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Liz Weston

This week’s money news

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This week’s top story: Home insurance companies may use aerial images to drop policies. In other news: how participating in campus protests could affect your financial aid, the worsening prescription drug shortage and how to cope with it, and balancing homebuying and summer travel.

Home Insurance Companies May Use Aerial Images to Drop Policies
Insurance companies may check photos of your home before deciding whether to renew your policy.

How Participating in Campus Protests Could Affect Your Financial Aid
Involvement in college protests could cost you your financial aid and more.

The Worsening Prescription Drug Shortage and How to Cope With It
Causes for the shortage vary but include a tornado-damaged Pfizer plant in North Carolina.

Yes, You Can Balance Homebuying and Summer Travel
Embarking on a getaway during your homebuying journey is possible — if you have a plan and don’t completely unplug.

Q&A: Need help with your IRA? Call a CPA, or maybe a PFS

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Dear Liz: My husband and I have substantial pre-tax savings in our workplace retirement plans and IRAs. Based on where those balances would be in retirement, we would definitely be paying more in taxes than now, and face the potential of running out of money if forced to withdraw it all. You often refer people to the Garrett Planning Network for fiduciary financial planners. Is there a similar organization for tax planners who can provide a strategy for rolling over our pre-tax accounts in order to take part of the hit now, and reduce taxes later? The financial planners we’ve found through Garrett have some tax knowledge, but refer us to tax professionals for more in-depth tax analysis.

Answer: Many fee-only financial planners work with tax professionals such as certified public accountants — CPAs — to craft Roth conversion plans that can reduce future taxes. If you want an all-in-one pro, though, you could consider hiring a CPA who is a personal financial specialist, or PFS. The PFS credential is similar to the certified financial planner credential, but is granted only to CPAs. To find one in your area, you can use the American Institute of CPAs’ directory at https://www.aicpa-cima.com/directories. Click the plus sign next to “Find a credential/designation holder,” select “PFS” in the box titled “Credential/designation name” and then input your location.

Q&A: Safeguarding your personal data is hard. Here are a few tips.

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Dear Liz: I was recently alerted that my Social Security number has been found on the dark web. My information was part of the AT&T breach that took place recently. I am no longer an AT&T customer and haven’t been for several years, but they have not made any contact with me. What do I do to keep myself safe and how do I get my information removed from the dark web? Why hasn’t AT&T reached out to me?

Answer: As a consumer, you don’t have much power. Companies often demand your personal data, such as Social Security numbers, before they’ll do business with you. Once your information is in their databases, you have no control over what happens to it. And if your information is leaked, there’s no way to remove it from the dark web.

You can’t even be sure how your information got there, given the sheer volume of database breaches in recent years. If you’re an adult with a Social Security number, chances are pretty good that number can be found on the black market sites where criminals buy and share information, says Eva Velasquez, chief executive of the Identity Theft Resource Center, a nonprofit that helps identity theft victims.

In other words, your data may have been compromised long before the latest incident, which AT&T says affected 73 million current and former customers. AT&T began notifying impacted customers via letters or email starting in April. Those customers should have received an offer for free credit monitoring.

There are a few things you can do to make yourself a bit less vulnerable to identity theft, such as putting freezes on your credit reports, not clicking on links in texts or emails if you didn’t initiate the transaction and using digital wallets or other secure payment methods.

Also, don’t be your own worst enemy. Beware of sharing personal information (birth dates, address, phone number, etc.) on social media. Consider limiting your audience to people you know and trust, Velasquez says.

The Identity Theft Resource Center also recommends using passkeys, a technology that replaces passwords, whenever you’re offered that option. If a passkey is not available, the center suggests using passphrases of 12 characters or more rather than shorter passwords. A passphrase is a sequence of words that can be personalized for easier memorization, typically with numbers added and a mix of capital and lowercase letters. The center gives an example of a passphrase for a 2015 University of Texas graduate: “H00kEmH0rns2015.” You’ll still need unique passphrases for every account and site. You also should turn on two-factor authentication or multi-factor authentication where available. This requires an extra step, such as getting a code on your phone or from an app, but this will make your accounts harder to compromise.

This week’s money news

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This week’s top story: 7 surprising facts about credit cards. In other news: Weekly mortgage rates rise again, look to last-minute scholarships when you can’t control FAFSA delays, and best cities for freelancers and self-employed workers 2024.

7 Surprising Facts About Credit Cards
Card issuers have a lot of leeway in terms of when and how they can make changes to your account. Some changes may be unwelcome, but others can work in your favor.

Weekly Mortgage Rates Rise Again, While Home Sales Increase, Too
Mortgage rates have climbed five weeks in a row and are now at their highest levels since the week before Thanksgiving.

No Financial Aid Package Yet? Look to Last-Minute Scholarships
You can’t control FAFSA delays, but you can control whether you research and apply for scholarship awards to lower your college costs.

Best Cities for Freelancers and Self-Employed Workers 2024
These 10 metro areas have a relatively large percentage of self-employed workers, relatively low state income tax rates and more.

Q&A: Is my wife’s pension at risk?

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Dear Liz: My wife worked in the private sector for 30 years and paid into Social Security before starting her current job in the public sector. She will get a small pension from this job when she decides to retire. It’s our understanding that the windfall elimination provision won’t apply to her since she contributed to Social Security for 30 years. Is that correct? Will she also be able to receive her small pension?

Answer: Yes and yes. The windfall elimination provision normally applies to people who receive pensions from jobs that didn’t pay into Social Security. This provision can reduce, but not eliminate, the benefits they get from Social Security. However, the provision doesn’t apply to people who have 30 or more years of “substantial earnings” from jobs that did pay into Social Security. The amount considered “substantial” varies by year; in 2024, it’s $31,275.

Q&A: A sticky inheritance scenario

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Dear Liz: I have an adult daughter by a previous marriage who has no savings or retirement funds. I want to change my living trust to ensure that my daughter only receives a monthly amount similar to my required minimum distribution from my IRA, plus half of our paid-off house after my wife and I pass away. Do I need a trust attorney?

Answer: Restricting access to an inheritance might be necessary, but few adults would be happy about being put on an allowance. Unhappy heirs may be more likely to challenge an estate plan, so you should get expert advice if you want your wishes to prevail.

Even if your daughter is amenable, you still need an estate planning attorney’s help to craft the trust that doles out the money. Understand that inherited IRAs typically must be drained within 10 years. (The exceptions are for surviving spouses, minor children, the disabled or chronically ill or survivors who are not more than 10 years younger than the account owner.) If the beneficiary is a trust, the distributions don’t have to be paid out to your daughter, but any amount retained by the trust will typically be taxed at a higher rate. Plus, you’ll have to find someone to manage the trust, notes Burton Mitchell, a Los Angeles estate planning attorney. Who you select to be the trustee is critically important, as they will have to deal with your daughter for the rest of her life, Mitchell says.

Also, you may need to reconsider how you own your house if you want to ensure half goes to your daughter. Typically couples own property jointly, so that the survivor inherits automatically. If you want to bequeath your half of the property to someone other than your spouse, you may need to change the ownership structure to tenants in common. You’ll need to think this through carefully, since such a change would have legal, tax and practical implications that you’ll want an attorney to thoroughly explain. For example, if your spouse dies before you, she could leave her house to someone other than you, Mitchell notes. The house could be sold and you might need to find somewhere else to live. Conversely, if you die first, your wife could be forced to move if your daughter insisted on selling the house.

In other words, achieving what you want may be a lot more complicated and have more repercussions than you currently imagine. Talking with an experienced estate planning attorney can help you better understand your options.