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September 30th, 2008
11:14 PM ET

Your questions, Suze's answers

Editor's note: Suze Orman answered your questions on AC360° tonight.  Here are the questions and her advice.

Anderson Cooper: The Dow's climb on Wall Street finishing up 485 after yesterday's record loss of 778. The Senate is supposed to vote on a bailout plan tomorrow night. Suze Orman is here to answer your questions on the wild ride. The bill the Senate will vote on tomorrow night will raise from $100,000 to $250,000 the amount the FDIC will protect in a bank. What does that mean? Is that a good thing?

Suze Orman: It's a good thing in that people don't have to go to more and different banks if they have more than $100,000. Does that help the little people? Who has $50,000? Maybe they have $50,000 in credit card debt. Very little people we're talking about that will affect. For large banks and large businesses, it makes it easier for them to meet their payroll by dealing with one bank.

Anderson: We have a ton of questions on the website. John writes,

I'm 28 years old with no credit card or student loan debt, my condo is paid off, I have a great job. Should I be taking advantage of the great deals you discussed on your website yesterday?

Suze: Yes, my dear John, of course he should be taking advantage of it. He doesn't have to use his money to get out of debt. How does he take advantage? How do you take advantage of what's going on here?

Suze: Very simple. Continue every single month, keep putting your money in the market in something giving you a good dividend, exchange traded fund, like the dvys that buy the Dow Jones industrial average. You can get a 4.7% yield, if you do it in little amounts of money over a long term, you will be fine. If you have a big amount of money and put it all in one lump sum you will be making one of the biggest mistakes.

Julie: Is it a total mistake to take out my husband’s $70,000 401k to pay off our credit cards? We have 3 kids in college and have racked up debt which now hurts! We want to start over and WON’T do it again! I have around $100,000 in my 401k which will stay put.

Suze: Are you kidding? You are not to touch a penny in your 401(k). Why? Number one, when you take it out, if you're not of age, 59 1/2 years of age, what's going to happen? You will pay not only ordinary income taxes on it, but you're going to pay a 10% penalty as well. The $70,000 you have in there or $100,000, all said and done, you will have $50,000. What are you doing? You will be taking out the money while everything is low here. Don't you dare touchit.  And here's the other thing to remember 401(k)s are protected against bankruptcy. So are retirement accounts. If you ever have to claim bankruptcy, keep the money in the 401(k), don't use it to pay off credit card debt.

Chelsea: I am 14, and I graduate High School in 2012. What can I do right now to ensure I can get a (college) loan, and will organizations and colleges become stingier with scholarships?

Suze: I'm not sure there's anything you can do to guarantee you will get a student loan except this, go out there and talk everybody to and in my opinion, tell them, why don't we pass something like this bill so we can free up money so it will be easier for people to lend you money when you need it.

Dee: We use two credit cards and pay off the balance in full each month. Our credit history is impeccable. I am hearing that our credit card companies may reduce our lines of credit thus lowering our FICO score. Is this true and why would the companies do this?

Suze: They're doing it because they don't want you to use your credit card, run up these lines of credit and all of a sudden say, sorry, I can't pay you back. Credit cards will be lowering the lines of credit, home equity lines of credit will be taken away from many of you. That will increase your debt to credit-limit ratio, 30% of your FICO score and your FICO score will go down and will hurt you and then what happens? Your car insurance premiums will go up. Is that true? It is.

Sandra: I currently bank with a local credit union. The bank is NCUA and ASI insured. Do I have the same security as a FDIC insured institution?

Suze: You absolutely do, don't worry about it.

Tonaka: In light of the economic crisis, I am very concerned for my parents, who are both receiving Social Security benefits. In a worse case scenario, would they continue to receive these benefits?

Suze: They will continue to receive social security benefits. Does social security have problems for many of us years to come? It does. You know what, let's get through today before we worry about our social security of tomorrow.

Anderson: Also, a lot of people wrote to me today, tou said in the past, if you're in it for ten years in the stock market, it's the best investment. In 1998, Dow Jones was at 7632. Yesterday, down almost 800 points. Wouldn't it have been better for someone to be in municipal bonds getting 5%?

Suze: It could, yes. Who could predict what's going to happen. If you had known back then, should you have been in municipal bonds at 5% tax rate? Possibly, but here's the thing. I went back for almost ten years. If you put money in the Standard & Poor's 500 index, you would be up on your money today if you did it every single month even though the market is far lower today than it was back then.


Filed under: 360° Radar • Bailout Turmoil • Economy • Suze Orman • T1
soundoff (58 Responses)
  1. Tony

    I hae a IRA CD Deposit paying only 1.9% that matures in Oct. at about $3700.00. Would I better off to take the 10% penealty and clam the rest as income on my taxes, and just payoff my credit cards wich would take care off almost all my credit debt. . I have other Mutual Funds, Another Roth IRA, that I never plan on touching until the 59.5 Yr. mark, and another Annuity what would be the best option with that first CD Deposit acount. I know that when it matures I can get a higher promotional % rate.

    Thanks Suze

    September 30, 2008 at 11:42 pm |
  2. Samuel Johannes

    We were looking to purchase a home before the bailout bill fell. We have now found the home we want and we have been pre-approved for a loan. Do you think this is a bad time to purchase a home given the events of the past 2 days? What do you think will happen to mortgage rates in the immediate future? Do you think we are better off waiting for the price of homes to settle?
    Thank you.

    September 30, 2008 at 11:41 pm |
  3. Francine Thorson

    Would It help if when a person uses the ATM machines, instead of charging a fee,the bank would give that money to the government to clear up the problem?

    September 30, 2008 at 11:40 pm |
  4. Chris

    I am 31 with a wife and 15 month old daughter. We have over 100K in ccard debt, student loans, and car loans. We put our house on the market in Vegas in December and moved to NC in January. We have had NO offers and the value of our house has dropped from 265K when we bought it to 200K. We have a 1250 1st mortgage and 750 2nd mortgage. Despite our best efforts, we have not been able to pay the 2nd in a few months and are now in foreclosure. In hindsight we never should have bought the house but it is what it is and we are not sure what to do. Any thoughts?

    September 30, 2008 at 11:39 pm |
  5. Kris Roberts

    Hi Suze –

    We have always had excellent credit and we have on eparticular business credit card that we secured a $19000 balance with a 2.9% interest rate "until the balance was paid in full". This card is with Advanta. We have it paid down to $13000 but we also had to use it to pay off another failed business expense which led us to take advantage of a $1300 cash advance. The inital rate was 9.9% and yesterday we we received our bill, that portion had been increased to 35.09%. Is this even legal?

    September 30, 2008 at 11:39 pm |
  6. lorraine hines

    If congress wants to help the average american, why not allow consumers to write off interest on car loans, credit card debt etc. Those write offs went out the door with RR. Why can't congress pass a bill that would go into effect immediately to help the average household. If you want to bail somebody out bail out the little people. What are your comments on that Suzie?

    September 30, 2008 at 11:39 pm |
  7. Janis

    I have a whole life insurance policy with MetLife with accumulated savings of about 7,000.00. If MetLife goes the way of AIG, what happens to my policy and my 7,000.00.

    Thanks.
    Janis

    September 30, 2008 at 11:39 pm |
  8. Sandy Roos

    'm a nurse and have been workingsince 1964. I planned to retire in Jan '09 I have a retirement acc't, a 401K, and 525/mo pensio?n. Can I still retire? How long before my retirement acc't might build back up? (There had been nearly 90,000 in it and about 30,000 in the 401K)

    September 30, 2008 at 11:38 pm |
  9. Michele DeSimone

    My husband is 60 and I am 58. We just rolled our 401K to a stable fund. We have 40,000 in debt and 89,000 in the stable fund. Do we pull out any funds to eliminate our debt and/or pay it down. HELP! We love you...

    September 30, 2008 at 11:38 pm |
  10. Toni

    I am currently a junior in college and pay most of my tuition with private loans, should I try to get a loan now to cover tuition my senior year or should I just wait until next year to get one?

    September 30, 2008 at 11:37 pm |
  11. Catherine from NJ

    Hello Suze:
    I know I haven't been fiscally solvent. My husband lost his job 5 yrs ago. We have fought our way back. He is finally in a job with which he feels good. We maxed out our credit card. I have do have a savings plan with my job. I am a teacher. We also have a pension from his job and my job when I retire. I contribute to an Equitable savings account with my job – I have about 20m dollars in that. We have a lot of equity in our house, because we basically finished it ourselves. I have a little investment in my sister's and my name from an inheritance from my mother, in a Smith Barney mutual funds account. What do you think? Should I continue to contribute to my Equitabele savings plan at work? Should I withdraw my share of the money from my Smith Barney joint account? Should I just put this accumulated money – @ a60m in my savings account in my bank instead?

    September 30, 2008 at 11:37 pm |
  12. Gupta

    Is interest rates likely to go up on credit cards and student loans?

    September 30, 2008 at 11:37 pm |
  13. Erik k Melczak

    I would like to know why in the world would congress wait to vote on the bailout bill just becuase of a jewish holliday? what ever happened to seperation of state and religion? what if there was a similar emergancy to the american people around christmas would they allow a delay in voting for christans to observe the birth of christ. I would bet they would be outcry from everywhere about seperation of state and church but it seems that they are making an exception for the jews what is up with that. . thank you for your time

    September 30, 2008 at 11:37 pm |
  14. cynthia

    I have cash totaling $150,000 in floaters (PIMCO and NUVEEN). My account adviser pitched them as reliable and virtually liquid. I did not know that these were no longer being offered. When I called to check on their security and discuss putting that money in CDs, he told me that the money may not be available for two weeks. I feel so nervous. I never received notice - nor a phone call from this guy! - about any trouble with these bonds. Eeeek. I think I had my head in the sand. Is my money safe???

    September 30, 2008 at 11:36 pm |
  15. Yunnuen W

    I receive student loans, if there is not bailout, do you think many students that receive loans could be affected

    September 30, 2008 at 11:35 pm |
  16. H.V. Davis

    I just heard the plan the Sen Dennis Kunnich offered. It helps the homeowners first and then Wall Street. What is wrong with that plan?

    September 30, 2008 at 11:35 pm |
  17. Tom Kelly

    Should we purchase a home now or wait?

    September 30, 2008 at 11:35 pm |
  18. Mike Slama

    I have $56,000 in credit card debt. Have you ever heard of someone with more? What's the easiest way for me to pay it off?

    September 30, 2008 at 11:35 pm |
  19. fred shazier

    why is it 401k plans dont offer withdraw without taxing twice before you get your money and applied to your eaned income at the end of the year.that taxed money would help people and the economy more.

    September 30, 2008 at 11:34 pm |
  20. Gupta

    I make close to 100K yearly income for the last 2 yrs. Never put money on 401k or bonds, except Savings and few stocks. Is this a good time to start putting money on 401k ? I am also a foreign citizen, should i transfer money abroad to avoid any risk of losing the money from local non insured banks?

    September 30, 2008 at 11:34 pm |
  21. Carmelo

    Hello Suzie, I have over 250k in equities and my account has lost over 80k. Should I move all my money into bonds versus equities?

    September 30, 2008 at 11:34 pm |
  22. carleen

    Got an annity with Jackson life should I move it it's not insured.Can I roll it into something else?

    September 30, 2008 at 11:33 pm |
  23. Johnnie Hudgens

    My husband and I are 74 & 70 years old and living on our retirement investments plus some social security. We have money in mutual funds and some growth bonds. It is going down so fast, looks like we will run out of money in about six year at the rate it is going now. Do you have any suggestions?

    September 30, 2008 at 11:33 pm |
  24. Mark

    My wife and I pulled all our mutal funds worth $20,000 3 days ago. We've been wondering if we should put it in a savings account or stash it in a hole. please help

    September 30, 2008 at 11:33 pm |
  25. Yunnuen W

    Hi,
    I receive student loans, if there is not bailout, do many student that receive students loans will be affected?
    Thanks

    September 30, 2008 at 11:32 pm |
  26. Cheryl

    I am unemployed and too young (59) too retire. My unemployment benefits have run out and the job situation is horrendous. I am currently living off my IRA which I know I will be taxed heavily for. Now my IRA is at risk and has lost a considerable amount of money. Do I take it out or wait? Claim bankruptcy? What do I do?

    September 30, 2008 at 11:32 pm |
  27. abbey

    I have 3 children, the last child born a year ago. Would you suggest enrolling in a 529 savings plan for the 1 year old or hold off? Also we use age based investing strategy (more aggressive the younger you are are) would you continue investing in these types of investments?

    September 30, 2008 at 11:32 pm |
  28. Marianne

    Is 75% of your net worth to much to have in Vanguard, in all kinds of different funds?

    September 30, 2008 at 11:32 pm |
  29. Floyd

    Mutual Funds, Should we continue in investing in Mutual Funds or stop and put our money in a more stable environment?

    September 30, 2008 at 11:31 pm |
  30. tamra

    So, why is it 700B and not 800B or 600B? Where'd the 700 calculation come from?

    September 30, 2008 at 11:31 pm |
  31. Gregory

    Are equity indexed annuities a safer place than the stock market? Is it true that there is no risk in terms of losing any of the principle if you don't take any out?

    September 30, 2008 at 11:31 pm |
  32. Steven Cravis

    Suze, a co-worker thought you said that under certain circumstances we could go to the ATM and find out we have no more account, no more money. If this is true, that you said this, what circumstances? And what must we do to prepare for this, or prevent it from happening?

    September 30, 2008 at 11:31 pm |
  33. Dolores

    How comfortable should I be with my 401k? I work for a financial instution and I'm concerned. If the company fails is my 401K safe?

    September 30, 2008 at 11:31 pm |
  34. jane

    I am 65, my retirement account which was $500000 2 months ago and is now down to $400000. What to do? My broker says ride it out. Obviously he is a lot younger than I am. I make $100000 annually running a nonprofit and a private law practice. I own my home which is not paid for yet and 2 investment properties which pay for themselves. I think I need an independent financial adviser to look at my portfolio to see if I am invested for my benefit. I like the work I do so guess I will keep working. My question: Do I cash in my retirement and put it in certificates of deposit?

    Thanks

    September 30, 2008 at 11:30 pm |
  35. Barbara

    Dear Suze,

    I was recently laid off in July 2008. I have 6k in my 401k which was not matched by company. It's with Guardian. I would like to take it out and place it into an Roth IRA other than it just stay there. What should I do? Thanks!

    September 30, 2008 at 11:30 pm |
  36. Ryan Hanrahan

    Suze,

    My wife and I are looking at purchasing a home (for under $100,00). IS noe a good time if we have already been approved and it is not outside of our means? (We have an annual household income of $60K)

    Ryan and Janel Hanrahan

    September 30, 2008 at 11:30 pm |
  37. Sam

    What affect will my taking funds from my 401K to prevent foreclosure on my home have.

    September 30, 2008 at 11:29 pm |
  38. mike

    Suze, my name is Mike from Upland Ca. I have been running a small business for over 22 years. 2 years ago I noticed a change in our profit margins and started to get worried about our economy. I started making changes but I couldnt change things fast enough. I have put over $200,000.00 into my company This year not only to find myself in a financial mess. My thought was to stand strong and we could muscle through this. I didnt want to let anyone go but ultimatly I have had to lay off most of my staff. I am still running my business with a skeleton crew. I am now up against the wall. I can stay in business the way we are right now but I will have to turn down larger projects in the futer because I dont have the capital nor the staff to complete the jobs. My credit is in bad shape so I cant get any funding. Please note that my credit was great 1 year ago. My question to you is, What does the bail out have to offer me???
    Thank you, Mike

    September 30, 2008 at 11:27 pm |
  39. tracy

    We all hear about our funds being FDIC insured, but we never hear how they will be repaid if our banks go "belly up." I would like to know if we would be repaid in one lump sum with no loss of funds, or if we would be paid back in installments? If installment was the option how long would it take to be paid back the funds we had trusted in the bank?

    September 30, 2008 at 11:27 pm |
  40. Joe

    we currently have about 100k in investments (mutual funds). Given the crisis would it me better to withdraw those funds and place them in a bank account that will be insured under FDIC instead of risking even more money?

    September 30, 2008 at 11:27 pm |
  41. liz

    I have checking accounts at washington mutual and wachovia. I also have a safe deposit box at washington mutual. If jp morgan-chase closes my branch, how will it affect my safe deposit box?
    also do the banks that took over washington mutual and wachovia have FDIC, insuiring that my accounts are still insured?
    Liz from laguna woods, california

    September 30, 2008 at 11:26 pm |
  42. Diana

    How so we know are money is really safe in our local banks even if they have FDIC? I only have a savings account of $10K and a checking with 1k.
    I closed my stocks, bonds and mutual funds cos we didn't want to lose any more money years ago.

    September 30, 2008 at 11:26 pm |
  43. Brett

    I have a question. I am in my early 20's and earning approximately $ 80000 per year. I max out both my 401k and IRA but was wondering; with the current environment, would it be best to slow my retirement savings and invest in a house? I have money for a down payment and a sufficient emergency fund but hate to decrease my savings for a house.

    Any thoughts?

    September 30, 2008 at 11:25 pm |
  44. Eileen

    Suzie~
    I have a Vanguard Federal Money Market Fund $18,000
    and Vanguard Short Term Treasury Fund Admiral Shares
    $117,000. I am 65 and want to know how safe these accounts
    are, please help me.

    Thank you,
    Eileen

    September 30, 2008 at 11:25 pm |
  45. Ron

    Suzy,

    What will ultimately happen if a government bailout does not pass?

    September 30, 2008 at 11:25 pm |
  46. kavita nair

    suze
    what do I do with my 401 k now? Move most of my 90percent stocks into bonds till market stabilizes, then reinvest into stocks? Or leave things as is?

    September 30, 2008 at 11:24 pm |
  47. Willie B. Smith

    Question for Suze Orman.

    My Credit Union is state charter and insured by ASI and ASE for $250,000 per account. Are my funds safe given that this institution is not also federally insured?

    thank you.

    September 30, 2008 at 11:22 pm |
  48. mohammed

    Oh Please leave Sarah Palin alone,

    If George Bush can run the country for 8 years , she can run the country better than him for next 18 years

    Mohammed

    September 30, 2008 at 11:22 pm |
  49. Dorothy Dixon

    Question: Is a bank account held in a revocable trust insured by the FDIC?

    September 30, 2008 at 11:21 pm |
  50. Debbie Naquin

    Could someone please tell me what happens to the money we lose in the stock market or on our 401k's. Who gets it? Where does it go?

    September 30, 2008 at 11:21 pm |
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