Tuesday’s need-to-know money news

Today’s top story: How to avoid bad money advice. Also in the news: A new episode of the Smart Money podcast on being creative with money, how to pay for summer fun, and 25% of Americans are delaying retirement due to inflation.

How to Avoid Bad Money Advice
We are surrounded by bad money advice, and it literally pays to be able to separate the useful from the ridiculous.

Smart Money Podcast: Get Creative About Money With Paco de Leon
This week’s episode is dedicated to a chat with Paco de Leon, author and creative.

How to Pay for Summer Fun: Financing Boats, RVs and More
Before deciding to finance a summer toy, consider your budget, what financing options make the most sense and any related costs.

25% of Americans are delaying retirement due to inflation, survey finds
Americans’ finances are being squeezed as inflation pushes up prices on things such as rent, groceries and gasoline.

Q&A: Reducing taxes in retirement

Dear Liz: It appears required minimum distributions will force me to take an additional $3,500 per month from my retirement funds starting in four years at age 72. This added taxable draw will greatly impact my income tax liabilities as I’m now fully retired. Are there any strategies at this time to reduce the hit? As my current income tax rate is 12% federal and 9% state, perhaps I should convert some of these funds to Roth IRAs?

Answer: Partial Roth conversions when your tax bracket is low can be an excellent way to reduce future mandatory withdrawals and save on taxes in the long run.

Let’s say you’re married filing jointly and have $60,000 in taxable income. The 12% federal tax bracket ends at $83,550, so you could convert more than $23,000 of your retirement funds without increasing your marginal federal tax rate. Conversions can affect other aspects of your taxes and finances, so consult a tax pro before proceeding.

Another way to potentially lower your tax bill may be to temporarily suspend your Social Security payments and take more from your retirement funds. Because of the peculiar way that Social Security is taxed, people often face a sharp rise and then fall in marginal tax rates when they have other income, something known as the “tax torpedo.” A tax pro should be able to determine if delaying or suspending Social Security payments could help you reduce the effects.

Wednesday’s need-to-know money news

Today’s top story: How to get travel insurance without paying for it out of pocket. Also in the news: Hotels tap into hot amenity amid surging gas prices, what rising prices could mean for your retirement, and why you should know which financial phase you’re in.

You Can Get Travel Insurance Without Paying for It Out-Of-Pocket
Holding certain travel cards can be a great way to easily acquire travel insurance. Just understand what’s covered.

Hotels Tap Into Hot Amenity Amid Surging Gas Prices

What Rising Prices Could Mean for Your Retirement Plans
Inflation means your retirement savings won’t go as far. Here’s how to pivot.

You Should Know Which ‘Financial Phase’ You’re In
Over your lifetime, you’ll earn, save, and spend in alignment with your values and goals.

Q&A: How to minimize taxes after you retire

Roth conversionsDear Liz: In preparing my 2021 tax returns, I was dismayed to find out that my first required minimum distributions from my retirement account have pushed me into the highest tax bracket ever in my life and caused 85% of my modest Social Security benefit to become taxable. Since I retired five years ago at full retirement age, I never had to pay taxes on my Social Security as it was the majority of my income. In my remaining years, I wonder if there is anything I can do to avoid paying about $8,000 to $9,000 a year in income taxes!? Even a partial conversion from a 401(k) to a Roth IRA would surely increase my Medicare Part B premium, another financial problem. I am not rich, just average middle class, and my financial goals are to carefully plan my necessary expenses so that I will not run out of funds. I do not need to leave an inheritance to my two adult children.

Answer: You’re probably correct that Roth conversions aren’t the answer now, although they may have been helpful earlier. You also may have been able to reduce the overall taxes you pay by waiting until age 70 to claim Social Security and taking distributions from your 401(k) instead.

You can discuss your situation with a tax pro to see if there are any other opportunities for reducing your taxes. Mostly, though, your situation is a good illustration of why it’s so important to get professional financial planning and tax advice well before you retire. Even if you think you’re well informed, you’re inexperienced — you’ve never retired before, whereas experienced financial planners and tax pros have guided many people through this phase of their lives.

Some of the decisions you make around retirement are irreversible and can have a profound effect on how much money you can spend. Ideally, you’d meet with a fee-only, fiduciary financial planner five to 10 years in advance of your retirement date and have several check-ins to make sure your financial plan is sound before you give notice.

Thursday’s need-to-know money news

Today’s top story: 3 tasks for new retirees that will pay off later. Also in the news: Credit card interest vs. buy now, pay later, forget the fed, pay off your credit card debt, and cities where it’s cheaper to buy than rent.

3 Tasks for New Retirees That Will Pay Off Later
Taking care of one more to-do list early on can set you up for a better retirement.

Credit Card Interest vs. Buy Now, Pay Later: Which Is Better for My Budget?
Key differences, like how rates are calculated and how much debt you can take on, are crucial to consider when weighing each financing option.

Forget the Fed, Pay Off Your Credit Card Debt
Credit card debt is always expensive, no matter what interest rate changes the Federal Reserve makes.

It’s Cheaper to Buy a House Than Rent in These Cities
Purchase prices and rents are skyrocketing, but there are areas where homeownership isn’t entirely out of reach.

3 tasks for new retirees that will pay off later

After a working lifetime of alarm clocks and meetings, you might be looking forward to a lot more unstructured time once you retire. But taking care of one more to-do list early on can set you up for a better retirement.

The following assumes you’ve already done some basic financial planning. Ideally, before you retire, you’ll create a budget, decide when to claim Social Security, settle on a sustainable withdrawal rate from your retirement funds and figure out how you’ll cover health care expenses. If any of those topics are still a mystery, consider talking to a fee-only financial advisor. If money’s tight, you may qualify for free or low cost consultations through the Foundation for Financial Planning, National Association of Personal Financial Advisors or the Association for Financial Counseling & Planning Education, among other organizations.

Even longtime do-it-yourselfers should consider getting expert retirement planning advice, says Catherine Azeles, a certified financial planner and investment consultant in Harrisburg, Pennsylvania. Although your days may be simpler without workplace demands, your finances often become more complex.

In my latest for the Associated Press, learn 3 tasks for new retirees that will pay off later.

The mental health risks of retiring

The late Pamela Hixon of Leipsic, Ohio, was eager to retire from her job running a hospice agency. Soon after she quit, however, Hixon spiraled into depression and anxiety. She sought help from counselors and her pastor, but it wasn’t enough. Six months after retiring, she took her own life.

“She lost purpose, she lost significance, she lost a sense of meaning in her life,” says her son Tony Hixon , a Findlay, Ohio-based wealth manager who wrote about the experience and how it transformed his financial planning practice in a book, “Retirement Stepping Stones: Find Meaning, Live with Purpose, and Leave a Legacy.”

Overall, retirees are a contented bunch and many report being happier in retirement than they were at the end of their careers. Older adults are less likely than younger people to experience major depression, says Brent Forester, president of the American Association for Geriatric Psychiatry.

In my latest for the Associated Press, how to manage the challenges of retirement and how to get help.

Tuesday’s need-to-know money news

Today’s top story: Crushing student loan debt prompts parents to consider postponing their retirement. Also in the news: Who should and shouldn’t consider using a personal loan to pay off holiday debt, the number one insurance claim filed by homeowners in the winter, and will employees be able to travel more this year?

Crushing student loan debt prompts parents to postpone their retirement
A federal program allows parents to borrow the full amount of a college education for their child, which could take decades to pay off.

Who should — and should not — consider using a personal loan to pay off holiday debt
How best to get a personal loan if it makes sense for you.

The number one insurance claims filed by homeowners in winter
If a winter weather disaster strikes would you know what to do?

Will you be able to travel more this year?
Working remotely from abroad is still a roll of the dice—should you do it, or just unplug?

Wednesday’s need-to-know money news

Today’s top story: More than half of travelers have the same New Year’s resolution. Also in the news: Saving on a new car from the factory, how to travel to Super Bowl LVI on a budget, and how to help your parents navigate health care in retirement.

More Than Half of Travelers Have the Same New Year’s Resolution
Remote work options will enable many people to travel in ways they couldn’t in the past.

Order a New Car From the Factory and Save
Waiting a few weeks or months gets you the vehicle you want, and perhaps a better price.

How to Travel to Super Bowl LVI on a Budget
If you splurged on tickets to the big game, here’s how to save on your flights and hotel.

How to Help Your Parents Navigate Health Care in Retirement
Try these tips to be the best advocate for your parents when and if they need your help.

Monday’s need-to-know money news

Today’s top story: How to help your parents navigate health care in retirement. Also in the news: What to buy (and skip) in January, borrow a 2022 money goal from a finance nerd, and would you relocate for $10K?

How to Help Your Parents Navigate Health Care in Retirement
Try these tips to be the best advocate for your parents when and if they need your help.

What to Buy (and Skip) in January 2022
New tips for the new year.

Need a 2022 Money Goal? Borrow One From a Finance Nerd
Set yourself up for success by setting reasonable goals, breaking them down into smaller steps and being persistent.

Would You Relocate for $10K? Should You?
Before you pack your bags, read the fine print, talk to your employer and assess your own deal-breakers.