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Market’s ‘hiccups’ don’t last forever

Published: Monday, Sept. 24, 2012 11:01 a.m. CDT

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DEAR BRUCE: I am 60 years old, and I have been a homemaker all my life. Now I have medical problems such that even if I did want to join the workforce, I would not be able to.

There are limited funds for retiring and no pension. We first invested just prior to 9/11 and lost a lot of that. Is there some way to recoup that loss? Also, years ago I cosigned to buy a house for our oldest. Is there some way to be removed from this obligation now? They have been paying on time for 10 years. — L.P., via email

DEAR L.P.: In a few lines, you’ve asked a bunch of questions.

First of all, you say you took losses as a result of 9/11 and ask if there is any way to recoup that loss. If you mean that you sold the securities you owned, the answer is no. Had you kept them and not panicked, those losses in most cases would have been recovered and then some. This is why I try to tell folks not to panic just because the market has a severe hiccup.

As for the cosigning, if your offspring has made the payments on time, every time, it’s very possible that after 10 years the mortgage holder would accommodate you and take your name off the loan. If, on the other hand, the payments have been spotty, forget about it. Unfortunately, when you cosign, you are responsible for the mortgage payments but have no benefits of homeownership, which is a whole different story. I understand wanting to help out your kids, but often it’s not in your best interest.

DEAR BRUCE: I am 34 years old and have a 5-year-old daughter. I have started saving for her college. I would like to get some type of life insurance that would protect and provide for her if something should happen to me. What can you suggest? — Reader, via email

DEAR READER: Congratulations on trying to put money away for your daughter’s education. Where you’re putting it can be a very important choice, but that’s a subject for another day.

As for life insurance, in my opinion you ought to consider term insurance. Since she is 5, you might want to consider a 20-year term. That would take you to age 54, at which time your daughter ought to be long on her own. In all likelihood, it would be the least expensive insurance you could purchase.

As to the amount of life insurance to buy, this depends in some measure on how much you are earning (protecting the money that you receive now) and on who would look after the child if something were to happen to you.

Don’t just assume that all of these things will happen. You should name as a potential guardian the person whom you would like to take over this responsibility if you’re not in the picture, and purchase enough insurance to guarantee this person has ample funds to provide for your daughter.

Send questions to bruce@brucewilliams.com or to Smart Money, P.O. Box 7150, Hudson, FL 34674. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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