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Liz Weston

This week’s money news

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This week’s top story: How to get paid for surviving the Southwest meltdown. In other news: Smart Money podcast on January money moves, and paying off your mortgage early, 4 ways to improve your odds of meeting new year’s money goals, and the path of mortgage rates prior to Fed meeting.

How to Get Paid for Surviving the Southwest Meltdown
In addition to covering some out-of-pocket costs, Southwest is offering at least $300 worth of points to stranded flyers.

Smart Money Podcast: January Money Moves, and Paying Off Your Mortgage Early
This week’s episode starts with a list of money tasks to do in the new year.

4 Ways to Improve Your Odds of Meeting New Year’s Money Goals
Daily life can get in the way of financial resolutions. Focus on your values and high-impact tasks.

Mortgage Rates Have Room to Rise in January, Prior to Fed Meeting
The path of mortgage rates will depend on the inflation outlook and the Fed’s aggressiveness in fighting rising prices.

Sneaky ways inflation affects your money in 2023

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By now, you’re probably familiar with the more obvious ways inflation affects your finances. Your money doesn’t go as far at the grocery store, for example. Credit card and other variable-rate debt is getting more expensive as the Federal Reserve raises short-term interest rates to combat inflation. Rates are also rising, albeit more slowly, on savings accounts.

But other ways inflation helps or hurts have gotten less attention. In my latest for the Associated Press, learn some of the major changes to watch for in 2023.

Q&A: Divorce survivors benefits and remarriage

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Dear Liz: I am a divorced man receiving Social Security survivors benefits based on the earnings record of my ex, who has died. I am 63. Can I get married and continue to receive benefits?

Answer: Yes. People receiving survivors benefits can remarry at age 60 or later without losing their benefits.

Survivors benefits are based on the earnings record of a spouse or ex-spouse who has died. That’s different from spousal benefits and divorced spousal benefits, which are based on the earnings record of someone who is still alive. People receiving divorced spousal benefits can’t remarry without losing those benefits.

Q&A: Old uncashed insurance policies

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Dear Liz: What advice can you provide to people when they stumble on old life insurance policies that may never have been cashed in?

Answer: My siblings and I have personal experience with this after coming across two policies in our late father’s papers. We learned one policy had indeed been cashed in, but the second — purchased in the 1930s, with a face value of $5,000 — was still in effect.

You typically can use a search engine to determine if the insurer is still in business or if it has changed its name or merged with another company. (Not surprisingly, the insurer that issued the 1930s policy had been involved in several mergers in the intervening decades, but it took just seconds for us to find the current incarnation.) If you’re having trouble tracking down the company, contact the insurance regulator in the state where the insurer was originally located.

Once you have the current insurer name and contact information, you can call and ask if the policy is still in force. If the policy has value, the insurer can instruct you how to make a claim.

Q&A: How a Roth IRA rollover can cause unforeseen problems

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Dear Liz: I have been contributing to my young adult children’s Roth IRA accounts for the past few years to get them started on retirement savings. My oldest just left her first job to go back to graduate school. Since her income will be low this year, I advised her to roll her defined contribution plan with her former employer into her Roth IRA to consolidate her retirement savings. Will this conversion affect the maximum amount that I can contribute to her Roth beyond the usual rules on maximum contributions?

Answer: A conversion could do more than affect her ability to contribute to a Roth. It also could inflate her tax bill, reduce her eligibility for financial aid and affect any health insurance subsidies she’s receiving. A conversion could still be a smart move because Roth IRAs offer tax-free withdrawals in retirement, but she should understand all the implications before following your advice.

The amount your daughter converts from her 401(k) or other defined contribution plan would be considered a taxable distribution and treated as income. That could affect her eligibility for tax breaks, such as education tax credits and Affordable Care Act subsidies, as well as her ability to contribute to a Roth. (In 2023, the ability for an individual to contribute to a Roth phases out between modified adjusted gross incomes of $138,000 to $153,000.)

Also, to be eligible to make a contribution, she must have earned income at least equal to the amount she (or you) plan to contribute. Retirement plan distributions aren’t considered earned income so she would need wages, salary, tips, bonuses, commissions or self-employment income to qualify.

The conversion could affect her financial aid in future years. Federal aid calculations are based on tax returns from two years prior, so her 2023 tax return could affect her aid if she’s still in school during the 2025-26 academic year.

Also, she needs to figure out how she would pay the tax bill on the conversion. Converting a regular retirement account to a Roth can make sense if someone expects to be in a higher tax bracket later, but the math starts to fall apart if the retirement account itself has to be raided to pay the tax.

Your daughter should consult a tax pro who can review her situation and provide personalized advice.

This week’s money news

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This week’s top story: Big questions on student debt still loom. In other news: Financial actions speak louder than resolutions, 5 ways to build your credit score in 2023, and how families can get seats together on a plane.

2023 Is Here — And Big Questions on Student Debt Still Loom
As 2023 unfolds, big questions remain around new repayment plans, debt cancellation, bankruptcy rules and more.

Financial Actions Speak Louder Than Resolutions
Skip goals, and go right from intention to action.

5 Ways to Build Your Credit Score in 2023
Here are a few ways experts suggest boosting credit in the new year.

How Families Can Get Seats Together on a Plane
Airlines are making seat selection more difficult and expensive, which can be particularly tough for families.