Ask Liz Weston

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Liz Weston

Thursday’s need-to-know money news

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Today’s top story: How your parents’ debt could outlive them. Also in the news: 7 Black financial influencers to follow in 2022, what rising interest rates mean for personal loans, and just how passive js passive income?

How Your Parents’ Debt Could Outlive Them
When you can and can’t be held personally responsible.

7 Black Financial Influencers to Follow in 2022
Black financial pros shared their advice about the Great Resignation, buying a house in a competitive housing market and investing in crypto.

What Do Rising Interest Rates Mean for Personal Loans?
Hikes in overall interest rates can impact personal loans, but factors under your control can also influence the cost.

Just How Passive Is Passive Income?
If you want to earn passive income, be ready to work for it.

Wednesday’s need-to-know money news

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Today’s top story: 5 common objections to buying an electric car, debunked. Also in the news: How to Avoid Long Lines at Rental Car Counters, Financial Therapists Say to Disrupt Debt Cycle, Look at Your Money Beliefs, and 10 Easy Tricks for Saving Money on Travel.

5 Common Objections to Buying an Electric Car, Debunked
Many consumers are still hesitant to buy EVs, despite rapid improvements to charging ranges, selection and price.

How to Avoid Long Lines at Rental Car Counters
With so many ways to jump the line, there’s no need to get stuck waiting at the rental car counter.

Financial Therapists Say to Disrupt Debt Cycle, Look at Your Money Beliefs
If you find yourself in a cycle of debt, you may need to address the root cause. These tips from financial therapists can help.

10 Easy Tricks for Saving Money on Travel
Travel is expensive, but there are plenty of ways to cut costs.

Tuesday’s need-to-know money news

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Today’s top story: How to score points in the credit game. Also in the news: 5 credit card trends to watch for, student loan payment plan promises forgiveness but rarely delivers, and how to tell if a bank account is right for you.

How to Score Points in the Credit Game
The traditional advice of paying on time and keeping balances low will eventually result in decent credit. But you can speed it up.

5 Credit Card Trends to Watch for in 2022
Expect more customized rewards and incentives, a more seamless overall customer experience and a big resurgence in travel credit cards, among other things.

Student Loan Payment Plan Promises Forgiveness But Rarely Delivers
Most borrowers are unlikely to ever see that debt forgiven, despite the baked-in promise to do just that.

4 Ways to Tell if a Bank Account Is Right for You

How your parents’ debt could outlive them

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Many people believe one of two common myths when a parent dies in debt, says Chicago estate planning attorney Michael Whitty. The first myth is that an adult child will become liable for their parents’ debt. The second myth is that they can’t.

Adult children typically don’t have to pay their parents’ bills, but there are exceptions. And even when a child doesn’t have to pay directly, debt could reduce what they inherit.

Debt doesn’t simply disappear when someone dies, Whitty explains. Creditors can file claims against the estate, and those claims usually have to be paid before anything is distributed to heirs. Creditors also are allowed to contact relatives about the dead person’s debts, even if those family members have no legal obligation to pay.

In my latest for the Associated Press, some issues to explore if you’re concerned that your parents’ debt might outlive them.

Monday’s need-to-know money news

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Today’s top story: 5 homebuying lessons from last year’s unsuccessful buyers. Also in the news: A new episode of the Smart Money podcast on No Spend Month and making money while raising kids, why you can expect to pay more for car insurance this year, and why banks are eliminating overdraft fees.

5 Homebuying Lessons From Last Year’s Unsuccessful Buyers
Buying a home in 2022 won’t be easy, but learning from last year’s challenges might give you the edge that you need to succeed.

Smart Money Podcast: No-Spend Month, and Making Money While Raising Kids
How to make a no-spend month work for you.

Why You Can Expect to Pay More for Car Insurance This Year
Rising car prices, supply-chain and labor shortages, plus minimal rate increases last year are leading to an expected surge in car insurance costs.

Why Banks Are Eliminating Overdraft Fees
More banks are reducing or eliminating overdraft fees on customer accounts because of increased competition.

Q&A: Here’s a strategy to avoid going broke in retirement

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Dear Liz: A lot has been written about how much can safely be withdrawn from a balanced investment portfolio so that it will last a lifetime. A popular strategy is to withdraw a percentage, say 4%, in the first year and then increase that withdrawal each subsequent year by the rate of inflation.

What are your thoughts on an alternate strategy of withdrawing a fixed percentage, say 4%, at the beginning of each year? This has the disadvantage of providing a more variable income stream year to year but has the advantages of simplicity and it can never deplete the portfolio to zero.

Answer: Many retirees would find it hard to cope with incomes that swing wildly from one year to the next. One way to address that volatility is to ensure that retirees have enough guaranteed income — through Social Security, pensions and annuities — to cover their basic, must-have expenses. Retirement plan withdrawals then would provide for their “wants,” such as travel, meals out and so on.

Cutting back on the nice-to-haves isn’t easy, but it’s better than not having enough money to pay the mortgage or buy groceries.

This approach is the core of the “Spend Safely in Retirement Strategy,” created by retirement researchers Wade Pfau, Joe Tomlinson and Steve Vernon with the help of the Society of Actuaries and the Stanford Center on Longevity.

The strategy suggests maximizing Social Security and basing withdrawals on the IRS’ required minimum distribution percentages. Reports detailing the strategy and the research behind it are available on both organizations’ websites, and Vernon’s book “Don’t Go Broke in Retirement” explains the strategy in detail.

Of course, trying to eliminate any possibility of running short means that you may die with a whole lot of unspent money. That may be great news for your heirs, but sad for you if you denied yourself excessively while you were alive. Finding the right balance between security and spending is tough, to say the least.