: max out my Roth 401k at work and I'm not
KT: qualified to fund my individual Roth because of my income.
KT: Is this possible?
Suze: What you should do if you do not already have
Suze: an IRA, a SEP IRA, any individual retirement account, forget
Suze: what you have at work. Work Roth 401ks, traditional 401ks, whatever,
Suze: they don't count. But if you do not have any
Suze: additional IRA outside of work.
Suze: Then therefore you can just open up a nondeductible IRA
Suze: and then convert it to a Roth, just that simple
Suze: that's known as a back door Roth, so that you
Suze: can do as long as you don't have another individual
Suze: retirement account of any kind.
KT: OK, OK. Next is from Jody. I never miss an
KT: episode of your podcast, and I used to watch Can
KT: I Afford it as a family.
KT: Well, we have a little treat. We have a treat
KT: coming up for YouTube. You just be patient. Well, my
KT: little girl has grown up and she's now 29 years old.
KT: Does that make us feel old?
KT: She wants to set up her first Roth IRA. She
KT: has $40,000 in a high interest savings to use to
KT: fund an IRA. Suze, I don't know how to guide her.
KT: Is there a brokerage firm you recommend that doesn't charge
KT: many fees? What should she do? ETFs, mutual funds? Question, question, question.
KT: Oh wait, and then there's one more line here. It said,
KT: but like KT, Roth investing and I are like oil
KT: and water. Thanks, Jody.
KT: You and I are from the same, same batch. We're
KT: both a little...
Suze: ...slippery, huh, anyway, um, so all you have to do
Suze: is like go to Schwab, go to Vanguard. Vanguard is
Suze: a fabulous brokerage firm. Vanguard Fidelity or Schwab either one
Suze: doesn't matter, OK? But let's say you did Schwab, go
Suze: and open up a Roth IRA for her fully funded
Suze: to 7000
Suze: dollars put it in their treasury money market fund or
Suze: whatever it may be and then have her dollar cost
Suze: average into these stock markets because obviously the stock market
Suze: is not having a really great time this year so far,
Suze: but it will again. Now if I were you I
Suze: would have her do exchange traded funds, ETFs, so she
Suze: has some diversification.
Suze: So it's really just that simple. So if she puts
Suze: in $7000 at once, then you would have her put
Suze: in approximately $583 a month into either the Standard and
Suze: Poor's 500 index fund, the Vanguard total stock market index fund,
Suze: or just keep it simple for her now to get
Suze: her used to investing in the ups and
Suze: downs of the market. That's what I would be doing
Suze: if I were you. Next, KT.
KT: OK, I have a question from Scott. He said, Suze
KT: and KT, thanks for all the advice. I'll be 50
KT: in June. He's a Gemini like you. Gemini Scott.
Suze: Like me, I'm gonna be 74.
KT: All right, Scott, you have a long way to go.
KT: Between your show...
Suze: And may your 24 years till that age be as
Suze: great as mine.
KT: Yes, between your show and conversations with my mom, converting
KT: all of my pre-tax retirement accounts without 401k seems to
KT: be the best course to limit RMDs.
KT: So he said, I have about 6 traditional IRAs with
KT: recent and potential market corrections. Would you recommend converting as
KT: many as possible to Roths this year?
Suze: I would, depending, however, what the tax ramification will be
Suze: to you, because even though the markets are down, that
Suze: doesn't mean that you don't have a lot of money
Suze: still in those positions. So therefore.
Suze: After you have checked with a CPA, then you decide
Suze: which investments that you have make the most sense, like
Suze: which ones do you want to keep that have gone
Suze: down dramatically.
Suze: And then you would convert those, but it's definitely worth
Suze: it to convert while the markets are
Suze: down.
KT: All right, next question.
Suze: Why did you look at me like that?
KT: I didn't know if you were done.
Suze: I wasn't sure I was done.
KT: I know. Are you finished?
Suze: Let me think about it.
KT: Yes, you are, OK, because I have so many good questions.
Suze: But what's key about that is never do it all
Suze: at once unless all you have in there is like
Suze: 3000 $5000. If you have a lot of money in there,
Suze: never convert to a Roth all at once. You'll be
Suze: so sorry that you did, especially if it puts you
Suze: in a really high tax
Suze: bracket.
KT: All right. Next question is from Gay, she said, I'm
KT: a retired New York City teacher with a 457B and
KT: a tax deferred annuity.
KT: They have RMD rules that seem similar to those of
KT: traditional IRAs, and now she's asking, I also have a
KT: relatively small traditional IRA opened at the beginning of time.
KT: Can these three types of accounts be aggregated for the
KT: RMD so I can draw from the least lucrative one?
KT: I don't, I thought that was a good question because
KT: I don't know. OK, can you?
Suze: Are you sure you don't
Suze: know. Is this you're quizzy.
KT: If it's a quizzy, then I'm going to guess you
KT: absolutely cannot aggregate accounts like that.
Suze: And why would you say that?
KT: Because they're, they're all different. They're all different.
Suze: Ding Ding Ding-a
KT: Yeah, I see.
Suze: She got that but
KT: It's a good question,
Suze: Right? People wonder.
Suze: You cannot if you have 15 different IRAs, then you
Suze: aggregate all of them, the total that's in there for
Suze: your RMD, and you can take it from anyone you want.
Suze: It doesn't matter, but you have to do it on
Suze: the total amount.
Suze: But you cannot add into that amount what's in your
Suze: tax deferred annuity or your 450 those are separate and
Suze: have to do their own. What you could do is
Suze: if you're retired and you want, you can roll them
Suze: over like you could roll over possibly your tax deferred
Suze: annuity into your IRA that you've had forever and aggregate
Suze: it there.
Suze: So that you'd only have to figure out one RMD.
Suze: So look into that to see if you can do
Suze: that with your accounts.
KT: So Suze, next question is from Linda. She said, I
KT: am a teacher and will receive a pension. We love teachers,
KT: don't we?
Suze: So much, so much.
KT: They're our favorite people. I'm a teacher, will receive a pension,
KT: but do not have enough Social Security credits to receive
KT: Social
KT: Security myself, my husband will receive Social Security, and I
KT: understand that I will be able to receive his Social
KT: Security benefit if he passes before me. But Suze, what
KT: about spousal benefit while we're both alive? He's 60. I
KT: am 59. We planned to wait until he was 70
KT: to begin collecting his social.
KT: However, will I be eligible for spousal benefits while he
KT: is alive? If so, is there any benefit to having
KT: him start to collect at 67 so we can both
KT: receive benefits earlier, or is it best to still wait
KT: till 70? You got to set her straight, Suze.
Suze: Linda, listen. The biggest mistake that most people make is
Suze: they always think that they are going to get 50%
Suze: of their spouse's social security, no matter what. So if
Suze: their spouse waits till they are 70, let's say, to
Suze: get Social Security, you think you're going to get 50%
Suze: of the amount that your spouse will get at 70,
Suze: and that's not true. You only get 50% of what
Suze: your spouse would have gotten at his or her full
Suze: retirement age, which is currently 67.
Suze: Now, since you aren't going to have any Social Security,
Suze: then what I would advise you to do is this.
Suze: Let's just say that your husband is going to get
Suze: $2000 at the age of 70. Therefore, you're not going
Suze: to get 50% of that $2000. You get 50% of
Suze: what he would get at his full retirement age of 67.
Suze: That means at 67
Suze: he would probably only be getting about $1600 a month,
Suze: which means you would get 50% of that, which is
Suze: about $800 a month. Remember you have to be 67,
Suze: your full retirement age
Suze: to get the full 50% of the spousal benefit. So
Suze: given that you and your husband are just one year apart,
Suze: it's just so great I can't tell you. So this
Suze: is what I would do if I were you.
Suze: Assuming that those numbers were your numbers and you have
Suze: to do this with your own numbers, I would have
Suze: your husband claim at the age of 68.
Suze: And that would be about $1750 a month. I would
Suze: have you claim 50% of the spousal benefit of his
Suze: full retirement age.
Suze: I would have you do that at 67, which would
Suze: give you about $800 a month. So you would get
Suze: approximately $2550 a month starting when he is 68 and
Suze: you are 67. Given that he wasn't going to claim,
Suze: let's just say till 70, that's two years of payments,
Suze: that you wouldn't have been getting neither of you cause
Suze: you have to claim spouse has to claim, Linda, in
Suze: order for you to get a spousal benefit. Therefore, in
Suze: those two years that would be close to $61,000 of
Suze: money that you're entitled to that you wouldn't have claimed.
Suze: I don't know. I think that's a big difference. And
Suze: if I were you, that's what I would go for.
Suze: Did that all make sense to you, KT?
KT: I think that it's smart that they 68 and 67,
KT: go for it. 61,000 is a lot of money in
KT: two years.
Suze: Yeah, and really if you look at the difference between
Suze: what they would have gotten.
Suze: No, it's not worth it in my
Suze: opinion.
KT: They do better off doing what you
KT: just said,
Suze: I think so, but you should always double check. All right,
Suze: next question, KT.
KT: Suze, my final question from Sheila. Hi, Suze, thank you
KT: for the Roth info. I'm a little confused because I
KT: heard you say that if you have pre-tax
KT: money in any retirement account, then don't do a backdoor Roth,
KT: but we have 401ks and 403Bs. So does that mean
KT: we shouldn't do a backdoor Roth or were you just
KT: referring to IRAs with tax money?
Suze: Now, I already answered that on this podcast, KT. What's
Suze: the answer?
Suze: Don't look at me like that.
KT: No.
Suze: So the answer is what?
KT: The answer is that
Suze: are
KT: you
Suze: were
Suze: you just referring to IRAs?
KT: So, so she has 401ks and 403Bs. Were you just
KT: referring to IRAs? Yes, you were. You were referring only
KT: to IRAs.
Suze: That's right. Good. So it wasn't. No, it was, yes, ding ding.
KT: I meant no, she can't do the other two.
Suze: Yeah, no, it's don't worry, any money you have an
Suze: employer sponsored plan.
Suze: I don't care what kind of money it is in there,
Suze: then that doesn't count for the pro rata backdoor IRA.
Suze: It's only traditional IRAs, IRAs, SEP IRAs, simple IRAs, anything
Suze: that's an individual retirement account.
Suze: Alright, KT, I did it.
KT: You did it, Suze. That's a wrap, and everyone, I want
KT: you to just remember three things.
Suze: What are they?
KT: People first, God, then money, then things.
Suze: And if you do that, stay safe, stay strong, stay healthy. Oh,
Suze: then together we really will rise. bye bye.