Thursday’s need-to-know money news


Today’s top story: Why you should love robo-advisors. Also in the news: 7 ways to trim your tax bill in retirement, how Roth IRA taxes work, and how to save money for the future when it’s uncertain.

Why You Should Love Robo-Advisors
Keeping costs low and advice honest.

Taxes in Retirement: 7 Ways to Trim Your Bill
Ideas that can reduce financial stress in retirement.

How Roth IRA Taxes Work
A good investment at tax time.

How to save for the future when it’s uncertain
Preparing for a variety of outcomes.





Q&A: Here’s a big mistake to avoid when planning your wedding

Dear Liz: Would you advise taking money out of your 401(k) for your wedding if you’re getting a lump sum of money within the same year and can pay the full amount back?

Answer: How about postponing the wedding until you can pay for it in cash?

That would be so much better than starting your life together “betting on the come” — in gambling parlance, counting on cards that haven’t yet been dealt into your hand. There are so many ways that can go wrong and only a few where it can go right.

The most obvious risk in borrowing from your 401(k) is that you will lose your job and won’t be able to pay back the money before the balance is deemed a withdrawal, incurring taxes and penalties. Plus, you can’t put the money back, so you’ve lost all the future tax-deferred compounding those savings could have earned.

You’re also setting a seriously bad precedent for your marriage when you borrow money for a luxury, which is what a wedding is. (You also might want to read the Emory University study that found the duration of a marriage was inversely proportional to how much was spent on the engagement ring and wedding. The more spent, in other words, the shorter the marriage.)

It’s easy to get in the habit of borrowing rather than making hard choices or having hard discussions. But a good marriage, and sound finances, requires plenty of both. Give yourselves the gift of a wedding you can afford, when you can afford it.

Q&A: Ask yourself these questions before using savings to pay off student debt

Dear Liz: I’m wondering whether I should use part of my emergency fund to pay off student loans. I currently have $15,000 in an emergency fund to cover three to six months of my living expenses and owe $18,000 in federal student loans. I’ve been feeling the itch to pay off a chunk of my student loans to reduce the years (and interest) I have to keep paying. I’d like to use $5,000 to $6,000 of my emergency fund to put toward the loan. For context, I’m already contributing 15% to my 401(k) and have no other debt.

Answer: First of all, well done. The fact that you have any emergency fund puts you ahead of the game, plus it’s great that you’re also saving for your retirement and avoiding credit card debt.

There are a few things to consider before using savings to pay down your loan. “Prepaying” a student loan is different from paying down credit cards. Reducing credit card debt typically frees up additional credit that you could use in an emergency. Paying down credit card debt also can help your credit scores by reducing your “credit utilization,” or the amount of your available revolving credit that you’re using. Extra money sent to a student loan lender, by contrast, can’t be clawed back if you should need it and doesn’t help your scores as much.

Federal student loan debt has other advantages. Interest rates tend to be low, and up to $2,500 of interest can be subtracted from your income even if you don’t itemize. That is a valuable “above the line” adjustment that can help you qualify for other tax breaks.

You shouldn’t hang on to debt just because of the tax savings, of course, since the value of the tax break usually is much less than the interest you pay. But most people have better things to do with their money than pay down low-rate, tax-deductible debt, especially if they have other types of debt, haven’t maxed out their retirement savings and don’t have an adequate emergency fund.

Which brings us back to your situation. You’ve checked all those other boxes. If your job situation is reasonably stable, then using a chunk of your savings to pay down debt can make sense — particularly if you have access to credit or other funds, such as help from friends or family, as a backup while you rebuild those savings.

Friday’s need-to-know money news

Today’s top story: 3 things that will change when you’re a homeowner. Also in the news: 3 times you can pay taxes with plastic and come out ahead, eight ways you can save money right now, and what happens if you default on a loan.

3 Things That Change When You’re a Homeowner
All you’ll think about is money.

3 Times You Can Pay Taxes With Plastic and Come Out Ahead
Build up your rewards.

Eight Ways You Can Save Money Right Now
Automate your savings.

What Happens if You Default on a Loan?
Don’t take it lightly.

Tuesday’s need-to-know money news

Today’s top story: How to resist online ads and keep your money. Also in the news: Avoiding a common student loan scam, a NerdWallet special report on home buyers, and why you should schedule an extra student loan payment on the day the interest is lowest.

How to Resist Online Ads and Keep Your Money
Fighting temptation.

She Fell for a Common Student Loan Scam. You Don’t Have To
Don’t get duped.

Recent Home Buyers Stretched, Future Hunters Optimistic
A NerdWallet special report.

Schedule an Extra Student Loan Payment on the Day the Interest Is Lowest
Make sure the payment is applied correctly.

3 money tasks you need to do right now

Most financial to-do lists focus on what you need to get done by Dec. 31, but there’s also a brief window early in the new year to save yourself some significant cash.

In my latest for the Associated Press, three tasks to consider doing now.

Tuesday’s need-to-know money news

Today’s top story: 9 housing and mortgage trends to watch for in 2019. Also in the news: Your easiest New Year’s resolution, a DNA test sends a family of 5 on a journey of a lifetime, and how often your credit score is updated.

9 Housing and Mortgage Trends to Watch for in 2019
What to expect next year.

Your Easiest New Year’s Resolution: Make Your Savings Grow Faster
This is a resolution you should keep.

DNA Test Sends Family of 5 on Journey Around the World
One family’s journey of a lifetime.

How Often Your Credit Score Is Updated
Timing is everything.

Tuesday’s need-to-know money news

Today’s top story: With money goals, multitasking pays off. Also in the news: Snagging hotel loyalty perks, what to know about high yield reward checking accounts, and how to not let debt ruin your holiday.

With Money Goals, Multitasking Pays Off
There needs to be more than just paying off debt.

Snag These Hotel Loyalty Perks, Even if You’re Disloyal
It all depends on the right card.

What to Know About High Yield Reward Checking Accounts
Some accounts offer interest as high as 5%.

Don’t Let Debt Ruin Your Holiday
Some people are still paying off last year’s gifts.

With money goals, multitasking pays off

Tackling money goals one at a time cost financial literacy expert Barbara O’Neill at least $1 million.

That’s how much O’Neill, a distinguished professor at Rutgers University, figures she lost by starting saving for retirement only after she had created an emergency fund, bought a car with cash and purchased a home.

“I tell students that eventually, 30 years later, I hit the million-dollar mark, but I could’ve had $2 million,” O’Neill says.

Too often, financial experts say, people want to attack their money goals one at a time: “As soon as I pay off my credit card debt, then I’ll start saving for a home,” or, “As soon as I pay off my student loan debt, then I’ll start saving for retirement.”

These folks don’t realize how costly the words “as soon as” can be. In my latest for the Associated Press, paying off debt is a worthy goal, but it shouldn’t come at the expense of other goals, particularly saving for retirement.