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Get smart with your money

Liz Weston

This week’s money news

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This week’s top story:  September mortgage rates forecast. In other news: Striking writer, 7 balance transfer credit card mistakes, and how to avoid them, and stock market outlook: September 2023.

September Mortgage Rates Forecast: Not Yet at the Top
Mortgage rates might rise in September, for the fifth month in a row, because of uncertainty about what the Federal Reserve will do in coming months.

Striking Writer: ‘This Fight Is a Fight That Is Deep’
A late night TV writer spells out what’s at stake in the ongoing WGA strike.

7 Balance Transfer Credit Card Mistakes, and How to Avoid Them
Balance transfer credit cards can be helpful tools for zapping debt, but they aren’t a cure-all and require you to avoid certain pitfalls.

Stock Market Outlook: September 2023
Student loan payments restart in October. Also, new weight-loss drugs could boost some stocks.

Q&A: When selling a vacation home, here are the taxes to expect

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Dear Liz: I am one-third owner of a vacation house. My siblings own the other two-thirds. We inherited the house from a parent about 10 years ago. I want to sell my third to my siblings, who are willing and able to buy it. Can I do anything to avoid capital gains? Would it make a difference if I sell my interest over several years?

Answer: Vacation homes aren’t eligible for the tax break that allows people to exclude up to $250,000 in capital gains from their income when they sell their primary home. If the property was used full time as a vacation or second home, rather than as a rental, it’s also not eligible to be swapped for another property in a 1031 exchange. (These exchanges allow investors to defer capital gains on real estate investment properties.)

Selling your share of the property over time won’t eliminate the capital gain, but it would spread out the tax bill. Discuss your options with a tax pro to see which approach makes the most sense.

Q&A: How delayed Social Security retirement credits work

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Dear Liz: I just got off the phone with the Social Security folks and they told me the 8% delayed retirement credit is based on your benefit at full retirement age, rather than an 8% increase every year based on the previous year’s amount. So, if my full retirement age benefit was $3,000, my benefit increases $240 each year, not $240 the first year and $259 the second year and $279.94 the third year. Is that your understanding?

Answer: Yes. Delayed retirement credits don’t compound. If there are three years between your full retirement age and age 70, when your benefits max out, you will get 24% more than if you had applied for Social Security at your full retirement age.

Q&A: Whether to close elderly mom’s CDs

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Dear Liz: I have the power of attorney for my 92-year-old mother, who has dementia. She has numerous financial accounts including money market, checking and savings accounts and certificates of deposit. When she passes, would it be easier to settle her estate if I start closing her CDs now and put that money into, say, her money market? I am the sole beneficiary for all of this.

Answer: If your mom has multiple accounts at different institutions, then consolidating those accounts now can save time and hassle later. You’ll want to review the rules for FDIC insurance, though, to make sure her accounts would remain adequately covered.

There’s probably less urgency if all her accounts are already at the same institution and under FDIC limits. Closing CDs prematurely could mean losing some interest, which may not make sense unless she urgently needs the money.

If you haven’t already, consider checking in with an estate planning attorney who can give you suggestions about what you can do now to ease the transition later.

Q&A: Don’t close that credit card

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Dear Liz: I’m debt free with a comfortable income and excellent credit. I just got a new cash-back credit card. I have three other credit cards, including one affiliated with a retail chain that I no longer use. Should I close the retail chain card so I only have three cards? Should I have fewer?

Answer: More is often better when it comes to your credit scores. The scoring formulas may temporarily drop a few points when you apply for a new card, but having at least four active credit accounts can help you achieve and keep high scores.

The formulas won’t punish you for having too many accounts or too much available credit. You could get dinged, though, if you use too much of that credit at one time. To avoid that, try to keep your balance on each card below 10% of its available limit.

How to get comfortable with taking smart financial risks

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Making money, whether by putting cash into the stock market, buying a home or jumping to a better-paying job, requires some degree of risk. While embracing any of those moves might feel as scary as skydiving off a cliff, there are times when a little risk makes financial sense.

“In certain scenarios, not taking enough risk is actually a bigger risk,” says Liz Davidson, CEO and founder of Financial Finesse, which provides workplace financial wellness programs as an employer benefit.

Davidson and other financial experts also caution against being overly risky with your finances. How to find the right level of financial risk for you is highly personal; there’s no formula that can tell you whether or not to buy that house or take that new job. But there are ways to get more comfortable with risk when you know that taking the less comfortable path is the right decision for you. In Kimberly Palmer’s latest for the Washington Post, learn how to get comfortable with taking smart financial risks.