Suze Orman Sets Up Free Advice Stand

"I have $15,000 in a Roth IRA and I have $4,000 in a 401(k)," he told Orman. "Would you recommend cashing those out as a first-time homebuyer?

"No," was Orman's immediate answer. "These are retirement accounts. Even though you're a CPA, [if] you're driving down the street, something happens, you're in a car accident and now you can't function anymore, you really can't pay your bills, you can't work. And you have to declare bankruptcy. Is this money protected from bankruptcy or is it not, Mr. CPA?"

"It is protected," he said.

"It is," Orman said. "So you are not to touch money in a retirement account. This is for your future."

So dreams were dashed for several would-be homebuyers. Orman urged caution and approved no one during the morning session. The next topic at hand:

... How Do I Prepare for Retirement?

First up on the new topic was Dave, a 54-year-old small business owner who's leery of 401(k)s.

"I just started a business five years ago," Dave told Orman. "Doing well, I opened up a 401(k), but the 401(k) was tanking and I stopped."

"You should have continued," Orman said. "If you keep dollar-cost averaging into good, no-load mutual funds, or things that make sense for you ... as the market goes down your dollars buy more shares, the more shares you have, the more money you make. Don't stop now."

But "don't stop" does not mean you should contribute the maximum amount. Maria, 36 and single, of Long Island, N.Y., had a similar question. Before she spoke to Orman, she was contributing 12 percent of her paycheck, she said.

Suze Orman: Paying for College

"Alright, that's the first thing we are going to change," Orman said. "First thing I want you to do is, only contribute up to the 3 percent that [employers] match, that's what I want you to do. So, today, or tomorrow, go into your HR office and you're actually going to lower your contribution into your 401(k) from 12 percent to 3 percent."

Maria also qualifies for a Roth IRA, something Orman said she should take advantage of.

"I want you to fund your Roth IRA up to the maximum ... So you can put in $5,000 into a Roth IRA."

Orman explained the cutback in 401(k) contributions.

"You're far better off saving for an eight-month emergency fund," she said. "You're far better off paying off your credit card debt, far better off saving for a down payment on a home."

Maria had one more question for Orman: What about life insurance? Orman said life insurance is for people with dependents, that term life is preferable to whole life and that the insurance should be kept only so long as dependents are in need. "Most people have insurance for their children," she explained. "Once their children are 23, 24, 25 years of age, if something happened, the kids would be okay." No more insurance required, she said.

After tackling questions on home buying and retirement, Orman got a surprise question from 16-year-old Orlando and his mother.

... How Do I Pay for College?

As the child of working-class parents growing up on the south side of Chicago, Orman said, she had to pay her own way through college, so she's a big proponent of parents just telling kids "no."

"Why can't my mother pay for my college?" Orlando asked Orman.

"My question is back to you," she said. "Why do you think your momma should pay for your college?"

Orlando's mother is single and works about 10 hours a day. She also has about $20,000 of credit-card debt.

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