Ask Liz Weston

Get smart with your money

Q&A

Q&A: Credit reports for the deceased

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Dear Liz: How does one get credit reports for someone who is dead? My deceased husband is still on my mortgage and I’d like to review his report to make sure it is correct. The estate went through probate, so I have court documents showing I am the executor. I looked at credit bureau websites and attempted to contact them by phone but have not been able to determine what information they need or where it should be sent.

Answer: The only thing that needs to be correct about your husband’s credit reports is the fact that he’s dead. Any other mistakes are irrelevant at this point, but his identity can still be stolen if the bureaus don’t know he’s deceased.

This is no small issue. About 2 million dead people have their identities stolen every year, either because they’ve been deliberately targeted or because criminals filling out credit applications used made-up Social Security numbers that happen to match those of people who have died, according to a 2012 study by research firm ID Analytics.

Eventually, the credit bureaus should get word of a death. Bureaus periodically check the Social Security death master file, which is a database of all the deaths reported to the agency. Lenders also notify the bureaus when they receive information that someone has died.

Just to make sure, though, you should notify the bureaus directly. Ask that a “deceased alert” be added to his files. Send death certificates — the real thing, not photocopies — by certified mail, return receipt requested. The addresses to use include:

TransUnion LLC, P.O. Box 2000, Chester, PA 19022
Experian, P.O. Box 2002, Allen, TX 75013
Equifax, P.O. Box 740260, Atlanta, GA 30374

Q&A: 401(k) followup

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Dear Liz: Your reply about what to do with a 401(k) after someone leaves a job was off base, in my opinion.

You advised the questioner to leave the 401(k) with the former employer until it could be rolled over to a new 401(k) with a new employer. Wouldn’t it be better to roll over the old 401(k) to an IRA? An IRA offers more control and better investment options than a 401(k).

Answer: More is not necessarily better. Some people appreciate the chance to diversify their investments by using a rollover IRA. Many others, however, have no need for thousands of investment options and in fact could be paralyzed by so many choices.

The investment options available for IRAs also can be more expensive than what’s typically available in large company plans. These 401(k)s often offer institutional funds with low expense ratios that are unavailable to retail investors.

Finally, 401(k)s have better protection from creditors than IRAs if the worker is sued or files for bankruptcy, although that won’t be an issue for the vast majority of savers.

People can protect an unlimited amount of money in a 401(k), while IRA protection is limited to $1,245,475.

Keeping an account with an old employer, or rolling it over to a new one, won’t be the right solution for everyone. But neither is an IRA rollover—despite what brokerage houses that profit from IRA rollovers may tell you.

Q&A: Brokerage accounts

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Dear Liz: I have some questions regarding my brokerage accounts. What happens to my investments there if the brokerage company goes out of business? How much of my investments will I be able to recover and how? Also, does it matter if my accounts are IRAs, Roth IRAs, or conventional brokerage accounts?

Answer: Most brokerages are covered by the Securities Investment Protection Corp., which protects up to $500,000 per eligible account, which includes a $250,000 limit for cash.

Different types of accounts held by the same person can get the full amount of coverage. IRAs, Roth IRAs, individual brokerage accounts, joint brokerage accounts and custodial accounts could each have $500,000 of coverage.

So with an IRA, a Roth and a regular brokerage account, you would have up to $1.5 million in coverage.

If you have a few traditional IRAs at the brokerage, though — say, one to which you contributed and one that’s a rollover from a 401(k) — those two would be combined for insurance purposes and covered as one, with a $500,000 limit.

In addition to SIPC coverage, many brokerages buy additional insurance through insurers such as Lloyds of London to cover larger accounts.

It’s important to understand that SIPC doesn’t cover losses from market downturns. The coverage kicks in when a brokerage goes out of business and client funds are missing.

SIPC is commonly compared to the Federal Deposit Insurance Corp., which protects bank accounts, but there’s an important difference between the two.

The FDIC is backed by the full faith and credit of the U.S. government. SIPC has no such implicit promise that if it’s overwhelmed by claims, the government will come to the rescue.

Q&A: Delayed tax refunds

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Dear Liz: How long is too long for an IRS tax refund to be disbursed? I got my state tax refund in a matter of weeks. The IRS refund has been “under review” for almost five months.

Answer: A sizable surge in tax refund theft as well as a database breach that exposed more than 300,000 taxpayers’ returns have kept the IRS pretty busy. At the same time, big budget cuts have left the agency with fewer people to help with these issues.

Five months is a long wait, but people who have been the victims of refund theft report waiting nine months or more to get their money back.

You can try contacting the IRS directly at (800) 829-1040, although you’re likely to be on hold for quite a while. If you can’t get a response, you can contact the IRS’ Taxpayer Advocate at (877) 777-4778, but be advised its resources have been trimmed as well and it may just refer you back to the IRS.

Q&A: Cashing mature savings bonds

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Dear Liz: I have savings bonds that have achieved full face value. What should I do? Keep them indefinitely or cash them in to fund my Roth account or what? Am I correct that once they have matured, there’s no more money to be made off them?

Answer: You are correct. Once savings bonds have matured and stopped earning interest, they should be redeemed and the money put to work elsewhere. EE, H and I bonds mature in 30 years, while HH bonds mature in 20 years. You can find more information at TreasuryDirect.gov.

Funding a Roth is a great idea for deploying these funds. Other good uses are paying off high-rate debt or building an emergency fund.

Q&A: Social Security survivor’s benefits

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Dear Liz: I am 64 and have been divorced over 22 years. My former husband passed away two years ago at the age of 62. Our marriage lasted more than 10 years and neither of us remarried. I went to the local Social Security office after he passed away, but the official there said I was not entitled to any claim for benefits on my ex’s work record. From what I have been reading, that may not be true. Are you able to clarify this for me? I am not able to get any firm answers, even from my financial advisor. My ex worked for a private employer his whole career, so he would have paid into Social Security. I recently lost my job, so the money would be helpful.

Answer: You qualified for benefits — but what the official may have meant was that you wouldn’t receive anything.

If you were still working at the time you inquired, any Social Security check would have been reduced by $1 for every $2 you earned over a certain amount ($15,120 in 2013). In other words, your benefit could have been wiped out had you earned enough. The earnings test ends at full retirement age (currently 66).

Survivor’s benefits are based on the amount that the deceased worker had been receiving if he’d started benefits or, if he hadn’t, what he would have received at full retirement age. The amount is reduced if survivors start benefits before their own full retirement age.

These benefits are available to both current and divorced spouses starting at age 60, or 50 if they’re disabled, or at any age if they’re caring for a child under 16 who is getting benefits based on the former spouse’s work record. To qualify for divorced survivor’s benefits, the marriage must have lasted 10 years. Your ex’s remarriage would not have affected this benefit. Neither would your own, since you were over 60 when he died.

Survivor’s benefits have more flexibility than spousal benefits or divorced spousal benefits, which are typically about half what the worker receives. You can switch from survivor’s benefits to your own retirement check, or vice versa, even if you start early. With spousal benefits, an early start typically locks you into a permanently reduced check.

You can start survivor’s benefits now or you can start your own benefit and switch to the survivor’s benefit at 66, if that would be larger, said economist Laurence Kotlikoff, who runs the claiming strategy site MaximizeMySocialSecurity.com.

You also need a new financial advisor — one who can be bothered to answer your questions. People who are retirement age should find advisors who are willing to put clients’ needs first and to educate themselves about Social Security claiming strategies.