Get smart with your money
Dear Liz: When the Social Security Administration makes its cost of living adjustments, do these increases get factored into the benefit amounts for people who are not yet collecting their Social Security?
Answer: Social Security’s inflation adjustments are factored into your retirement benefits starting at age 62, whether or not you’re actually collecting checks. So there’s no reason to speed up an application just to lock in a cost of living adjustment.
Dear Liz: In a recent column, an attorney suggested that a veteran’s information can be shredded three years after death. However, surviving spouses of veterans can be eligible for benefits to cover the costs of assisted living and would need to provide that information.
Answer: That’s an excellent point. Many people aren’t aware of the “aid and attendance” benefit that can help veterans and their spouses pay for help with activities of daily living, including bathing, dressing and using the bathroom. These custodial care costs are typically not covered by Medicare.
Dear Liz: Does a spouse automatically inherit everything if the other passes away without a will?
Answer: Not necessarily.
Anything that has a beneficiary designation, such as retirement accounts and life insurance, would typically pass to the person named as beneficiary even if that’s not the surviving spouse. Bank and investment accounts also may have “transfer on death” or “pay on death” beneficiaries. In many states, cars and even homes can be passed with beneficiary designations. In addition, jointly owned assets would pass to the other owner.
Other assets would pass to the deceased spouse’s survivors according to state law if there is no will or living trust. You can look up those laws by searching for the state’s name and the words “intestate succession.” If there are no children, the surviving spouse may inherit everything or may have to share with the deceased’s parents or siblings. If there are children, the surviving spouse inherits a portion of the estate with the children getting the remainder.
For example, in California — a community property state — the spouse would inherit all the community property and one half of the separate property if there is one child, and the child would inherit the rest. With two or more children, the spouse gets all of the community property and one-third of the separate property, with the children sharing the rest.
Dear Liz: We are just getting to the age where mandatory distributions from our retirement accounts have to start. We don’t need the additional cash as we have great pensions. If we convert to Roth IRAs, will the amount in the Roth be subject to minimum deductions going forward? Will our heir have to pay any taxes on the money in the Roth account when inherited? Can we count the amount converted to the Roth account against the mandatory required distribution? I do understand that all the money will be taxed as income when coming out of the retirement accounts.
Answer: Required minimum distributions and Roth conversions have to be separate transactions. Conversions can’t count against your RMDs, and you’re not allowed to put an RMD into a Roth.
Any money you convert to a Roth would, however, reduce future RMDs, since Roths aren’t subject to mandatory distributions. Your heirs wouldn’t pay taxes on inherited Roth accounts, either, although they would be required to drain those accounts within 10 years.
Plus, you’re increasing your pool of tax-free money. This could be especially helpful for whichever of you survives the other, because after the year of death, the survivor probably won’t be able to file as “married filing jointly” anymore and would be subject to less favorable single taxpayer status.
Consult a tax pro, however. Roth conversions can push you into a higher tax bracket and increase your Medicare premiums. A “laddered” approach, or a series of partial Roth conversions over several years, may be advisable.
If you or a loved one can no longer live safely at home, assisted living may be the answer. Residents typically live in their own rooms or apartments and get housekeeping services, meals and help with personal care.
But facilities can vary enormously, and people’s expectations about assisted living often clash with reality, elder care experts say. Here are some important things to know. In my latest for ABC News, learn 5 surprising facts about assisted living.
This week’s top story: October mortgage rates forecast. In other news: 6 pitfalls to avoid when shopping for Medicare Advantage, 5 tips to get primed and ready for Amazon’s October Prime Day, and entrepreneurs feeling less optimistic as rates rise.
October Mortgage Rates Forecast: Highest in 2 Decades
In September, mortgage rates reached their highest levels since 2000, and they could inch upward in October.
Shopping for Medicare Advantage: 6 Pitfalls to Avoid
From picking a plan for the perks to not checking next year’s network, here are some traps it’s easy to fall into while shopping for Medicare Advantage.
5 Tips to Get Primed and Ready for Amazon’s October Prime Day
Amazon’s Prime Big Deal Days event is next week: Oct. 10-11.
NerdWallet Small-Business Financing Index: Rates Up, Optimism Down
NerdWallet’s annual index considers data about delinquency rates, new loan volumes and business-owner sentiment.