Ask Liz Weston

Get smart with your money

Liz Weston

Wednesday’s need-to-know money news

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Today’s top story: Keep an eye on debt using visual aids. Also in the news: How to make last-minute flight changes, pet insurance can help keep costs for your furbaby in check, and nearly 30% of shoppers haven’t paid off last years holiday debt.

Keep an eye on debt using visual aids
Visual aids provide motivation.

Winter storms, COVID: How to make last-minute flight changes
Be prepared for last-minute flight changes or cancellations this year.

Nearly 30% of shoppers haven’t paid off last years holiday debt
Financial experts give tips on how to limit your debt

Pet insurance can help keep costs for your furbaby in check
70% of U.S. households have a pet, according to the 2021-2022 American Pet Products Association National Pet Owners Survey.

Tuesday’s need-to-know money news

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Today’s top story: Disability and Credit Access: why scores are key in a crisis. Also in the news: 4 features to look for in the best credit cards of 2022, considering the suburbs, and is trading employee equity a good idea?

Disability and Credit Access: Why Scores Are Key in a Crisis
Having good credit can help you get low-interest loans or credit cards to help you cover your bills in an emergency. Here’s how to get started.

Best Credit Cards of 2022: 4 Features to Look For
Credit card issuers are offering more choice and flexibility as they add features to new cards.

Can’t Buy the House You Want? Consider Moving Out of the City
Suburban and small-town living has its perks, including more spacious and affordable choices for first-time home buyers.

Is Trading Employee Equity a Good Idea?
Buying or selling employee equity has become easier and more accessible, but is it right for your portfolio?

Monday’s need-to-know money news

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Today’s top story: How to avoid going overboard and over budget on kids’ holiday gifts. Also in the news: A new episode of the Smart Money podcast on countering uncertainty and building wealth early, Medicare and prescription drug costs, and what you need to know about Medigap Plan D.

Avoid Going Overboard and Over Budget on Kids’ Holiday Gifts
To avoid overspending this year, find a gifting strategy that works for your kids and your budget.

Smart Money Podcast: Countering Uncertainty, and Building Wealth Early
Sean and Liz discuss how to counter uncertainty, and respond to a young listener’s question about building wealth.

Does Medicare Cover Prescription Drugs?
Original Medicare beneficiaries can buy prescription coverage called Part D. Medicare Advantage plans usually include coverage.

What Is Medigap Plan D? What You Need to Know
Medigap Plan D helps Medicare enrollees with some costs not covered by Medicare Part A and Part B.

Q&A: How to boost your credit scores in the next year

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Dear Liz: I am 36 with a 535 credit score and about to move back to the U.S. from Colombia with my future wife. I’d like to increase my score by 100 or 200 points within eight to 12 months. Is it possible?

Answer: Increasing your credit scores to the mid-600s within a year or so is probably a reasonable goal.

Most consumer credit scores are on a 300-to-850 range. The higher your scores, the easier it will be to get approved for loans and credit cards, plus you’ll be offered better rates and terms.

What’s considered a good or bad score depends on the lender and the scoring formula. In general, scores below 630 or so are considered bad while scores in the mid-600s are usually considered “fair.” Good scores typically begin around 690.

Consider a credit builder loan from a credit union or online lender. The money you borrow is placed in a certificate of deposit or a savings account for you to claim after you’ve made 12 on-time payments. You’ll pay interest to the lender but be building your savings at the same time.

Secured credit cards are another way to build credit. You deposit a certain amount with the issuing bank, often $200 to $2,000, and get a credit line in the same amount. If you use the charge lightly and pay it off in full each month, you can build credit without paying interest.

Q&A: Lump sum or annuity?

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Dear Liz: You recently answered a question about whether to take a lump sum or an annuity payout from a pension. I think you need to be more cautious about making a blanket statement about the payout being the only viable option. There are other reasons for taking the lump sum, such as the pension fund’s stability. My mother’s friend lost her entire pension when Bethlehem Steel went bankrupt. Also, I like the idea of being able to access the lump sum in the case of a catastrophic need (call me a control freak!).

Answer: You certainly can access more of your money with a lump sum, but that’s a double-edged sword. You could withdraw too much too fast and run out of money. You could lose money to bad markets, bad investments, bad decisions and fraud. Even if you’re making good financial decisions now, that may not always be the case as our cognitive abilities tend to decline with age.

The column you’re referencing didn’t say that an annuity is the only viable option, however. In that particular case, the annuity option came with retiree health insurance while the lump sum option did not. It would be pretty hard to top guaranteed income for life plus medical benefits, but that doesn’t mean it’s impossible.

A lump sum could be a better option if the pension is particularly generous and the pension fund isn’t solvent. Your mother’s friend’s pension, for example, was covered by the Pension Benefit Guaranty Corp., so she didn’t lose the whole thing when Bethlehem Steel went under. Workers there lost part of what was promised them because their pensions were larger than the amount covered by the PBGC.