April 3, 2025 • 28 mins
On this episode of Ask KT and Suze Anything, Suze answers questions about 529 plans, Social Security and IRA rollovers. Plus, a quick word about the markets and tariffs and more.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Suze (00:30):
April 2nd, 2025. Welcome everybody to the Women and Money
podcast as well as everybody smart enough to listen. Yes,
I know, I said April 2nd.
And most of you are listening to this because the
podcast normally drops on April 3rd, but because we will
be traveling tomorrow, we recorded it a day earlier, and
(00:54):
it's actually 9:37 a.m. and the reason that I'm telling
you that, everybody, is that before we begin.
The Ask KT and Suze Anything portion of the Women
and Money podcast. Say hi to everybody,
KT (01:09):
Hi Everybody!
Suze (01:10):
Right, is that obviously today is the day that tariffs
are going to be announced, and so many of you
have been writing in to go, Suze, Suze, what's going
to happen when he announces? Are there tariffs? Are there not?
Take a pause. Take a breath.
All right.
President Trump has told you he's going to be announcing
(01:33):
tariffs at the time that we are recording this, he
hasn't announced yet.
But let me just talk to you a little bit
about the stock market regardless of what happens. Right now
it is down because people think he is going to
be announcing tariffs. And do you know how I talked
to all of you about support and resistance levels? You
(01:57):
need to know that this market is.
Going to probably go on a roller coaster ride. It's
already been on a roller coaster. Do you like roller coasters?
I actually do.
KT (02:07):
Suze loves them. I don't.
Suze (02:09):
I love them so much. But anyway, so just be
prepared for it as I'm recording this with KT. The
Standard and Poor's 500 index is about 5,601. That is
the level it is at.
It's down 30 points so far on the day. A
lot of you have been writing in and go, What
is the next support level, the level that if it
(02:33):
goes down to, it should bounce up.
That level is 5480 for those of you who just
want to know. If it breaks that level, it could
absolutely go down another 5% to 5,367. OK, so it
could go down, but I expect that it will hold
(02:55):
at 5480 and it could then go up and its
resistance will be 5,703.
So for those of you who don't know what I'm
talking about, a support level is when the market goes
down to a certain point and the market supports it there.
(03:16):
And you want it to hold there and if it
breaks at that level, it then falls more. Resistance is
it starts to go up and it hits a resistance level,
and it's very hard to go through that. So the
next week or two you're going to see bouncing all
over the place. And for those of you who wrote
in and wanted to know that now you know, all right, KT,
(03:39):
how are you, my dear?
KT (03:41):
Kind of bouncing around. That's what I am.
Suze (03:44):
Should that have been your quizzy?
KT (03:47):
What is the resistance level? All right. So are we ready?
Suze (03:52):
What do you think my resistance level is with you?
KT (03:55):
0.
Suze (03:57):
You don't think I have a resistance level with you? Never.
What does that mean?
Does that mean that I just go off the wall
no matter
what
KT (04:07):
All the time.
Suze (04:08):
No, KT, that's not
true.
KT (04:11):
We don't have resistance levels.
Suze (04:13):
We just keep going higher and
higher.
KT (04:15):
Yeah, we just go up. We don't drop and we
don't worry about resistance
level.
Suze (04:20):
Oh, that's my girl. All right, OK, OK, you
got good questions?
KT (04:23):
I have a first comment from Natalie, and I love this.
Suze (04:26):
Wait, I just want to say something before you ask questions,
all right.
As much as all of you care about the stock market,
there are other things in your personal financial life that
you need to pay attention to, which is usually what
this particular podcast Ask KT and Suze Anything is about.
(04:49):
So just don't focus on one thing. You have to
focus on everything. All right, KT.
KT (04:55):
OK, but focus on this, everyone.
This is from Natalie. She said, Hi, Suze and KT.
I played your can I afford it games on Suze's
YouTube channel. Wait, so many of you don't know this,
but Suze's official YouTube channel, which is youTube.com/ Suze Orman, yes,
(05:16):
now offers a really fun can I afford it game
which
is part of the original Suze Orman show, which many
of you watched for decades. In any event, I want
you to go there and play this. Natalie writes super fun,
great jackets. She's mentioning Suze's wardrobe. If you can definitely
(05:36):
make more of these, please, but obviously you need to
come up with a KT avatar.
So I'm not going to tell you why she said
that until you go and actually play Suze's Can I
Afford game.
Suze (05:51):
Yeah, and there's other things there as well, and it
seems to be quite popular. We just launched it a
week or two ago. Can you believe that for all
these years I couldn't get
my own YouTube channel back. Somebody had it and we
didn't even know who had it. Anyway, that's besides the point.
All right, KT, ask away.
KT (06:09):
OK, first question here. It says my mother has a
529 account for my son. My son is going to
graduate in May. This is from Teresa. So let me explain.
This is a little bit long, everybody.
There's approximately $7000 left in that 529 account. On one
(06:29):
of your podcasts, you mentioned that 529 accounts can be
moved into a Roth account. The 529 company confirmed this,
but said the funds wouldn't be accessible without a
penalty for 15 years. The IRS rules this isn't a quizzy.
(06:50):
Hold on. The IRS rules say that the Roth account
has to be open for 15 years to do this,
which isn't the same as what the 529 company said. Suze,
my son has a Roth that's been open for a year,
so what should we do with the leftover 529 money?
Then she said her mom is 81 years old.
Suze (07:12):
Teresa, listen to me. For your son to be able
to transfer it to a Roth IRA. The 529 account
has to have been opened for at least 15 years.
For those of you who are wondering what Teresa is
talking about is that if you happen to have had
a 529 account that has been opened for at least
(07:34):
15 years.
And let's just say Teresa had had this account for
15 years, and the beneficiary of it was her son.
And he had earned income in the year that he
wanted to roll it over into the Roth. The Roth
IRA has to be in the name of her son.
(07:58):
And it has to be subject to the annual Roth
IRA contribution limit for this year, which is $7000 since
he is under 50.
And just so you know, there's a lifetime limit of
$35,000 that can be rolled over for this. So it's
(08:18):
very tricky, everybody, and listen, contributions and earnings from the
last 5 years that you've put into the 529 are
not eligible to be rolled over, so they gave you
a benefit.
That it's just so hard to use. It's not even funny,
so I doubt many of you will be able to
(08:38):
be qualified for it. All right, KT, next, why are
you looking like that?
KT (08:43):
Because I wish people, we, we need to video at
least one of our podcasts for we're sitting here with
our bathrobes on. It's late in the morning on the 2nd,
and Suze's so animated that her hands fly everywhere when
she's giving this advice.
And she often just barely misses the mic.
(09:04):
So I'm looking at her like trying to direct those
hands flying everywhere. She gets very, very excited and very
animated.
Suze (09:12):
Well, the reason that I get excited and animated, it's like...
KT (09:16):
You're frustrated.
Suze (09:17):
If you're going to give everybody a benefit, like being
able to transfer money from a 529 plan into a Roth,
make it so that it really applies to the majority
of people. Don't make it so hard.
That even the 529 plan company doesn't know how it works. All right.
KT (09:36):
All right. This is from Andrea. She said, I love
your podcast so much.
Suze (09:41):
Me too.
KT (09:42):
My financial adviser is advising me to buy municipal bond
ETFs and money market municipal bonds. Is this a safe
way to reduce federal income taxes?
Is it?
Suze (09:57):
You know.
All of you have to weigh reducing income taxes against
possible loss of principal. Any municipal investment, a bond or
an ETF or mutual fund that is made up of
municipal bonds, the interest on those bonds are absolutely federally
(10:22):
tax free.
But they also have to be bonds that are in
the state that you live in if you live in
a state that is taxable, so if you live in California,
you would need an ETF or mutual fund that was
made up of all municipal bonds of the state of California.
(10:44):
I don't think that's a great way for you to
save taxes because normally the interest rate on municipal bonds
are lower.
Than what the actual taxable yields on treasuries and certificates
of deposits happen to be, like if you look at
the yield on the 12 month CD at Alliant Credit Union,
(11:06):
which is an incredible yield right now, I think you
would find and you would do that by the way,
by going to myalliant.com. I think you would find that
that yield after taxes may be even higher
than your ETF or mutual fund made up of municipal bonds.
And remember an ETF or a mutual fund doesn't have
(11:30):
a maturity date, so you have no guarantee of getting
back the amount of money that you originally put in.
So the fact that you're even asking this question tells
me about your sophistication level, and truthfully I wouldn't be
doing it if I were you.
All right, what is that look for?
KT (11:50):
It took
a long time to get to a no.
Suze (11:54):
Am I being too verbose?
KT (11:56):
No,
Suze (11:57):
Is verbose the right word?
KT (11:58):
It's not verbose at all. Verbose is your actions, but
the amount of information, I would have taken the no
right up front and be happy with
it.
Suze (12:07):
But KT, don't you want these people to be educated
as to how it works?
KT (12:11):
Not necessarily.
Suze (12:13):
Yeah, of course you don't.
KT (12:14):
Just give her the straight up no.
Suze (12:17):
This is, this
KT (12:18):
is from Nisha.
All right, this is a yes or no as well. Hi, Suze,
I'm still working, but wondering if I should take a
lump sum or monthly annuity when I retire next year.
I was sure to take an annuity, but now my
company's pension benefit has been sold and transferred to an
(12:38):
insurance company as a group annuity. Is it still safe
to take an annuity over a lump sum in this case?
Suze (12:46):
Yeah, but I need to know the amounts. What are
the amounts?
KT (12:48):
So the choice is the lump sum
is 500,000 or the annuity is 3300 per month with 50%
survival benefit when I retire next year. That's from Nisha.
Suze (13:03):
So Nisha, the big mistake that all of you make
is that you really think that upon your death,
that your spouse will need 50% less than what they
were getting when you were alive, and I can tell
you over all the years that I've been doing this,
(13:26):
that is not true because if both of you also
qualify for Social Security upon your death, Nisha, if you
happen to die first.
Your spouse is going to lose half of your pension
in this case and also your Social Security or your
(13:46):
spouse's Social Security. One of those will go away whichever
one is lower, so their income will go down dramatically.
And when one spouse dies, I call it the loneliness
factor where the spouse is lonely, so they actually spend
more money.
When one of you is alive than when both of
(14:07):
you are alive because you go to visit your kids more,
you go out to eat more, you're just lonely, so
you have to take that into consideration now. The numbers
that KT gave me that you could have a $500,000
lump sum rollover or an an annuity of $3300 per month.
(14:32):
Or approximately 1650 per month upon your death.
So at 3300 per month, that's a 7.9% return on
your money, which is a great return.
Now if you have kids or anything like that.
And it does go to your spouse upon your spouse's death.
(14:52):
All that money is gone. So if both of you
are killed in a car crash, it's immediately all gone.
So I don't know, do you have kids? Do you not?
If you die, then your spouse's return goes down to 3.96%. Obviously,
if you rolled it over.
(15:14):
And you invested it, you probably only would be getting
maybe 3 or 4% on that money but still have
access to the principal. So you're going to have to
decide this one because I don't have enough information on it.
But if you don't have any kids, if you know
that your spouse will be absolutely OK with $1650 a
(15:37):
month after your death.
Because it's possible that your spouse could die before you
as well, then the annuity might be a good choice.
I just don't have enough information, but I've just given
you the information that you need to think about in
making this decision. All right, next, KT.
(15:57):
Oh, I finally answered a question. She doesn't have a
look on her face like,
KT (16:01):
Well, you know, I was just thinking about the friend
of ours that was in publishing who was not married,
did not have children, and for her, the annuity made
a great deal of sense. Remember?
Suze (16:13):
Yes, yes
KT (16:14):
That worked out.
Great, great for her...
Suze (16:16):
Great for her because she also did it at a
time when interest rates were very high and her return
was incredible. So sometimes everybody, it does make sense. You
need to sit down with somebody and go through the
pros and the cons of it.
In your particular situation because every one of you is
(16:37):
different
decisions.
KT (16:40):
OK, next from Maria. I love your podcast and look
forward to listening every Sunday and Thursday. Thank you so much, Suze,
for all the information and guidance you provide. So for 2024,
due to my income, I cannot contribute to a Roth IRA.
(17:00):
My question is, should I convert the traditional IRA immediately
or the same day into a Roth IRA in order
to avoid accruing interest that I would need to pay
tax on? I've never done this before, so I'm not
sure how the timing works.
Suze (17:18):
So obviously she's doing a backdoor Roth, and it's not
a traditional IRA. It is an IRA that she's doing
a nondeductible contribution to, so she's putting in $7000 into that.
She isn't going to take a tax deduction for it,
(17:39):
and she's able then KT to convert it because it
doesn't matter your income you can convert 100% of the
money into a Roth and still qualify for that roth.
So the question is, do you do it immediately? Listen,
when you put it in the non-deductible IRA, just put
it in an account that doesn't make any interest for
(18:01):
a few days.
And then when it feels right to you convert it
to a back door broth. It's just that easy. It's
not a big deal, my dear Maria. All right.
KT (18:13):
OK, this is from Jerri. She said, hi Suze and
KT love the work you both do to help us
all with all the cuts to government programs, potentially no
taxes on Social Security and Social Security running
out sooner than later.
Suze (18:29):
And that makes a lot of sense. Social Security's running out,
so they're going to not tax Social Security, who only
helps the rich, not the poor. I just don't understand it.
KT (18:39):
Wait a minute, calm down, calm down. I was wondering...
Suze (18:42):
Look at me waving my hands.
KT (18:43):
Oh, no, she's going crazy now. Anything we talk about
with these government programs makes Suze a little hot under
the collar. I was wondering if I should take mine
at 67 instead of waiting until 70.
We don't need the money right now, but would be
better off to take it and put it into something
safe in the event that Social Security runs out of
(19:05):
money or gets drastically cut. Should I put it in
CDs or high yield savings or treasuries?
What should she do? What about an Alliant CD?
Suze (19:16):
What you have to remember, Jerri, is that from the
age of 67 to 70, your Social Security check increases
not only by 8% a year, but also by the
cost of inflation.
And it the CPI, the Consumer price index, and it
(19:36):
seems like inflation is going up. So you're not gonna
be able to meet those returns by a CD or
a treasury or anything that's safe.
However, what is the goal of money? The goal of
money is for you to feel secure, and if you
feel more secure by taking your Social Security at full
retirement age, then you should do exactly that. I do
(20:00):
not have a crystal ball. I do not know what's
going to happen with Social Security. I do not know
what the government is going to do with it. I
cannot imagine in my wildest dreams that this government
would make it that you do not get your Social
Security check at 70 under the current laws. I can
(20:24):
imagine that for future recipients they change the full retirement
age from 67 to 70.
I just can't imagine it. I also cannot imagine that
they're going to cut benefits. If they cut benefits, there
will be the biggest revolt in the United States that
(20:46):
there has ever been. So I just, I can't believe it.
But then again, I can't believe a lot of things
that are happening. So like I said, I don't have
a crystal ball, so you have to do exactly what
makes you feel secure. All right.
KT (21:02):
This is from Clay. Hi, Suze and...
Suze (21:04):
Did you do
that
because you like to play with clay?
KT (21:07):
Maybe, but I...
Suze (21:09):
Tell everybody how you're a sculptor. What a sculpture. What
are you?
KT (21:13):
A sculptor, and I've been trying to do a portrait
of Suze for quite some time.
Suze (21:18):
Is it called a portrait or a bust?
KT (21:20):
It's a a bust, but it's a portrait. I'm trying
to do a head of Suze.
Suze (21:25):
Can you imagine trying to do my head anyway? Go on.
KT (21:28):
It's mostly a lot of hair right now, but, but
I'll get there.
I really want to get my daughter her own Roth
IRA ASAP, but she's only 3 years old.
Suze (21:39):
So is she working?
KT (21:40):
Ready... Does enrolling her in a medical study count as
earned income?
So just to give everyone a background, the medical study
is through her pediatrician, and it involves simply monitoring her
after the little girl receives routine shots.
Suze (21:58):
And they pay her for that.
KT (21:59):
Yeah, so it's sponsored probably by a medical group anyway.
So that's with...
Suze (22:04):
Pop quizzy, pop quizzy.
Does it qualify for a Roth as earned income?
KT (22:09):
No.
Suze (22:10):
Why?
KT (22:11):
Because she didn't earn it.
Suze (22:13):
Right. So it's taxable, right? KT, but not earned income,
KT (22:18):
It's not an earned. She didn't, she didn't work for it.
She's 3 years old.
Suze (22:22):
So no, KT happens to be right, ding ding ding dingy.
Oh good. There's your
quizzy.
Earned income means you work for it. You can't go
to like Vegas and win money.
And even though that money is taxable, consider that earned income,
even though you are pulling down a lever, or maybe
(22:43):
you just push a button now.
KT (22:43):
Or throwing a pair of dice.
Suze (22:45):
Or maybe you don't do anything. But anyway, so no, you,
it does not qualify as earned income. All right,
KT (22:52):
OK, so Suze, question from Kelly.
Our accountant has determined my husband can contribute 45,000 to
his SEP for this 2024 year. Would you still advise this?
Part of me wonders if we were better off putting
this in an investment account and not contributing to the
SEP any longer.
Suze (23:14):
Let me see that for a second, KT, and see
what else she wrote, which is
I see he also has $400,000 already
in a SEP IRA.
So if he were to do a backdoor Roth, he
(23:34):
would have a pro rata rule. All right, I got it.
All right, Kelly, you listen to me and listen to
me closely now.
You should absolutely do the SEP IRA.
And you don't think about doing a back door Roth
with him. You think about just simply taking an amount
of money from the SEP IRA and converting it to
(23:58):
a Roth. If you now put another $45,000 in there.
And then you convert that all right, so you pay
taxes on that, but you're getting larger amounts of money
into your Roth IRA. That's how people get a whole
lot of money into a Roth because you're not limited
(24:20):
to the $7000 or the $8000 a year. You're not
limited by income, so you eventually could get all of
his money into a Roth IRA.
Simply by converting it, talk to your accountant about that.
All right, KT, OK you have time for a few more.
KT (24:41):
OK, I have one from Jennifer. I like this one.
Hi Susie and KT love your show. I feel like
you're my personal friends.
Suze (24:49):
We are.
KT (24:50):
We are, Jennifer.
We're your friends.
Suze (24:52):
Wanna go have lunch?
KT (24:53):
Well, she's in Raleigh, North Carolina.
Suze (24:55):
Forget it. OK.
All right.
KT (24:57):
So her dad passed away in 2022, leaving her.
with an inherited IRA worth $500,000 that's the current value.
It's a mix of individual stocks and good companies like Nvidia, QQQ,
and a dozen others. I've been taking only the minimum
distribution these past two years.
(25:19):
But all must be liquidated entirely within 8 years. If
I continue to pull the minimum each year, I'll have
a huge lump sum to withdraw in 2032 when I'm
60 years old, which will be taxed as ordinary income.
So she's saying she's smart. No, she's smart. Would it
(25:40):
be better to take out disbursements evenly over these next years,
or should I continue taking minimums?
Suze (25:47):
Great. So yes, when you're in a situation where you
inherit an IRA from a relative, not your spouse, you
are a non-eligible designated beneficiary, and all of you should
know what that means by now. You have 10 years
to wipe that account clean, so you should take whatever
(26:10):
amount is in there divided by 10.
And take out that amount of money every single year
so the account really is wiped clean by the end
of the 10th year, otherwise you're going to be hit
with a tremendous tax bracket but you should also work
with a
CPA, because maybe you'll be in a lower tax bracket
(26:32):
in a few years, so you could take out more
then than right now. So it's a little tricky, but
don't just take out little amounts of money right now
and get hit big in 10 years. All right, last one, KT.
KT (26:46):
OK, this is from Marcie. She said, Hi, Suze, I'm 62.
At my new job of only 6 months, I do
not pay into Social Security. Will my Social Security benefit
decrease as a result of my last working years being
at an employer that does not allow me to pay
(27:07):
into Social Security?
Suze (27:09):
Well, it depends, and because you don't tell us
anything about this, Marcie, in terms of, listen, if you
don't already have 35 years in, you know, Social Security
and and jobs that have paid into Social Security, then yeah.
These years that you're working that don't pay into Social
(27:32):
Security will absolutely hurt you because when you do apply
these years are going to be 0000. If you already
have 35 years that you've paid into Social Security, these
years will not hurt you. If you have not, then
they will.
All right, KT, is that a wrap?
KT (27:54):
That's a wrap.
Suze (27:55):
All right, everybody, so I can't wait to see what
happens today with the tariffs and um and and I
don't even know what to say anymore. All right, so
KT take us out.
KT (28:07):
There's only one thing we want you to remember, and
it's
this.
Suze (28:13):
People first,
KT (28:14):
then money,
Suze (28:15):
then things,
KT (28:16):
and you stay
Suze (28:18):
safe, stay safe, stay strong and just stay on your
own path, all right, everybody, see you soon bye bye now.
April 2nd, 2025. Welcome everybody to the Women and Money
podcast as well as everybody smart enough to listen. Yes,
I know, I said April 2nd.
And most of you are listening to this because the
podcast normally drops on April 3rd, but because we will
be traveling tomorrow, we recorded it a day earlier, and
(00:54):
it's actually 9:37 a.m. and the reason that I'm telling
you that, everybody, is that before we begin.
The Ask KT and Suze Anything portion of the Women
and Money podcast. Say hi to everybody,
KT (01:09):
Hi Everybody!
Suze (01:10):
Right, is that obviously today is the day that tariffs
are going to be announced, and so many of you
have been writing in to go, Suze, Suze, what's going
to happen when he announces? Are there tariffs? Are there not?
Take a pause. Take a breath.
All right.
President Trump has told you he's going to be announcing
(01:33):
tariffs at the time that we are recording this, he
hasn't announced yet.
But let me just talk to you a little bit
about the stock market regardless of what happens. Right now
it is down because people think he is going to
be announcing tariffs. And do you know how I talked
to all of you about support and resistance levels? You
(01:57):
need to know that this market is.
Going to probably go on a roller coaster ride. It's
already been on a roller coaster. Do you like roller coasters?
I actually do.
KT (02:07):
Suze loves them. I don't.
Suze (02:09):
I love them so much. But anyway, so just be
prepared for it as I'm recording this with KT. The
Standard and Poor's 500 index is about 5,601. That is
the level it is at.
It's down 30 points so far on the day. A
lot of you have been writing in and go, What
is the next support level, the level that if it
(02:33):
goes down to, it should bounce up.
That level is 5480 for those of you who just
want to know. If it breaks that level, it could
absolutely go down another 5% to 5,367. OK, so it
could go down, but I expect that it will hold
(02:55):
at 5480 and it could then go up and its
resistance will be 5,703.
So for those of you who don't know what I'm
talking about, a support level is when the market goes
down to a certain point and the market supports it there.
(03:16):
And you want it to hold there and if it
breaks at that level, it then falls more. Resistance is
it starts to go up and it hits a resistance level,
and it's very hard to go through that. So the
next week or two you're going to see bouncing all
over the place. And for those of you who wrote
in and wanted to know that now you know, all right, KT,
(03:39):
how are you, my dear?
KT (03:41):
Kind of bouncing around. That's what I am.
Suze (03:44):
Should that have been your quizzy?
KT (03:47):
What is the resistance level? All right. So are we ready?
Suze (03:52):
What do you think my resistance level is with you?
KT (03:55):
0.
Suze (03:57):
You don't think I have a resistance level with you? Never.
What does that mean?
Does that mean that I just go off the wall
no matter
what
KT (04:07):
All the time.
Suze (04:08):
No, KT, that's not
true.
KT (04:11):
We don't have resistance levels.
Suze (04:13):
We just keep going higher and
higher.
KT (04:15):
Yeah, we just go up. We don't drop and we
don't worry about resistance
level.
Suze (04:20):
Oh, that's my girl. All right, OK, OK, you
got good questions?
KT (04:23):
I have a first comment from Natalie, and I love this.
Suze (04:26):
Wait, I just want to say something before you ask questions,
all right.
As much as all of you care about the stock market,
there are other things in your personal financial life that
you need to pay attention to, which is usually what
this particular podcast Ask KT and Suze Anything is about.
(04:49):
So just don't focus on one thing. You have to
focus on everything. All right, KT.
KT (04:55):
OK, but focus on this, everyone.
This is from Natalie. She said, Hi, Suze and KT.
I played your can I afford it games on Suze's
YouTube channel. Wait, so many of you don't know this,
but Suze's official YouTube channel, which is youTube.com/ Suze Orman, yes,
(05:16):
now offers a really fun can I afford it game
which
is part of the original Suze Orman show, which many
of you watched for decades. In any event, I want
you to go there and play this. Natalie writes super fun,
great jackets. She's mentioning Suze's wardrobe. If you can definitely
(05:36):
make more of these, please, but obviously you need to
come up with a KT avatar.
So I'm not going to tell you why she said
that until you go and actually play Suze's Can I
Afford game.
Suze (05:51):
Yeah, and there's other things there as well, and it
seems to be quite popular. We just launched it a
week or two ago. Can you believe that for all
these years I couldn't get
my own YouTube channel back. Somebody had it and we
didn't even know who had it. Anyway, that's besides the point.
All right, KT, ask away.
KT (06:09):
OK, first question here. It says my mother has a
529 account for my son. My son is going to
graduate in May. This is from Teresa. So let me explain.
This is a little bit long, everybody.
There's approximately $7000 left in that 529 account. On one
(06:29):
of your podcasts, you mentioned that 529 accounts can be
moved into a Roth account. The 529 company confirmed this,
but said the funds wouldn't be accessible without a
penalty for 15 years. The IRS rules this isn't a quizzy.
(06:50):
Hold on. The IRS rules say that the Roth account
has to be open for 15 years to do this,
which isn't the same as what the 529 company said. Suze,
my son has a Roth that's been open for a year,
so what should we do with the leftover 529 money?
Then she said her mom is 81 years old.
Suze (07:12):
Teresa, listen to me. For your son to be able
to transfer it to a Roth IRA. The 529 account
has to have been opened for at least 15 years.
For those of you who are wondering what Teresa is
talking about is that if you happen to have had
a 529 account that has been opened for at least
(07:34):
15 years.
And let's just say Teresa had had this account for
15 years, and the beneficiary of it was her son.
And he had earned income in the year that he
wanted to roll it over into the Roth. The Roth
IRA has to be in the name of her son.
(07:58):
And it has to be subject to the annual Roth
IRA contribution limit for this year, which is $7000 since
he is under 50.
And just so you know, there's a lifetime limit of
$35,000 that can be rolled over for this. So it's
(08:18):
very tricky, everybody, and listen, contributions and earnings from the
last 5 years that you've put into the 529 are
not eligible to be rolled over, so they gave you
a benefit.
That it's just so hard to use. It's not even funny,
so I doubt many of you will be able to
(08:38):
be qualified for it. All right, KT, next, why are
you looking like that?
KT (08:43):
Because I wish people, we, we need to video at
least one of our podcasts for we're sitting here with
our bathrobes on. It's late in the morning on the 2nd,
and Suze's so animated that her hands fly everywhere when
she's giving this advice.
And she often just barely misses the mic.
(09:04):
So I'm looking at her like trying to direct those
hands flying everywhere. She gets very, very excited and very
animated.
Suze (09:12):
Well, the reason that I get excited and animated, it's like...
KT (09:16):
You're frustrated.
Suze (09:17):
If you're going to give everybody a benefit, like being
able to transfer money from a 529 plan into a Roth,
make it so that it really applies to the majority
of people. Don't make it so hard.
That even the 529 plan company doesn't know how it works. All right.
KT (09:36):
All right. This is from Andrea. She said, I love
your podcast so much.
Suze (09:41):
Me too.
KT (09:42):
My financial adviser is advising me to buy municipal bond
ETFs and money market municipal bonds. Is this a safe
way to reduce federal income taxes?
Is it?
Suze (09:57):
You know.
All of you have to weigh reducing income taxes against
possible loss of principal. Any municipal investment, a bond or
an ETF or mutual fund that is made up of
municipal bonds, the interest on those bonds are absolutely federally
(10:22):
tax free.
But they also have to be bonds that are in
the state that you live in if you live in
a state that is taxable, so if you live in California,
you would need an ETF or mutual fund that was
made up of all municipal bonds of the state of California.
(10:44):
I don't think that's a great way for you to
save taxes because normally the interest rate on municipal bonds
are lower.
Than what the actual taxable yields on treasuries and certificates
of deposits happen to be, like if you look at
the yield on the 12 month CD at Alliant Credit Union,
(11:06):
which is an incredible yield right now, I think you
would find and you would do that by the way,
by going to myalliant.com. I think you would find that
that yield after taxes may be even higher
than your ETF or mutual fund made up of municipal bonds.
And remember an ETF or a mutual fund doesn't have
(11:30):
a maturity date, so you have no guarantee of getting
back the amount of money that you originally put in.
So the fact that you're even asking this question tells
me about your sophistication level, and truthfully I wouldn't be
doing it if I were you.
All right, what is that look for?
KT (11:50):
It took
a long time to get to a no.
Suze (11:54):
Am I being too verbose?
KT (11:56):
No,
Suze (11:57):
Is verbose the right word?
KT (11:58):
It's not verbose at all. Verbose is your actions, but
the amount of information, I would have taken the no
right up front and be happy with
it.
Suze (12:07):
But KT, don't you want these people to be educated
as to how it works?
KT (12:11):
Not necessarily.
Suze (12:13):
Yeah, of course you don't.
KT (12:14):
Just give her the straight up no.
Suze (12:17):
This is, this
KT (12:18):
is from Nisha.
All right, this is a yes or no as well. Hi, Suze,
I'm still working, but wondering if I should take a
lump sum or monthly annuity when I retire next year.
I was sure to take an annuity, but now my
company's pension benefit has been sold and transferred to an
(12:38):
insurance company as a group annuity. Is it still safe
to take an annuity over a lump sum in this case?
Suze (12:46):
Yeah, but I need to know the amounts. What are
the amounts?
KT (12:48):
So the choice is the lump sum
is 500,000 or the annuity is 3300 per month with 50%
survival benefit when I retire next year. That's from Nisha.
Suze (13:03):
So Nisha, the big mistake that all of you make
is that you really think that upon your death,
that your spouse will need 50% less than what they
were getting when you were alive, and I can tell
you over all the years that I've been doing this,
(13:26):
that is not true because if both of you also
qualify for Social Security upon your death, Nisha, if you
happen to die first.
Your spouse is going to lose half of your pension
in this case and also your Social Security or your
(13:46):
spouse's Social Security. One of those will go away whichever
one is lower, so their income will go down dramatically.
And when one spouse dies, I call it the loneliness
factor where the spouse is lonely, so they actually spend
more money.
When one of you is alive than when both of
(14:07):
you are alive because you go to visit your kids more,
you go out to eat more, you're just lonely, so
you have to take that into consideration now. The numbers
that KT gave me that you could have a $500,000
lump sum rollover or an an annuity of $3300 per month.
(14:32):
Or approximately 1650 per month upon your death.
So at 3300 per month, that's a 7.9% return on
your money, which is a great return.
Now if you have kids or anything like that.
And it does go to your spouse upon your spouse's death.
(14:52):
All that money is gone. So if both of you
are killed in a car crash, it's immediately all gone.
So I don't know, do you have kids? Do you not?
If you die, then your spouse's return goes down to 3.96%. Obviously,
if you rolled it over.
(15:14):
And you invested it, you probably only would be getting
maybe 3 or 4% on that money but still have
access to the principal. So you're going to have to
decide this one because I don't have enough information on it.
But if you don't have any kids, if you know
that your spouse will be absolutely OK with $1650 a
(15:37):
month after your death.
Because it's possible that your spouse could die before you
as well, then the annuity might be a good choice.
I just don't have enough information, but I've just given
you the information that you need to think about in
making this decision. All right, next, KT.
(15:57):
Oh, I finally answered a question. She doesn't have a
look on her face like,
KT (16:01):
Well, you know, I was just thinking about the friend
of ours that was in publishing who was not married,
did not have children, and for her, the annuity made
a great deal of sense. Remember?
Suze (16:13):
Yes, yes
KT (16:14):
That worked out.
Great, great for her...
Suze (16:16):
Great for her because she also did it at a
time when interest rates were very high and her return
was incredible. So sometimes everybody, it does make sense. You
need to sit down with somebody and go through the
pros and the cons of it.
In your particular situation because every one of you is
(16:37):
different
decisions.
KT (16:40):
OK, next from Maria. I love your podcast and look
forward to listening every Sunday and Thursday. Thank you so much, Suze,
for all the information and guidance you provide. So for 2024,
due to my income, I cannot contribute to a Roth IRA.
(17:00):
My question is, should I convert the traditional IRA immediately
or the same day into a Roth IRA in order
to avoid accruing interest that I would need to pay
tax on? I've never done this before, so I'm not
sure how the timing works.
Suze (17:18):
So obviously she's doing a backdoor Roth, and it's not
a traditional IRA. It is an IRA that she's doing
a nondeductible contribution to, so she's putting in $7000 into that.
She isn't going to take a tax deduction for it,
(17:39):
and she's able then KT to convert it because it
doesn't matter your income you can convert 100% of the
money into a Roth and still qualify for that roth.
So the question is, do you do it immediately? Listen,
when you put it in the non-deductible IRA, just put
it in an account that doesn't make any interest for
(18:01):
a few days.
And then when it feels right to you convert it
to a back door broth. It's just that easy. It's
not a big deal, my dear Maria. All right.
KT (18:13):
OK, this is from Jerri. She said, hi Suze and
KT love the work you both do to help us
all with all the cuts to government programs, potentially no
taxes on Social Security and Social Security running
out sooner than later.
Suze (18:29):
And that makes a lot of sense. Social Security's running out,
so they're going to not tax Social Security, who only
helps the rich, not the poor. I just don't understand it.
KT (18:39):
Wait a minute, calm down, calm down. I was wondering...
Suze (18:42):
Look at me waving my hands.
KT (18:43):
Oh, no, she's going crazy now. Anything we talk about
with these government programs makes Suze a little hot under
the collar. I was wondering if I should take mine
at 67 instead of waiting until 70.
We don't need the money right now, but would be
better off to take it and put it into something
safe in the event that Social Security runs out of
(19:05):
money or gets drastically cut. Should I put it in
CDs or high yield savings or treasuries?
What should she do? What about an Alliant CD?
Suze (19:16):
What you have to remember, Jerri, is that from the
age of 67 to 70, your Social Security check increases
not only by 8% a year, but also by the
cost of inflation.
And it the CPI, the Consumer price index, and it
(19:36):
seems like inflation is going up. So you're not gonna
be able to meet those returns by a CD or
a treasury or anything that's safe.
However, what is the goal of money? The goal of
money is for you to feel secure, and if you
feel more secure by taking your Social Security at full
retirement age, then you should do exactly that. I do
(20:00):
not have a crystal ball. I do not know what's
going to happen with Social Security. I do not know
what the government is going to do with it. I
cannot imagine in my wildest dreams that this government
would make it that you do not get your Social
Security check at 70 under the current laws. I can
(20:24):
imagine that for future recipients they change the full retirement
age from 67 to 70.
I just can't imagine it. I also cannot imagine that
they're going to cut benefits. If they cut benefits, there
will be the biggest revolt in the United States that
(20:46):
there has ever been. So I just, I can't believe it.
But then again, I can't believe a lot of things
that are happening. So like I said, I don't have
a crystal ball, so you have to do exactly what
makes you feel secure. All right.
KT (21:02):
This is from Clay. Hi, Suze and...
Suze (21:04):
Did you do
that
because you like to play with clay?
KT (21:07):
Maybe, but I...
Suze (21:09):
Tell everybody how you're a sculptor. What a sculpture. What
are you?
KT (21:13):
A sculptor, and I've been trying to do a portrait
of Suze for quite some time.
Suze (21:18):
Is it called a portrait or a bust?
KT (21:20):
It's a a bust, but it's a portrait. I'm trying
to do a head of Suze.
Suze (21:25):
Can you imagine trying to do my head anyway? Go on.
KT (21:28):
It's mostly a lot of hair right now, but, but
I'll get there.
I really want to get my daughter her own Roth
IRA ASAP, but she's only 3 years old.
Suze (21:39):
So is she working?
KT (21:40):
Ready... Does enrolling her in a medical study count as
earned income?
So just to give everyone a background, the medical study
is through her pediatrician, and it involves simply monitoring her
after the little girl receives routine shots.
Suze (21:58):
And they pay her for that.
KT (21:59):
Yeah, so it's sponsored probably by a medical group anyway.
So that's with...
Suze (22:04):
Pop quizzy, pop quizzy.
Does it qualify for a Roth as earned income?
KT (22:09):
No.
Suze (22:10):
Why?
KT (22:11):
Because she didn't earn it.
Suze (22:13):
Right. So it's taxable, right? KT, but not earned income,
KT (22:18):
It's not an earned. She didn't, she didn't work for it.
She's 3 years old.
Suze (22:22):
So no, KT happens to be right, ding ding ding dingy.
Oh good. There's your
quizzy.
Earned income means you work for it. You can't go
to like Vegas and win money.
And even though that money is taxable, consider that earned income,
even though you are pulling down a lever, or maybe
(22:43):
you just push a button now.
KT (22:43):
Or throwing a pair of dice.
Suze (22:45):
Or maybe you don't do anything. But anyway, so no, you,
it does not qualify as earned income. All right,
KT (22:52):
OK, so Suze, question from Kelly.
Our accountant has determined my husband can contribute 45,000 to
his SEP for this 2024 year. Would you still advise this?
Part of me wonders if we were better off putting
this in an investment account and not contributing to the
SEP any longer.
Suze (23:14):
Let me see that for a second, KT, and see
what else she wrote, which is
I see he also has $400,000 already
in a SEP IRA.
So if he were to do a backdoor Roth, he
(23:34):
would have a pro rata rule. All right, I got it.
All right, Kelly, you listen to me and listen to
me closely now.
You should absolutely do the SEP IRA.
And you don't think about doing a back door Roth
with him. You think about just simply taking an amount
of money from the SEP IRA and converting it to
(23:58):
a Roth. If you now put another $45,000 in there.
And then you convert that all right, so you pay
taxes on that, but you're getting larger amounts of money
into your Roth IRA. That's how people get a whole
lot of money into a Roth because you're not limited
(24:20):
to the $7000 or the $8000 a year. You're not
limited by income, so you eventually could get all of
his money into a Roth IRA.
Simply by converting it, talk to your accountant about that.
All right, KT, OK you have time for a few more.
KT (24:41):
OK, I have one from Jennifer. I like this one.
Hi Susie and KT love your show. I feel like
you're my personal friends.
Suze (24:49):
We are.
KT (24:50):
We are, Jennifer.
We're your friends.
Suze (24:52):
Wanna go have lunch?
KT (24:53):
Well, she's in Raleigh, North Carolina.
Suze (24:55):
Forget it. OK.
All right.
KT (24:57):
So her dad passed away in 2022, leaving her.
with an inherited IRA worth $500,000 that's the current value.
It's a mix of individual stocks and good companies like Nvidia, QQQ,
and a dozen others. I've been taking only the minimum
distribution these past two years.
(25:19):
But all must be liquidated entirely within 8 years. If
I continue to pull the minimum each year, I'll have
a huge lump sum to withdraw in 2032 when I'm
60 years old, which will be taxed as ordinary income.
So she's saying she's smart. No, she's smart. Would it
(25:40):
be better to take out disbursements evenly over these next years,
or should I continue taking minimums?
Suze (25:47):
Great. So yes, when you're in a situation where you
inherit an IRA from a relative, not your spouse, you
are a non-eligible designated beneficiary, and all of you should
know what that means by now. You have 10 years
to wipe that account clean, so you should take whatever
(26:10):
amount is in there divided by 10.
And take out that amount of money every single year
so the account really is wiped clean by the end
of the 10th year, otherwise you're going to be hit
with a tremendous tax bracket but you should also work
with a
CPA, because maybe you'll be in a lower tax bracket
(26:32):
in a few years, so you could take out more
then than right now. So it's a little tricky, but
don't just take out little amounts of money right now
and get hit big in 10 years. All right, last one, KT.
KT (26:46):
OK, this is from Marcie. She said, Hi, Suze, I'm 62.
At my new job of only 6 months, I do
not pay into Social Security. Will my Social Security benefit
decrease as a result of my last working years being
at an employer that does not allow me to pay
(27:07):
into Social Security?
Suze (27:09):
Well, it depends, and because you don't tell us
anything about this, Marcie, in terms of, listen, if you
don't already have 35 years in, you know, Social Security
and and jobs that have paid into Social Security, then yeah.
These years that you're working that don't pay into Social
(27:32):
Security will absolutely hurt you because when you do apply
these years are going to be 0000. If you already
have 35 years that you've paid into Social Security, these
years will not hurt you. If you have not, then
they will.
All right, KT, is that a wrap?
KT (27:54):
That's a wrap.
Suze (27:55):
All right, everybody, so I can't wait to see what
happens today with the tariffs and um and and I
don't even know what to say anymore. All right, so
KT take us out.
KT (28:07):
There's only one thing we want you to remember, and
it's
this.
Suze (28:13):
People first,
KT (28:14):
then money,
Suze (28:15):
then things,
KT (28:16):
and you stay
Suze (28:18):
safe, stay safe, stay strong and just stay on your
own path, all right, everybody, see you soon bye bye now.
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