Get smart with your money
Many people don’t have much choice about when they retire. Illness, job loss or caretaking responsibilities push them out of the labor force, ready or not.
But some people have the opposite problem: They do have a choice, and yet they can’t quite bring themselves to quit working.
In my latest for the Associated Press, check three signs you may be ready to retire.
Today’s top story: Should you bank with your brokerage?Also in the news: AirPods Black Friday 2021 deals, Smart Money Podcast on the benefits of being boring with your money, and saving money even back at the gym.
Should You Bank With Your Brokerage?
A cash management account can make it easier to invest, and CMAs have their own unique banking-style benefits.
AirPods Black Friday 2021 Deals: Are They Worth It?
Amazon and Best Buy are marking the AirPods Pro down to $189.99.
Smart Money Podcast The Benefits of Being Boring With Your Money, and Why to Make a Will ASAP
The benefits of being boring with your money.
Quitting Peloton? You Can Save Money, Even Back at the Gym
Peloton’s weak earnings data indicates that people are quitting at-home workouts. It could save you money, too.
Dear Liz: A reader recently asked about passing a $500,000 inheritance to their children. You mentioned the option of disclaiming, or refusing the inheritance so that it would go to their kids. You wrote, “If you decide not to disclaim and later give the entire $500,000 to your kids, you wouldn’t have to pay gift taxes until you gave away considerably more. Plus, gifts are tax free to the recipients.” Are you possibly mixing up gifting and inheriting? As I understand it, gifting to your kids is limited to something like $15,000 per parent per kid. Unless you have a huge family, that’s not going to add up to $500,000 of tax-free giving.
Answer: Many people get confused about how gift taxes work. The gift and estate tax systems are intertwined, causing further confusion.
There’s no limit on how much you can give away during your lifetime: You can give as much money as you want to as many people as you want. If you give more than $15,000 to any one recipient in a given year, however, you’re required to file a gift tax return. That doesn’t mean you owe gift taxes.
The amounts over $15,000 count against your lifetime estate and gift tax exemption, which is currently $11.7 million per person. So if you give someone $20,000, the extra $5,000 would be deducted from your $11.7-million lifetime exemption. Only after you exhausted that lifetime exemption would you owe gift taxes.
Dear Liz: I receive Social Security. My recently divorced girlfriend receives Social Security from her ex-husband who is still living. If we were to get married, would either of us lose part or all of our Social Security benefits? It seems like a simple, straightforward question, but every Social Security representative I speak with by phone or in person gives me a different answer. My girlfriend did not work long enough to earn her own Social Security benefits. She was married over 30 years and is over 60.
Answer: Your girlfriend would lose her divorced spousal benefits if she remarries, but she could then qualify for spousal benefits based on your earnings record. Your benefits would not be affected. A Social Security representative should be able to calculate how much her benefit would change.
Dear Liz: What is the difference between a fee-based financial planner and a fee-only financial planner? I have had a few complimentary meetings with a fee-based financial planner regarding retirement planning and income-generating strategy. I am 61 and currently have $325,000 in a traditional IRA and a 401(k) from a former employer, with 70% of both accounts held in stocks. The planner suggests that I put the whole $325,000 into a fixed indexed annuity, which he says is no risk. Is this a good idea?
Answer: Someone who is “fee based” typically accepts commissions or other incentives for selling certain investments in addition to charging fees. “Fee only” advisors accept money only from their clients.
Another important word that starts with f: fiduciary. Fiduciary advisors promise to put your interests ahead of their own. A fiduciary advisor, for example, typically wouldn’t recommend putting all your money in a single investment since having all your eggs in one basket is rarely in your best interest.
Most advisors are not fiduciaries, however, and may recommend poorly performing or expensive products to you when better options are available because those lesser options pay them more. Indexed annuities can pay high commissions to the people selling them, for example, and that can be a powerful incentive for your advisor to gloss over their potential disadvantages.
Indexed annuities are sold as a way to benefit from some of the upside of the stock market without the risk of loss if the market falls. But these annuities are complex and insurers can typically change the rules that govern your returns. In addition, you may face surrender charges if you need to take your money out.
The Securities and Exchange Commission has issued investor alerts about indexed annuities. These alerts urge potential investors to thoroughly investigate how the contracts are structured, how returns are figured and how the calculations can change. Anyone who is considering an indexed annuity would be smart to run the purchase past a fee-only, fiduciary financial planner to see whether it really makes sense for their situation.
By the way, there’s no such thing as a no-risk investment. Every investment poses some kind of risk, and a fiduciary advisor will take the time to explain those to you so you can make an informed judgment.
Today’s top story: How to leave Crypto to a loved one. Also in the news: Black Friday return policies, the October jobs report gives tired travelers a glimmer of hope, and the unexpected way bad credit messes with your life.
How to Leave Crypto to a Loved One
If you don’t make a plan for your cryptocurrency, it could be lost after you die. Here’s how to make sure it gets passed down to a loved one.
As You Shop Black Friday, Keep Return Policies in Mind
Before making purchases this holiday season, consider retailer return policies to save time and money.
October Jobs Report Gives Tired Travelers a Glimmer of Hope
The travel industry is experiencing significant job growth, according to October 2021 Bureau of Labor Statistics figures.
The Unexpected Ways a Bad Credit Score Messes With Your Life
Looking beyond mortgages and car loans.