Ask Liz Weston

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Liz Weston

Tuesday’s need-to-know money news

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Today’s top story: 3 things to know if you’re new to gig work. Also in the news: How to craft smarter money goals in 2021, the do’s and don’ts of getting and using a paycheck protection program loan, and 5 steps you can take to pay off consumer debt.

3 Things to Know if You’re New to Gig Work
To the IRS, you’re a small business.

How to Craft Smarter Money Goals in 2021
The pandemic has changed everything.

The Do’s and Don’ts of Getting, Using a Paycheck Protection Program Loan
Best practices that can help small businesses owners get their PPP loan funded and forgiven.

5 steps you can take to pay off consumer debt
Creating the right plan.

Monday’s need-to-know money news

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Today’s top story: How insurance fraud costs you money. Also in the news: A new episode of the Smart Money podcast on lottery winners and what to do with extra COVID cash, how to decide if your first house should be a condo, and how to choose your ACA plan.

How Insurance Fraud Costs You Money
Insurance fraud adds an extra $400 to $700 to your premiums every year and costs about $80 billion overall.

Smart Money Podcast: Jackpot Windfall and Extra COVID Cash

Should Your First House Be a Condo?
A condo can make a great starter home, but weigh the pros and cons of buying a condo vs. a house to decide whether it’s right for you.

How to Choose Your Obamacare Plan
Finding the right amount of coverage.

Q&A: More about spousal benefits

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Dear Liz: You recently wrote that a wife could apply for Social Security at 62 and then switch later to her spousal benefit. I do not believe this is accurate. Once the wife starts drawing, she is committed.

Answer: Typically, that’s true. When someone applies for Social Security, their retirement benefit is compared with their potential spousal benefit and they would get the larger of the two amounts. If the spousal benefit is larger, they would technically get their own benefit plus a supplemental amount.

Because they had already started getting their own benefit either way, they couldn’t switch later — there’s nothing else to switch to. (In the past, someone could start a spousal benefit and leave their own benefit to grow, but that’s no longer an option.)

For a spousal benefit to be available, however, the husband must have already started his retirement benefit. In this case, he would not have done so. That means the only benefit the wife could qualify for when she applies is her own. Once he applies at age 70, a spousal benefit would be triggered. If that amount is larger than what she was getting, she would get a supplement on top of her retirement benefit, as described above.

Q&A: Couples and their accounts

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Dear Liz: You’ve been writing about things people should do after a spouse dies. May I recommend that before your spouse dies, be sure every account is in both your names.

It took six months to cancel my landline phone after my husband died and I moved out of our home. Apparently when we moved in 30 years ago, the service was in just my husband’s name. (I finally reached someone who said, “I don’t know why you’re having so much trouble with this!” and fixed it.)

Also, it took 1½ years, plus hundreds in lawyer fees, to get access to the safe deposit box that he’d had with his parents. This is despite a trust and will leaving everything to me. I was told that “banks don’t care about wills.”

Answer: That’s an excellent suggestion. It’s a lot easier to add a spouse to an account while you’re both alive. It’s a good idea to review all your accounts periodically to make sure the right people are on them, either as joint account holders or as beneficiaries.

Not every account can or should be in both spouses’ names, of course.

Modern credit card accounts, for example, typically aren’t jointly held but instead have a primary cardholder and an authorized user. Also, retirement accounts are in one person’s name alone, although the spouse typically is the beneficiary.

Banks aren’t the only entities that can ignore wills. Typically a payable-on-death account will go to the beneficiary, regardless of what a will or trust says. And speaking of estates, sometimes accounts will be held separately for estate planning purposes.

If you have an estate planning attorney, check with that person before changing how accounts are held.

Q&A: Here’s why trying to time the stock market is a really bad idea

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Dear Liz: I confess that I am one of those people who panicked and sold a portion of my portfolio in March, against the advice of many who said, “Hold, don’t fold.” Thus, when the market bounced back, I was left standing out in the cold.

I am filled with a tremendous sense of stupidity. I have no idea what I should do with the cash, which remains in a money market account.

Do I wait for a 5% or 10% market correction to reenter the market? Do I leave the money in a money market account, where it earns 0.01% interest, and wait for interest rates to rise?

Answer: You tried to time the market once, with painful results. Why would you want to make the same mistake again?

That’s what you’re doing when you wait for a correction to enter the market. Many people think they’ll have the discipline to do this, but the reality can be quite different.

Once the market drops 5% to 10%, what’s to keep it from dropping further? Would you be able to jump in as others are bailing out? And what if the correction is manageably small but happens after the market has climbed considerably? You would still have missed out on a substantial amount of growth.

You may have panicked because you were taking too much risk with your portfolio. Perhaps you were trying for maximum returns or the proportion devoted to stocks had increased during the previous bull market.

The solution is to craft an asset allocation that reflects your goals and risk tolerance. Then you regularly rebalance back to that asset allocation.

Having such a plan can help you resist the urge to cash out in a downturn. So too can having an advisor who can help you craft a plan and talk you down when anxiety has you climbing the walls.

Friday’s need-to-know money news

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Today’s top story: Relax. The Reddit-Hedge Fund battle won’t tank your 401(k). Also in the news: How Medicare star ratings can help you choose a plan, the tax credit fix many can’t afford to miss, and what is Dogecoin and why are people buying it?

Relax. The Reddit-Hedge Fund Battle Won’t Tank Your 401(k)
The internet is aflame with stock market reactions. But if you invested for the long term, you’re likely insulated from any fallout.

Medicare Star Ratings: How They Can Help You Choose a Plan
Medicare star ratings (compiled by the government) help shoppers compare Medicare Advantage and Part D drug plans.

The Tax Credit Fix Many Can’t Afford to Miss
Working families could miss out on the refundable tax credits they need to make ends meet.

What is Dogecoin, and Why Are People Buying It?
The hottest meme crypto.