Ask Liz Weston

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Liz Weston

Q&A: You can pause Social Security payments

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Dear Liz: Are you allowed to stop your Social Security payments if you choose to make over the $23,000 limit?

Answer: When you start Social Security before your full retirement age, you’ll face the earnings test that reduces your benefit by $1 for every $2 you make over a certain limit, which in 2026 is $24,480.

You can suspend your Social Security payments once you reach your full retirement age. At that point, however, the earnings test will no longer apply.

The money you lost to the earnings test isn’t gone forever. The amounts that were withheld will be added back to your benefit over time. What you have lost is the increase in your benefit that would have occurred had you delayed your application until full retirement age.

You still have one last chance to benefit from delay, however. If you opt to suspend your benefit at full retirement age, you can get delayed retirement credits that will boost your check by 8% for each year between your full retirement age and age 70. For most people, that 24% boost plus accrued cost-of-living increases will be well worth the wait.

Q&A: How to help grandchildren pay for college

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Dear Liz: What is the best way for us to contribute to our grandchild’s college expenses? I believe federal financial aid formulas no longer count grandparents’ cash or 529 contributions. Would direct cash to the student (who is responsible) or a 529 be the most beneficial to the student or us?

Answer: If the grandchild is already in college, then cash contributions may make the most sense. The tax benefits of a 529 plan at this point would be minimal, and you’d face some restrictions in what expenses qualify.

Keep in mind, though, that you may need to file a gift tax return if you give more than the annual exclusion amount, which in 2026 is $19,000 per recipient. You won’t actually have to pay gift taxes until the amounts you give away over that annual exclusion total more than your lifetime gift and estate tax exclusion amount, which in 2026 is $15 million per person.

Any amount you pay directly to the college for tuition expenses isn’t counted toward the gift tax exclusion. (The same is true for any medical expenses you pay on behalf of someone else, as long as the payments are made directly to the medical provider.) In other words, there’s no limit on how much tuition you can pay, as long as you pay the college directly.

If college is still many years away, then 529 college savings plans are often the best option.

These plans, administered by the states, allow contributions to be invested and grow tax-deferred. Withdrawals are tax-free when used for qualified education expenses, including tuition, room and board, books and supplies, computers and related equipment and repayment of student loans.

Qualified education expenses do not include transportation costs, insurance payments or room and board above what school housing and meal plans would cost.

There’s no federal tax deduction for contributions to 529 college savings plans, although many states offer tax breaks (California and Oregon are among the states that don’t offer such incentives).

The tax breaks typically apply only if you contribute to that state’s plan, but you’re allowed to contribute to any state’s plan and use the money at nearly all accredited two-year, four-year, and graduate schools in the U.S. and many schools abroad.

Morningstar rates each plan annually.

For the wealthy, 529 plans have another benefit: up to five years’ worth of annual exclusion amounts can be contributed at once, without having to file a gift tax return. In 2026, that means you could contribute up to $95,000 per recipient.

In the past, 529 plan assets had only a small impact on financial aid, but distributions were another story. Money distributed from a grandparent-owned account was treated as untaxed income to the student, which could reduce financial aid by up to 50%.

Today’s Free Application for Federal Student Aid (FAFSA) no longer counts such distributions or any cash contributions from people other than the child’s parents. The formula also doesn’t count 529 plans owned by people other than the parents.

Such plans are still counted by the CSS Profile, which is used by about 200 private colleges, and some of the schools also count distributions. If your grandchild attends one of these schools and receives financial aid, check with the school’s financial aid office about how your generosity could affect their aid package.

Q&A: Is free advanced directive site really free?

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Dear Liz: Your recent column about advanced directives said that people could get a free version at PrepareForYourCare.org. I found there is a charge. Is this for all online directives?

Answer: Prepare is a free site supported by donations, grants and licensing agreements. If you were asked to pay, you either clicked the donate button or weren’t on the correct site.

Q&A: How to fix a mistaken contribution to an IRA

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Dear Liz: When I retired, I had a small 401(k) with about $12,000 in it. Instead of rolling that money into an IRA, I took a distribution and paid taxes on it. I had no immediate need for the remaining funds, so eventually I opened a new IRA account and deposited the money.

I now realize I should have put it in a Roth IRA so I wouldn’t face double taxation on the money. This is the stupidest thing I’ve done in recent memory. Is there any legal mechanism I can use to get that money out and into a Roth without paying taxes the second time?

Answer: You made a mistake, but probably not the one you think.

You can’t contribute to an IRA — or a Roth IRA, for that matter — if you don’t have earned income. So if you’ve fully retired, you should contact your IRA administrator and let them know you need to withdraw your “excess contribution” as well as any earnings the contribution has made.

If you contributed this year, you have until your tax filing deadline — typically April 15, 2026 — to remove the funds without penalty. If you contributed in a previous year, you’ll typically face a 6% excise tax for each year the money remained in your account.

Now, a warning about financial mistakes: They tend to become more common as we age. That can be incredibly unsettling, especially to do-it-yourselfers used to handling finances competently on their own. Retirement is a good time to start implementing some guardrails to protect ourselves and our money.

Hiring a tax pro would be a good first step. Anything to do with a retirement fund should be run past this pro first to make sure you’re following the tax rules.

Q&A: Closing credit accounts doesn’t need to be a big deal

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Dear Liz: Your recent response to the person giving bad advice about closing credit accounts was truly a public service. Over the years, I have opened and closed many credit accounts. Only once was a credit card closed for non-usage by the issuer and there was no major degradation of my credit score. Never has one of my actions altered my score by more than a few points or for more than a few months at a time. Misinformed statements such as those made by that individual can confuse people who are new to the world of credit or unfamiliar with how it works.

Answer: Before the advent of credit scoring, your ability to get a new loan or credit card may have been affected by a notation on your credit reports that a previous account was closed by the issuer. Today, though, it doesn’t matter who closes an account and there’s no need to add a notation that you were the one requesting the closure. If you mishandled the account, that will be evident from the missed payments that would show up on your credit reports (and be incorporated into your scores). If you handled the account responsibly, that will also be evident on your reports.

As mentioned in previous columns, closing credit accounts can have a significant impact on your scores if you have a few accounts or major blemishes on your credit. Closing a card with a high limit can ding your scores more than closing one with a lower limit.

But people with multiple credit accounts and a history of managing credit responsibly aren’t likely to suffer significant or lasting damage to their scores when they close an account.