■ Retirement investing
■ Small-biz savings
Email your personal-finance questions to:
“Suze Orman Q&A”
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Q&A with Suze Orman
The Costco Connection
P.O. Box 34088
Seattle, WA 98124-1088.
Over the time share
By Suze Orman
My parents bought a time share back in
2005. They never use it and now want to
get rid of it. They have paid it off, but they
do owe $3,000 in maintenance fees. Do you
have any advice on how to sell a time share?
Suze will answer
selected questions in
this bimonthly column.
She regrets that
cannot be answered
I ASSUME you have already tried to sell the property back to the resort and were turned down?
One of the largest websites with a lot of advice
from fellow time-share owners is tug2.net, run by
the Timeshare Users Group. A key tip: Do not pay
anyone or any service an upfront fee to rent or sell
If the time share is in an especially weak market
your best option might be to donate the property
to a charity. You can learn more at
age. Have you done the calculations to see what
the “good amount” in your 401(k) will generate in
monthly income? The earlier you retire, the longer
that money has to support you in retirement. And
you should plan on living a very long time. For example, half of today’s 65-year-olds will still be alive
into their mid-80s. The T. Rowe Price Retirement
Income Calculator is a terrific free tool that will give
you a good estimate of how much your potential
savings and income sources in retirement will generate in monthly income.
Please make sure you are in fact in great shape
before you retire early. Working just a few more
years can make a great difference.
Suze Orman’s TV
show airs Saturday
nights on CNBC. Suze
can be contacted at
My husband and I are federal government
employees in our mid-40s and have a 7-year-
old son. We already are saving for his college
in a 529 fund. We have a good amount of savings in 401(k) funds, no credit card debt and
a rental property that pays itself off every
month. We have a decent emergency fund
and we have some savings that we are trying
to decide how to invest in the near future.
We are considering three options:
■ Pay off some of our mortgage (
currently 30-year fixed at 4. 75 percent)
and reduce to a 15-year fixed rate of
3 percent (move off a jumbo loan)
■ Buy another investment property
whose rent pays the mortgage
■ Renovate our house (an addition
that would increase the property
value and add some benefits for
us—nothing essential, though)
Which option would you recommend,
considering our plan for an early retirement
after our son graduates from college?
Virginia r o
BRIAN BOWEN SMITH
My husband is 46 years old. I am 39. He
makes about $55,000 a year. We own our
own home and both cars. We have no mortgage or car payments. We have $10,000 in
the bank, and $16,000 at home. We have one
large credit card bill, about $6,000. 2012 is
the year we will get it paid off. I have $1,600
in a Roth IRA, though I’m considering adding
$1,000 in a year if we can get thrifty with our
money. My husband has a 401(k) with about
$8,000 (he lost quite a bit in the crash).
I just started a small business about a
year ago. I am investing money into it to get
it started and not seeing much in profit yet,
though I know it can become profitable in
How can a couple, just getting by, save
up enough for retirement?
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THE FIRST choice gets my vote. Refinancing into
a 15-year mortgage so you get the benefit of a low-
er rate and have the mortgage paid off as you head
into retirement makes plenty of sense, assuming
you intend to live in this home through your retire-
ment. I don’t want you investing in another prop-
erty until your home is paid off, especially if the
investment property would be nearby. That leaves
you financially undiversified if there’s a downturn
in your local economy and real estate market.
I also want to float a fourth option: Seriously
crunch the numbers before you retire at a young
AUGUST 2012 ;e Costco Connection 15
ARE YOU saying you have $16,000 in cash at home?
If that’s the case, my first piece of advice is move it
into your federally insured bank account.
I am also concerned that you are putting money
into a new business when you still have $6,000 in
credit card debt that no doubt has a hefty interest
rate. Use some of that $16,000 in cash to get rid of
your credit card debt pronto.
As for retirement savings, if your husband’s
401(k) offers a matching contribution he’d better
be contributing enough to qualify for the maximum match. It is insane to not take advantage of
free money. I want your annual retirement savings
(the 401(k) up to the match and then the Roth
IRA) to total at least $4,500 a year. That’s 10 percent of your current income.
Ideally you should save even more. There is no
magic wand to wave here: Sit down together and go
through your spending. I have rarely seen households that can’t significantly cut hundreds of dollars in monthly spending if they get serious about
separating wants from needs. C