Liz Weston

Q&A: Mistaken address leads to debt collection

February 16, 2015 By Liz Weston

Dear Liz: A debt collector says I owe a small debt from a store credit card I opened about six months ago. The wrong address was on file, so I hadn’t received any documentation at all. After opening the account I had called the store customer service line to arrange a payment, but the representative told me I had to wait for my account number and card in the mail. It never showed up, obviously, because of the wrong address issue. I understand that it was still my responsibility to pay this, but I called the store and then the bank that issued the card and got no response. Do I have any right to dispute the collection or at least catch a break?

Answer: The Fair Credit Billing Act requires that when accounts are opened, lenders send written notice about the account holder’s right to dispute errors, said credit expert Gerri Detweiler. Lenders are also supposed to send you statements when your account has activity (such as a balance due).

You could make the argument that the lender violated federal law by sending the information to the wrong address, Detweiler said, and that your credit scores have suffered as a result.

Yes, you should have contacted the store again after the card failed to arrive, but the lender should have fixed the problem and called off the collector once it was notified.

You can file a complaint with the Consumer Financial Protection Bureau at http://www.consumerfinance.gov and it will contact the lender to try to resolve the dispute. You’ll be able to log into the CFPB site to track the progress of its investigation.

You also should get copies of your credit reports and dispute any negative information related to this account, including any collections activity, said Detweiler, who writes about credit and debt at Credit.com.

Should the lender balk at removing the derogatory information from your credit reports, you can hire a consumer law attorney (referrals from http://www.naca.net) to press your case.

Q&A: IRA’s and 401(k)’s

February 16, 2015 By Liz Weston

Dear Liz: You answered a reader who asked whether to contribute to her IRA, her Roth IRA or her regular or Roth 401(k) account. I thought that if you have access to a 401(k) at work, you couldn’t make a contribution to an IRA or Roth IRA.

Answer: That’s a common misconception. You can contribute to an IRA even if you have a workplace plan. What you may not be able to do is deduct the contribution. The tax deduction depends on your modified adjusted gross income and phases out in 2015 between $61,000 and $71,000 for singles and $98,000 to $118,000 for married couples filing jointly.

You also may be able contribute to a Roth IRA if you have a workplace plan. Contributions to a Roth are never deductible, but your ability to contribute phases out between $116,000 to $131,000 for singles and $183,000 to $193,000 for married couples filing jointly.

What “secret millionaires” can teach us

February 12, 2015 By Liz Weston

This column first appeared on DailyWorth under the headline “Lessons from secret millionaires.”

Eugenia Dodson grew up on a Minnesota farm, the daughter of poor Swedish immigrants. Her childhood poverty affected her so profoundly that even in her old age, she refused to replace a stove with only one working burner — even though by then she was worth tens of millions of dollars. Dodson, who left nearly $36 million to the University of Miami when she died in 2005 at age 100, is just one of many secretly wealthy people who live quiet, frugal lives and then leave unexpected fortunes to charity.

I’ve been collecting stories of such secret millionaires for years now. Some are men, though the women interest me more, as females usually earn less, invest more conservatively and wind up poorer in retirement. These women break that mold. Here’s what we can learn from them.

They’re not born rich

Secret millionaires can be farmers, school teachers or, in Dodson’s case, a hairdresser. Dodson eventually opened her own beauty shop after she moved to Miami in the 1920s at the urging of a high school friend, according to her attorney, Donald Kubit. She made it through the Great Depression living simply and frugally, habits she continued through her life. “I had no idea when I met her that she was a woman of such wealth,” says Kubit, who met Dodson in her nineties.

Buy and hold works

Secret millionaires are often heavily invested in stocks — the one type of investment that consistently beats inflation over time. Many favored well-known, blue-chip companies. Margaret Southern, a retired teacher of special-needs children in Greenville, S.C., preferred household names like 3M, General Foods and Heinz that paid dividends, according to a story about her in the Greenville News. Southern reportedly liked having the dividend checks to buy whatever she wanted. When Southern died at 94, she bequeathed $8.4 million to the Community Foundation of Greenville to benefit children and animals.

Let it grow

Long lives mean that even small amounts invested over time have the decades they need to grow into real wealth. (As an example, $10,000 can grow to $100,000 in 30 years with an 8 percent average annual return, which is a typical long-term gain for stocks. In 40 years, that $10,000 would grow to $200,000. In 50 years, you’d have nearly $500,000.) You can’t control how long you live, but you can take advantage of long-term compounding by starting to invest as early as you can and leaving the money alone to grow.

These secret millionaires tend to be pretty vital, too: Elinor Sauerwein of Modesto, California, painted her own house, mowed her own lawn and harvested her own fruit from atop a ladder into her nineties, according to an ABC News report. Sauerwein left $1.7 million to the Salvation Army.

Don’t live too poor

Living below your means is essential to growing wealth, but it is possible to go overboard. Helen Dyrdal of Renton, Washington lived with broken furniture and wore tattered clothes, leaving her best friend with the impression she was impoverished, according to a KOMOnews.com report. Dyrdal was actually worth more than $3 million, which she left to Seattle-area charities when she died at 91.

Eugenia Dodson, meanwhile, was desperate to find a cure for diabetes, the illness that killed her two brothers. That’s why she gave two-thirds of her fortune to the University of Miami’s Diabetes Research Institution Foundation. (A lung cancer survivor, Dodson left the other third to the university’s cancer research center.) But she wasn’t able to give money away during her lifetime, Kubit says.

“She would have been treated royally by her charitable beneficiaries,” Kubit says. “But she was always afraid that she might need the money.” If Dodson, Dyrdal and other secret millionaires had been able to address their fears about money, they may have died a bit less wealthy — but they might have been happier. The best part of money is enjoying it while you’re alive, even if you want to benefit others when you die.

Please check out my other DailyWorth columns here.