Color of Money

Hi, Michelle. When I first started reading your column a few years ago, I had under $1,000 in the bank and was forced to put major unexpected expenses (like car repairs) on my credit card. I was often stressed about money. Now, thanks to your advice and finding a better-paying job, I have a an emergency fund that would cover about six months worth of expenses, a $2,000 Life Happens fund, and about $4,000 in a fund that will go towards my next car (which I hope to pay for in cash, a few years from now). I’m also able to give more to charity, including helping out a friend and her mom, who lost their jobs due to the COVID pandemic. Thank you so much for your wisdom and motivation! I sleep better at night knowing that even if I am laid off, I will be okay. Caroline

Dear Michelle, This is the writer from last week who talked about self-immolation. I am sorry that you felt that you had to post my message and the suicide hotline number just in case I was in danger. I am not in immediate despair. My message was not an emotional plea for help but an angry political statement about the rampant insanity leading us off a cliff. Things have not come to the point where I am destitute and living under the bridge. But if they shut down Social Security I will be, and I would rather torch myself than beg from the likes of Mitch McConnell. I disagree strongly with the person who wrote in after me saying, Relax, no politician would EVER be willing to suffer the consequences of shutting down Social Security. I would beg that person to open her eyes. We certainly hope she is right. But systems do break and countries do fall apart. I just caution that all of us must fight for our basic rights. And if I have nothing, nothing, nothing left, well, I'm going to make a statement on my way out. If that's my last little bit of power, I'll seize it. I just wanted to reassure you and vent some more. Also, I so highly value your work.

Michelle, My long-time house cleaner has been with me for 11 years. She cleans our house every other week and has watched our kids grow up. We care about her very much. She has a full-time job cleaning at a small hospital, but she barely makes ends meet. Recently she had her purse stolen, and unfortunately she did not know that she should not carry her social security card around with her. So the thieves had her SS number as well as her drivers license number. With this info they were able to empty out her bank accounts- her stimulus check that she was saving along with her small amount of savings- $3500. To her it is her life savings. She went to the bank, but according to them since they used her SS number and had her DL number, there's nothing they can do. She also filed a police report, but they said there is almost no chance of getting her money back. She obviously can't afford a lawyer, and that would cost more than the money she lost. Does she have any other alternatives. I feel so badly for her! I thought our money was insured if it was in the bank.

I refinanced my mortgage earlier this year. I just started basically paying toward principle so that my total mortgage payment is what it was before the refinance. I have a mortgage amortization spreadsheet that I modified to calculate the total amount of extra payments and the amount of interest I'm savings. Holy cow - in just 3 extra payments, I'm saving more in interest than the extra payments I've saved. Logically, I knew making extra payments made sense, but seeing it calculated out just hammers it home!

Last week I received notice that my application for the TEPSLF was approved! All my student loans were forgiven! This is such a huge weight of my shoulders. Now my husband and my only debt is the mortgage. That's it! Cars are paid off (saving for when we have to replace), no credit card debt, just the mortgage! I know there are mixed feelings about loan forgiveness, but I made 10 years of on-time payments in an Income Based Repayment plan (in which my monthly payment was determined by my income) and after 10 years, I actually owed $15,000 more than when I started. This system is crazy. Anytime I got a promotion or a raise, the income was 100% eaten up by an increase loan payment. The forgiveness application process took about 9 months for me, from my first PSLF application (I had to apply multiple times and was denied at least 3 times) to actually getting the loans forgiven. I actually cried at my computer reading the message. I'm thinking of printing and framing it. Sometimes I wish I hadn't gone to grad school and taken out the loans, but it is very hard to break into my field without the advanced degree. I also definitely did not understand, as a 22 year old, what I was getting into. It was too easy to just sign the papers and get the loans. In any case, I am now STUDENT LOAN FREE!!!!!!

with this awful forced loan through their FICA tax deferral. I am fortunate enough to be above the income limit so I won't have to deal with it. Please know that your fellows are thinking about you. We know you can deal with this unnecessary financial complication - putting aside the money and drawing it down as the double withholding happens next year. But you shouldn't have to.

Dear Michelle, I am in despair over the payroll tax deferral nonsense. My husband and I are both feds, so we're being forced into this idiocy with no way to opt out. I can't even pay back the "loan" in a lump sum, but must suffer through it being pulled out of our 2021 paychecks for four months. I don't know how it's going to affect my tax filing or my mortgage refinance. I have written to my representatives begging them to stop it, and it looks like they're not going to succeed. Maybe this is a Carolyn Hax question more, because having more trouble dealing with the emotional/anger part of this situation rather than the financial. But can you perhaps do a column on the financial part of this? Thank you so much for your dedication to covering all of the new financial curveballs we've been thrown this year.

It's not just a loan. It's a bribe. Orange Man is saying "If you elect me I will make the cut permanent." Of course, he's not saying that it would wreck Social Security, which is a long-standing Repub dream.

Single female homeowner, 61 years old. Just laid off in August after working at my association for 30 years. Am I angry--yes! But, luckily my severance will keep me going until March of next year and my house will be paid off in December--a full 12 years early on my 30 year mortgage. So instead of worrying about a $1400 monthly payment, I just need to have enough for my property taxes and insurance which will come to a little under $600 a month. If there was ever a testimonial for paying down your mortgage -- I'm it!

Hi Michelle, I love your columns and this chat--thanks so much for such useful information. Here's my question. My father-in-law died in 2019 with many more debts than assets (including years of unfiled tax returns). We cleaned up the various messes and filed the 2019 one in February 2020. We received a notice from the IRS in March that they needed another copy of his estate paperwork, which we faxed in immediately (March 26). I know there's a tremendous backlog there but how long should we wait for a response? This is the only thing holding up closing his estate. BTW, we also got a stimulus $1200 for him, direct deposited, so wrote a check back to the IRS which was just deposited----so I do know they're getting to things.

I have heard that there are some colleges who give preferred admissions to students who can pay full price. Is that true?! I'll feel awful if I can't give my kid every advantage, but dang that's a LOT of cash!

While I agree that the Executive Order makes no sense at all in regards to what it was supposed to do: stimulate the economy, I don't understand the despair over it. As you say, set aside the extra money received this year, to use in the first four months next year when the amounts are deducted from your paycheck. The people who will be in despair, are those who just don't pay attention, and don't know that the extra money this year needs to be paid back. And, the people who do not have the self constraint to not spend it now, believing (wrongly) in Trump's promise that it will be forgiven. But, if you are savvy enough to be worried about it now, you are savvy enough to take steps to manage it.

Thanks for the answer, Michelle---we'll just wait. One more thing that I know you've discussed in the past but I want to reinforce: in your death book, PLEASE make sure you sign up for an IRS.gov account so your family/executor can easily gain access to your prior tax records. This was the only thing that saved us.

But non-citizens in Austria are getting checks... Attaboy Sec. Mnuchin.

Fed here - as the chat was going on I received an email from my payroll office explaining the OASDI withholding deferral. I had thought that I was just barely above the cut-off and didn't have to worry about it, but the email clarified that it's based on my *taxable* wages, which are just under the cut-off. Sigh. I think I can adjust my HSA withholding to get my taxable wages just above the cut-off, but I need to run the numbers. (I'm thinking that a lump sum HSA catch-up at the end of the year will mess up just one paycheck instead of all of them.) Just wanted to share because I had missed that detail the first time I read about this!

Hello Michelle, We have maxxed out our IRAs, 401K, and HSA. We are lucky to have more to save. Our investment advisor has recommended we use permanent life insurance as an investment that can later (we are 50 & 52) be used for tax free retirement income. She says this will be very useful in a down-market year so that we can take income from the policy instead of our investments and avoid confirming the loss and reducing the ability of those investments to recover (by reducing the balance that could grow when the market recovers). But using insurance this way is very complicated, and not being an insurance agent myself, I'm afraid I'll never understand all the details. Should I take her advice? Or is there a better way to manage our savings? I'm struggling to find good, smart, and impartial advice on this rare problem.

As a Fed who automatically promotes *during* the period where the SS witholdings aren't being made, I'm trying to figure out what kind of a mess I'm going to have come tax-time. You KNOW that DFAS is going to withold based on our base pay, and not account for the fact that we were at different pay rates during the mandatory stopped-witholding period. It's going to be a nightmare figuring out what my actual tax rate is going to be and how much I'm going to owe (I carefully tune my witholdings to ensure I write a *very small* check to the IRS come tax-season every year). So much frustration for such a stupid policy move.

There's a good chance that she talked to a teller at the bank who didn't take a house cleaner (likely an immigrant with limited language skills) seriously. The poster should start by going to the bank with her housekeeper and talking to the manager together with a copy of the police report. Make clear that "There is nothing we can do" will get escalated to higher authority.

Yeah, that's a sweet sentiment, but one side lives in a fact-based world that sees responsible government and public service as a benefit for all of us, and the other lives in a death cult led by a deranged fascist. Not much middle ground there.

Hi Michelle, I work at a university, and as you have likely heard, universities are suffering substantial financial losses during the pandemic. For this reason my employer announced that as of October they will be temporarily stopping both the retirement match and the retirement base contribution that they had been providing. The total amount was equal to about 10% of my salary, and I cannot make up the difference. I have already slightly increased my 403b contribution (and will probably be able to increase it a bit more), and begun contributing a very small amount to a Roth IRA that I have. I am trying to not stress about this, but I am 45 and given the economic realities and governance our country is currently experiencing, I am afraid that a) Social Security will not be there when I need it, b) health care costs will just keep increasing, c) I will have to work until I keel over. There just isn't any way that I could tighten my belt and pinch pennies to make up that that entire 10%, so do you have any words of wisdom? Thank you!

Hi Michelle, Do you have any suggestions on how to prepare financially for the inevitable tax increases that will be imposed if Biden wins and control of the senate switches? Particularly do you know whether the deduction for state and local taxes will be restored to offset the much higher tax rates?

With the understanding that I can't know what the original poster is being sold, I can offer a little personal experience. In our 30's, we knew we needed substantial life insurance with two small children. Someone we knew and trusted sold us a whole life policy. Without any argument as to whether this was a good or bad idea, what sold me on it at the time was the expectation that if we paid the premium for about 20 years, the policies would be fully paid up and we'd have a nice nest egg for retirement, obviously presuming no one would have collected on a policy. Flash forward, we had some down years where we had to pay the premiums with policy loans, so they're not fully paid up. However, the cash value is pretty decent and we do have a plan going forward. It's just not quite what I had planned. Still, with the chance to do it over, I imagine I'd have done it differently.

I read wise advice once that you should never invest in something you don't understand. If you can't explain it to someone, you don't understand it, and should stay away from it.

Here's an NBC article on knowing your rights and bank account fraud.

The posts about paying mortgage off early and layoffs reminds me of advice that I rarely see given. Take out a loan for the longest term, usually 30 years. While the interest is higher, the monthly payment will be much less. Pay extra on principal each month, as if you had taken the shorter term. That way, when you lose your job, you are only obligated to pay the lower amount. I did this, and while I luckily never did lose my job, my mortgage was paid off years early, and I paid only about $1000 more over the life of the loan for that security of not losing my house.

So far it sounds like negotiations are going great to avoid on October 1st through sometime in December. All feds, please note that this is no guarantee that there won't be one in December. None at all. Please plan accordingly.

Dear Michelle, I have a retirement account from a previous job (less that $5K in it) that is invested in a Target Retirement Date Fund 2040 with one of the major investment companies. I am not adding to the account and based on my career trajectory, I will probably not be able to. Should I let the funds just sit there and continue to earn some interest/income over the next two decades or should I roll it over into an IRA or another fund to which I might be able to add principle to in the future (not something I can do immediately)? I know from reading you that if I do a rollover, it should be done directly by the company/bank so I don't get the 10% early withdraw penalty. Thanks for all your great advice. Nicholas

Does each child need a separate 529 account? We just welcomed our 2nd and set up a new UTMA, but not sure if we should do another 529. I understand you can transfer that account between people, but our kids are 3 years apart so they'll likely be in college at the same time. Also, besides the UTMA and college savings, we have one savings account simply designated as "kids". Any gifts we receive go into that savings account, and there's a monthly auto transfer from that to the 529. Are there other accounts do we need to set them up for later in life. Thank you!

I started a 529 for my grandson when he was born 3 years ago. He will have a baby brother this year and I am not sure how to continue saving for them both. I am (hopefully) two years away from retirement. Our two children went to college on loans and scholarships. We were only able to cash flow some help for both kids, but not a lot. My husband is retired. The other set of grandparents do not contribute to this or any 529. Our house and cars are paid for though we may get a newer used car before my retirement date. What are your thoughts on this?

This is hogwash - and the person who said 'go with her to the bank' is right. This is where you use your privilege. How dare they treat her this way. You might want to make complaints to oversight bodies too.

A trillion dollar tax cut for billionaires and the poster is worried the Democrats will hurt their finances?

Many law schools have free or low-cost clinics where people can get advice about housing and consumer issues. That might be a place to start.