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CNN Larry King Live

Suze Orman: Keep Your Money Safe

Aired October 04, 2007 - 21:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LARRY KING, HOST: Tonight, losing your home and your mind because of money?
Cash queen Suze Orman gets down and dirty with finances. She wants you to be filthy rich.

(BEGIN VIDEO CLIP)

SUZE ORMAN: You'd better know for sure that you are doing the right thing with your money.

(END VIDEO CLIP)

KING: She tells it like it is.

(BEGIN VIDEO CLIP)

ORMAN: Well, if you're looking good but you're feeling horrible because you're broke.

You cannot afford it.

(END VIDEO CLIP)

KING: And she's take your calls and e-mails. We've got a bunch of them.

Suze Orman is here to save your house, maybe your sanity, next on LARRY KING LIVE.

She returns, the always popular, always informative, Suze Orman -- personal financial expert, number one "New York Times" best-selling author, Emmy winning television host. Her most recent book -- there you see its cover -- "Women and Money: Owning the Power To Control Your Destiny".

The last time you were here, Suze -- by the way, we've got a lot of e-mails and a lot of King Cam questions, too.

But the last time you were here, you said the mortgage meltdown situation was very bad, seriously bad.

How is it now?

ORMAN: It's still bad. It's going to get worse.

For who? For those people who bought homes that they could not afford. They bought it with no money down. They went into interest only mortgages. They went into negative amortization mortgages, which means they paid less than what they owed, so their mortgage actually grew.

For those people, is going to be really, really bad as soon as their rates adjust upwards. The Feds aren't going to save them. They're going to lose their homes.

KING: Is this a good time to buy, then?

ORMAN: This could be a very good time to buy only if -- and only if -- you get a price that is a serious steal. You know, right now, we have real estate going to the prices -- in some areas -- back to 2004. There are people who are in such trouble, you could pick up a piece of property right now, 2002 prices. Interest rates on mortgages -- 30- year fixed rate mortgages -- are still seriously low.

So if you're buying a home to live in, I don't care these Cracker Jacks that get on TV and say, don't you dare buy a piece of real estate. Oh, give me a break. You need a home to live in, you're far better off buying now.

KING: Why hasn't it affected Manhattan and Beverly Hills?

ORMAN: Well, it hasn't affected the very high end. And I want you to think about Manhattan for a second. Here you have many of these apartment buildings that are co-ops that you had to buy with what?

One hundred percent cash. Fifty percent cash. You had to be approved by a condo board, a co-op board. So you weren't allowed to buy these apartments -- the majority of them -- with no money down, 80/20 financing, negative amortized loans. You had to have money to buy these things. That's why it didn't affect us.

KING: We have a King Cam question for Suze Orman.

It's from Los Angeles and it's about real estate.

Watch.

UNIDENTIFIED FEMALE: I'm wondering how the shake-up in the subprime market will affect real estate prices in hot markets?

ORMAN: It's not so much the shake-up of the subprime market that's going to affect real estate.

What affects real estate is this. You have a mortgage. Interest rates are going to adjust up, especially if you have an adjustable rate mortgage.

When that mortgage adjusts up and you can't afford the mortgage payment anymore -- and, possibly, you owe more than what the property is worth, you tend to walk away from that house.

When you walk away from the house, it's now vacant. If the house is vacant, then you go into foreclosure and it starts to bring down real estate prices everywhere in the area.

Look at Stockton. The number one place in the United States for foreclosures is Stockton. Two years ago, it was the number one place of appreciation of real estate.

KING: Wow!

That's Stockton, California?

ORMAN: That's right, Stockton, California.

KING: It used to be a rule of thumb that your housing-related expenses shouldn't be more than 30 percent of your income.

Is that still about right?

ORMAN: That's about right. But the lenders took that rule and they threw it out the window, Larry. They didn't care how much you owed. They didn't care if you verified your income. All the lenders cared about was could they lend you money so that, therefore, they could make money.

Now, here's the thing that's very important for people to realize. Because many mortgage companies and banks, especially, when they lend you money, what happens is they take that loan and they sell it off. So they don't care if it's a really secured loan or not, because they're not going to be the ones responsible for it.

KING: An e-mail question from Cheryl, Southfield, Michigan: "My present mortgage will be up for refinancing in August of 2008. My interest rate is now 3.25. Should I wait until next year or refinance now?"

ORMAN: Cheryl, it depends. 2008 is just a little bit away. If I were you, I would be refinancing right now. Let me tell you why. First of all, interest rates on 30-year and 15-year fixed rate mortgages are still really low. That's number one. But we never know what the future holds for you.

Do you get in a car accident?

I don't want to be morbid here, but do you lose your job?

Does something happen where you won't qualify for a loan six months or one year from now?

So while things are good right now and if you're going to stay in that house, and you can qualify to refinance, do it now, girlfriend. Do it now.

KING: Another e-mail from Tracy in Baltimore: "Are bimonthly mortgages a good idea?"

ORMAN: Bimonthly mortgages -- and, you know, Larry, we talked about this two weeks ago when I was here -- bimonthly mortgages are simply where you pay -- rather than paying a mortgage once a month, you pay your mortgage payment every two weeks. In a sense, by doing that, you're paying 13 mortgage payments a year rather than just 12. That reduces a 30-year mortgage down to about 25 years, a 15-year mortgage down to about 12.3 years.

Could you do the exact same thing -- let's say you owed $1,200 a month for a mortgage payment. Divide that by 12 and send in $1,300 every single month and you would accomplish the exact same thing.

Either way, OK, I don't love bimonthly, biweekly mortgage payments.

KING: The stock market goes up, it goes down, then it breaks a new record, a new high.

Is this a good time to invest?

ORMAN: It's always a good time to invest if you have time on your side.

What normal person invests for a week from now, three weeks from now?

When you invest in the market, you, hopefully, are investing for 10, 20, 30 years from now. If I were investing in the market right now and I needed to, you know, really have good returns, I would look at it like this. I don't want the market to go up. I want the market to go . Because the way most people invest in the stock market today is through their retirement plan at work. You're putting in monthly payments every month from a 401k or a 403b. If the market goes down, the shares of the mutual funds offered within your 401k plan go down. The more those share prices go down, the more shares you buy with the money you put in. The more shares you buy, the more money you have in the long run -- 20 or 30 years from now when you need this money.

So who cares if the market goes up, if the market goes down?

Just buy good quality and you'll be fine.

KING: What do you think of day traders?

ORMAN: If you know what you're doing, OK. But day traders most likely don't have a place sooner than later to spend the night, because they probably lost everything sooner than later -- I don't -- they -- day trading is for the birds.

KING: I've got a friend, a well-known broadcaster who is whacked. He's up every morning. He lives in L.A...

ORMAN: Yes?

KING: Every morning at 5:00. He's trading all day.

ORMAN: Markets -- and is he making money?

KING: Some weeks he does, some weeks he doesn't. ORMAN: That's all -- I think day traders are kind of like, you know, gamblers, races, horses. I think the way you invest in the stock market is you buy things every single month. You dollar cost average into the market. And over the long run, you're going to do great no matter what the market does.

KING: Suze Orman is the guest.

Up next, McMansion mania versus a down housing market. Something's got to give. Suze tells us what that something is when we return.

(BEGIN VIDEO CLIP)

ORMAN: You'd better know for sure that you are doing the right thing with your money. So I ask you to look into your money, to make sure that you aren't making mistakes. You deserve to have financial freedom. You deserve to make the most out of your money. You deserve to have every day be your birthday. And the only way everyday is going to be your birthday, ladies and gentlemen, is when you have true financial freedom.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: Suze Orman is the guest.

We're helping you with your finances.

Is it ever a good idea to pay off a mortgage early?

ORMAN: I always think it's a good idea if -- and only if -- you're going to stay in that home for the rest of your life. So, you know, some always, they trade, they do this. But once you become 45, 55 years of age sometimes you know you're going to stay there forever. If that's the case, I think it should be your number one priority to pay off that mortgage.

KING: An e-mail from Carrla, Evansville, Indiana: "I'm 45, no mortgage, car payments, credit card or other debt. I have significant savings and investments."

Want to come over here?

(LAUGHTER)

"My home is worth about $250,000. I want to add a room, which would cost about $35,000. Should I take out a mortgage to finance it?"

ORMAN: No, you shouldn't take out a mortgage to finance it. You're -- here you are, you're a person. You own everything outright, which says to me you don't like debt. You have savings. You have it, so please just pay for it outright.

KING: Yes. ORMAN: However, you be very careful, because if you think you're going to spend only $35,000 when you build something, you'd make sure that you've budgeted for at least 70, because I don't know one construction project that ever comes in on budget.

KING: An e-mail from Dorothy in Houston, Texas: "I took out a home equity loan for $35,000 about a year ago to buy a second home. It didn't happen. The money is sitting in my bank. What should I do with it?"

ORMAN: It depends. You said, Dorothy, that you took out a home equity loan. There is a difference between a home equity loan and a home equity line of credit. A home equity loan is where the interest rate is fixed for the entire length of the loan. A home equity line of credit is where the interest rate fluctuates according to what's happening in the interest rate environment.

If the interest rate on your home equity loan is lower than what you can get in a C.D. In a money market account -- I mean you can get 5 percent or so in some of these places -- you keep it. If it's more expensive, pay it back. That's how you figure it out.

KING: We've got a King cam question about big wealth and its impact on the economy.

Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Yes. My question is, I was just wondering if you think that large accumulations of wealth like with Bill Gates and others, and even smaller accumulations of wealth, don't actually themselves act as drags on the economy by bottling up wealth when it might be used for other more productive purposes, like goods and services?

ORMAN: Well, you know, what you have to understand is that a lot of that wealth of those very, very wealthy gentlemen -- and women, for that matter -- they don't have it sitting in cash. They have it sitting in stocks, stock options, other investments, real estate. So they aren't having a drag on the economy. If anything, they're investing it properly and they're probably keeping this economy going, my dear friend.

KING: Now concerning McMansion.

To a lot of Americans, it seems the attitude is bigger is better. A lot of upgrades in amenities when it comes to housing. Thoughts on the McMansion mentality and implication on people's personal financial situation.

ORMAN: I think it's horrific, absolutely...

KING: Terrific?

ORMAN: Horrific. KING: Horrific?

ORMAN: Horrific. Don't like it on any level.

Why?

KING: Why, Suze?

ORMAN: Why, Miss. Orman, do you think that way?

I'll tell you why I think that way, everybody. When you have these huge 25,000, 40,000 square feet mansions, what do you think it takes to run them?

The electricity for air conditioning, for heat, for -- to maintain it?

That has an effect on everybody. You know, you have to look at the world, Larry, and it's not just about money.

What's happening to our resources?

What's happening to our oils?

Where does it all go?

When you have these places for two people that are 40,000 square feet, what are they thinking?

They don't need that. I hate the McMansions.

KING: Is this a good time?

ORMAN: You know, it depends who you are, if this a good time or not.

KING: Well, if you're rich, it's always a good time.

ORMAN: It's always a good time. If you are middle America right now or just you're working to make it and you've gotten yourself in a situation where you owe more than the money that you have coming in, you don't have money to pay for health insurance, it's not a good time. And it's not getting any better at all. I've said it before, the rich are getting richer and the poor are getting poorer. And I know some people will argue with me on this, but I think the middle class is disappearing. And that's a shame for the most powerful country in the world.

KING: Disappearing by going poorer?

ORMAN: By going poorer. They most certainly are. You know, it's our right to not -- when you look at what our children owe in student loans, when you see that they're graduating with $150,000 of a student loan and they come and maybe they'll get a job for $35,000 if they're lucky. But good luck being able to put gasoline in your car. Good luck to being ever able to pay back that student loan. Your jobs are being outsourced. So many things are happening. They can't afford a piece of real estate. Even though real estate prices have come down, they're still exorbitant.

Yes, it's not a good time.

KING: When we come back, lots more priceless advice from Suze Orman on managing your debt, keeping your credit score high and lots of other things.

All next.

Don't go away.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Sales of new homes have dropped to a seven year low. And that, we're wondering how...

UNIDENTIFIED FEMALE: As you mentioned, new home sales tumbled 8 percent in August, to their slowest pace since 2000. And the median home price tumbled by 7 (INAUDIBLE). That is the biggest drop in almost four decades.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

KING: We're back with Suze Orman.

Kid Rock tomorrow night.

An e-mail question from Cecily in Las Vegas: "My husband and I are 60 years old and made a $100,000 profit from the sale of a home. Should we invest the money or buy another home?"

ORMAN: Oh, how can I answer that for you, girlfriend, because I don't know what you want to do.

But the question is this. You're 60 years of age. Actuarially speaking, if you're healthy, you're going to live another 20, 30 years.

Where are you going to live?

Do you want to simply continue to rent for the next 20 or 30 years or do you want to buy something that again eventually you can own outright?

I think everybody needs a home.

And so why wouldn't you take that money and buy another home?

Sixty, you're a baby, still. You're not that old. Buy another home if that's what you think you should do.

KING: You mentioned that the wealthy have it good earlier. ORMAN: Yes, they do.

KING: Define wealth.

What's a wealthy person to you?

ORMAN: Well, a wealthy person, you know, I've always said in my books that the definition of true wealth is that which can never diminish. Wealth really, Larry, isn't defined by how much money you have. There's some people -- and you can travel in countries that have absolutely no money and you can look at them and their eyes have more wealth in it than all the money in the world could ever buy. And then you can look at some people...

KING: What's wealth to you?

ORMAN: So, meaning what would be a lot of money to me?

KING: Yes.

What, $25 million?

Is that wealthy?

ORMAN: No, actually, a lot of money to me now, right now, would be about $100 million or up.

KING: $100 million or up?

ORMAN: Um-hmm.

KING: That doesn't diminish, that you never touch.

ORMAN: That you never touch. Obviously, yes, you know, it used to be oh my God, if you could just be -- have a million dollars. Now, it's $10 million. If you look at it, $10 million invested at 5 percent is only $500,000 a year. It's like yes, you need, believe it or not, wealth...

KING: So it's $25 million of what, by your standards?

ORMAN: It's OK. Not a lot.

KING: OK.

ORMAN: OK?

KING: Boy, a lot of people are (INAUDIBLE).

ORMAN: I know. But it's true.

KING: Yes.

ORMAN: But, I mean -- but you asked me and that's what I think.

KING: $100 million. ORMAN: $100 million.

KING: E-mail from Lola, Charleston, South Carolina: "Suze, please help. My husband and I are 47 years old with two kids. Current total salary $95,000. Because of a period of being out of work and not being able to sell our house after we moved so I could get employment, we have $75,000 in credit card debt. Should I tap my 401k to help pay it down?"

ORMAN: I am begging you not to tap your 401k to pay down a credit card. Not only you shouldn't tap your 401k, everybody watching tonight should never ever, ever take a loan from a 401k plan.

Why?

The money that is in your 401k, which is a retirement plan with your employer, is money you have never paid taxes on. When you take a loan from a 401k, normally you have five years to pay that loan back.

Pay it back with what?

Money you have already paid taxes on. Later on in life, when you go to take that money out again, you will pay taxes on it one more time. The government is wishing and praying that you take a loan out so that you volunteer for double taxation.

What's wrong with you?

You don't want to do that.

Do not take a loan from your 401k to pay down credit card debt ever.

I just have to say one more thing. Money that's in a 401k or a retirement account, an IRA, if you claim bankruptcy, it is safe and sound. They can't take it from you. So the more money you keep in a retirement account -- if you are in true financial trouble and you ever end up claiming bankruptcy -- the more money you're going to have after bankruptcy.

Got that?

KING: I never heard of that.

Should you pay all your credit cards every month if you can?

ORMAN: Absolutely.

KING: Don't...

ORMAN: You should never ever carry credit card debt if you don't have to, even if it's at a zero percent interest rate.

KING: Because?

ORMAN: Because when you carry a lot of debt against your credit limits on these credit cards, even if it's at a zero percent interest rate, that decreases your FICA or your credit score. When your FICA or credit score goes down, in many states, your car insurance premium actually goes up. So I would not be carrying debt on credit cards.

KING: A question, an e-mail from Rosalyn in Union City, New Jersey: "Should you be saving money when you're in debt?"

ORMAN: Depends at what the interest rate of your debt is, number one, and what your FICO score happens to be. I personally, again, would tell you that the credit card companies right now are doing many things to make sure that they're making money off of you. There are two major credit card companies right now that have actually increased their late payments. They've increased their cash advance interest rates. Credit cards can be very tricky.

So if you have credit card debt, I would like to see you get out of credit card debt first before you save money.

KING: I believe Bank of America and other banks are going to follow -- a dollar a month -- it's going to be $3 to take money out of an ATM machine.

ORMAN: Yes, but...

KING: That always looks cheap.

Is it?

ORMAN: No, it's not cheap. That's a huge thing. But, remember, they're doing that for people who aren't their customers. Where these banks are really getting people on their credit cards is when they are charging -- for instance, you go and take a cash advance from your credit card. A lot of people can't pay their bills, so they take out cash advances. There's cards out there now that have just raised their interest rate to 29.22 percent if you take out a cash advance -- 22 percent, if you pay...

KING: So pay it every month.

ORMAN: Yes, but the thing is, they're going to -- yes, pay it every month. But if you're taking a cash advance, you can't pay it back, because you need the money or you won't be taking a cash advance. And they're charging you a 3 percent transaction fee besides. Oh, they're getting you totally across-the boards.

KING: Yes. Plus the $3.

ORMAN: Plus -- well, $3 if you're doing it not at your own bank. So, remember, the Bank of America thing is just -- if you're a client of Bank of America, they're not going to charge you $3. But if you're not a client of Bank of America and...

KING: Is that rip-off?

ORMAN: I think that's a rip-off. Let them use your money.

What do you care?

Yes, it's a rip-off.

KING: Because you're paying money to get your own money.

ORMAN: Yes.

KING: Not bad.

ORMAN: Not bad. It's pretty good.

KING: We're going to take a break and we'll be back with more.

We've got lots more e-mails and lots more King Cam questions for Suze Orman on this edition of LARRY KING LIVE.

Coming up, as bad as the housing and credit crunch are, does she see a recession up ahead?

We'll find out next on LARRY KING LIVE.

Next week, former president Jimmy Carter. Plus, Howard K. Stern's first live interview since the death of Anna Nicole Smith. And rock legend Eric Clapton, all coming up on LARRY KING LIVE.

(COMMERCIAL BREAK)

KING: We're back with Suze Orman. On our Website, by he way, CNN.com/larryking. We got a quick vote. Which do you have more of, savings or debt? Right now, 55 percent of the people have said, debt. There's still time to vote. Are you surprised by that?

ORMAN: No.

KING: I thought it would be more.

ORMAN: I give these talks all the time. My normal audience size is anywhere from 10 to 30,000 people. I ask one question when ever I start my talk. Please stand up if you have credit card debt, 99 percent of the audience constantly stands up.

KING: We have a caller, Fargo, North Dakota. Hello.

CALLER: Hello. Suze, what do you think about reverse mortgages for people in their late 70s?

ORMAN: You have to be very careful, just before I answer that, for the viewers watching who don't know what a reverse mortgage is. A reverse mortgage is when normally you own your house outright, you're living in it, you don't have enough money to pay your bills and you think, I know, I'll take the equity of my home out via a reverse mortgage where the bank pays you either a monthly payment to stay there, you can have a line of credit where you can write a check or they give you a lump sum of money.

Here's the key. I like reverse mortgages, especially those FHA approved, OK, however, the cost to get a reverse mortgage, the points up front, the fees are so very, very expensive currently, do I think, as the baby boomers get older and more and more people need to do reverse mortgages, will those expenses come down? I do. If you can wait another year or two or three to take one out, I think its fine.

KING: She's in her late 70s.

ORMAN: You have to be 62 years of age or older to have a reverse mortgage.

KING: We have an e-mail from Newark, New Jersey. I'm in debt management program. Does credit counseling and debt consultation have a negative effect on your credit score?

ORMAN: Depends what type of debt management program you are in. They're two types, one sponsored by the National Foundation of Consumer Credit, where you go to them, they educate you, and you pay them every month. They pay your credit cards for you; they negotiate with the credit card companies to get a lower interest rate. Those do not hurt your credit scores at all.

However, other debt management programs actually tell you if you owe $5,000 in credit card debt, they will reduce the $5,000 you owe by ruining your credit, negotiating with the credit card companies, because you have such a bad credit score, they don't think you'll ever pay them back, don't you ever use one of those. They ruin your whole life, if you ask me.

KING: See a recession coming?

ORMAN: I'm not exactly sure. Some people say we're in a recession, some people say we're on the brink of a recession. I don't care whether we're in a recession or not, to tell you the truth. I look at everyday people in their lives.

KING: If they're in trouble --

ORMAN: If you're in trouble, you're in a recession. Who cares?

KING: E-mail question from Stefanie in Rochester, New York. My IRA funds are now in a stock market, should I move them into a money market until we know just how bad the economy will get with the mortgage crises and its ripple effects? I don't need any money for 20 years.

ORMAN: No. Are you crazy? This is the time for you to stay where you are. All you want to make sure is that the stock or mutual funds or the exchange traded funds that you're invested in are good. Do they have earnings? Do they have a good manager? Are they in an area they should be in? If you don't know what to do, buy an indexed mutual fund or indexed exchange fund. Now is the time to stay the course and dollar cost average, where you invest a specific amount of money every single month over the next 20 years and girlfriend, you'll be sitting pretty.

KING: Suze Orman, she knows her stuff. Another king-cam question, tips on investments. Another king cammer from a young guy looking to invest.

HENRY: Hi, Suze, my name's Henry, I was wondering if you have any tips for those of us without a very large investment budget these days.

ORMAN: Tips for those without a very large investment budget these days. If you don't have a large investment budget, the first tip I can always tell you, want to guarantee yourself an 18 percent return on your money, pay off your credit card debt. Because most of you have $9,000 in credit card debt at an 18 percent interest rate. Get out of credit card debt next, if you want to put money away for retirement, always put money in a 401(k) plan if and only if your employer matches your contribution, which means you put in a dollar, they give you 50 cents. All employers only match up to a specific amount of money, usually 6 percent of your base pay after that. Or if they don't match, do a Roth IRA, if you qualify. It is the best place around to put money.

KING: Caller from Alberta, Canada. Hello.

CALLER: How are you?

KING: Fine.

CALLER: Good. Three years ago I was sick. My question is this, I have since accumulated $30,000 in debt to three different institutions, the bank and government and a credit card. I have $35,000 in a government registered RSP. Who do I pay and how do I pay it? What do I do?

ORMAN: You pay the government first.

KING: That's the Canadian government.

ORMAN: That's the Canadian government. Because all governments, the IRS here or any taxing authority has the ability to seize a bank account, garnish your wages, so you always pay off the IRS or a student loan for that matter, for those of you listening because you can't do anything about that.

Next, you would want to make sure if you had debt that's secured by the equity in your home, for instance, that debt is the debt you pay next, and the debt that you pay last is unsecured debt, which is always credit card debt, because if you can't pay that, what are they going to do to you? They're going to have to sue you, win a judgment, and put a lien against your house or something. If you don't have one, it's in that order to pay off your debt.

KING: Suze Orman is the quest and when we come back is bad news from Main Street good news for Wall Street. Or does it just seem that way? We will ask Suze that and lots emails too right after this.

ORMAN: Here's what you need to know. You are never going to be powerful in life until you are powerful over your own money, how you think about it, how you feel about it and how you invest it. What happens to your money directly will affect the quality of your life, not my life, not your financial advisor's life, not your banker's life, but your life.

(COMMERCIAL BREAK)

KING: We're back with Suze Orman. We have another king cam question it is related to interest rates and investing decision. Watch.

(UNIDENTIFIED FEMALE): I'm wondering if now is a good time to buy some long-term CDs or do you think that interest rates will go up even higher.

ORMAN: Interest rates actually aren't going to go up for a while. Interest rates are really going down. I want you to think about this, everybody. The Feds have lowered the Fed fund rate from 51/4 to 4 3/4? Have you noticed the interest rate you are being paid on the bank accounts and CDs that is going down. When the Fed fund lowers their rates, the rates that the banks pay you go down.

For those of you right now you are afraid to invest in the stock market, you are afraid to invest in real estate; you want to keep your money in the savings account. Look what's happening to you? You're making less and less on your money. If the Feds continue to lower, which I think you will see them do, you will see that happening. You should be locking up, at least right now, a nine month CD, a one year Cd. Now is the time to lock it and go longer, one or two years, not to stay short term, right now.

KING: E-mail from Robert in Houston. As more and more baby boomers approach retirement age when and under what circumstances should they consider long-term care insurance?

ORMAN: Long-term care insurance is insurance that's very, very important, everybody. The stats are approximately 1 out of 3 of you will spend some time in a nursing home after the age of 65. Medicare will not pay for it. You don't want to end up on Medicaid; you don't want to do that thing that means you're broke. Who will pay for it? You out of your own pocket and you will go financially bankrupt if you don't have long-term care insurance. Perfect age to buy long-term care insurance is 59 if and only if you can afford it, from 59, all the way until 84.

Depends, it would be about $2,000, $3,000 a year. A good company, that premium will stay stable the entire time. But remember Larry, average age of entry into a nursing home is 84. You do not want to buy long-term care insurance at 59, have your situation change and drop it at 75.

KING: Is there a Main Street Wall Street clash.

ORMAN: Sure. There is always a Main Street --

KING: Wall Street is not interested in Main Street?

ORMAN: I don't think Wall Street is interested in Main Street. I'm not even sure that the Feds are interested in Main Street. The Feds lowered their rates so it saved Wall Street. All this happened. But is it really going to help the normal persons that are walking on Main Street? The Fed fund rate is not going to help this adjustable rate mortgage problem.

KING: I know you're a big advocate of taking advantage of employer offered retirement plans. Are there times there might be a better option than putting money in a 401(k).

ORMAN: You bet you there are. If your employer does not match your contribution, I wouldn't be putting a penny in my employer's 401(k) plan if that were the case. I would much rather see you, if you qualify, to have a Roth IRA. If you don't qualify for a Roth, have a traditional IRA or non-deductible IRA, I want to see all of you have money in an IRA.

In the year 2010, no matter what your income, you will be able to convert into a Roth IRA. Currently, your income has to be under $100,000 for you to put money from a regular IRA into a Roth. Roth is where you want to be.

KING: We're going to take a break and we will have more e-mails for Suze Orman in a moment. Right now, let's check in with Anderson Cooper down the hall somewhere. He will host "AC 360" at the top of the hour. What is up Anderson?

ANDERSON COOPER, HOST, "AC 360:" Larry, I've been taking notes on what Suze Orman is saying. Good advice. Tonight on "360," newly released video, perhaps clues on a mysterious airport death. You are seeing the video that we've seen today, the security camera images taken just before Carol Anne Gotbaum died in police custody. What they review we will have that just ahead.

And a deadly armored car heist in the Philadelphia as violet crime is arising across the country. America's birthplace is becoming a killer capitol. We'll look at reasons why, keeping them honest.

All that plus a new twist in the bathroom bust of Senator Larry Craig on "360" at the top of the hour Larry.

KING: I didn't get that one. We'll tune in for that at 10:00 Eastern, 7:00 Pacific with Anderson Cooper. We'll be right back with Suze Orman. Don't go away.

Tomorrow night on "LARRY KING LIVE, his name is "Kid Rock." And his exclusive, his first interview since that BMA brawls with Tommie. What really happened?

A new controversy with his ex, Pamela Anderson. What's the deal?

Plus, for the first the first time ever we'll go honky-tonking.

He lets cameras into the place one of rock's wildest characters calls home "Kid Rock" tomorrow night.

(COMMERCIAL BREAK)

KING: We're back with Suze Orman. Another e-mail from Karen in Lawrence, Kansas. I'm a single mom making less than $3,000 a month. At 42, I finally get the importance of saving for retirement. How much should I save a month and how do I figure it out?

ORMAN: You should save as much as you can. This is Suze's rule of thumb. I want you to have at least six to eight months of an emergency fund in a savings account, a lot will pay you anywhere from 4 to 5 percent. Have it sitting there in case something goes wrong, you need money because I don't want you taking a cash advance from a credit card because that's where they're going to get you.

After that, if you own a home and you know you're going to stay in that home the rest of your life, I would want to see you pay off that mortgage, truthfully, before you save money anywhere else. If you don't own a home, now is the time to start saving for a down payment so you can purchase one.

KING: An e-mail from Brian in Los Angeles. I'm four years from retirement. I have about $500,000 saved in CDs. I've always wanted a home of my own. Should I buy one or hold the money for retirement?

ORMAN: Well, where are you living right now? Here's the problem.

KING: Probably renting.

ORMAN: You are renting. And rents in my opinion are going up and up and up. Why are they going up? Because all the people losing their homes can't afford to keep it have to rent. Because they have to rent, landlords now can increase the prices. I would rather see you have a home you can own.

Now, if you're paying $2,000 a month for rent, that's $24,000 a year. Where are you going to get that from? A home once you pay it outright, that's like having a lot of money.

KING: E-mail from Sandy in Illinois, what's the best way to save money for our young grandkids so it won't count against them in college loan calculations and they can't touch it until they're 25.

ORMAN: You see, a lot of you, when you want to put money away for your kids, a lot of you are using what's called uniform gift to minor act accounts. Please don't do that. Because if you put money in an UGMA, that money will count against them for financial aid. If you put money in a 529 plan or savings account to pay for some of their education that will not hurt them for financial aid. That's where you would be able to save it.

However, they're going to be able to touch it before 25. If you really want to lock it up and not have it touched before 25, you just want it in a regular trust with certain stipulations. Please, give it to them when they're 18 and they need it for college, everybody.

KING: A lot of what you're painting here tonight is bleak.

ORMAN: You have to get who Suze Orman is. Suze Orman is the personal financial adviser for the world for people who have financial problems. I'm not your typical financial adviser that says, well, you're really rich; let me invest your money for you. So many rich people come to me. I go, you don't need me. You can have anybody you want. I look for the people who have credit card debt, losing their homes, they don't have any money and they needed advice on what to do. Because that's who I am, I get thousands of people, of course I will feel this way.

KING: And you do it through books and media. You don't have personal accounts. No. I don't have personal accounts. Through my television shows, books, through my talks, I talk about that which most financial advisers could care less about.

KING: We'll be back with our remaining moments with Suze Orman. We'll have a king cam question too. Don't go away.

ORMAN: Let's say you were 25 years of age right now. And you were putting $100 a month away in a good mutual fund or some investments, and you did that every single month, every month, until you were 65 years of age, and you got normal market returns, as the market is doing right now on that money. Do you know, at the age of 65, you would have $1 million?

(COMMERCIAL BREAK)

KING: We're back with Suze Orman. One more king-cam question about a glittering subject. Watch.

(UNIDENTIFIED MALE): Hi. I heard the Canadian dollar reached parity with the U.S. dollar. With a reclining greenback, are we going to face major inflation in this country?

ORMAN: We may face major inflation in this country not so much because of a greenback and things like that, because we have inflation here, have the highest wheat prices around, look at the price of oil and look at everything that's happening but the decline of the dollar is something you really need to pay attention to. If you think that it only affects those of you who travel overseas, so that it's more expensive to go to Europe or to go to London, that's not true, because our dollar is going down.

When we are bringing products in, we are having to pay more for it and who do you think those stores are going to pass that increase onto? Those of you that shop at the lower end stores, you will be paying more for those goods so it will affect you as well, which is what? Means inflation.

KING: One more call, Atlanta. Hello.

CALLER: Yes, hello.

KING: Hi.

CALLER: My question is, why is the -- we're closing on a home shortly; I'm trying to find out why the realtor and the loan officer are trying to push us into an arm rather than a fixed rate? What are they getting out of it? Depends. They may be getting more points to sell you that arm. Here's the thing. Arm means adjustable rate mortgage. Maybe for you to qualify for that, because whatever the reason you have going on in your life right now financially speaking, maybe that's what you qualify for. Do you have a good credit score?

(UNIDENTIFIED FEMALE): Are you there, dear?

CALLER: Yes, yes, we do.

ORMAN: Listen, if they're pushing you that way, do me a favor, push them out of your life. If you are in this home, can you get either a 15 year or 30 year fixed rate mortgage? Make sure you put at least 20 to 30 percent down and you will be fine. Are you putting 20 percent down?

CALLER: No, I'm not but I did ask them for a 15 to 30 year mortgage and they completely ignored me.

ORMAN: If you're not putting at least 20 percent down, you will owe something known as PMI private mortgage insurance. Please buy that up front. Go to mgidc.com, Mortgage Guarantee Insurance Corporation, as long as you have at least 10 percent equity in your house you can buy your PMI up front, it is 1 percent of your mortgage amount. That's how you should do it. Do not buy a piggyback loan; do you hear me, Atlanta?

CALLER: Yes, I do.

KING: What are you talking about?

ORMAN: Well here is the thing. If you don't have at least 20 percent down, the lenders don't feel you have enough skin in the game and so they charge you private mortgage insurance ask you do two loans, an 80 percent loan and then usually another loan that piggy backs on top of that.

KING: A second mortgage.

ORMAN: A second mortgage or a home equity line of credit or home equity loan. I'd like to see you buy the PMI up front. How do you do that, it is 1 percent of your mortgage amount, done.

KING: You're always so excited about everything. Do you ever get tired of what you do?

ORMAN: No. I start at 4:30 in the morning. When it's talking about money, to help people make more out of less, nothing makes me feel very excited. If I can change the way people feel, think and act about money, I've done my job.

KING: Do you hear from people?

ORMAN: I hear from thousands and thousands of people everyday.

KING: Thanks.

ORMAN: You betcha.

KING: So you get a reward that way?

ORMAN: That's what I do. I don't do this for the money anymore. I do this because somebody's got to do it. I love doing it. You sat across the desk from people for a long time. You don't see a sparkle like this in somebody's eye unless they love what they're doing.

KING: As always, Suze thanks.

ORMAN: Thanks for having me.

KING: Suze Orman, she'll be back, our number 1 "New York Times" best selling author, Emmy winning TV host. And you head to our Website, CNN.com/larryking you can e-mail tomorrow night's guest, Kid Rock or download our current broadcast, Whoopi Goldberg. It's all at one great place, CNN.com/larryking.

Next week's guests include Jimmy Carter, Howard K Sterns and Eric Clapton.

Now, Anderson Cooper and "AC 360." Anderson.

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