Ask Liz Weston

Get smart with your money

Q&A

Q&A: What is financial infidelity? And what should you do about it?

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Dear Liz: My sister is married to a man who is considerably older. They’ve been married for eight years. He has cancer and the outlook isn’t good, but he refuses to discuss their financial status. As a result, she has no idea what’s going on. How can she force him to tell her their financial situation? They aren’t getting divorced, and every article I’ve read only addresses financial disclosure in divorce cases. I will probably be the one helping her figure this out after he passes away.

Answer: Refusing to discuss the details of shared finances is at best a form of financial infidelity. A recent NerdWallet survey conducted by the Harris Poll found that many Americans aren’t sharing financial secrets with loved ones, including their income, credit card debt and how much they’ve spent on a purchase.

But at worst, it can be a sign of abuse. If he’s controlling or abusive in other ways, her physical safety may be at risk. Encourage her to call the National Domestic Violence Hotline at (800) 799-7233, which can help her assess her situation and connect her to resources that can help.

Even if she doesn’t plan to divorce, a consultation with a divorce attorney could still help. The attorney could suggest ways to piece together some of the details of their financial life and advise her about state laws regarding shared responsibility for any debts.

Q&A: Should you close a credit card?

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Dear Liz: You recently wrote about how closing credit cards can hurt your credit scores. I’m wondering what impact closing a business credit card would have on my personal credit score.

For many years I have been working in the film industry under contracts with my personal services loan-out company. My company has two credit cards, including a travel rewards card with a hefty annual fee. This card has been useful to me because my job involved a lot of international travel. But as I’m now nearing retirement and traveling less, I’m considering closing that account. Will closing the card affect my personal credit scores?

Answer: The answer lies in your credit reports, which you can view for free at AnnualCreditReport.com. (Type that address into your browser rather than searching for it, because the top results are likely to be sites that want to charge you for credit monitoring. If you’re asked for a credit card, you’re on the wrong site.)

Typically, business cards don’t show up on personal credit reports and thus won’t affect your credit scores. But check to make sure.

Before you actually call to close the card, however, you should know that the company probably will want to keep your business. You may be offered a hefty wad of rewards points as an incentive to keep the account open. The points could be worth enough to offset some or even all of the annual fee.

Also, review all of the benefits the card offers. Many premium cards offer various credits to offset the fee, and not all of them are related to travel. Even if those aren’t enough to entice you to keep the card, you may want to use the credits before shuttering the account for good.

You also may have the option to swap your card for one with a lower annual fee, something known as a “product change,” so you’ll also want to investigate whether one of the issuer’s other cards might be a better fit.

Q&A: Social Security survivor benefits

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Dear Liz: I am trying to understand the Social Security survivor benefit. I delayed starting to receive my benefits until I reached age 70. My wife just started receiving benefits at 66 and 10 months. Upon my passing, will she receive my benefit at full retirement age, plus the 8% annual delayed retirement credit plus the annual cost of living increases?

Answer: Assuming your benefit is larger than hers, then yes — her survivor benefit would be the amount you were getting at your death. The survivor gets the larger of the two checks a couple was receiving, and the other benefit goes away.

Q&A: Distributing funds from inherited IRAs

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Dear Liz: You have referenced the relatively new 10-year rule that sets a deadline for distributing money out of an inherited IRA. You mentioned that surviving spouses are one exception to that rule. Aren’t there others?

Answer: Yes. The 10-year rule applies to IRAs of those who die after Dec. 31, 2019. Most non-spouse inheritors must empty an inherited IRA by the tenth year after the year the original owner died. If the original owners had reached the age where they were expected to make required minimum distributions, the inheritor also must take yearly distributions.

“Eligible designated beneficiaries,” however, have the option of taking distributions more slowly, typically over their own life expectancy. Eligible designated beneficiaries include the original owner’s spouse or minor children, people who are chronically ill or permanently disabled, or inheritors who are not more than 10 years younger than the original account holder. Minor children will be subject to the 10-year rule once they reach the age of majority, which is 18 in most states.

Q&A: What is a ‘qualified higher education expense’ for 529 college savings plans?

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Dear Liz: We are tapping our child’s 529 college savings plan for the first time and are confused on what qualifies as a “qualified higher education expense.” Obviously tuition counts, but what about other fees, such as student body fees, health insurance coverage and tuition insurance? We’re also trying to figure out how much we can withdraw to cover an off-campus apartment next year. The college website lists three different food plans (with different costs) as well as different room costs depending on whether the student is in a dorm or a college-run apartment on campus.

Answer: A fee must be required to be considered a qualified education expense for a tax-free 529 plan withdrawal, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. The qualified fee can be required either to attend the institution or required of all students in a particular for-credit course of instruction, Luscombe said. The school’s business office can tell you what’s required and what’s optional.

This school year, while your student lives on campus, you can withdraw an amount equal to the actual cost incurred for room and board. You can’t take tax-free withdrawals for other costs, such as dorm furnishings, groceries or restaurant meals. Next year, you can use the school’s official “cost of attendance” figures listed on its website, which will set an upper limit on what qualifies as room and board expenses. The college may list different figures for dorm rooms, on-campus apartments, married or graduate student apartments or living at home.

“If more than one figure for room and board is listed in the COA, you could use the highest figure that would apply to the particular student’s situation,” Luscombe said.

Books, supplies and computers used for school are also considered qualified education expenses. Transportation and commuting costs are not.

Q&A: Claiming Social Security benefits

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Dear Liz: My husband turned 70 this past May and waited until then to take his Social Security. I am 61 and will qualify for a benefit based on my work history, although my benefit is substantially less than his. I understand I can take half of his benefit at my full retirement age of 67. I asked a Social Security representative if I could take my (reduced) benefit at age 62 and then switch to half of my husband’s benefit at 67. She told me I should file at 62 and take half of his benefit at that time. That sounds too good to be true, and your article and others I’ve read disagree with her advice.

Answer: Social Security representatives aren’t supposed to give people advice about when or how to claim their benefits. But ideally they would offer correct information about your options.

Congress did away with most people’s ability to switch from a spousal benefit, which is up to 50% of their partner’s amount, to their own benefit. Now when you apply for Social Security, you’ll be considered to be applying for both a spousal benefit and your own benefit and you’ll get the larger of the two. There’s no switching later.

It could be that your own benefit will always be smaller than your spousal benefit, regardless of when you apply. But that doesn’t mean it’s a smart decision to lock in a permanently reduced benefit by applying early.

AARP has a free Social Security claiming calculator you can use to explore the impact of applying at different ages.