Q&A: Still no coronavirus stimulus check? You’re not alone

Dear Liz: Both my wife and I are on Social Security retirement benefits. We were told we had to do nothing to get our stimulus payment even though we don’t file tax returns. We’ve made two calls to the IRS and gotten no suggestions from them.

Answer: If your Social Security payments are direct deposited, your relief payments should have been sent to that bank account. If you don’t have direct deposit, your payments should have been mailed. You (or a computer-savvy friend) can check to see the status of your payment at the “Get My Payment” section of the IRS.gov website.

If your payment isn’t on the way or there’s another problem, you should reach out to the IRS. It’s not clear from your statement — “no suggestions from them” — if in your previous attempts you actually reached a human being or just a recording. Please make sure you’re calling the right number because the stimulus payment number — (800) 919-9835 — is different from the general taxpayer hotline. You may have to be patient because hold times can be long.

Q&A: The ups and downs of reverse mortgages

Dear Liz: I have been a reverse mortgage specialist for the last 12 years and had some thoughts about the writer who complained that the $40,000 she initially borrowed had grown to a debt of $189,000, or more than her home was worth.

Using a compound interest calculator, it would take about 16.5 years for the debt to grow that large. The borrower would have lived in their home for all that time without making payments toward the debt, although they were still responsible for taxes, insurance and maintaining the property. They can stay in the home for as long as it’s their principal residence. Once they leave the home, the lender will sell the home and receive the difference between the sales price and the loan balance from the government insurance program that everyone with a reverse mortgage pays into. Otherwise, no lender would take out this loan for a potentially long term and risk losing money in the end. Maybe it was a good deal.

Answer: Possibly, but she regretted the decision anyway. She took out a reverse mortgage at a time of financial hardship and now wishes she hadn’t.

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People facing financial crises often develop tunnel vision and grab at solutions without thinking through the future costs of their decisions. (The excellent book “Scarcity: Why Having Too Little Means So Much” by Sendhil Mullainathan and Eldar Shafir explains the science of why that happens.)

Advertising for these loans can gloss over the downsides, such as potentially not being able to tap your equity later, when you may need it more. Reverse mortgages can be a good solution for some seniors but certainly not all of them.

Q&A: Pitfalls of unequal will distributions

Dear Liz: You’ve written that when writing their wills, parents should be careful about leaving unequal distributions to their children. What wasn’t mentioned was that a person could have a “good” child and a “bad” one. The “bad one” has never done a thing for the parent, such as inviting her to the child’s home at Thanksgiving or Christmas, and only visits the parent in the summer when the parent just happens to live at the beach. The “good” one is very attentive and visits the parent even in winter, and so on. What is your thinking in inheritance in this case?

Answer: It’s your money, and there’s no one right way to divide an estate. However, it’s disturbing that your assessment of your children seems to be based solely on how much attention you get.

It’s possible one child acts more selfishly or thoughtlessly than the other. It’s also possible that you are difficult to please, and one child understandably limits the time she spends trying to do so.

Q&A: A shutdown reality check

Dear Liz: Recently a reader asked about withdrawing money from an IRA to pay credit card debt. You mentioned the many ways that was a bad idea, including the fact that retirement money is protected in bankruptcy court. Liz, the writer had only $10,000 in credit card debt. Bankruptcy should be a last resort. A lifestyle change or picking up a second job would be a better route to knocking out the debt.

Answer: “Picking up a second job” — really? Most people will be lucky to hang on to the ones they have in the coming months.

No one suggested that this reader should file bankruptcy, but anyone considering taking money from a retirement plan to pay debt should understand this major drawback — especially now. Bankruptcy experts expect business and personal bankruptcy filings to soar because of the pandemic.

You might want to check your other assumptions, as well. People typically don’t wind up in bankruptcy court because they refused to cut out their lattes or didn’t work hard enough. They get sick or disabled, lose their health insurance, get divorced, have a breadwinner die — or get stuck in a pandemic. Those with higher incomes and more savings may be better able to weather financial setbacks, but few of us are truly immune from their effects.

Q&A: The value of waiting

Dear Liz: This is a follow-up question to one you recently answered about tapping 401(k)s in order to delay the start of Social Security. I am 63 and retired early with a good pension that fully covers my basic living expenses. Any additional money would only be “gravy” for vacations and travel. Would I be taxed the same if I start taking Social Security now vs. waiting? I could easily tap my 401(k) to put off applying for Social Security.

Answer: When it comes to Social Security, if you can wait, you probably should.

Many middle-income people who have retirement funds will pay higher taxes if they start their benefits early, according to researchers who studied the “tax torpedo,” which is a sharp increase and then decline in marginal tax rates caused by the way Social Security benefits are taxed. The researchers found that many could lessen its effects by delaying the start of Social Security and tapping retirement funds instead.

If you’re married and the primary earner, it’s especially important to delay as long as possible because your benefit determines the survivor benefit that one of you will receive after the other dies.

Q&A: Culture and parental advice

Dear Liz: You recently answered a question from a parent who wanted to know how to fix a financial issue in an adult child’s marriage. Your advice was basically to butt out. I think that may depend on culture. What if your advice saved your child’s marriage? What if it prevented your child from going into bankruptcy? Would it be worth the uncomfortable conversation? In some cultures, the approach is to butt in and confront the issue; if it causes problems, well then you deal with that also.

Answer: There may well be a culture in which the interference of in-laws is gladly received, rather than merely tolerated. There may even be people who enjoy being the target of unsolicited advice. It’s hard for some of us to imagine, but it’s certainly possible.

It’s probably safer to assume that your counsel is unwelcome and annoying unless it’s been specifically requested — and often even then.

Q&A: Different approaches to marital finances

Dear Liz: Thank you for mentioning that many couples like to keep their finances entirely or mostly separate. Our solution was to create a joint bank account just for paying joint expenses, such as rent, food, entertainment together, vacations and so on. We each funded this account proportionately, based on our income (for example, the person earning 65% of the total income contributed 65% of the funds). Expenses, such as gifts to our separate children, entertainment on our own, car payments and all personal expenses were paid out of our own separate accounts. Each year at tax time, we’d revise the proportion of the joint account, if necessary, based on our separate tax return figures. It was so simple and tension-free. This was a second marriage for both of us, and we never had disagreements about money.

Answer: Congratulations for finding an approach that worked so well for both of you. As you demonstrate, there’s no one right way for couples to handle their money. Some prefer to have everything in joint accounts, others keep everything separate, and most are somewhere in between.