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Three Rules That Beat Budgeting · Suze Orman's Women & Money (And Everyone Smart Enough To Listen)

• 0:08
  KT: Hello, Suze, and good morning everyone and welcome to the
• 0:11
  KT: Women in Money podcast and everyone's smart enough to listen.
• 0:15
  KT: This is KT in the house.
• 0:18
  KT: And today is a very special day.
• 0:21
  Suze: KT. Wait, everybody gotta listen to me. So we're about
• 0:25
  Suze: to start the podcast, and I said, You wanna start?
• 0:28
  Suze: You wanna do it? And she goes, Yeah, I can
• 0:30
  Suze: do it.
• 0:30
  KT: What's wrong with that?
• 0:31
  Suze: What day is today?
• 0:33
  KT: I didn't get there yet.
• 0:34
  Suze: That's how you start.
• 0:36
  KT: No, I'm doing it KT way. Today's Thursday, January 22nd, and
• 0:41
  KT: why did I wait to give you that date? Because
• 0:44
  KT: it's Don Race's birthday.
• 0:47
  KT: And Don is our brother-in-law, the daddy of Sophia and
• 0:52
  KT: Travis that you've heard about for years, and he's on
• 0:57
  KT: his way to Oregon to carve wood. Unbelievable.
• 1:02
  Suze: You, you, you're cracking me up here already, Travis.
• 1:07
  Suze: You know that you forgot to start with January 22, 2026.
• 1:12
  KT: Here we go.
• 1:12
  Suze: No, no,
• 1:13
  KT: Today is January 22nd, 2026, the birthday of Don.
• 1:20
  Suze: No, stop, stop, stop. Anyway, Don, we wish you a very,
• 1:23
  Suze: very happy birthday. We love you so much. How old
• 1:27
  Suze: is he?
• 1:28
  Suze: We don't know.
• 1:29
  KT: I don't know. It doesn't matter.
• 1:30
  Suze: That's how much we love him, everybody. We don't even
• 1:32
  Suze: know how old he is.
• 1:33
  KT: He never looks old. He's a handsome man.
• 1:35
  Suze: Handsome man. Now this is the Ask KT and Suze
• 1:38
  Suze: Anything edition. You want to ask a question, just write
• 1:43
  Suze: in to ask Suze S U Z E podcast at gmail.com.
• 1:48
  Suze: If KT chooses it, oh, we will answer it on
• 1:52
  Suze: the podcast. I just have to say something, KT.
• 1:55
  Suze: So as you know, everybody, I read many of the emails.
• 1:59
  Suze: Sometimes I answer you directly, as you all know. So
• 2:03
  Suze: I'm reading this one email, and it says, so I
• 2:06
  Suze: asked you a question a few weeks ago. I didn't
• 2:09
  Suze: get an answer, right? How do I know what the
• 2:12
  Suze: answer to my question is and how do I know
• 2:15
  Suze: when it's gonna be on the podcast? Will you let
• 2:17
  Suze: me know?
• 2:19
  Suze: And I was like, I just wrote back one simple line.
• 2:22
  Suze: You have to listen to the podcast. Just that simple.
• 2:27
  Suze: All right, KT, go on.
• 2:29
  KT: Also, she gets thousands, thousands. Also, you're lucky if she
• 2:34
  KT: answers you. It's not something that she ever has to do.
• 2:38
  KT: She loves doing that.
• 2:40
  Suze: However, I do want to say something to a few
• 2:42
  Suze: of you. You wrote, I answered. You wrote again, and
• 2:46
  Suze: I answered.
• 2:47
  Suze: You wrote again and then I got tied up and
• 2:51
  Suze: I get distracted sometimes and whatever if I've been communicating
• 2:56
  Suze: with you and all of a sudden you don't hear
• 2:58
  Suze: from me, don't just give up write again just reply
• 3:03
  Suze: to
• 3:03
  Suze: the emails that have been coming back and forth, so
• 3:06
  Suze: it will be brought to my attention again. I go,
• 3:08
  Suze: oh yeah, yeah, yeah, yeah, so don't give up. All right,
• 3:11
  Suze: go on.
• 3:12
  KT: I'm starting with a question from Ben and I really
• 3:15
  KT: like this and I like you, Ben, for this question.
• 3:19
  KT: Hi KT and Suze, I consider myself very fortunate. I'm
• 3:24
  KT: debt free. I own my own home. I am consistently
• 3:28
  KT: dollar cost averaging into my stock portfolio. I contribute to
• 3:34
  KT: my retirement and I have accessible funds.
• 3:38
  KT: I feel like I could share some of this with
• 3:41
  KT: someone or a cause less fortunate than me, but I'm
• 3:45
  KT: unsure how to determine the right amount. Suze, is there
• 3:49
  KT: a framework or guideline for deciding what is considered an
• 3:53
  KT: appropriate or responsible gift or donation?
• 3:57
  KT: Great question.
• 3:59
  Suze: How would you answer that?
• 4:00
  KT: Do what we do, Ben.
• 4:02
  Suze: What do we do?
• 4:02
  KT: We, we have charities that we really believe in and
• 4:06
  KT: that we like. One of them is St. Jude's
• 4:08
  Suze: No, but that wasn't his question.
• 4:09
  KT: No. Well, hold on...
• 4:10
  Suze: How do you decide on a responsible amount?
• 4:12
  KT: 10% is probably a good rule of thumb, like, like
• 4:15
  KT: all the tithings that are out there.
• 4:18
  Suze: That's how you would answer this question?
• 4:21
  KT: Maybe, yea.
• 4:21
  Suze: (Suze makes the wrong answer noise)
• 4:21
  KT: OK, well...
• 4:22
  Suze: Give me this. Give me this. Just give me this
• 4:25
  Suze: before we even start. I just got to, before we
• 4:28
  Suze: even got into this podcast, I got to do my
• 4:31
  Suze: favorite thing. (Suze makes the wrong answer noise again)
• 4:34
  Suze: You hate that, don't you?
• 4:35
  KT: I do. We need a different noise.
• 4:37
  Suze: What should it be?
• 4:38
  KT: I don't know, but we don't need a negative noise
• 4:41
  KT: at this hour in the morning. Answer Ben's question.
• 4:45
  Suze: So Ben, listen to me.
• 4:47
  Suze: I'll never forget one of the Oprah shows I was doing,
• 4:52
  Suze: and there was a woman, and this is really for everybody,
• 4:55
  Suze: there was a woman who was in debt. Her car
• 4:58
  Suze: was just repossessed. She had credit card debt, but yet
• 5:04
  Suze: she was still giving 10% of her money away. I'll
• 5:08
  Suze: never forget this, and I looked at her and I said.
• 5:13
  Suze: Why would you want to make yourself a burden on God?
• 5:17
  Suze: Why would you want to do that? Because isn't it
• 5:21
  Suze: true that you're constantly praying to God and saying, God,
• 5:25
  Suze: I just wish I had some more money. And she said, Yes,
• 5:28
  Suze: I pray for that all the time. And I said,
• 5:31
  Suze: You know what, maybe God is saying to you:
• 5:35
  Suze: Listen, I'm OK right now. Maybe you could just give
• 5:38
  Suze: me 1% or $10 or whatever, but you have got
• 5:42
  Suze: to be responsible for yourself and take care of yourself first.
• 5:47
  Suze: And then I went on and I said on that
• 5:50
  Suze: Oprah show, sometimes it's harder for some people to give
• 5:54
  Suze: $1 because they don't have any than it is for
• 5:58
  Suze: some people to give $5,000 because they have so much
• 6:01
  Suze: or whatever it may be.
• 6:03
  Suze: So, Ben, you have to decide on an amount that
• 6:07
  Suze: feels responsible to what you have and really what you feel.
• 6:14
  Suze: I would tell you in terms of where you should
• 6:16
  Suze: give it, your heart will tell you.
• 6:19
  Suze: What happens with me is all of a sudden, sometimes
• 6:22
  Suze: even I'll be in the car or I'll see somebody
• 6:25
  Suze: and I'll just be compelled to give them some money.
• 6:29
  Suze: Other times it will be an organization, sometimes it will
• 6:33
  Suze: be a person
• 6:35
  Suze: who just needs help. I don't get a tax write
• 6:38
  Suze: off for it. It doesn't matter. I just want to
• 6:42
  Suze: help them because helping them makes my heart feel better.
• 6:47
  Suze: It's not about helping them gets me a tax write off.
• 6:52
  Suze: My advice to you would be there's no percentage amount
• 6:56
  Suze: that should be dictated.
• 6:58
  Suze: You know when you should give and when you don't
• 7:02
  Suze: want to give. You know who to give to if
• 7:05
  Suze: you simply follow your heart. It will lead you to
• 7:09
  Suze: the right place to donate money to. Just that simple.
• 7:13
  Suze: Next question, KT.
• 7:15
  KT: OK. Next question is from...
• 7:17
  Suze: I have a question for you.
• 7:18
  KT: Yeah.
• 7:18
  Suze: How come when I give an answer, if you disagree
• 7:21
  Suze: with it, you don't go: (and Suze makes the wrong answer noise again).
• 7:26
  KT: I am not gonna go there.
• 7:28
  Suze: Why is that?
• 7:29
  KT: This is called the Women and Money podcast. You're Suze Orman,
• 7:33
  KT: the money guru of the world, and I'm KT, and
• 7:37
  KT: I'm gonna disagree with your financial advice? No, no, no,
• 7:41
  KT: I might disagree with your emotional advice, or, but no,
• 7:46
  KT: I'm never gonna disagree with your financial advice. It's made
• 7:50
  KT: me millions of dollars.
• 7:53
  Suze: All right, here you go, KT, if you did disagree,
• 7:56
  Suze: you would...
• 7:56
  KT: I wouldn't do that noise.
• 7:58
  Suze: No, but if you did disagree.
• 8:01
  Suze: You would have, you feel like you're powerful enough that
• 8:03
  Suze: you would do so, right?
• 8:05
  Suze: Yea. Oh, I would, well, we disagree all the time
• 8:08
  Suze: off air, so why wouldn't I disagree on air?
• 8:12
  Suze: I have absolutely no idea.
• 8:13
  KT: Everybody, I, if I disagree with her, she knows. But
• 8:17
  KT: I'm not gonna disagree about money...
• 8:19
  Suze: Guess what, everybody, there is a saying in our household.
• 8:22
  Suze: What is it, KT?
• 8:23
  KT: KT is always right.
• 8:24
  Suze: Yeah, it just, oh, it irks me. Anyway, go on.
• 8:27
  KT: All right, this is from Elle.
• 8:30
  KT: Hi Suze and KT, I plan on retiring in two
• 8:34
  KT: years at 67 from the federal government. I have a
• 8:38
  KT: car that will be paid off within two years and
• 8:42
  KT: a mortgage balance of $120,000.
• 8:46
  KT: I have a modest TSP under 500,000 and is allocated 50%
• 8:54
  KT: G and 50% C. I don't know what that means, Suze,
• 8:58
  KT: so you'll have to tell us. Should I maintain
• 9:01
  KT: or change that allocation, I may withdraw $20,000 when I retire.
• 9:07
  KT: Thank you for all.
• 9:09
  Suze: Elle, first of all, you did not say if your
• 9:13
  Suze: TSP was a Roth TSP, which makes me believe it's
• 9:17
  Suze: a traditional TSP, which means it's pre-tax.
• 9:22
  Suze: So for the next two years, do you hear me,
• 9:26
  Suze: for the next two years till you are 67, every
• 9:29
  Suze: single penny that you put in to the TSP needs
• 9:34
  Suze: to be what? It needs to be a Roth TSP.
• 9:38
  Suze: That's number one. Number two, you say that you may
• 9:44
  Suze: withdraw 20,000 at retirement. Why?
• 9:49
  Suze: If you withdraw that the way you currently have it now,
• 9:52
  Suze: and even if you open up a Roth TSP it's
• 9:55
  Suze: got to be open for at least five years to
• 9:57
  Suze: take it out tax-free unless you have a Roth IRA,
• 10:02
  Suze: which I don't think you do because you didn't say
• 10:04
  Suze: you did, then you could have converted it to a
• 10:07
  Suze: Roth IRA at 67, and if you had had that
• 10:11
  Suze: open for five years, then you could have taken out
• 10:14
  Suze: the $20,000 possibly tax-free, but that's besides the point.
• 10:18
  Suze: But you want to withdraw $20,000 at retirement.
• 10:23
  Suze: And the question is: Why? Why would you do that?
• 10:28
  Suze: It's going to affect so many things. So, I want
• 10:32
  Suze: you to number one, immediately get into a Roth TSP. Also,
• 10:39
  Suze: if you're not in a very high income tax bracket
• 10:42
  Suze: or you can afford it.
• 10:44
  Suze: You might want to because you're now allowed to, as
• 10:48
  Suze: of January 28 actually, you're allowed to do in plan conversions,
• 10:53
  Suze: so you could take some of the money that's in
• 10:56
  Suze: your traditional TSP and now transfer it to a Roth
• 11:01
  Suze: TSP that wasn't allowed before January 28 of this year
• 11:06
  Suze: for the TSPs.
• 11:08
  Suze: In terms of your allocation, KT said, so what's a
• 11:11
  Suze: G and what's a C? KT, within the TSP, the
• 11:15
  Suze: Thrift Savings Plan, there are many different mutual funds or sections.
• 11:20
  Suze: The G is like the government one. It's like a
• 11:23
  Suze: money market fund. They pay you an interest rate. It
• 11:26
  Suze: doesn't fluctuate. It is good. It is solid. It's there.
• 11:30
  Suze: The C is like the Standard and Poor's 500 index,
• 11:34
  Suze: like a common stock fund.
• 11:36
  Suze: So right now, she is divided 50/50.
• 11:41
  Suze: The rule of thumb is when you retire you wanna
• 11:47
  Suze: make sure that you have at least three years of
• 11:52
  Suze: living expenses in your retirement account within a money market
• 11:57
  Suze: account or the G fund in your situation. That's because
• 12:02
  Suze: if the market starts to go down, you do not
• 12:06
  Suze: want to have to take money from a C fund
• 12:09
  Suze: or a stock fund
• 12:11
  Suze: when the market is down. So. Elle, you're gonna have
• 12:15
  Suze: to decide that you may want more if you really
• 12:19
  Suze: need money in the G fund than the C fund,
• 12:22
  Suze: just so you know.
• 12:23
  KT: Right now it's a 50/50...
• 12:25
  Suze: 50/50 split.
• 12:26
  KT: What would you recommend, 75/25?
• 12:29
  Suze: No, I wouldn't. I would either. Well, really what she
• 12:33
  Suze: needs to do is figure out what would three years
• 12:36
  Suze: of her living expenses really be. That's beyond what her
• 12:41
  Suze: pension is gonna be or her Social Security. What is
• 12:44
  Suze: that gap between her guaranteed income
• 12:47
  Suze: and what she needs for three to five years actually
• 12:50
  Suze: of living expenses and whatever that gap is that should
• 12:54
  Suze: be in the G fund or if she does an
• 12:58
  Suze: IRA rollover, a Roth IRA rollover, then that would stay
• 13:02
  Suze: in a money market fund for her wherever it is.
• 13:05
  Suze: All right, next, KT.
• 13:06
  KT: This is from Cathy. What are some instances when a
• 13:09
  KT: spouse would lose a deceased spouse's pension?
• 13:14
  Suze: Cathy, the main reason that you would lose your spouse's
• 13:21
  Suze: pension when they died is because, number one, they chose
• 13:26
  Suze: a pension that was a life only pension, which means
• 13:32
  Suze: it's good for his or her life, period. And after
• 13:36
  Suze: that there's no more money and normally one chooses that
• 13:41
  Suze: because they feel like
• 13:43
  Suze: I want more money now. We need more money. You
• 13:45
  Suze: won't need as much when I die. So the largest
• 13:48
  Suze: pension choice is life only. Then it starts to decrease
• 13:53
  Suze: when you want to leave a joint and survivor benefit.
• 13:58
  Suze: The biggest decrease is when you get a 100% joint
• 14:01
  Suze: and survivor benefit, which means spouse dies, you get 100%
• 14:07
  Suze: of what they were getting.
• 14:09
  Suze: Many people opt for a 50% joint and survivor benefit.
• 14:13
  Suze: I always say that is a serious mistake. If you
• 14:15
  Suze: have the option. I don't care how much money you
• 14:18
  Suze: have or how much money you need. Always do a 100%
• 14:24
  Suze: joint and survivor option unless you know that the spouse
• 14:28
  Suze: that you'll be leaving it to
• 14:30
  Suze: is seriously ill isn't going to survive you by any means,
• 14:34
  Suze: and you know that without a shadow of a doubt,
• 14:37
  Suze: and or they have what's called a pop up option,
• 14:40
  Suze: but that's a whole other popcast. Next, there are many
• 14:45
  Suze: pensions where you know your spouse is going to get
• 14:48
  Suze: a pension, but they haven't signed up for the pension yet,
• 14:53
  Suze: and they die before they sign up for it.
• 14:58
  Suze: There are corporations and places that one can work, that
• 15:02
  Suze: if you don't sign up for it and you die
• 15:04
  Suze: before that.
• 15:06
  Suze: Out of luck.
• 15:08
  KT: Really?
• 15:08
  Suze: Uh-huh. You gotta know these things.
• 15:09
  KT: Oh my, wait a minute, Suze, stop right there. If
• 15:13
  KT: you're working for a company and let's say you're, you've
• 15:15
  KT: been there 15 years.
• 15:18
  KT: And you never signed up or your HR people haven't really nudged you.
• 15:22
  Suze: Usually they ask you to sign up at 55 or
• 15:25
  Suze: 60 right in there somewhere just depends.
• 15:28
  KT: But if you haven't done that...
• 15:28
  Suze: If you haven't done that...
• 15:30
  KT: Your, your spouse... if you die all of a sudden
• 15:33
  KT: you have a heart attack and you die on the job,
• 15:36
  KT: let's say your spouse doesn't get a pension, if you didn't sign up?
• 15:38
  Suze: That's right. If you didn't sign up, that's why you've
• 15:41
  Suze: got to...
• 15:41
  KT: Can you dispute it?
• 15:42
  Suze: No, not if those are the rules. That's why you
• 15:44
  Suze: have to know how does it work? And if you
• 15:48
  Suze: can't sign up for a pension yet, that's when you
• 15:51
  Suze: have term life insurance to cover yourself in case that
• 15:55
  Suze: were to happen. Also, believe it or not.
• 15:59
  Suze: There are times when if it's less than a 50%
• 16:04
  Suze: joint and survivor option, the spouse has to sign off,
• 16:09
  Suze: and a lot of times the spouse doesn't listen and
• 16:11
  Suze: they just say, whatever.
• 16:14
  Suze: And you should always check what happens in case of
• 16:17
  Suze: a divorce, because sometimes that can change. So there's so
• 16:21
  Suze: many things that can happen, but the main reason is
• 16:26
  Suze: normally they've chosen a life only option which if they
• 16:31
  Suze: are married is the absolute biggest mistake
• 16:34
  Suze: that they can ever make in their lives unless their
• 16:37
  Suze: spouse is seriously ill. All right, KT, next.
• 16:40
  KT: So Suze, wait, I have a question. If the spouse
• 16:44
  KT: that's working signed off, he or she wants 100%, they
• 16:48
  KT: don't leave anything after death to their spouse...
• 16:52
  Suze: And the spouse signed off on it, yes...
• 16:53
  KT: Can they change their mind like a year later?
• 16:56
  Suze: They can't even change their mind a week later once
• 16:59
  Suze: they start the pension.
• 17:00
  KT: OK. Next question is from Peg.
• 17:03
  KT: I am 83. I have been a poor money manager
• 17:07
  KT: all my life. I've been able to make some positive change.
• 17:10
  Suze: Don't you think that's funny? Poor and money in the
• 17:13
  Suze: same breath?
• 17:14
  KT: I've been a poor money manager.
• 17:16
  Suze: But still, right? Poor money anyway. Go on.
• 17:19
  KT: So wait a minute, but here's what I love about the question.
• 17:22
  KT: This is where I, I wonder if it's ever too late, Suze.
• 17:25
  KT: I'm 83.
• 17:27
  KT: I've been a poor money manager all my life. I've
• 17:30
  KT: been able to make some positive changes in the past
• 17:33
  KT: few years. Ready? I need help getting the basics in
• 17:38
  KT: budgeting and learning not to spend. Can you help me?
• 17:43
  Suze: Girlfriend, you listen to me...
• 17:45
  KT: Wait. 83, is it ever too late?
• 17:47
  Suze: Listen to me, Peg, right? If you are now able
• 17:52
  Suze: to make good financial decisions, you don't really need help
• 17:58
  Suze: getting the basics in budgeting and learning not to spend.
• 18:02
  Suze: Right, but she says, Can I help? Here are three rules.
• 18:05
  Suze: You follow these three rules, and I promise you, you
• 18:09
  Suze: will know exactly how to budget. All right. I don't
• 18:14
  Suze: like the word budget. Budgets, KT, are like diets.
• 18:16
  KT: Wait, go tell her...
• 18:17
  Suze: But wait, do you know...
• 18:18
  KT: ...here's the three rules.
• 18:19
  Suze: Oh, all right. Anyway, I wanted to tell you why
• 18:22
  Suze: I don't like budgets, but that's besides the point.
• 18:25
  KT: No. The three rules. Go for it.
• 18:26
  Suze: Oh, she's keeping me on point today. All right.
• 18:29
  Suze: Is this: you are to live below your means but
• 18:34
  Suze: within your needs. What is a need? A need is
• 18:38
  Suze: food that you get at a grocery store. It's gasoline
• 18:43
  Suze: that you put in your car because either you, you
• 18:45
  Suze: really have to go somewhere. You don't go out joyriding,
• 18:48
  Suze: although at 83 she probably doesn't do that.
• 18:50
  KT: What is the second rule?
• 18:52
  Suze: The second rule is how do you do that?
• 18:56
  Suze: From this day forward, when you go to spend any
• 18:59
  Suze: money at all, Peg, ask yourself the question: Is this
• 19:04
  Suze: a need or is this a want? If it is
• 19:07
  Suze: a need, buy it. If it's a want, walk away.
• 19:12
  Suze: And last but not least, just get as much pleasure
• 19:15
  Suze: out of saving as you do spending. It's just that simple.
• 19:20
  KT: Now wait, this isn't just for Peg. This, these three
• 19:24
  KT: rules apply to everyone, no matter what age you are.
• 19:28
  Suze: But don't you wanna ask me why I don't like budgets?
• 19:31
  KT: No.
• 19:32
  Suze: Why not?
• 19:32
  KT: Because you, you think they're like a diet, they don't work.
• 19:35
  KT: People start it. It's a, it's a silly thing. A
• 19:38
  KT: budget isn't something people follow.
• 19:41
  Suze: All right, go on.
• 19:42
  KT: The three rules though they will follow.
• 19:45
  Suze: Ding ding ding ding ding.
• 19:48
  KT: All right, this is from, this is from Carla. She said,
• 19:51
  KT: I was blessed to be gifted your books in my
• 19:54
  KT: early 20s.
• 19:56
  KT: And took your advice to invest in index funds with
• 20:00
  KT: a low expense ratio in my first 401k. Now in
• 20:05
  KT: my forties I have 1 million plus in investments. Thank you.
• 20:10
  Suze: Hopefully in Roth's. Go on.
• 20:13
  KT: All right, everybody that we know that's under 30, listen
• 20:16
  KT: to that, right? She took Suze's advice. My parents have
• 20:20
  KT: named me executor of their will. They are in their
• 20:23
  KT: early eighties. They have a reverse
• 20:25
  KT: mortgage, a car loan on a 2025 sedan, and credit
• 20:30
  KT: card debt. I am told that when they pass to
• 20:34
  KT: turn the house and car over to the bank, there's
• 20:38
  KT: nothing left for my sister and I. Is it really
• 20:41
  KT: this simple? My parents have declared bankruptcy in the past,
• 20:46
  KT: maxed out credit cards, and buy a new car every
• 20:48
  KT: two to three years. They are disclosing little information, which
• 20:53
  KT: is why I read
• 20:55
  KT: "The Ultimate Retirement Guide for 50+" to learn more. I
• 21:00
  KT: don't want to purchase their home from the bank. I'm
• 21:03
  KT: glad they're able to supplement their income through the reverse mortgage.
• 21:07
  KT: I don't want to be on the hook for their debts.
• 21:10
  KT: Please feel free to edit my submission. I did not
• 21:14
  KT: edit this, Carla, because you need to hear Suze's advice.
• 21:19
  Suze: And so does everybody
• 21:21
  Suze: else who happens to have parents that are as irresponsible
• 21:26
  Suze: as Carla's when it comes to money and is willing
• 21:30
  Suze: to say here kids you deal with the fact that
• 21:33
  Suze: we have been financial screw ups OK just that simple
• 21:37
  Suze: and trust me there are many out there. Carla sweetheart
• 21:41
  Suze: listen to me number one.
• 21:43
  Suze: As long as you don't put your name on anything,
• 21:45
  Suze: as long as you don't say you'll take responsibility for it,
• 21:48
  Suze: you are not responsible for any credit cards that they
• 21:52
  Suze: have in their names. When they both die.
• 21:57
  Suze: Then those debts will absolutely go away. However, when one
• 22:02
  Suze: of them dies, the other is still going to be responsible,
• 22:06
  Suze: and that's what you have to think about, cause there
• 22:09
  Suze: is where we might have a problem. They're both in
• 22:12
  Suze: their 80s. Maybe one of them has a pension like
• 22:15
  Suze: your father. He dies before your mother.
• 22:20
  Suze: Now, we've lost one Social Security check, maybe we've lost
• 22:24
  Suze: a pension check, like I just talked about a few
• 22:26
  Suze: minutes ago, and now your mom
• 22:29
  Suze: or the surviving parent has less money available than they
• 22:34
  Suze: did with even more and more credit card debt and
• 22:37
  Suze: guess what now they've maxed out on their credit cards
• 22:40
  Suze: they can't get any more credit and now we have
• 22:43
  Suze: problems so you better start to find out right now
• 22:48
  Suze: what's really going on with them because it's not just
• 22:52
  Suze: what happens when they are dead.
• 22:54
  Suze: It's what happens when one of them dies, and you
• 22:58
  Suze: might want them to listen to this if you don't
• 23:00
  Suze: have the nerve to ask them for this on your own.
• 23:04
  Suze: That's number one. Number two, they have a reverse mortgage
• 23:08
  Suze: on their home.
• 23:11
  Suze: What that means is that the bank owns the house
• 23:14
  Suze: and the bank is paying them monthly every month to
• 23:18
  Suze: live in that house. Now I don't know how long
• 23:21
  Suze: that's been going on. It is possible that the bank
• 23:25
  Suze: has already paid out more than the house is worth,
• 23:30
  Suze: or maybe they haven't.
• 23:32
  Suze: But on your parents' death, what will happen is depending
• 23:38
  Suze: on how much has been taken out if they've taken
• 23:41
  Suze: out already more than the house is currently worth, the
• 23:45
  Suze: bank is just gonna take the house and you don't
• 23:46
  Suze: have to worry about it. If they haven't taken out
• 23:49
  Suze: as much as the house is worth, then you will
• 23:53
  Suze: sell the house, pay the bank back.
• 23:57
  Suze: And you get to keep the rest. I have a
• 24:00
  Suze: feeling the bank is going to get the house. As
• 24:04
  Suze: far as their car goes, the car, just call the
• 24:07
  Suze: car company up and say, hey, repossess it. It's theirs, whatever.
• 24:11
  Suze: Any car company that is stupid enough
• 24:14
  Suze: to really lend people money who have claimed bankruptcy, who
• 24:19
  Suze: have probably horrible FICO scores, all the stuff going on
• 24:23
  Suze: with your parents, fine, let them repossess the car, no
• 24:28
  Suze: big deal. I'm sure that's exactly what will happen. So
• 24:33
  Suze: the main thing, however, that I'm worried about isn't so
• 24:37
  Suze: much what happens when they've died.
• 24:40
  Suze: It's what happens as they get older and older and
• 24:44
  Suze: now all of a sudden do they need nursing care?
• 24:48
  Suze: What are they gonna need? What if they can't take
• 24:50
  Suze: care of themselves? Who's gonna be responsible for that? And
• 24:54
  Suze: is that gonna fall on you? So Carla, more than anything,
• 24:59
  Suze: don't worry about after they've died. That's not gonna be
• 25:01
  Suze: a problem.
• 25:03
  Suze: The problem becomes, what are you gonna do as they
• 25:06
  Suze: get older and older and older. They keep up these
• 25:09
  Suze: bad financial habits, they get more and more into financial trouble.
• 25:15
  Suze: Now does somebody... what happens?
• 25:17
  Suze: You need to sit down with them. You need to
• 25:19
  Suze: be an adult, and you need to say, I don't
• 25:22
  Suze: care that you don't want to talk to me about this.
• 25:25
  Suze: I need to know these things, and I want to
• 25:28
  Suze: know them now, or else, as you get older, if
• 25:32
  Suze: you need my help before you've died, I'm not going
• 25:36
  Suze: to be able to be there for you.
• 25:39
  KT: Now wait, uh, on that same note, Susie, listen to this.
• 25:44
  KT: There's always some light at the end of the tunnel.
• 25:47
  KT: Her parents, Carla's parents were 83 and a mess, but
• 25:50
  KT: listen to this. This is from Sue, who's 80 years old.
• 25:54
  KT: She said, Hi, Suze, I'm 80 years old and I
• 25:57
  KT: live in New York State. My daughter lives in Pennsylvania,
• 26:02
  KT: which I recently read has an inheritance tax of 4.5%
• 26:08
  KT: for children of the deceased. I have about 3 million
• 26:13
  KT: in a 403B which names my son a New York
• 26:17
  KT: state resident and my daughter as the beneficiaries.
• 26:22
  KT: If I am reading this correctly, is my daughter gonna
• 26:25
  KT: have to give 4.5% of my hard earned money to
• 26:30
  KT: the state of Pennsylvania? If so, how would that work
• 26:35
  KT: if she withdraws the money over 10 years, since PA
• 26:39
  KT: also says that inheritance tax payments are due on the
• 26:44
  KT: death and are delinquent after nine months.
• 26:48
  KT: Sue lives in upstate. Well, she lives in New York State.
• 26:51
  Suze: No problem, Sue. Listen to me. First of all, normally
• 26:56
  Suze: this 4.5%, which is true, applies to things like real estate,
• 27:01
  Suze: things like that. It never usually applies to a retirement account,
• 27:07
  Suze: especially because you happen to be in New York. All right, now,
• 27:11
  Suze: if you were a Pennsylvania resident, everything was there, da
• 27:14
  Suze: da da da.
• 27:15
  Suze: But even then, normally IRAs are not included in this 4.5%
• 27:22
  Suze: estate tax. All right, next.
• 27:24
  KT: But the reason I wanted you to read that is
• 27:27
  KT: here is an 80 year old that's extremely responsible.
• 27:32
  Suze: And how does that help Carla?
• 27:34
  KT: Well, the Carla, I'm just saying to everyone listening that
• 27:38
  KT: because you're in your 80s, it doesn't mean that you,
• 27:41
  KT: you know, are bad with money like Carla's parents. This
• 27:45
  KT: woman Sue is great.
• 27:50
  KT: You don't like that?
• 27:51
  Suze: Well, the reason I'm looking at you like that is KT.
• 27:55
  Suze: Most of the 80 year olds that are writing in,
• 27:59
  Suze: where they're the ones writing in.
• 28:01
  Suze: They have money. They've been listening to me for 40 years.
• 28:05
  Suze: They are, of course, are responsible. And so the real
• 28:09
  Suze: lesson there is if you start early, you'll end up
• 28:13
  Suze: with millions like most of our 80 and 70 year
• 28:16
  Suze: olds and 90 year olds have multi-millions. However, Carla is
• 28:22
  Suze: gonna end up with millions when she's in her 80s.
• 28:26
  Suze: But parents who don't listen to the Women and Money podcast,
• 28:29
  Suze: they never have. They never listened to me on CNBC
• 28:33
  Suze: or any of that.
• 28:35
  Suze: What are you gonna do? What this really shows you, everybody,
• 28:39
  Suze: is if you start early.
• 28:41
  Suze: You'll be just fine. All right, go on.
• 28:43
  KT: OK, so this last question is from Richard. I was
• 28:46
  KT: saving this for you, Suze. Ready, everyone? Richard, I'm right
• 28:52
  KT: there with you. I love this question. Suze, what is
• 28:56
  KT: a backdoor Roth and how do I do it?
• 29:01
  Suze: Do you want to answer that? Do you want that to be your pop quizzy?
• 29:03
  KT: I'll give it a shot. Let me give it a shot.
• 29:05
  Suze: Did you plant that?
• 29:07
  KT: No, I didn't plant it, but I'll give it a shot.
• 29:09
  KT: I don't, I don't maybe have the exact numbers right, but...
• 29:14
  KT: The Roth has requirements and if one doesn't meet those requirements,
• 29:20
  KT: a backdoor Roth was created for those that have a
• 29:25
  KT: traditional IRA.
• 29:28
  KT: And they have they're they're not able to open a Roth.
• 29:32
  KT: What they can do is convert the traditional IRA.
• 29:37
  Suze: No, that's not what a back door is.
• 29:40
  KT: That's why the back door is...
• 29:42
  Suze: Oh, that was such a good try.
• 29:44
  KT: Why... then why that's one of the reasons why it
• 29:47
  KT: exists so that you could actually
• 29:51
  KT: put money through the back door into a Roth.
• 29:55
  Suze: All right, but let me explain it very clearly.
• 29:57
  KT: All right, explain it better, please.
• 29:59
  Suze: That wouldn't be hard.
• 30:01
  KT: It's not nice. (KT makes the wrong answer noise)
• 30:05
  Suze: All right. Once you make too much money...
• 30:10
  KT: That's what I said.
• 30:11
  Suze: You listen to me closely...
• 30:13
  KT: But that's what I said. Everyone, OK, go ahead.
• 30:15
  Suze: They know what you said.
• 30:17
  KT: All right, go ahead. Finish.
• 30:19
  Suze: All right, she so hates being wrong. She hates...
• 30:22
  KT: No, no, no, you're gonna describe what I'm, what I
• 30:25
  KT: think I was correct...
• 30:26
  Suze: KT, can you let me do this?
• 30:28
  KT: All right, go ahead. Tell everybody what is a backdoor Roth.
• 30:32
  Suze: Obviously, there are maximum modified adjusted gross income limits that
• 30:39
  Suze: you have to be under to do what's called a
• 30:43
  Suze: contributory Roth, and a contributory Roth is where you are
• 30:49
  Suze: able to put in up to $7,500 if you are
• 30:54
  Suze: under 50 this year, $8,600 if you are 50 or older,
• 30:59
  Suze: and you can do that every year.
• 31:01
  Suze: However, you can also do what's called a conversion. Which means
• 31:07
  Suze: if you have a traditional IRA right now,
• 31:11
  Suze: an IRA that obviously you've never paid taxes on, you
• 31:15
  Suze: can convert that money regardless of your income,
• 31:20
  Suze: into a Roth IRA. You just have to do what?
• 31:25
  Suze: You have to pay taxes on the amount that you converted.
• 31:29
  Suze: But then a backdoor Roth is very, very different.
• 31:35
  Suze: A backdoor Roth is where you do not have a
• 31:40
  Suze: traditional IRA already, or a traditional SEP IRA or a
• 31:44
  Suze: simple IRA because if you do, you cannot do a
• 31:49
  Suze: backdoor Roth, because if you do a backdoor Roth, you
• 31:53
  Suze: are going to be subjected to what's known as the
• 31:56
  Suze: pro rata rule, which means you're gonna have to pay
• 31:59
  Suze: taxes on that money essentially twice.
• 32:02
  Suze: So you just don't do it. If you do not
• 32:05
  Suze: have a traditional retirement account outside of work of any kind,
• 32:12
  Suze: what you do is you open up a IRA but
• 32:17
  Suze: you make it non-deductible and you fund it with either
• 32:22
  Suze: the 7,500 this year or the 8,600 if you are
• 32:27
  Suze: 50 or older.
• 32:29
  Suze: And you then immediately convert it to a Roth IRA.
• 32:35
  Suze: So now you have gotten money into the Roth IRA
• 32:39
  Suze: through the back door, as if it's like a contributory Roth.
• 32:44
  Suze: But you cannot contribute more than 7,500 or 8,600 right
• 32:49
  Suze: now to a traditional IRA that you make non-deductible. So
• 32:54
  Suze: do you understand the difference, KT? It's not just converting
• 32:58
  Suze: money you have in a traditional.
• 33:00
  KT: I missed out on that part. You're right. The deductible and non-deductible.
• 33:05
  Suze: You got that?
• 33:06
  KT: I think so.
• 33:07
  Suze: All right.
• 33:07
  KT: I have to think about it.
• 33:09
  Suze: All right, but that's going through the back door. The
• 33:14
  Suze: key is, however, you have to make sure that you
• 33:17
  Suze: do convert it.
• 33:20
  Suze: And the reason is you want it in the Roth
• 33:22
  Suze: IRA because if it stays in the non-deductible IRA and
• 33:27
  Suze: it starts to grow, if it makes money and then
• 33:31
  Suze: you convert it, the amount of money that it's grown
• 33:34
  Suze: will be taxed to you, so there you go, but
• 33:37
  Suze: you have to be careful with it.
• 33:40
  KT: That's the part I missed.
• 33:41
  Suze: Yeah, you thought you were so smart, didn't you?
• 33:45
  KT: I didn't think I was smart. I told everyone I'm studying
• 33:47
  KT: the Roth, so I really know it, and I thought
• 33:50
  KT: that I kind of got the backdoor.
• 33:52
  Suze: We talked about this. I just wanna say this to you.
• 33:56
  Suze: I'm proud that you tried.
• 33:59
  Suze: No, I'm not kidding, KT. If you just try, eventually
• 34:04
  Suze: you will get it versus I don't know the answer.
• 34:07
  Suze: I don't know. It's a back door, side door, inside.
• 34:10
  KT: No, no, no, I wanna know the answer to everything
• 34:13
  KT: about a Roth.
• 34:14
  Suze: Tell me why you wanna know.
• 34:15
  KT: Because I should after all these years. I should, and
• 34:19
  KT: it's important that I know the difference.
• 34:21
  Suze: All right, there we go, everybody. And in the same way,
• 34:25
  Suze: KT says she should.
• 34:27
  Suze: So should you. So until Sunday, there's only one thing
• 34:32
  Suze: that we want you to remember. Number one, we want
• 34:35
  Suze: you to go to my YouTube channel, right? Youtube.com/ Suze Orman.
• 34:41
  Suze: Please subscribe because again, I am so trying to convince
• 34:45
  Suze: KT to do videos of these podcasts, but
• 34:50
  Suze: she's not quite into that yet. One day, maybe so
• 34:54
  Suze: until Sunday. There's only one thing that we want you
• 34:56
  Suze: to remember. What is that, KT?
• 34:58
  KT: People first, then money, then things, and maybe, maybe on
• 35:03
  KT: Susie's birthday we will come live on video.
• 35:08
  Suze: I doubt it highly, but especially given last Sunday's podcast,
• 35:14
  Suze: you now know why I say to all of you,
• 35:17
  Suze: now you stay safe. Bye-bye.