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Liz Weston

Thursday’s need-to-know money news

June 29, 2017 By Liz Weston

Today’s top story: NerdWallet’s best credit card tips for July. Also in the news: How to set up your 401(k), tips to evade gas pump skimmers, and how painting your bathroom this color could boost your home’s selling price.

NerdWallet’s Best Credit Card Tips for July 2017
What to look for in July.

How to Set Up Your 401(k)
A big step towards retirement.

Guard Your Card: 5 Tips to Evade Gas Pump Skimmers
Don’t get fleeced at the pump.

Paint your bathroom this color and boost your home’s selling price by $5,400
All about the blues.

Filed Under: Liz's Blog Tagged With: Credit Cards, gas pump skimmers, real estate, Retirement, scams. 401(k), tips

Wednesday’s need-to-know money news

June 28, 2017 By Liz Weston

Today’s top story: The death of the 20% mortgage down payment. Also in the news: What you need to know about P2P payment apps, working beyond 65, and 5 cars that cost the lowest to insure.

The 20% Mortgage Down Payment Is Dead
R.I.P

Ditching Cash for P2P Payment Apps? 3 Things to Know
The world of digital currency.

Working Beyond 65 — Will You Want To Or Need To?
What the future holds.

5 cars that cost the least to insure
You don’t have to break the bank.

Filed Under: Liz's Blog Tagged With: car insurance, cars, mortgage, mortgage down payment, P2P apps, Retirement

Black marks fall off credit reports in July

June 28, 2017 By Liz Weston

Starting July 1, the credit scores of up to 14 million people could begin to rise as credit reports are scrubbed of nearly all civil judgments and many tax liens.

Consumer advocates hail the data’s deletion as a long-overdue victory for people whose scores were unfairly dinged by inaccurate information. Others worry the changes could inflate the scores of risky borrowers and have a catastrophic impact on lenders.

People shouldn’t expect an immediate jump in their scores, however.

In my latest for the Associated Press, how the process will work and when you can expect to see changes.

Filed Under: Liz's Blog Tagged With: civil judgments, Credit, credit report, Credit Score, tax liens

Tuesday’s need-to-know money news

June 27, 2017 By Liz Weston

Today’s top story: What to buy (and skip) in July. Also in the news: Conquering the fear of credit cards, 25 tips for first-time home buyers, and why Millennials can’t have nice things (or save any money.)

What to Buy (and Skip) in July
Timing is everything.

Conquer Fear of Credit Cards Now, Reap Benefits Later
Use them wisely.

25 Tips for First-Time Home Buyers
What to watch out for.

This is why millennials can’t have nice things (or save any money)
Curb the spending.

Filed Under: Liz's Blog Tagged With: Credit Cards, millennials, new home buyers, saving money, tips

Monday’s need-to-know money news

June 26, 2017 By Liz Weston

Today’s top story: How to assess your credit card needs after divorce. Also in the news: Generation Z is off to a strong start with credit, why your friend has a better credit score than you, and how to ensure your gift cards don’t go to waste.

How to Assess Your Credit Card Needs After Divorce
How to determine what you need.

‘Gen Z’ Off to Strong Start With Credit, Analysis Shows
The fiscally responsible generation?

Why Your Friend Has a Better Credit Score Than You
Sifting through the possibilities.

How to ensure your gift cards don’t go to waste
Don’t toss away free money.

Filed Under: Liz's Blog Tagged With: Credit, Credit Score, Divorce, Generation Z, gift cards

Q&A: Deferred compensation plans

June 26, 2017 By Liz Weston

Dear Liz: I’m 54 and plan on retiring at 55 with a government pension. I have about $450,000 in a 457(b) deferred compensation plan. I owe about $220,000 on my home. I would like to pay off my 15-year, 2.5% interest mortgage. This would free up $1,900 a month and leave us debt-free. Everyone I’ve spoken to says this is a bad idea since I’d lose my mortgage interest deduction and I’d be “investing” in a low-interest vehicle (my mortgage). My only other obligation is my daughter’s college education, and I’m paying that in cash. Am I crazy to pay off this mortgage?

Answer: You’re not crazy, but you probably haven’t thought this all the way through.

The money in your deferred compensation plan hasn’t been taxed. Withdrawing enough to pay off your mortgage in one lump sum would shove you into a higher tax bracket and require you to take out considerably more than $220,000 to pay the tax bill. You could easily end up paying a marginal federal tax rate of 33% plus any applicable state tax — all to pay off a 2.5% loan.

There are a few scenarios where using tax-deferred money to pay off a mortgage can make sense. Some people have so much saved in retirement plans that the required minimum distributions at age 70½ would push them into high tax brackets and cause more of their Social Security to be taxed. They also may have paid down their mortgage to the point where they’re no longer getting a tax break.

In those instances, it may be worth withdrawing some money earlier than required to ease the later tax bill. The math involved can be complex, though, and the decisions are irreversible, so anyone contemplating such a move should have it reviewed by a fee-only financial advisor who is familiar with these calculations.

In fact, it’s a good idea to get an objective second opinion from a fiduciary any time you’re considering tapping a retirement fund. (Fiduciaries are advisors who pledge to put your interests ahead of your own.)

During your meeting, you also should review the other aspects of your retirement plan. How will you pay for health insurance in the decade before you qualify for Medicare? If you’re a federal employee, you should be eligible for retiree health insurance but your premiums may rise once you quit work. If you’re planning to buy individual coverage through a healthcare exchange, what will you do if that’s yanked away or becomes unaffordable? How will you pay for long-term care if you need it, since that’s not covered by health insurance or Medicare?

You can get referrals to fee-only financial planners from the National Assn. of Personal Financial Advisors at napfa.org. You can find fee-only planners who charge by the hour at Garrett Planning Network, garrettplanningnetwork.com.

Filed Under: Investing, Liz on MSN, Q&A, Retirement Tagged With: deferred compensation, q&a, Retirement

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