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Liz Weston

The mental health risks of retiring

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The late Pamela Hixon of Leipsic, Ohio, was eager to retire from her job running a hospice agency. Soon after she quit, however, Hixon spiraled into depression and anxiety. She sought help from counselors and her pastor, but it wasn’t enough. Six months after retiring, she took her own life.

“She lost purpose, she lost significance, she lost a sense of meaning in her life,” says her son Tony Hixon , a Findlay, Ohio-based wealth manager who wrote about the experience and how it transformed his financial planning practice in a book, “Retirement Stepping Stones: Find Meaning, Live with Purpose, and Leave a Legacy.”

Overall, retirees are a contented bunch and many report being happier in retirement than they were at the end of their careers. Older adults are less likely than younger people to experience major depression, says Brent Forester, president of the American Association for Geriatric Psychiatry.

In my latest for the Associated Press, how to manage the challenges of retirement and how to get help.

Monday’s need-to-know money news

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Today’s top story: How to crush your holiday debt. Also in the news: A new episode of the Smart Money podcast on paying for Covid tests, needing booster shots before you travel, and small business trends that are here to stay.

How to Crush Your Holiday Debt
Here’s what you can do to take control of your holiday debt.

Smart Money Podcast: COVID Tests, and Reversing a Credit Score Drop
This week’s episode starts with a discussion about how to get COVID-19 tests right now.

Will You Need a COVID-19 Vaccine Booster to Travel?
Travel rules remain in flux, so be sure to check your destination’s requirements.

These Small-Business Pandemic Trends Are Here to Stay
Virtual services, social media and online sales will continue to be key to small business success in 2022 and beyond.

Q&A: When a lower credit score might not be cause for alarm

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Dear Liz: I sold my house, paid off my mortgage and then got a new mortgage for another home in 2021. When I applied for the new mortgage, my credit score was 830. After buying the home, my score dropped to the low 700s. It’s gone up only 2 points in seven months. I have no other debt. What’s going on?

Answer: Remember, you don’t have one credit score, you have many. When you applied for a mortgage, you typically would be shown three older-generation FICO scores — one from each of the three major credit bureaus (Equifax, Experian and TransUnion). Your interest rate would have been based on the middle number. If your scores were 840, 830 and 700, for example, your rate would be based on 830. Any score over 740 typically gets the best rate and terms on a mortgage, all else being equal.

The score you’re monitoring now was probably created from a different scoring model. If the score is a FICO score, it probably was created from an updated formula such as FICO 8 or FICO 9. It’s also possible that you’re viewing a VantageScore 3.0 or 4.0. VantageScore is a FICO competitor.

If you’ve been monitoring the same score all along and it actually dropped 100 points since your application, then something else is going on. Please check your credit reports from all three bureaus and look for a skipped payment, a collection or some other serious problem.

Q&A: Where to park cash?

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Dear Liz: I turned 72 in December and took my first required minimum distribution. With the goal of purchasing property next year, should I put the funds — $6,000 — in my Roth IRA or just put it in my bank savings account? Also, should I convert my traditional IRA to a Roth or just leave it alone?

Answer: To contribute to an IRA or Roth IRA, you must have earned income such as wages, salary or self-employment income. If you don’t have earned income, your contribution would be considered an excess contribution that could incur a 6% penalty for each year the money remained in the account.

You don’t have to be working to convert a traditional IRA to a Roth, but there’s typically not much reason to do so at this point unless you intend the money to go to your heirs and want to pay the income taxes rather than have them do so. Even then, you should run this idea past a tax pro or a financial planner since conversions can create other problems, such as higher Medicare premiums.

Q&A: HELOC situation improves

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Dear Liz: Your recommendation that a retired couple consider a home equity line of credit to pay for home repairs astonished me. According to news reports, HELOCs are becoming harder and harder to find. Banks that still offer them have gotten stricter. And to suggest a reverse mortgage for a couple who only need $10,000, I think, is not the best option for them.

Answer: Lenders did tighten their requirements for HELOCs after the pandemic began, and some stopped offering them entirely. But the situation is starting to ease, thanks to rising levels of home equity and a generally strong economy.

The original letter writer’s spouse had proposed using a low-rate credit card to pay for a new furnace and water heater. Using a low-rate card isn’t a bad option if the balance can be paid off quickly, but could become expensive otherwise. Low rates are typically teaser rates that expire after a certain period. The couple then could try to roll the balance onto another low-rate card, but there’s no guarantee they would be approved for such a balance transfer or that they would get a large enough credit limit.

You’re quite right that a reverse mortgage wouldn’t be a great solution if the couple needed only $10,000, but the letter writer indicated they had little in savings. A reverse mortgage or line of credit could provide an ongoing source of funds for those with few other options.

Friday’s need-to-know money news

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Today’s top story: How to get more joy while giving to good causes. Also in the news: How a financial therapist can help shift your money mindset, a new episode of the Smart Money podcast on making your dream life, and 6 options for when you buy now and can’t pay later.

How to Get More Joy While Giving to Good Causes
Research shows that spending money on others is more likely to make us happy.

How a Financial Therapist Can Help Shift Your Money Mindset
A financial therapist can help you challenge your money fears and make progress in your investing journey.

Smart Money Podcast: Making Your Dream Life
Sean and Liz chat with travel Nerd Sam Kemmis about how he made his dream life possible.

6 Options for When You Buy Now and Can’t Pay Later
If you’ve taken on more buy now, pay later debt than you can handle, here are some options for easing the burden.