SEPTEMBER 2014 ;e Costco Connection 17
that point she will be out on her own and no longer
dependent on your income.
My advice is to buy a policy with a death
benefit that is 25 times the income needs of your
dependent. I know that sounds like a lot, but term
insurance is incredibly affordable. Even at age 50,
a male in good health can purchase a $500,000
10-year level term policy for less than $60 a month.
SelectQuote.com and AccuQuote.com are two
online sites that sell policies from top-rated insurers.
I also recommend that your partner consider
buying additional life insurance. Employers typically offer a standard death benefit that is equal to a
year or two of salary. In my opinion, that is not
Over the past 24 years I have held five different jobs, each with a different retirement
plan. What criteria do I look at to see which
plans to roll over and which plan is the best
one to be rolled over to?
AS YOU APPROACH retirement it is very smart to
consolidate retirement plans; otherwise, in retirement you are going to have a part-time job keeping
track of all your accounts. An important advantage
of a rollover is that you will have a broader menu of
investments to choose from.
Fees should be your top concern. Assuming
you are going to mostly use mutual funds and
exchange-traded funds (ETFs), you want to focus
on companies that offer portfolios with low
expense ratios. That’s an annual charge all funds
and ETFs levy. Many low-cost index mutual funds
and ETFs charge less than 0.25 percent a year. The
less you pay in fees, the more you get to keep. It
doesn’t sound sexy, but it is a key to successful
investing. If you want to use ETFs, which tend to
have the lowest costs, focus on brokerages that
offer a lineup of ETFs you can use without having
to pay a commission.
An important tip: It can make sense to keep
some money in a 401(k) until you are age 59½. If for
some reason you need to tap any retirement savings
between the age of 55 and 59½, you can make a
withdrawal from a 401(k) without owing a 10 percent early-withdrawal penalty. (You will owe income
tax on any withdrawals from traditional accounts.)
Once your retirement money is rolled over into an
IRA, any withdrawal made before age 59½ will
incur the 10 percent early penalty. C
Email your personal-
(425) 313-6718; or mail to
finance questions to
“Suze Orman Q&A”
in the subject line; or fax to
Q&A with Suze Orman
The Costco Connection
P.O. Box 34088
Seattle, WA 98124-1088.
Suze will answer
selected questions in
this bimonthly column.
She regrets that
cannot be answered
Suze Orman’s TV
By Suze Orman
show airs Saturday
nights on CNBC. Suze
can be contacted at
A car purchase question: Buy a $33,000 car
new with 0 percent interest over five to
six years, with a 50 percent down payment?
Buy new using a home equity loan, with an
interest rate of 3 to 4 percent with the same
down payment? Or buy used with the same
down payment? Which option saves me the
most money and/or costs me the least?
NEVER EVER USE a home equity loan or line of
credit to finance a car. If for some unforeseen reason
you ever fall behind in your home equity payments,
you run the risk of losing the home.
If you need to borrow for a car it should be with
an auto loan. A zero-rate loan is obviously compelling, but I’d rather you see what sort of deal you can
get with a three-year loan. Just because you can
stretch a car payment over five to six years does not
make it a smart deal. A car is a depreciating asset. I’d
rather you buy a less expensive car you can pay off
in three years.
It’s not about how much car you can afford; it’s
about finding the least expensive car that meets
your needs and paying it off as fast as possible.
At what point does a person no longer need
life insurance? I am a 50-year-old male with
one child left at home (a high school sophomore). I’ve always thought I should have it,
At my age and with my minimal income,
should I be concerned about life insurance?
LIFE INSURANCE IS to protect those who are
dependent on your income. Is your daughter in
any way dependent on your income? It doesn’t
matter how much her mother makes. If you pay
for any of your daughter’s expenses or contribute
to the household finances, both your daughter
and your partner are in some way dependent on
If it is your daughter who would be most
affected if you were to die unexpectedly, you
should consider a 10-year level term policy. That
would protect your daughter through college. At
tially more than I do and has great life
; Life insurance
; Rolling IRAs together
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Financing a car purchase