Ask Liz Weston

Get smart with your money

Liz Weston

Monday’s need-to-know money news

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seniorslaptopToday’s top story: Why getting pre-approved for a mortgage is important if you live in these cities. Also in the news: How couples can master the financial balancing act, overcoming income shocks, and how 529 plans can now be used for college supplies.

Get Preapproved for a Mortgage — Especially if You Live in These Cities
Where real estate inventory is moving fast.

How Couples Can Master the Financial Balancing Act
Creating an equitable balance,

How to Overcome ‘Income Shocks’ that Wreck Retirement Security
Coping with unexpected surprises.

Now 529 plans can be used for college supplies
Getting your freshman the computer she needs.

Q&A: Defaults on a co-signed student loan

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Dear readers: A recent column about private student loans prompted financial aid expert Mark Kantrowitz to reach out with some additional advice for people who co-signed student loans for someone who has stopped paying. Although private student loans don’t have the same rehabilitation options as federal student loans, Kantrowitz encourages anyone in this situation to ask the lender, “What are my options?” and “Can you remove the default?”

“I’ve seen lenders not only remove the default from the co-signer’s credit history, but even reduce the interest rate if the co-signer agrees to make the payments by auto-debit,” said Kantrowitz, coauthor of the book “File the FAFSA.”

Someone who agrees to make payments may get a better deal than someone who pays off the loan in a lump sum, Kantrowitz said, because lenders want to be paid interest. But there would be nothing to stop a co-signer who makes payment arrangements to pay off the debt in full after a few months.

“This way he potentially can have the default entirely removed from his credit history, restoring him to his previous credit score,” Kantrowitz said. “It also leaves the account open, so that he can pressure the [borrower] into making payments.”

Q&A: Divorced survivor benefits

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Dear Liz: After death, do ex-spousal Social Security benefits continue?

Answer: Any checks you’re getting from Social Security are supposed to stop when you die. But you’re probably asking what happens after the death of your ex-spouse.

The good news is that you would be eligible for divorced survivor benefits. Instead of receiving a check based on half of what your ex was getting, your payment will be based on the entire check your ex was getting. (With either benefit, the check would be reduced if you started benefits before your own full retirement age.)

Benefits for divorced spouses are available if the marriage lasted at least 10 years. Divorced spousal benefits end if the person remarries, but divorced survivor benefits can continue if the survivor remarries after reaching age 60.

Q&A: Retirement calculators are a wake-up call for undersavers

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Dear Liz: Are retirement calculators a hoax? It seems that the published estimates for the amount of savings required are insanely high. If most U.S. citizens haven’t saved much and have a decent standard of living in retirement, where is the misperception? Let’s say an individual is resolved to choose hospice over intensive care — so we can reduce healthcare from the equation — and is no longer paying for a mortgage or college. How could someone really need to replace a high percentage of salary? Do we really need to save millions to retire? Even if we just spend the principal in the calculated estimates, we are truly old before we run out. I have got to be missing something.

Answer: You’re missing quite a few things.

People born between 1936 and 1945 — those aged 71 to 80 now — typically had enough savings, home equity, pension income and Social Security benefits to replace 99% of their annual incomes in retirement, according to a Pew Charitable Trust study. This generation benefited from steadily rising incomes and wealth levels through most of their working lives.

Early boomers, born between 1946 and 1955, aren’t quite as well off but typically can replace a comfortable 82% of their incomes.

They’re the last generation, though, that’s expected to be truly secure on average in retirement. Younger people are much less likely to have pensions. Stagnant incomes, rising costs and falling wealth levels further undermine their financial security.

Late boomers, born between 1956 and 1965, are on track to replace 59% of their incomes. GenX, born between 1966 and 1975, could see their incomes cut in half in retirement.

Imagine living on 50% of what you make now. If that would be easy — and if you’re really resolved to choose death over medical treatment — maybe you don’t have to worry about retirement calculations.

If the thought of eking by on half your current income makes you break out in a cold sweat, though, then you better start saving.

Friday’s need-to-know money news

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types-of-scholarshipsToday’s top story: Companies that help you repay or avoid student loans. Also in the news: Solutions to your retirement fund shortfall, debunking Social Security myths, and why Walmart is suing Visa.

6 Companies That Help You Repay or Avoid Student Loans
Alternative options.

10 Solutions to Your Retirement Fund Shortfall
There’s still time to catch up.

Debunking 3 Big Myths About Social Security
Getting to the truth.

Why Walmart is suing Visa, and what it means for your credit cards
Safety first.

Thursday’s need-to-know money news

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common-retirement-mistakesToday’s top story: 5 expenses that will change when you retire. Also in the news: Questions for credit counselors, how to budget for a wedding that isn’t your own, and could we be on the verge of another housing crisis?

5 Expenses That Will Change in Retirement
Could you see more cash in your wallet?

7 Questions to Ask a Credit Counselor
Be prepared.

How to budget for a wedding — that’s not your own
Expenses add up quickly.

Are We Heading for Another Housing Crisis?
It’s getting easier to get a mortgage amid increasing home prices.