Get smart with your money
Americans aren’t terrific at saving for retirement. Many are even worse when it comes to figuring out how much to spend once they get there.
An actuary who’s studied the issue for three decades recently proposed a relatively straightforward strategy that can help. In my latest for the Associated Press, how to use this strategy to make your retirement savings last.
Today’s top story: 7 gifts that help your grad stash more cash. Also in the news: Why rideshare insurance is a must, how credit card issuers pursue wary Millennials, and how to know if you qualify for public service loan forgiveness.
7 Gifts That Help Your Grad Stash More Cash
Cool and practical.
Why Rideshare Insurance Is a Must
Minding the gap.
How Credit Card Issuers Pursue the Wary Millennial
Brand trust and unique experiences.
How to Know If You Qualify for Public Service Loan Forgiveness
Making sure you’re on the right track.
Dear Liz: My wife (71) and I (68) have been diligent savers our entire lives. We have accumulated IRA assets of approximately $2 million along with a house and other assets. Our total estate is under $10 million. We have two adult children in their 20s who did not inherit the saving gene. My question is: Does a trust exist that would maintain the IRA’s tax-deferred status, make required minimum distributions to our kids and include appropriate spendthrift provisions? Also, would the distributions be based on our life expectancies or on theirs?
Answer: Yes, you can create a spendthrift trust and name it as the beneficiary of your IRAs. Your children could be named beneficiaries of the trust. Required minimum distributions for inherited IRAs would be based on the elder child’s life expectancy. Your children would not be able to “invade” or tap the principal.
A spendthrift trust would not only prevent your kids from blowing through any money left in the IRAs. It also would prevent creditors from getting the money in case of bankruptcy. In many states, inherited IRAs are vulnerable to creditor claims.
Here’s the thing, though: This is a question you should be asking your estate planning attorney. If you don’t have one, you need to get one. People with small, simple estates may be able to get away with do-it-yourself planning, but yours is neither small nor simple. Trying to save money by using software or forms just isn’t a good idea. Whatever money you save may be wasted when your estate plan goes awry in ways you didn’t foresee, because you’re not an estate planning expert.
Trusts that name IRAs as beneficiaries, for example, must have special language to accomplish what you want, said Jennifer Sawday, an estate planning attorney in Long Beach. Without the right language, the IRA custodian might liquidate the IRA instead. That would trigger the taxes and lump sum payouts you’re trying to avoid.
Dear Liz: I contacted a company to help me resolve my debt. They present themselves as a nonprofit organization and seem to offer a possible solution by reducing the interest rate I’m paying on my credit cards. How do I determine the trustworthiness of this and other such organizations?
Answer: If the organization is affiliated with the National Foundation for Credit Counseling, then it’s a legitimate credit counseling agency. These agencies offer debt management plans that typically allow people to pay off their credit card debt over three to five years at reduced interest rates. People enrolled in the plans make monthly payments to the counseling agency, which then distributes the money to the creditors. Fees vary by agency, but the cost to set up a plan is typically less than $50 and the monthly fee around $35.
Debt management plans are not loans or debt consolidation. They’re also not a way to settle your debt for less than you owe. They’re a potential solution for people to pay off what they owe over several years.
Credit counseling got a bad name in the 1990s when a bunch of companies masquerading as nonprofits got into the business of offering debt management plans. Many siphoned off money that was meant for creditors or failed to pay creditors at all. The IRS cracked down and cleared out many of the worst offenders.
You can visit www.nfcc.org to see if the agency is listed and to get its contact information. (It’s best to get the information directly from NFCC, just in case you’re dealing with a copycat.)
Before you sign up with a credit counselor, though, you also should consult with a bankruptcy attorney. Credit counselors may try to steer you away from bankruptcy, and you’ll want an attorney to review your situation to help you understand if bankruptcy may be a better option.
Dear Liz: Will my wife, after I’m gone, be able to claim one half of my Social Security benefits because she is the surviving spouse? I am concerned and confused, because her monthly Social Security benefit is much larger than mine. Does that affect this aspect of the available benefit?
Answer: If by “gone” you mean “dead,” then no, that’s not how survivor benefits work.
When one member of a married couple dies, the surviving spouse does not continue to get two benefit checks. The survivor is given the larger of the couple’s two benefits. If she’s already receiving much more than you, then she will continue taking her own benefit and your checks will end.
The “one half” benefit is the spousal benefit, which is paid out while the primary earner is still alive. Typically when married people apply for Social Security, the retirement benefit they earned is compared with their spousal benefit, which is up to one half of what the other spouse has earned. (The amounts are reduced if the person applies for benefits before his or her own full retirement age.) The applicants get the larger of the two checks.
Spousal benefits also are available to divorced spouses, if the marriage lasted at least 10 years.
Today’s top story: Seeking smart, funny – and a credit score above 700. Also in the news: Wellness travel helps you tune up or tune out, what you need to know about investing in IPOs, and a major tax mistake to avoid if you have student loans.
Seeking Smart, Funny — and a Credit Score Above 700
Your credit score could impact your dating options.
Wellness Travel Helps You Tune Up or Tune Out
Getting in touch with what matters.
What You Need to Know About Investing in IPOs
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Got student loans? Don’t make this major tax mistake
Don’t forget to deduct your interest.