Ask Liz Weston

Get smart with your money

Liz Weston

Q&A: My kids grew up. Will their credit scores go down?

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Dear Liz: Many years ago I took out a credit card to pay for my two children’s college expenses. They were authorized users for miscellaneous expenses. They no longer use or even have access to the cards. Now they are both in stable, well-paying jobs. I would like to keep the card but remove the authorized users. How would this affect their credit scores? Or mine, for that matter?

Answer: You helped your kids establish good credit by adding them as authorized users. Removing them won’t affect your credit scores. The effect on their scores depends on how well they’ve managed credit on their own.

The impact should be minimal if they’ve continued to build credit by opening their own credit cards and paying those on time. Ideally, for credit-building purposes, they’ll also have a solid history paying an installment loan, such as a mortgage, student loan or auto loan.

If they haven’t used credit much and have a thin file — generally, fewer than five accounts showing on their credit reports — the damage might be more significant. If that’s the case, you may want to delay removing them as authorized users while they open other lines of credit. They should know that they don’t have to carry debt to have good credit: Just using credit cards lightly and paying the balances in full should do the job.

Q&A: What’s ‘substantial’ in the eyes of Uncle Sam?

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Dear Liz: I am retired and subject to both the windfall elimination provision and the government pension offset. In a recent column you indicated someone wouldn’t be subject to the windfall elimination provision if they had 30 years of “substantial earnings” in a job where Social Security tax was withheld. I contributed to Social Security for 32 years. How does one determine if these annual earnings are “substantial”?

Answer: Social Security has a two-page pamphlet about the windfall elimination provision that you can find online or request from the agency by calling (800) 772-1213. The pamphlet features a chart of the earnings required each year to be considered substantial. In 1992, for example, the amount was $10,350. In 2024, it’s $31,275. If you create a My Social Security online account — and you should — you can compare the amounts to what you earned during the years you contributed to the system.

Social Security has already done this and concluded you’re subject to the provision, which reduces but doesn’t eliminate your benefit because of the pension you earned from a job that didn’t pay into Social Security. If your Social Security record is inaccurate, though, you can contact the agency to correct it. You’ll probably need some kind of proof, such as pay stubs or W2s, so hopefully you’ve kept good records over the years.

Q&A: I’ve got a 457(b), not a 401(k). Are they insured the same?

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Dear Liz: As an employee of a public agency that offers a 457(b) account, it would be helpful to know if these accounts are insured in a manner similar to a 401(k).

Answer: Employer-provided, tax-deferred 457(b) accounts are quite similar to 401(k)s. Both allow employees to make pretax contributions to a retirement account that can be invested for future growth. The accounts aren’t insured the same way bank accounts are, but the money is kept in a separate trust that’s protected from creditors.

Q&A: Should I be afraid of payment apps?

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Dear Liz: I pay rent via check (yes, I am aware of the risks). My landlord would prefer that I use Zelle, which has drawbacks. People have had their bank accounts drained. Also, I heard that peer-to-peer money transfer apps should only be used by friends and family, not for business, and not for large sums of money.

Answer: As you may know, Zelle payments are made instantly. If you send the money to the wrong party, you could be out of luck. Federal law protects you if your account was hacked, but not if you make a mistake or have been duped into sending money to a scam artist. (Zelle does investigate allegations of fraud, however, and may return the money if you’ve been deceived.)

Many people are comfortable using Zelle and other payment systems to send money to people and businesses they know well, while others aren’t. If you continue to use checks, make sure to mail them directly at the post office or use a shipping service that offers a tracking number, such as Fedex. Monitor your account closely and set up alerts that notify you when checks over a certain amount are cashed. Fraud related to check theft has soared, so you’ll need to be extra vigilant if you continue sending paper checks.

This week’s money news

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This week’s top story: What Visa’s upcoming changes might mean for your wallet. In other news: HELOC to pay kid’s college tuition or not, weekly mortgage rates dip, and what women should know about their investing power and needs.

What Visa’s Upcoming Changes Might Mean for Your Wallet
Combining multiple payment methods onto one ‘credential’ is one way Visa is trying to make the spending experience seamless.

Should You Use a HELOC to Pay Your Kid’s College Tuition?
Home equity could provide an ample source of college funding, but borrowing against it is a financially risky move.

Weekly Mortgage Rates Dip, Hopes of Multiple Rate Cuts Wane
Average fixed mortgage rates fell slightly this week, with the 30-year rate continuing last week’s dip below 7%.

What Women Should Know About Their Investing Power and Needs
Women face different challenges, and some advantages, when it comes to managing their money over the long term.

Q&A: What to do when your financial advisor isn’t doing right by you

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Dear Liz: My husband and I are in our 80s, living in a retirement community. Our investment account is valued at $550,000. This has to see us through till we die. We have no pension, no other assets. Social Security provides $2,760 a month and we are in the lowest tax bracket. Our financial advisor is using tax loss harvesting “to save us from capital gains tax.” We are both uncomfortable with this. Taking a loss on purpose doesn’t feel like a secure path and should be for people with a long-term future. Should we ask him to stop using this method of trading?

Answer: Tax loss harvesting involves selling investments that have gone down in value to offset some or all of the gains from investments that have gained in value. The point is to reduce capital gains taxes. Since you’re in the lowest tax bracket, however, your federal tax rate on long-term capital gains is effectively zero. It’s hard to imagine how your advisor would justify tax loss harvesting, given your situation.

Go ahead and ask them. The answer should give you some insight into how much your advisor knows, or cares, about your individual circumstances. Obviously, you should halt the tax loss harvesting if there’s no good reason to do it, but you might also want to start looking for a new advisor.

Keep in mind that most financial advisors don’t have to put your best interests first. They can recommend investments or pursue strategies that make them money, regardless of whether the recommendations are the best fit for your financial situation.

If you want an advisor committed to putting you first, you’ll need to seek out one who is willing to be held to a fiduciary standard. Such advisors include certified financial planners, certified public accountants (including those who are personal financial specialists) and accredited financial counselors. A fiduciary would have taken the time to understand your financial situation and then crafted a strategy to best fit your circumstances.