Get smart with your money
Good financial advice leaves you better off. Bad advice does the opposite, and may even enrich someone else at your expense.
In my latest for the Associated Press, some areas where you need to be particularly careful to seek out good advice, since bad advice can be so costly.
Today’s top story: Turn your next car purchase into a vacation. Also in the news: The new version of layaway, how soon you’ll recover from holiday spending, and why Travelex users need to lock down their financial information right now.
Turn Your Next Car Purchase Into a Vacation
The car you want might be cheaper in another state.
You can have the item now. But can you really afford it?
There’s a new version of layaway.
How Soon Will My Credit Recover From Holiday Spending?
It’s going to take a bit.
Travelex Users: Lock Down Your Financial Info Right Now
A serious data breach.
Today’s top story: How to create a retirement ‘paycheck’. Also in the news: Handy money rules of thumb for a quick financial checkup, how one woman ditched nearly $60K of debt in less than a year, and the retirement savings blind spot you don’t realize you have.
How to Create a Retirement ‘Paycheck’
Creating a reliable retirement income stream is complex but worth it.
Handy Money Rules of Thumb for a Quick Financial Checkup
Stop winging your way through it.
How I Ditched Debt: A Spender, a Saver and Dreams of a Family
How one woman conquered nearly $60K of debt in less than a year.
The retirement savings blind spot you don’t realize you have
You could be retiring too early.
Today’s top story: How to make room for fun in your 2020 budget. Also in the news: You may have to give more personal data to get a personal loan, how to focus on monthly tasks to hit 2020 money goals, and how scammers can use your old credit card numbers.
How to Make Room for Fun in Your 2020 Budget
A budget doesn’t have to be torture.
You May Have to Give More Personal Data to Get a Personal Loan
Loan companies begin to look at alternative data.
Focus on Monthly Tasks to Hit 2020 Money Goals
Taking it one month at a time.
How Scammers Can Use Your Old Credit Card Numbers
This story could change the way you shop online.
Dear Liz: I’m 76 and retired. During the decades I worked, I contributed to my IRA yearly using my tax refund or having money deducted from my paycheck. No one told me I would have to pay taxes on this when I turned 70. For the past six years, I have been required to withdraw a certain percentage of this IRA money and pay taxes on it. Is there ever going to be an end to this? Do I have to keep paying taxes on the same money every year? And what about when I pass away, do my children have to keep paying?
Answer: Ever heard the expression, “There’s no such thing as a free lunch”?
You got tax deductions on the money you contributed to your IRA over the years, and the earnings were allowed to grow tax deferred. Those tax breaks are designed to encourage people to save, but eventually Uncle Sam wants his cut.
Also, you aren’t “paying taxes on the same money every year,” because the money you withdraw has never been taxed. Plus, you’re required to take out only a small portion of your IRA each year starting at 70½. The required minimum distribution starts at 3.65% and creeps up a bit every year, but even at age 100 it’s only 15.87% of the total. You can leave the bulk of your IRA alone so it can continue to grow and bequeath the balance to your children.
Your heirs won’t get the money tax free. They typically will be required to make withdrawals to empty the account within 10 years and pay income taxes on those withdrawals. Previously, they were allowed to spread required minimum distributions over their own lifetimes. Congress recently changed that to require faster payouts because the intent of IRA deductions was to encourage saving for retirement, not transfer large sums to heirs.
The Roth IRA is an exception to the above rules. There’s no tax deduction when you contribute the money, but the money can be withdrawn tax-free in retirement or left alone — there are no required minimum distributions. Your children would be required to start distributions, but wouldn’t owe taxes on those withdrawals.
Dear Liz: I recently added myself onto my 95-year-old father’s two credit card accounts as an authorized user. I am his agent under a power of attorney and handle his finances. I noticed that after being added to those accounts, my credit scores increased. When he passes on, I plan to close those accounts. Will my credit score be negatively affected?
Answer: Possibly. Closing accounts doesn’t help your scores and may hurt them. Scoring formulas are sensitive to the amount of credit you have versus how much you’re using. Closing an account shrinks your available credit, and the formulas don’t like that.
If you have good scores and plenty of other open accounts, though, the damage from closing these accounts probably will be minor and short-lived.