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May 15, 2025 25 mins

On this new edition of Ask KT and Suze Anything, Suze answers questions about sharing inherited IRAs, traditional 401(k)’s versus ROTHs and so much more.


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Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Suze (00:30):
May 15, 2025. Welcome everybody to the Women and Money
podcast as well as everybody smart enough to listen. Drum
roll introducing the one and only

KT (00:41):
KT. Today is Ask Suze Anything starring KT.

Suze (00:47):
What else is today, KT

KT (00:48):
May 15th and we're going back to the island finally.

Suze (00:53):
We have been in Florida for one full month.

KT (00:57):
Yes, yes.

Suze (00:58):
One day we'll tell you why, but that's besides the point.
But today we get to go back to our home
in the island, so KT could not be more excited
if she tried, right?

KT (01:12):
I'm very
happy because this is now coming into the season. I
love the most, which is summer.

Suze (01:18):
What do you love about it?

KT (01:19):
Hot, calm, beautiful, long days, early mornings, late, late nights...

Suze (01:26):
And hurricanes.

KT (01:27):
Well, that's at the end of the summer. That's called
hurricane season. This is just lazy summer floating around with
Suze in the ocean, very calm summer.

Suze (01:38):
All right, so today is Ask KT and Suze anything
if you have a question that you would possibly like
for us to answer it on the podcast, please write
into ask Suze podcast@gmail.com. By the way, you're better off
just writing into ask Suze podcast at gmail.com.

(02:00):
Versus sending in a question on the Women and Money
community app for some reason, don't ask me. Those don't
necessarily always go through. So if you have a question,
ask Suze podcast at gmail.com. KT, let's begin.

KT (02:17):
My first question, Suze...

Suze (02:18):
My voice is hoarse today, huh, is down.
What is my voice today?

KT (02:22):
It's OK. It's getting a little better. Suze had lots
of procedures on her throat, so we're trying to get
rid of this cough you all know about. But today
is pretty good.

Suze (02:32):
Pretty good. But that's why we've been here for a month.

KT (02:34):
Yeah, not bad. All right,go on.
So I'll do most of the talking, right? This is from Whitney.

Suze (02:40):
I got news, everybody,
even if my throat is 1,000%, Katy always does most
of the talking anyway. Go on.

KT (02:49):
Yes, she does, and this is from Whitney. She said, Suze,
here's why I'm writing. I've just gone through a divorce,
and one of the major reasons I divorced him was
our different approaches to money. So true, right, Suze.
So she said, my ex-husband is an extremely prominent world
class scientist who is known throughout his field as just

(03:12):
about the best in the world. He can do the
most complicated mathematical computations that one can think of. However,
this is funny, when it comes to the simple arithmetic
of income minus expenses, he struggles.
Just goes to show that even if you are a
highly educated professor at a university sometimes common sense isn't

(03:39):
so
common.

Suze (03:40):
Now I actually gave that to KT to open up
today's podcast. Do you wonder why KT?

KT (03:49):
I think it was funny.

Suze (03:50):
You think it was funny, but I know it's true.
When I was actually seeing clients, had my own firm.
And everything what absolutely puzzled me is that doctors, lawyers, neurosurgeons,
you name it. They were so horrible with money I
can't even tell you, and I almost got to the point,

(04:13):
everybody seriously KT, that because I always had a waiting
list of people wanting to see me, that one of
the questions was, are you a doctor?

KT (04:22):
And then you wouldn't see them.

Suze (04:23):
And then really we would put them down to the
bottom of the list because it was just so frustrating
to me because number one they always thought what they
thought was correct, even if it wasn't.
And they didn't understand the simplest of things just like
Whitney was saying. So the reason that I wanted that

(04:44):
is because maybe you're in a relationship with somebody who
is a brainiac, very high powered job, knows everything, very intellectual,
who knows what that doesn't mean they're good with money.
Because money is all about emotions and that's what we
learned on last Sunday's podcast.

KT (05:05):
And a lot of common sense.

Suze (05:08):
I just want you to be aware if you're in
a relationship with somebody who makes a lot of money,
very high powered, regarded by everybody as this most brilliant
person around,
it does not mean that you should lose your power
thinking that they're better at it than you cause chances
are they are not. All right, KT.

KT (05:29):
OK, so Suze asked me to redo a question that
we actually had on last Thursday, but the information that
she gave to this question was inaccurate.
So we were redoing it and we've got a much
better and more succinct answer and guidance for all of
you and it's kind of sad this question. Hi, Suze,

(05:52):
my 60 year old sister recently passed away.
Her 401k is worth $281,000. My other sister and I
are the beneficiaries. I'm 62. My sister is 64. So
all these girls were in their 60s, and the young
one died. She said. We also have two other siblings

(06:14):
we wish to share it with. They are 59 and 64.
We're all still working.
The funds will be transferred to an inheritance 401k. What
is the best way to share with our other two siblings?

Suze (06:30):
Yeah, now here's the thing. Notice that in this question,
it says that the funds will be transferred to an
inheritance 401k.
All of you have to understand that the way a
401k is done in most corporations versus an inherited IRA

(06:53):
is very, very different, so I answered as if the
money was going to stay in a 401k that's inherited
now many corporations listen to me closely,
do not really honor the Secure 2.0 act where if
you are an eligible beneficiary that you can then do

(07:15):
what take it out over your life span. They would
simply say in most corporations that you have 10 years
to wipe an inherited 401k clean, and that's how I
answered the question.
What's important for all of you to know is if
you're ever in a situation where you have money that

(07:39):
you're inheriting from a 401k, you're far better off transferring
it to an inherited IRA in your
individual names and so the sisters that is what you
should do now because it will be in an inherited
IRA now you are what's called an eligible designated beneficiary.

(08:04):
Which means that you can take this account over and
stretch the withdrawals over your entire life expectancy, and why
can you do that? Because you happen to be an
individual that's not more than 10 years younger than the
deceased IRA owner, which you're not. You're actually older than her.

(08:30):
But it doesn't matter if you're older, you also qualify
as an eligible designated beneficiary. So the correct answer to
this question is if you do an inherited IRA in
your individual names.
You are an eligible designated beneficiary, and you can absolutely

(08:50):
take it out over your life expectancies. You do not
have to wipe it clean in 10 years at what KT?

KT (08:59):
How do
they share it?

Suze (09:00):
They share it now this becomes a little difficult because
it depends how much do they want to share and
because it's in a traditional inherited IRA.
Any money they take out, they're gonna have to pay
ordinary income taxes on it, so they're gonna have to
decide do they want to take a lump sum out.

(09:22):
And just give it to the sisters minus the tax
that's going to be owed on it. Are they going
to take it out in small little lump sum?

KT (09:31):
So
in essence they have to have a family meeting to
determine how they all wish to
share this.

Suze (09:37):
Yes, but if they share it, they need to make
sure that it's equal and that the sisters
also have to pay income tax on whatever is being shared.

KT (09:47):
Everyone shares the expenses as well.

Suze (09:50):
Yeah. OK, OK. All right.

KT (09:51):
Well, that's clear. So next question's from Gillian. She said,
hi Suze, I'm a federal worker stationed overseas.
I have two dependents, spouse and child. I am the
sole breadwinner. I used to feel like my job was stable,
but as you know, we are living in fear of
losing our jobs at any moment.

(10:14):
What a shame, right? No comment here, Suze.

Suze (10:17):
Stupid.

KT (10:18):
I know. Anyway, so Gillian said, I have significant debt
but still pay into my TSP.
And have a decent emergency fund.

Suze (10:28):
Now everybody
at TSP is a thrift savings plan, which is essentially
a 401k or 403B, but it's for federal employees alright, go on.

KT (10:39):
So her question is, should I stop paying into my
TSP and use both that money and the emergency fund
money to pay down debt?
Note, now this is important, she said. Doing this won't
even cover half of my debt.

Suze (10:56):
Now, KT, if you are going to answer that question,
what would you say?

KT (10:59):
If I did a pop quizzy...
I would say um no I don't think she should
stop paying into the TSP and I definitely would not
use that emergency fund money.

Suze (11:11):
And why shouldn't she stop paying into the TSP?

KT (11:14):
Because
that's growing, and I think that what she has to
do is, is use other monies to pay down the debt.

Suze (11:23):
So, all right, so pretty good KT kind of ding
ding ding. Listen to me.

KT (11:28):
Was that a little pop-up quiz because we weren't gonna
do
them anymore.

Suze (11:31):
I know a little pop up quizzy.

KT (11:33):
Do you all miss the quizzies, everybody?

Suze (11:35):
Don't ask us if they say yes, I'm gonna do
it again. KT was always so nervous about these quizzies.

KT (11:41):
When the

Suze (11:41):
quizzy

KT (11:41):
time came up, I was like, let's hurry up and
finish this recording. I hated the quizzies because I didn't
get them right.

Suze (11:47):
And then I realized if KT hates anything, why the
heck are we doing it? That just was stupid, so
I stopped the quizzies. But here's the thing I want
all of you to know the key answer to this question.
Is... note doing this won't even cover half of my debts,

(12:07):
so she can stop putting all this money towards her retirement,
and it still will not help her with her debts.
There is a rule of thumb, when you owe more
money than you are worth, you are essentially bankrupt number one. Number two,
and none of you ought to forget what I'm about
to say. Your TSP.

(12:30):
Your IRA, your 401k, your 403B are all protected against bankruptcy.
So if you put a lot of money into your
Roth IRA into your TSP, you built it and built
it and built it.
Guess what, if ever you needed to claim bankruptcy, that

(12:53):
money would be safe and sound. Therefore, no, do not
stop putting money in a place that's safe and sound.
Now if you had said to me, if I did this,
I'd be out of debt in like 6 months or
8 months, different answer. But given the fact that you
have so much debt.

(13:17):
I have a feeling that especially if you lose your job,
you're the sole breadwinner, and on and on, uh, we
may be heading for a situation that you just want
to protect everything you possibly can. All right, go on.

KT (13:31):
This next question is my favorite because of the name Lupi.
This is from Lupi. I, I love that name.

Suze (13:39):
Her name's Lupi,

KT (13:41):
L U P I Lupi. Love that name.

Suze (13:44):
You know why she really loves that name? KT and
I used to have a little favorite word, right, that,
that when I was on TV that I would let
her know I was thinking about her and it would
be like do
whatever it could be, but like some loopy loopy doopy
and it was kind of like pulling my ear.

KT (14:03):
She'd say
like the markets are really doopy loopy today, KT and
I knew or she'd say today, and I knew it
was for me. All right, so, so this is from Lupi.
She said, Hi, Suze, thanks for sharing all of your knowledge.
I'll be 70 this summer and will begin taking SSI
the last 4 months of the year.

(14:23):
Filing jointly with my husband, I project our combined income
for 2025 will be less than that $60,000.
I'm contemplating converting a portion of my traditional IRA to
a Roth this year. My goal is to convert just
enough to keep us in the current tax bracket, which

(14:44):
should be 12%.
Is this a good idea to do the conversion in
this down market?

Suze (14:52):
As you're reading this, this market is not a down
market anymore.

KT (14:56):
Not anymore. This email was sent a little while ago,
but it sure isn't the same
today.

Suze (15:01):
Now, first of all, it's true. So if her income
is $60,000 her base income per year, that's approximately $30,000
under
what it would be for her to go to the
next income tax bracket, which would be 22% by the way.
So she has approximately $29,450 that she could convert.

(15:28):
And still stay in the 12% tax bracket, so that's
just something that she should look at if she wants
to do it. What you should be doing right now
because these markets have really gone up so and aren't
you all thrilled that you stayed in, that you didn't
get out, that you just kept dollar cost averaging, and

(15:50):
now you have stocks like Palantair almost at $130.
Are you kidding me? Really, you all should be so
happy right now. But then another month from now when
it turns around, you're gonna be so depressed again. The
lesson you have got to learn from all this is

(16:10):
just stick with it.
Just keep dollar cost averaging. Just stick with what's good
and everything like that for you, my dear Lupi. What
you should be doing seriously is take a look at
your portfolio and anything that really hasn't skyrocketed that much.
Why don't you just convert, even if it did skyrocket?

(16:33):
It's
possible that it's gonna continue to skyrocket. You know, it's
projected now, Mr. Fitzgerald says that he thinks Palantair's gonna
go to 200. Wow. So if you happen to own Palantair,
for instance, you can't just wait till something goes down.
You have to decide, I want to keep it. I'm
just gonna convert it. So just start

(16:55):
doing it now little by little so you stay in
the 12% tax bracket and just get the money over there.
It's no longer a down market and you just can't
necessarily say I'm going to wait because it may not
be a down market again,
That it might be down for a

KT (17:12):
while, but who knows?

Suze (17:13):
That's right. So KT, tell everybody
what you said to me yesterday after I said to you, Look, KT,
we're back way up again in our portfolio.

KT (17:23):
I said, make sure we don't go back down again.

Suze (17:25):
So she and she was serious.

KT (17:26):
I was serious. I said, Great, how do you, how
do you stay up there, Suze?

Suze (17:30):
And I said, you probably don't.
So
everybody wants to always stay up there, but they don't
like when it goes down.

KT (17:38):
For years she would come in and say, KT, your
Apple shares, for instance, your Apples are up like
500 points or whatever and I'd say sell them that
my answer to every time she announced that I had
a gain I'd say sell it just like that and
she would laugh at me and walk out of the
room and I'm really glad she did because if I

(18:00):
kept doing that, I actually wouldn't get anywhere, quite honestly.

Suze (18:03):
And just so all of you know.
I don't plan, I hope KT doesn't either, to sell
anything that we have. I think they're all incredible investments.
I think if the market goes down dramatically again, I
will just buy more of what I already have, and

(18:24):
so I'm thrilled when the market goes down.
And I love seeing it go back up again, but
overall the trend is really up right now, KT we're
no longer in my opinion in this like bear market
that's gonna go down, down, down, down, down. I think
overall these markets are up at this point in time,

(18:46):
so maybe Sunday I'll go over some areas of the market.
That I think are probably really good for all of
you to be involved in in case you're not.

KT (18:55):
I think that would be a great idea. It's, it's
a good time to do that.

Suze (18:59):
Yeah, give me
one more question.

KT (19:00):
OK, so I have one here from CP and she said,
this is Carol. She said, Hi, Suze. I had a
401k from a previous employer that I rolled into a
traditional IRA.
I was then advised to contribute into the IRA, which
I have been doing for years. I just realized after

(19:22):
hearing some of your podcast that I was contributing after-tax
amounts to pre-tax IRA for which I'm not getting any deductions.
I mean that's crazy, right?

Suze (19:35):
Well, she could have been doing a Roth the whole
time and getting tax-free growth.

KT (19:39):
So wait, let me finish telling you what she's doing.
I just stopped contributing to the IRA. I'm 52. I
can't withdraw from the IRA yet.
Question is, can I withdraw the after-tax contribution I made
in the IRA without paying tax on the total amount
and open a Roth IRA as you advise to open

(20:03):
a Roth for tax-free withdrawal? I need guidance on this, Suze.
I appreciate it. Thank you so much. So Carol
is a little bit confused.

Suze (20:12):
Yeah, so Carol, I'm so sorry that your financial adviser
didn't take the time to just give you a little
bit more guidance that said rather than contributing after tax
dollars to your IRA that you already have, which simply
means that you're putting more money in there, but the

(20:35):
growth of that money is still gonna be taxed to
you as ordinary income when you withdraw it.
All he or she had to say to you is,
why don't you just open up a Roth IRA, put
the money in there obviously with after tax dollars, let
it grow, and it will all be tax free. But no,
they didn't take the time to say that. But here's

(20:57):
what you need to understand now with a straight Roth IRA.
You can take out any time you want,
regardless of how long the account has been open or
your age, your original contributions that you put in, so
if you put in $7000 a year ago, $7000 this year,

(21:20):
whatever it may be, you could take out the $14,000
no
taxes, penalties doesn't matter. It's the growth on that money
that you cannot touch until you're 59.5 and the account's
been open for at least 5 years. At that point
then everything in there is tax free.

(21:43):
You would think that that's how an IRA works that
you put in after tax dollars, but it is not.
It is very, very different. So whenever you make a
non-deductible an after-tax contribution to a traditional IRA,

(22:04):
you establish what the IRS calls a basis in that IRA,
the amount in which you already paid taxes on. So
first of all, do you know the amount that you
have put in to that IRA and that is your basis.
All future distributions listen to me closely now from that

(22:26):
IRA are then treated under the pro rata rule, so
you cannot simply pull out only your after-tax contributions, girlfriend.
So here's what you have to have done hopefully.
Did you file a form 8606 every single year? You

(22:47):
needed to do so because it's right there that it
keeps track of how much in a nondeductible contribution you made,
so that's important because now you have choices ready. Why
don't you just do a total conversion to a Roth
IRA with everything that's in there.

(23:09):
If there isn't that much money, you then get the
after tax contribution that goes into a Roth.
You then only owe taxes on the earnings and the
part that was taxable in the IRA, but then everything
is in a Roth IRA done just that simple. Now
you may have too much money in there to do so,

(23:31):
and it might affect your tax bracket, but if I
were you, I would look at converting it to a
Roth because it's such a mistake to leave after tax.
Money growing taxable within your IRA. It is such a waste.
So can you just see a CPA and get that

(23:52):
to happen for yourself? All right, KT...

KT (23:56):
That was a wrap, Suze.

Suze (23:57):
That's a little bit of an early wrap because we
are packing up to get on the plane to go
back home. Do you think Colo remembers what we
look like?

KT (24:07):
No, not at all, but he's very excited.
He's excited. He misses us, even if his wife was
with him. He so misses us.

Suze (24:16):
Are you sure?

KT (24:17):
Yes,

Suze (24:19):
We'll find out shortly. So until Sunday when we are
back with Suze School, there's only one thing that we
want you to remember when it comes to your money.
What is it, KT?

KT (24:31):
Use lots of sunscreen. Stay safe.

Suze (24:36):
No, actually KT, have you been reading the reports on sunscreen?

KT (24:40):
No

Suze (24:41):
Horrible.

KT (24:42):
Oh, don't use lots of sunscreen. You just wear a
hat and stay out of the sun.

Suze (24:46):
Yeah, like we do. But anyway, just remember people first...

KT (24:52):
Thne money...

Suze (24:52):
Then things. Now you stay safe. Bye bye.
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