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Liz Weston

How to navigate your most dangerous decade

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Losing a job is almost always traumatic. In your 50s, job loss can be devastating — and devastatingly common.

More than half the workers who entered their 50s with stable, full-time jobs were laid off or pushed out at least once by age 65, according to an analysis of employment data from 1990 to 2016 by the nonprofit newsroom ProPublica and the Urban Institute, a nonprofit think tank. Only 10% of those who lost a job ever found another that paid as much, and most never recovered financially.

Such concerns may seem remote in a booming economy, when the official unemployment rate is 3.5% overall and just 2.4% for those 55 and over. But recessions are inevitable, and even in good times older workers can be more vulnerable to involuntary job loss because of age discrimination.

In my latest for the Associated Press, the importance of having a plan to navigate what could be your most dangerous decade.

Tuesday’s need-to-know money news

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Today’s top story: Be your financial Valentine. Also in the news: 44% of adults admit to keeping money secrets from a partner, most consumers have already broken their resolutions, and how to reset your finances after a breakup.

Be Your Financial Valentine
The best gifts you can give yourself.

44% of adults admit to keeping money secrets from a partner
Financial infidelity.

Most Consumers Have Already Broken Resolutions
Have you kept yours?

How to Reset Your Finances After a Breakup
Putting the pieces back together.

Monday’s need-to-know money news

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Today’s top story: Should your student loans and your spouse’s get hitched? Also in the news: Investing vs paying student loans, the blunt truth about medical expenses, marijuana, and your tax returns, and how to figure out your finances when you’re single.

Should Your Student Loans and Your Spouse’s Get Hitched?
A look at the pros and cons.

SmartMoney Podcast: ‘Should I Invest or Pay Down My Student Loans?’
Where should your money go?

Blunt Truths About Medical Expenses, Marijuana and Your Tax Return
The IRS needs to chill.

How to Figure Out Your Finances When You’re Single
Making the budget that works solely for you.

Q&A: Here’s what early retirees need to know about Roth IRA and 401(k) taxes and penalties

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Dear Liz: I have been contributing to a Roth 401(k) and a Roth IRA for several years. I plan to retire early. Am I able to withdraw any of my Roth contributions without penalty before I reach age 60?

Answer: Your contributions to a Roth IRA can always be withdrawn tax free, at any time and at any age, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. Once you’ve withdrawn an amount equal to your contributions, though, the rest of your money — your earnings — may be subject to taxes and penalties. To avoid those, you generally must be at least 59½ and the account must be at least five years old.

The rules are somewhat different for Roth 401(k)s. Early withdrawals from these accounts are considered a mix of contributions and earnings, so any distributions before age 59½ typically incur taxes and penalties. Even after 59½, the withdrawals could be taxed and penalized if you haven’t been contributing to the account for at least five years.

Roth 401(k)s are also subject to rules that require minimum distributions to start at age 72. Many people who retire with Roth 401(k)s roll the money into Roth IRAs to avoid these restrictions.

Q&A: New rules for required distributions

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Dear Liz: I cannot find when the SECURE Act takes effect. My wife, who turns 69 this summer, has a traditional Roth IRA worth about $150,000, all in a single large-company growth mutual fund. Obviously we don’t want to see it depreciate during a certain-to-come down market and then have to begin withdrawals before the market recovers. Would it be wise to move from the mutual fund into certificates of deposit or bonds, within the same IRA?

Answer: There’s really no such thing as a “traditional Roth IRA.” Since you’re asking about the Setting Every Community Up for Retirement Enhancement Act, which pushed back the age at which required minimum distributions have to begin from 70½ to 72, we’ll assume she has a traditional IRA subject to those RMD rules. (Roth IRAs are not subject to required minimum distributions.)

According to the IRS, people who reached 70½ in 2019 are subject to the prior rule and must take their first RMD by April 1 of this year. Those who reach 70½ this year or later must take their first RMD by April 1 of the year they turn 72.

That means your wife has some time to find an asset allocation that protects her somewhat from market drops while still allowing some growth. A fee-only financial planner could help her customize a portfolio, or she could consider a target date retirement fund (with a target date of 2015 or 2020, to benefit from a more conservative asset allocation). Moving everything to CDs or bonds would be trying to time the market, which rarely works, but having at least a portion of her money in safer investments could be smart.

Q&A: Storing documents in emergency kits

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Dear Liz: I have appreciated your advice over the years, but I strongly disagree with your information about relying on electronic media during a disaster. If a really big disaster happens in this country, there will be no internet or Wi-Fi available. When the Loma Prieta earthquake hit in 1989, everything was offline for days, including gas pumps, banks and grocery stores.

Answer: Natural disasters are obviously quite disruptive, which is why it’s important to keep cash on hand, your gas tank at least half full and a couple weeks’ worth of meals in the pantry. But it’s important to note that quite a few things have changed since 1989, including the prevalence of identity theft.

The original question was specifically about storing copies of driver’s licenses, credit cards and financial records, including bank and brokerage documents, in a disaster kit. A copy of a driver’s license does little to help you prove your identity, since copies can be counterfeited, but it could provide an identity thief with enough valuable information to successfully impersonate you. The same is true of hard copies of credit cards and financial records — the benefit of having them in the kit is outweighed by the risks.

Instead, security expert Avivah Litan suggests storing only the account numbers in the kit, and keeping your driver’s license or other original identifying document with you at all times. She also recommended scanning important documents and storing them in a secure online account.

The providers of these accounts typically have backup systems and alternate power supplies to keep them up and running. The same is true of your financial institutions, which also store electronic records of your accounts. Chances are those servers and backup servers also are located far from where you live, so they probably would not be affected by any disaster that hits you.

Should we have a disaster big enough to knock everyone offline permanently, then all the documents in the world are unlikely to be of much use.