Ask Liz Weston

Get smart with your money

Liz Weston

Tuesday’s need-to-know money news

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Today’s top story: 4 common debt consolidation mistakes and how to avoid them. Also in the news: Inflation could be sapping your pandemic savings, how your driving habits can lower your insurance bills, and how lifestyle creep can erode your savings one raise at a time.

4 Common Debt Consolidation Mistakes and How to Avoid Them
Before you consolidate, build your credit, assess your budget and compare consolidating to other debt payoff strategies.

As Pandemic Saving Settles, Inflation Could Sap Your Surplus
In the midst of the coronavirus pandemic, many Americans have been able to tuck away more cash than ever before.

How Your Driving Habits Can Lower Your Insurance Bill
Telematics insurance can help you lower your car insurance rates, as long as you’re a safe driver.

Lifestyle Creep: Eroding Your Savings, One Raise at a Time
Lifestyle creep may put your retirement savings at risk more than anything else.

Monday’s need-to-know money news

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Today’s top story: 3 things to do before you buy crypto. Also in the news: A new episode of the Smart Money podcast on back to school shopping and breaking bad money habits, student debt is canceled for borrowers with disability, and 6 ways to make your business more agile.

3 Things to Do Before You Buy Crypto
All your friends are doing it. Should you invest in crypto, too? Take it slow and meet other money goals first.

Smart Money Podcast: School Supply Shopping and Breaking Bad Money Habits
How to save money when back-to-school shopping this year.

Student Debt Canceled for Borrowers With Disability; $10K Forgiveness Stalled

6 Ways to Make Your Business More Agile
Small businesses with agility can quickly pivot to survive disruptions and take advantage of opportunities.

Q&A: Medicare and Social Security

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Dear Liz: If my wife and I wait until we are 70 to collect Social Security but retired at our full retirement age of 66 and 2 months, would we still be able to get Medicare for those 3 years and 10 months before we reach 70?

Answer: You’re eligible for Medicare at age 65, which is typically when you should sign up. Delaying can incur penalties you’d have to pay for the rest of your life.

People receiving Social Security benefits at 65 are signed up automatically for Part A (hospital coverage) and Part B (which pays for doctor visits), with the Part B premiums deducted from their benefits. If you’re not already receiving Social Security, you’ll need to contact the Social Security office, which manages Medicare enrollment, to sign up and pay the Part B premiums.

Q&A: Saving after retirement

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Dear Liz: I’m retired, age 67. I have a SEP that requires me to pay taxes on any withdrawals. I also have standard savings and checking accounts. The SEP has been earning 13% to 14% annually, and of course the savings account earns very little. Where does it make sense for me to place savings each month — in the bank or the SEP?

Answer: Well, not the SEP. A SEP is a simplified employee pension plan that only allowed contributions as long as you were employed by the company that offered it.

Besides, the reason for the difference in returns is what’s in the account, not the account itself. The SEP probably is invested in stocks, while the savings account is just cash earning the current low interest rates. On the other hand, the money in your savings account is FDIC insured so that you won’t lose your principal.

Money in the stock market is at risk because stocks don’t always rise in value. (Over time, a diversified mix of stocks typically will earn better returns than other types of investments, but you can’t count on the money being there if you need it in a hurry.)

If you’re retired and don’t have earned income, you can’t put money into other retirement accounts such as IRAs or Roth IRAs. You can, however, open a brokerage account and invest money through that. You’ll still pay taxes on any withdrawals, but if you hold the investments for at least a year you can benefit from lower capital gains tax rates.

Q&A: Your accounts are likely to outlive you. How to safely store that information

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Dear Liz: I’m attempting to become as paperless as possible while also organizing all of our financial information into one place so if one of us dies, the other (or our child) will be able to access everything in one concise source. My current system is downloading all bank and investment accounts and medical payments onto memory sticks. One is kept in the safe deposit box, the other hidden. Is there a better, safer system out there that would not involve a third party?

Answer: If you’re unwilling to use a secure online storage site, then your system is a reasonable if somewhat laborious option. You should be sure, however, that your trusted person will have access to your computer for the most up-to-date information. The person also probably will need access to your phone, since identity authentication codes are often sent by text.

You’ll need to record passwords for your devices and consider creating a list of logins and passwords for all the sites you regularly use. If you use a password manager, you often can set up emergency access for trusted people.

Going paperless is usually the most convenient, safe and ecologically friendly option, but your trusted person won’t be able to rummage through your desk to find clues about where your assets are, what bills need to be paid and what services should be shut down. Otherwise, as one friend put it, your frequent flier miles could disappear while your Netflix subscription continues indefinitely.

If you want a system that doesn’t involve frequent trips to your safe deposit box, consider sites such as Everplans that allow you to store important information and to name people who can be given access if you’re incapacitated or dead. Your accountant or attorney may be able to recommend other sites that perform similar functions.