ArcaMax

Time for another Q&A column! If you have a question, send an email to: askjill@jillonmoney.com.

Question: I have $20,000 of credit card debt that resulted from a medical emergency. My bank has offered me a $25,000 home equity loan at 9 percent interest. Should I take the loan and pay off the credit card, which charges me 27%?

Answer: Of course, 9% is a lot lower than 27%, so yes, this is a good way to eradicate your high interest debt faster. Just make sure you read the fine print of the equity loan before signing. Once you proceed, automate your payments and try to pay a little extra on the loan each month so you can put this debt in the rear-view mirror.

Q: I’m 65 and have struggled with my health this year, and I don’t think that I can continue working full time. I’m thinking about claiming Social Security now. If I wait two years, my monthly income will increase by $270. What should I do?

A: There are three important ages when it comes to Social Security retirement benefits: 62, 67 and 70. While you can claim as early as age 62, doing so will permanently reduce the benefit by as much as 25%.

That’s why I usually advocate that people wait until their full retirement age, which is 67 for anyone born after 1960. (Waiting until age 70 increases benefits by up to 8% a year more.) That said, if your physical condition prevents you from working full time, consider claiming early and then try to work part time to help make your cash flow work better.

Q: When does an umbrella insurance policy make sense? We have a paid for home worth about $600,000 and the rest of our money is split between CDs and retirement accounts.

A: Umbrella insurance may provide additional liability protection when the limits of your auto, homeowners, motorcycle, RV or boat insurance policies are exhausted. You are right that your retirement accounts are protected from creditor claims, but your house and the CDs are not.

The only downside to picking up extra umbrella coverage is the cost, but these policies are usually affordable. In order to purchase umbrella coverage, your homeowners’ policy and your auto policy will have to be up to snuff and must meet certain minimum liability limits. That means that you may need to upgrade your current policies, which could result in an increase in your premium. That said, if you can afford the extra cost, umbrella policies can provide an extra level of protection that might provide peace of mind.

Q: My mother passed away and left me a stack of savings bonds. My bank will not cash them — what should I do?

A: Go to TreasuryDirect.gov. There you'll set up an account, link your bank account, complete Form 1522, and send everything to Treasury.

Q: We're in our late 30s and have a new mortgage at 6.125%. We are fortunate in that we have extra money each month, and we don’t know whether to invest it or to pay down the mortgage early. It's hard to pass up a guaranteed 6.125% return.

A: Before paying off the note, it’s important that you have established an emergency reserve fund with six to 12 months of your living expenses, maxed out your retirement accounts at work, and are not carrying any consumer debt. Then consider whether losing access to the money that would be used to pay down the mortgage would cause any concern. If you have thought through those issues, then paying down the mortgage could work.

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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com)

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