March 13, 2025 • 26 mins
For this Ask KT & Suze Anything edition, Suze answers more questions about Roths, RMDs, Social Security spousal benefits and more!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
KT (00:28):
Hi everybody. Welcome to the Women and Money podcast, and
everyone's smart enough to listen. This is KT here, and
I'm opening this on March 13th for Suze, who is
in the studio with me, but she's still suffering from
sinuses and who knows what else. Listen to this nose.
Listen to her.
Suze (00:49):
Hello, hello.
So we thought we would get through this podcast if
I saved my voice some because it just now came
back after a while of me not even having one.
Don't ask me why.
KT (01:02):
I'll answer
the questions for everyone.
Suze (01:05):
Oh, I love that.
KT (01:07):
All right, so...
Suze (01:08):
Anyway, before we start though, KT, with question and answers,
which is very important, everybody, cause your money is far
more than what's happening in the market. It's these little
things that you also need to know about like converting
a Roth, not converting it, all kinds of things. So
we have to deal with those things as well. They're
(01:31):
equally as important.
But I told you that last Sunday I was going
to tell you my interpretation of what's going on with
the market. Wasn't able to, God willing, I will do
so this Sunday, but here's the bottom line. Yeah, we're
in for a rocky road, and I don't know which
way that road is going to lead, and the reason
(01:54):
is this the incredible uncertainty.
Of making a decision, then it's unmade. This is going
to happen and then it's not gonna happen on and
off causes confusion and when not only investors like you
are confused, but businesses are confused, governments are confused, everybody's confused,
(02:18):
everybody just stops and does nothing.
And when you do nothing it's because you're afraid. And
what have I always told you? Fear is the greatest
internal obstacle to wealth. So it's best to do nothing
than something you don't understand in many cases. So I
have no problem with just briefly saying if you're in
(02:40):
good quality, everything, as I've told you, just stay put,
but some day we'll go into greater detail after we
figure out what happened
this week in the market all the way through Friday.
All right, KT.
KT (02:56):
OK, so I've got some great questions here and this
one says, hi Suze and KT, I've been listening to
you for a year and a half, and you have
made me feel much more control of my situation. And
this is from Michelle. She said, Suze, we bought our
forever house in May 2023.
(03:17):
To be in a better school district, we went from
a 2.5% interest rate to now having a 6% interest rate.
Our new house costs significantly more than the old one,
so our mortgage payment has more than doubled. We did
plan for this, all right, that's the key to this email, Suze.
We did plan for this. We saved to comfortably
(03:40):
staying afloat and figured we would be able to refinance
in 1 to 2 years. My question for you is,
at what point would we refinance when rates get to 5%
or lower? What would make a difference?
Suze (03:56):
It all depends seriously, and what it depends on is this,
so listen closely. Many people make the mistake
of they do a mortgage at a specific interest rate
for let's say 30 years like you probably did at 6%
and then you think, all right, when interest rates go
down you'll refinance and let's say that happens 4 or
(04:20):
5 years from now.
Then you refinance for another 30 years. So these 4
or 5 years that you have been paying on it,
you've just lost all of that. So you think that
you're ahead, but the truth of the matter is you're not.
So rule number one, if you ever do refinance.
(04:44):
You have to make sure you don't have the mortgage
term longer than the current amount of years left on
your mortgage. So if you have only 26 years left
on your mortgage that you're refinancing, then refinance your new
house for 25 years, all right, not another 30, something
(05:06):
like that. That's number one, number 2.
It's hard for me to answer the question because I
don't know if you're going to have points involved, not
points involved, what the closing costs are going to be.
So the way that you would figure this out is
what is it going to cost you to totally refinance
(05:27):
this house.
And what will your current mortgage payments be? And what
will the savings be if you were to do that
between your new mortgage rate and your old?
Then you divide that number, the difference into the cost
of refinancing.
(05:48):
And then you'll know how long it's gonna take you
to make up for that figure. If it's going to
be 5, 6, 7 years and you don't think you're
going to be in the house that long, then it
makes absolutely no sense to do it. If it's gonna
be like 2 years and you know you're gonna be
in the house that long or longer, then you refinance.
(06:08):
So that is how I would answer that question. In fact,
that's how I did answer it. All right, next, KT.
KT (06:14):
Next is from Pamela, and it's not a question but
it's something I want. It's a lesson and Suze, you
taught her this lesson ready.
Hi KT and Suze.
Suze (06:23):
Have I
taught you any lessons?
KT (06:25):
Me? Oh my God, we don't have enough time and
podcast for the rest of our life for me to
answer that.
Suze (06:33):
Because people sure like my Roth IRA podcast.
KT (06:36):
I don't want to talk about March 6th.
Suze (06:38):
All right, fine, no problem.
KT (06:39):
So I left your Suze school on March 6th.
Suze (06:44):
Oh, that's
fascinating because I'm sitting here thinking about how did KT
even know that the Roth IRA quiz was on March 6th.
I went, did she listen to it?
KT (06:55):
I listen to that over and
Suze (06:56):
over. Honest to God, everybody, I had no idea she
was just gonna say what she was because I don't
know these questions
she's reading.
KT (07:02):
I loved your Suze school on March 6th. I only
got one question wrong, so I was like showing off Pamela.
Pamela got one question wrong. KT got like 50% wrong.
Now she said, I also want to..
Suze (07:16):
KT, behonest, you got, you got...
KT (07:19):
I got like 70% wrong.
Suze (07:21):
Yeah, you got 3 right out of 18.
KT (07:24):
That's not true.
Suze (07:25):
It is true.
KT (07:26):
It is not. Don't listen
to
her. I also wanted you to know that when I
was getting my taxes done a month ago, the CPA
told me I couldn't withdraw from my contributions in my
Roth
IRA without a penalty. I've had my Roth IRA for
(07:46):
10 years. I will be 58 in June. I told
him that is not true. I didn't want him doing
my taxes, Suze, so I walked out the door.
She left. I'm so proud of her. She said, I
can't even take credit. I learned this all from you.
I want to help my 28 year old son and
(08:07):
31 year old daughter with everything I've learned from you.
Thank you so very much, Pamela. Is that great? She
had the courage, everyone, to get up and walk
out he was so wrong.
Suze (08:20):
And
the lesson from that is just because somebody is in
a suit sitting behind a desk with some plaque that
says they're this or that doesn't mean they know what
they are talking about. Just a quick story, KT. I
did a PBS special, the very first one ever.
And that is when I said and introduced Roth IRAs
(08:43):
for the very first time and told everybody that they
could take out their original contributions any time they want
without taxes or penalties regardless of age or how long
it's been in there.
All these people after it aired wrote in to PBS
and said that's absolutely wrong. You have to take that
off the air, blah blah blah blah. Ha, I was right.
(09:07):
They were wrong. Just because they have a few initials
after their name
doesn't mean squat.
KT (09:14):
The, the point of that whole experience is that you've
got to really know and you can't just trust one...
Suze (09:22):
You have to check, double check, be clear, be crystal
clear and no and no, and hey, if you didn't
believe him or her, go to another one and see
if they agree, but it's written everywhere.
So he's just whatever. Ok, go on.
KT (09:37):
OK, this is from,
Suze (09:39):
Wait, aren't you proud of me? I didn't call him
what I was going to say, he asked.
KT (09:41):
Yes, thank you, especially with that nasally nose of yours.
The next is from...
Suze (09:46):
Do I snore with it?
KT (09:47):
No.
Suze (09:48):
Oh, that's good to know. OK, go on.
KT (09:50):
All right. The next question is from Deb Johnny. Don't
you love that name? Deb Johnny?
Suze (09:56):
Do you think her mom's name is Deb?
And her daddy's name is Johnny, and they named her
Deb Johnny.
KT (10:00):
Maybe I just think it's a pretty name. She said, Hi, Suze,
I hope this is a quick one. I'm in my mid-50s.
I've recently retired. I have about $3 million in assets.
I'm single with no dependents. I have $650,000 in my 401k.
Of which 500,000 is traditional, the rest is Roth. What
(10:25):
do you think about using my traditional 401k balance to
purchase a single premium immediate lifetime annuity to get some
predictable income before I become eligible for Social Security? She's
planning on taking that at 70.
I'll get about 2.8k per month, which will cover more
(10:47):
than 50% of my monthly expenses. She's doing this, Suze,
because she said that way she can let her brokerage
account grow without starting to draw down too much. So I,
you know, what do you think
about that?
Suze (11:01):
I think it's a really, really bad idea.
KT (11:04):
Why?
Suze (11:04):
And the reason is this, Deb, Johnny.
Right now you're in your mid-fifties and KT just said
you want to do this cause $2.8k a month is
going to pay for 50% of your expenses. That's your
expenses today, girlfriend. That 2.8 is not going to change
(11:26):
for the rest of your life. So what do you
think it's going to be worth 20 or 30 years
from now? What do you think your expenses are going
to be 20 or 30 years from now?
You need to keep up with inflation and you need growth.
At this age, you do not need more income because
you already have $3 million in assets.
(11:50):
So the goal here is number one to protect your assets,
but keep up with the income for when you really
need it that you have it invested in something that grows
dividend paying stocks if I were you. But no, I
would not be taking it now for my 401k. I
think it would be the biggest mistake you could ever make.
If you told me you were 69 and you wanted
(12:12):
to do it. I'd think about it.
But not in the 50s. No, go on, KT.
KT (12:19):
OK, next question is from Maria. She said, hi Suze
and KT. I've listened to your Sunday podcast on questions
about Roth. This is another March 6th. It was so informative.
Thank you so much. I want to ask if I
could use my money in my savings account,
(12:39):
after tax, to transfer to an IRA and then convert
it to a Roth through the back door. I already
max out my Roth 401k at work and I'm not
qualified to fund my individual Roth because of my income.
Is this possible?
Suze (12:58):
What you should do if you do not already have
an IRA, a SEP IRA, any individual retirement account, forget
what you have at work. Work Roth 401ks, traditional 401ks, whatever,
they don't count. But if you do not have any
additional IRA outside of work.
(13:22):
Then therefore you can just open up a nondeductible IRA
and then convert it to a Roth, just that simple
that's known as a back door Roth, so that you
can do as long as you don't have another individual
retirement account of any kind.
KT (13:42):
OK, OK. Next is from Jody. I never miss an
episode of your podcast, and I used to watch Can
I Afford it as a family.
Well, we have a little treat. We have a treat
coming up for YouTube. You just be patient. Well, my
little girl has grown up and she's now 29 years old.
(14:03):
Does that make us feel old?
She wants to set up her first Roth IRA. She
has $40,000 in a high interest savings to use to
fund an IRA. Suze, I don't know how to guide her.
Is there a brokerage firm you recommend that doesn't charge
many fees? What should she do? ETFs, mutual funds? Question, question, question.
(14:27):
Oh wait, and then there's one more line here. It said,
but like KT, Roth investing and I are like oil
and water. Thanks, Jody.
You and I are from the same, same batch. We're
both a little...
Suze (14:41):
...slippery, huh, anyway, um, so all you have to do
is like go to Schwab, go to Vanguard. Vanguard is
a fabulous brokerage firm. Vanguard Fidelity or Schwab either one
doesn't matter, OK? But let's say you did Schwab, go
and open up a Roth IRA for her fully funded
(15:03):
to 7000
dollars put it in their treasury money market fund or
whatever it may be and then have her dollar cost
average into these stock markets because obviously the stock market
is not having a really great time this year so far,
but it will again. Now if I were you I
(15:25):
would have her do exchange traded funds, ETFs, so she
has some diversification.
So it's really just that simple. So if she puts
in $7000 at once, then you would have her put
in approximately $583 a month into either the Standard and
Poor's 500 index fund, the Vanguard total stock market index fund,
(15:48):
or just keep it simple for her now to get
her used to investing in the ups and
downs of the market. That's what I would be doing
if I were you. Next, KT.
KT (15:58):
OK, I have a question from Scott. He said, Suze
and KT, thanks for all the advice. I'll be 50
in June. He's a Gemini like you. Gemini Scott.
Suze (16:09):
Like me, I'm gonna be 74.
KT (16:12):
All right, Scott, you have a long way to go.
Between your show...
Suze (16:16):
And may your 24 years till that age be as
great as mine.
KT (16:20):
Yes, between your show and conversations with my mom, converting
all of my pre-tax retirement accounts without 401k seems to
be the best course to limit RMDs.
So he said, I have about 6 traditional IRAs with
recent and potential market corrections. Would you recommend converting as
(16:45):
many as possible to Roths this year?
Suze (16:49):
I would, depending, however, what the tax ramification will be
to you, because even though the markets are down, that
doesn't mean that you don't have a lot of money
still in those positions. So therefore.
After you have checked with a CPA, then you decide
which investments that you have make the most sense, like
(17:13):
which ones do you want to keep that have gone
down dramatically.
And then you would convert those, but it's definitely worth
it to convert while the markets are
down.
KT (17:25):
All right, next question.
Suze (17:26):
Why did you look at me like that?
KT (17:27):
I didn't know if you were done.
Suze (17:29):
I wasn't sure I was done.
KT (17:30):
I know. Are you finished?
Suze (17:32):
Let me think about it.
KT (17:33):
Yes, you are, OK, because I have so many good questions.
Suze (17:36):
But what's key about that is never do it all
at once unless all you have in there is like
3000 $5000. If you have a lot of money in there,
never convert to a Roth all at once. You'll be
so sorry that you did, especially if it puts you
in a really high tax
bracket.
KT (17:53):
All right. Next question is from Gay, she said, I'm
a retired New York City teacher with a 457B and
a tax deferred annuity.
They have RMD rules that seem similar to those of
traditional IRAs, and now she's asking, I also have a
relatively small traditional IRA opened at the beginning of time.
(18:18):
Can these three types of accounts be aggregated for the
RMD so I can draw from the least lucrative one?
I don't, I thought that was a good question because
I don't know. OK, can you?
Suze (18:30):
Are you sure you don't
know. Is this you're quizzy.
KT (18:32):
If it's a quizzy, then I'm going to guess you
absolutely cannot aggregate accounts like that.
Suze (18:38):
And why would you say that?
KT (18:40):
Because they're, they're all different. They're all different.
Suze (18:43):
Ding Ding Ding-a
KT (18:44):
Yeah, I see.
Suze (18:44):
She got that but
KT (18:45):
It's a good question,
Suze (18:46):
Right? People wonder.
You cannot if you have 15 different IRAs, then you
aggregate all of them, the total that's in there for
your RMD, and you can take it from anyone you want.
It doesn't matter, but you have to do it on
the total amount.
But you cannot add into that amount what's in your
(19:06):
tax deferred annuity or your 450 those are separate and
have to do their own. What you could do is
if you're retired and you want, you can roll them
over like you could roll over possibly your tax deferred
annuity into your IRA that you've had forever and aggregate
it there.
So that you'd only have to figure out one RMD.
(19:29):
So look into that to see if you can do
that with your accounts.
KT (19:33):
So Suze, next question is from Linda. She said, I
am a teacher and will receive a pension. We love teachers,
don't we?
Suze (19:40):
So much, so much.
KT (19:41):
They're our favorite people. I'm a teacher, will receive a pension,
but do not have enough Social Security credits to receive
Social
Security myself, my husband will receive Social Security, and I
understand that I will be able to receive his Social
Security benefit if he passes before me. But Suze, what
(20:03):
about spousal benefit while we're both alive? He's 60. I
am 59. We planned to wait until he was 70
to begin collecting his social.
However, will I be eligible for spousal benefits while he
is alive? If so, is there any benefit to having
(20:24):
him start to collect at 67 so we can both
receive benefits earlier, or is it best to still wait
till 70? You got to set her straight, Suze.
Suze (20:33):
Linda, listen. The biggest mistake that most people make is
they always think that they are going to get 50%
of their spouse's social security, no matter what. So if
their spouse waits till they are 70, let's say, to
get Social Security, you think you're going to get 50%
(20:56):
of the amount that your spouse will get at 70,
and that's not true. You only get 50% of what
your spouse would have gotten at his or her full
retirement age, which is currently 67.
Now, since you aren't going to have any Social Security,
(21:19):
then what I would advise you to do is this.
Let's just say that your husband is going to get
$2000 at the age of 70. Therefore, you're not going
to get 50% of that $2000. You get 50% of
what he would get at his full retirement age of 67.
(21:41):
That means at 67
he would probably only be getting about $1600 a month,
which means you would get 50% of that, which is
about $800 a month. Remember you have to be 67,
your full retirement age
(22:03):
to get the full 50% of the spousal benefit. So
given that you and your husband are just one year apart,
it's just so great I can't tell you. So this
is what I would do if I were you.
Assuming that those numbers were your numbers and you have
to do this with your own numbers, I would have
(22:24):
your husband claim at the age of 68.
And that would be about $1750 a month. I would
have you claim 50% of the spousal benefit of his
full retirement age.
I would have you do that at 67, which would
give you about $800 a month. So you would get
(22:46):
approximately $2550 a month starting when he is 68 and
you are 67. Given that he wasn't going to claim,
let's just say till 70, that's two years of payments,
that you wouldn't have been getting neither of you cause
you have to claim spouse has to claim, Linda, in
(23:10):
order for you to get a spousal benefit. Therefore, in
those two years that would be close to $61,000 of
money that you're entitled to that you wouldn't have claimed.
I don't know. I think that's a big difference. And
if I were you, that's what I would go for.
(23:32):
Did that all make sense to you, KT?
KT (23:34):
I think that it's smart that they 68 and 67,
go for it. 61,000 is a lot of money in
two years.
Suze (23:42):
Yeah, and really if you look at the difference between
what they would have gotten.
No, it's not worth it in my
opinion.
KT (23:49):
They do better off doing what you
just said,
Suze (23:51):
I think so, but you should always double check. All right,
next question, KT.
KT (23:54):
Suze, my final question from Sheila. Hi, Suze, thank you
for the Roth info. I'm a little confused because I
heard you say that if you have pre-tax
money in any retirement account, then don't do a backdoor Roth,
but we have 401ks and 403Bs. So does that mean
(24:16):
we shouldn't do a backdoor Roth or were you just
referring to IRAs with tax money?
Suze (24:23):
Now, I already answered that on this podcast, KT. What's
the answer?
Don't look at me like that.
KT (24:32):
No.
Suze (24:34):
So the answer is what?
KT (24:36):
The answer is that
Suze (24:38):
are
KT (24:38):
you
Suze (24:38):
were
you just referring to IRAs?
KT (24:41):
So, so she has 401ks and 403Bs. Were you just
referring to IRAs? Yes, you were. You were referring only
to IRAs.
Suze (24:51):
That's right. Good. So it wasn't. No, it was, yes, ding ding.
KT (24:54):
I meant no, she can't do the other two.
Suze (24:56):
Yeah, no, it's don't worry, any money you have an
employer sponsored plan.
I don't care what kind of money it is in there,
then that doesn't count for the pro rata backdoor IRA.
It's only traditional IRAs, IRAs, SEP IRAs, simple IRAs, anything
(25:17):
that's an individual retirement account.
Alright, KT, I did it.
KT (25:23):
You did it, Suze. That's a wrap, and everyone, I want
you to just remember three things.
Suze (25:28):
What are they?
KT (25:29):
People first, God, then money, then things.
Suze (25:33):
And if you do that, stay safe, stay strong, stay healthy. Oh,
then together we really will rise. bye bye.
Hi everybody. Welcome to the Women and Money podcast, and
everyone's smart enough to listen. This is KT here, and
I'm opening this on March 13th for Suze, who is
in the studio with me, but she's still suffering from
sinuses and who knows what else. Listen to this nose.
Listen to her.
Suze (00:49):
Hello, hello.
So we thought we would get through this podcast if
I saved my voice some because it just now came
back after a while of me not even having one.
Don't ask me why.
KT (01:02):
I'll answer
the questions for everyone.
Suze (01:05):
Oh, I love that.
KT (01:07):
All right, so...
Suze (01:08):
Anyway, before we start though, KT, with question and answers,
which is very important, everybody, cause your money is far
more than what's happening in the market. It's these little
things that you also need to know about like converting
a Roth, not converting it, all kinds of things. So
we have to deal with those things as well. They're
(01:31):
equally as important.
But I told you that last Sunday I was going
to tell you my interpretation of what's going on with
the market. Wasn't able to, God willing, I will do
so this Sunday, but here's the bottom line. Yeah, we're
in for a rocky road, and I don't know which
way that road is going to lead, and the reason
(01:54):
is this the incredible uncertainty.
Of making a decision, then it's unmade. This is going
to happen and then it's not gonna happen on and
off causes confusion and when not only investors like you
are confused, but businesses are confused, governments are confused, everybody's confused,
(02:18):
everybody just stops and does nothing.
And when you do nothing it's because you're afraid. And
what have I always told you? Fear is the greatest
internal obstacle to wealth. So it's best to do nothing
than something you don't understand in many cases. So I
have no problem with just briefly saying if you're in
(02:40):
good quality, everything, as I've told you, just stay put,
but some day we'll go into greater detail after we
figure out what happened
this week in the market all the way through Friday.
All right, KT.
KT (02:56):
OK, so I've got some great questions here and this
one says, hi Suze and KT, I've been listening to
you for a year and a half, and you have
made me feel much more control of my situation. And
this is from Michelle. She said, Suze, we bought our
forever house in May 2023.
(03:17):
To be in a better school district, we went from
a 2.5% interest rate to now having a 6% interest rate.
Our new house costs significantly more than the old one,
so our mortgage payment has more than doubled. We did
plan for this, all right, that's the key to this email, Suze.
We did plan for this. We saved to comfortably
(03:40):
staying afloat and figured we would be able to refinance
in 1 to 2 years. My question for you is,
at what point would we refinance when rates get to 5%
or lower? What would make a difference?
Suze (03:56):
It all depends seriously, and what it depends on is this,
so listen closely. Many people make the mistake
of they do a mortgage at a specific interest rate
for let's say 30 years like you probably did at 6%
and then you think, all right, when interest rates go
down you'll refinance and let's say that happens 4 or
(04:20):
5 years from now.
Then you refinance for another 30 years. So these 4
or 5 years that you have been paying on it,
you've just lost all of that. So you think that
you're ahead, but the truth of the matter is you're not.
So rule number one, if you ever do refinance.
(04:44):
You have to make sure you don't have the mortgage
term longer than the current amount of years left on
your mortgage. So if you have only 26 years left
on your mortgage that you're refinancing, then refinance your new
house for 25 years, all right, not another 30, something
(05:06):
like that. That's number one, number 2.
It's hard for me to answer the question because I
don't know if you're going to have points involved, not
points involved, what the closing costs are going to be.
So the way that you would figure this out is
what is it going to cost you to totally refinance
(05:27):
this house.
And what will your current mortgage payments be? And what
will the savings be if you were to do that
between your new mortgage rate and your old?
Then you divide that number, the difference into the cost
of refinancing.
(05:48):
And then you'll know how long it's gonna take you
to make up for that figure. If it's going to
be 5, 6, 7 years and you don't think you're
going to be in the house that long, then it
makes absolutely no sense to do it. If it's gonna
be like 2 years and you know you're gonna be
in the house that long or longer, then you refinance.
(06:08):
So that is how I would answer that question. In fact,
that's how I did answer it. All right, next, KT.
KT (06:14):
Next is from Pamela, and it's not a question but
it's something I want. It's a lesson and Suze, you
taught her this lesson ready.
Hi KT and Suze.
Suze (06:23):
Have I
taught you any lessons?
KT (06:25):
Me? Oh my God, we don't have enough time and
podcast for the rest of our life for me to
answer that.
Suze (06:33):
Because people sure like my Roth IRA podcast.
KT (06:36):
I don't want to talk about March 6th.
Suze (06:38):
All right, fine, no problem.
KT (06:39):
So I left your Suze school on March 6th.
Suze (06:44):
Oh, that's
fascinating because I'm sitting here thinking about how did KT
even know that the Roth IRA quiz was on March 6th.
I went, did she listen to it?
KT (06:55):
I listen to that over and
Suze (06:56):
over. Honest to God, everybody, I had no idea she
was just gonna say what she was because I don't
know these questions
she's reading.
KT (07:02):
I loved your Suze school on March 6th. I only
got one question wrong, so I was like showing off Pamela.
Pamela got one question wrong. KT got like 50% wrong.
Now she said, I also want to..
Suze (07:16):
KT, behonest, you got, you got...
KT (07:19):
I got like 70% wrong.
Suze (07:21):
Yeah, you got 3 right out of 18.
KT (07:24):
That's not true.
Suze (07:25):
It is true.
KT (07:26):
It is not. Don't listen
to
her. I also wanted you to know that when I
was getting my taxes done a month ago, the CPA
told me I couldn't withdraw from my contributions in my
Roth
IRA without a penalty. I've had my Roth IRA for
(07:46):
10 years. I will be 58 in June. I told
him that is not true. I didn't want him doing
my taxes, Suze, so I walked out the door.
She left. I'm so proud of her. She said, I
can't even take credit. I learned this all from you.
I want to help my 28 year old son and
(08:07):
31 year old daughter with everything I've learned from you.
Thank you so very much, Pamela. Is that great? She
had the courage, everyone, to get up and walk
out he was so wrong.
Suze (08:20):
And
the lesson from that is just because somebody is in
a suit sitting behind a desk with some plaque that
says they're this or that doesn't mean they know what
they are talking about. Just a quick story, KT. I
did a PBS special, the very first one ever.
And that is when I said and introduced Roth IRAs
(08:43):
for the very first time and told everybody that they
could take out their original contributions any time they want
without taxes or penalties regardless of age or how long
it's been in there.
All these people after it aired wrote in to PBS
and said that's absolutely wrong. You have to take that
off the air, blah blah blah blah. Ha, I was right.
(09:07):
They were wrong. Just because they have a few initials
after their name
doesn't mean squat.
KT (09:14):
The, the point of that whole experience is that you've
got to really know and you can't just trust one...
Suze (09:22):
You have to check, double check, be clear, be crystal
clear and no and no, and hey, if you didn't
believe him or her, go to another one and see
if they agree, but it's written everywhere.
So he's just whatever. Ok, go on.
KT (09:37):
OK, this is from,
Suze (09:39):
Wait, aren't you proud of me? I didn't call him
what I was going to say, he asked.
KT (09:41):
Yes, thank you, especially with that nasally nose of yours.
The next is from...
Suze (09:46):
Do I snore with it?
KT (09:47):
No.
Suze (09:48):
Oh, that's good to know. OK, go on.
KT (09:50):
All right. The next question is from Deb Johnny. Don't
you love that name? Deb Johnny?
Suze (09:56):
Do you think her mom's name is Deb?
And her daddy's name is Johnny, and they named her
Deb Johnny.
KT (10:00):
Maybe I just think it's a pretty name. She said, Hi, Suze,
I hope this is a quick one. I'm in my mid-50s.
I've recently retired. I have about $3 million in assets.
I'm single with no dependents. I have $650,000 in my 401k.
Of which 500,000 is traditional, the rest is Roth. What
(10:25):
do you think about using my traditional 401k balance to
purchase a single premium immediate lifetime annuity to get some
predictable income before I become eligible for Social Security? She's
planning on taking that at 70.
I'll get about 2.8k per month, which will cover more
(10:47):
than 50% of my monthly expenses. She's doing this, Suze,
because she said that way she can let her brokerage
account grow without starting to draw down too much. So I,
you know, what do you think
about that?
Suze (11:01):
I think it's a really, really bad idea.
KT (11:04):
Why?
Suze (11:04):
And the reason is this, Deb, Johnny.
Right now you're in your mid-fifties and KT just said
you want to do this cause $2.8k a month is
going to pay for 50% of your expenses. That's your
expenses today, girlfriend. That 2.8 is not going to change
(11:26):
for the rest of your life. So what do you
think it's going to be worth 20 or 30 years
from now? What do you think your expenses are going
to be 20 or 30 years from now?
You need to keep up with inflation and you need growth.
At this age, you do not need more income because
you already have $3 million in assets.
(11:50):
So the goal here is number one to protect your assets,
but keep up with the income for when you really
need it that you have it invested in something that grows
dividend paying stocks if I were you. But no, I
would not be taking it now for my 401k. I
think it would be the biggest mistake you could ever make.
If you told me you were 69 and you wanted
(12:12):
to do it. I'd think about it.
But not in the 50s. No, go on, KT.
KT (12:19):
OK, next question is from Maria. She said, hi Suze
and KT. I've listened to your Sunday podcast on questions
about Roth. This is another March 6th. It was so informative.
Thank you so much. I want to ask if I
could use my money in my savings account,
(12:39):
after tax, to transfer to an IRA and then convert
it to a Roth through the back door. I already
max out my Roth 401k at work and I'm not
qualified to fund my individual Roth because of my income.
Is this possible?
Suze (12:58):
What you should do if you do not already have
an IRA, a SEP IRA, any individual retirement account, forget
what you have at work. Work Roth 401ks, traditional 401ks, whatever,
they don't count. But if you do not have any
additional IRA outside of work.
(13:22):
Then therefore you can just open up a nondeductible IRA
and then convert it to a Roth, just that simple
that's known as a back door Roth, so that you
can do as long as you don't have another individual
retirement account of any kind.
KT (13:42):
OK, OK. Next is from Jody. I never miss an
episode of your podcast, and I used to watch Can
I Afford it as a family.
Well, we have a little treat. We have a treat
coming up for YouTube. You just be patient. Well, my
little girl has grown up and she's now 29 years old.
(14:03):
Does that make us feel old?
She wants to set up her first Roth IRA. She
has $40,000 in a high interest savings to use to
fund an IRA. Suze, I don't know how to guide her.
Is there a brokerage firm you recommend that doesn't charge
many fees? What should she do? ETFs, mutual funds? Question, question, question.
(14:27):
Oh wait, and then there's one more line here. It said,
but like KT, Roth investing and I are like oil
and water. Thanks, Jody.
You and I are from the same, same batch. We're
both a little...
Suze (14:41):
...slippery, huh, anyway, um, so all you have to do
is like go to Schwab, go to Vanguard. Vanguard is
a fabulous brokerage firm. Vanguard Fidelity or Schwab either one
doesn't matter, OK? But let's say you did Schwab, go
and open up a Roth IRA for her fully funded
(15:03):
to 7000
dollars put it in their treasury money market fund or
whatever it may be and then have her dollar cost
average into these stock markets because obviously the stock market
is not having a really great time this year so far,
but it will again. Now if I were you I
(15:25):
would have her do exchange traded funds, ETFs, so she
has some diversification.
So it's really just that simple. So if she puts
in $7000 at once, then you would have her put
in approximately $583 a month into either the Standard and
Poor's 500 index fund, the Vanguard total stock market index fund,
(15:48):
or just keep it simple for her now to get
her used to investing in the ups and
downs of the market. That's what I would be doing
if I were you. Next, KT.
KT (15:58):
OK, I have a question from Scott. He said, Suze
and KT, thanks for all the advice. I'll be 50
in June. He's a Gemini like you. Gemini Scott.
Suze (16:09):
Like me, I'm gonna be 74.
KT (16:12):
All right, Scott, you have a long way to go.
Between your show...
Suze (16:16):
And may your 24 years till that age be as
great as mine.
KT (16:20):
Yes, between your show and conversations with my mom, converting
all of my pre-tax retirement accounts without 401k seems to
be the best course to limit RMDs.
So he said, I have about 6 traditional IRAs with
recent and potential market corrections. Would you recommend converting as
(16:45):
many as possible to Roths this year?
Suze (16:49):
I would, depending, however, what the tax ramification will be
to you, because even though the markets are down, that
doesn't mean that you don't have a lot of money
still in those positions. So therefore.
After you have checked with a CPA, then you decide
which investments that you have make the most sense, like
(17:13):
which ones do you want to keep that have gone
down dramatically.
And then you would convert those, but it's definitely worth
it to convert while the markets are
down.
KT (17:25):
All right, next question.
Suze (17:26):
Why did you look at me like that?
KT (17:27):
I didn't know if you were done.
Suze (17:29):
I wasn't sure I was done.
KT (17:30):
I know. Are you finished?
Suze (17:32):
Let me think about it.
KT (17:33):
Yes, you are, OK, because I have so many good questions.
Suze (17:36):
But what's key about that is never do it all
at once unless all you have in there is like
3000 $5000. If you have a lot of money in there,
never convert to a Roth all at once. You'll be
so sorry that you did, especially if it puts you
in a really high tax
bracket.
KT (17:53):
All right. Next question is from Gay, she said, I'm
a retired New York City teacher with a 457B and
a tax deferred annuity.
They have RMD rules that seem similar to those of
traditional IRAs, and now she's asking, I also have a
relatively small traditional IRA opened at the beginning of time.
(18:18):
Can these three types of accounts be aggregated for the
RMD so I can draw from the least lucrative one?
I don't, I thought that was a good question because
I don't know. OK, can you?
Suze (18:30):
Are you sure you don't
know. Is this you're quizzy.
KT (18:32):
If it's a quizzy, then I'm going to guess you
absolutely cannot aggregate accounts like that.
Suze (18:38):
And why would you say that?
KT (18:40):
Because they're, they're all different. They're all different.
Suze (18:43):
Ding Ding Ding-a
KT (18:44):
Yeah, I see.
Suze (18:44):
She got that but
KT (18:45):
It's a good question,
Suze (18:46):
Right? People wonder.
You cannot if you have 15 different IRAs, then you
aggregate all of them, the total that's in there for
your RMD, and you can take it from anyone you want.
It doesn't matter, but you have to do it on
the total amount.
But you cannot add into that amount what's in your
(19:06):
tax deferred annuity or your 450 those are separate and
have to do their own. What you could do is
if you're retired and you want, you can roll them
over like you could roll over possibly your tax deferred
annuity into your IRA that you've had forever and aggregate
it there.
So that you'd only have to figure out one RMD.
(19:29):
So look into that to see if you can do
that with your accounts.
KT (19:33):
So Suze, next question is from Linda. She said, I
am a teacher and will receive a pension. We love teachers,
don't we?
Suze (19:40):
So much, so much.
KT (19:41):
They're our favorite people. I'm a teacher, will receive a pension,
but do not have enough Social Security credits to receive
Social
Security myself, my husband will receive Social Security, and I
understand that I will be able to receive his Social
Security benefit if he passes before me. But Suze, what
(20:03):
about spousal benefit while we're both alive? He's 60. I
am 59. We planned to wait until he was 70
to begin collecting his social.
However, will I be eligible for spousal benefits while he
is alive? If so, is there any benefit to having
(20:24):
him start to collect at 67 so we can both
receive benefits earlier, or is it best to still wait
till 70? You got to set her straight, Suze.
Suze (20:33):
Linda, listen. The biggest mistake that most people make is
they always think that they are going to get 50%
of their spouse's social security, no matter what. So if
their spouse waits till they are 70, let's say, to
get Social Security, you think you're going to get 50%
(20:56):
of the amount that your spouse will get at 70,
and that's not true. You only get 50% of what
your spouse would have gotten at his or her full
retirement age, which is currently 67.
Now, since you aren't going to have any Social Security,
(21:19):
then what I would advise you to do is this.
Let's just say that your husband is going to get
$2000 at the age of 70. Therefore, you're not going
to get 50% of that $2000. You get 50% of
what he would get at his full retirement age of 67.
(21:41):
That means at 67
he would probably only be getting about $1600 a month,
which means you would get 50% of that, which is
about $800 a month. Remember you have to be 67,
your full retirement age
(22:03):
to get the full 50% of the spousal benefit. So
given that you and your husband are just one year apart,
it's just so great I can't tell you. So this
is what I would do if I were you.
Assuming that those numbers were your numbers and you have
to do this with your own numbers, I would have
(22:24):
your husband claim at the age of 68.
And that would be about $1750 a month. I would
have you claim 50% of the spousal benefit of his
full retirement age.
I would have you do that at 67, which would
give you about $800 a month. So you would get
(22:46):
approximately $2550 a month starting when he is 68 and
you are 67. Given that he wasn't going to claim,
let's just say till 70, that's two years of payments,
that you wouldn't have been getting neither of you cause
you have to claim spouse has to claim, Linda, in
(23:10):
order for you to get a spousal benefit. Therefore, in
those two years that would be close to $61,000 of
money that you're entitled to that you wouldn't have claimed.
I don't know. I think that's a big difference. And
if I were you, that's what I would go for.
(23:32):
Did that all make sense to you, KT?
KT (23:34):
I think that it's smart that they 68 and 67,
go for it. 61,000 is a lot of money in
two years.
Suze (23:42):
Yeah, and really if you look at the difference between
what they would have gotten.
No, it's not worth it in my
opinion.
KT (23:49):
They do better off doing what you
just said,
Suze (23:51):
I think so, but you should always double check. All right,
next question, KT.
KT (23:54):
Suze, my final question from Sheila. Hi, Suze, thank you
for the Roth info. I'm a little confused because I
heard you say that if you have pre-tax
money in any retirement account, then don't do a backdoor Roth,
but we have 401ks and 403Bs. So does that mean
(24:16):
we shouldn't do a backdoor Roth or were you just
referring to IRAs with tax money?
Suze (24:23):
Now, I already answered that on this podcast, KT. What's
the answer?
Don't look at me like that.
KT (24:32):
No.
Suze (24:34):
So the answer is what?
KT (24:36):
The answer is that
Suze (24:38):
are
KT (24:38):
you
Suze (24:38):
were
you just referring to IRAs?
KT (24:41):
So, so she has 401ks and 403Bs. Were you just
referring to IRAs? Yes, you were. You were referring only
to IRAs.
Suze (24:51):
That's right. Good. So it wasn't. No, it was, yes, ding ding.
KT (24:54):
I meant no, she can't do the other two.
Suze (24:56):
Yeah, no, it's don't worry, any money you have an
employer sponsored plan.
I don't care what kind of money it is in there,
then that doesn't count for the pro rata backdoor IRA.
It's only traditional IRAs, IRAs, SEP IRAs, simple IRAs, anything
(25:17):
that's an individual retirement account.
Alright, KT, I did it.
KT (25:23):
You did it, Suze. That's a wrap, and everyone, I want
you to just remember three things.
Suze (25:28):
What are they?
KT (25:29):
People first, God, then money, then things.
Suze (25:33):
And if you do that, stay safe, stay strong, stay healthy. Oh,
then together we really will rise. bye bye.
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