Ask Liz Weston

Get smart with your money

Liz Weston

Feel out of control? These money moves can help

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Behavioral economist Dan Ariely and his colleagues at Duke University’s Center for Advanced Hindsight have a pact. Every week, the group of 50 people picks one small business in Durham, North Carolina, and each person spends $100 there.

A one-time $5,000 infusion wouldn’t make a difference to Amazon, Costco or any other large retailer, but it could be enough to keep a local business afloat, Ariely says. Taking this action helps the group feel that they’re making a difference when so much of the world seems out of control.

“This is, to a large degree, a crisis of Main Street,” says Ariely, the bestselling author of books including “Predictably Irrational.” “We’re taking a retailer and we’re saying, ‘We’re giving you a little bit of breathing room.’”

In my latest for the Associated Press, how to wrest back control from the unpredictability of the pandemic.

Monday’s need-to-know money news

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Today’s top story: New lawyers frustrated, depressed by student loan debt. Also in the news: A new episode of the SmartMoney podcast on lower mortgage rates and moving during a pandemic, how to take a high-interest loan and skip the debt cycle, and why you’ve got more time to pay off federal student loans.

New Lawyers Frustrated, Depressed by Student Loan Debt
Student loan debt is affecting every aspect of their lives.

Smart Money Podcast: Lower Mortgage Rates, and Moving During a Pandemic
Rents are dropping.

How to Take a High-Interest Loan and Skip the Debt Cycle
Consider your bank as an option.

You’ve Got More Time to Pay Off Your Federal Student Loans
You now have until Dec. 31st.

Q&A: Balancing disability and survivor benefits

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Dear Liz: My 70-year-old husband is retiring at the end of the month. I’m 64 and collecting Social Security disability. If he should pass away before me, which is not likely considering my medical conditions, will I still get at least half of his Social Security income instead of my own, if it’s more than what I’m already collecting? I do understand that my disability benefit will stop at 65. I will then be collecting a regular Social Security benefit at my retirement age of 67. We are totally confused and trying to decide whether to forgo getting a retirement annuity benefit for me from his employer pension if he should pass before me.

Answer: Your disability benefit doesn’t stop at 65. It continues until you reach your full retirement age of 67, and then converts to a retirement benefit. The name for the benefit changes but the amount doesn’t.

If the amount you’re receiving is less than what your husband gets, and your husband dies first, you will get a survivor’s benefit equal to what he was getting. Survivors don’t get their own benefit plus their spouse’s; they just get the larger of the two benefits.

With pensions, it would be smart to get expert advice before you sign away your right to a survivor benefit. The default payout option for a married person is typically “joint and survivor,” which means the survivor would continue to receive the checks after the person dies. Opting for a “single life” payout instead increases the monthly check, but the money stops when he dies. While it may seem more likely you’ll die first, there are no guarantees and waiving your right to a survivor benefit could lead to a steep drop in your income.

The pension may offer different joint and survivor options, such as 100%, 75% and 50%. With the 100% option, the payments continue to be the same if he dies first. The 75% and 50% options reduce the payment after his death to 75% or 50% of the previous amount. Choosing 75% or 50% could be a decent compromise that allows you to get more money now but still get payments should he die first.

Q&A:The IRS doesn’t need your worry

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Dear Liz: My mother received a stimulus payment on behalf of my late father in April. Per an IRS directive on May 6, I returned the money to the IRS. As of Aug. 1, the check I sent has not been cashed. I have made two phone calls to the specific IRS phone number that deals with any stimulus payment issues and both times have been told, “Don’t worry about it.” Do you have any suggestions for us?

Answer: Yes. Don’t worry about it. And stop calling.

The IRS is dealing with a tremendous backlog that accumulated while its operations centers were shut down because of the pandemic. Although the centers have reopened, the pandemic is still affecting the agency and probably will do so for some time.

The IRS recently warned that “live assistance on telephones, processing paper tax returns and responding to correspondence continue to be extremely limited.” The IRS will cash the check eventually; your calls won’t speed that up and will unnecessarily tax an already overwhelmed system.

In the future, consider using the IRS’ online payment systems. They’re safer than sending checks in the mail and you’ll get instant confirmation that your payment was received.

Q&A: What to do when coronavirus brings job loss, debt and a housing dilemma

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Dear Liz: I was employed as a tour guide for seniors but because of COVID-19, all our trips are canceled. I depended on the income because I have no other, besides Social Security, which I started at age 62. I now have credit card debt. I also needed a new car (mine was 24 years old and dying) so I’m leasing a car. The lease is up early next year and I would love to keep the car, if possible. My question is what to do with my home, where I have lived for more than 65 years. It was our parents’ home and now it’s owned equally with my brother, although because I live here, I pay everything: mortgage, taxes, insurance and so on. Should I sell my house and get an apartment? Rent it out? Get a roommate? Getting a roommate would not be my first choice, but I really want to stay in my home that I love so much.

Answer: If getting a roommate would give you enough income, then that may be the best solution — particularly since staying in your home is a top priority. Ideally, the rent you could charge would be enough to allow you to make ends meet, pay off your debt and save to buy your car.

If you’d still be running a deficit, however, then consider other solutions. If you can’t rent the home for enough to keep your head above water, then you probably should consider a sale.

One option, if your brother is amenable, is to sell some or all of your equity to him with the understanding that you could remain in the home. Make sure to get a written agreement; a lawyer could help with this. If your brother is not willing or able to buy your equity, you may have to put the house up for sale.

These are difficult changes, but your job isn’t likely to come back anytime soon. Finding a new gig, at your age and in this economy, may not be possible. Selling the house could free up some money for the future and allow you to reduce expenses rather than going deeper into debt.

Friday’s need-to-know money news

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Today’s top story: Can you have too much credit? Also in the news: How to safely move during a pandemic, what personal finance apps should be doing to better serve older people, and how to avoid paying a penalty if you missed the tax filing deadline.

Can You Have Too Much Credit?
Credit scoring formulas don’t punish people for having too many credit accounts, but too much debt can hurt scores.

How to Move Safely During a Pandemic
Keeping yourself and your stuff safe.

This is what personal finance apps should be doing to better serve older people
What a survey revealed about the apps.

How to Avoid Paying a Penalty If You Missed the Tax Filing Deadline
You could qualify for a first-time penalty abatement.