Tuesday’s need-to-know money news

Financial-PlanningToday’s top story: How life insurance companies learn all of your secrets. Also in the news: How to avoid overwhelming student loan debt, questions parents should answer before paying for a wedding, and financial tips to ease the transition from military to civilian life.

How Life Insurance Companies Learn Your Best-Kept Secrets
It’s all in the data.

8 College Planning Tips to Avoid Overwhelming Student Loan Debt
Starting off on the right foot.

Paying for a Wedding: 5 Questions Parents Should Answer Now
Forget about any fancy purchases for a while.

8 Financial Tips To Ease The Transition From Military To Civilian Life
Coping with big changes.

Monday’s need-to-know money news

common-retirement-mistakesToday’s top story: College counselors spill financial aid secrets. Also in the news: How to tell if you’re on track for retirement, why new grads have a huge retirement savings advantage, and the 401(k) mistakes that could cost you a bundle.

College Counselors Spill 6 Financial Aid Secrets
Get the inside scoop.

Do the Math to Tell If You’re on Track for Retirement
Checking your progress.

New grads have a huge retirement savings advantage
How much will you have in 40 years?

The 401(k) Mistakes That Could Cost You a Bundle
Pay close attention.

Q&A: Spreading out the tax hit from capital gains

Dear Liz: We are in the lowest tax bracket. If we sell a capital gains asset worth several hundred thousand dollars, does that put us in a higher bracket and we pay 20% or do we remain in the lower bracket and pay 15%?

Answer: In the two lowest federal income tax brackets, the capital gains rate is actually zero. For a married couple filing jointly, taxable income below $18,550 in 2016 would put you in the 10% tax bracket, while income between $18,550 and $75,300 would put you in the 15% bracket. Both 10% and 15% income tax brackets pay no federal tax on long-term capital gains.

But capital gains count as income in determining your tax bracket. So a big capital gain can push you into a higher bracket, which means you would pay a higher capital gains rate.

Let’s say your normal taxable income is $75,000. You sell an asset with a $25,000 capital gain. Now you’re in the 25% tax bracket with taxable income between $75,300 and $151,900, which means your long-term capital gains rate will be 15%.

A really big gain would put you in the top 39.6% bracket, which applies to taxable income above $466,950. In that bracket, your capital gains rate would be 20%. Also, an additional 3.8% surtax applies for taxpayers with adjusted gross incomes over $250,000 for married couples and $200,000 for singles. The surtax is applied to the lesser of the taxpayer’s net investment income or the amounts over those limits.

There may be ways to alleviate or spread out the tax hit. You could sell losing investments to offset some or all of the gain. Another option for some assets is to sell a portion at a time over several years, or use an installment sale. A tax pro can walk you through your options.

Q&A: Cerebral slide can hit your wallet

Dear Liz: As a practicing attorney, age 72, I take exception to your advice to the grandmother who complained about her husband co-signing for his granddaughter’s deadbeat boyfriend’s auto loan. You said, “He is showing signs of cognitive impairment.” She never gave his age. Even if he was past 70, an impairment may or may not be true without knowing more facts. I know people in their 80s and beyond who are careful and manage their money very well. In my 30 years of practice, I have seen many cases where relatives and friends co-sign for a family member or friend, often for an auto loan. This practice crosses all age and demographic lines. Each person has a reason for co-signing (or lending money), but the most common thread in family members is: “It’s really hard to say no to a person I love.”

Answer: You might want to take another look at that column. The grandfather co-signed a loan not for a relative or a friend, but for a young man whose last name he didn’t know — and he did so without consulting his wife.

Not everyone turns into a financial fool in his later years, but our cognitive abilities do decline with age, starting in our 20s. Until our 50s, those losses in cognitive function are offset by increased experience and knowledge. After that, our growing wisdom isn’t enough to offset our cerebral slide.

If you think you’re cognitively as sharp as you were in your youth, then you may be the exception — or you may be deluded.

Researchers who tested people in their 80s found that “large declines in cognition and financial literacy have little effect on an elderly individual’s confidence in their financial knowledge, and essentially no effect on their confidence in managing their finances,” according to a paper for the Center for Retirement Research.

That’s why it’s important to put protections into place to keep yourself from making bad financial choices. You can start by simplifying your finances and consolidating accounts to make them easier to monitor. You may want to develop a relationship with a trusted financial advisor, one with a fiduciary duty to put your interests first, so that you can seek good counsel before making financial moves. Also, many people as they age give a trusted child or friend access to their accounts so they can be watched for suspicious transactions.

Q&A: Do the math on retirement benefits

Dear Liz: My full retirement age for Social Security benefits is 66. To receive that amount, do I have to keep working until I am 66? I was going to retire at 63 and receive a state pension and wait until 66 to apply for Social Security. I wasn’t planning on working full-time from 63 to 66.

Answer: You don’t have to keep working. When to retire can be a separate decision from when to start Social Security benefits.

Before you do either, though, find out how your state pension may affect your Social Security benefits. If you’re receiving a pension from a job that didn’t pay into the Social Security system, your Social Security benefit may be reduced. If that’s the case, it can make sense to delay taking your pension and start taking Social Security earlier. You can use claiming software such as MaximizeMySocialSecurity.com or SocialSecurityChoices.com to see what might be the best approach.

Friday’s need-to-know money news

payday-loansToday’s top story: Covering the costs of long-term care. Also in the news: Discovering tax credits you qualify for, how to save money on your wedding day, and how the government’s new rules will make payday loans a little less terrible.

Covering the Costs of Long-Term Care
Preparing for the future.

What Tax Credits Can I Qualify For?
Finding the “gold nuggets” of the tax world.

10 Ways to Save Money on Your Wedding Day
Weddings don’t have to cost a fortune.

The government’s new rules will make payday loans less terrible
Easing horrific interest rates.

Thursday’s need-to-know money news

Today’s top story: Credit counseling for housing. Also in the news: What happens to your debt after you die, how to benchmark your net worth, and how to navigate five embarrassing money situations.

Credit Counseling for Housing: What It Is and What to Expect
You don’t have to go it alone.

Will Your Heirs Have to Pay Up When You Die With Debt?
Your creditors will be waiting.

How to Benchmark Your Net Worth In 3 Easy Steps
Taking stock.

How to Navigate 5 Embarrassing Money Situations
It happens to everyone.

Wednesday’s need-to-know money news

Today’s top story: What you need to know about the new Social Security changes. Also in the news: Deciding between leasing or buying a car, how new graduates starting a business should manage their debt, and what to know before rolling over your 401(k).

What You Should Know About the New Social Security Rules
Big changes.

Lease or Buy a Car? Answer 7 Questions to Find Out
Deciding what’s right for you.

4 Essential Tips for Grads Starting a Business Despite Student Debt
Managing both.

3 things to know when rolling over your 401(k)
Be aware of what you’re getting into.

Don’t Give Up on Social Security — Count On It

Blog-Crop71Everything you think you know about Social Security is probably wrong.

The system isn’t “running out of money.” It’s not going bankrupt. And the chances are quite good that millennials will receive benefits from Social Security — although half of them don’t believe it, according to a 2014 Pew Research Center study.

Not understanding how Social Security works can be hugely detrimental to your future retirement. In my latest for NerdWallet, why it’s important to act instead of panicking.

Tuesday’s need-to-know money news

18ixgvpiu0s24jpgToday’s top story: Why you shouldn’t wait for a 401(k) to start saving for retirement. Also in the news: Cell phone options for when you’re traveling overseas, credit problems that can destroy your home-buying dreams, and five crucial retirement years for your money.

Don’t Wait for a 401(k) to Start Saving for Retirement
Don’t wait to start saving period.

Cell Phone Options When You’re Traveling Overseas
Keeping your bill as low as possible.

5 credit problems that can destroy your home dreams
Tackling issues before you buy a home.

5 crucial retirement years for your money
Years to pay attention to.