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Liz Weston

Q&A: Social Security survivor benefits

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Dear Liz: You recently wrote that someone’s Social Security survivor benefit would be the same as her spouse’s, including the 8% annual delayed retirement credits and cost of living increases. My husband just took his Social Security at age 70 but we were told I wouldn’t get his full survivor benefit as I took my own benefit at age 62. Is it because in the other question, the wife took her benefit at her full retirement age of 66 years and 8 months? So confused with all the rules!

Answer: The rules are certainly confusing, but the advice you got was wrong.

Your early start certainly reduced your own retirement benefit, but doesn’t reduce your survivor benefit. If your husband dies first and has the larger benefit, you’ll get a survivor benefit equal to his check and your retirement benefit will cease.

What does reduce survivor benefits is starting them early. Survivor benefits can start as early as 60, but you don’t get the full amount until you’ve reached full retirement age. (Full retirement age was 66 if you were born from 1943 to 1954. Between 1955 and 1959, full retirement age increases by two months each year; for people born in 1960 and later, full retirement age is 67.)

If you’re already past your full retirement age, you don’t need to worry about a reduced survivor benefit. If your husband dies before you reach full retirement age, the correct claiming strategy depends on your situation. Consider getting expert advice about when to switch to the survivor benefit.

Q&A: There’s a new option for leftover funds from a 529 college savings plan — your kid’s retirement

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Dear Liz: We put four kids through college using 529 college savings. All four are out of college with good jobs and we have about $50,000 left over. Would you suggest just letting it build for the grandkids’ college in 20 to 30 years? The amount should grow considerably in that time and may pay for all the grandkids’ college expenses as well.

Answer: You have a number of options with leftover 529 funds, including eventually changing the beneficiaries to your future grandkids. Since none have been born yet, and may not be for a while, you can just leave the accounts alone to grow for now.

In addition to paying qualified college education expenses, up to $10,000 per year of 529 funds can be used for private school tuition for kindergarten through 12th grade. In addition, up to $10,000 per beneficiary can be used to repay student loans.

If you do decide to earmark funds for the grandkids, you may want to think about the best way to divide the money. You may not know for a while how many grandkids you’ll have. It’s entirely possible for the first grandchild to reach college age before the last one even comes along.

Another option that’s new this year is to use the leftover 529 money to fund Roth IRAs for your children, the original beneficiaries. If the account has been open at least 15 years, each year you can roll over an amount equal to the contribution limit, which for 2024 is $7,000. (The lifetime rollover limit for each beneficiary is $35,000.) This assumes the beneficiary has earned income at least equal to the rollover amount.

Q&A: Protecting a daughter’s inheritance

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Dear Liz: We need help knowing what to do regarding leaving our home and money to my unmarried daughter. She has had a boyfriend for over 15 years. How can we protect her inheritance so he can’t claim half?

Answer: Inheritances are considered separate property. So her inheritance could be considered hers alone even if your daughter marries this guy and lives in a community property state where other income and assets accumulated during the marriage would be considered joint property.

She might have to be careful not to commingle funds, however. A partner who contributes toward a mortgage on a house might have a claim on the property, for example.

Please talk to an estate planning attorney who can assess the situation and give you — and your daughter — personalized advice.

Retiring wasn’t easy — even after years of writing about it

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A couple of years ago, I wrote a column about how to have a retirement worth saving for. It ended with a quote from personal finance educator Barbara O’Neill, who reflected on how the pandemic disrupted many retirees’ plans.

“It wasn’t just two years lost, it was two good years,” O’Neill said then. “You don’t know how many of those you have left.”

One of my younger colleagues objected to that sentiment, saying it was a jarring ending to an otherwise upbeat column. But my older co-workers got it. Those of us who currently have good health and energy don’t know how long those blessings will last. There’s no guarantee we’ll get to enjoy the retirements we have planned.

That lesson was driven home in July 2023, when a longtime colleague died at age 61. We’d had many talks over the years about the retirement he had envisioned. It’s heartbreaking that his dreams will never happen.

But his death was the push I needed to make my own decision. By the time you read this, I will have retired from my job at personal finance site NerdWallet.

You can read the rest of the column here.

This week’s money news

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This week’s top story: Congress delays shutdown again, extends funding to March. In other news: What to do about debt in retirement, 4 strategies for using side hustles to fund retirement savings, and ‘enormous’ savings for Americans by limiting overdraft fees.

Congress Delays Shutdown Again, Extends Funding to March
On Jan. 18, Congress approved yet another stopgap that will avoid a possible government shutdown until March.

What to Do About Debt in Retirement
From taking on side work to strategically downsizing, here are ways to help you tackle retirement debt.

4 Strategies for Using Side Hustles to Fund Retirement Savings
Side hustles can be used to pay for everyday expenses, but they can also help fund your retirement goals.

CFPB: ‘Enormous’ Savings for Americans by Limiting Overdraft Fees
With billions in revenue at stake, banks are lining up against the proposal.

 

Q&A: With tax day coming, here’s what to know about the difference between an enrolled agent and a CPA

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Dear Liz: What is the difference between using an enrolled agent and a certified public accountant to file income taxes? I have used a CPA in the past to file my federal and state income taxes but I need to find a new person for this job. My financial situation is fairly simple: single, no dependents and no real estate. Is an EA qualified to file income taxes? Do they look for possible tax credits? What happens if there is an audit?

Answer: Enrolled agents specialize in taxes. They can prepare returns, provide tax advice and represent you in an audit. (In fact, many enrolled agents used to work for the IRS, giving them intimate knowledge of the agency’s policies and practices.)

CPAs have broader education requirements and don’t necessarily specialize in taxes. They may be auditors, financial planners or business consultants, for example.

If you have complex financial or tax needs, a CPA could be a good fit. Otherwise, an EA could fill the bill and may be more economical. You can get referrals from the National Assn. of Enrolled Agents.