February 26, 2018 By

Q&A: A husband’s death. A pile of bills. Now what?

Dear Liz: After my husband died, I was in shock and really not in my right mind for at least a year, but really more. During this time I didn’t pay attention to bills. Only the ones that were getting shut off got paid. Now I’m behind on several credit cards that I’ve had for years. I can’t keep up anymore, but I don’t know what to do.

Answer: It’s natural in your situation to be overwhelmed and not know where to start. Your first task should be determining if you can realistically pay what you owe.

If your unsecured personal debt — credit cards, medical bills, payday loans and personal loans — equals half or more of your income, then you may not be able to dig yourself out. If that’s the case, consider making appointments with a credit counselor and a bankruptcy attorney to review your options. You can get referrals from the National Foundation for Credit Counseling at www.nfcc.org or (800) 388-2227 and the National Assn. of Consumer Bankruptcy Attorneys at www.nacba.org.

Even if your debts don’t total half your income, you may find it helpful to discuss your situation with a credit counselor or an accredited financial counselor (referrals from the Assn. for Financial Counseling and Planning Education at www.afcpe.org). These counselors can review your situation and help you craft a plan to get your finances back on solid ground.

Social Security survivor benefits also can be a way to restore your financial stability, depending on your age. You can receive survivor benefits starting at age 60, or age 50 if you’re disabled, or at any age if you’re caring for your husband’s child if the child is younger than age 16 or disabled.

Applying for survivor benefits doesn’t preclude you from applying for your own retirement benefit later. You could take a widow’s benefit at 60 and then switch to your own benefit when it maxes out at age 70, if your own benefit would be larger at that point.

Filed Under: Credit & Debt, Credit Cards, Q&A Tagged With: , ,
February 26, 2018 By

Q&A: The reasons behind falling credit score

Dear Liz: Please explain to me how one’s credit depreciates. After paying off my home, my credit score went from mid-700 to mid-600. There were no changes or inquiries. I built it back up to 734, got into a tight spot and took a loan from my bank. I just checked the score again and now it’s 687. I have not been late or missed a payment. I thought keeping current on all payments and in some cases paying more would help, but it’s not. I need some help and direction.

Answer: We’ll assume that you’ve been monitoring the same type of score from the same credit bureau. (You don’t have just one credit score, you have many, and they can vary quite a bit depending on the credit bureau report on which they’re based and the formula used.)

Paying off a mortgage could have a minor negative impact on your credit scores if that was your only installment loan. Credit score formulas typically reward you for having a mix of installment loans and revolving accounts, such as credit cards.

But the drop shouldn’t have been that big. Something else probably triggered the decline, such as an unusually large balance on one of your credit cards.

Scoring formulas are sensitive to how much of your available credit you’re using, so you may be able to restore points by paying down your debt if you carry a balance or charging less if you pay in full each month. There’s no advantage to carrying a balance, by the way, so it’s better to pay off your cards every month.

Filed Under: Credit Scoring, Q&A Tagged With: , , ,
February 26, 2018 By

Q&A: Can creditors get your IRA funds?

Dear Liz: You recently wrote that workplace retirement plans offer unlimited protection from creditors but that IRAs are protected only up to $1,283,025. When I transferred my 401(k) to a rollover IRA, the advisors at the brokerage assured me that the rolled-over money also enjoys the unlimited protection. Your article seems to imply otherwise. Can you clarify what is the correct rule?

Answer: Two sets of rules apply, which causes a fair amount of confusion.

In bankruptcy court, your transferred money would be protected. Money rolled into an IRA from a workplace plan such as a 401(k) enjoys unlimited protection from creditors in bankruptcy filings. Outside of bankruptcy court, however, creditor protection is determined by your state’s laws, which may not be as generous. If someone successfully sues you and wins a judgment, for example, your IRA could be at risk.

Filed Under: Credit & Debt, Q&A Tagged With: , , ,
February 23, 2018 By

Friday’s need-to-know money news

Today’s top story: Quick – Can you come up with $400? Also in the news: Is 4-year college right for you, car negotiating secrets for people who hate haggling, and 5myths about your 2017 tax refund and what not to do if you want to do if you want it quicker.

Quick — Can You Come Up With $400?
Most of America cannot.

Ask Brianna: Is 4-Year College Right for You?
Do you really need all 4 years?

Car Negotiating Secrets for People Who Hate Haggling
Negotiating without pressure.

5 myths about your 2017 tax refund and what not to do if you want it quicker
Calling the IRS won’t help.

Filed Under: Liz's Blog Tagged With: , , , , , , , ,
February 23, 2018 By

Why Millennials Should Care About Medicare Right Now

Medicare provides basic health care to one out of six Americans, most of them 65 and older. Even people decades away from retirement, though, should be concerned about Congress meddling with the program.

Lawmakers understand that cutting current retirees’ benefits is a political nonstarter. Older people vote, and they have one of the most powerful lobbyists, AARP, advocating on their behalf.

Younger people? Not so much. Politicians will be tempted to foist the biggest cuts on people farther away from retirement (who are presumably paying less attention).

In my latest article for the Associated Press, why it’s crucial that Millennials begin to think a

Filed Under: Liz's Blog Tagged With: , ,
February 22, 2018 By

Thursday’s need-to-know money news

Today’s top story: 5 pieces of popular tax advice that are actually baloney. Also in the news: VW aims to plug into nostalgia with the electric bus, Social Security is underpaying thousands of widows and widowers, and 33% of Americans don’t have more savings than credit card debt.

5 Pieces of Popular Tax Advice That Are Actually Baloney
Popularity doesn’t make them true.

VW Aims to Plug Into Nostalgia With Electric Bus
We’re going back to the 60’s.

Social Security underpays thousands of widows and widowers
Claiming a larger benefit.

33% of Americans do not have more savings than credit card debt
A third of the country is in trouble.

Filed Under: Liz's Blog Tagged With: , , , , , ,
February 21, 2018 By

Wednesday’s need-to-know money news

Today’s top story: How debt settlement can make a bad money situation worse. Also in the news: Using an IRA as a legal, last-minute way to lower your taxes, 4 reasons why it’s smart to buy a used cell phone, and how to budget as a freelancer.

Debt Settlement Can Make a Bad Money Situation Worse
Not the perfect solution.

An IRA Is a Legal, Last-Minute Way to Lower Your Taxes
There’s still time for 2017 taxes.

4 Reasons It’s Smart to Buy a Used Cell Phone
Saving on new-to-you tech.

How to Budget as a Freelancer
Budgeting when income isn’t reliable.

Filed Under: Liz's Blog Tagged With: , , , , , , , , ,
February 20, 2018 By

Tuesday’s need-to-know money news

Today’s top story: 5 items that make any hotel room feel like home. Also in the news: 3 “tax-friendly” states that are anything but, the best thing you’ve done to get your finances in order, and 5 gas mileage myths that are wasting your money.

5 Items That Make Any Hotel Room Feel Like Home
You don’t have to feel like a stranger while on the road.

This Harsh Tax Can Make These 3 “Tax-Friendly” States Anything But
Nevada, Texas, and Washington.

What’s the Best Thing You’ve Done to Get Your Finances in Order?
Share your tips.

5 gas mileage myths that are wasting your money
You can leave the air conditioning on.

Filed Under: Liz's Blog Tagged With: , , , , , , ,
February 19, 2018 By

Q&A: An inexpensive lawyer in the suburbs is fine for smaller estates

Dear Liz: My wife and I have updated our will and trust every 10 years. So far we’ve been sorely disappointed. The local bar association recommended some attorneys, but they were relatively young, inexperienced, unable to answer a lot of our most basic questions, and produced documents that I could have created on my home computer. It seems as though the most experienced attorneys are downtown in tall office buildings with equally tall price tags while the suburbs get the new graduates, the generalists or the estate planning attorneys who didn’t make it in the big leagues. Can you recommend a referral source that will actually suggest someone who is experienced, specializes in estate planning and won’t require us to drive 40 miles to downtown?

Answer: The first question that must be asked is whether yours is a big-league estate.

If your joint estate is worth more than $22.4 million, the current estate tax exemption limit for a married couple, you probably should swallow your distaste and hire a skyscraper-based attorney. You’ll need expert help dealing with estate tax issues, and that doesn’t come cheap.

If your estate is not in the big leagues, you should still be able to hire a competent, experienced attorney if you do sufficient research beforehand. Understand that software will be drafting your plan, regardless of which lawyer you choose.

What you’re paying for is advice on the documents you need, assurance that those documents are prepared correctly and help getting the deeds for your real estate recorded for your trust, said Jennifer Sawday, an estate planning attorney in Long Beach. Good estate planning attorneys have seen the many ways an estate plan can go wrong so they can give the guidance needed to help you avoid disaster and create the outcomes you want.

Sawday said the best source of referrals maybe your CPA or tax preparer. Your tax pro has a good idea of your financial situation and probably has referred many other clients to good attorneys. Financial planners and attorneys who specialize in other areas can often recommend someone as well.

“Professionals don’t refer to other professionals time and time again who give bad service or otherwise generate unhappy clients,” Sawday said.

Interview two or three attorneys before you decide. You’ll typically have to pay a consultation fee, but you’ll have a much better idea of whether they can answer your questions to your satisfaction.

The suburbs, by the way, are precisely where you’re likely to find reasonably priced, competent attorneys, since they don’t have the same overhead costs as the skyscraper set.

Filed Under: Estate planning, Q&A Tagged With: ,
February 19, 2018 By

Q&A: When rolling your 401(k) into an IRA isn’t a good idea

Dear Liz: I have just retired. I have a 401(k) from work. Do I keep it as is or do I roll it over into an IRA?

Answer: Investment companies and their representatives like to push the idea of rollovers as the best option, but that may profit them more than it does you.

Leaving your money in your employer’s 401(k) has several potential advantages. Many 401(k)s offer access to institutional funds, which can be much cheaper than the retail funds available to IRA investors. Workplace retirement plans also offer unlimited protection from creditors if you’re sued or forced to file bankruptcy. An IRA’s bankruptcy exemption is limited to $1,283,025, and protection from creditors’ claims varies by state. (In California, for example, only amounts “necessary for support” are out of reach of creditors.)

If you retired early, you can access your 401(k) without penalty at age 55. The typical age to avoid penalties from IRA withdrawals is 59½.

You may opt for a rollover if your 401(k) offers only expensive or poorly performing options. Even if you decide to roll over the rest of your 401(k), though, get a tax pro’s advice before you roll over any company stock. You may be better off transferring the stock to a taxable account now so you can let future appreciation qualify for capital gains rates. Ask your tax pro how best to take advantage of this “net unrealized appreciation.”

Filed Under: Q&A, Retirement Tagged With: , , ,