Get smart with your money
Today’s top story: Mortgage trends for the rest of 2020. Also in the news: Why a credit card company can lower your limit, why you might not want to zero out every credit card, and how to know if your 401(k) fees are too high.
Mortgage Trends for the Rest of 2020
Lower rates but fewer homes.
Can a Credit Card Company Lower My Credit Limit?
Why you might not want to zero out every credit card
Why 1% is better than 0%.
How to Know if Your 401(k) Fees Are Too High
Start comparing costs.
Today’s top story: What you can do if your college says to stay home this fall. Also in the news: 8 things that will get more expensive (and 3 that will be cheaper) post-pandemic, 7 ways moving from a city to a small town could save you money, and what yo do when your forbearance ends.
What you can do if your college says to stay home this fall
Options for undergrads, grad students, vets and international students.
8 Things That Will Get More Expensive (and 3 Things That Will Be Cheaper) Post-Pandemic
Food and clothing costs will rise.
7 ways moving from a city to a small town could save you money
Looking for a simpler life.
What to Do When Your Mortgage Forbearance Ends
Start with contacting your broker.
Parents who are downsizing or simply decluttering may have to get creative at finding homes for all their unwanted possessions – particularly these days.
The generations that came after the baby boom are famously less interested than their predecessors in the trappings of domestic life, says Elizabeth Stewart, author of “No Thanks Mom: The Top Ten Objects Your Kids Do NOT Want (and What To Do With Them).”
Gen Xers and millennials often don’t want to polish silver or hand wash china, Stewart says. They’re also typically not interested in dark, heavy furniture, books, photo albums, vintage linens or someone else’s collections.
In my latest for the Associated Press, how to figure out what to do with it all.
Today’s top story: 6 credit card scams and how to avoid them. Also in the news: A new episode of the SmartMoney podcast on COVID impulse spending and building credit while paying off debt, how Black Friday shopping could look very different this year, and making a plan to repay your borrowed 401(k) money.
6 Credit Card Scams and How to Avoid Them
Crooks don’t have to steal your card — just your card information. Keep your money and your identity safe.
Smart Money Podcast: COVID Impulse Spending, and Building Credit While Paying Debt
Finding the right payoff method for your debt.
Black Friday Shopping Could Look Very Different This Year
Lining up for doorbusters could be a thing of the past.
Make a Plan to Repay Your Borrowed 401(k) Money
Start thinking of a payoff strategy.
Dear Liz: I have three financial providers that supply regular, free credit scores: my bank and two credit card issuers. My credit score from the bank is always a “perfect score” while the two card companies are consistently 17 points lower, both exactly the same for two years now. I always pay off most or all of the outstanding balance on time or early. Any clue as to why there is this consistent difference?
Answer: The companies probably are using different credit scoring formulas or different credit bureaus, or both.
You don’t have one credit score. You have many. FICO is the dominant scoring formula, but lenders also use VantageScores and the credit bureaus sometimes provide their own, proprietary scores.
The formulas have been updated over the years. The FICO 8 is the most commonly used score, but the FICO 9 is the latest version and FICO 10 will be introduced this summer. Some scoring formulas are modified to suit different industries, such as auto lending or credit cards, plus each score is calculated from data at one of the three credit bureaus.
So one institution may provide its customers a FICO Score 9 from Experian, another might offer a FICO 8 Bankcard score from Equifax and a third might give you a VantageScore 3.0 from TransUnion. Even if all three were using the same type of score, they probably would use different credit bureaus, or vice versa. To make things even more confusing, your credit scores are constantly changing as your credit bureau information changes.
Furthermore, you typically can’t predict which score or scores a lender will use to evaluate your application for credit. Rather than worry about which number is “right” — they all are — use the free scores as a general indicator of your credit health.
Dear Liz: I am 41 and have had a traditional IRA for about two decades. I funded it for the first 10 years, taking a tax deduction for the contributions. Since I’ve had a 401(k) with my employer for the past several years, I obviously cannot take a deduction for the IRA amount, but I could still put money in. My 401(k) is fully funded, as is my husband’s. Does it make sense to also fund our IRAs with post-tax, nondeductible amounts? I realize any gains we make will be taxed at withdrawal, but I also know that as long as the money stays in the IRA, it can grow tax deferred.
Answer: First, congratulations on taking full advantage of your workplace retirement plans and still being able to contribute more.
You potentially can deduct contributions to IRAs when you have a 401(k) or other workplace retirement plan, but your income must be below certain limits. You can take a full deduction if your modified adjusted gross income is $104,000 or less as a married couple filing jointly. After that, the ability to deduct the contribution starts to phase out and is eliminated entirely if your modified adjusted gross income is $124,000 or more. (If you don’t have a workplace retirement plan but your spouse does, the income limits are higher. The deduction starts to phase out at $196,000 and ends at $206,000.)
If you can’t deduct contributions, you can look into contributing to a Roth IRA — but that too has income limits. For a married couple filing jointly, the ability to contribute to a Roth begins to phase out at modified adjusted gross income of $196,000 and ends at $206,000. If you can contribute, it’s a good deal. Roth IRAs don’t offer an upfront tax break but withdrawals in retirement can be tax free. You also can leave the money alone for as long as you want — there are no required minimum withdrawals starting at age 72, as there typically are for other retirement accounts.
If your income is too high to contribute to a Roth, you could still contribute to your IRA or to any “after tax” options in your 401(k). But you might want to consider simply investing through a regular taxable brokerage account. You don’t get an upfront tax deduction but you could still benefit from favorable capital gains tax rates if you hold investments for a year or more. Furthermore, you aren’t required to take withdrawals. That flexibility can help you better manage your tax bill in retirement.