Ask Liz Weston

Get smart with your money

Liz Weston

Painless – even fun – ways to learn about money

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The online landscape is littered with horrible personal finance advice: teenagers promoting day trading strategies, “influencers” flogging questionable investment schemes and people with dubious credentials insisting you shouldn’t invest in a 401(k).

Outrageous statements and flashy graphics grab attention, but there’s also plenty of sound, factually correct money content out there — and some of it is even entertaining.

In my latest for the Associated Press, learn more about managing your finances while having at least a little fun.

Monday’s need-to-know money news

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Today’s top story:  Avoid the risks of having multiple buy now, pay later loans. Also in the news: Why you should contact the manufacturer directly, recalled infant formulas, and how to get a free upgrade to first class (or score the cheapest possible seat).

Avoid the Risks of Having Multiple Buy Now, Pay Later Loans
Taking on multiple BNPL payments can be risky.

Why You Should Contact the Manufacturer Directly (and How to Do It)
A way to get the inside scoop if your favorite product is off the shelves.

Don’t Use These Recalled Infant Formulas, FDA Says
Four babies have been hospitalized with bacterial infections after consuming formula linked to one manufacturing facility.

How to Get a Free Upgrade to First Class (or Score the Cheapest Possible Seat)
Replace the sounds of crying babies with the soft clink of champagne glasses.

Q&A: Government pensions and Social Security

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Dear Liz: Both of my parents have been retired for over 25 years. My father collects Social Security but my mother didn’t have enough quarters to collect. Both have Postal Service retirements. Can my mother file and get half of my father’s amount? Can they get back payments for 25 years?

Answer: The answer to both questions is “probably not.”

Your parents’ situation is complicated by the fact that the federal government changed its pension system for civilian employment in the 1980s. Prior to 1984, civilian employment was covered by the Civil Service Retirement System and workers did not pay into Social Security. Starting in January 1984, new hires were covered by the Federal Employee Retirement System and were required to pay into Social Security. Current hires had the option, but not the requirement, to join FERS, says William Meyer, founder of Social Security Solutions, a claiming strategy site.

Normally when someone receives a pension from a job that didn’t pay into Social Security, the government pension offset would reduce or eliminate any Social Security spousal benefit they might otherwise receive. However, there is an exception: The offset doesn’t apply to government workers who pay Social Security taxes for the last 60 months of employment. This exception applies to employees paying into FERS, Meyer says.

If your mother paid into FERS during the last 60 months of her employment at the Postal Service, she would be eligible for a spousal benefit on your father’s record, Meyer says. If your mother didn’t pay into FERS those last 60 months, the government pension offset would apply and would reduce or eliminate any spousal benefit.

That option should have been explored when your parents applied for their Postal Service retirement benefits, Meyer says. Social Security also would have looked into it as part of your father’s application process. If she’s not receiving a Social Security spousal benefit, she probably didn’t switch to FERS and did not pay into Social Security during the last 60 months of her employment at the Postal Service, Meyer says.

Q&A: How a living trust helps your heirs after you die

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Dear Liz: My husband and I made a living trust in 2004. He died in 2018, so his half became irrevocable. But while we were settling his estate, no one mentioned (though I can see clearly in the 2004 flow sheet) that all the assets from his half went into a survivor’s trust, controlled by me. I had the option to disclaim those assets within a year, which I did not do, so now everything is mine. Is this standard? If so, how can it be considered irrevocable?

Answer: The structure you’re describing is pretty standard for living trusts, which avoid probate, the court process that otherwise follows death. Living trusts are considered revocable when they are created, meaning the creators can make changes during their lifetimes. Eventually, the trust usually becomes irrevocable, which means changes no longer can be made.

Your living trust was entirely revocable while both of you were alive. That means you could make changes or cancel the trust entirely. When your husband died, part of the living trust became irrevocable — the part that created the survivor’s trust. You had the option to disclaim those assets, which means refusing to accept them, but you couldn’t dictate where the assets would go at that point or otherwise change the terms of the trust.

If your living trust had created a bypass trust instead, then that would have been irrevocable as well but the structure would have been quite different. The assets in the bypass trust would not become yours. Instead, you would get the income from the assets but they would ultimately be passed to heirs designated by your husband.

As mentioned earlier, bypass trusts can be helpful in blended family situations. They also are used to avoid or reduce estate taxes, which are no longer an issue for the vast majority of people. (A public service announcement: If your estate plan was created prior to 2010, you need to have it reviewed pronto. It’s entirely possible your plan includes a bypass trust that’s no longer necessary and that could needlessly complicate your estate.)

Friday’s need-to-know money news

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Today’s top story: A financial checklist for quitting your job. Also in the news: Is it better to reprice or refinance a loan, how to talk to a real human being at the IRS.

A Financial Checklist for Quitting Your Job
Plan your exit to maximize the time and money you’ve put in over the years.

Is It Better to Reprice or Refinance a Loan?
Repricing is often faster – and cheaper – than refinancing.

How to Talk to a Real Human Being at the IRS
Because continuously screaming “Agent” doesn’t always work.

Thursday’s need-to-know money news

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Today’s top story: The surge in mortgage rates. Also in the news: What caring for an aging parent could cost you, A new episode of the Smart Money podcast on building your financial smarts with Bola Sokunbi

The Property Line: What’s With the Surge in Mortgage Rates?
Rising mortgage rates have outpaced expectations for the start of this year. Here’s why they’ve spiked recently and what it means for you.

What Caring for an Aging Parent Could Cost You
Trying to work while caring for an aging loved one can be difficult, stressful and at times overwhelming.

Smart Money Podcast: Building Your Financial Smarts With Bola Sokunbi
Personal finance Nerd Kim Palmer talks with money author and educator Bola Sokunbi about budgeting and side gigs.