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Liz Weston

Tuesday’s need-to-know money news

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Today’s top story: How to avoid waiting on credit card customer service lines. Also in the news: COVID-19 refunds on campus, why older Americans might be having trouble getting credit cards, and money-saving tips everyone should know.

How to Avoid Waiting on Credit Card Customer Service Lines
Alternatives to sitting on hold.

Will You Get a Refund If COVID-19 Closes Your Campus?
You might get a refund for room and board, but don’t expect a tuition refund if campus shuts down again.

Why older Americans might be having trouble getting credit cards
How banks determine creditworthiness.

Money-Saving Tips Every College Student Should Know
Saving money whenever possible.

The 2 costs that can make or break your nest egg

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If you earn a decent income but have trouble saving, the culprits could be the roof over your head and the car in your driveway.

Retirement savers who contribute more to their 401(k)s often spend less on housing and transportation than their peers, according to a study by the Employee Benefit Research Institute and J.P. Morgan Asset Management.

Better savers also spend less on food and drink, but housing and transportation are bigger expenses that tend to be less flexible. Once you commit to a place to live and a car payment, you’re typically stuck with those expenses for a while.

In my latest for the Associated Press, how your house and your car could be affecting your retirement savings.

Monday’s need-to-know money news

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Today’s top story: How hotel prices changed in 2020 vs. 2019. Also in the news: A new episode of the SmartMoney Podcast on emergency loans and the perks of buying local, what to know about EFTs and adding them to your portfolio, and what to do if you receive an unpaid notice from the IRS.

Analysis: How Have Hotel Prices Changed in 2020 vs. 2019?
Hotel prices have dipped significantly.

Smart Money Podcast: Buying Local, and Emergency Loans
How to help local businesses hit hard by the pandemic.

What are ETFs and why you should consider them for your portfolio
Many investments wrapped in a single package.

What to Do if You Receive an Unpaid Notice From the IRS
Don’t panic.

Q&A: Where’s that tax refund?

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Dear Liz: Like the writer in a recent column, I received a stimulus check for my late mother and dutifully mailed the IRS a check as the agency requested on May 6. The check finally cleared on Aug. 12. So, yes, the IRS will absolutely eventually cash it. However, I’m still waiting for the federal tax refund for my mother’s final tax return, which I mailed on April 20. I figure if it took them over three months to just cash a check, it’ll be at least a couple more months, if not longer, to process the return.

Answer: You’re probably right, and — as the previous column emphasized — the IRS does not need calls from people about non-urgent matters as the agency slowly works through its massive backlog. If you can wait to talk to the IRS, in other words, you should.

Q&A: Social Security ‘child benefit’ math

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Dear Liz: I just turned 62 and I have 3 children, ages 11, 13 and 15. I understand that starting Social Security now means my benefit is permanently reduced. Should I delay or take it now, since my children could get benefits?

Answer: The so-called “child benefit” complicates the math that usually favors delaying the start of Social Security.

Each of your children could get a monthly check equal to half your benefit because they’re under 18 and presumably unmarried. (Unmarried children who are under 19 but still in high school, or 18 or older with a disability that began before age 22, also can qualify.) There’s a family maximum that limits the total that can be paid to any household, which ranges from 150% to 180% of the parent’s full benefit amount.

Your kids can’t receive these benefits unless you’re receiving yours, however. Applying before your own full retirement age, which is 66 years and 8 months, permanently shrinks your check and subjects the family benefits to the earnings test if you’re still working. The earnings test reduces your benefit by $1 for every $2 you make over a certain limit, which this year is $18,240. The earnings test goes away after you reach full retirement age.

If you’re married, your claiming strategy also needs to consider your spouse. A reduced benefit could affect the survivor benefit one of you will have to live on when the other dies.

With so many variables to consider, you’d be smart to consult a Social Security claiming strategy site such as MaximizeMySocialSecurity or Social Security Solutions. These services aren’t free, but an investment of $20 to $50 could result in thousands more over your lifetime.

Q&A: Here’s why two 401(k) accounts aren’t better than one

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Dear Liz: I changed jobs more than three years ago and did not roll over my 401(k) when I started a 401(k) account with my new employer. I’m perfectly happy having separate accounts. However, I’ve read some IRS rules that I cannot understand about being penalized for not contributing to a 401(k) for five years. So my question: After turning 59½, will I face any sort of penalty or loss when I begin withdrawing funds from a 401(k) account that has been sitting idle?

Answer: There’s no penalty for not contributing to an old 401(k). In fact, you cannot contribute to an old 401(k). Once you leave the employer that sponsored the plan, you generally can’t put any more money into it.

What you may have stumbled upon are IRS rules that apply to employers who sponsor 401(k) plans that have a profit-sharing component.

Employers aren’t required to make contributions to these plans every year — there may be years when there’s no profit to share — but their contributions have to be “recurring and substantial.” If the employer hasn’t made contributions in three of the past five consecutive years, the plan could be terminated, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

That obviously doesn’t apply to your situation, and if you want to continue managing two 401(k) accounts, you’re welcome to do so. But consider rolling the money into your new employer’s plan, if it’s a good one and accepts such transfers. That would mean one fewer account you need to track and also could give you access to more money if you wanted to take out a loan.