Ask Liz Weston

Get smart with your money

Q&A

Q&A: Social Security versus government pensions

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Dear Liz: I have a dear friend who after 48 years of marriage went through a horrible divorce. She worked for a school district that did not pay into Social Security but her ex was self-employed and did pay into the system. I advised her to apply for spousal benefits but she was told she was not entitled due to her pension. Is this right? Social Security is a federal program. What does it have to do with a state or county pension? I feel she is being cheated out of income she could desperately use.

Answer: It’s unfortunate that your friend is struggling. But she’d be worse off trying to live on a spousal benefit from Social Security than she is now.

People who get pensions from jobs that didn’t pay into Social Security may be subject to two provisions, the windfall elimination provision and the government pension offset. WEP can reduce but not eliminate any Social Security retirement benefit they earned from other jobs that paid into Social Security. Typically, the Social Security benefit at full retirement age won’t be reduced by more than half the pension amount.

GPO, by contrast, reduces a Social Security spousal or survivor benefit by two-thirds of the amount of the pension. That means GPO can entirely eliminate a Social Security benefit based on someone else’s work record. If your friend can’t qualify for a divorced spousal benefit, that means she’s already receiving more from her pension than she would get from Social Security.

Consider helping your friend look for other ways to make ends meet. Benefits Checkup, offered by the National Council on Aging, could help her find programs that could help pay for medical care, groceries, utilities and other necessities.

Q&A: Here’s a 2024 resolution: Stop using paper checks. Fraud is soaring

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Dear Liz: I had several checks stolen from the U.S. Postal Service. The thieves altered and cashed the checks. I monitor my bank accounts religiously and discovered the altered checks quickly. I immediately put holds on the checks and for the most part I have been reimbursed. One check, however, was written out to one bank for $4,339 and then cashed through another bank. The first bank told me they were pursuing the second bank for payment, and that when they get reimbursed, I’ll get reimbursed. I’ve been waiting since October 2022! Recently I received a letter from the first bank saying, in effect, that the other bank hasn’t responded so they consider the case closed. Basically, I’m out the money. This is obvious fraud and no one is taking it seriously.

Answer: Check fraud is soaring even as the use of checks has declined. Thieves take signed checks from mailboxes, sometimes using keys stolen from mail carriers, and “wash” them with common solvents such as nail polish remover. Once the checks dry, they change the amounts and payees and then cash the altered checks.

If you report the problem to your bank promptly — typically within 30 to 60 days of your statement date, depending on state law — then you should be made whole.

You can start by making a complaint to the Consumer Financial Protection Bureau online or by calling (855) 411-2372. The CFPB has a pretty good track record of getting companies to respond.

Also, please look into other payment methods. Electronic payments are much more secure as well as faster and easier to trace.

Q&A: What is financial infidelity? And what should you do about it?

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Dear Liz: My sister is married to a man who is considerably older. They’ve been married for eight years. He has cancer and the outlook isn’t good, but he refuses to discuss their financial status. As a result, she has no idea what’s going on. How can she force him to tell her their financial situation? They aren’t getting divorced, and every article I’ve read only addresses financial disclosure in divorce cases. I will probably be the one helping her figure this out after he passes away.

Answer: Refusing to discuss the details of shared finances is at best a form of financial infidelity. A recent NerdWallet survey conducted by the Harris Poll found that many Americans aren’t sharing financial secrets with loved ones, including their income, credit card debt and how much they’ve spent on a purchase.

But at worst, it can be a sign of abuse. If he’s controlling or abusive in other ways, her physical safety may be at risk. Encourage her to call the National Domestic Violence Hotline at (800) 799-7233, which can help her assess her situation and connect her to resources that can help.

Even if she doesn’t plan to divorce, a consultation with a divorce attorney could still help. The attorney could suggest ways to piece together some of the details of their financial life and advise her about state laws regarding shared responsibility for any debts.

Q&A: Should you close a credit card?

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Dear Liz: You recently wrote about how closing credit cards can hurt your credit scores. I’m wondering what impact closing a business credit card would have on my personal credit score.

For many years I have been working in the film industry under contracts with my personal services loan-out company. My company has two credit cards, including a travel rewards card with a hefty annual fee. This card has been useful to me because my job involved a lot of international travel. But as I’m now nearing retirement and traveling less, I’m considering closing that account. Will closing the card affect my personal credit scores?

Answer: The answer lies in your credit reports, which you can view for free at AnnualCreditReport.com. (Type that address into your browser rather than searching for it, because the top results are likely to be sites that want to charge you for credit monitoring. If you’re asked for a credit card, you’re on the wrong site.)

Typically, business cards don’t show up on personal credit reports and thus won’t affect your credit scores. But check to make sure.

Before you actually call to close the card, however, you should know that the company probably will want to keep your business. You may be offered a hefty wad of rewards points as an incentive to keep the account open. The points could be worth enough to offset some or even all of the annual fee.

Also, review all of the benefits the card offers. Many premium cards offer various credits to offset the fee, and not all of them are related to travel. Even if those aren’t enough to entice you to keep the card, you may want to use the credits before shuttering the account for good.

You also may have the option to swap your card for one with a lower annual fee, something known as a “product change,” so you’ll also want to investigate whether one of the issuer’s other cards might be a better fit.

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.