September 18, 2025 • 26 mins
Many of you had some new questions after Suze’s Roth Five Year Rule Masterclass, so KT picked out a great sample and Suze answers them.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Suze (00:07):
September 18, 2025. Welcome everybody to...
KT (00:11):
The Women and Money podcast, and everyone's smart enough to listen.
Suze (00:16):
Ding ding ding ding ding. Anyway, it is September 18th, right? KT?
Is there anything special on today?
KT (00:24):
I don't know.
Suze (00:25):
I don't think so.
KT (00:26):
But it's a nice number. It's a lucky number. It
adds up to 9.
Suze (00:29):
Do you all know that 9?
KT (00:32):
Is Suze's lucky number KT's is 8.
Suze (00:35):
Yeah, but I want you to think about this. September
is a 9, 18 is a 9, and 2025 is
a 9.
KT (00:45):
Yeah.
Suze (00:46):
So this is a
KT (00:46):
...triple 9 day.
Suze (00:48):
So everybody, it is a lucky, lucky day, especially for money,
just so you know. OK, there you go. But this
is also special because it is Ask KT and Suze Anything,
and KT is in the studio, and I know that
makes you all or the majority of you anyway, so,
(01:09):
so happy.
KT...
KT (01:12):
Wait, tell everyone how to send a question to KT
so that I can pick it up, pick it out.
Suze (01:17):
But we have so many, but anyway, send your question
into Ask Suze podcast@gmail.com.
And if KT likes it, it will be read on
this podcast and answered, but don't be surprised if I
answer you directly, OK.
KT (01:39):
Are we ready?
Suze (01:40):
No.
KT (01:41):
OK.
Suze (01:42):
I'm not quite ready yet because
so many people wrote in and said how surprised they were,
how quiet you were.
On Sunday. They were so disappointed when they didn't hear
you because you said you were going to be there
and then you pop in at the very end.
KT (02:02):
Because I was, I was condemned to silence. No, Suze
said the only way I can do my Sunday school,
which is about Roth and it's complicated, is if you
don't interrupt me. So I did not interrupt her. I
was as still
as a mouse. However, following that, we got lots and
(02:22):
lots of emails with questions that you all have about
that masterclass.
Suze (02:28):
So we thought, why not complete it today and make
sure that none of you are
confused.
KT (02:35):
All right, I have some really great questions here, but
here we go. Are you ready?
Suze (02:40):
I'm always ready.
KT (02:40):
All right, dear KT and Suze, thanks for the most
recent
Suze School on the five year rule of Roth. I
want to convert from a traditional IRA to a Roth.
I know I will pay taxes, but the only way
I could accomplish this at this stage of my life
is to have my financial planner withhold the taxes from
(03:04):
the sale and transfer the remaining.
Suze (03:06):
So you can stop right there, right there you can
stop right there.
So who's the name of this person?
KT (03:12):
Julie.
Suze (03:13):
Julie, Julie, if that's the only way you can do it,
and you know that's the only way you can do it,
you don't have the money to convert. Don't do it.
Don't do it. Don't do it. Next question, KT.
KT (03:25):
She's 52, just so you know.
Suze (03:25):
Don't do it, Julie. So for all of you, when
you convert, you owe taxes on the money that you
converted that year.
If you don't have money outside of a retirement account
to do so, don't do it because if they withhold
the money for you to pay your taxes.
(03:46):
There's going to be a 10% penalty on it because
number one, you are not 59 and a half years of age. You're
going to owe ordinary income tax on that money as well.
It makes absolutely no sense whatsoever. All right, KT, go on.
KT (04:03):
OK, so next question is from Pam. She said, Dear
Suze and KT, after listening to last Sunday's Suze School,
I think I made a boo boo.
I have had a Roth for over 20 years. I'm 68, retired,
and decided it would work well to convert yearly for
the next five years, money from my traditional IRA into
(04:26):
a Roth. My boo boo was I opened a new
Roth instead of converting to the old. Now I realize
after the show I should have just converted into my
original Roth, which was well over five years old. My
question is,
can I now transfer the new Roth conversion into my
(04:46):
old Roth without causing any trouble?
Suze (04:49):
Pop quizzy.
KT (04:50):
Oh...
Suze (04:51):
You sat here the entire day on Sunday. You said...
KT (04:56):
Ok, yes.
Suze (04:58):
Yes, what?
KT (04:58):
Yes, you can.
Suze (05:00):
And does she need to?
KT (05:03):
No.
Suze (05:04):
Why?
KT (05:06):
Because the five year rule's passed. Way passed.
Suze (05:10):
And so?
KT (05:14):
That's not fair. Stop asking me. I answered it. I
said yes. So now you take over.
That's not fair. You take over.
Suze (05:24):
Oh, I see.
KT (05:25):
You keep asking me questions like I know all the answers.
Suze (05:28):
You said last Sunday all of you are my witness, right?
But she sat there and she said, Now I know
everything there is to know about Roths.
KT (05:37):
Most, mostly, mostly, but not all the spaces in between.
Suze (05:40):
All right, first of all, Pam.
We'll tell all of you, if you happen to know Pam,
that I actually answered her directly.
KT (05:49):
All right, so Pam, give us... tell us... write back in and
tell us the damn answer.
Suze (05:55):
So like I said, sometimes I answer and I felt
so bad for her because she felt like she made
a boo boo on the fact of the matter is
she did not. KT, don't act...
don't try to act smart now. Just don't do it.
KT (06:10):
I was right. I was right with my answer.
Suze (06:12):
KT, but you don't know why you were right. And
when you don't know why you've done something, you are
not right, you are a guesser, not somebody anyway, forget
about it. No, listen to me, everybody, seriously. Your first
Roth that you open,
the date of that first Roth follows you everywhere. So
(06:34):
in this particular case, truthfully, Pam, because you are older
than 59 and a half and because you had a
Roth IRA opened for more than five years, you can
convert all you want, pay the taxes on it, and
take that money out any time you want.
(06:57):
Because you have literally done two things. You've had a
Roth for five years, and you're over 59 and a half years of age,
so it doesn't matter. Just pay the taxes and all
of that money is available to you whatsoever. So the
truth of the matter is,
you don't really need to keep a five year time
(07:21):
clock cause that clock has already run because of your
first Roth IRA that you opened 20 years ago. You
do not have to ever use that Roth IRA again.
You can open one new Roth, one new Roth, one
new Roth, all conversions, and they're all dated back to
the first one, so you didn't make a mistake.
(07:44):
It could be easier, however, now just for you to
transfer because it's not a conversion anymore, you might want
to transfer all these accounts that you have into just
one Roth IRA.
And it doesn't have to be the first one that
you opened, but you just might want to even transfer
that one and all the ones that you opened into
(08:07):
one Roth IRA now.
And guess what, it might be a whole lot easier
for you. All right, KT.
KT (08:15):
This is the next question is, is the same category
ready for this? This is Rebecca, she said. Suze, on
the ultimate Roth five year rule masterclass, you mentioned there
are two different kinds of Roth accounts.
A converted Roth and the other being a contribution Roth.
Suze (08:33):
Contributory, yes.
KT (08:34):
Contributory. So the question is, can a contributory Roth and
a converted Roth be held in the same account?
Suze (08:43):
Absolutely without any problem. So a lot of you feel like,
oh my God, I have a Roth IRA now I'm
going to do a rollover from a 401k and I
need a separate account for that. And no, everything can
go into one account.
Absolutely.
KT (09:01):
So this next question from Anne.
This is interesting, Suze, because I, I think this is
a great question because I don't have a clue if
there's a limit.
Suze (09:10):
That's very funny, everybody, KT doesn't have a clue.
KT (09:13):
If there's a limit, ready, everyone, listen, listen. When you do
a Roth conversion, are you allowed to put in more
than $8,000? Two people wrote to you, Suze, that they
put in $50,000 and $100,000 in one year.
Suze (09:30):
And you honest to God don't know the answer to that.
I need you to think deeply for me.
KT (09:38):
I think you can put in any amount because you
pay
the taxes on it all.
Suze (09:44):
So why did you say you don't have a clue?
KT (09:45):
Well, it was interesting because for some reason there's all
these limits on many different things, but not on a Roth...
Suze (09:52):
No.
KT (09:52):
Not on the, not on a converted converted Roth.
Suze (09:56):
So contributory Roths are Roths everybody that you contribute to
every year with after tax money, period. You're limited to
the annual amount depending on your age.
7,000 if you're under 50, 8,000 if you're 50 or older.
When you are converting, you can convert any amount of
(10:17):
money that you want. Just know, whatever you convert, Oh,
you are going to owe ordinary income taxes.
KT (10:24):
Pay taxes on it. So that's why she was confused.
So Anne, there...
Suze (10:28):
We don't know, you don't know why she was confused.
KT (10:30):
She was, because she said, Hey...
Suze (10:33):
KT stop it, go to the next question.
KT (10:36):
Ok, the next question is Scott. This is, I am
one of the men smart enough to listen, and I
really appreciate all the help you have given my wife
and me. Are the 5 year rules the same for
Roth 401k conversions as they are for the Roth IRA conversions?
Suze (10:55):
Here's the scoop, Scott. They are and they are not,
and this is the reason why.
You worked for a company for five years. You had
their Roth 401k for all five years. You quit. You
go to a new employer that has a Roth 401k,
and you transfer from the old to the new.
(11:16):
Your old time clock, the five years there comes with
you to the new one, so your new employer's retirement
account takes on the clock of your first one, just
that simple, however, listen closely.
When you go from a Roth 401k to a Roth IRA,
(11:41):
the clock does not come with you. Even though you're
transferring from a 401k that's a Roth to a Roth IRA.
Both after tax, does not matter. The Roth IRA will
replace the time clock of your Roth 401k, that is
(12:02):
why you want to start a Roth IRA today. So
that the time clock is running. So when you do
finally go from a Roth 401k to a Roth IRA,
you've taken on the time clock of the Roth IRA
that has been opened. If there isn't one that's been opened,
(12:23):
your 5 year time clock starts the day you transfer.
One more thing, Scott, a Roth IRA you can take
out your original contributions any time you want without taxes
or penalties regardless of your age or how long the
money has been in there.
Your Roth 401k does not work like that, so there
(12:45):
is another difference there, which is why truthfully, after the
point of the match in a Roth 401k, you're far
better off taking that money and having a Roth IRA.
Once you've maxed out your Roth IRA, go back
to your Roth 401k unless you can fully max out
both at the same time. Go on, KT.
KT (13:05):
Yeah, this next question is um similar to that as well.
This is from Janet. She said after listening to your
very helpful podcast on Roth's one thing I'm not totally
clear on my husband, aged 73.
And I, age 68, each have a Roth IRA from
(13:26):
contributions from our working years that date back much more
than five years ago. In recent years we've been doing
Roth conversions into a new Roth account for each of
us held at different brokerage houses.
Does the five year rule still no longer apply if
(13:46):
our Roth conversions are in totally different accounts than our
original Roth accounts or...
Do you have to do the conversion into the original
to have the five year rule no longer apply once
you are over 59 and a half?
Suze (14:04):
So, I obviously did not do a very good job
on the masterclass because a lot of you seem to
be
confused. First of all, my dear Janet, your husband is 73,
you are 68. You've had a Roth IRA opened way
long ago. The five year rule doesn't even apply to
(14:25):
you on any level whatsoever, so you don't need to
worry about it.
They don't have to be different accounts. They can be
different accounts. They can be the same accounts. You shouldn't
even think about it because of your age, and you
had a Roth more than five years ago. Just that simple.
It doesn't matter. You can do anything you want and
(14:48):
you're going to be fine.
KT (14:50):
OK, so the magic takeaway, Suze is 59 and a half.
Suze (14:53):
Yes.
KT (14:54):
All right.
Suze (14:54):
And five years. Yes, yeah, after that it just doesn't
even matter.
It's like the five year rule doesn't apply.
KT (15:03):
OK, good, it's gone.
This is from Lynn, she said, I just received your
Ultimate Retirement Guide for 50+. I'm really wishing I had
used it years ago. We always hear that.
Now I need your advice, possibly changing my traditional IRA beneficiary.
(15:23):
I am 71. My husband is 90. My traditional IRA
balance is approximately $780,000. My husband's is $335,000. Is it
prudent for me to designate him my 100% beneficiary?
(15:44):
I am seeing in your distribution table that if I
pass before him, the combined RMD would be 91,000 this year.
So there you go.
Suze (15:57):
You should see KT's face reading this.
KT (15:59):
Well, so he's 90 years old.
Suze (16:02):
He's 90. You are 71.
And really you could very well pass before him. You
never know what can happen in life. In my opinion,
all of you are just too freaked out about these RMDs.
Stop it, everybody. Your job in life is to make
(16:25):
sure that your husband is taken care of in whatever
way he needs, and there are different rules when you
leave
a retirement account to a spouse versus when you leave
it to a non-spouse and therefore you want to make
sure that he has access to that money he can
(16:47):
do anything he wants with that money. So if it
were me in this situation.
I would absolutely leave it all to him. I would
not think about the RMDs. The truth of the matter
is he's probably going to need to take out that money,
for a nurse, for somebody to take care of him,
(17:08):
to maybe he goes into a skilled living facility or
just an assisted living, he's going to need that money anyway.
Leave it to him and don't worry about those stupid RMDs.
KT (17:22):
Next question, Suze, is from Steve, another smart man.
I'm Steve and I'm one of those people smart enough
to listen. I'm 60 and retired with a pension covering
current expenses. I have about 1.2 million in a traditional IRA.
And 300,000 in my Roth, both at the same institution.
(17:46):
I'm going to do some conversions from my traditional to
my Roth. My portfolio is about a 65/35 balance. Do
I keep the 65/35 balance on the conversions or convert
the 65 equities first so the future biggest growth happens
(18:07):
in my Roth? Steve.
Suze (18:11):
She's smiling again. How old is he?
KT (18:13):
60. What's funny is that men's, you know how they
ask the question, 65/35.
Suze (18:22):
Well, no, it's 65 stocks, 35 bonds. Here's what I
would tell you, Steve. Simple convert the equities first because
they have a better chance of going far higher than
bonds right now, even though that I do think bonds
are going to continue to go up a little bit
because interest rates are going to go down. So get
(18:43):
the stocks out of there and into the Roth sooner
than later.
KT (18:49):
Next question from Marie, and Marie has another RMD dilemma,
she said....
Suze (18:54):
What's an RMD KT?
KT (18:56):
Required Minimum Distribution, baby!
Suze (18:58):
Ding ding, ding, ding.
KT (18:59):
So she said, Suze, first thank you for all the
advice and knowledge you so freely give to those of
us that need it. I'm 72, so the dreaded RMDs
are on the horizon.
Can I use the money from my RMD to open
a Roth for my adult children? This would get the
(19:19):
Roth clock started for them. Thank you, Marie.
Suze (19:22):
So Marie, listen to me. In fact, everybody listen to me.
I hope that's true, don't you, KT?
KT (19:29):
Yes, they better listen.
Suze (19:30):
When you take out a required minimum distribution, you obviously
have to pay income tax on it.
And just that simple. After you've paid income tax, you
can do anything you want with that money. So if
you want to take that money and use it to
(19:51):
fund your adult children's Roth IRAs, OK, but you have
to make sure that they have earned income because if
they don't have earned income.
You can't put any money into their Roth, and you
can only put a maximum, let's just say they're under 50,
a maximum of $7,000 a year each or
(20:17):
whatever their earned income is, whichever is less. So if
their earned income is only $3,500 a year, you can
only put $3,500 a year into their Roth. So that's
how it works, my dear Marie. OK, go on, KT.
KT (20:35):
So Suze, why do you think people are so afraid
of their RMDs?
Suze (20:39):
Because first of all, if they had listened to me
years ago and you had done a Roth, everybody, you
wouldn't have to take out RMDs. Even if you had
a Roth 401k, you don't have to take out RMDs,
and that's a new law. However, required minimum distribution means
you have to take money out whether you need it
(21:01):
or not and pay taxes on it.
That money KT counts towards the taxation of Social Security
and Medicare B premiums, so people don't want to have
to take it out if they don't have to. Like
we have to take it out and we don't need it,
and it counts towards everything. However, that's why I'm just
(21:24):
going to say it again. If you don't do a
Roth retirement account on your own, an IRA.
A Roth 401k TSP, you know, or 403B at work,
you are making the biggest mistake in your life. Don't
be stupid, everybody. OK, go on.
And I say that KT, I just because everybody now
(21:47):
writes and they say, why didn't I do this 20
years ago? I never thought my contributions would add up
to $1.2 million to $2 million and everything, of course
you didn't, but I think it for you, so just
listen to me, especially if you're younger out there. Go on.
KT (22:05):
This is from Katie. She said, I'm a new listener
to your program and I love it.
I'm finally understanding the Roth, I, I think she said,
but I have a question...
Suze (22:17):
Oh, you have something in common with KT. How nice. Go on.
KT (22:20):
But I have, that's not nice, but I have a
question after,
Suze (22:24):
It's true!
KT (22:25):
But I have a question after listening to your podcast
on Sunday. I opened a Roth IRA at a bank
several years ago with a one-time deposit.
I'm now over 59 and half, so I know I
can access the contribution penalty free if needed, which luckily
I doubt I need to do. My question is I'd
(22:48):
like to open another Roth at Vanguard and start contributing
on a regular basis.
Does my five year rule apply here for the new account,
or will the five year rule already be met?
Suze (23:02):
You've already met the five year rule.
KT (23:04):
So let's answer it. You're over 59 and a half.
Suze (23:08):
If you're over 59 and a half, everybody, and you
have had a Roth IRA opened anywhere,
for over five years, the five year rule no longer
applies to you. However, Katie, get it, KT, when I
said you have something in common because her name is
(23:30):
Katie and you're KT.
KT (23:31):
It's not what you meant.
Suze (23:32):
It's what... ok, well.
KT (23:33):
So not what you meant...
Suze (23:35):
But you all know what I meant.
KT (23:37):
Uh huh.
Suze (23:38):
Is that, listen, you say that you opened up a
Roth IRA at a bank several years ago with a
one time deposit. If I were you, I would absolutely, if
you're opening up a new Roth IRA at Vanguard, can
you just transfer,
your Roth IRA at the bank into Vanguard? I think
(23:59):
you'll have a far better return on your money in
the long run. All right, go on.
KT (24:04):
So one of the listeners sent three questions. Can I
ask all three, and we'll see if you can get
through them before we run out of time? So, does
it make sense for me to continue down the path
to max out on the traditional 401k, or should I
convert to a Roth 401k?
Suze (24:21):
Absolutely convert to a Roth. Do not be, you know
what I said before, the S word. OK, go on.
KT (24:27):
Stupid.
Suze (24:30):
That's the first time I've ever heard her say that word.
KT (24:32):
If the Roth 401k is a recommendation, when converting, what
percentage should I try to convert per year?
Suze (24:40):
Whatever amount of money makes sense tax-wise, check with your
CPA so that you don't go into a higher income
tax bracket. Next.
KT (24:50):
All right, Suze, this is the last question from this listener,
and then this is a wrap. Can I continue to
contribute the $7,000 per year to my backdoor Roth IRA
if I have a Roth 401k?
Suze (25:05):
Pop quizzy.
KT (25:08):
Oh.
Yeah, you can.
Suze (25:11):
Why do you say "oh?"
KT (25:12):
I just, because every time I hear the word quizzy,
I'm like, Oh, KT, don't get it wrong, don't get
it wrong.
Suze (25:18):
Ding ding ding ding ding ding. KT, don't be so
afraid of being wrong.
KT (25:23):
That is a wrap. You would.
Suze (25:25):
No.
KT (25:25):
I'm not afraid. I'm not afraid. I'm like, come on already.
Suze (25:31):
OK, no problem. All right, everybody, until Sunday with Suze
School that I have no idea what it's going to be.
KT (25:39):
But it's going to be a whole lot easier than
last Sunday.
Suze (25:44):
I think that masterclass, even though it doesn't seem like
it given so many questions that have come in, it's
a great, great masterclass.
KT (25:52):
Maybe you should do real estate.
Suze (25:55):
On what?
KT (25:56):
On Sunday school.
Suze (25:57):
I'll think about it. All right, but until then there's
only one thing that we want you to remember, and
it's this:
People first, then money, then things.
Stay safe, stay healthy, stay secure, and we'll see you soon.
Bye bye.
September 18, 2025. Welcome everybody to...
KT (00:11):
The Women and Money podcast, and everyone's smart enough to listen.
Suze (00:16):
Ding ding ding ding ding. Anyway, it is September 18th, right? KT?
Is there anything special on today?
KT (00:24):
I don't know.
Suze (00:25):
I don't think so.
KT (00:26):
But it's a nice number. It's a lucky number. It
adds up to 9.
Suze (00:29):
Do you all know that 9?
KT (00:32):
Is Suze's lucky number KT's is 8.
Suze (00:35):
Yeah, but I want you to think about this. September
is a 9, 18 is a 9, and 2025 is
a 9.
KT (00:45):
Yeah.
Suze (00:46):
So this is a
KT (00:46):
...triple 9 day.
Suze (00:48):
So everybody, it is a lucky, lucky day, especially for money,
just so you know. OK, there you go. But this
is also special because it is Ask KT and Suze Anything,
and KT is in the studio, and I know that
makes you all or the majority of you anyway, so,
(01:09):
so happy.
KT...
KT (01:12):
Wait, tell everyone how to send a question to KT
so that I can pick it up, pick it out.
Suze (01:17):
But we have so many, but anyway, send your question
into Ask Suze podcast@gmail.com.
And if KT likes it, it will be read on
this podcast and answered, but don't be surprised if I
answer you directly, OK.
KT (01:39):
Are we ready?
Suze (01:40):
No.
KT (01:41):
OK.
Suze (01:42):
I'm not quite ready yet because
so many people wrote in and said how surprised they were,
how quiet you were.
On Sunday. They were so disappointed when they didn't hear
you because you said you were going to be there
and then you pop in at the very end.
KT (02:02):
Because I was, I was condemned to silence. No, Suze
said the only way I can do my Sunday school,
which is about Roth and it's complicated, is if you
don't interrupt me. So I did not interrupt her. I
was as still
as a mouse. However, following that, we got lots and
(02:22):
lots of emails with questions that you all have about
that masterclass.
Suze (02:28):
So we thought, why not complete it today and make
sure that none of you are
confused.
KT (02:35):
All right, I have some really great questions here, but
here we go. Are you ready?
Suze (02:40):
I'm always ready.
KT (02:40):
All right, dear KT and Suze, thanks for the most
recent
Suze School on the five year rule of Roth. I
want to convert from a traditional IRA to a Roth.
I know I will pay taxes, but the only way
I could accomplish this at this stage of my life
is to have my financial planner withhold the taxes from
(03:04):
the sale and transfer the remaining.
Suze (03:06):
So you can stop right there, right there you can
stop right there.
So who's the name of this person?
KT (03:12):
Julie.
Suze (03:13):
Julie, Julie, if that's the only way you can do it,
and you know that's the only way you can do it,
you don't have the money to convert. Don't do it.
Don't do it. Don't do it. Next question, KT.
KT (03:25):
She's 52, just so you know.
Suze (03:25):
Don't do it, Julie. So for all of you, when
you convert, you owe taxes on the money that you
converted that year.
If you don't have money outside of a retirement account
to do so, don't do it because if they withhold
the money for you to pay your taxes.
(03:46):
There's going to be a 10% penalty on it because
number one, you are not 59 and a half years of age. You're
going to owe ordinary income tax on that money as well.
It makes absolutely no sense whatsoever. All right, KT, go on.
KT (04:03):
OK, so next question is from Pam. She said, Dear
Suze and KT, after listening to last Sunday's Suze School,
I think I made a boo boo.
I have had a Roth for over 20 years. I'm 68, retired,
and decided it would work well to convert yearly for
the next five years, money from my traditional IRA into
(04:26):
a Roth. My boo boo was I opened a new
Roth instead of converting to the old. Now I realize
after the show I should have just converted into my
original Roth, which was well over five years old. My
question is,
can I now transfer the new Roth conversion into my
(04:46):
old Roth without causing any trouble?
Suze (04:49):
Pop quizzy.
KT (04:50):
Oh...
Suze (04:51):
You sat here the entire day on Sunday. You said...
KT (04:56):
Ok, yes.
Suze (04:58):
Yes, what?
KT (04:58):
Yes, you can.
Suze (05:00):
And does she need to?
KT (05:03):
No.
Suze (05:04):
Why?
KT (05:06):
Because the five year rule's passed. Way passed.
Suze (05:10):
And so?
KT (05:14):
That's not fair. Stop asking me. I answered it. I
said yes. So now you take over.
That's not fair. You take over.
Suze (05:24):
Oh, I see.
KT (05:25):
You keep asking me questions like I know all the answers.
Suze (05:28):
You said last Sunday all of you are my witness, right?
But she sat there and she said, Now I know
everything there is to know about Roths.
KT (05:37):
Most, mostly, mostly, but not all the spaces in between.
Suze (05:40):
All right, first of all, Pam.
We'll tell all of you, if you happen to know Pam,
that I actually answered her directly.
KT (05:49):
All right, so Pam, give us... tell us... write back in and
tell us the damn answer.
Suze (05:55):
So like I said, sometimes I answer and I felt
so bad for her because she felt like she made
a boo boo on the fact of the matter is
she did not. KT, don't act...
don't try to act smart now. Just don't do it.
KT (06:10):
I was right. I was right with my answer.
Suze (06:12):
KT, but you don't know why you were right. And
when you don't know why you've done something, you are
not right, you are a guesser, not somebody anyway, forget
about it. No, listen to me, everybody, seriously. Your first
Roth that you open,
the date of that first Roth follows you everywhere. So
(06:34):
in this particular case, truthfully, Pam, because you are older
than 59 and a half and because you had a
Roth IRA opened for more than five years, you can
convert all you want, pay the taxes on it, and
take that money out any time you want.
(06:57):
Because you have literally done two things. You've had a
Roth for five years, and you're over 59 and a half years of age,
so it doesn't matter. Just pay the taxes and all
of that money is available to you whatsoever. So the
truth of the matter is,
you don't really need to keep a five year time
(07:21):
clock cause that clock has already run because of your
first Roth IRA that you opened 20 years ago. You
do not have to ever use that Roth IRA again.
You can open one new Roth, one new Roth, one
new Roth, all conversions, and they're all dated back to
the first one, so you didn't make a mistake.
(07:44):
It could be easier, however, now just for you to
transfer because it's not a conversion anymore, you might want
to transfer all these accounts that you have into just
one Roth IRA.
And it doesn't have to be the first one that
you opened, but you just might want to even transfer
that one and all the ones that you opened into
(08:07):
one Roth IRA now.
And guess what, it might be a whole lot easier
for you. All right, KT.
KT (08:15):
This is the next question is, is the same category
ready for this? This is Rebecca, she said. Suze, on
the ultimate Roth five year rule masterclass, you mentioned there
are two different kinds of Roth accounts.
A converted Roth and the other being a contribution Roth.
Suze (08:33):
Contributory, yes.
KT (08:34):
Contributory. So the question is, can a contributory Roth and
a converted Roth be held in the same account?
Suze (08:43):
Absolutely without any problem. So a lot of you feel like,
oh my God, I have a Roth IRA now I'm
going to do a rollover from a 401k and I
need a separate account for that. And no, everything can
go into one account.
Absolutely.
KT (09:01):
So this next question from Anne.
This is interesting, Suze, because I, I think this is
a great question because I don't have a clue if
there's a limit.
Suze (09:10):
That's very funny, everybody, KT doesn't have a clue.
KT (09:13):
If there's a limit, ready, everyone, listen, listen. When you do
a Roth conversion, are you allowed to put in more
than $8,000? Two people wrote to you, Suze, that they
put in $50,000 and $100,000 in one year.
Suze (09:30):
And you honest to God don't know the answer to that.
I need you to think deeply for me.
KT (09:38):
I think you can put in any amount because you
pay
the taxes on it all.
Suze (09:44):
So why did you say you don't have a clue?
KT (09:45):
Well, it was interesting because for some reason there's all
these limits on many different things, but not on a Roth...
Suze (09:52):
No.
KT (09:52):
Not on the, not on a converted converted Roth.
Suze (09:56):
So contributory Roths are Roths everybody that you contribute to
every year with after tax money, period. You're limited to
the annual amount depending on your age.
7,000 if you're under 50, 8,000 if you're 50 or older.
When you are converting, you can convert any amount of
(10:17):
money that you want. Just know, whatever you convert, Oh,
you are going to owe ordinary income taxes.
KT (10:24):
Pay taxes on it. So that's why she was confused.
So Anne, there...
Suze (10:28):
We don't know, you don't know why she was confused.
KT (10:30):
She was, because she said, Hey...
Suze (10:33):
KT stop it, go to the next question.
KT (10:36):
Ok, the next question is Scott. This is, I am
one of the men smart enough to listen, and I
really appreciate all the help you have given my wife
and me. Are the 5 year rules the same for
Roth 401k conversions as they are for the Roth IRA conversions?
Suze (10:55):
Here's the scoop, Scott. They are and they are not,
and this is the reason why.
You worked for a company for five years. You had
their Roth 401k for all five years. You quit. You
go to a new employer that has a Roth 401k,
and you transfer from the old to the new.
(11:16):
Your old time clock, the five years there comes with
you to the new one, so your new employer's retirement
account takes on the clock of your first one, just
that simple, however, listen closely.
When you go from a Roth 401k to a Roth IRA,
(11:41):
the clock does not come with you. Even though you're
transferring from a 401k that's a Roth to a Roth IRA.
Both after tax, does not matter. The Roth IRA will
replace the time clock of your Roth 401k, that is
(12:02):
why you want to start a Roth IRA today. So
that the time clock is running. So when you do
finally go from a Roth 401k to a Roth IRA,
you've taken on the time clock of the Roth IRA
that has been opened. If there isn't one that's been opened,
(12:23):
your 5 year time clock starts the day you transfer.
One more thing, Scott, a Roth IRA you can take
out your original contributions any time you want without taxes
or penalties regardless of your age or how long the
money has been in there.
Your Roth 401k does not work like that, so there
(12:45):
is another difference there, which is why truthfully, after the
point of the match in a Roth 401k, you're far
better off taking that money and having a Roth IRA.
Once you've maxed out your Roth IRA, go back
to your Roth 401k unless you can fully max out
both at the same time. Go on, KT.
KT (13:05):
Yeah, this next question is um similar to that as well.
This is from Janet. She said after listening to your
very helpful podcast on Roth's one thing I'm not totally
clear on my husband, aged 73.
And I, age 68, each have a Roth IRA from
(13:26):
contributions from our working years that date back much more
than five years ago. In recent years we've been doing
Roth conversions into a new Roth account for each of
us held at different brokerage houses.
Does the five year rule still no longer apply if
(13:46):
our Roth conversions are in totally different accounts than our
original Roth accounts or...
Do you have to do the conversion into the original
to have the five year rule no longer apply once
you are over 59 and a half?
Suze (14:04):
So, I obviously did not do a very good job
on the masterclass because a lot of you seem to
be
confused. First of all, my dear Janet, your husband is 73,
you are 68. You've had a Roth IRA opened way
long ago. The five year rule doesn't even apply to
(14:25):
you on any level whatsoever, so you don't need to
worry about it.
They don't have to be different accounts. They can be
different accounts. They can be the same accounts. You shouldn't
even think about it because of your age, and you
had a Roth more than five years ago. Just that simple.
It doesn't matter. You can do anything you want and
(14:48):
you're going to be fine.
KT (14:50):
OK, so the magic takeaway, Suze is 59 and a half.
Suze (14:53):
Yes.
KT (14:54):
All right.
Suze (14:54):
And five years. Yes, yeah, after that it just doesn't
even matter.
It's like the five year rule doesn't apply.
KT (15:03):
OK, good, it's gone.
This is from Lynn, she said, I just received your
Ultimate Retirement Guide for 50+. I'm really wishing I had
used it years ago. We always hear that.
Now I need your advice, possibly changing my traditional IRA beneficiary.
(15:23):
I am 71. My husband is 90. My traditional IRA
balance is approximately $780,000. My husband's is $335,000. Is it
prudent for me to designate him my 100% beneficiary?
(15:44):
I am seeing in your distribution table that if I
pass before him, the combined RMD would be 91,000 this year.
So there you go.
Suze (15:57):
You should see KT's face reading this.
KT (15:59):
Well, so he's 90 years old.
Suze (16:02):
He's 90. You are 71.
And really you could very well pass before him. You
never know what can happen in life. In my opinion,
all of you are just too freaked out about these RMDs.
Stop it, everybody. Your job in life is to make
(16:25):
sure that your husband is taken care of in whatever
way he needs, and there are different rules when you
leave
a retirement account to a spouse versus when you leave
it to a non-spouse and therefore you want to make
sure that he has access to that money he can
(16:47):
do anything he wants with that money. So if it
were me in this situation.
I would absolutely leave it all to him. I would
not think about the RMDs. The truth of the matter
is he's probably going to need to take out that money,
for a nurse, for somebody to take care of him,
(17:08):
to maybe he goes into a skilled living facility or
just an assisted living, he's going to need that money anyway.
Leave it to him and don't worry about those stupid RMDs.
KT (17:22):
Next question, Suze, is from Steve, another smart man.
I'm Steve and I'm one of those people smart enough
to listen. I'm 60 and retired with a pension covering
current expenses. I have about 1.2 million in a traditional IRA.
And 300,000 in my Roth, both at the same institution.
(17:46):
I'm going to do some conversions from my traditional to
my Roth. My portfolio is about a 65/35 balance. Do
I keep the 65/35 balance on the conversions or convert
the 65 equities first so the future biggest growth happens
(18:07):
in my Roth? Steve.
Suze (18:11):
She's smiling again. How old is he?
KT (18:13):
60. What's funny is that men's, you know how they
ask the question, 65/35.
Suze (18:22):
Well, no, it's 65 stocks, 35 bonds. Here's what I
would tell you, Steve. Simple convert the equities first because
they have a better chance of going far higher than
bonds right now, even though that I do think bonds
are going to continue to go up a little bit
because interest rates are going to go down. So get
(18:43):
the stocks out of there and into the Roth sooner
than later.
KT (18:49):
Next question from Marie, and Marie has another RMD dilemma,
she said....
Suze (18:54):
What's an RMD KT?
KT (18:56):
Required Minimum Distribution, baby!
Suze (18:58):
Ding ding, ding, ding.
KT (18:59):
So she said, Suze, first thank you for all the
advice and knowledge you so freely give to those of
us that need it. I'm 72, so the dreaded RMDs
are on the horizon.
Can I use the money from my RMD to open
a Roth for my adult children? This would get the
(19:19):
Roth clock started for them. Thank you, Marie.
Suze (19:22):
So Marie, listen to me. In fact, everybody listen to me.
I hope that's true, don't you, KT?
KT (19:29):
Yes, they better listen.
Suze (19:30):
When you take out a required minimum distribution, you obviously
have to pay income tax on it.
And just that simple. After you've paid income tax, you
can do anything you want with that money. So if
you want to take that money and use it to
(19:51):
fund your adult children's Roth IRAs, OK, but you have
to make sure that they have earned income because if
they don't have earned income.
You can't put any money into their Roth, and you
can only put a maximum, let's just say they're under 50,
a maximum of $7,000 a year each or
(20:17):
whatever their earned income is, whichever is less. So if
their earned income is only $3,500 a year, you can
only put $3,500 a year into their Roth. So that's
how it works, my dear Marie. OK, go on, KT.
KT (20:35):
So Suze, why do you think people are so afraid
of their RMDs?
Suze (20:39):
Because first of all, if they had listened to me
years ago and you had done a Roth, everybody, you
wouldn't have to take out RMDs. Even if you had
a Roth 401k, you don't have to take out RMDs,
and that's a new law. However, required minimum distribution means
you have to take money out whether you need it
(21:01):
or not and pay taxes on it.
That money KT counts towards the taxation of Social Security
and Medicare B premiums, so people don't want to have
to take it out if they don't have to. Like
we have to take it out and we don't need it,
and it counts towards everything. However, that's why I'm just
(21:24):
going to say it again. If you don't do a
Roth retirement account on your own, an IRA.
A Roth 401k TSP, you know, or 403B at work,
you are making the biggest mistake in your life. Don't
be stupid, everybody. OK, go on.
And I say that KT, I just because everybody now
(21:47):
writes and they say, why didn't I do this 20
years ago? I never thought my contributions would add up
to $1.2 million to $2 million and everything, of course
you didn't, but I think it for you, so just
listen to me, especially if you're younger out there. Go on.
KT (22:05):
This is from Katie. She said, I'm a new listener
to your program and I love it.
I'm finally understanding the Roth, I, I think she said,
but I have a question...
Suze (22:17):
Oh, you have something in common with KT. How nice. Go on.
KT (22:20):
But I have, that's not nice, but I have a
question after,
Suze (22:24):
It's true!
KT (22:25):
But I have a question after listening to your podcast
on Sunday. I opened a Roth IRA at a bank
several years ago with a one-time deposit.
I'm now over 59 and half, so I know I
can access the contribution penalty free if needed, which luckily
I doubt I need to do. My question is I'd
(22:48):
like to open another Roth at Vanguard and start contributing
on a regular basis.
Does my five year rule apply here for the new account,
or will the five year rule already be met?
Suze (23:02):
You've already met the five year rule.
KT (23:04):
So let's answer it. You're over 59 and a half.
Suze (23:08):
If you're over 59 and a half, everybody, and you
have had a Roth IRA opened anywhere,
for over five years, the five year rule no longer
applies to you. However, Katie, get it, KT, when I
said you have something in common because her name is
(23:30):
Katie and you're KT.
KT (23:31):
It's not what you meant.
Suze (23:32):
It's what... ok, well.
KT (23:33):
So not what you meant...
Suze (23:35):
But you all know what I meant.
KT (23:37):
Uh huh.
Suze (23:38):
Is that, listen, you say that you opened up a
Roth IRA at a bank several years ago with a
one time deposit. If I were you, I would absolutely, if
you're opening up a new Roth IRA at Vanguard, can
you just transfer,
your Roth IRA at the bank into Vanguard? I think
(23:59):
you'll have a far better return on your money in
the long run. All right, go on.
KT (24:04):
So one of the listeners sent three questions. Can I
ask all three, and we'll see if you can get
through them before we run out of time? So, does
it make sense for me to continue down the path
to max out on the traditional 401k, or should I
convert to a Roth 401k?
Suze (24:21):
Absolutely convert to a Roth. Do not be, you know
what I said before, the S word. OK, go on.
KT (24:27):
Stupid.
Suze (24:30):
That's the first time I've ever heard her say that word.
KT (24:32):
If the Roth 401k is a recommendation, when converting, what
percentage should I try to convert per year?
Suze (24:40):
Whatever amount of money makes sense tax-wise, check with your
CPA so that you don't go into a higher income
tax bracket. Next.
KT (24:50):
All right, Suze, this is the last question from this listener,
and then this is a wrap. Can I continue to
contribute the $7,000 per year to my backdoor Roth IRA
if I have a Roth 401k?
Suze (25:05):
Pop quizzy.
KT (25:08):
Oh.
Yeah, you can.
Suze (25:11):
Why do you say "oh?"
KT (25:12):
I just, because every time I hear the word quizzy,
I'm like, Oh, KT, don't get it wrong, don't get
it wrong.
Suze (25:18):
Ding ding ding ding ding ding. KT, don't be so
afraid of being wrong.
KT (25:23):
That is a wrap. You would.
Suze (25:25):
No.
KT (25:25):
I'm not afraid. I'm not afraid. I'm like, come on already.
Suze (25:31):
OK, no problem. All right, everybody, until Sunday with Suze
School that I have no idea what it's going to be.
KT (25:39):
But it's going to be a whole lot easier than
last Sunday.
Suze (25:44):
I think that masterclass, even though it doesn't seem like
it given so many questions that have come in, it's
a great, great masterclass.
KT (25:52):
Maybe you should do real estate.
Suze (25:55):
On what?
KT (25:56):
On Sunday school.
Suze (25:57):
I'll think about it. All right, but until then there's
only one thing that we want you to remember, and
it's this:
People first, then money, then things.
Stay safe, stay healthy, stay secure, and we'll see you soon.
Bye bye.
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