Suze Orman's Women & Money (And Everyone Smart Enough To Listen)
Suze School: Financial Solutions if You’ve Lost Your Job
Sun, 23 Feb 2025
Do you know how you will pay your mortgage, buy food and handle your other must pay expenses, if you lose your job? Make sure you have your Suze notebooks with you for this episode, as Suze gives you all the steps to take so you can survive and rise through this painful situation. Jumpstart financial wellness for your employees: https://bit.ly/SecureSave Protect your financial future with the Must Have Docs: https://bit.ly/3Vq1V3GGet your savings going with Alliant Credit Union: https://bit.ly/3rg0YioGet Suze’s special offers for podcast listeners at suzeorman.com/offerJoin Suze’s Women & Money Community for FREE and ASK SUZE your questions which may just end up on the podcast. Download the app by following one of these links: CLICK HERE FOR APPLE: https://apple.co/2KcAHbH CLICK HERE FOR GOOGLE PLAY: https://bit.ly/3curfMISee omnystudio.com/listener for privacy information.
Chapter 1: What financial advice does Suze give for current interest rates?
All right, listen up to me, everybody. Interest rates are not going to last. They're going down, down, down, down, down. So I want you to take advantage of the 12 to 17 month CD at myalliant.com. You have to look at it. So much higher than treasuries. I cannot even tell you. So currently, they are paying for amounts of $1,000 to $74,999, 4.25 APR for $75,000 and up. It is 4.30.
4.25.
4.25.
4.25. We are strong.
We are strong. We are wise.
February 23rd, 2025. Welcome everybody to the Women in Money podcast, as well as everybody smart enough to listen. I would highly suggest since today is Susie school, for you to take out your Susie notebooks. If you don't have one, I most certainly would take out paper and pen and write down the things that I'm going to talk to you about today. Let's first go to a Susie story.
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Chapter 2: How can you prepare financially before losing your job?
I want you to put yourself in this situation. You have worked for a company for the past year. 10, 15, 20, 25 years, maybe even longer, and you feel secure, you're solid in that company. You've given them everything that you have, and they've been good to you. They've provided you with a paycheck, a retirement account, all kinds of things that have allowed you to do what? Maybe buy a home. Maybe
Maybe buy a car. Be able to put money away in a 529 plan for your children to send them to college or whatever it may be. And of course, if you bought a home, most likely you still have a mortgage on that home. Or you financed that car. Because very few people today, honestly, can buy anything outright.
Even though you've been really trying hard to take my advice and get yourself an eight to 12 month emergency fund, put money away, make sure if anything goes wrong, you have at least eight to 12 months to get you by. Because if you do lose your job, it could easily take you eight months to a year to get another one. But even though you've been trying to do so,
You just have maybe managed to save a month or two of must-pay expenses. You have some credit card debt, but really not a whole lot. And here you are happy because you are just getting by. Yes, yes, it's true that the cost of food and everything, your insurance policies, all of that have gone up.
So it's costing you more and more, making it even harder for you to put money in an emergency savings account. But you're still getting by. You're not behind on anything. Maybe you have a spouse, but it's true that your spouse is now working and it takes both of your salaries to just get by. All right, everything's going along. And all of a sudden you get an email that says you're fired.
You're like, what? Not me. Not one of the tens of thousands of people who have just been fired. Really? Really? I'm fired? How am I going to pay my mortgage payment? How am I going to pay my car payment? How am I going to feed my family? What are we going to do? Oh my God, Susie, because you've been writing me, help me, help me, help me. And I'm like, oh, here we go again.
And I say that because a few years ago, I remember doing a podcast when the federal government had shut down and how were these people going to get by without a paycheck. But then it was a little bit different because they were still working for the government. We knew they would be going back sooner than later.
So it wasn't quite the catastrophe as it is now when you are not going to go back and have that job anymore. And in many of the places... It's the only jobs that are available as to where you live that pay any decent wage whatsoever. But all of you need to know, again, that it's not just the federal government that is cutting. All of these things, really, the tariffs, everything that is going on
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Chapter 3: What immediate steps should you take after losing a job?
you can see many major corporations are starting to have layoffs as well. If you think that the price of eggs and everything might not affect the fact that your bakery or the restaurant you work for or whatever may have to close down because they just can't afford the price of goods anymore, Well, you might be facing a reality there. So all of these possibilities absolutely affect you.
It's not just if you lose your job or whatever. What happens if you're in an accident or you get sick and you can't work? So this podcast is for every single one of you listening. And all I can do is beg you to take it seriously that anything can happen to you at any time. So you have got to take the steps today to protect your tomorrows in case it happens. All right, everybody.
Suzy School is now in session. Let's just imagine that this has happened to you. All right. What you really need to do is the very first thing is you have to cut all your expenses down to nil. I know you've enjoyed going out to eat. You've enjoyed going on cruises. You've enjoyed taking a vacation here and there.
You enjoy going shopping, buying clothes, buying all this, going to the movies, going everywhere. Those are not must-pay expenses. Those at this point in time, when you're in this situation, they all have to go. They're gone. And I know you're going to say, but Susie, I really need to go to the gym. I need this massage once a week. I need these things. No, you don't. You want those things.
And I understand how they play in your mental health and everything. What's going to really affect your mental health is when you can't afford to pay your rent or your mortgage or anything like that. Now, I just want you to think about that for a second.
When all of you stop going out, eating out, going on cruises, checking in here, doing that, whatever it may be, that starts to affect the economy. which is why you've seen the markets go down, because people are afraid, everybody. They don't understand tariffs. They don't understand the ramifications of everything that is happening right now. It's all happening so fast that it has scared them.
And when people are afraid, guess what? Fear is the main internal obstacle to wealth. And that's when they start selling and everything. But we'll get to that later on dealing with the market, Palantir, Walmart, and everything else that has happened back to this reality for right now.
After you have cut all your expenses that are not must-pay expenses, I need you to take an inventory of all your money. How much do you have in an investment account? How much do you have in a cash account? How much do you have, seriously, in retirement accounts? And you're to divide them between Roth retirement accounts and traditional retirement accounts. How much do you have in a 529 plan?
How much do you have in an HSA savings account? I need you to take an inventory of everything that you have. Where is your money? Now, I need you to take an inventory of your must-pay expenses and the income that you will be having coming in, possibly from your spouse, possibly from rentals that you have, whatever it may be. What is your shortfall.
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Chapter 4: How to manage expenses and income after a job loss?
And if you don't have a lot of money in that retirement account, possibly use it all up, still then not being able to pay your expenses, and then end up having to claim bankruptcy, and now you have nothing. So you need to look at the amount of money that you have in your retirement accounts, versus the amount of money that you need every single month to just get by?
And how long will that money in the retirement account last you? If it's going to last you under eight months, you are not to take the money from there. Do you hear me? If it's going to last you two years, five years, whatever, you have a lot of money in there, okay, that may be a source of where you get the money from, but you have to think about it carefully, all right?
If you have money in a retirement account, and that retirement account happens to be a traditional one, all pre-taxed, because you did not listen to Ms. Orman. You did not go the Roth retirement account route. You wanted your tax write-off at the time. All right, this is what you need to know. If you are 59 and a half years of age or older,
any money you take out of a traditional retirement account pre-tax, you will owe ordinary income tax on that money. You will not owe, however, a 10% penalty. In most cases, if you're under 59 and a half and you withdraw money from a retirement account that's pre-taxed, of course you will owe ordinary income tax, but you may also owe a 10% penalty.
Unless your retirement account is an employer retirement account, it is a TSP, a 401k or a 403b, listen closely. and you are under the age of 59 and a half, but you are 55 years of age or older in the year that you lost your job or you left service. Now, what that means is, as you're listening to me, you may be 54 right now, but you will turn 55 before or on December 31st of this year.
If that is true, any money that you withdraw from your employer-sponsored account, you will have to pay ordinary income tax on it, but you will not have to pay the 10% penalty. it only applies the 55 or older rule to money that you have in an employer-sponsored plan. So if you take money that is in your TSP 401k or 403b and you do an IRA rollover with it,
and you are going to be 55 years of age or older, you're not yet 59 and a half, but between those ages, and you do an IRA rollover with it, in most cases, you cannot touch that money without the 10% penalty. Now, there are things that you can do if you did that called separate and equal periodic payments. But trust me, you do not want to do that. All right, everybody, it is complicated.
You could possibly get yourself in trouble. So it would be far easier for you just leave the amount of money that you know you want to access from an employer-sponsored plan, in the employer sponsored plan. If you happen to have a lot of money in your employer sponsored plan, and you want to roll some of it to an IRA rollover, and you are going to be 55 or older this year, okay,
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Chapter 5: Why is it important to avoid using retirement funds prematurely?
But leave the amount of money that will at least last you for a year or longer in the employer-sponsored plan. So that is a place that if you do withdraw, you're only going to pay income tax on it. But remember, you've lost your job. So your income taxes aren't going to be that high this year. Because even if you are with spouse who's earning money, your income has gone down considerably.
So just something for you to think about. For those of you who only have a little bit of money within those retirement accounts, whether it's your IRA or not, before you use any cash, before you take money out of any retirement account, I would like to see you, I know you're going to think I've lost it here.
I'd like to see you put any expenses you can on your credit card and only pay the minimum payment due when the bill comes in. Remember, credit cards can be discharged in bankruptcy if you need to claim bankruptcy. You do not want to take money from a retirement account because if you claim bankruptcy and you've taken it, again, I'm repeating this, that money's gone and you have nothing. You
You want to maintain any cash that you have just in case. So this is a case where Ms. Orman is saying, all right, let's just use your credit cards for now and let's see how it goes. Another place that even before you touch retirement accounts, regardless of how much you have in retirement accounts, where you might want to get the money from would be if you have an investment account.
So besides your retirement accounts, you opened up an account at a brokerage firm, and you've been buying stock or whatever it is, ETFs or whatever that may be.
especially because there isn't a 10% penalty there, there isn't ordinary income tax there, if you've owned your investments for over a year, that would probably be one of the first places I would go if you're lucky enough to have an investment account to get money.
In choosing what you should do, I would be consulting an accountant or a CPA to look at your situation, look at your taxes, what you have going on really, and make your choice from there. I know you're not going to like this next one if you don't have any of that, but you happen to put some money in a 529 plan for your kid, and your kid is still years away from college, or even if they're not,
you could take money from the 529 plan. And obviously, you're going to pay a 10% penalty on earnings from that account. And you're going to pay tax on the earnings as well. But depending on what you have in there and your current tax bracket, because you don't have income possibly coming in, that might not be a bad idea.
And in fact, that probably would be a better idea, really, than draining money from a retirement account. A lot of you have cash in an HSA account, a health savings account. That is the one place I would most likely tell you not to take money from.
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Chapter 6: What tax implications do you face when withdrawing from retirement accounts?
That is because if you're under the age of 65, not only will you pay ordinary income tax on it, since it's not going to be for a qualified medical expense, but you're going to pay a 20% penalty on it as well. If you're 65 or older, All right, you're not going to pay the 20% penalty, but you will pay for non-qualified medical expenses, ordinary income tax. Those are some of your options.
Now, for those of you who were lucky enough to listen to me, and you actually opened up a Roth TSP, a Roth 401k, or a Roth 403b, and now you have lost your job, listen to me closely now. I just want you to see an example of what you can do to help yourself. Write this down, everybody. Let's just say you have $50,000 in your Roth TSP.
All right, let's just say that's true because that's for federal employees and that's who's really dealing with this right now, but it applies to everybody. And that $50,000 is made up of $30,000 that you put in, $20,000 of earnings. All When you withdraw money from a Roth TSP, it does not work like a Roth IRA.
Any money you originally contribute to a Roth IRA, you can take out at any time without taxes or penalties, regardless of your age. In a Roth TSP, they don't do it that way. They do a combination and prorate how much of your distribution is made up of your original contributions and of your earnings. So let's just say of this $50,000 that's in there where you put in the original $30,000 and
And let's just say you want to take out $20,000. The way that it would work is this. You would divide $30,000 by $50,000, your original contributions, which is 60%. you would divide $20,000, which is your earnings, by $50,000, the total that you have in the account, and that would be 40%. So you want to take out $20,000. 60% of that is considered your contributions.
You're not going to owe taxes, penalty on it, nothing, $12,000. However, 40% of that $20,000 is going to be considered your earnings. That is $8,000. So if you take this from your Roth TSP, and you are not 59 and a half years of age or older, or possibly 55 or older in the year you left service, you are going to owe ordinary income taxes no matter what on the $8,000 and possibly a 10% penalty.
However, let's just say you were smart and you decided to roll over all $50,000 into a Roth IRA. Two things. If your Roth IRA has been opened for five years or longer or however long it's been open, The money that you're rolling in there takes on the time period of that Roth IRA. Let's say you don't have a Roth IRA and you are opening it for the first time. When you roll it over,
All $50,000, $30,000 is going to be contributions. $20,000 is going to be earnings. You can take out without taxes or penalties anything up to that $30,000. It's the $20,000 that has to stay in that account for at least five years and until you're 59 and a half to access it without 10% penalty and taxes.
So in that case, if you wanted $20,000, you could withdraw it without any taxes or penalties versus the other situation. If you took it from your Roth TSP, you are going to owe ordinary income taxes on that $8,000 plus possibly a 10% penalty. So to save yourself that tax money and penalty, if you just simply do a Roth IRA rollover with your Roth TSP 401k or 403b, you've lost your job now.
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