Three Rules That Beat Budgeting

Summary

Suze Orman's Women & Money (And Everyone Smart Enough To Listen)

Episode: Three Rules That Beat Budgeting

Date: January 22, 2026
Hosts: Suze Orman and KT

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Episode Overview

In this lively Ask KT & Suze Anything edition, Suze Orman and KT tackle pressing personal finance questions from listeners. The centerpiece/theme of the show is Suze’s “Three Rules That Beat Budgeting,” providing practical, easy-to-remember guidance for achieving financial well-being at any stage of life. The episode features in-depth, listener-driven advice on charitable giving, retirement account allocations, pensions, handling parents' debt, inheritance issues, and demystifying the backdoor Roth IRA—all woven with Suze and KT’s signature humor and warmth.

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Key Discussion Points & Insights

1. Giving Responsibly: How Much Is "Enough"?

[03:43–07:46]

• Listener Question: Ben, debt-free and financially comfortable, wonders how to determine a responsible amount to donate to charity.
• KT Suggests: “10% is probably a good rule of thumb, like all the tithings that are out there.” [04:43]
• Suze’s Insight: There is no magic percent. “You have got to be responsible for yourself and take care of yourself first.” She recounts an Oprah show guest who gave tithes despite being deeply in debt, and urges listeners to let their heart guide their giving, ensuring their own security first.
• Notable Quote:

  “If you simply follow your heart, it will lead you to the right place to donate money to. Just that simple.” – Suze Orman [07:40]

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2. Retirement Account Allocations: G vs. C Funds in TSP

[08:59–13:37]

• Listener Question: “L” is approaching retirement, has a TSP split 50% G fund (government, stable) and 50% C fund (stocks), and asks about the best allocation approaching retirement.
• Suze’s Rule of Thumb:
  • Ensure at least three years (preferably up to five) of living expenses (the “gap” between fixed income and needs) are in safe, stable funds (G fund or money market), not stocks.
  • Recommends starting Roth TSP contributions immediately, and, as of Jan. 28th, 2026, considering in-plan conversions of traditional TSP to Roth TSP if tax situation permits.
  • Strongly cautions against unnecessary withdrawals at retirement.
• Notable Quote:

  “If the market starts to go down, you do not want to have to take money from a C fund... when the market is down.” – Suze Orman [11:25]

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3. Pension Payout Choices and Protecting Spouses

[13:37–17:32]

• Listener Question: Kathy asks, "When would a spouse lose a deceased spouse's pension?"
• Suze’s Explanation:
  • Main reason: If the retiree chose a “life only” pension (ends at death, no survivor benefit).
  • Joint-and-survivor options (especially “100% survivor”) ensure continued payouts.
  • Warns if beneficiary paperwork isn’t completed before death, spouse could get nothing. Divorce and beneficiary designations can complicate matters.
• Notable Quote:

  “Life only [pension]... if [you] are married, is the absolute biggest mistake you can ever make in their lives unless their spouse is seriously ill.” – Suze Orman [16:12]

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4. Three Rules That Beat Budgeting

[18:15–19:52]

• Listener Question: Peg, 83, asks if it’s too late to change spending habits and requests budgeting help.
• Suze’s Three Rules:
  1. Live below your means but within your needs.
  2. Before spending, ask: Is this a need or a want? If it’s a need, buy. If it’s a want, walk away.
  3. Get as much pleasure out of saving as you do spending.
• Suze’s Philosophy: She dislikes the term “budget”; likens them to diets (“they don’t work”). The three rules provide a better, lifelong guide for spending at any age.
• Notable Quotes:

  “Budgets… are like diets. They don’t work.” – Suze Orman [18:48]
  “These three rules apply to everyone, no matter what age you are.” – KT [19:52]

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5. Handling Irresponsible Parents’ Debt & Estate

[20:03–26:11]

• Listener Question: Carla, executor for financially reckless parents with a reverse mortgage, car loan, and credit card debt, asks if she’ll inherit these burdens.
• Suze’s Guidance:
  • Carla and her sister are not liable for their parents’ debts, as long as they haven’t co-signed or agreed to be responsible.
  • Warns that the real issue isn’t what happens after both parents die—it’s the financial strain and care needs if only one parent remains, losing income but retaining debt.
  • Recommends a frank conversation with parents about their true situation, especially if future care might fall to the children.
• Notable Quote:

  “Don’t worry about after they’ve died. The problem becomes what are you going to do as they get older and…keep up these bad financial habits.” – Suze Orman [25:20]

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6. Inheritance Taxes on Retirement Accounts

[26:11–28:04]

• Listener Question: Sue wonders if Pennsylvania’s inheritance tax applies to her out-of-state daughter inheriting her $3M 403b.
• Suze’s Clarification:
  • “Normally this 4.5%... applies to things like real estate, things like that. It never usually applies to a retirement account, especially because you happen to be in New York.” [27:23]
• Teachable Moment: Sue is commended for her responsibility; contrasts with Carla’s parents, emphasizing the value of financial education across generations.

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7. Demystifying the Backdoor Roth IRA

[29:15–34:41]

• Listener Question: Richard asks, “What is a backdoor Roth and how do I do it?”
• KT’s Attempt: Gives a partially correct answer about Roth eligibility and conversions.
• Suze’s Detailed Explanation:
  • If you earn above Roth IRA limits and have no existing traditional IRA, you may make a non-deductible IRA contribution and immediately convert it to a Roth IRA (the “backdoor”).
  • If you already have a traditional IRA, complexities arise (pro-rata rule), possibly resulting in double taxation.
  • Must convert prompt to avoid growth being taxed later.
• Notable Quotes:

  “A backdoor Roth is where you do not have a traditional IRA already… what you do is you open up an IRA, make it non-deductible, and immediately convert it to a Roth IRA.” – Suze Orman [32:30]
  “If you just try, eventually you will get it… So should you. So until Sunday, there’s only one thing we want you to remember…” – Suze Orman [34:23]

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Notable Quotes & Memorable Moments

• Follow your heart in giving: “If you simply follow your heart, it will lead you to the right place to donate money to. Just that simple.” – Suze Orman [07:40]
• On budgeting: “Budgets are like diets. They don’t work.” – Suze Orman [18:48]
• On pensions: “Life only [pension]... is the absolute biggest mistake you can ever make...” – Suze Orman [16:12]
• On backdoor Roths: “A backdoor Roth is where you do not have a traditional IRA already... you open up [a] non-deductible IRA and immediately convert it.” – Suze Orman [32:30]
• Generational differences: “What this really shows you… is if you start early, you’ll be just fine.” – Suze Orman [29:00]

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Timestamps for Important Segments

| Timestamp | Segment | |------------|-----------------------------------------------------------------| | 03:43 | Charitable giving – how much is “enough?” (Ben’s question) | | 08:59 | TSP allocations & Roth conversions (L’s question) | | 13:37 | Pension payout choices & spousal risk (Kathy’s question) | | 18:15 | Three Rules That Beat Budgeting (Peg’s question) | | 20:03 | Dealing with parents’ debt and inheritance (Carla’s question) | | 26:11 | Inheritance tax on retirement accounts (Sue’s question) | | 29:15 | Backdoor Roth IRA explained (Richard’s question) | | 34:41 | Encouragement to keep learning; episode wrap-up |

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Episode Tone & Style

• Conversational, warm, supportive, and often humorous, particularly in Suze and KT’s banter.
• Suze combines tough love and reassurance, making complex financial topics approachable.
• KT adds relatability, sometimes playing the role of the non-expert learning alongside listeners.

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Summary Takeaway

This episode distills financial wisdom down to core principles: act from a place of self-care with giving, ensure safety with your retirement and pensions, don’t worry about budgeting—follow Suze’s three timeless rules instead—and always keep learning. No matter your age or circumstance, it’s (never) too late to make good financial choices.

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Signature Sendoff:

“People first. Then money. Then things.” – Suze Orman & KT [35:29]

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Transcript

[Suze Orman]

Hi, everybody. Suzio here. Now, what is the goal of money? The goal of money is for you to be secure. And there is no better way for you to be secure than having an emergency savings account. It is essential for your financial foundation. So all of you should be participating in the ultimate opportunity savings account at Alliant Credit Union. Go to myalliant.com to find out more. And be secure.

[KT]

Hello, Susie, and good morning, everyone, and welcome to the Women and Money podcast. And everyone smart enough to listen, this is KT in the house. And today is a very special day.

[Suze Orman]

Kt, wait. Everybody gotta listen to me. So we're about to start the podcast and I said, you want to start? You want to do it? And she goes, yeah, I can do it.

[KT]

What's wrong with that?

[Suze Orman]

What day is today?

[KT]

I didn't get there yet.

[Suze Orman]

No, Thursday. How you start?

[KT]

No, I'm doing it KT way. Today's Thursday, January 22nd. And why did I wait to give you that date? Because it's Don Race's birthday and Don is our brother in law, the daddy of Sophia and Travis that you've heard about for years, and he's on his way to Oregon to. To carve wood. Unbelievable.

[Suze Orman]

You, you. You're cracking me up here already. Travis, you know that you forgot to start with January 22, 2020.

[KT]

Ready? Here we go.

[Suze Orman]

No, no, you.

[KT]

Today is January 22, 2026, the birthday of Don.

[Suze Orman]

No, stop, stop, stop. Anyway, Don, we wish you a very, very happy birthday. We love you so much. So much. How old is he? We don't know.

[KT]

I don't know. It doesn't matter.

[Suze Orman]

That's how much we love him, everybody. We don't even know.

[KT]

He never looks old. He's a handsome man.

[Suze Orman]

Handsome man. Now this is the Ask KT and Susie Anything edition. You want to ask a question, just write into Ask Susie S u z e podcastmail.com if KT chooses it. Oh, we will answer it on the podcast. I just have to say something, kt. So, as you know, everybody, I read many of the emails. Sometimes I answer you directly, as you all know. So I'm reading this one email and it says, So I asked you a question a few weeks ago. I didn't get an answer. How do I know what the answer to my question is? And how do I know when it's going to be on the podcast? Will you let me know? And I was like, I just wrote back one simple line. You have to listen to the podcast. Just that simple.

[KT]

All right, Katie, go on Also, she gets thousands, thousands. So you're lucky if she answers you. It's not something that she ever has to do. She loves doing that.

[Suze Orman]

However, I do want to say something to a few of you. You wrote, I answered. You wrote again. And I answered, you wrote again. And then I got tied up and I get distracted sometimes and whatever. If I've been communicating with you and all of a sudden you don't hear from me, don't just give up, write again. Just reply to the emails that have been coming back and forth. So it will be brought to my attention again. I go, oh, yeah, yeah, yeah, yeah. So don't give up. All right, go on.

[KT]

I'm starting with a question from Ben, and I really like this, and I like you, Ben, for this question. Hi, KT and Susie. I consider myself very fortunate. I'm debt free. I own my own home. I am consistently dollar cost averaging into my stock portfolio. I contribute to my retirement and I have accessible funds. I feel like I could share some of this with someone or a cause less fortunate than me, but I'm unsure how to determine the right amount. Susie, is there a framework or guideline for deciding what is considered an appropr or responsible gift or donation? Great question.

[Suze Orman]

How would you answer that?

[KT]

Do what we do, Ben.

[Suze Orman]

What do we do?

[KT]

We, we have charities that we really believe in and that we like. One of them is St. Jude's no.

[Suze Orman]

But that wasn't his question.

[KT]

No. Well, hold on.

[Suze Orman]

How do you decide on a response?

[KT]

10% is a probably a good rule of thumb. Like, like all the tidings that are out there.

[Suze Orman]

That's how you would answer this question?

[KT]

Yeah. Okay, well, first, give me this.

[Suze Orman]

Give me this. Just give me this. Before we even start, I just got to, before we even got into this podcast, I got to do my favorite thing. You hate that, don't you?

[KT]

I do. We need a different noise.

[Suze Orman]

What should it be?

[KT]

I don't know. But we don't need a negative noise at this hour in the morning. Answer Ben's question.

[Suze Orman]

So, Ben, listen to me. I'll never forget one of the Oprah shows I was doing and there was a woman, and this is really for everybody. There was a woman who was in debt. Her car was just repossessed. She had credit card debt, but yet she was still giving 10% of her money away. I'll never forget this. And I looked at her and I said, why would you want to make yourself a burden on God? Why would you want to do that? Because isn't it True that you're constantly praying to God and saying, God, I just wish I had some more money. And she said, yes, I pray for that all the time. And I said, you know what? Maybe God is saying to you, listen, I'm okay right now. Maybe you could just give me 1% or $10 or whatever. But you have got to to be responsible for yourself and take care of yourself first. And then I went on and I said on that Oprah show, sometimes it's harder for some people to give $1 because they don't have any than it is for some people to give $5,000 because they have so much or whatever it may be. So, Ben, you have to decide on an amount that feels responsible to what you have and really what you feel. I would tell you in terms of where you should give it, your heart will tell you. What happens with me is all of a sudden, sometimes even I'll be in the car or I'll see somebody and I'll just be compelled to give them some money. Other times it will be an organization. Sometimes it will be a person who just needs help. I don't get a tax write off for it. It doesn't matter. I just want to help them because helping them makes my heart feel better. It's not about helping them. Gets me a tax write off. My advice to you would be there's no percentage amount that should be dictated. You know, when you should give and when you don't want to give. You know who to give to. If you simply follow your heart, it will lead you to the right place to donate money to. Just that simple. Next question, Katie.

[KT]

Okay, next question is from.

[Suze Orman]

I have a question for you.

[KT]

Yeah.

[Suze Orman]

How come when I give an answer, if you disagree with it, you don't go?

[KT]

I am not going to go there.

[Suze Orman]

Why is that?

[KT]

This is called the Women and Money podcast. You're Suze Orman, the money guru of the world, and I'm kt And I'm going to disagree with your financial advice sometimes. No, no, no. I might disagree with your emotional advice or. But no, I'm never going to disagree with your financial advice. It's made me millions of dollars.

[Suze Orman]

All right, go on. All right, here you go. But, kt, if you did disagree, you would have power.

[KT]

I wouldn't do that noise.

[Suze Orman]

No, but if you did disagree, you would have. You feel like you're powerful enough that you would do so, right?

[KT]

Yeah.

[Suze Orman]

All right.

[KT]

Oh, I would. We disagree all the time off air. So why wouldn't I disagree on air?

[Suze Orman]

I Have absolutely no idea.

[KT]

All right, everybody. If I disagree with her, she knows, Guess what? But I'm not gonna disagree.

[Suze Orman]

But guess what, everybody. There is a saying in our household. What is it? KT.

[KT]

KT's always right.

[Suze Orman]

Yeah, it just.

[KT]

That's.

[Suze Orman]

It irks me. Anyway, go on.

[KT]

All right. This is from L. Hi, Susie and KT. I plan on retiring in two years at 67. From the federal government. I have a car that will be paid off within two years and a mortgage balance of $120,000. I have a modest tsp under 500,000 and is allocated 50% g and 50% c. Yeah, I don't know what that means. Tell us, should I maintain or change that allocation, I may withdraw $20,000 when I retire. Thank you for all.

[Suze Orman]

Elle. First of all, you did not say if your TSP was a Roth tsp, which makes me believe it's a traditional tsp, which means it's pre Roth tax. So for the next two years, do you hear me? For the next two years till you are 67, every single penny that you put in to the TSP needs to be what it needs to be a Roth tsp. That's number one. Number two, you say that you may withdraw 20,000 at retirement. Why? If you withdraw that the way you currently have it now, and even if you open up a Roth tsp, it's got to be open for at least five years to take it out tax free. Unless you have a Roth ira, which I don't think you do because you didn't say you did, then you could have converted it to a Roth IRA at 67. And if you had had that open for five years, then you could have taken out the $20,000, possibly tax free. But that's besides the point. But you want to withdraw $20,000 at retirement. And the question is why? Why would you do that? It's going to affect so many things. So I want you to, number one, immediately get in to a Roth tsp. Also, if you're not in a very high income tax bracket or you can afford it, you might want to, because you're now allowed to, as of January 28th, actually, you're allowed to do in plan conversions. So you could take some of the money that's in your traditional TSP and now transfer it to a Roth TSP. That wasn't allowed before January 28th of this year for the TSPs. In terms of your allocation. KT said, so what's a G and what's a C? KT within the TSP, the thrift savings Plan. There are many different mutual funds or sections. The G is like the government one. It's like a money market fund. They pay you an interest rate. It doesn't fluctuate. It is good, it is solid, it's there. The C is like the Standard and Poor's, the 500 index, like a common stock fund. So right now she is divided 50, 50. The rule of thumb is when you retire, you want to make sure that you have at least three years of living expenses in your retirement account within a money market account or the G fund in your situation. That's because if the market starts to go down, you do not want to have to take money from a C fund or a stock fund when the market is down. So, Elle, you're going to have to decide that you may want more if you really need money in the G fund than the C fund.

[KT]

Just because right now it's a 50, 50 split.

[Suze Orman]

50, 50 split.

[KT]

So what would you recommend? 75, 25?

[Suze Orman]

No, I wouldn't. I would either. Well, really what she needs to do is figure out what would three years of her living expenses really be that's beyond what her pension is going to be or her Social Security. What is that gap between her guaranteed income and what she needs for three to five years actually of living expenses? And whatever that gap is that should be in the G fund or if she does an IRA rollover, a Roth IRA rollover, then that would stay in a money market fund for her, wherever it is. All right, next.

[KT]

Kt this is from Kathy. What are some instances when a spouse would lose a deceased spouse's pension?

[Suze Orman]

Kathy, the main reason that you would lose your spouse's pension when they died is because, number one, they chose a pension that was a life only pension, which means it's good for his or her life, period. And after that there's no more money. And normally one chooses that because they feel like, I want more money now we need more money. You won't need as much when I die. So the largest pension choice is life. Only then it starts to decrease. When you want to leave a joint and survivor benefit, the biggest decrease is when you get 100% joint and Survivor benefit, which means spouse dies, you get 100% of what they were getting. Many people opt for a 50% joint and Survivor benefit. I always say that is a serious mistake. If you have the option, I don't care how much money you have or how much money you need, always do 100% joint and Survivor option. Unless you know that the spouse that you'll be leaving it to is seriously ill, isn't going to survive you by any means. And you know that without a shadow of a doubt. And. Or they have what's called a pop up option, but that's a whole other podcast. Next. There are many pensions where you know your spouse is going to get a pension but they haven't signed up for the pension yet and they die before they sign up for it. There are corporations and places that one can work that if you don't sign up for it and you die before that, out of luck really. Uh huh. You got to know these things.

[KT]

Wait a minute, Susie, stop right there.

[Suze Orman]

Yeah.

[KT]

If you're working for a company and let's say you're, you've been there 15 years and you never signed up or your HR people haven't really, usually they.

[Suze Orman]

Ask you to sign up at 55 or 60 right in there somewhere. Just depends.

[KT]

But if you haven't done that, if.

[Suze Orman]

You haven't done that, you can use.

[KT]

Your, if you die all of a sudden you have a heart attack and you die on the job. Let's say your spouse doesn't get a pension if you didn't sign up.

[Suze Orman]

If you didn't sign up, that's why you've got it.

[KT]

Did you dispute it?

[Suze Orman]

No, not if those are the rules. That's why you have to know how does it work. And if you can't sign up for a pension yet, that's when you have term life insurance to cover yourself in case that were to happen. Also, believe it or not, there are times when if it's less than a 50% joint and Survivor option, the spouse has to sign off. And a lot of times the spouse doesn't listen and they just say whatever. And you should always check what happens in case of a divorce because sometimes that can change. So there's so many things that can happen, but the main reason is normally they've chosen a life only option which if they are married, is the absolute biggest mistake that they can ever make in their lives unless their spouse is seriously ill. All right, KT next.

[KT]

So Susie, wait. I have a question.

[Suze Orman]

Yes.

[KT]

If the spouse that's working signed off, he or she wants 100%, they don't leave anything after death to their spouse.

[Suze Orman]

And the spouse signed off on it. Yes.

[KT]

Can they change their mind like a year later?

[Suze Orman]

They can't even change their mind a week later once they start the pension.

[KT]

Okay, next question is from peg. I am 83, I have been A poor money manager all my life. I've been able to make some positive changes.

[Suze Orman]

Wait, don't you think that's funny? Poor and money in the same.

[KT]

I've been a poor money manager, but still.

[Suze Orman]

Right. Poor money. Anyway, go on.

[KT]

So wait a minute. But here's what I love about the question. This is where I wonder if it's ever too late. Susie, I'm 83.

[Suze Orman]

Yeah, baby. Yeah, baby.

[KT]

I've been a poor money manager all my life. I've been able to make some positive changes in the past few years. Ready? I need help getting the basics in budgeting and learning not to spend. Can you help me?

[Suze Orman]

Girlfriend, you listen to me.

[KT]

So wait, 83. Is it ever too late?

[Suze Orman]

No, listen to me, Peg, right? If you are now able to make good financial decisions, you don't really need help getting the basics in budgeting and learning not to spend, Right? But she says, can I help? Here are three rules. You follow these three rules and I promise you, you will know exactly how to budget. All right. In fact, I don't like the word budget. Budgets, KT are like diets. Wait.

[KT]

Go tell her the.

[Suze Orman]

But wait. Do you know.

[KT]

Here's the three rules.

[Suze Orman]

Oh, all right. Anyway, I wanted to tell you why I don't like budgets.

[KT]

But that's because the point three rules go for.

[Suze Orman]

Oh, she's keeping me on point today. All right, is this. You are to live below your means, but within your needs. What is a need? A need is food that you get at a grocery store. It's gasoline that you put in your car. Because either you really have to go somewhere, you don't go out joyriding. Although at 83, she probably doesn't do that.

[KT]

What's the second rule?

[Suze Orman]

Right. The second rule is, how do you do that? From this day forward, when you go to spend any money at all, Peggy, ask yourself the question, is this a need or is this a want? If it is a need, buy it. If it's a want, walk away. And last but not least, just get as much pleasure out of saving as you do spending. It's just that simple.

[KT]

Now, wait, this isn't just for Peg. These three rules apply to everyone, no matter what age you are.

[Suze Orman]

But don't you want to ask me why I don't like budgets?

[KT]

No.

[Suze Orman]

Why not?

[KT]

Because you think they're like a diet. They don't work. People started it. It's a silly thing. A budget isn't something people follow. I go on the three rules they will follow. All right, this is from this Is from Carla. She said I was blessed to be gifted your books in my early 20s and took your advice to invest in index funds with a low expense ratio in my first 401k. Now in my 40s, I have 1 million plus in investments. Thank you.

[Suze Orman]

Hopefully in Roths. Go on.

[KT]

All right, everybody that we know that's under 30, listen to that, right? She took Susie's advice. My parents have named me executor of their will. They are in their early 80s. They have a reverse mortgage, a car loan on a 2025 sedan, and credit card debt. I am told that when they pass to turn the house and car over to the bank, there's nothing left for my sister and I. Is it really this simple? My parents have declared bankruptcy in the past, maxed out credit cards and buy a new car every two to three years. They are disclosing little information, which is why I read the ultimate retirement guide for 50 plus to learn more. I don't want to purchase their home from the bank. I'm glad they're able to supplement their income through the reverse mortgage. I don't want to be on the hook for their debts. Please feel free to edit my submission. I did not edit this, Carla, because you need to hear Susie's advice and.

[Suze Orman]

So does everybody else who happens to have parents that are as irresponsible as Carla's when it comes to money and is willing to say, here kids, you deal with the fact that we have been financial screw ups, okay? Just that simple. And trust me, there are many out there. Carla, sweetheart, listen to me. Number one, as long as you don't put your name on anything, as long as you don't say you'll take responsibility for it, you are not responsible for any credit card that they have in their names. When they both die, then those debts will absolutely go away. However, when one of them dies, the other is still going to be responsible. And that's what you have to think about because there is where we might have a problem. They're both in their 80s. Maybe one of them has a pension like your father. He dies before your mother. Now we've lost one Social Security check. Maybe we've lost a pension check like I just talked about a few minutes ago. And now your mom or the surviving parent has less money available than they did with even more and more credit card debt. And guess what? Now they've maxed out on their credit cards, they can't get any more credit and now we have problems. So you better start to find out right now, what's really going on with them, because it's not just what happens when they are dead, it's what happens when one of them dies. And you might want them to listen to this if you don't have the nerve to ask them for this on your own. That's number one. Number two, they have a reverse mortgage on their home. What that means is that the bank owns the house and the bank is paying them monthly, every month to live in that house. Now I don't know how long that's been going on. It is possible that the bank has already paid out more than the house is worth, or maybe they haven't. But on your parents death, what will happen is depending on how much has been taken out, if they've taken out already more than the house is currently worth, the bank is just going to take the house and you don't have to worry about it. If they haven't taken out as much as the house is worth, then you will sell the house, pay the bank back and you get to keep the rest. I have a feeling the bank is going to get the house. As far as their car goes. The car, just call the car company up and say, hey, repossess it, it's theirs, whatever. Any car company that is stupid enough to really lend people money, who have claimed bankruptcy, who have probably horrible FICO scores, all the stuff going on with your parents, fine, let them repossess the car. No big deal. I'm sure that's exactly what will happen. So the main thing, however, that I'm worried about isn't so much what happens when they've died, it's what happens as they get older and older. Now all of a sudden, do they need nursing care? What are they going to need? What if they can't take care of themselves? Who's going to be responsible for that? And is that going to fall on you? So Carla, more than anything, don't worry about after they've died. That's not going to be a problem. The problem becomes what are you going to do? As they get older and older and older, they keep up these bad financial habits. They get more and more into financial trouble. Now does somebody, what happens? You need to sit down with them, you need to be an adult and you need to say, I don't care that you don't want to talk to me about this. I need to, to know these things and I want to know them now. Or else as you get older, if you need my help before you've died, I'm not Going to be able to be there for you.

[KT]

Now, wait on that same note, Susie, listen to this. There's always some light at the end of the tunnel. Her parents, carla's parents were 83 and a mess. But listen to this. This is from sue, who's 80 years old. She said, hi, Susie, I'm 80 years old and I live in New York State. My daughter lives in Pennsylvania, which I recently read has an inheritance tax of 4.5% for children of the deceased. I have about 3 million in a 403B which names my son a New York state resident and my daughter as the beneficiaries. If I am reading this correctly, is my daughter going to have to give 4.5% of my hard earned money to the state of Pennsylvania? If so, how would that work if she withdraws the money over 10 years since Pa also says that inheritance tax payments are due on the death and are delinquent after nine months.

[Suze Orman]

Who live?

[KT]

Sue lives in upstate. Well, she lives in New York State.

[Suze Orman]

No problem. Sue, listen to me. First of all, normally this 4.5%, which is true, applies to things like real estate, things like that. It never usually applies to a retirement account, especially because you happen to be in New York. All right, now if you were a Pennsylvania resident, everything was there, da, da, da, da. But Even then, normally IRAs are not included in this 4.5% estate tax. All right, next.

[KT]

But the reason I wanted you to read that is here is an 80 year old that's extremely responsible.

[Suze Orman]

And how does that help Carla?

[KT]

Well, Carla, I'm just saying to everyone listening that because you're in your 80s, it doesn't mean that you are bad with money like Carla's parents. This woman sue is great. You don't like that.

[Suze Orman]

The reason I'm looking at you like that is KT, most of the 80 year olds that are writing in, where they're the ones writing in, they have money. They've been listening to me for 40 years. They are of course are responsible. And so the real lesson there is if you start early, you'll end up with millions. Like Most of our 80 and 70 year olds and 90 year olds have multi millions. However, Carla is going to end up with millions when she's in her 80s. But parents who don't listen to the Women and Money podcast, they never have. They never listened to me on CNBC or any of that. What are you going to do? What this really shows you, everybody is if you start early, you'll be just fine. All right, go on.

[KT]

Okay, so this last question is from Richard. I was saving this for you, Susie. Ready, everyone? Richard, I'm right there with you. I love this question, Susie. What is a backdoor Roth, and how do I do it?

[Suze Orman]

Do you want to answer that? Do you want that to be?

[KT]

I'll give it a shot. Let me give it a shot.

[Suze Orman]

Did you plant that?

[KT]

No, I didn't plant it, but I'll give it a shot.

[Suze Orman]

Little.

[KT]

I don't. I don't maybe have the exact numbers right, but the Roth has requirements, and if one doesn't meet those requirements, a backdoor Roth was created for those that have a traditional ira, and they have. They're not able to open a Roth. What they can do is convert the traditional ira.

[Suze Orman]

No, that's not what a back door is.

[KT]

That's why the back door is.

[Suze Orman]

Oh, that was such a good trap then.

[KT]

Why. That's one of the reasons why it exists, so that you could actually put money through the back door into a rock.

[Suze Orman]

All right, but let me explain it very clearly.

[KT]

All right? Explain it better, please.

[Suze Orman]

That wouldn't be harder.

[KT]

It's not nice.

[Suze Orman]

All right, Once you make too much money.

[KT]

That's what I said.

[Suze Orman]

You listen to me closely.

[KT]

But that's what I said, everyone. Okay, go ahead.

[Suze Orman]

They know what you said.

[KT]

All right, go ahead, finish.

[Suze Orman]

All right. She so hates being wrong. She hates.

[KT]

No, no, no. You're gonna describe what I. What? I think I was correct.

[Suze Orman]

Katie, can you let me do this?

[KT]

All right, go ahead. Tell everybody. What is a backdoor wrong.

[Suze Orman]

Right. So obviously, there are maximum modified adjusted gross income limits that you have to be under to do what's called a contributory Roth. And a contributory Roth is where you are able to put in up to $7,500 if you are under 50 this year, $8,600 if you are 50 or older. And you can do that every year. However, you can also do what's called a conversion, which means if you have a traditional IRA right now, an IRA that obviously you've never paid taxes on, you can convert that money, regardless of your income, into a Roth ira. You just have to do what you have to pay taxes on the amount that you converted. But then a backdoor Roth is very, very different. A backdoor Roth is where you do not have a traditional IRA already or a traditional SEP ira, or a simple ira, because if you do, you cannot do a backdoor Roth, because if you do a backdoor Roth, you are going to be subjected to what's known as the pro RATA rule, which is. Which means you're going to have to pay taxes on that money essentially twice. So you just don't do it. If you do not have a traditional retirement account outside of work of any kind, what you do is you open up ira, but you make it non deductible, and you fund it with either the 7500 this year or the 8600 if you are 50 or older. And you then immediately convert it to a Roth ira. So now you have gotten money into the Roth IRA through the back door, as if it's like a contributory Roth, but you cannot contribute more than 7,500 or 8,600 right now to a traditional IRA that you make non deductible deductible. So do you understand the difference, kt? It's not just converting money you have in a traditional.

[KT]

I missed out on that part. You're right. The deductible and non deductible.

[Suze Orman]

Okay, you got that?

[KT]

I think so. All right. I have to think about it.

[Suze Orman]

All right, but that's going through the back door. The key is, however, you have to make sure that you do convert it. And the reason is you want it in the Roth ira, because if it stays in the non deductible IRA and it starts to grow, if it makes money and then you convert it, the amount of money that it's grown will be taxed to you. So there you go. But you have to be careful with it.

[KT]

That's the part I missed.

[Suze Orman]

Yeah. You thought you were so smart.

[KT]

No, I do think I was smart when I told everyone I'm studying the Roth. So I really know it. And I thought that I kind of got.

[Suze Orman]

All right, stop, stop. We talked about this. I just want to say this to you. I'm proud that you tried. No, I'm not kidding, kt. If you just try, eventually you will get it. Versus, I don't know the answer. I don't know, is it back door, side or inside this?

[KT]

No, no, no. I want to know the answer to everything about a Roth.

[Suze Orman]

Tell me why you want to know.

[KT]

Because I should. After all these years, I should. And it's important that I know the difference.

[Suze Orman]

All right, there we go, everybody. And in the same way KT says she should, so should you. So until Sunday, there's only one thing that we want you to remember. Number one, we want you to go to my YouTube channel, YouTube.com Susie Orman. Please subscribe because again, I am so trying to convince KT to do videos of these podcast, but she's not quite into that yet. One day maybe. So until Sunday, there's only one thing that we want you to remember. What is that?

[KT]

KT People first. Then money, then things. And maybe maybe on Susie's birthday we will come live on video.

[Suze Orman]

I doubt it highly but especially given last Sunday's podcast. You. You now know why I say to all of you now you stay safe. Bye Bye.

[Podcast Chorus/Group]

We are strong we are wise we will not apologize we are here we will thrive Together we will rise we're the little bit of faith and everything it takes we are strong we always together we will rise.

[Suze Orman]

Hi everybody. Suzy O here and I have to tell all of you there is one benefit that I know all of you need and your corporations need to offer. And it comes from a company that I helped co found over 5 years ago by the name of Secure Save. So whether you're an employee or an employer, I want you to go to securesave.com Suzie S U Z E and take a look at what I have for you there. I promise you you're gonna like it.

[Podcast Disclaimer Narrator]

All right now, neither Suze Orman Media nor Suze Orman is acting as a certified Financial Planner Advisor, a certified Financial Analyst, an economist, cpa, accountant or lawyer. Neither Suze Orman Media nor Suze Orman make any recommendations as to any specific securities or investments. All content contained in this podcast is for informational and general purposes only and does not constitute financial accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any losses which may arise from accessing or reliance on information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss damages, direct or indirect, arising from the use of this information. The must have documents discussed in this podcast are legal documents created by a lawyer and distributed by Hay House. Thanks for listening.