Monday’s need-to-know money news

Today’s top story: How to rebound from natural disaster debt. Also in the news: Quitting your job without another lined up, a 5-step recipe for financial success, and how to get in the holiday spirit without going into debt.

How to Rebound From Natural Disaster Debt
Slow and steady recovery.

Ask Brianna: Should I Quit My Job Without Another Lined Up?
Escaping a job you hate.

Your 5-step recipe for financial success
Five simple steps.

How to get in the holiday spirit without going into debt
A budget is essential.

Q&A: How to sort out the taxes when you sell your house

Dear Liz: I am trying to understand the capital gains tax exemption as it applies to the sale of a house. If I have no mortgage and I sell my house before I have lived in it for two of the previous five years that are now required for the exemption, is it based on the total selling price of the house or on the amount over what I paid for it? And what is the tax rate based on?

Answer: The home sale exemption can shelter from taxes up to $250,000 per owner ($500,000 for a couple) of capital gains from a home sale. If you don’t live in the home for at least two of the previous five years, you typically can’t use the exemption unless the sale was because of a change in employment, health problems that require you to move or an unforeseen circumstance that forced the sale.

The rules on these exceptions can get pretty tricky, so you’d need to discuss your situation with a tax pro. If you qualify, the amount of the exemption usually would be proportionate to the percentage of the two years that you actually lived in the home. If you sold after one year, for example, you might exempt up to $125,000 per owner.

Whether you have a mortgage does not affect the capital gains calculation. What matters is the difference between the price you get when you sell the house and the price you paid when you bought it.

From the sale price, you get to subtract any selling costs such as real estate commissions. From the purchase price, you can add in certain costs, such as home improvement expenses. What results after these adjustments is your capital gain for tax purposes.

If you have capital gains in excess of the exemption, you would pay long-term capital gains rates on that profit. Long-term capital gains are typically taxed at a 15% federal rate, although the highest-income taxpayers (those in the 39.6% bracket) may pay 20% and the lowest-income taxpayers (those in the 10% and 15% brackets, including taxable capital gains) pay a 0% rate.

States typically have additional taxes.

Wednesday’s need-to-know money news

Today’s top story: What to do if an ATM eats your deposit. Also in the news: Betterment adds a charitable giving option, 3 things you definitely shouldn’t finance, and the best Cyber Monday sales for 2017.

What to Do if an ATM Eats Your Deposit
Don’t panic.

Betterment Adds a Charitable Giving Option
Just in time for Giving Tuesday.

3 things you definitely shouldn’t finance
Don’t take out that credit card just yet.

Best Cyber Monday Sales for 2017
No need to fight the crowds.

Tuesday’s need-to-know money news

Today’s top story: Black Friday snafus and the insurance that fixes them. Also in the news: Holiday credit card promotions, how to skip long lines at the airport without spending a dime, and five things you shouldn’t buy on Black Friday.

Black Friday Snafus and the Insurance That Fixes Them
Protect yourself.

Are Holiday Credit Card Promotions Right for You?
Reading the fine print.

Skip Long Lines at the Airport — Without Spending a Dime
What you need to know.

5 things you shouldn’t buy on Black Friday
Hold out for real bargains.

When good money advice is bad for you

Discussing economic class is tricky in America, but the working and middle classes face vastly different financial challenges than upper-income families, and the gaps are growing wider. Good money advice for high earners could be lousy for low earners, and vice versa.

For example, certified financial planners recommend saving a three-month emergency fund before tackling other money goals.

That advice can make sense for affluent families — those who can afford a financial planner — since high earners often have enough discretionary income to create an emergency fund quickly. For families living paycheck to paycheck, the same advice could be an expensive mistake.

In my latest for the Associated Press, why good money advice isn’t one size fits all.

Monday’s need-to-know money news

Today’s top story: What doesn’t affect your credit score. Also in the news: A crash course for first-time Black Friday shoppers, how far your money will stretch on Black Friday, and how to pick a college that won’t break the bank.

What Doesn’t Affect Your Credit Score
Focusing on the important factors.

A Crash Course for First-Time Black Friday Shoppers
Tips for rookies.

See How Far Your Money Will Stretch on Black Friday
Getting the most for your money.

How to pick a college that won’t break the bank
Avoiding years of student loan repayment.

Q&A: How to figure out the right time for retirement

Dear Liz: I hear so much talk about waiting to collect Social Security. What are good reasons to start collecting Social Security at age 62? I recently retired from the military with a monthly retirement of $4,400. I plan to work a civilian job until I’m 62 (eight more years).

I’m in fairly good health now, but decades of military service and multiple deployments overseas put a lot of miles on my chassis. I truly hope I do, but I don’t know if I will live until I’m 80 or 90 years old.

Answer: None of us knows how much more time we have on this Earth. The primary reason for delaying Social Security is to decrease the odds of running short of money if we (or our spouses) happen to live a long time.

Think of it as a kind of longevity insurance because the longer you live, the more likely you are to use up your savings and to rely on your Social Security check for most, if not all, of your income. The wealthier you are — in savings and in pensions — the less important it may be to delay Social Security.

Your military pension provides a substantial monthly check and (presumably) survivor benefits for your spouse. These benefits will rise with inflation. You also have retiree health insurance at reasonable rates. You’re better off than most people approaching early retirement.

Still, your pension may not cover all your expenses and it’s not clear how much you have in other savings. Also, consider that your survivor would get about half (or less) of your pension check if you die first. So you may still want to hedge your bets by waiting at least until your full retirement age of 67 to start Social Security.

In addition to increasing your benefit, delaying to that age means you won’t be subject to the earnings test that can reduce your check by $1 for every $2 you earn over a certain limit (currently $17,040). You may think now that you’ll be ready to stop working at 62, but many early retirees find they miss the stimulation and social contact work provides.

Q&A: When considering retirement, money isn’t the only factor

Dear Liz: You answer many questions about whether people are ready to retire. But there’s one other thing to consider besides money, and this is more important.

Folks need to seriously ask themselves whether they can handle being retired. I know I can’t stand it.

I have more than enough assets, plus a pension, plus healthcare, plus no debts or bills. I’m young and healthy. But I find happiness in work.

Unfortunately, I had to leave my job owing to conditions outside of my control. I now live in a beautiful house at the beach, with all my money and all the things I like to do — and I’m miserable. I’m looking for a part-time job. I live in a small community and there aren’t many jobs, but I’m hopeful to find one.

Tell your readers that it’s not only the advice of a financial planner, but also some good soul-searching that they’ll need, especially if someone is a manager or a highly educated professional. You can’t just give that up and go from full time to no time. At least work part time before retiring to make sure it’s what you want.

Answer: That’s excellent advice. Not everyone derives meaning and purpose from work, but many do, and an abrupt adjustment can be painful. Good luck in your search for a job that gives you a reason to get up in the morning.

Q&A: Government financial help after disaster may come as a loan

Dear Liz: With all the recent hurricanes and other natural disasters, people are being helped by the Federal Emergency Management Agency with money for rentals or home replacements. What repayment does the government expect? Are there taxes owed by the recipients of that money?

Answer: FEMA grants aren’t taxable, but they’re typically not enough to replace a home. FEMA may provide up to $33,000, but the typical grant is much smaller — in the $3,000-to-$8,000 range, according to recent data from the agency.

Most financial assistance after a disaster comes in the form of low-interest loans to renters and homeowners, offered through the Small Business Administration. Recipients are expected to repay those loans.

Q&A: More reasons why adding an adult child to a deed is a bad idea

Dear Liz: I’m an estate planning attorney and I agree with your warning to the couple who wanted to add their daughter to their house deed to avoid probate.

The daughter’s share of the home would lose the step-up in tax basis she would get if she inherited instead, plus there are several other issues. What if the daughter gets sued or has creditor problems? The house could be at risk.

The parents also may not have thought through what might happen if the daughter marries, divorces or dies before they do. A living trust would cost some money to set up but would avoid these problems.

Answer: A revocable transfer-on-death deed is another option for avoiding probate, but a living trust is a more all-encompassing solution that also can help the daughter or another trusted person take over in case of incapacity.

In any case, they should consult an estate planning attorney, who has a far better understanding of what can go wrong after a death and how to prevent those worst-case scenarios.