Get smart with your money
A successful yard sale involves hours of preparation and plenty of hard work. So does an unsuccessful sale. I’ve had both kinds and can confidently say the version that makes money is better.
In my latest for the Associated Press, tips culled from experts (and bitter experience) for having a good sale.
Today’s top story: Interest rates on new federal student loans going up for 2022-2023. Also in the news: A new episode of the Smart Money podcast on yard sales and refinancing, what to do if you can’t afford car insurance, and how to find a savings account bonus.
Smart Money Podcast: Fruitful Yard Sale, and When Not to Refinance
This week’s episode starts with a conversation about how to have a successful — and moneymaking — yard sale.
What to Do if You Can’t Afford Car Insurance
Don’t drop your insurance. Instead, start by contacting your insurer about payment options and discounts.
Interest Rates on New Federal Student Loans Going Up for 2022-23
Federal student loan interest rates will increase over 1 percentage point; the changes go into effect July 1.
How to Score a Savings Account Bonus — and Know When to Skip It
Look online for top promotions.
Dear Liz: I have a question about an unethical accountant. I am a retiree living on my investments. My accountant continually put me on extension and every October told me how much to pay. Finally, I created an account with the state tax agency and discovered I was being billed for interest, fees and penalties for failing to pay estimated quarterly taxes. What really gets me angry is how I was never told I needed to pay these taxes each quarter. This has been going on at least 15 years. What are my options? Is there an entity that governs the behavior of accountants?
Answer: There is — if your tax preparer is actually an accountant. Some tax preparers use that title even if they don’t have an accounting credential, said Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs.
If your tax preparer is in fact a certified public accountant, then you can make a complaint to your state’s board of accountancy. You can find a list of boards here. Otherwise you can consider contacting the Better Business Bureau, your state’s consumer protection agency or the Consumer Financial Protection Bureau, Grzes said.
A good tax preparer will alert clients to ways they can reduce their tax bill and will discuss the reasons for filing an extension as well as the need to make quarterly estimated payments, Grzes said. But there are no federal regulations governing tax return preparation, although some states have such laws, he said.
For example, anyone who is physically in California and prepares tax returns for a fee, and who is not an attorney, CPA or enrolled agent, is required to register with the California Tax Education Council, Grzes said. The CTEC site has information about how to file a complaint against a tax preparer who isn’t governed elsewhere.
Dear Liz: It appears required minimum distributions will force me to take an additional $3,500 per month from my retirement funds starting in four years at age 72. This added taxable draw will greatly impact my income tax liabilities as I’m now fully retired. Are there any strategies at this time to reduce the hit? As my current income tax rate is 12% federal and 9% state, perhaps I should convert some of these funds to Roth IRAs?
Answer: Partial Roth conversions when your tax bracket is low can be an excellent way to reduce future mandatory withdrawals and save on taxes in the long run.
Let’s say you’re married filing jointly and have $60,000 in taxable income. The 12% federal tax bracket ends at $83,550, so you could convert more than $23,000 of your retirement funds without increasing your marginal federal tax rate. Conversions can affect other aspects of your taxes and finances, so consult a tax pro before proceeding.
Another way to potentially lower your tax bill may be to temporarily suspend your Social Security payments and take more from your retirement funds. Because of the peculiar way that Social Security is taxed, people often face a sharp rise and then fall in marginal tax rates when they have other income, something known as the “tax torpedo.” A tax pro should be able to determine if delaying or suspending Social Security payments could help you reduce the effects.
Dear Liz: You’ve advocated for going paperless. My preference for paper financial documentation over electronic versions is that paper provides “proof” in the event something compromises online or email reporting. What am I missing?
Answer: Proof of what, exactly?
That’s not a rhetorical question. If you don’t understand why you’re retaining a document, and what the alternatives are, you risk burying yourself in paper.
Consider your bank statements, for example. Your paper document is just a reproduction of the digital files that the bank securely stores and regularly backs up. If you do the same, regularly downloading statements and backing them up to secure storage, there’s no reason to convert the files to paper. Paper is in fact more vulnerable, since it can burn up in a house fire, be destroyed in a flood or simply have its ink fade to illegibility. In the rare circumstance where you actually need to provide a paper document, you can simply print it out.
Many people don’t even bother downloading their statements. Many financial institutions allow you to access five or more years’ worth of statements for free, which is as long as you’re likely to need such access.
There are a few documents you should keep in physical form either because they’re most useful that way (passports and driver’s licenses, for example) or because accessing or replacing them can be a hassle (birth certificates, citizenship certificates, divorce degrees and military discharge papers, among others). Even these documents, though, should be scanned and stored securely in case they’re lost or destroyed.
Today’s top story: How to understand and reduce taxes when selling your home. Also in the news: Why you need to learn your parents’ financial plans ASAP, how debt-related stress affects body and mind, and the goods and services that have actually dropped in price this year.
How to Understand and Reduce Taxes When Selling Your Home
If your home’s value has soared, congratulations. If you decide to sell, beware.
Learn Your Parents’ Financial Plans ASAP
A difficult and important conversation to have.
How Debt-Related Stress Affects Body and Mind
The stress of being in debt can cause physical symptoms like insomnia and stomachaches. It can also harm you emotionally and affect your relationships.
These Goods and Services Have Actually Dropped in Price This Year
Inflation has brought on a price increase for most things, but not everything.