On this edition of Ask KT and Suze Anything, Suze answers questions about investing for a child, financial security in one’s 50s, bond ladders, funding trusts, using AI to invest and more.

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Podcast Transcript:

Suze: KT, what’s the date? What’s the date of the year?

KT: Good morning, everybody. It is August 22nd, 2024.

Suze: Ding, ding, ding.

KT: So Suze, do I sound tired? Everyone, Suze looked at me and said you already look worn out and tired, KT and it’s not even the sun’s not even wait. Let me tell you why. So some one that sleeps in the same bed as I do.

Suze: Who is that? Who is sleeping in your bed?

KT: Listens to MSNBC all night long in her earphones or an ear or whatever you do and guess what it kind of penetrates through the mattress.

Suze: I wait, wait, wait. Do you know what I do, KT? I don’t,

Suze: I don’t use earphones in my ear because it’s not healthy. And number two. So what I do is because, well, you’re a little hard of hearing. It’s not a secret, right?

KT: I can’t hear. She can’t hear anything. So what, which is a good thing sometimes if you live in this household.

Suze: So, but I know I call her and I go KT. KT. Nothing, nothing

KT: I do hear her.

Suze: I know. It drives me crazy. But anyway, so I turn on my little iphone. The actual volume to only the second up from that

KT: It’s under your pillow…

Suze: Because I think if it’s under my pillow, you won’t hear it.

KT: I hear it right through the mattress. I hear little murmurs and I wonder what are they saying?

KT: Keeps me awake. It also wakes me up.

Suze: It’s not just MSNBC, it’s Bloomberg, it’s CNBC. It’s important. KT that I know everything that’s happening in the economy to know it. 24 7. Yeah. But during the day it’s difficult because you want to go swimming, you want to go in the ocean, you wanna go fishing, you wanna…

KT: Did you tell everyone, we caught two mackerel the other day. It was great. We went, we went out on the boat by herself. It was fabulous

Suze: Because Colo when we went out happened to be in Columbia on vacation.

KT: I said, let’s surprise him. He’s gonna be coming home any day. Now, let’s go out and see what we can do on our own. And we caught two nice mackerel.

Suze: But it was an interesting thing. You know, I have to just a little banter for just a little bit here because I love it so much, which is not like I talked to KT all day.

KT: I have a lot of questions. Don’t banter for long,

Suze: But here’s something that’s important for years when KT and I first moved to the island, it was just Katie and me taking the boat out, cleaning the boat,

KT: Taking the boat out, catching a lot of fish, bringing them, putting them on ice, cleaning the boat, fileting the fish.

Suze: Then cryo- vacuum them, eating the fish. Sometimes not eating dinner till 10 o’clock at night. When we would finish all that, it was fabulous. And then Colo came into our lives and we taught him how to fish and we taught him how to be a captain of the boat and fish and everything. And then he took that over and then it’s been years really since on our own, KT and I took out the boat.

KT: Wait, we, we almost took out the dock with it the other day. So, so I’m the first mate, Suze’s the captain. There’s many, many lines which are ropes all over the dock, the boat and you have to make sure that everything is free and clear. So the captain who never leaves the captain’s seat.

Suze: Well, there’s many things you have to do. You have to the boat, the temperatures, right? All the things I did.

KT: I forgot to take one spring line, the spring line is attached to the middle of the boat cleat and the dock and as we’re leaving, she says, ok, go, I said, free and clear Suze, you’re good to go. And I pushed the boat off the dock and all of a sudden I see one spring line. I said, wait, stop. And the boat kind of comes to this full, like a bungee cord, pulling it back.

KT: And I, I thank God if she put any power on that boat, we would have taken the dock with us. That’s enough bantering.

Suze: But the point of why I was telling you all of this is that when you’ve done something and then you don’t do it for a while. You literally forget how to do something, especially something that maybe you really loved. So therefore, I think it’s important that KT and I continue to do that on our own or even if we’re with Colo.

KT: We had a good time.

Suze: Yeah. But just to let him sit there and for us to do it. So for those of you, if ever you’re in a situation where somebody is doing something for you all the time that you used to do, you better start doing it again. All right.

KT: Yeah. You get rusty. Wait, do you want to tell everybody that this is the women Money KT and Suze? Anything and how to send in a question?

Suze: And how would they send in a question? KT tell him, girlfriend, send in an email to ask Suze – Suze podcast at gmail.com and if KT picks it, we will answer it on this podcast But right before we begin, I realized we’ve never told Colo who’s back now that we almost took the dock out.

KT: I’m not telling him.

Suze: But he listens to the podcast. Oh, sorry, Colo. Sorry Colo. All right. Go on.

KT: You better be the captain from now on. All right, this is from Josephine. My first question. Hi, Suze. Thank you for your time. My daughter just turned 18 years old this month. She’s not working and refused to go to college.

KT: She does not have debt and does not have any credit cards. Yes. She knows that she got an inheritance of $90,000 from her dad when he passed away six years ago since my daughter was a minor at that time, they could not give it to her. It was placed in a surrogate court for six years. We just got the money last week.

Suze: Stop for one second there, KT, because I just want people to take note of what you just said that her daughter got $90,000. But because she was a minor, it was put into a surrogate account because minors can’t inherit money. And that’s what I’ve been trying to tell you for all these years. So sometimes a trust is a way to get around that. All right. Go on.

KT: Ok. So mom wants to know Suze. Should I put the money in a CD? Can you advise me where I should invest my daughter’s money? My friend who is a trader is offering me to invest in an insurance account.

Suze: Of course they are. Anyway, go on KT.

KT: Ok. So I don’t think that’s a friend if they want you to invest your daughter’s money in insurance. In any event, Josephine is 59 years old. She’s a registered nurse. She has no debt. Her house is fully paid and her daughter lives with her. So she sounds like a very responsible and caring mom. What do you recommend that Josephine and her daughter do with the 90,000?

Suze: Well, your key was what you just said, you just said, what should Josephine and her daughter do? Right? So even though her daughter is only 18 years of age this month, happy birthday, Josephine’s daughter, right? She’s not working and refuses to go to college.

Suze: So this is her money, it’s going to be put into her name now. So the question becomes what’s going to stop her from taking out this money to just live on?

Suze: So that’s dangerous my dear because she doesn’t work and doesn’t want credit cards and all of that and doesn’t want to go to college. So we need to address that in a second here. Very first thing, however, is she doesn’t have any credit cards. So as somebody starts to become an adult, they absolutely need a credit score because without that, she’s not gonna be able to do mostly anything on her own.

Suze: Therefore, the first thing you should do is if you have a good FICO score, which is really anything at 760 or above, then what would be important for you is to add her name to all of your credit cards as an authorized user, then your FICO score will become her FICO score. 

Suze: But don’t tell her you did that number one and number two, don’t give her any of your credit cards. She doesn’t need them. She just needs your FICO score. Next. Should you put this money in a CD? It depends. How is she going to pay bills? I get that. She’s living at the house, but we don’t want her to think just because she has all this money now that she can just live there rent free. She doesn’t have to work if she’s not going to school, what is she going to do?

Suze:  So, what I would love to see her be able to do is to get a job that pays her at least $7000 a year. And then we would put that $7000 a year into a Roth IRA in her name.

Suze: And then we would invest it and we’ll just see if you do that and what the markets do, you can buy an index fund. There’s all kinds of things, but I’ll be telling you as time goes on more things to do with money. But that’s one thing the other thing I would do then at this point until we know what she’s going to do. I wouldn’t necessarily lock all of it up in a CD.

Suze: Maybe I would take after the $7000 but she has to earn money. Remember, so she needs that job. Maybe I would take half of it like $45,000 and lock it up in a 12 month or 18 month CD at Alliant Credit Union. That’s my alliant.com. And therefore you would lock in today’s interest rates, which are great there, go there and you’ll see so that she can’t get it. And then you would have essentially $35,000 that, you know, just, you have to put it in a money market account probably at Fidelity or Schwab in case she wants some of that money or wants to use it to maybe buy a car or something like that. But you have to sit down with her and talk to her about it, make these decisions with her since she knows she got it, you just can’t make the decisions for her.

KT: Yeah, I think the first step here is to get the daughter on board with wanting to save and secure that money. That’s the first step is like make her really want to have a little stock portfolio or a CD or investments. She needs to want that. She has to understand.

Suze: So what has to happen, KT is Josephine needs to show her daughter how much $7000 a year would be in a Roth IRA if she were able to do that, probably it would be more over all the years. But anyway, 7000 a year starting at 18 till she’s 65 is 47 years at 10 or 12% annual average rate of return, which is absolutely possible. The 12% annual average rate over 47 years, just give a guess KT, what she would have.

KT: Oh,

Suze: how much? A year? 7000 and over, well, over a million dollars,

KT: She’d have $13 million. You know, even at large,

KT: That’s, that’s almost, um, for an 18 year old. That’s almost too abstract to understand

Suze: At a 10% annual average rate tell her. It’s 6 million, but it’s still a lot of money. So we have to get her head into the money game at 18 years of age. So you will start doing that with her by, she gets to pick the stock, she gets involved with that to see how it works. And remember you’re gonna be dollar cost averaging. All right, KT.

KT: Ok. Next questions from Kim. Hi, Suze. I will be 54. I am divorced and made a career change two years ago that doubled my income. I’ve been able to save $12,000 in that time. That’s, that’s great.

KT: Which is what, which is in my bank savings account. And although this feels great, I have $0 in my 401k. My company does not match nor do I have a Roth Ira or any other investments or assets? So Kim says I don’t have credit card debt, but I owe 4000 on my car. I want to create the most security for my future, especially because of my age.

KT: So what do you recommend? Where does she begin? Probably with the 401k? Right. The Roth.

Suze: No. So given the fact that your company does not match the 401k, I don’t want you to put a penny in their 401k useless. Right. But I have a feeling you don’t make that much money where you’re over the modified adjusted gross income limit, which is $146,000 to max out a Roth IRA. So therefore, you know what I would do. Now, this is going to be interesting advice. So listen closely the $12,000 that you have in a bank savings account isn’t really making much interest for you whatsoever. So, what I would be doing is I would be taking because now that you’re over the age of 50 you could put $8000. Listen to me closely into a Roth IRA this year, I would take $8000 from the $12,000 that leaves you $4000 in there. 

Suze: Just listen closely and I would either at Schwab or Fidelity, put it into a Roth IRA. Within the Roth IRA. I would just put it in a money market account right now making about four, some odd percent interest and leave it there. So now money that’s not making any interest is gonna be making tax free interest for you. But listen, if anything goes wrong and you need that money, you can take out any money that you originally put into the Roth without any taxes or penalties whatsoever. It’s the interest that it’s earning you can’t touch.

Suze: So, if you need it, it’s still your emergency fund. But we’ve gotten it now into a Roth and we’re starting to build up a Roth as time goes on. Next, the $4000 that you have left. I would then go to my alliant.com and I would open up an ultimate opportunity savings account and I would put $100 a month in every single month. It will be earning 3.10 percent interest again. If you need it, you can get it any time you want, but it will be earning 3.10 percent interest. But at the end of those 12 months, they will give you $100. Now, we’re starting to work with your money so that it’s making interest and growing for you and taking it advantage of a Roth because you can only contribute up to a max every year in a Roth. And if things continue to go better for you, then next year we can do it again. But you still have access to that money as an emergency fund. Now, you don’t have any credit card debt, but you owe $4000 on your car.

Suze: So any extra money that you have right now, I want you to pay off the debt as soon as you can on that car. Because if I can get your expenses down now, I have more money for you to save. Those would be the things that I would have you doing at this moment in time. But next, I have to tell you, I think you’re doing just great. Oh, yeah. All right.

KT: So here’s the next question I was told that if you take money out of the market for even a short period, it can significantly impact your long term results. For example, missing just the 10 best days in the market over a 20 year period, they say can reduce your overall returns. Is that true, Suze? I mean, is that, so this question is wondering like, is it true that if you miss market days you can ruin like a huge return?

Suze: It is true. It’s true. But KT just handed me your email and it says, do you have numbers that support that they want an actual numbers. So I do have numbers. I hope I could remember these, right? But because I used to use this example just a little bit ago, um back in 2022. So I haven’t done the numbers since, you know, the end of two years ago. A good memory. But I used to when I would give a talk or a webinar, I would say if you look at a 20 year period of time, KT and it was from, I think January 1st 2003 to December 31st 2022.

Suze: And if you had just invested $10,000 in a standard and Poor’s 500 index and remained fully invested over those years, your investment would have probably grown to about $65,000 and that’s why investing is so important. However, if you missed out on just the 10 best days during that period, you would have only about $29,000. And the other thing was, but if you missed out on the 20 best days, you’d have only about $18,000. Unbelievable. So those are the things that people need to understand. You are far better off keeping your money in the market than taking it out to try to do something else with it or take a 401k loan. But I hope those numbers are correct. All right.

KT: Ok. Here’s another one that I didn’t understand. I never heard of this. Can you explain Suze? This is from Maria, what is rebalancing and whether or not it’s advisable for a 401k plan to be rebalanced. And if so how often, what does that mean?

Suze: Balances and truthfully, I think it’s what Warren Buffett just did with his Apple stock. It’s funny everybody thought, oh, Warren Buffett, the great all time investor just got rid of half of his um holding in Apple.

Suze: And everybody thought that meant, oh my God, he must not like Apple. Well, he still has 400 million shares of it and he got rid of it at $210 a share. He got rid of it at $210 a share. And right after that, it zoomed right up. So anyway, he rebalanced his portfolio in my opinion because what happens, Maria is sometimes you have a position in a mutual fund or a stock and that mutual fund or stocks skyrockets on you. And all of a sudden you may find that you have 80 or 90% of your entire portfolio in one stock because of how much it went up. 

Suze: So then a lot of people think you need to rebalance because that’s too much in one stock. So you’re too heavy in just one end and therefore you reduce that exposure and then you take that money and you buy other things with it or invest more in what you already have. So you have more of a balanced portfolio. So sometimes is that advisable? Yeah, you bet it is because the last thing you want is to be really heavy somewhere and then all of a sudden it get obliterated, which is possible.

Suze: So is it advisable? I think it’s advisable to always take a look at what you’re invested in and does it make sense for the period of the economy you’re in at that moment in time? All right.

KT: All right. Here’s another one. This is from Doctor D. I’m in my early sixties with about 1.5 million in assets. Do you think putting 250,000 in a taxable two year bond ladder is a good idea. At this point, I’m taking a sabbatical, so the taxable was recommended over tax free.

Suze: D, I don’t know truthfully why you, you have $1.5 million in assets. You wanna put $250,000 on the advice of somebody to go into a two year bond ladder, but you’re only taking a sabbatical, you’re going to go back to work.

Suze: So therefore why just a two year bond ladder? My problem with that is, is that, do you need the income from that bond ladder just to live on? Because the truth of the matter is $250,000 into a two year bond ladder might give you approximately $450 a month in income, right. That’s taxable. But do you really need that $450 a month and give up the possibility of tying up $250,000 in high yield municipal bonds if you can find them right now, so that when you go back to work, then you’ve locked in the higher interest rates of today versus what they might be two years from now. So we’re only talking about $10,000. So, if it were me, D, over a two year period of time, because obviously that might be what you’re saying.

Suze: That is, I would simply be taking $10,000 putting it in cash investing the rest in a wise way to lock up longer term interest rates. And if you’re going to do a bond ladder, you would at least be doing it out to 10 years.

Suze: Two years. Make absolutely no sense. To me. It’s a wise way, a wise way would be depending on what her income is going to be when she goes back to work. Maybe municipal bonds is a way for her to go to get tax free income. But then again, she might not even need income, then maybe she could then go into zero coupon bonds a whole another Suze School. But no, I don’t think it’s a wise thing for you to do. I think you need to look to what’s gonna happen with interest rates long term. Ok. I just did financial surgery there.

KT: You know what you need to do. You need to do a Suze School on that because it seems very confusing, taxable, nontaxable, you know, laddering bonds, coupons.

KT: Zeros sounds a little bit like my Roth friends. All right, ready. This is from Grace. Suze, I am confused about funding my living revocable trust. Can I choose not to fund my home? Am I able to choose and select what I want to fund? Do I fund my pension plan? You need to explain to grace why a living revocable trust is a benefit for all of her assets. Explain that.

Suze: Well, just very quickly, you can choose not to fund your home. Why you would choose that is beyond me.

KT: Explain why she should.

Suze: Because chances are your home is your greatest asset. And upon your death, if it’s not in a trust, then if you leave it to somebody via a will, it’s gonna have to go through probate and it will be based on your fair market value of that home, not just the equity that you have in that home. So why you would want to choose not to fund probably the most important asset is beyond me. So for all of you who don’t know, funding a living revocable trust simply means you change the title of an asset from your individual name, Suze Orman into the title of the trust, Suze Orman trustee for the Suze Orman Living revocable Trust. And it’s held for my benefit while I’m alive and my beneficiaries benefits after I have died. And then they don’t have to go through probate. But more importantly, if I become incapacitated, then within the trust, there’s an incapacity clause and a good trust that allows your successor trustee to sell it without you having to go to probate court. Be declared incompetent if you need to sell it and get a conservatorship for you.

Suze: So, yeah, you’re able to choose and select what you want to fund. Do I fund my pension? No, your pension needs to be in your individual name. All right, KT. Oh, we’re already almost at 30 minutes.

KT: I have one. I have one question I want you to answer for Christy. She has two adult Children that she wants to split her assets upon her death. One child is a special needs. So she’s saying Suze, what’s the best way to ensure they both inherit the assets you want? They have to have two different.

Suze: Yeah, it depends if your child is y has special needs and that means your child is on SSI, the best thing you could do for that child is to make sure that you have a special needs trust. So that money for this child, that money goes into that trust and then doesn’t disqualify him or her from SSI. The other one, truthfully, I don’t know the assets that you have, but the other one, you might want to have a living revocable trust that leaves the assets to your other adult child. So they don’t have to go through probate. That’s probably the best way to do. It also can just make your bank accounts and other things pay on debt. So it goes directly to the other adult child, but you absolutely need a special needs, trust for your other special needs child.

KT: Ok. I have an easy one for you, Suze from Gloria. Easy, easy, easy. Hi, Suze and KT, what is the maximum amount that FDIC insures for treasuries? Still 250,000? That’s an easy, easy one.

Suze: Quizzy. KT. That’s your quizzy.

KT: I think. Yes, I think the answer is still 250,000. (Suze makes the wrong answer noise).

KT: Well, the FDIC is bank accounts, not a treasury. Alright, there you go. But it’s 250,000 for bank accounts not for your treasury. So what is, how do you insure a treasury?

Suze: By the full faith and authority of the United States government. So when you have a treasury, we’re all wishing and hoping that the treasury can do anything they need to do, raise taxes, anything in order to pay us.

KT: Wait, I I have one more. I definitely want you to answer this one from Joseph.

KT: Good day ladies. He says quick question is a subject which is why I picked it, Suze. What are your feelings about using A I generated stock trading sites to play the market for artificial intelligence?

Suze: What is the one word, KT look at that email.

Suze: What is the one word

KT: Feeling, feeling? What are your feelings?

Suze: No, what is the one word that will set me off?

KT: Play, play, play, play. What are your feelings about playing with money, Suze?

Suze: It’s, here’s the thing.

KT: I know what she’s gonna say.

Suze: Say it then.

KT: You would probably say money isn’t something to play with, but it is something to invest.

Suze: So Joseph, I don’t like the question, you know, hey, maybe an A I generated stock trading portfolio is good and maybe it will make you money, but I am not a trader. I am an investor. There are times that I get a little speculative with money but very, very little. Right? And so the fact that you wanna be a stock trader and you want to play the market, my feelings about it is ok, but only with money you want to lose.

KT: One quick question is each CD covered by FDIC or credit union insurance. I have multiple CDS at Alliant Credit Union. A couple are over $250,000 limit. Should I use multiple credit unions to buy more? I think you, you don’t need multi credit unions, do you?

Suze: No, but what you need is different beneficiaries. So instance you could have one CD in just your name. Now you have $250,000 there. If your beneficiaries on that CD, let’s say you have two beneficiaries. Maybe it’s your spouse, maybe it’s another child. Now, you’re at $500,000 of FDIC insurance. You could actually name different beneficiaries up to $1.2 million worth of FDIC insurance. But you could have a CD. Your spouse could have a CD. If you have a spouse, you could have a joint CD each with $250,000 for each person there. 

Suze: However, you’re also your beneficiaries get $250,000. What you can do just to check it out is there are calculators that will show you. Are you insured or are you not? But I think you’re fine if you just have multiple CDs with multiple ownerships, but definitely with multiple beneficiaries and then you would be just fine. All right.

Suze: KT, do you miss your real quizzy today?

KT: No.

Suze: You’re happy.

KT: I’m happy with a half a ding, ding, ding on the, on the, on the treasury versus bank account insurance.

Suze: See, when you rub your face, I it makes you look tired. Don’t rub it.

KT: I have itchy eyes from the salt water.

Suze: All right. Do you?

KT: Yeah.

Suze: So salt water, even though you went swimming yesterday.

KT: I’m in the salt water for such a long time that I have to put drops in. So my eyes don’t get real itchy.

Suze: All right. So we’re going to go let KT put drops in her eyes so she stops itching them. But what we are also going to say to all of you until Sunday with Suze School. Are you wondering what I’m going to do?

KT: What are you going to do Sunday?

Suze: I don’t know yet. I’ll think about it.

KT: Well, Colo and I are going to be cutting trees so you better do it early, early,

Suze: Early in the morning you got it. So, anyway, until this Sunday, there’s only one thing that I want you to remember when it comes to your money. And what is it, KT?

KT: People first, then money, then things. And if you do that you will be unstoppable.

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