Ask Liz Weston

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Q&A

Q&A: Social Security survivor benefits

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Dear Liz: I am trying to understand the Social Security survivor benefit. I delayed starting to receive my benefits until I reached age 70. My wife just started receiving benefits at 66 and 10 months. Upon my passing, will she receive my benefit at full retirement age, plus the 8% annual delayed retirement credit plus the annual cost of living increases?

Answer: Assuming your benefit is larger than hers, then yes — her survivor benefit would be the amount you were getting at your death. The survivor gets the larger of the two checks a couple was receiving, and the other benefit goes away.

Q&A: Distributing funds from inherited IRAs

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Dear Liz: You have referenced the relatively new 10-year rule that sets a deadline for distributing money out of an inherited IRA. You mentioned that surviving spouses are one exception to that rule. Aren’t there others?

Answer: Yes. The 10-year rule applies to IRAs of those who die after Dec. 31, 2019. Most non-spouse inheritors must empty an inherited IRA by the tenth year after the year the original owner died. If the original owners had reached the age where they were expected to make required minimum distributions, the inheritor also must take yearly distributions.

“Eligible designated beneficiaries,” however, have the option of taking distributions more slowly, typically over their own life expectancy. Eligible designated beneficiaries include the original owner’s spouse or minor children, people who are chronically ill or permanently disabled, or inheritors who are not more than 10 years younger than the original account holder. Minor children will be subject to the 10-year rule once they reach the age of majority, which is 18 in most states.

Q&A: What is a ‘qualified higher education expense’ for 529 college savings plans?

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Dear Liz: We are tapping our child’s 529 college savings plan for the first time and are confused on what qualifies as a “qualified higher education expense.” Obviously tuition counts, but what about other fees, such as student body fees, health insurance coverage and tuition insurance? We’re also trying to figure out how much we can withdraw to cover an off-campus apartment next year. The college website lists three different food plans (with different costs) as well as different room costs depending on whether the student is in a dorm or a college-run apartment on campus.

Answer: A fee must be required to be considered a qualified education expense for a tax-free 529 plan withdrawal, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. The qualified fee can be required either to attend the institution or required of all students in a particular for-credit course of instruction, Luscombe said. The school’s business office can tell you what’s required and what’s optional.

This school year, while your student lives on campus, you can withdraw an amount equal to the actual cost incurred for room and board. You can’t take tax-free withdrawals for other costs, such as dorm furnishings, groceries or restaurant meals. Next year, you can use the school’s official “cost of attendance” figures listed on its website, which will set an upper limit on what qualifies as room and board expenses. The college may list different figures for dorm rooms, on-campus apartments, married or graduate student apartments or living at home.

“If more than one figure for room and board is listed in the COA, you could use the highest figure that would apply to the particular student’s situation,” Luscombe said.

Books, supplies and computers used for school are also considered qualified education expenses. Transportation and commuting costs are not.

Q&A: Claiming Social Security benefits

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Dear Liz: My husband turned 70 this past May and waited until then to take his Social Security. I am 61 and will qualify for a benefit based on my work history, although my benefit is substantially less than his. I understand I can take half of his benefit at my full retirement age of 67. I asked a Social Security representative if I could take my (reduced) benefit at age 62 and then switch to half of my husband’s benefit at 67. She told me I should file at 62 and take half of his benefit at that time. That sounds too good to be true, and your article and others I’ve read disagree with her advice.

Answer: Social Security representatives aren’t supposed to give people advice about when or how to claim their benefits. But ideally they would offer correct information about your options.

Congress did away with most people’s ability to switch from a spousal benefit, which is up to 50% of their partner’s amount, to their own benefit. Now when you apply for Social Security, you’ll be considered to be applying for both a spousal benefit and your own benefit and you’ll get the larger of the two. There’s no switching later.

It could be that your own benefit will always be smaller than your spousal benefit, regardless of when you apply. But that doesn’t mean it’s a smart decision to lock in a permanently reduced benefit by applying early.

AARP has a free Social Security claiming calculator you can use to explore the impact of applying at different ages.

Q&A: Closing credit cards could hurt scores

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Dear Liz: If I have a few credit cards, why would my credit be negatively affected if I paid off and closed some?

Answer: Your credit scores won’t be negatively affected by paying off your card balances — quite the opposite. Paying off debt improves your credit utilization — the amount of your available credit you’re actively using — and that’s a powerful way to boost your scores.

If you close accounts, however, that would reduce your available credit, and that’s bad for your credit scores. That doesn’t mean you can never close a credit card, but you should do so sparingly and try to keep open your cards with the highest limits, if possible.

Q&A: Social Security benefits for exes

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Dear Liz: I divorced after three decades of marriage, and my ex remarried before age 60. If I understand Social Security’s rules correctly, that remarriage disqualified my ex from claiming a survivor’s benefit based on my work history. Here’s my question: If my ex’s current spouse dies before he does, does that then make him eligible to claim a survivor benefit on MY work history? I am retired and collect my Social Security benefit; he too is retired and presumably collecting his.

Answer: Yes. If your ex is widowed, he typically would have the option of taking a survivor benefit based on his most recent spouse’s work history, or a divorced survivor benefit based on your work history, instead of his own benefit. His choice would not affect how much you receive.