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Liz Weston

Q&A: Here’s why two 401(k) accounts aren’t better than one

August 24, 2020 By Liz Weston

Dear Liz: I changed jobs more than three years ago and did not roll over my 401(k) when I started a 401(k) account with my new employer. I’m perfectly happy having separate accounts. However, I’ve read some IRS rules that I cannot understand about being penalized for not contributing to a 401(k) for five years. So my question: After turning 59½, will I face any sort of penalty or loss when I begin withdrawing funds from a 401(k) account that has been sitting idle?

Answer: There’s no penalty for not contributing to an old 401(k). In fact, you cannot contribute to an old 401(k). Once you leave the employer that sponsored the plan, you generally can’t put any more money into it.

What you may have stumbled upon are IRS rules that apply to employers who sponsor 401(k) plans that have a profit-sharing component.

Employers aren’t required to make contributions to these plans every year — there may be years when there’s no profit to share — but their contributions have to be “recurring and substantial.” If the employer hasn’t made contributions in three of the past five consecutive years, the plan could be terminated, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

That obviously doesn’t apply to your situation, and if you want to continue managing two 401(k) accounts, you’re welcome to do so. But consider rolling the money into your new employer’s plan, if it’s a good one and accepts such transfers. That would mean one fewer account you need to track and also could give you access to more money if you wanted to take out a loan.

Filed Under: Q&A, Retirement Tagged With: IRA, q&a, retirement savings

Friday’s need-to-know money news

August 21, 2020 By Liz Weston

Today’s top story: Why taking Social Security early costs too much. Also in the news: Student loans still cover living costs with classes online, why you should renew your passport right now, and how millennials and Gen Z are using TikTok to learn about personal finance.

Why Taking Social Security Early Costs Too Much
Longer lifetimes make the penalty for taking Social Security early, and the reward for delaying, too high.

College Going Online? Student Loans Still Cover Living Costs
Your cost of attendance might be different if you’re learning remotely due to COVID-19.

Why you should renew your passport right now
Try to beat the long lines.

How millennials and Gen Z are using TikTok to learn about personal finance
Sharing tips they didn’t learn in school.

Filed Under: Liz's Blog Tagged With: Gen-Z, maximizing Social Security, millennials, online classes, passports, Social Security, Student Loans, TikTok, travel

Why taking Social Security early costs too much

August 20, 2020 By Liz Weston

Starting Social Security early typically means getting a smaller benefit for the rest of your life. The penalty is steep: Someone who applies this year at age 62 would see their monthly benefit check reduced by nearly 30%.

Many Americans have little choice but to accept the diminished payments. Even before the pandemic, about half of retirees said they quit working earlier than they’d planned, often due to job loss or health issues. Some have enough retirement savings to delay claiming Social Security, but many don’t. And now, with unemployment approaching Depression-era levels, claiming early may be the best of bad options for older people who can’t find a job. In my latest for the Associated Press, why it pays to wait with Social Security.

Filed Under: Liz's Blog Tagged With: maximizing Social Security, Social Security

Wednesday’s need-to-know money news

August 19, 2020 By Liz Weston

Today’s top story: Choosing the right vehicle for your off-road adventures. Also in the news: Why a new fee shouldn’t stop you from refinancing your mortgage, what to do when you’ve paid off your credit card debt, and how to manage any credit card debt you may have racked up the last few months.

Choose the Right Vehicle for Your Off-Road Adventures
A versatile SUV can take you almost anywhere, but prepare for trade-offs the farther you venture off-road.

The Property Line: Don’t Let New Fee Stop You From Refinancing
Millions of homeowners could still benefit from refinancing their mortgages to get a lower interest rate.

You paid off all of your credit card debt—what to do next?
Don’t cut up those cards just yet.

How to manage any credit card debt you may have racked up the last few months
Talk to your lenders.

Filed Under: Liz's Blog Tagged With: car shopping, credit card debt, Credit Cards, mortgage refinancing, off-road vehicles

Tuesday’s need-to-know money news

August 18, 2020 By Liz Weston

Today’s top story: Is it harder for seniors to get credit cards? Also in the news: Factoring in fees on grocery, delivery, what to do if losing your job means losing your life insurance, and there’s still time to claim your missing $500 stimulus for dependents.

Is It Harder for Seniors to Get Credit Cards?
Even with more time to build history, seniors may have a hard time getting credit.

For grocery delivery, add fees to the list
Convenience comes at a cost.

What to do if losing your job means losing life insurance
Examining your options.

There’s Still Time to Claim Your Missing $500 Stimulus for Dependents
Another opportunity to get your stimulus.

Filed Under: Liz's Blog Tagged With: Credit Cards, dependents, fees, grocery delivery, job loss, life insurance, pandemic, Seniors, stimulus

Monday’s need-to-know money news

August 17, 2020 By Liz Weston

Today’s top story: Federal loans are paused until 2021 – should you pay anyway? Also in the news: A new episode of the SmartMoney podcast on pet costs and extreme couponing, what to know about the coronavirus charges on your college bill, and the tough choices renters are facing.

Federal Loans Are Paused Until 2021 — Should You Pay Anyway?
Federal student loan payments are suspended interest-free through the end of 2020.

Smart Money Podcast: Pet Costs and Extreme Couponing
The costs of our furry friends.

What to Know About Coronavirus Charges on Your College Bill
Some colleges are charging for testing.

Renters must make some tough choices in the coming weeks: What to do if you’re at risk
Ways to fight evection.

Filed Under: Liz's Blog Tagged With: Coronavirus, eviction, federal student loans, payments, renters, renting, SmartMoney podcast

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