Can We Afford to Adopt?

Q: My husband and I are in the process of adopting a child from Korea. We've put about $8,000 on a credit card, and within nine months we'll probably have to spend another $21,000. We don't make a lot of money, but we have excellent credit. Instead of putting the balance on a credit card, we're thinking about dipping into our Roth IRA and taking an unsecured line of credit from our bank. We have three biological children and have waited many years to make this adoption happen, but with all the craziness in the economy, I'm terrified of ruining ourselves financially. There are quite a few families ahead of us in the adoption process, so now would be the time to back out. Should we?

A: I applaud your desire to adopt a child in need, but I also need you to first think about the children you already have. As you clearly point out, you are on the verge of making choices that could financially ruin your family. Adding credit card debt is never a great idea, and in 2009 it is very risky. Credit card companies are looking for ways to shore up their own financial statements, and when they see customers increasing their debt during a recession, they get nervous. And when credit card companies get nervous, they raise the interest rates on those accounts—to as high as 32 percent. While it's true that you can withdraw any money you have contributed to your Roth without tax or penalty, I am not a big fan of this move. What will you have to live on in retirement?

Your wisest move is to make choices that help build your family's security. When you have eight months of emergency living expenses set aside and you can pay the adoption fees out of extra savings or income, then you should go for it. Until then, my advice is to wait.

Suze Orman's latest book is her 2009 Action Plan: Keeping Your Money Safe & Sound (Spiegel & Grau).