Wednesday’s need-to-know money news

mortgage2Today’s top story: Common mortgage roadblocks and how to fix them. Also in the news: How to make your retirement nest egg last longer, why you should try haggling when renting an apartment, and ten back-to-school supplies that teachers say are a waste of money.

4 Common Mortgage Killers & How to Survive Them
Common roadblocks and how to fix them.

Dreaming of Early Retirement? Make Your Nest Egg Last Longer
Retiring a decade early? It could be done.

Why you should always try to haggle when renting an apartment.
It’s rare, but possible!

Teachers Say Don’t Waste Money On These 10 Back-To-School Supplies
Don’t overspend.

Being a Bridesmaid or Groomsman With No Financial Regrets
How to celebrate a big day without the big expenses.

Q&A: IRA contributions and tax deductions

Dear Liz: I am changing jobs because of a layoff. I contributed to my former employer’s 401(k) to the extent possible. My new employer also offers a 401(k), but I won’t be eligible for a year.

I want to use an IRA in the meantime. I do not understand how I should answer the question on the tax form about whether my employer offers a retirement plan when I am determining how much of my IRA contribution I can deduct. My employer does, obviously, but I can’t participate yet. Advice, please?

Answer: You’re smart to continue your retirement savings while you wait to become eligible for the new employer’s 401(k). Missing even one year of contributions could cost you tens of thousands of dollars in lost retirement income.

When you’re not covered by an employer plan, all of your contribution to an IRA is typically deductible.

When you are covered, your contribution’s deductibility is subject to income limits. In 2015, the ability to deduct an IRA contribution phases out between modified adjusted gross incomes of $61,000 to $71,000 for singles and $98,000 to $118,000 for married couples filing jointly.

To be considered covered by an employer plan, you have to be an active participant, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. That means money has to be put into your account by you or your employer or both.

Here’s the twist: You’re considered covered for the whole tax year if you participated in a plan during any part of that year. So the IRS will consider you an active participant for 2015 because you were contributing to your former employer’s plan for part of this year.

If you start contributing to your new employer’s plan when you become eligible next year, you’ll be considered covered for 2016 as well.

You could decide not to contribute to the new employer’s plan until 2017 to preserve your IRA’s deductibility, but it probably makes more sense to start contributing to the new plan to get both the tax break and any match.

If your contribution to an IRA isn’t deductible, consider making a contribution to a Roth IRA instead.

In retirement, withdrawals from a regular IRA will be subject to income taxes while withdrawals from a Roth IRA will be tax free. In 2015, your ability to contribute to a Roth phases out between modified gross incomes of $116,000 to $131,000 if you’re single and $183,000 to $193,000 if you’re married.

Monday’s need-to-know money news

1403399192000-retire-workToday’s top story: What you cannot ignore on your retirement statement. Also in the news: How to improve your finances in a single day, how teens can save money on car insurance, and why mental accounting can be dangerous.

4 Things You Can’t Ignore on Your Retirement Statement
Pay close attention.

10 Ways to Improve Your Finances in One Day
It only takes a day!

One way teens can actually save on car insurance
Letting your teen behind the wheel doesn’t have to cost a fortune.

Be Aware of “Mental Accounting” When You Save Money on a Purchase
Convincing yourself you’re saving money is a big mistake.

5 Simple Ways to Save Money as a New College Student
The more they save, the fewer times they’ll call looking for money.

Q&A: Credit score changes

Dear Liz: My Discover card started including a complimentary credit score with my statement. My first report was 840. Each month since has been lower.

Two months ago it was 812 and the last one was 800. I have not applied for any new loans, cards or other credit. My limit on this card is $4,000, and I never charge more than $500 each month, which is paid in full. Why does my number keep dropping when I’m doing nothing different?

Answer: You may not be doing anything different, but the underlying information used to create your credit scores changes all the time.

The company that creates the leading credit scoring formula, FICO, says 8 of 10 people experience changes to their FICO scores by up to 20 points from month to month.

One factor that typically changes: the balances reported by your creditors. The fact that you pay your credit card in full is wise, but irrelevant to your scores.

The balances transmitted to the credit bureaus and used to calculate your scores may be the balances from your last statement, or from a random date in the previous month. If you have other credit accounts and loans, the balances from those factor into your scores as well.

Other things can also change. For example, an old, closed account may “fall off” your credit report, which could affect your credit utilization (how much of your available credit you’re using) as well as the average age of your credit accounts.

Also, every month your active accounts get older, which is typically a positive factor.

So you’ll see changes even when you’re looking at the same type of score from the same credit bureau.

You would see even more variation if you could see all your scores, since lenders use various formulas and pull scores from three credit bureaus.

Although the FICO score is the leading formula, that doesn’t mean the FICO you’re seeing is the FICO a particular lender is using. The lender may use a newer or older version of the formula — or one tweaked to the auto lending or credit card industry, for example.

You don’t have much to worry about, in any case. Scores over 800 indicate that you’re quite unlikely to default, so lenders should give you their best rates and terms if you do decide to apply for credit.

Friday’s need-to-know money news

building-good-creditToday’s top story: How to build credit without a credit card. Also in the news: Financial steps to take if you’re getting divorced, apps to help with moving, and how your financial behavior is manipulated.

7 Ways to Build Credit Without a Credit Card
Non-credit card options for building credit.

7 Financial Steps to Take When Getting a Divorce
Protecting yourself during a difficult time.

These Apps Will Make Your Next Move a Breeze
Taking some of the stress away from moving.

The Six Ways Your Financial Behavior Is Manipulated
Who’s pulling the strings?

The recession has helped nudge women into science jobs

STEM-logo_webEncouraging more women to pursue careers in science, technology, education and math – the so-called STEM fields – is a worthy goal, given the potential payoff for our economy and for women who get jobs in these higher-paying fields.

One surprising way to make it happen: Suffer through a recession.

My column for Reuters explores how women shift their career focus towards the sciences when the economy is struggling.

For DailyWorth, I take a look at the six types of money bullies and how to handle them.

And for CBS MoneyWatch, I examine the average credit score for millennials.

Thursday’s need-to-know money news

635522783074355959-holiday-cardsToday’s top story: The most dangerous threat to your identity. Also in the news: How to stop living paycheck-to-paycheck, how to improve your credit score by separating business from pleasure, and the Social Security fix that could hurt your retirement.

The Most Dangerous Identity Theft Threat
What you need to watch out for.

How to Stop Living the Paycheck-to-Paycheck Lifestyle
Time to start saving.

Will Fixing Social Security Hurt Your Retirement?
How a fix could hurt your bottom line.

How to Improve Your Credit Score by Separating Business From Pleasure
Separate expense categories are essential.

If You Hired Mo’ Money Taxes To Prepare Your Return, You Continue To Have Mo’ Problems
Catchy commercial, bad company.

Your credit score may matter more than your driving record

CRO_TOC_Cover_09_2015The vast majority of auto insurers use credit information to help determine your premiums, except in the three states where it’s not allowed (California, Massachusetts and Hawaii). Credit scores don’t just matter–a new special investigation by Consumer Reports has found that sometimes your credit scores matter more than your driving record.

The researchers hired a company called Quadrant Information Services, which gathers the mathematical pricing formulas insurers have to file with the states. They used the data to create 20 hypothetical policyholders and analyzed what happened when various ratings factors were changed. In Kansas, for example, a moving violation would boost a single policyholder’s premium by $122 on average, but a good (rather than a great) credit score would increase it by $233. A bad score could drive it up by $1,3o1.

The credit scores insurers use aren’t the same as the ones lenders use, and you have no right to see the insurance scores that are being used to judge you.

The researchers get a bit off track when they imply that using credit scores discriminates against the poor, because that isn’t something that’s backed up by research. But you should have a right to see any score that’s being used to judge you, and to challenge the accuracy of the underlying information that goes into the score.

 

 

Dealing with collectors? Here’s a free ebook to help

dca-new-ebook-free-3DsmGetting calls from collection agencies, or spotting collection accounts on your credit reports, can be scary. You can deal with this, but not alone. Check out  “Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights,” which is now a free ebook on Smashwords. You can get it here: https://www.smashwords.com/books/view/520261.

Written by long-time consumer educators and advocates Gerri Detweiler and Mary Reed, this book will tell you what you need to know to deal with collection accounts and fight unethical collection agencies. Longtime readers of the column will recognize Gerri’s name, because she’s the person I turn to when I have questions about debt and debt collections.

Get the book and get started!

UPDATE: Gerri tells me some people have trouble downloading from Smashwords, so here’s another link:

http://www.debtcollectionanswers.com/buy-now.html