Friday’s need-to-know money news

Today’s top story: When life blows up your well-laid plans. Also in the news: How to shop Black Friday deals online, 5 things to consider when shopping for index funds, and how much you should have in your 401(k), based on your age.

When Life Blows Up Your Well-Laid Plans
A sudden change in your financial security can trigger a wealth of reactions, including grief and disorientation.

How to Shop Black Friday Deals Online
Smart Black Friday shopping begins with planning.

5 Things to Consider When Shopping for Index Funds
Index funds are a set-it-and-forget-it investment perfect for beginners, but it helps to know what to look for.

How Much You Should Have in Your 401(k), Based on Your Age?
The right amount at every stage.

Thursday’s need-to-know money news

Today’s top story: Sustainable investing could get a lot harder. Also in the news: Why you should file the FAFSA ASAP, why savings accounts and CDs are still worth it despite low rates, and how to find your lost 401(k).

Sustainable Investing Could Get a Lot Harder
The Labor Department wants to keep socially responsible investments out of 401(k)s and private pensions.

The FAFSA Just Opened: Why You Should Apply Now
File the FAFSA early to get a better shot at more free money and more time to appeal if you need to.

Savings Accounts and CDs Are Still Worth It Despite Low Rates
Rates will rise again.

How to Find Your Lost 401(k)
Don’t leave hard-earned money behind.

Monday’s need-to-know money news

Today’s top story: 6 credit card scams and how to avoid them. Also in the news: A new episode of the SmartMoney podcast on COVID impulse spending and building credit while paying off debt, how Black Friday shopping could look very different this year, and making a plan to repay your borrowed 401(k) money.

6 Credit Card Scams and How to Avoid Them
Crooks don’t have to steal your card — just your card information. Keep your money and your identity safe.

Smart Money Podcast: COVID Impulse Spending, and Building Credit While Paying Debt
Finding the right payoff method for your debt.

Black Friday Shopping Could Look Very Different This Year
Lining up for doorbusters could be a thing of the past.

Make a Plan to Repay Your Borrowed 401(k) Money
Start thinking of a payoff strategy.

Wednesday’s need-to-know money news

Today’s top story: Which airline has the most valuable elite status program. Also in the news: A look at summer homebuying, 25 tips for buying your first home, and how to automatically transfer your 401(k) money when you change jobs.

Which Airline Has the Most Valuable Elite Status Program?
The best perks and how to earn them.

Summer Homebuying: Tips for Pricey Homes and Pandemic Concerns
Know your market.

25 Tips for Buying Your First Home
How to avoid a money pit.

How to Automatically Transfer Your 401(k) Money When You Change Jobs
Introducing auto portability.

Wednesday’s need-to-know money news

Today’s top story: Your 401(k) match may be in jeopardy. Here’s what you should do. Also in the news: What happens to your travel rewards if your airline goes bankrupt, how to upgrade your old car with new tech, and why your student loan Coronavirus forbearance is messing up your credit report.

Your 401(k) match may be in jeopardy. Here’s what you should do
Steps to take right now.

Airlines are on the brink of bankruptcy — what happens to your voucher, travel miles and airline credit card if they go belly up?
No guarantee of a refund,

Upgrade Your Old Car With New-Car Tech
You can get rid of those 8-track tapes.

Why Your Student Loan Coronavirus Forbearance Is Messing Up Your Credit Report
Scores are dropping as much as 50 points.

Q&A: What to do if an employer messes up your 401(k) coronavirus hardship withdrawal

Dear Liz: I used the Coronavirus Aid, Relief, and Economic Security (CARES) Act to cash out my 401(k). My ex-employer waived the 10% penalty but withheld 20% for federal taxes. It seems unconscionable to keep $20,000 of my money for at least eight months instead of sending it to me. The law states I have three years to pay the taxes and I need that hard-earned money now. Is there anything I can do to make my former employer release my money?

Answer: Please contact your former employer immediately. It sounds like what you got was a regular distribution, which can be penalized as well as taxed and which can’t be paid back. Your employer can’t waive an IRS penalty — it either applies to the distribution by law or it doesn’t — and the 20% withholding indicates this was not a coronavirus hardship withdrawal, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

Coronavirus hardship withdrawals allow qualified people to withdraw as much as $100,000 of their balances from 401(k)s and IRAs, but these withdrawals aren’t available to everyone. You must have been affected physically or financially by the pandemic.

Plus, if you want to take the distribution from a 401(k), check if your employer is offering the option. A majority of employers now offer coronavirus hardship withdrawals, according to a Willis Towers Watson survey, but some are opting not to do so.

If you qualified for a coronavirus hardship withdrawal from a 401(k) plan offering that option, the distribution should not have been subject to withholding.

You would owe income taxes but not the usual 10% federal early withdrawal penalty, and you would have three years to pay the income taxes on the withdrawal. You also would have the option to pay the money back within three years and then amend your tax returns to get the taxes you paid refunded.

If your former employer did not offer coronavirus hardship withdrawals but you otherwise qualified, you had the option of rolling your 401(k) money into an IRA and then taking a coronavirus hardship withdrawal from the IRA. (You can typically roll money out of only a former employer’s plan. If you’re still working for that employer, such rollovers usually aren’t allowed.)

If your employer won’t release the withheld money, you still have a way to limit the damage. You can put the rest of what you received into an IRA, as long as you do so within 60 days, and then take a coronavirus hardship withdrawal from the IRA.

Unless you can come up with the $20,000 that was withheld, however, you’ll have to pay taxes and penalties on that $20,000 and you won’t be able to pay that money back. That’s unfortunate, but it’s better than having the entire $100,000 penalized and not having the option to pay any of it back.

Q&A: Coronavirus aid law lets you more easily tap retirement savings. That doesn’t mean you should

Dear Liz: You recently mentioned that a person can withdraw money from their 401(k) and spread the taxes over three years. If 401(k) is paid back, they can amend their tax returns to get those taxes refunded. Because of some major home repairs, I asked our accountant about this before we proceeded. He said that he hasn’t read anything official about the above. Would you please provide where you obtained your information, so we can decide if that’s an avenue we can use?

Answer: It’s possible you had this conversation before March 27, when the Coronavirus Aid, Relief, and Economic Security (CARES) Act became law.

Otherwise, it’s kind of hard to imagine an accountant anywhere in the U.S. who hasn’t heard of the emergency relief package that created the stimulus checks being sent to most Americans, as well as the Paycheck Protection Program’s forgivable loans for businesses and the new coronavirus hardship withdrawal rules for 401(k)s and IRAs.

Those rules allow people who have been affected financially or physically by COVID-19, the disease caused by the novel coronavirus, to get emergency access to their retirement funds if their employers allow it.

Even if you do have access to such a withdrawal, you should consider other avenues first.

The income taxes on retirement plan withdrawals can be substantial, even when spread over three years. Perhaps more importantly, you probably would lose out on future tax-deferred returns that money could have earned because few people who make such withdrawals will be able to pay the money back.

A home equity loan or line of credit is typically a much better option for home repairs, if you can arrange it.

Tuesday’s need-to-know money news

Today’s top story: Cashing out 401(k) due to COVID-19? Consider these things first. Also in the news: How one man paid off almost $37,000 of debt, what you need to know about COVID-19 and life insurance, and removing late payments from your credit report with a goodwill letter.

Cashing Out a 401(k) Due to COVID-19? Consider These Things First
Don’t make a rash decision.

How I Ditched Debt: Trimming Small Expenses to Achieve a Big Goal
How one man paid off almost $37,000 of debt.

Life insurance and COVID-19: What you need to know
Taking a look at the exceptions.

Remove Late Payments From Your Credit Report With a Goodwill Letter
It never hurts to ask.

Thursday’s need-to-know money news

Today’s top story: How to get traction paying off your credit cards in 2020. Also in the news: 8 moves to consider for IRAs and 401(k)s under the new Secure Act, using points and miles for wedding travel, and the 5 best states for retirees in 2020.

How to Get Traction on Paying Off Your Credit Cards in 2020
Finding the right strategy for your situation.

8 Moves to Consider for IRAs, 401(k)s Under New Secure Act
Looking at the major changes to retirement savings plans.

Ask a Points Nerd: Should I Use Points and Miles to Book Wedding Travel?
To pay or not to pay?

Here are the 5 best states for retirees in 2020
Which one sounds good to you?

Q&A: When savings are meager, it might be time to unretire

Dear Liz: I’m 67, retired and have $83,000 in a 401(k) that I left with my employer. Should I see a certified financial planner? Based on my current income, I either need a job, or I have to start pulling $10,000 from my 401(k) each year, which will clean out my account in eight years.

Answer: You definitely need a job.

You could burn through your nest egg even faster than you expect if the stock market drops or an unexpected expense crops up. And retirement is loaded with surprise expenses, from healthcare bills to home repairs to long-term care. Even in a best-case scenario, you’re likely to run short of money long before you run out of breath.

A planner could have warned you about this and suggested that a few more years of working, saving and delaying Social Security could have given you a far more comfortable retirement.

It may not be too late.

If you can return to work full-time, you could suspend your Social Security benefit. That would allow it to grow by 8% each year until you turn 70. If you’re married and the higher earner, that also would increase the survivor benefit that one of you will have to live on once the other dies.

Even if you can’t work full time, a part-time job could ease the drain on your 401(k). If you’re a homeowner, you also could consider a reverse mortgage that would allow you to turn your home equity into a lifetime stream of monthly checks, a line of credit or a lump sum.

A fee-only advisor — one who is paid only by clients’ fees, rather than by commission — could help you review your options. The Garrett Planning Network offers referrals to fee-only planners who charge by the hour.

Another option for people on a budget: accredited financial counselors or financial fitness coaches. These folks aren’t certified financial planners, but they can help with budgeting, debt management and retirement planning. You can get referrals from the Assn. for Financial Counseling & Planning Education.