Color of Money Live (Feb 20)

Feb 20, 2020

Welcome to a weekly discussion about your money hosted by Michelle Singletary, nationally syndicated personal finance columnist for The Washington Post.

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So glad you could join me today. 

If you've got a Thursday Testimony send it my way.

Let's get started. 

Last year me and my wife froze our and our kids credit accounts. Last week we got a letter in the mail from a credit card company that said they couldn't open the account b/c we had a credit freeze in place. We didn't try to open the account. the credit freeze saved us from the hassle of someone opening a rogue credit card! It only took 10 min combined to do it all 3 credit agencies and it saved us so much more. needless to say the credit freeze will remain in place forever

So glad you made this move to protect yourself against identity thieves. But stay diligent about checking all your accounts. 

Read this: You’ll soon be able to freeze your credit for free — but that won’t be the end of identity theft

 

My husband and I met with a financial planner yesterday (yay for getting life in order!) and he recommended term life insurance which I know you support if financially feasible. My issue is how much coverage. Do you have a rule of thumb or online calculator you recommend? Also, any insurance carriers you like? Should it be the same or different company from our LTC insurance? Thanks for all you do!

Keep in mind that life insurance is intended to replace the income needed to take care of your dependents. So how much you will need depends on how much your dependents will need to live on should you die. 

I can't recommend a company but certainly start with firms you already have a relationship with. 

Here's an  articles I think will help. 

How Much Life Insurance Should You Carry?

And try this life insurance calculator at Bankrate.com 

 

Are investment companies, etc., still required to mail paper copies of 1099's? I'm getting email notifications of their availability, but no paper ones yet... Thanks Why are they offloading this information onto the user to print? Only the company benefits from email by not having to print and mail. It does nothing for me - - emails can be misdirected, hacked, etc. So can mail, but how many zillions of hard copy mailings are hacked vs online accounts?

You may just have gotten notification that the forms are available. I've received the notifications and hard copies. 

Hi Michelle, I have a young family member who grew up in a series of bad situations and is now a single parent. The family member lives on the other side of the country, so my parents and I only see them once a year or less. We’ve sent them money over the years to cover rent, car repairs, food, diapers and other basic needs. We are now at a point that we want to help this person get in stable ground. You’ve talked in the past about how you work with family who move in with you (meeting weekly, looking at all aspects of their finances, etc). I’d love to have her move in with either me or our parents, but it’s logistically difficult. What are other ways we can help this person turn things around from afar? I’ve already asked them to send me their budget, bills, debts, pay stubs, etc. But how do I do this effectively from far away. I don’t have any family members I trust to meet with her in my stead. Thank you! AJ, 35, female, Midwest

It's so wonderful that you and your parents are trying to assist this relative. If this person can't move across country, continue to do what you're doing. Call, Skype, etc. to stay and touch and go over the budget, spending habits, questions, etc. There are so many ways to virtually meet when you can't do it in person. 

And for any of you thinking of having an adult child, relative or friend move in so that they can save money or pay off debt read the following columns:

Thinking about welcoming adult children back into the nest? Consider these tips before deciding

Is there a freeloader living in your home? Set some ground rules.

So as of last quarter 2019, I've joined that club. I'm 64, single, plan to retire at the end of next year when I'm eligible for full SS, and am planning to move back to my hometown, where the cost of living is cheaper. I also have about $60,000 in my savings account. What should I be doing to prepare for retirement at this point?

You are definitely joining a growing club.

Read: The number of 401(k) and IRA millionaires continue to reach record levels

So, what should you be doing?

Even with $1 million you need to figure our your retirement budget. I would start practicing what it will be like living off just Social Security and what you plan to withdraw from your retirement account. 

Pretend you only have the S.S. money and retirement income. See how far the money goes so that you can figure out if you need to cut back on anything. 

Read: It’s still crucial to budget, even when your money meets your needs

If you don’t want to run out of money in retirement, follow this rule of thumb

Talking to my sister-in-law recently and found out she is planning to work until 70 or very close to that because she wants to be sure that the youngest kid has access to her fantastic (union negotiated) health insurance until he is 26. We are all upper middle class (the union is for lawyers in public service and their staff). I'd keep working until I was eligible to keep my federal employee health insurance even if I won a lottery (don't play so it won't happen, but you get the idea). Found out recently that a friend is going without because both COBRA and the ACA plans were too expensive after a job loss, despite getting a lot of professional work as a contractor. The whole idea is terrifying. I haven't had to look at COBRA payments in nearly two decades. Back then, I thought that $350 a month was outrageous and it wasn't a high deductible plan.

The health care crisis is just that. Even those of us with good plans are scared to death of losing the benefit. It's a crying shame! 

I am working on eliminating debt etc. but thanks to your advice I had a "life happens" fund ready when an upstairs neighbor's failure at plumbing flooded my condo. I was out of my home for five weeks. While I was unhappy, inconvenienced and sometimes scared (don't get me started on the foibles of insurance), I had enough money to relocate without waiting for the loss of use clause to kick in, which it eventually did. The awful memories of seeing my unit gutted as part of the repair process are fading but that awful time would have been so much worse without some cash dollars on hand. Thank you.

Thank you for this testimony. When life happens it's so good to have a life happens fund! 

And for those who aren't familiar with this, it's different than your emergency fund, which is for times when you've lost a job, etc. You need a fund that you can tap regularly when life happens such as a flooded condo or a major car repair. The life happens fund keeps you from draining the emergency fund, which you want to reserve for financial dire situations. 

No need to feel bad about taking money from the life happens fund because that's why it's there. It is the slush fund. Money comes out and when you get a chance put it back. It's like the emergency fund is the airbag in your car and the life happens fund is the seat beat.

They both work together to keep you financially safe. 

Hi Michelle - I'm hoping you might have some insight into this. I know that credit card companies can work with people on the interest rate charged, and I wanted to know if a public student loan servicer would also be willing to work with borrowers on lowering their interest rate. Is this something that happens? Some background - I consolidated four loans into two. Thanks!

If you are having trouble making your loan payments certainly contact the lender. Whether they can adjust the interest rate depends on the loan. No harm in asking. 

Hi Michelle and chatters! My family is considering downsizing so that we can move to a neighborhood we like and is closer to family and activities/parks/etc and also so we can pay off the mortgage faster. We have 1 toddler and are trying for another child, and expect to be in a 3bed, 1 ba home probably under 1200 sq ft (thats just whats within our target price range). Any tips from folks who have done this? I feel like this is the right move, but then I worry about as the kids age, parents age, clutter, and entertaining. Most of my friends are upsizing at this stage of life so its making me second-guess myself. Though I grew up in a house just a tad larger than our target home, and I feel like everything was fine. Anyway, just looking for some insight from anyone who has it!

Do what you can afford and make the space fit.

I grew up in a row house in Baltimore having to sleep in the same bed as my sister. And I lived to tell the story. And trust me, many of those folks upsizing are also upsizing their debt and financial stress!

I used TurboTax on my fed and DC taxes with direct deposit of refunds. The federal refund hit my bank quickly. I was about to inquire about the DC refund when it arrived in the form of a check with a notice that because of rampant fraud and identity theft, DC was returning to issuing refunds via check. Whatever, I guess.

This fraud stuff is a real problem. But glad you got your funds. 

My husband got laid off a year ago and I was stunned by how much COBRA would cost us to continue his coverage. Fortunately, I found a terrific healthcare broker who doesn't charge me (she works off commission I guess) who put together a really good plan for us that covers our needs, despite the $5700/pp deductible. Remember: if you don't make a lot of money from your job or following a layoff, you can qualify for a subsidy on the marketplace (Thank you, President Obama). It's worked out well for us, though I'm still hoping the hubs can get a job with the healthcare benefit included.

We recently nearly had a scare with my daughter. She's away on an internship. The nonprofit provided her with healthcare. She got very sick (collapsed lung). Then the bills started to come in -- thousands of dollars. She was so very worried. It's working out. Her primary health care coverage kicked it and she's still on our policy (She's just 24). So far just a few manageable co-pays.

But man were we terrified that her coverage wouldn't cover much at all. 

Great (and usefully concrete) analogy!!

I know right. I've never used that analogy before but will now. 

No question, but I loved last week's chatter's remark about a "February Feast," the thought of dedicating February to cleaning out her food supplies. I know it's akin to your "Financial Fast," but since I don't do that, I like the idea of dedicating February - a famine time in our (northern hemisphere's) not-so-distant past - to living off our stored supplies for winter. I've cleared at least five old packages of food from the freezer!

It was a great idea. I frequently challenge people doing my 21 Day Financial fast to "eat out their house," meaning eat up everything before going to the grocery store. And I mean everything until the cupboards are bare. 

I also got only an email from Vanguard this year, no hard copies in the mail. This was the first year this has happened and if this is a permanent change it was not announced or explained by the company. Not hard to download and print myself, obviously, but it would be nice to have things explained in advance.

Very true. 

Your poster illustrates one of the arguments for universal health insurance: A more flexible economy. People wouldn't have to work at jobs they don't like and maybe even don't need just to keep health insurance. People would be free to try new work, retire early and open a slot for someone else, move across the country and more if they didn't have to ask "What about my insurance?"

I totally agree. Our health insurance shouldn't be dependent on having a certain kind of job. 

To the person that posted about their friend not able to afford insurance, depending on your state, income and age, you may be able to get financial assistance. I live in MD, am a contractor, make about $55K and am 60. The state, through Medicaid pays a portion of the premium, and that amount goes up for every year I get older. (Deductible is ridiculously high, however)

Thanks for sharing this.

I **urge** the OP to suggest to their friend to look again at the ACA: there are significant cost-saving subsidies available. Health insurance pricing is now analogous to college tuition: the generic sticker-price may be irrelevant to the individual (but you have to know to apply for need-based aid!).

Yes, always double check.

Afternoon Michelle - (she/her, SC) - I am planning on trying for a baby in the next year (choice mom) and am thinking about all the financials I want to have in order before I get overly emotional in my decision making. I already know my insurance will cover 70% of most of the IUI/IVF and up to $15,000, so I'll need to have some money socked away for that as well as extra copays, deductibles, etc. What I'm currently debating is if it makes more sense to take out a short term disability policy for maternity leave or just focus on saving up and pull from savings. (No paid maternity leave and I won't have near enough leave for the entirety of it.) Thoughts?

If you can do both. Never a bad thing to save as much as you can when trying to or having a baby. 

It strikes me that setting a benchmark of $1 million for retirement is fine. But tracking the number of people who manage that seems a bit suspect. $1 million isn't the same year to year because of inflation. So, the number may be growing, but that threshold is lower in real dollars than it was.

Or, as I wrote, reporting on the fact that people can amass such a large sum in their workplace plan inspires -- or can.

I want folks to know it's possible, especially young adults. Discounting or including inflation, a $1million is a huge achievement for people with workplace retirement plans.  

 

I usually try to stay longer but got to finish up my Sunday column. If you've not been filing your tax returns or you owe and been ignoring correspondence from the IRS, you are doing to want to read this column. 

Take care and see you next week. 

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Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Wednesday and Sunday and is carried in more than 120 newspapers.

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