Ask Liz Weston

Get smart with your money

Liz Weston

Why is money so confusing?

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Managing money is an essential life skill, yet most U.S. adults would fail a financial literacy test. Consider the results of a survey meant to measure financial literacy, called the TIAA Institute-GFLEC Personal Finance Index. On average, U.S. adults correctly answered only 50% of its financial literacy questions in 2022.

In other words: If you find money confusing, you’re far from alone. But the reasons you’re baffled may have more to do with how our brains work than how money does. In my latest for the Associated Press, understand what could help you to get a handle on your finances.

Monday’s need-to-know money news

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Today’s top story: How to check if your bank is greenwashing. In other news: Smart Money Podcast on how to manage medical debt and the meanings behind common real estate terms.

Is Your Bank Greenwashing? Here’s How to Check
Research the impact your bank has on the planet and any environmental claims or commitments it makes.

Smart Money Podcast: How to Manage Medical Debt
Personal finance Nerd Kim Palmer talks with Maloney about her own experience working in an ER as well as dealing with medical debt she accrued as a teenager.

The Meanings Behind Common Real Estate Terms
DOM, EMD, contingency, stale listing, and other housing market lingo.

Q&A: You need to satisfy this key requirement to get an IRS home sale tax exemption

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Dear Liz: I was given a condominium, which I’m renting out while I live overseas, traveling from country to country. I understand that when I sell the condo, I can exclude up to $250,000 of home sale profits if the property is my “primary residence” for at least two of the last five years. But how is primary residence established? I have heard that the IRS looks at the address on your tax returns, on your voting registration and on file with the Department of Motor Vehicles. I list the condo’s address for voter registration but with the IRS and DMV, I use my mail forwarding address. Will that keep me from establishing the condo as my primary residence?

Answer: What’s keeping you from establishing the condo as your primary residence is the fact that it’s not your primary residence. Someone else is living there and paying you rent.

If you want to take advantage of the home sales profit exemption, you need to actually occupy the home. You’re allowed “short, temporary absences” but not the vagabond life.

Q&A: Avoiding Medicare late enrollment penalties

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Dear Liz: I have taken multiple in-person and online educational classes about Medicare prior to my 65th birthday. What I learned from these classes was that the law demands people register for Medicare Part A when we turn 65 whether we are working or not. Like the woman in your column, I also work full time and do not plan to retire until 70 (at least that is my new target date). At the time of my retirement I will apply for Medicare Part B and purchase supplemental insurance.

Answer: It’s wonderful that you made the effort to educate yourself about Medicare, which can be incredibly complicated. However, you got the wrong lesson about what’s required, since there’s no law that forces people to sign up for any part of Medicare, including Part A, which covers hospitalizations and which is typically premium-free.

The reason most people should sign up at age 65 has to do with penalties. People who delay signing up for Medicare Part B, which covers doctor’s visits, or Part D, which covers prescriptions, can face permanent, lifetime premium penalties unless they qualify for certain exemptions. One of those exemptions is having qualifying health insurance coverage from a job, either your own or your spouse’s. You can find more details at https://www.medicare.gov/basics/costs/medicare-costs/avoid-penalties.

Q&A: Dealing with credit challenges

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Dear Liz: I felt you should have corrected the person who said they felt like a loser because heavy credit card usage lowered their credit scores. I went through a period of poor credit after I was diagnosed with amyotrophic lateral sclerosis (ALS). It took about nine months to get our financial footing again. My scores are on the mend now, but at no point did I feel like a loser. In fact, I am very proud of how I and my family responded to this challenge. Many people are hit with misfortune that is no fault of their own. Often they are truly winners with how they respond. I hope you take the opportunity to make a comment about how bad credit doesn’t make a person a loser. That often the best of us are revealed by how we deal with it instead.

Answer: The original letter writer was making a wry comment about their situation, writing that their husband “thinks it’s funny he has great scores and I look like a loser!”

But your point about people being more than their credit scores is well taken.

Q&A: Delaying Social Security benefits

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Dear Liz: I reached my full Social Security age (66) in December 2020. I’ve been waiting until age 70 to start benefits so I can get the 8% annual delayed retirement credits and maximize my benefit. However, if the 2023 cost of living increase will be 10.5%, should I go ahead and start benefits this year, at age 68? Does someone need to be on Social Security for a full year before being eligible for the COLA, or would one month be enough?

Answer: Your benefit will get the cost of living increase whether you’ve started receiving checks or not. In fact, it’s been getting those increases since you turned 62 and became eligible. So applying now just means giving up two years’ worth of delayed retirement credits.