Get smart with your money
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.
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.
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.
Dear Liz: My wife and I are well over 70 and receive Social Security. We pay for Medicare Part B as well as IRMAA (Income-Related Monthly Adjustment Amount) for Part B and Part D via deductions from our monthly checks. We just received our annual notice from the Social Security Administration of the 2.8% cost-of-living increase for 2026. At the same time, our Medicare deductions were increased such that we ended with a monthly $20 increase in Social Security for my wife and $80 for me. That hardly goes along with the sentence in the standard letter from the SSA that the COLA helps us keep up with the cost of living. Are we just lucky that our monthly checks from the government did not actually decrease?
Answer: In a word, yes.
The cost of healthcare and healthcare insurance typically rises faster than the general rate of inflation. Medicare costs haven’t increased as quickly as those for private insurance. However, it’s still not unusual for higher Medicare premiums to wipe out Social Security cost-of-living increases for the year.
Fortunately, you have other resources to help you cope with inflation. IRMAA is a Medicare surcharge that kicks in for people with modified adjusted gross incomes over $109,000 if single or $218,000 if married filing jointly. The surcharge is determined by your income tax return from two years ago, so your 2026 IRMAA is based on your 2024 filing.
Dear Liz: Could you possibly recommend a financial advisor I could sit down with who could counsel me on ways to save money? I work a full-time clerical job, but worry all the time about being homeless someday.
Answer: Talking with a financial expert can help you formulate a sound plan for your future, which in turn can help allay your fears.
Start with your employer. Some companies offer financial wellness programs that may include one-on-one counseling. Others offer financial advice through their 401(k) or other retirement plan providers.
Another option is an accredited financial counselor. These professionals provide advice on budgeting, debt, credit, retirement savings and other money topics. They’re fiduciaries, meaning they’re required to put your best interests first. Some are employed by credit unions or the military, and others offer a sliding scale. You can start your search at findanafc.org.
The National Foundation for Credit Counseling at www.nfcc.org primarily helps people pay off credit card debt, but its member agencies also offer budget counseling. You can find its budgeting tool at www.nfcc.org/resources/monthly-expense-tool/.
By Liz Weston
Dear Liz: A reader mentioned recently their credit score dropped only four points after closing a credit card they had since 1981. Three years ago I closed a credit card that was over 30 years old and my credit score dropped 20 to 35 points, depending on the credit reporting bureau. My score hasn’t gone up since despite good credit and no late payments. Please remind readers that many factors go into a credit score when closing a credit card.
Answer: As mentioned in the previous column, the impact of a card closure varies depending on other information in your credit reports. If your scores are high and you have several other open credit cards in good standing, the impact is likely to be minimal. If your scores aren’t great, you have few accounts or you’re closing one of your highest-limit cards, the impact may be greater.
Also keep in mind that there are many different credit scoring formulas in use today, so you don’t have just one credit score: you have dozens. FICO and VantageScore are the two main providers, but lenders use different versions of these scores and, as you’ve noted, the results also vary according to the credit bureau they use.
Your scores constantly change because the underlying information in your credit reports changes. Even if you aren’t actively adding or closing accounts, the balances on your accounts typically change from month to month. Higher balances on credit cards can hurt your scores, while lower balances can help. Each month your accounts get a little older (which is a good thing) and more time has passed since your last account opening (also a good thing).
You can offset the impact of a closure by continuing to handle your accounts responsibly. You also might consider adding a new account to the mix if the point drop is significant enough to affect your financial life. If the score drop took you from the 800s to the high 700s, though, it probably isn’t worth the bother of trying to “fix” it since your scores will typically get you the best rates and terms on any credit you may need.