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; Student loan debt
; Life insurance
; Credit scores
By Suze Orman
How many retirement accounts are too
many? I have a 401(k) through my current
employer, as well as a Roth and an IRA
through an investment company. The IRA
was a rollover of a SARSEP (Salary Reduction
Simplified Employee Pension Plan) from an
employer that went out of business. It is a
modest amount, and I was thinking it would
be better to roll it over to my 401(k) in order
to take advantage of compounding.
NOT ALL EMPLOYERS allow reverse rollovers—
moving money from an IRA into a 401(k). But even
if yours does, there really are no advantages to taking this money and rolling it back into a 401(k). An
IRA at a discount brokerage firm gives you far more
flexibility than a 401(k); you can build a diversified
portfolio of low-cost mutual funds and exchange-traded funds. That account can compound just as
much as a 401(k) account. The vehicle doesn’t matter; it’s the investments themselves—and their
underlying cost—that count.
My advice for anyone with single and multiple
IRAs and old 401(k)s is to consolidate them at one
discount brokerage. That will make it easier to keep
track of and handle withdrawals when you retire.
I also suggest considering converting traditional
IRA assets to a Roth IRA. You need to consult a tax
pro, as there are taxes due when you convert, but
you then have the prospect of tax-free withdrawals
I have about $130,000 in student loan
debt in my name for my children. I either
took out the parent PLUS or co-signed, as
the interest rate was lower in my name.
The rates range from 6. 5 to 8. 5 percent.
With rates at the lows that they are today,
is there any way to consolidate these loans
at lower rates for them?
Brick, New Jersey
YOU CAN CONSOLIDATE each type of loan, but
do not try to combine them in one consolidated
loan with a private lender. PLUS loans are federal
loans, which come with important protections; if
you run into a rough patch you can apply for deferment. And there are a variety of repayment plans
you can choose with federal loans. Private loans do
not have those guaranteed protections or flexible
The loans you co-signed for are private loans,
and it sounds like they have variable interest rates.
Shop around for the best deals on consolidating private loans. My advice is to choose a fixed-rate loan.
More and more banks and credit unions now offer
this option. In the coming years interest rates are
more likely to rise than fall. Locking in a fixed rate
today is smart.
My husband is 53 years old. I am 54. Our children are 17 and 19, a senior in high school
and a sophomore in college. We paid our
house off in the last year. We currently have
a life insurance policy for $750,000, which
will end in the next decade. My husband
thinks it is better to change to a lower policy
for $300,000 for the next 20 years, figuring
we will save on the premium in the next few
years. I am not sure what is best to do. We
would really like your opinion.
Oceanside, New York
IT DEPENDS ON what you are trying to protect. I
have always said that life insurance is to protect the
people who rely on your income. It sounds like the
kids will not be dependent on you for much longer,
so I am not sure you need life insurance, period,
regardless of the amount. If your mortgage is paid
off and the kids are independent adults in a few
years, what is the purpose of the $300,000 policy?
That’s the question only you two can answer. And
keep in mind, canceling one policy and taking out a
new one requires requalifying based on your current age and health status. If you do decide to go this
route, don’t get rid of the existing policy until the
first payment for the new policy has been cashed.
A few years ago I had the highest credit
score my banker had ever seen (he didn’t tell
me the number, but it was 800-plus). Then
I had an ID theft incident wherein someone took out a credit card using my Social
Security number. I was able to get it declared
fraudulent and removed, but in the meantime my score dropped into the 500s and
credit agencies dropped my lines of credit.
How can I bring my scores back up?
THE TWO BIGGEST drivers of your credit score
are paying your bills on time, every month, and
keeping your total debt payments to a small fraction
of all your outstanding credit limits (aim for less
than 30 percent.) Focus on those two factors and
your score should improve over time. C