Podcast Summary: Suze Orman's Women & Money (And Everyone Smart Enough To Listen) Episode: Ask KT and Suze Anything: Why Buying a Condo Can End Up As Your Biggest Nightmare
Release Date: December 26, 2024
Host/Author: Suze Orman Media

In this engaging episode of Suze Orman's Women & Money podcast, Suze Orman and her co-host KT delve into a variety of listener questions, offering expert financial advice tailored to each unique situation. The episode blends personal anecdotes, financial strategies, and practical tips, ensuring listeners gain comprehensive insights into managing their finances effectively.

1. Should I Pay Off My Car Loan or Invest My Maturing CD?

Listener: Sharon
Timestamp: [04:01] - [08:13]

Sharon, a 72-year-old retiree, seeks advice on whether to use her $25,000 maturing Certificate of Deposit (CD) to pay off her car loan or invest the funds. Her current monthly auto payment is $351, and she aims to reduce her expenses to increase her savings.

Suze Orman assesses Sharon's financial situation, noting her total monthly income is $4,965 against expenses of $4,700, leaving a narrow margin of $265. After reviewing Sharon's broader financial portfolio—including a $26,000 money market fund, $40,000 Roth IRA, $70,000 IRA, $19,000 in mutual funds, and $30,000 in bonds—Orman concludes:

“If you took that $7,917 and paid it off, you'd have an additional $351 a month that you wouldn't have to pay. That's like you'd have $616 more per month than what you have in expenses now. You have more cushion and that will make you feel more secure.”
— Suze Orman [06:26]

Advice: Suze recommends using the CD funds to pay off the car loan, emphasizing the enhanced financial security and reduced monthly obligations that result from eliminating the loan.

2. Navigating the Complexities of Annuities

Listener: Janet
Timestamp: [08:50] - [18:23]

Janet, a 68-year-old retired teacher with a pension, discusses her variable and index-linked deferred annuity, which has grown from $50,000 to $68,300 over six years—a 36.6% increase. She inquires whether to cash out the annuity or transfer the funds through a brokerage firm.

Suze Orman critically evaluates annuities, highlighting their drawbacks:

“An indexed annuity is not a good investment because you only get a percentage of what the index goes up. You do not get the entire thing.”
— Suze Orman [13:33]

Orman explains the tax implications and potential penalties associated with annuities, especially if cashed out before retirement age. She advises Janet to:

“If it were me, I would surrender $9,150 right now before the end of the year, which is half of your gain. That's what I would do. And I would pay taxes on it.”
— Suze Orman [16:19]

Advice: Suze recommends partially cashing out the annuity to minimize tax liabilities and advises against holding onto annuities due to their inherent financial disadvantages.

3. Understanding FICO Scores for Home Buying

Listener: Theresa
Timestamp: [18:23] - [22:35]

Theresa expresses confusion over the different FICO score models and their relevance when purchasing a home. She mentions various score models (5, 6, 4, 7, 8, 10) and seeks clarity on which is most important.

Suze Orman demystifies the complexities of FICO scores:

“FICO score 8 is the one that's mostly widely used by creditors for general credit decisions.”
— Suze Orman [19:33]

She further explains that different FICO models are utilized by various lenders, particularly mortgage lenders who often rely on models 2, 4, and 5, which are mandated by Fannie Mae and Freddie Mac.

Advice: Suze advises aiming for a FICO score of 760 or above to secure the lowest interest rates and recommends understanding which specific FICO model lenders use during the home-buying process.

4. Evaluating Robinhood as a Brokerage Platform

Listener: Marilyn
Timestamp: [22:35] - [23:34]

Marilyn inquires about Suze Orman's opinion on the Robinhood app for buying and selling stocks, referencing past skepticism.

Suze addresses her initial reservations and acknowledges Robinhood's improvements:

“A few years ago I wanted to let you touch them with a ten-foot pole. Seriously. But they have adapted their ways and now I think they are a fine brokerage firm that you absolutely can invest in.”
— Suze Orman [23:10]

Advice: While Suze expresses initial doubts, she recognizes Robinhood's evolution and now considers it a viable option for both investment and speculative stock trading.

5. Financial Planning After Remarriage and Inheritance

Listener: Susan
Timestamp: [23:34] - [28:01]

Susan, 67, recently remarried her high school sweetheart and plans to sell an inherited house in California, expecting a profit of approximately $700,000. She seeks guidance on maintaining liquidity, ensuring asset safety, and managing investments without jeopardizing her inheritance intended for her children.

Suze Orman emphasizes the importance of maintaining asset separation to protect inheritance plans:

“You are never to put this $700,000 into his name on any level. As joint tenants, you are always to keep it in your name under your separate account.”
— Suze Orman [24:54]

Advice: Suze advises against titling the inherited funds jointly, recommending instead to keep them separate to ensure the inheritance is preserved for Susan's children. She suggests using trusts and trusts' structures to manage joint assets effectively and explores safe investment options like CDs and treasury notes for maintaining liquidity and minimizing risk.

6. Managing Condo Assessments and Delinquent Owners

Listener: Sandra
Timestamp: [28:01] - [33:40]

Sandra, a 57-year-old Miami condo owner, faces hefty special assessments totaling $42,000 due to building deterioration and a high number of delinquent owners. With $69,000 owed on her condo and only eight years until retirement, she contemplates selling her unit but is concerned about the financial implications and potential liabilities.

Suze Orman provides a comprehensive analysis:

“Given the age of your building, which is 52 years of age, it's more likely that you're going to need a lot of assessments in the future. And so it's very difficult.”
— Suze Orman [29:08]

She outlines the challenges of selling in such conditions, including the necessity to pay assessments before closing and the difficulty in attracting buyers due to the building's financial instability.

Advice: Orman recommends setting a realistic selling price that accounts for the assessments and encourages consulting financial and legal advisors. She also emphasizes the importance of attending HOA meetings to stay informed and explore all available options for managing and mitigating assessment burdens.

7. Trusts as Beneficiaries for Bank Accounts

Listener: Susanna
Timestamp: [33:40] - [35:34]

Susanna, a 51-year-old single individual with no children, questions whether she needs a secondary beneficiary when her trust is designated as the primary beneficiary for her bank and brokerage accounts.

Suze Orman advises against solely naming the trust as a beneficiary without additional provisions:

“If you die and your beneficiary happens to be the trust, no big deal, you avoided probate, so to speak. However, the problem is, what if you don't die and you're incapacitated and now it's just in your name with the beneficiary being your trust.”
— Suze Orman [35:14]

Advice: Suze recommends changing the title of the accounts to align with the trust's name rather than merely naming the trust as a beneficiary. This ensures that in the event of incapacitation, the successor trustee can manage the accounts without complications.

Conclusion and Personal Insights

Timestamp: [35:34] - [38:41]

As the episode draws to a close, Suze and KT reflect on personal memories and significant dates, including Boxing Day and the birthday of the late Jimmy Buffett. They share heartfelt anecdotes about influential teachers and express gratitude towards their listeners.

Additionally, Suze reiterates the importance of financial security and invites listeners to explore savings opportunities through Alliant Credit Union's Ultimate Opportunity Savings Account, emphasizing the benefits of consistent saving habits.

“If you are looking for a way to start saving to get the most out of your money, I want you to go to myalliant.com and look into opening an ultimate opportunity savings account. Put in at least $100 a month, every single month for 12 consecutive months, earn 3.10% interest on your money right now and get $100 at the end.”
— Suze Orman [38:04]

Key Takeaways:

• Financial Security: Prioritizing debt reduction can enhance financial stability, even if potential investment returns are slightly higher.
• Annuity Awareness: Understand the tax implications and potential penalties before investing in or cashing out annuities.
• Credit Scores: Maintain a high FICO score (760+) to secure favorable mortgage rates, and be aware of different FICO models used by lenders.
• Investment Platforms: Evaluate brokerage platforms like Robinhood based on their evolution and current offerings.
• Estate Planning: Keep inherited assets separate to protect them for intended beneficiaries, utilizing trusts effectively.
• Condo Ownership: Be proactive in managing special assessments and understand the challenges of selling properties in financially troubled buildings.
• Trust Management: Align account titles with trusts to ensure smooth management in cases of death or incapacitation.

This episode underscores Suze Orman's commitment to empowering listeners with actionable financial advice, fostering a community where women can navigate their financial journeys with confidence and clarity.