Thanks to rising inflation, Series I savings bonds have enjoyed a boom in popularity. I bonds issued from May 2022 through October 2022 earned a composite rate of 9.62% for the first six months, which prompted investors to stash more than $1 billion in I bonds in October alone. I bonds issued from November 2023 through April 2024 pay a composite interest rate of 5.27% during the first six months; a significant drop but still an attractive return for a no-risk investment.

Although savings bonds can earn interest for up to 30 years, you may want to redeem them earlier. You can cash in I bonds, as well as EE bonds (which pay a fixed 2.5% rate for bonds issued from May through October 2023), after you’ve owned them for a year. But if you redeem bonds within five years, you’ll lose the last three months of interest.

Here are the steps you need to take if you’re ready to cash in your savings bonds.

In the United States, your credit score is one of the most important evaluations of your financial health. A good credit score can open doors for you, while a bad one can cause you to be denied loans, a place to live or even a job. Fortunately, there are several steps you can take to improve your credit score and keep it on track. From consistently making on-time payments to keeping your credit utilization ratio below 30%, we've researched the 10 most important steps you can take to get your credit score back in good standing.

The lowest credit score you can have is 300 while the highest is 850. Between these two scores, there are multiple credit score ranges. The following ranges are how two of the major consumer credit reporting bureaus (Experian and Equifax) classify credit scores:
Poor (300-579); Fair (580-669); Good (670-739); Very Good (740-799); Excellent (800-850)

While there is a specific tier that is specifically referred to as “good,” any score in the 700s and above is typically considered good credit. Having credit in this range will help you qualify for better terms on loans, lower interest rates and other perks such as access to the best rewards credit cards.

How to improve your credit score

Whether you're looking to figure out how to repair bad credit or just a few ways to improve your credit score, there are several steps you can take to make sure your credit score is in the best shape possible. Many of these steps are not just one-time actions but habits you'll need to consistently practice and commit to. With some patience and dedication, the following 10 steps will have you well on your way to attaining a higher credit score.

1. Consistently make on-time payments

Making payments on time is one of the most important steps toward improving your credit score. Credit bureaus track your payment history, so if you consistently pay your bills late or miss them altogether, it will likely result in negative marks on your credit report. Even one reported late payment could have a major impact for up to seven years. To make sure you never miss one, you can set up automatic payments for all of your accounts. This will help ensure that payments are made on time, and you don't have to worry about forgetting or getting hit with late fees. Additionally, establishing a budget and tracking your spending will help you stay on top of your finances, ensuring you always have money available for your payments.

2. Keep your credit utilization ratio low

One of the other major factors that impact your credit score is your credit utilization ratio. This ratio measures the amount of debt you owe compared to the total amount available to you. Generally speaking, it's best to keep your credit utilization ratio below 30%, as this has been shown to have the most positive effect on your credit score. To find your credit utilization ratio, add up all of your outstanding credit card balances and divide that number by the sum of all your credit limits. If this number is above 30%, consider paying off some of the debt to reduce it down to that threshold.

3. Check your credit report for errors

Your credit report is a document containing information about your credit history, such as all of the debts you currently owe and whether or not you’ve made your payments on time. It’s important to check your credit report for errors regularly, as inaccuracies can have an adverse effect on your credit score. For example, if there are any delinquent accounts or late payments that don’t belong to you, getting them removed could drastically improve your score.

There are three major credit bureaus (Equifax, Experian and TransUnion) that track and report your credit history. As put forth by federal law, you have the right to a free copy of your credit report once every 12 months from each bureau. This can be done by visiting AnnualCreditReport.com, calling 1-877-322-8228 or completing the Annual Credit Report request form and mailing it to:
Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281

If you do find any errors, you can dispute them with the credit bureau that reported the mistake. Each of the three bureaus allows you to dispute the information online, over the phone or by mail. Be sure to include any supporting documentation that proves the error is incorrect. For further guidance, read our guide on how to read your credit report.

4. Pay down your outstanding balances

Paying down your debt is often a quick way to improve your credit score. As you pay off accounts in full, the outstanding balance will be reported to the credit bureaus as $0. This will result in a reduction of your credit utilization ratio and help you achieve a higher score. It will also help you avoid any late payments that could lower your score. Focusing first on paying off the highest-interest accounts is usually the best approach, as this will save you the most money in interest over time. If you have a lot of debt, it may be difficult to quickly pay off all of the accounts in full. In this case, you may want to look into a debt consolidation loan or a debt management plan in order to reduce your interest rates and simplify the process.

5. Avoid frequent credit inquiries

Applying for new lines of credit or loans always results in the lender checking your credit history. This is known as a “hard inquiry,” and too many of these can have a negative effect on your score. It is best to avoid frequent credit inquiries, as this could signal to the credit card company or lender that you're desperate for credit. But compared to other factors, hard inquiries have a relatively small impact on your score and don't stay on your credit report for more than two years.

6. Keep paying your other bills on time

Aside from credit cards, other types of accounts are also reported to the credit bureaus. This includes student loans, mortgages, auto loans, utilities and even medical bills. By consistently making your payments on time for all these accounts, you'll be able to build a strong history that shows lenders you're a responsible borrower.

7. Don't close old accounts

As previously mentioned, one factor affecting your credit score is the average age of your accounts. Generally speaking, it's a good idea to keep older accounts open, as this will help increase the average age of your accounts and credit mix. That being said, it's important to keep an eye on any old accounts that you're no longer using, as they may be costing you money in annual fees. If that's the case and you already have a high average credit age, closing the account may be best to save money.

Other ways to improve your credit score

Build up your credit file with a secured credit card, credit builder loan or a rewards credit card

If you're just starting out and don't have much of a credit history, you can establish one by taking out a secured credit card, applying for a credit builder loan or signing up for a rewards credit card. These products are designed to help you build a credit history with minimal risk and offer secure ways for beginners to start establishing their credit scores.

A secured credit card is a type of credit card that requires you to make a deposit upfront to act as collateral against future payments. Your credit limit will be equal to the amount of your deposit - if you put down $500, that will be your credit limit. By consistently making your payments on time, you build a positive credit history and improve your score.

With a credit card builder loan, borrowers make monthly payments (usually small amounts) similar to a standard loan, but instead of receiving the funds upfront, the money is held in an account until the loan is paid off. Each successful monthly payment is reported to the credit bureaus and helps build your credit score.

Rewards credit cards are a type of card that provides rewards, such as cashback or points, for each purchase you make with the card. Although these types of cards are usually reserved for those with good-to-excellent credit, some cards are designed for those with fair or limited credit history. Using these cards responsibly can help you build a good credit score while earning rewards.

Monitor your credit score

Finally, it's important to monitor your credit score on a regular basis. While you can obtain a free copy of your credit report from each of the three major bureaus once per year, you can also use online monitoring tools to receive regular updates. This will help you stay on top of any changes to your score and take action if necessary. It will also allow you to identify any suspicious activity on your account that may be the result of identity theft.

Catch up on your past-due credit accounts

If you have any past-due accounts, it's best to catch up on payments as soon as possible. Many lenders offer payment plans and other assistance programs, so it's worth taking the time to research your options. If you’re able to make a payment agreement and stick to it, your credit score should start to improve.

In some cases, you may even be able to negotiate with the creditor in order to have the account removed from your credit report. This can be done by writing a goodwill letter, explaining the circumstances that caused the late payment and asking if they would be willing to delete it from your report in exchange for payment.

Does paying off collections improve your credit score?

Unfortunately, paying off a collection account won't immediately improve your credit score. Even after paying off a collection account, it will likely remain on your credit report for up to seven years. The only exception is sending a goodwill request after having paid off the debt — in which case, the collection account can be removed if the creditor agrees. That said, paying off collections does result in the account being updated from unpaid to “paid in full." This can make a difference for lenders that look beyond just the credit score and into the details of your credit report. It's almost always best to pay off any debt you have in collections, as the longer it goes unpaid, the worse it will look on your credit report.

How long does it take to improve your credit score?

This depends on several factors, including the type of history on your credit report and the changes you make to improve it. Generally speaking, your credit score can take anywhere from a few months to a few years to improve. Even though credit scores are typically updated at least once a month, the unique history and factors related to your report will determine how long it will take for your score to improve.

For example, if you have several missed payments, collections accounts and a relatively short average age of accounts, it could take longer to repair the damage. If the only thing negatively impacting your score is a single late payment or a high utilization rate, improving your score would likely take significantly less time. Be patient and consistent in your efforts, as the results may not happen overnight.

Does your credit score increase when you pay off a loan?

Generally speaking, paying off a loan will result in an increasing credit score over time. This is because it will show that you are a responsible borrower who can be trusted to pay back loans. It will also reduce your overall debt-to-income ratio, which can help improve your credit score.

Summary of Money's how to improve your credit score

Whether your credit score is low or it's decent, and you’re looking to improve it further, there are a number of strategies that can help. Some of the most impactful ways to increase your credit score include making on-time payments for all of your accounts, maintaining a credit utilization ratio below 30%, disputing any errors on your report, avoiding opening too many new accounts, regularly monitoring your credit score and avoiding frequent credit inquiries. The most important thing is to stay consistent and persistent with your efforts, as it may take some time for the changes you make to have an impact.

Many subscription offers are tempting, especially if they offer a free trial period before you commit. But what if you’re getting a magazine subscription you never ordered? How do you stop it?

The FTC is hearing from folks who are being charged for subscriptions they don’t want and never ordered. When contacted, some magazines say that people must speak to a different company. People also report getting error messages when they try to cancel online.

Thanks to rising inflation, Series I savings bonds have enjoyed a boom in popularity. I bonds issued from May 2022 through October 2022 earned a composite rate of 9.62% for the first six months, which prompted investors to stash more than $1 billion in I bonds in October alone. I bonds issued from November 2023 through April 2024 pay a composite interest rate of 5.27% during the first six months - a significant drop but still an attractive return for a no-risk investment.

Although savings bonds can earn interest for up to 30 years, you may want to redeem them earlier. You can cash in I bonds, as well as EE bonds (which pay a fixed 2.5% rate for bonds issued from May through October 2023), after you’ve owned them for a year. But if you redeem bonds within five years, you’ll lose the last three months of interest.

Determine the value of your bonds.

GRAND RAPIDS, Mich. — A recent study from the Better Business Bureau (BBB) found companies that promise to reduce a person’s debt or improve their credit often fail those consumers.

“These companies are supposed to be following federal regulations, and a lot of them are slipping under the radar,” said Katie Grevious, marketing and communications manager with the BBB of Western Michigan. Grevious explains that debt relief and credit repair companies often advertise quick and extensive fixes for low scores or past due bills, but the BBB’s analysis revealed a much more limited ability to enact change than implied. According to the study, of those who entered settlement plans, nearly half dropped out before finishing payment.

Additionally, the fees requested by the companies frequently cost consumers thousands of dollars and leave them worse off. The study cites a Michigan woman’s experience in which she negotiated a contract to pay a little more than $27,000 of her father’s debt. However, when the balance reached a few hundred dollars five years later, she realized only $5,780 went to the creditors. The settlement company got the rest.

“It's not just identifying the clear scams,” said Grevious. “It's these businesses that are legitimate businesses, but they're doing things the wrong way, and making the industry worse, when really the point is to try to help people, help them get out of their debt, help them pay things off.”

The BBB has received more than 12,700 complaints and negative reviews about the industry since 2020. Many of the companies in question are based in the American west. In its study, the BBB recommended state and federal regulators ensure clear and upfront disclosures of what fees are being chartered and encouraged them to continue to monitor advance fee or advance fee-like payment structures. Grevious notes people can negotiate settlements themselves, but it takes time and effort. She suggests consumers seek out highly rated companies, whose consultants provide easy to understand, detailed information about their services.

Red flags for predatory debt and credit assistance companies include:
Debt relief/settlement

1. Try to convince consumer to stop paying their debts to begin settlement
2. Promise they can settle with any creditor

1. Use credit reports to add debts to consolidation that consumer didn’t ask about
2. Employ high-pressure tactics to get consumers to consolidate quickly
3. Hide or attempt to downplay fees for consolidation

1. Fail to provide holistic advice for improving credit
2. Claim they can guarantee a credit score improvement
3. Make big promises about the types of credit report issues they can address

Red flags for debt and credit assistance scammers include:

• Ask for upfront fees
• Attempt to gain access to bank information
• Say they have special access to loan forgiveness programs
• Insist that taxes need to be paid before debt is settled or consolidated

Consumers do have rights when it comes to debt collection. Collectors can do the following:

• Contact you by phone, letter, email, text message, or social media as long as they identify themselves as debt collectors
  
• Contact you at work unless you tell them you are not allowed to get calls there
  
• Contact other people about you to find your address, phone number, and place of employment but CANNOT contact them more than once or discuss your debt with them (except for your spouse or your attorney).
  

They cannot do the following:

1. Call before 8 a.m. or after 9 p.m. (unless you agree to it)
   
2. Pretend to be someone else, like a government agency or credit reporting company, or use a false company name
   
3. Use threats of violence or harm or use obscene or profane language
   
4. Publish a list of names of people who don’t pay their debts
   
5. Falsely claim you have committed a crime
   
6. Misrepresent the amount of money you owe
   
7. Lie about whether or not the papers they send you are legal forms or give you something that looks like an official document if it isn’t
   
8. Tell you that you will be arrested if you don’t pay your debt or say they will seize, garnish, attach, or sell your property unless they are permitted by law to do so
   
9. Threaten you with legal action if doing so would be illegal or if they don’t intend to actually do it
   
10. Try to collect any interest, fee, or other charge on top of the amount you owe unless the contract that created your debt - or your state law - permits the charge
    
11. Deposit a post-dated check early
    
12. Contact you by postcard or any other means that can outwardly be identified as coming from a debt collector
    

Good finance practices translate to how you run your household. It goes beyond just paying off your credit card and saving money. You're happier and more prosperous when financially efficient in all aspects of your life.

But how do you create a financially efficient home and lifestyle? Taking the first steps can help weather inflationary times. But even when economic times are good, a financially efficient household can help you prosper.

Know All Expenses

Although this is often mentioned, it can’t be stressed enough. Know where you are spending your money. Many people have subscriptions they don't use anymore. Go through all your subscription services. If you have some that automatically renew, make sure you remove them. When was the last time you were at the gym? If you're not using it, cancel it.

Wrap your head around your day-to-day finances by tracking them for two months. Seeing how you've been spending money is an eye opener.

Set Time for a Money Meeting

Whether you have a spouse or not, set time monthly to review your finances. This is a cornerstone when it comes to sound financial practices. Make sure you and your spouse are on the same page when looking through expenses and income. What are the ongoing expenses? Add up what regular or ancillary revenue you have. And discuss what significant expenses, like taxes or a new car, are about to happen. The same procedure should be practiced if you are alone. Go over everything that financially affects you.

Make House Energy Efficient

If you experience severe weather like hot summers or cold winters, your electricity bill can be one of your biggest expenses. Try to minimize what you can when it comes to energy consumption. Do you have drafty windows? If you’re planning on staying in your home a long time, replacing old windows may save money in the long run. Placing a timer on a thermostat to change your house's temperature while you're at work can save money. There are many ways to save on energy consumption.

The point is to minimize recurring expenses.

Practice Practical Over Style

When planning for a financially efficient household, start with the house. How big and elaborate a house do you need? Are you trying to impress your friends or family? That doesn't mean you need to live in a shack but instead go for a modest home. A 1,700-square-foot home can still be as nice as a 3,000-square-foot home without the balloon payment.

When buying a car, go for the highest safety rating not the highest price tag. Be practical and protect your family instead of impressing your neighbors.

Shop With a List

Most Americans are impulse items. They wander around the store and end up checking out with purchases they didn’t come into the store to buy. Most people buy what they don’t need or even want because it’s on sale. Always make a list when going to the store. This isn’t just for groceries. If you go to Lowes, don’t walk up and down the aisle to see what’s new. Instead, have your list, buy what you need, and leave. Shop for clothes with a list. If you need a new dress and shoes for a wedding, your list will keep you in check. Instead of scouting around to see what's new and on sale, you'll look for what you need.

Whether it's on paper or your phone, always keep an ongoing list. And keeping a list also goes for online shopping. If you need a new cable for your phone, don’t start perusing through electronics to see the latest.

Buy in Bulk

Buy in bulk the same items you use monthly. That could mean paper towels, detergent, dishwashing liquid, etc. Don't buy that ten-pound bag of rice because it's a deal. Your family will get sick of rice real fast, and it will end up thrown away.

Take your list and only buy recurring items.

Practice Mise En Place

Mise en place is a French phrase that means "putting in place." It refers to the preparation and organization of ingredients and supplies when cooking. Chefs practice this French concept. They always put items like pots or spatulas back where they belong. This way, when cooking in a restaurant, they can efficiently prepare food quickly. Chefs always have their ingredients nearby to cook ahead of time. They don’t have to take the time to run to the pantry or cooler. It’s all there.

Make sure your home is organized. It takes time away from other projects if you're always hunting around for batteries. If you can’t find an item like your tennis shoes or batteries, you may buy them again. This adds to costs.

Outsource Household Services

This may seem like a strange way to be fiscally responsible, but outsourcing jobs that take you away from profitable enterprises is beneficial. If something breaks, many people try to MacGyver their way to fixing things. You may make a bigger mess of it unless you're a Mr. or Mrs. handyman. You could take the option of spending hours watching YouTube videos. But does this save you money? Your time is worth money as well.

Examine the Past and Learn

Many people look to the future when discussing finances, but what about the past? Reflect on what you spent money on throughout the year. Was there a big expenditure or an emergency last year? Discuss or think about what you did right and what improvements are needed.

Creating a Financially Efficient Household

You don't have to cut out every luxury for an efficient household or lifestyle. But picking and choosing the priorities ahead of time will allow you to have a smoother financial life.

Meet monthly, either with your spouse or yourself, to make sure you're on track. This is the cornerstone of your financial stability.

One of the most significant ways to deter excess spending is to shop with a list. Stick to it, and you'll reduce your bills.

At some point, you may want to start downsizing your home. Or you may have to sort through your childhood home after the death of a parent. It can be time-consuming, emotional and intimidating trying to unload years' worth of possessions and memories. As a result, estate sale companies are becoming more popular than ever, helping you downsize or sell items belonging to a late relative.

But should you hire one?

Melissa Haas is glad she did.

Haas is dealing with the loss of her mother and trying to sort through a lifetime of possessions, like her mom's vintage stove from the 1950s.

Haas decided to hire an estate-selling company, Caring Transitions, to help ease the emotional burden. Franchise owner Rosie Harris says the company handles everything for you.
"It's an emotional process," Harris said. "It's difficult for them to go through each and every drawer and closet in the home and reminisce on those items."

So her team of appraisers goes over everything from furniture to collectibles.
"We take pictures of the items in the home, and we put them on our auction site, and people go online and bid," she said.

Plus, Harris now does it all online, avoiding that busy yard sale of years past.
"It's also a lot less traffic in the home," she said, "so you don't have the public knowing the address where the house is, or maybe the house is vacant."

You can find similar companies to Caring Transitions on EstateSales.net and EstateSales.org.

What to ask upfront

When hiring an estate sale company, the nonprofit Consumers' Checkbook suggests these key questions to ask:

• How and where will the company advertise your sale?
• When will you get paid?
• Do they take a percentage of the sale or a set fee?
• What happens to leftover items after the sale? Do they return them, keep them, or donate them?
• How do they secure valuable items like jewelry?

You also want to make sure their workers are qualified to appraise certain items and check the company's website for quality photos.

Haas is happy she's hiring Harris' company, so she doesn't have to do all this work herself.
"It's like dismantling my mother's life, which is very hard," Haas said. "And to know that someone else might appreciate a teapot or a painting or a chair just warms our heart."

As for her mother's old stove? It's still in the family house, and Haas hopes a new family will love it.

So consider an estate selling company if it is all a bit much for you, and that way you "Don't Waste Your Money".

The Consumer Financial Protection Bureau (CFPB) is warning consumers not to store money in nonbank, peer-to-peer payment apps such as Venmo, Paypal, and CashApp, because that money is not automatically insured by the government.

A growing number of consumers prefer to make payments without cash and are adopting payment apps. More than three-quarters of U.S. adults have used at least one payment app, according to the agency. CFPB director Rohit Chopra warned in a June 1 statement that payment services like PayPal, Venmo, Cash App, and Apple Pay "Are increasingly used as substitutes for a traditional bank or credit union account, but lack the same protections to ensure that funds are safe." The CFPB highlighted the protection offered by deposit insurance following the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank in March after customers with uninsured deposits pulled their money en masse.

The Federal Deposit Insurance Corporation (FDIC) insures bank accounts up to $250,000. However, payment apps are not federally insured on the institutional level. Customers could lose their funds if one of those companies were to fail.

The CFPB recommended that users move money off their payment apps and into their bank accounts. Funds held certain types of payment app accounts, such as PayPal Savings, are deposited in FDIC-member banks and would be protected. But much of the funds are held by the services themselves, without federal insurance.

"We find that stored funds can be at risk of loss in the event of financial distress or failure of the entity operating the nonbank payment platform, and often are not placed in an account at a bank or credit union and lack individual deposit insurance coverage," the CFPB said in its report. "Consumers may not fully appreciate when, or under what conditions, they would be protected by deposit insurance," the agency added.

The agency also noted the payment apps make money by investing funds their customers store on the apps, similar to how banks invest their customers deposits. But unlike insured bank deposits, those stored funds would be at risk if the payment apps' investments lose value, which itself could spark a run on the deposits, the CFPB said. "If a nonbank payment app was to go bankrupt as a result of these risks, customers may not be the only creditors with claims on the company's remaining assets," said the CFPB. "Even if consumers do not ultimately lose any funds, they may face significant delays in accessing their funds while the bankruptcy process unfolds."

The Financial Technology Association, an industry group that represents PayPal Holdings and Cash App's owner Block Inc., defended the safety of the funds in a statement. "Tens of millions of American consumers and small businesses rely on payment apps to better spend, manage, and send their money. These accounts are safe and transparent," the association said. "FTA members provide clear and easy-to-understand terms in all their products and prioritize consumer protection every step of the way."

Peer-to-peer payment apps and non-banks offering bank-like services have exploded in popularity in the last decade. Venmo now has more than 90 million customers, and recently announced it was going to allow parents to create accounts for their teenage children, potentially bringing in tens of millions of new customers for the app.

Apple recently announced a savings account tied to its Apple Card that is operated by Goldman Sachs. The savings account took in billions of dollars in deposits within days of its launch.

There's nothing more convenient than groceries showing up at your door, but depending on where you shop and how much you spend -- you'll likely pay a little extra.

(Webmaster – Been reading a lot of articles about Self-Checkout Snafus. You Must be VERY careful!!)

You use the self-checkout kiosk at a local store. As you head to your car, a security officer stops you and accuses you of shoplifting…or perhaps weeks later, an officer shows up at your home with a warrant for your arrest for misdemeanor larceny. What happened? You may have forgotten an item at the bottom of your basket…or a barcode you scanned wasn’t read correctly.

These scenarios have played out scores of times around the country in recent years as self-checkout becomes common. Retailers have a legitimate reason for their vigilance—theft accounts for nearly 4% of inventory at stores with self-checkout versus just 1.5% for stores with traditional checkout. In fact, big-box chains and supermarkets routinely videotape self-checkout activity.

Protect yourself at self-checkout:

Be slow and intentional when scanning your items. Avoid rushing even if there is a line of impatient customers behind you. When you scan, listen for the beep indicating that the barcode has been read, then check the view screen for confirmation of your purchase.

Scan each item separately if you have several identical ones. To streamline the checkout process, some customers resort to scanning one of the identical items multiple times. Problem: You can easily lose count.

Use traditional checkout lines if you are purchasing expensive items. In some states, larceny becomes a much more serious felony charge when the disputed items total as little as $200.

Call an attendant if a self-checkout scanner is faulty or sluggish.

(Edited for length)

The Year of the Rabbit involves generous rewarding of past sacrifices. All the seeds of effort that you have sown will bear fruit and pay off. Their sweetness depends on your purest intentions.

According to Chinese astrology, the rabbit symbolizes prosperity, peace, longevity and hope. The rabbit is the fourth animal in the Chinese zodiac and the luckiest of all animals. It symbolizes elegance, mercy, alertness, patience, intelligence and swiftness. People born in the Year of the Water Rabbit are peaceful and calm. They shy away from arguments and love fine things. They are artistic and pay attention to details. Rabbits are smart animals, and you can use their traits to plan for a prosperous financial future.

Here’s how to use the rabbit’s personality to achieve greater financial prosperity in 2023:

Sacrifice and Plant a Seed.

Financial freedom will remain a mirage if you spend everything you earn. Debt due to overspending will leave you stressed. Overspending can prevent you from achieving your financial goals.

Pay Attention to Details.

Paying with credit cards is convenient, and you can spread out your payments, if money is tight. But rising interest rates are making those credit cards dangerous these days.

Alicia Turner knows that. This mom says buying food for her family is getting more and more expensive every week. "It's very hard to purchase what you are trying to purchase," she said. With grocery inflation running well over 10 percent, she says is putting more charges onto her credit card.

And if you don't pay the bill in full every month, that bill can get bigger very quickly.

More credit card use at the same time as rising rates.

Inflation and the end of stimulus checks mean many consumers are putting more purchases onto their credit cards right now. But at the same time, rates are shooting up, with the average credit card interest rate now over 18 percent, according to Bankrate.com. As card rates approach 20 percent, financial experts say it's easy to fall into the "Credit Card Trap."

That's where you don't have enough cash each month to pay even half of your monthly credit card bill, so the balance keeps going up and up.

Suzanne Powell is a financial advisor and author of "The Ultimate Money Moves for Women over 50." She says, "what could have taken you 5 years to pay something off, may now take 8 or 9 or 10 years." Powell says when carrying a balance on your card with 18 percent interest, a vacation or big screen TV can cost you a lot more than you ever dreamed. "Over time they really don't realize they pretty much paid double for it," she said.

Powell suggests if you are falling into the credit card trap:
* Try to pay down your balance, starting with the highest rate credit card first.
* Look for a zero percent balance transfer card, if you qualify. There are still cards that will charge zero percent interest if you move a balance to them.
* Pay with cash or a debit card, not a credit card, when possible. Limit credit cards to gas, groceries, and essential purchases.

Mom Alicia Turner is trying not to rack up big credit card bills, but inflation is making it difficult. "It gets tighter," she said. "You have to work twice as hard for your income."

The worse news for many families: Credit card rates are expected to rise even further in the coming weeks.

So be careful how often you say "charge it," so you - Don't Waste Your Money.

Are you looking for a job, housing, or insurance? Did you know your credit affects your ability to get them; and how much interest you'll pay?

President Biden has warned Americans to lock their "digital doors" over the potential for Russian cyberattacks in retaliation for US economic sanctions. Chilling possibilities: Crippled banks and frozen ATMs across the US; power outages and gasoline shortages; paralyzed public transportation, hospitals and government buildings; individuals locked out of their e-mail and personal data.

It sounds like a Hollywood movie, but it is even more of a reality thanks to the Russian government's recent arrest and possible recruitment of key members of REvil, a criminal computer-hacking syndicate. REvil was responsible for sabotaging major companies last year, including the world's largest meat producer, Brazil-based JBS Foods, and East Coast fuel supplier Colonial Pipeline.

To help you understand what could happen in a widespread cyberattack and what to do now to protect yourself, your data and your money, Bottom Line Personal spoke to renowned -cybersecurity expert John Sileo:

Get ready for a Cyberattack

The US suffers tens of thousands of ransomware attacks, credit card database breaches and malware intrusions every year. But an attack from Russia would be more strategic, inflicting damage on the computers and Internet connections that underlie our vital systems. Fortunately, after years of watching Russia’s cyber-attacks against neighboring Ukraine, the US can anticipate Russian attacks.

What you can expect: An attack on the US would focus on four major areas - energy, water and electrical infrastructure; financial institutions; cloud-data companies; and telecommunication firms. It's unlikely that Russia would cause disruptions that inflict major loss of life akin to a 9/11 event - that would invite massive retaliation from the US, which has its own cybermilitary capabilities. But Russian intrusions could create extensive inconveniences in your daily life that last hours, days, maybe even weeks.

Infrastructure

Analysis: Internet-connected computers control private and public facilities around the country. Cyberattacks against US energy companies, especially small ones that lack protective resources, could disrupt operations of oil and natural-gas pipelines. Power facilities could be knocked offline.

More plans are offering annuities that could provide incomein retirement. Here’s what you need to know.

Despite the economic challenges presented by the COVID-19 pandemic, the vast majority of workers continued to contribute to their retirement plans in 2021, according to the Investment Company Institute. All told, Americans have more than $11 trillion stashed in plans offered through their jobs.

But even though workers get a lot of advice and encouragement on their journey to retirement, they are often left on the tarmac when they reach their destination. Historically, employers have provided little guidance on what retirees should do with the big pile of money they’ve accumulated over the past 40 or 50 years.

Now, a growing number of companies are providing workers with a way to turn a slice of their savings into a monthly paycheck in retirement. In addition to the usual choices of mutual funds and other investments, they’re offering workers the option of investing in an annuity that can be converted into guaranteed income after they retire.

Retirees can already purchase annuities from a variety of insurance companies, of course, but few do, even though many retirement experts believe that annuitizing a portion of your savings reduces the risk that you’ll run out of money in retirement. In large part, that’s because the security that annuities provide comes with some caveats: In exchange for guaranteed payments, you must hand over a large lump sum to an insurance company, and you usually can’t get that money back. In addition, some types of annuities are loaded with fees and restrictions that are often hard to decipher without professional help.

In the past, companies resisted offering annuities in their retirement plans because they feared they would be sued if the insurer went out of business. The 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act sought to address those concerns by providing employers that offer in-plan annuities a safe harbor from such lawsuits. To avoid liability, employers must still vet annuity providers to ensure that they’ve complied with state laws and have maintained healthy financial reserves.

ON THE MENU

Several companies that have added annuities to their lineups are offering them in their target-date funds. Target-date funds, which are owned by more than half of participants in 401(k) plans, provide a set-it-and-forget-it portfolio that gradually shifts to more-conservative assets as you near retirement.

For example, TIAA-CREF’s Secure Income Account, a deferred fixed annuity, replaces a portion of the fixed-income holdings in a target-date fund and accounts for 40% to 60% of the individual’s assets by the time the 401(k) owner retires, says Philip Maffei, managing director for corporate income products for TIAA-CREF. Upon retiring, the participant would have a choice of annuitizing all of the money in the account, annuitizing just a portion of it or taking a lump sum, Maffei says.

Fidelity Investments, one of the nation’s largest 401(k) plan managers, is providing its 401(k) clients with a menu of immediate annuities from up to five different insurance companies.

The annuities are available to workers age 59½ and older, who will have the option of converting any portion of their savings to an annuity when they retire. Funds that aren’t converted can remain invested in the Fidelity plan.

A CHECKERED PAST

Millions of educators already own annuities in 403(b) plans, the retirement accounts typically offered to public school teachers, and a lot of them would give their results a failing grade. Many school districts have turned the job of offering retirement plans over to sales agents who promote high-cost equity-indexed and variable annuities. Teachers who are unhappy with their investments often discover that moving their money to a lower-cost option will trigger hefty surrender fees.

Proponents of annuities in 401(k) plans say workers are offered plenty of protections from those types of problems. Even with the safe harbor provided by the SECURE Act, companies that offer 401(k) plans are required by law to act in the best interest of their employees, which means they must vet their plan’s investment options, including annuities.

That kind of vetting could also give annuities offered through retirement plans an edge over annuities purchased on the retail market, providers say. “Having the plan sponsor play the vetting role gives a lot of peace of mind to participants that they’re getting a good-quality annuity product,” says Keri Dogan, senior vice president of retirement income at Fidelity.

A financial planner can help individuals select annuities available on the open market, but not everyone can afford to hire an adviser, says Jeff Cimini, head of strategy and financial management at Voya Financial, which provides retirement, insurance and investment services. Annuities “are complex, and generally speaking, they’re sold, not bought,” he says.

Employees who buy annuities through their retirement plan may also benefit from institutional pricing, which means they’ll pay lower fees than they’d pay on the retail market, Dogan says. In addition, the SECURE Act mandates that annuities purchased in a 401(k) plan must be portable, which means employees who change jobs or retire can move their annuity to another plan or IRA without paying surrender charges or fees.

THE FINE PRINT

Although lower costs and portability could make annuities offered through retirement plans more appealing, annuities are still complex products. Fees and other expenses aren’t as transparent as they are for mutual funds and exchange-traded funds. In addition, annuities—including those offered in 401(k) plans—come in a variety of flavors. TIAA-CREF’s Secure Income Account, for example, is a deferred fixed annuity that offers a guaranteed interest rate, which currently ranges from 3.4% to 3.65%, depending on the size of the plan, with the option of converting the balance to guaranteed income after retirement. While Fidelity is currently limiting its offering to immediate annuities, it plans to add a qualified longevity annuity contract (QLAC), an annuity that starts payouts when a participant reaches a specific age, typically 80 or older. (These types of annuities require a smaller outlay of funds than immediate annuities because of the possibility that the owner will die before payments begin.) Some plans are adding variable annuities, which provide some exposure to the stock market before converting to income in retirement.

If you decide to add an annuity to your portfolio, you’ll also need to decide when (or whether) to annuitize—that is, convert it into a guaranteed income stream, a decision that’s usually irrevocable. Complicating the decision is the current interest rate environment, which could depress the size of your monthly check, depending on when you annuitize an existing investment or purchase one that offers an immediate payout. In the case of immediate annuities, for example, payments are tied to rates for 10-year Treasuries, and while those rates are higher than they were a year ago, “they’re very likely to go higher in the future,” says Harold Evensky, a certified financial planner and chairman of Evensky & Katz/Foldes Financial.

While Evensky believes investing a portion of your savings in an immediate annuity can significantly reduce the risk that you’ll run out of money in retirement, he says most retirees are better off waiting until at least age 70 to buy an annuity because payouts increase as you age. And if interest rates continue to rise, you’ll also benefit from delaying payouts.

That means leaving your funds in your 401(k) for years after you retire—something many large plans are starting to encourage. Having more assets in their plans gives employers more clout when they negotiate fees and other services with fund managers.

A SNAPSHOT OF THE FUTURE?

Under a provision in the SECURE Act, companies are required to include an illustration in their retirement plan’s quarterly or annual statements that estimates the amount of monthly income your balance would provide if you were to convert the funds to an annuity (see the example on the below). While these illustrations could raise awareness about the value of annuitizing retirement income, retirement experts say they’re primarily useful for older workers who have accumulated a significant balance. Without supplemental tools, such as projections of how much additional contributions would add to the balance, younger workers or new plan participants could end up with a “discouraging picture” of the amount of guaranteed income their savings would buy, the Insured Retirement Institute, a trade association, wrote in a comment letter to the Department of Labor.

Annuity providers are hopeful that the DOL will allow plans to include future contributions, company matches and investment returns in the income estimates. Participants in the Thrift Savings Plan, the federal government’s version of a 401(k) plan, already receive those kinds of projections in their plan statements, says Paul Richman, chief government and political affairs officer for the IRI.

IMMEDIATE ANNUITIES

The Payout

Retirement plan providers will soon be required to provide employees with an estimate of the amount of monthly income their current 401(k) balance would provide if they were to purchase an annuity that provides payouts immediately. The example below assumes the participant and the participant’s spouse (in the case of a joint life annuity) will be 67 on December 31, 2022.

Current account balance: $125,000.
Single life annuity: $645 per month.
Joint life annuity: $533 per month for participant’s life; $533 per month for the spouse following participant’s death.
SOURCE: U.S. Department of Labor.

LEARNING THE LINGO

An Annuities Roster

Here are some varieties of annuities that may be offered by your 401(k) plan:
Single-premium immediate annuity. Also known simply as an immediate annuity, you typically give an insurance company a lump sum in exchange for monthly payments for the rest of your life or for a specified period.

Deferred fixed annuity. These annuities offer a guaranteed interest rate over a specific period and can be converted into an income stream in retirement.

Qualified longevity annuity contract (QLAC). A type of deferred annuity that’s funded with assets from your IRA or 401(k). You can invest up to 25% of your account (or $145,000, whichever is less) in a QLAC, and the funds will be excluded from the calculation to determine required minimum distributions. When you reach a specified age, which can be as late as 85, the funds will be converted into payments guaranteed to last for the rest of your life. The taxable portion of the money you invested will be taxed when you start receiving income.

Variable annuity. A type of deferred annuity that invests in mutual fund like subaccounts to create future income (usually in retirement).

To cross the finish line when you want, find the right target for your retirement savings and follow our training regimen.

As anyone who uses a fitness app can attest, setting goals can be a valuable motivational tool. The allure of the couch is easier to resist if your Fitbit or Apple Watch informs you that you’re well short of your daily step or exercise target.

Likewise, visualizing a retirement goal—and working toward a specific number—can motivate you to save, even when retirement is years away. “We’ve found that most people find it helpful, regardless of their age, to have an idea of how much they likely should be saving in order to retire at a reasonable age,” says Tom McCarthy, a certified financial planner in Marysville, Ohio. “Without a target, they just don’t know how much to save, how much risk to take and which types of investment accounts to use.”

There are plenty of calculators on the internet that will help you estimate your retirement number. But as with any calculator, your results will depend on the information you provide, which may not always be accurate. And even if your data is on target, your retirement number isn’t static. The amount you’ll need to retire comfortably will change through-out your working career depending on numerous factors, ranging from how much you earn, how long you expect work and your investment returns.

Saving for retirement consists of many moving parts, “and no one’s crystal ball is clear enough to set a number and then stop planning,” McCarthy says. Your target number should be reviewed periodically—ideally once a year—to determine whether you’re on track or need to make adjustments to reflect changes in your life (or lifestyle). This exercise becomes particularly important when you’re in your fifties and sixties, when you’ll be able to come up with a better idea of how much money you’ll need to maintain your standard of living.

STARTING OUT
If you’re in your twenties, you should think of saving for retirement as a marathon rather than a sprint. Instead of focusing on the amount of money you’ll need to retire in 40 or 50 years—which may seem completely out of reach—reverse engineer the process. Calculators such as the one at www.dinkytown.net/java/401k-calculator .html will help you see how even modest increases in the amount you save in a 401(k) or other retirement-savings plan will compound over time.

For example, suppose you’re 25, earn $50,000 a year, contribute 5% of your pay to your 401(k) and plan to re-tire at age 67. If you receive matching contributions of 50% on 6% of pay, you’ll have more than $1 million when you retire (this assumes a 3% annual salary increase and a 6% average annual return on your investments). Bump your contributions up to 6% and you’ll have $1.25 million.

At this age, time is your biggest ally, because even a small amount in contributions will grow and compound free of taxes until you take withdrawals in retirement. If you start saving in your twenties, as much as 60% to 70% of the amount you’ll have saved at retirement will come from investment gains rather than contributions, says Ted Benna, a benefits consultant who is credited with creating the 401(k) plan. “If you wait until age 40 to start saving, it gets flipped the other way—more will come from your contributions than your investment gains,” he says.

You’ll need to save even more if you get a late start and, say, a bear market depresses your investment returns as you approach retirement. Savers who start early, on the other hand, have plenty of time to recover from—or prepare for—market downturns. Starting early also gives you the ability to be aggressive, which means investing most of your savings in stocks—typically via mutual funds or exchange-traded funds—which have historically delivered the highest rate of return.

There’s a good chance you’ll change jobs several times, particularly when you’re starting out. Resist the temptation to cash out your retirement-savings plan after you leave your job. A survey by the Transamerica Center for Retirement Studies found that 13% of millennials have at some point in their working years cashed out their 401(k) plans when changing jobs, compared with 6% of Gen Zers and 4% of boomers. Although the amount you’ve saved during your first few years on the job may not seem like much, the hit to your nest egg will be significant. First, the amount you take out will get a lot smaller after you pay taxes and a 10% early-withdrawal penalty on it (you have to be at least 55 and leave your job to avoid that penalty). But you’ll also sacrifice the investment gains you’ve earned. It’s the equivalent of starting a marathon, running six miles, and then returning to mile one. A better option: Roll your savings into your new employer’s 401(k) plan or, if that’s not an option, into an IRA.

Borrowing from your 401(k) may be appealing if you want to pay off high-interest debt. A 401(k) loan won’t trigger taxes and penalties unless you leave your job and don’t repay the remaining balance, but it can still slow your progress. That’s because loans come with an opportunity cost. The amount you’ve borrowed won’t be invested, which means you’ll have to save more to compensate for the lost investment gains. You’ll also pay taxes on the money you use to repay the loan as well as on withdrawals in retirement.

PASSING THE HALFWAY POINT
At this juncture, you should have a better sense of when you’d like to retire and how much money you’ll need to achieve that goal. If your progress is lagging, you still have time to accelerate your pace with catch-up contributions. In 2022, workers who are 50 or older can save up to $27,000 ($20,500 plus catch-up contributions of $6,500) in a 401(k) or other employer-provided retirement-savings plan. If you meet income-limit requirements, you can also stash $6,000 in a Roth IRA, plus an additional $1,000 if you are 50 or older. That’s a smart move because withdrawals of earnings from your Roth will be tax-free as long as you’re 59½ or older and have owned a Roth for at least five years. If you don’t meet the income requirements for contributing to a Roth, you can stash the same amount in a traditional IRA.

The past two years of market gains have given many savers a strong tailwind. If investment gains have pumped up your savings, you may be tempted to slack off on contributions, but that’s a temptation you should resist. Kiplinger expects stock market returns to be closer to historical averages in 2022—in the high single digits instead of the double-digit returns the market has delivered over the past two years (see “Where to Invest in 2022,” Jan.). Financial planners interviewed for this story suggested using an annual rate of 6% when calculating average returns for your portfolio. It’s safer to err on the conservative side than to overestimate your returns, says Devin Pope, a CFP with Albion Financial Group, in Salt Lake City. “If you estimate 10% and get 5%, you’re a long way away” from your goal, he says.

APPROACHING THE FINISH LINE
To borrow another sports metaphor, your last decade or so or of working is the retirement red zone, says Jonathan Duggan, a CFP in Frederick, Md. In football, the red zone is the last 20 yards before the goal line. And just as activities in the red zone can determine the outcome of a football game, the decisions you make now will go a long way toward helping you reach your goal.

If you haven’t been keeping track of your living expenses, this is a good time to start, says Adam Wojtkowski, a CFP in Walpole, Mass. “The five- to 10-year window is when you actually have a rough idea of what your spending might be once you decide to make the flip to retirement,” he says. Getting a handle on your spending will help you estimate how much of your income you need to replace in retirement. Most calculators recommend replacing 70% to 80% of your gross income, but that will depend on a number of factors, such as whether you’ll pay off your mortgage before retirement, whether you’ll downsize or move to another location, and even how you plan to spend your time. At this point, you should also be able to estimate how much you’ll receive from Social Security and a pension, if you have one.

If you’re not as far along as you want to be, there’s still time to move the goalposts, whether it means working longer, saving more or downsizing. Alternatively, if you’ve saved consistently and invested wisely, you may be pleasantly surprised to find that you can retire earlier than planned. But before you call it quits, consider these potential budget busters:

Taxes.
No matter how much you’ve saved, you’ll have to share some of that money with Uncle Sam. “One of the common mistakes I see when people calculate their retirement number is that they forget about the taxes,” Duggan says. The amount of your tax bill will depend on overall tax rates at the time you retire, your personal tax rate, where you live (because state taxes can also take a bite out of your budget) and, significantly, where you’ve invested your savings. Depending on your situation, “withdrawals will be anything from tax-free to taxed as ordinary income,” Duggan says.

If nearly all of your money is invested in 401(k) plans and other tax-deferred accounts, most of your withdrawals will be taxed at your income tax rate, and you’ll be required to start taking withdrawals at age 72 (see “Lower Taxes on your RMDs,” Jan.). Withdrawals from Roth IRAs will be tax-free, as long as you’ve owned a Roth for at least five years and are 59½ or older when you take the money out. Capital gains rates on taxable accounts range from 0% to 20%, depending on your income. Many retirees have a combination of these types of accounts in their retirement savings. Consider sitting down with a CFP or tax professional to discuss strategies to manage taxes on your savings.

Health care.
If you plan to retire before age 65, you’ll probably need to allocate a big slice of your savings to pay for health insurance. Even after 65, when you’ll be eligible for Medicare, it’s important to budget for your out-of-pocket health care costs, which can be significant. For 2022, the standard premium for Medicare Part B, which covers doctors’ visits and outpatient services, will be $170.10 a month, up nearly 15% from 2021. Retirees who are subject to the high-income sur-charge will pay from $238.10 to $578.30 a month, usually based on their 2019 modified adjusted gross income. Fidelity Investments estimates that a 65-year-old couple who retired in 2021 will need to have saved approximately $300,000 (after taxes) to cover health care in retirement. Long-term care can take a big bite out of your savings, too.

My wife has a little plaque hanging on the wall of her art studio. She’s a fiber artist who makes quilted landscapes and something called “temari,” which are decorative Japanese thread balls. She sells her wares in a local art gallery. If you want to see her work, just go to FiberArtsByBecky.com. Anyway, that plaque, which she got when we both retired in 2005, says: “Help me! My husband retired and he doesn’t have a hobby!”

I was thinking of that plaque when I opened my email inbox today. There were scores of letters from readers of my column. I probably get hundreds of emails every week from across the country. And for the most part, I’m not complaining—and my wife is rejoicing. Answering those emails has become my hobby. It keeps me out of her hair. My wife can work on her little crafts in peace upstairs while I work on my “hobby” downstairs. (That’s part of the secret to a 47-year marriage!)

Shopping online is oh-so-convenient. Haven’t we all bought stuff online when we could easily run to the store (figuratively, of course) and be back home in less than 30 minutes? Because reputable online businesses want happy, returning customers, they make returning something almost as simple as buying it. But what if a seller won’t give you a refund even though you qualify for it? Or what if you ordered something and never got it?

In some states, residents can choose which company supplies their electricity — but they probably shouldn't. Electricity typically is supplied by a local utility, but if you live in Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Texas or Washington, DC, you have the option of choosing a retail supplier to provide generation supply. The local utility remains responsible for distribution and maintaining the electric grid. If you live in Texas, selecting a retail electricity supplier is required — there's no default option of sticking with the utility.

Residents of these states almost certainly have received mailings, phone calls or in-person sales calls from retail suppliers promising lower rates or even renewable energy. Some suppliers advertise "peace of mind" with fixed rates. Don't believe it—studies in seven of these states all found that consumers who switch pay more for electricity, on average, than those who stay with their local utility over a reasonable period. The low rates promised by retail suppliers often are "teaser" rates that soon climb, or there are hidden fees that boost customers' bills. Most of these contracts allow the supplier to renew your contract by negative option—that is, without your affirmative agreement to new terms.

In these states, default service is provided by the local utility, but it is purchased in the wholesale market through competitive bids and there is no profit attached. Retail suppliers usually can't beat the default service prices because they have to spend big money on marketing to attract customers.

In almost every state, the public utility commission requires that the default service have a fixed price. Both the utilities and the retail competitors tend to purchase the power they sell to consumers on the same wholesale market, so it's extremely rare for retailers to overcome these disadvantages.

But none of this means that deregulating electricity markets is a bad idea — there's some evidence that competitive markets lower electricity costs for consumers through the default service competitive-bid process. But, ironically, it's customers in these states who don't switch suppliers who reap the benefits.

What to do:
The vast majority of people should purchase power from their local utility and reject all offers to switch.

Two exceptions. If you're a careful consumer who is willing to invest some time, you might be able to save money by switching repeatedly from one retail electricity supplier to another, taking advantage of low introductory rates, then moving on when those intro rates increase.

Texas residents must choose a retail supplier. Texas has no default option.

If either of these conditions applies to you, read supplier contracts carefully before signing up so you understand the per-kilowatt-hour rates being offered, when and how much those rates can increase, the length of your contractual commitment and whether you could be charged fees for cancelling. Do not let a telemarketer or door-to-door salesperson pressure you into switching suppliers without first reading the contract.

Ideally, you should start planning for retirement the day you receive your first paycheck. But in reality, most of us don't focus on retirement until much later—and that's fine, as long as you've been saving throughout your career. Once you reach your fifties, though, it's time to start thinking about when you'll retire, where you'd like to live, and how you'll spend your time once you stop working.

While the pandemic has thrown a wrench in some retirement plans, it has created opportunities, too. The personal savings rate has soared, as Americans who were able to keep their jobs stashed their stimulus checks, along with money they would normally spend on restaurants and travel, in savings accounts. Instead of allowing that money to languish in a low-interest account, consider using it to beef up your retirement savings.

With the caveat that the when of retirement may be out of your control—if you're, say, forced to retire earlier than planned or need to stay on the job longer to make up for gaps in your savings. Here's a list of items to check off when you're 10 years, 5 years and 1 year away from your expected retirement date.

10 Years Until Retirement
Retirement is on the horizon, but other matters—your family, your job, your kitchen renovation—tend to consume most of your attention. Still, it's not too soon to start running the numbers, ideally with the help of a certified financial planner, to get a sense of whether your planned retirement date is realistic.

In the wake of the COVID-19 pandemic, you may need to make some course corrections. More than 80% of Americans say the pandemic has affected their retirement plans, and one-third estimate that they'll need two to three years to get back on track, according to a survey conducted by Fidelity Investments. The Coronavirus Aid, Relief and Economic Security (CARES) Act enacted early last year allowed people who suffered financial setbacks as a result of the pandemic to withdraw up to $100,000 from their 401(k) or other employer-provided retirement plans without paying a 10% early-withdrawal penalty. If you took a hardship withdrawal (and your employer allows it), you have up to three years to repay the funds and have the repayment treated as a tax-free rollover. (If you repay the distribution after you've paid taxes on it, you can file an amended return and get a refund.) The sooner you repay any hardship withdrawals, the more time your money will have to grow. Similarly, while the CARES Act gave borrowers six years instead of five to repay 401(k) loans, the sooner you repay the loan, the sooner you'll be able to take advantage of market gains on a bigger balance.

$ Use your stimulus check or other money you've saved to increase contributions to your retirement plans. If you're 50 or older, you can stash up to $26,000 in your 401(k) or other employer-sponsored retirement savings plan. You can also contribute up to $7,000 (if you're age 50 or older) to a traditional IRA or, if you don't earn too much to qualify, a Roth IRA (see ‘Drop In Income’ Strategy below).

$ If your employer offers one, consider shifting some of your 401(k) contributions to a Roth 401(k). Having all of your savings in tax-deferred 401(k) plans and traditional IRAs can result in big tax bills when you start taking withdrawals, says Karen Van Voorhis, a CFP in Norwell, Mass. And while many dual-income married couples earn too much to contribute to a regular Roth, there are no income limits on contributions to Roth 401(k) plans.

$ Contribute to a health savings account. In 2021, workers age 55 and older who are covered by a high-deductible health insurance plan can contribute up to $4,600 to an HSA. You can use the money to pay for medical expenses that aren't covered by your insurance, but if you pay those expenses out of pocket and let the money in your HSA grow until you retire, you'll have a stockpile of tax-free money to pay for medical expenses that aren't covered by Medicare. Many plans let you invest contributions in mutual funds or exchange-traded funds.

$ Pay off high-interest debt, such as credit cards or PLUS loans you took out for your children's college education. Nearly one-fourth of retirees say that debt has made it more difficult for them to live comfortably in retirement, according to the Employee Benefit Research Institute's 2021 Retirement Confidence Survey. With interest rates at record lows, though, paying off your mortgage before you retire may not be the best use of your money (see ‘Keep Your Mortgage’ Strategy below).

$ Create (or update) your estate plan, which should include a will or trust, health care proxy and power of attorney. Review beneficiaries on insurance policies and retirement plans.

$ Rebalance your portfolio. It's too soon to make a big shift from stocks to conservative investments, because you're still years away from retirement. But the stock market has been going gangbusters for months, which means you may have more invested in stocks and stock funds than you're comfortable with. For example, if your target asset allocation is 80% stocks and 20% bonds and cash, you may need to sell some stock funds to get your portfolio back on track.

Strategy: Take Advantage of a Drop in Income
The economy has begun to rebound this year, but many workers are still unemployed or have seen their hours reduced, and some have voluntarily taken time out to care for at-home children. If you fall into that camp, you may be able to take steps that will reduce your tax bill when you retire.

If the reduction in your income caused you to drop into a lower tax bracket but you're still in good financial shape, this year may be the ideal time to convert some of the money in your traditional IRA to a Roth, says Karen Van Voorhis, a certified financial planner in Norwell, Mass. You'll pay taxes on any money you convert, but you'll pay less than you would owe in higher-income years. And once you retire, withdrawals from your Roth will be tax-free, as long as you're 591/2 or older and have owned a Roth for at least five years.

A decline in your household income could also make it possible for you to contribute to a Roth. If you're married and file jointly, you can't contribute the maximum to a Roth IRA if your 2021 modified adjusted gross income is more than $208,000. If your household income falls below that threshold this year, you have until April 15, 2022, to con- tribute to a Roth. Each spouse can contribute up to $6,000 in 2021, or $7,000 if they're 50 or older.

Strategy: Consider Keeping Your Mortgage

It's hard to put a price on the peace of mind that comes from retiring debt-free, and there's no question that you should strive to pay off high-interest debt before you stop working. But with mortgage rates at record lows, paying your mortgage off early may not be the best use of your money, financial planners say.

For example, you shouldn't pay off your mortgage unless you're already contributing the maximum to your retirement- savings plans. If you have a 30-year mortgage with a 3% interest rate, there's a good chance you'll earn more on your investments than you'll save on interest. Likewise, don't drain your emergency savings to pay off the mortgage. And even if you check both of those boxes, you should pay off your mortgage only if you have enough money in taxable accounts to pay for it, says David Foster, a certified financial planner in St. Louis. Taking money out of a traditional IRA or 401(k) will likely trigger a significant tax bill, he notes.

Still, when it comes to the appeal of retiring mortgage-free, "the math may say one thing, but your heart says something else," says Jeremy Finger, a CFP in Myrtle Beach, S.C. If you can retire your mortgage without jeopardizing your retirement savings—or triggering a big tax bill—go ahead and pay it off, he says. Alternatively, consider accelerating the payoff, either by making extra payments or by refinancing to a shorter term. That way, you can retire mortgage-free, or with only a few years to go until the loan is paid off, without depleting your cash reserves.

{Webmaster here – If you can payoff your mortgage early, without cashing in income producing investments, like I did; it frees up a big chunk of monthly money that you can save up to remodel your home, buy a new/used car, vacation, on and on!}

5 Years Until Retirement

It's not too soon to start estimating what your expenses will be in retirement, which is critical to determining whether you can afford to retire in five years. If you spent the pandemic working from home, you may have a pretty good idea of how much you'll save when you're no longer commuting or having your clothes dry cleaned. But don't lowball your post-retirement expenses. Many retirees see their expenses go up in the early years of retirement, when they're still healthy enough to pursue activities they didn't have time to enjoy while they were working. And if you plan to retire before age 65, you'll need to budget for health insurance, too.

To get a handle on your cost of living in retirement, comb through your credit card and bank statements to get an idea of how much you spend each month on everything from gas to pet care. Once you've done that exercise, use a retirement budget worksheet, such as the one offered at http://investor.vanguard.com/calculator-tools/retirement-expenses-worksheet, to estimate your expenses in retirement.

Then, consider sitting down with a CFP to determine whether you've saved enough to afford the lifestyle you've envisioned. You may conclude that working a year or two longer will significantly enhance your retirement security (see "The Benefits of Working Longer," June).

$ Add up sources of guaranteed income, such as Social Security and a pension, if you're eligible for one. If you don't have an online Social Security account, go to www.ssa.gov/myaccount/create.html to set one up.

$ Once you've signed up for an online account with Social Security, review your earnings history to make sure you've received credit for every year you worked. Your benefits could be shortchanged if an employer reported earnings under an incorrect name or Social Security number.

$ If you're concerned that you haven't saved enough, look into the possibility of a phased retirement. For example, instead of quitting your job in five years, ask your employer if you could continue to work two or three days a week.

$ Explore part-time positions or gig-economy jobs that will generate additional income in retirement. Check out www.sidehusl.com, which reviews and rates online job sites, for leads on companies that offer part-time work for retired professionals.

$ If you plan to relocate in retirement, start visiting potential destinations. Many people dream of retiring to an area they've visited on vacation, but that's not the same as living like a local. Try to visit at different times of the year, and take advantage of short-term rental properties or Airbnbs.

$ Plan for the cost of long-term care. Premiums for long-term care insurance rise as you age, so this may be your last chance to purchase a policy you can afford. While the pandemic made many seniors wary of nursing homes, most current policies provide a pool of benefits that include RETIREMENT coverage of home health care. Talk to an insurance agent who represents a number of companies so you can compare coverage and costs. (A CFP can also help you determine whether you have sufficient assets to cover long-term care on your own or in conjunction with a smaller policy.)

$ Start shifting some of your savings to more-conservative investments; but be careful. With interest rates so low, an overly conservative portfolio could lag inflation, exposing you to the risk of running out of money. Many workers at this stage of their lives opt for a 60-40 allocation; 60% stocks, 40% in government bonds—but with interest rates at record lows, you may need to diversify that portion of your portfolio with funds that invest in triple-B-rated corporate bonds, preferred stocks, convertible bonds and real estate investment trusts (see "Earn Up to 10% On Your Money," June).

$ Prepare for the unexpected. Nearly half of retirees surveyed by the Employee Benefit Research Institute said that they retired earlier than expected. Many people end up retiring earlier than planned because of layoffs or health issues. Make sure you have at least a year's worth of expenses in an emergency account so your retirement savings can continue to grow.

1 Year Until Retirement

With retirement so close, you may find yourself browsing catalogs or websites for cruises or walking tours. But even if you're convinced you've saved enough to retire in a year, you've still got plenty of work to do—and big decisions to make. Start by sitting down with your human resources department to review your pension (if you have one), any retiree health care coverage and other benefits. In some cases, postponing retirement by just a few months could affect your monthly pension payout or your 401(k) match, so be judicious when setting a date for your departure.

This is also a good time to refine the budget you created at the five-year point. You should have a better idea of how you'll spend your time and how much those endeavors will cost. And if you've decided to downsize or move to a lower-cost area, you should be able to estimate how reducing your cost of living will affect your budget.

$ Determine when you'll apply for Social Security. Use your online account to review how much your benefits will contribute to your retirement income. Most boomers are eligible for full retirement benefits at age 66, but if you delay until age 70, you'll receive a delayed-retirement credit of 8% a year.

$ Start exploring your Medicare options. If you're approaching age 65, you're probably already receiving lots of mail from various Medicare Advantage, medi-gap and Part D prescription plans. You'll be in a much better position to choose a plan that's right for you if you start reviewing your options at least a year in advance, says Kari Vogt, a CFP and Medicare insurance broker in Columbia, Mo. Planning ahead will also help you avoid gaps in coverage that could trigger costly Medicare penalties.

$ If you're eligible for a traditional pension, review the pros and cons of taking a lump sum versus a monthly payout. A CFP can help you consider which option works best for you and your spouse.

$ Decide what to do with money in your current employer's 401(k) plan. Rolling the money into an IRA may offer more flexibility when you take withdrawals, but some 401(k) plans provide institutional-class funds with lower fees.

$ Simplify your finances. If you have 401(k) plans with former employers, consider consolidating them into an IRA so you can reduce paperwork, review your investment allocation and possibly lower some of your account expenses.

$ Go to www.missingmoney.com or www.unclaimed.org to make sure you haven't lost track of any former employers' pension benefits, retirement plans, bank accounts or other funds.

$ If you have decided on a retirement destination, step up your research. Subscribe to the local paper, talk to real estate agents in the area, and research local hospitals and health care providers.

$ Come up with a plan for charitable giving. Many retirees want to support their favorite causes but don't have a strategy, says David Foster, a CFP in St. Louis. You can do the most good by making scheduled contributions a part of your budget, he says.

Strategy: Create a Bucket System

One of the challenges facing retirees is preserving enough of their savings to protect them from bear markets while keeping enough invested in stocks to stay ahead of inflation. A system that divides your savings into three “Buckets" can solve this dilemma. Set aside enough cash in the first bucket to cover living expenses for the first year or two of retirement that won't be covered by Social Security, a pension and/or an annuity. In the second bucket, invest what you expect to need in the next 10 years in short- and intermediate- term bond funds. The third bucket wilt hold money you won't need until much later, which means you can invest it in stocks and alternative investments. Review your cash bucket annually to determine whether it needs to be replenished from your other buckets. If the stock market takes a dive, you'll have enough in your first two buckets to cover expenses for years, giving your stocks plenty of time to recover.

Over the past year, the Coronavirus created financial problems for many people. Maybe you’re one of them. As you work to regain your financial footing, scammers will continue to try to steer you off course. Here are a few ways to spot, stop, and report payment scams.

# Asked to pay with gift cards? Don’t do it. Gift cards are the most common form of payment people use when losing money to scammers. Scammers often pose as legitimate companies, the government, or someone you know. They tell you to pay with a gift card — but only scammers do that. If you share a photo of the back of a gift card or read the numbers to anyone, your money will be gone. If anyone asks for payment by gift card, it’s a scam.

If You’re Trying To Clean Up Your Credit, you’ll come across plenty of companies offering an easy fix. But any company promising instant results for a price is likely a scam. The FTC says Grand Teton is one of those companies. In its lawsuit, the FTC says Grand Teton tricked people into paying hundreds – even thousands – of dollars for so-called credit repair services. Through websites, sales calls, convincing emails, and text messages, the company allegedly promised to boost credit scores by removing all negative items, among other things, from customers’ credit reports – and also boost scores by adding the customer as an authorized user on other people’s credit cards. But people who signed up with Grand Teton didn’t see a significant change in their credit scores, despite paying hefty (and illegal) up-front fees. And, if consumers complained or tried to get their money back from their bank, Grand Teton allegedly threatened to slap them with lawsuits.

Here’s the thing about credit repair: there’s rarely an instant fix. To clean up your credit and protect yourself from credit scams:

Many people who feel they should have received a stimulus check last year -- or the second one this year -- are still empty handed. While many of us have finally received our portion of the $1,200 check and the latest $600 check, many are still waiting for at least one of them.

You can try calling the IRS to resolve it, and waiting, and waiting, and waiting some more.

But the good news is there is now a very simple way to claim the stimulus you didn't receive, when you file your taxes.

Whether you’re just starting out or starting a new life, information on your background report can determine if you get credit, a job, or even housing. That’s why the law requires background screening companies to take steps to ensure the accuracy of the information they collect and share about you. But some companies don’t take enough of these steps and put together inaccurate background reports that can stand between you and a place to live.

The FTC says AppFolio, a tenant screening company, didn’t have procedures to ensure the information they reported on prospective tenants was accurate. AppFolio allegedly gave landlords reports with incorrect criminal and eviction information, outdated or duplicate information, records for a different name or date of birth, or records that left out important details, like the outcome of a court case. Because AppFolio allegedly didn’t take steps to ensure accurate information, the FTC says applicants may have been denied apartments or other housing.

If you’re looking to rent a place, find out what’s on your background and credit reports and be prepared to correct any errors and resolve any issues with your credit:

Remember when stores ran out of toilet paper, hand sanitizer, and face masks? Well, now COVID-19 is cause for a new shortage: coins. Because of business shutdowns and social distancing, people have been spending cash at stores or restaurants at record low levels. Adding to the shortage, the U.S. Mint has slowed down coin production for a few months to keep employees safe from COVID-19. Now, some businesses are running low on coins and not offering change.

Especially during this time of crisis, dealing with the death of a loved one is hard. Dealing with a debt collector calling about their debts can make it even harder. If you’re in this situation and a debt collector calls, it’s important to know who is responsible for those debts, and what a debt collector can — and cannot — do to collect payment.

Here are some things to know:

A debt doesn’t go away when a person dies. But that doesn’t (usually) mean you owe it, either. The deceased person’s estate owes the debt. If there isn't enough money in the estate to cover the debt, it typically goes unpaid. There are some exceptions, though. For example, you could be responsible if you were a co-signer, or in some cases if you’re the person’s spouse.

Debt collectors may only talk with certain people about a deceased person’s debt. Collectors can discuss the debt with the deceased person’s spouse, parent (if the deceased was a minor child), guardian, executor or administrator, or any other person authorized to pay debts with assets from the estate. The debt collector may not talk to anyone else about these debts. If they don’t know how to reach the right person, they can contact other relatives to ask for the correct contact information. But they can call each person only once, and they can’t get into the details of the debt or ask the relative for payment on these calls to gather contact info.

Debt collectors may not bend the truth to make you pay. Debt collectors cannot lie or imply that you or any other family member legally has to pay the estate’s debts out of your own pocket. It’s illegal for them to harass you to pay the debt yourself. If the deceased left debts and no assets, it’s usually not your responsibility to pay.

You have rights. If you think you don’t owe some (or all) of the debt, or you just don’t recognize it, send the collector a letter disputing it. Be as specific as possible about why you think the debt is wrong – but give as little personal information as possible. Once you get the validation notice (which says how much you owe, to whom, and what to do if you don’t think you owe the debt), you have 30 days to send the dispute letter. By law, the collector then must stop contacting you – though the debt doesn’t go away. But, if the collector sends you written verification of the debt, they can start contacting you again. If the collection calls get to be too much, you can stop them. Just send the collector a letter telling them to stop contacting you and the estate. Keep a copy for your records. Stopping the calls won’t cancel the debt. You still might be sued or have debt reported to a credit bureau.

As the coronavirus shutdown caused businesses to cut staff, a staggering number of Americans filed for unemployment benefits - 26 million people made initial claims over the course of five weeks from mid-March to mid-April. If you're among those dealing with a loss of income, you may be struggling to keep up with bills—or you may anticipate trouble down the road if you can't get back to work soon. Many lenders are providing relief to customers, whether voluntarily or because it's required by new federal mandates, According to a survey from LendingTree, 91% of those who asked for a break on their mortgage or credit card payment because of coronavirus related circumstances got one. The key word is asked. With the exception of federal student loans you generally have to contact your lender to get relief.

Be proactive. Reach out to your lender before you miss a payment. The Coronavirus Aid, Relief and Economic Security (CARES) Act includes a requirement that lenders report your account as current to the credit bureaus; Equifax, Experian and Trans-Union; if you are affected by consequences of the pandemic and are current on your account when you enter an agreement to defer payments, make partial payments or use some other accommodation. The rule applies to agreements made between January 31, 2020, and the later of 120 days after March 27, 2020, or 120 days after the end of the national emergency regarding the coronavirus. To ensure that your credit reports don't reflect negative information that shouldn't be there, you can visit www.annualcreditreport.com to get a free copy of your report from each bureau. Normally, a new report is available only every 12 months, but through April 2021, you can get a report weekly.

Before you call your lender, do some prep work. The Consumer Financial Protection Bureau recommends being ready to talk about your financial and employment status, the amount of your debt obligation that you can afford restart regular payments, and details about your income, expenses and assets. "You might end up sitting on hold for an hour or more," says Sara Rathner, credit card expert for personal-finance website NerdWallet. "You want to make that call worth it."

If you work out an agreement with your lender, get confirmation of the terms in writing, and make sure that you understand them, Your lender may, for example, temporarily reduce your payment or allow you to skip some payments but expect you to later cover the amount that you missed, either all at once or through extended or increased payments. And interest may still accrue on your balance while payments are paused. As the end of the relief period nears, if you don't think your circumstances will improve enough to return to your regular payment schedule, ask the lender if you qualify for an extended program, says Bruce McClary, vice president of communications for the National Foundation for Credit Counseling.

Help for homeowners and renters. As of mid-April, 6% of mortgages were in forbearance (providing a temporary suspension or reduction of payments), compared with only 0.25% in early March, according to the Mortgage Bankers Association. The CARES Act includes protections for homeowners with federally backed mortgages. Almost half of U.S. mortgages are owned or backed by Fannie Mae and Freddie Mac; other federal entities that own or back mortgages include the Federal Housing Administration, Department of Veterans Affairs and Department of Housing and Urban Development. If your loan qualifies, your lender can't foreclose on you for 60 days after March 18, 2020. And if you're suffering financial hardship related to pandemic, you can request up to 180 days of forbearance, plus one extension of up to 180 days. Lenders can’t add extra fees, penalties or interest during the forbearance. If your mortgage is not federally backed, relief is at your lender's discretion unless your state has its own forbearance requirements; but many institutions are offering it.

The CARES Act also mandates that landlords who use federally backed or multifamily loans for their properties cannot evict tenants for nonpayment of rent for 120 days starting March 27, 2020. Plus, some state and local governments have issued their own moratoriums on all evictions. If you can’tpay your rent, talk to your landlord. Even if not required by authorities, he or she may be willing to temporarily trim or halt payments.

Assistance for credit cards and auto loans. Major credit card issuers are generally offering relief, and some have publicly specified certain options in response to the pandemic. Chase allows customers to delay up to three payments and Citi will waive minimum payments and late fees for up to two payment cycles. If your credit-card bills are unmanageable, ask your card issuer what's available through its hardship program, such as a lower interest rate or reduced or suspended payments. Keep in mind that entering a hardship program may come with its own difficulties. The issuer may freeze your credit card, which is problematic if you rely on it for basic expenses such as groceries, says Rathner.

Many auto lenders are also willing to work with borrowers who can’t keep up with payments. Acura and Honda Financial Services, for example, are offering deferrals of up to 60 days and late-payment fee waivers to existing customers.

I can’t pay my mortgage. What are my options?

If the disaster makes it impossible to make your monthly house payments, ask your servicer for mortgage forbearance. A forbearance “allows you to stop making your payments for an agreed-upon time,” says Lisa Tibbitts, director of public relations for Freddie Mac. In a forbearance agreement, you might make partial payments or stop making payments for a specific time. Generally, a forbearance lasts up to six months and can be extended up to another six months. Interest still accrues during the time you aren’t making full monthly payments. But under a forbearance agreement, the lender won’t charge late fees or report you to credit bureaus. The lender will want you to catch up on your missed payments after the forbearance period is over. That might involve paying extra every month for a few years, modifying the loan or reaching some other negotiated agreement.

To talk with a Department of Housing and Urban Development-approved housing counselor before agreeing to forbearance, call 800-569-4287.

Does it seem like your bank charges fees for everything these days? It might be worse than you think. Some banks charge their customers a fee for doing nothing. If you fail to initiate any transactions in your checking, savings or money-market account for periods ranging from a few months to a year, you might get hit with an "inactivity" or "dormant account" fee of $5 to $15 every month until you do. Continued inaction could mean that your bank freezes your account. If you then, say, start writing checks from a frozen account, those checks will bounce, potentially triggering multiple bounced-check fees. Or your bank might close your inactive account, resulting not only in bounced checks but also in a loss of any interest that you thought the account was earning.

Account holders might learn of this only after it has occurred; and then only if they log into their accounts and check their online statements carefully. Many financial institutions no longer automatically supply printed statements.

EXAMPLES
Essential Checking accounts at SunTrust in Florida face a $15 per month fee after 12 months of inactivity. Community Bank in New York and Pennsylvania imposes a $15 per month inactivity fee after 12 months for checking accounts and after 36 months for savings accounts. Commerce Bank, which has locations across the Midwest, imposes a $3 per month fee starting after just 60 days of inactivity for "myDirect Checking" accounts. Citadel Credit Union in Pennsylvania imposes a $15 per month fee when "Free Checking" accounts are inactive for 90 days.

WHAT TO DO
Ask your bank or credit union whether any of your accounts could face inactivity fees and how to avoid them. Consider the following steps...
Set up an automatic, online recurring transfer of a small amount of money into or out of the account each month or quarter.
Use an institution that does not charge inactivity fees like Capital One Bank 360 Checking and various Ally Bank accounts.

5 Signs You Have Too Much Debt

6 Last-Minute Retirement Planning Strategies

By Brian Perry, October 26, 2017 in Retirement as published in Bankrate.com

In a perfect world, everyone would follow a consistent saving and investing plan, allowing them to retire with the same lifestyle they enjoyed during their working careers. In reality, though, many people find they are rapidly approaching retirement age without nearly enough savings. If this situation is all too familiar to you, don’t worry — you still have several options. Implementing these last-minute solutions may not work as well as long-term retirement planning, but it’s better than doing nothing at all.

Save like crazy
Financial professionals recommend that you save 15 percent or more of your income throughout your career for retirement. If you haven’t done so and time is running short, try drastically increasing your savings rate. Reduce your current expenses wherever possible and funnel the savings into your retirement accounts. The IRS makes this easier by offering catch-up provisions that allow people over age 50 to contribute extra money to IRAs and 401(k)s. For example, for the 2017 tax year, the annual contribution limit for an IRA is $6,500 for people 50 and older. Those who are 50-plus may contribute as much as $24,000 into a 401(k) plan.

When buying auto insurance, do you really know what you are getting and why? The language used in auto insurance ads and policies often is misleading or confusing, and can lead you to be under protected or overcharged.

Solution: Do what the insurance industry hopes you won't do; learn to understand the tricky auto insurance terms explained below. Then you will be able to ask the right questions when buying auto insurance... reject the options you don't need ...avoid hidden auto insurance traps...and get the best price for the protections you do need.. . (Availability and details of various types of coverage in this article may vary by state.)

Terms You May Think You Understand But Don't.

What's tricky: New-car replacement can increase your premiums by 15% or more. Plus, the coverage is available for only a limited time for any given car. Example: Ameriprise and Liberty Mutual offer new-car replacement until cars are one-year old or have been driven 15,000 miles (whichever comes first).

What to do: From a financial standpoint, most drivers should skip this coverage. It's unlikely to pay off, considering that there is less than a 1% chance in any given year of having an accident in which one's vehicle is totaled.

“Gap Coverage.” This option often is pushed on people who have made small down payments on their vehicles. It pays the difference between the balance of a loan due on your totaled vehicle and what your insurer pays you if the car is totaled.

What's tricky: What this covers can vary. Example: Most gap coverage does not include your out-of-pocket deductible. However, Allstate's gap coverage pays deductibles up to $1,000. And although gap coverage typically pays off your car loan regardless of your car's value, Progressive's version pays a maximum of just 25% of the car's actual cash value at the time of the accident.

What to do: This might be a cost-effective add-on for some drivers who still owe a lot on their cars because it typically costs just $30 a year and the premium decreases as the vehicle ages. And you can drop it after a few years as you pay off the loan. Before you buy it, be sure to clarify with the insurer the extent of the coverage.

"Decreasing Deductible." This feature, also known as "vanishing deductible," reduces the deductible on your collision insurance without increasing the premium if you remain accident-free. Example: At Travelers, the Premier Responsible Driver Plan will reduce your deductible by $50 every six months that you go without an accident, up to a total reduction of $500.

What's tricky: To qualify, all drivers covered by the policy must remain accident-free. That includes accidents that aren't your fault, such as another car hitting yours. If you have an accident, your original deductible is reinstated and you must reestablish a clean record to qualify for future reductions. This feature typically is available only as part of an upper-tier insurance package that adds 5% or more to your premiums.

What to do: It's not worth that extra cost on its own, so be sure you think it's worth paying for the package, which can include new-car replacement and/or accident forgiveness.

"Accident Forgiveness." This feature helps you avoid a rate increase following your first at-fault accident. Without this benefit, some insurers push up base premiums by 10%, 20% or more after just one accident, and the higher rates can last as long as five years.

What's tricky: The coverage may exclude teenage drivers. If you do have an accident, it may take three to five years to requalify for this feature.

What to do: This essentially is asking you to pay up front for accidents you might have in the future. Avoid this coverage unless you are a very bad driver.

"Appraisal Clause." If you and the insurer can't agree on how much will be paid to repair or replace your vehicle after an accident, this clause allows for the appointment of an appraiser by each side. If the two appraisers can't agree, they can jointly choose a third appraiser as umpire.

What's tricky: Under an appraisal clause, the insurer might be able to force you to accept arbitration rather than take the matter to court. Also, the appraisers may have a conscious or unconscious bias in favor of the insurer.

What to do: You always want to retain the option to get a lawyer and go to court. Twenty-six states prohibit or restrict insurance companies from imposing this type of arbitration on drivers. Check with your state's department of insurance. If your state allows forced arbitration, this is an important consideration in choosing insurers. Check whether a potential insurer includes an appraisal clause in its policy.

"As Defined By Us." This phrase can refer to a variety of different terms or concepts in a policy. Watch out when it's used to give the insurer the right to make its own determination about the proper cost for a repair even if that is a below-market rate. Look for this phrase in the limits of liability section of your policy.

What's tricky: You might be stuck paying the difference if you want to use a repair shop that's more expensive than the insurer deems necessary.

What to do: If you have a favorite auto-repair shop, ask the insurer whether it has approved and paid for work at that shop in the past. If not, find out which shops the insurer knows in your area that will accept its rates and make sure that you are OK with using them... or seek another insurer.

"Collision" And "Comprehensive." You probably already know the basic meaning of these auto-insurance terms, but it's not their meaning that often trips up drivers. Collision includes damage to your car when you hit another car or an inanimate object such as a tree or fence or you drive over a hazard such as a deep pothole. Comprehensive (really not comprehensive in its extent of coverage) covers loss or damage caused by an event other than what collision covers, such as fire, theft, vandalism or hitting an animal.

What's tricky: Despite what many people think, no state requires either of these two types of coverage. What's required by most states is liability coverage, which protects you if you're at fault for an accident and the other car is damaged or if the driver and any passengers in either vehicle are hurt. However, if you have a loan on your car, the lender probably requires that you carry both collision and comprehensive.

What to do: In general, drop collision coverage, which can be about three times as expensive as comprehensive, when the value of your car is less than 10 times the annual cost of the collision coverage. Set aside what you save on your premiums for buying your next vehicle.

“Uninsured/Underinsured Motorist.” This coverage protects you if you're in an accident involving an at-fault motorist who has no insurance (or not enough) to pay for your damages and/or medical care for injuries. Or if the other driver cannot be located (a hit-and-run). If you live in one of the dozen states with no-fault insurance, insurers typically don't offer this option. (In no-fault states, if you are injured in an accident, your auto insurance covers both your vehicle damage, regardless of who was at fault, and your medical expenses through a personal-injury-protection policy that you are required to buy.)

What’s tricky: Of the states that do assign fault in accidents, 23 do not require drivers to have uninsured/underinsured motorist coverage. Insurers in those states generally offer this coverage as two separate policy options—one for uninsured/underinsured motorist property damage (UMP D), the other for uninsured/underinsured motorist bodily injury (UMBI).

What to do: Everyone should consider having UMBI, even in a no-fault state, if the option is offered. Reason: About 15% of cars are uninsured, and many insured cars are covered by low-tier policies with low coverage limits. If you are hit by an uninsured or underinsured driver and incur medical expenses, your UMBI coverage kicks in before your health-care insurance coverage does. That means you typically won't face out-of-pocket deductibles and co-payments. UMBI also will cover some lost wages, depending on the policy, if your injuries prevent you from working and may compensate you for your pain and suffering, which your health-care insurance may not. How much UMBI coverage you need will depend on what other insurance you already carry, including any short-term disability insurance, and the out-of-pocket requirements of your health insurance. Consider getting at least " 100/300" coverage (a maximum of $100,000 for your injuries and up to $300,000 total for injuries to everyone in your car).

"Credit-Based Insurance Score." Yes, there is a score related to your credit that can affect your auto insurance rates.

What's tricky: This special credit score, used by almost all auto insurers, comes from the same company that issues the FICO credit score used by mortgage lenders and other lenders, but it's not the same score. Government studies have shown a correlation between credit scores and the likelihood of filing auto insurance claims. The lower a customer's credit score, the greater the likelihood he/she will make a claim. Car insurers believe that this is because people who manage their money responsibly also are more careful in how they drive. (Note: Three states—California, Hawaii and Massachusetts—prohibit auto insurers from using consumer credit information to determine premiums.)

What to do: You cannot get access to your credit-based insurance score. However, you should monitor your regular credit reports to make sure that they are accurate, and ask to be reevaluated by your insurer if you have found and corrected errors in your reports.

"Multipolicy Discount." Some insurers reduce your auto-coverage premiums as much as 10% to 15% if you buy one or more other types of insurance from them such as a homeowner's policy.

What's tricky: You don't necessarily save money bundling policies. An insurer that specializes in insuring cars may have its homeowner's business handled by a third party and offer uncompetitive rates or less comprehensive coverage.

What to do: Shop for the best rates on comparable policies, including discounts and bundles at various insurers.

You're nothing but a number. That's the title of a book by credit expert John Ulzheimer. Whether you are seeking a good deal on a loan, a credit card or an insurance policy, the number that represents your credit score can determine whether you get it. You can keep your credit score high by avoiding these five common mistakes...

PAYING MORE THAN 30 DAYS LATE

We all know that late payments can sink credit scores. What a lot of people don't realize, however, is that everyone gets a 30-day grace period before any lender can report delinquency to the credit bureaus. Even if you are hit with a late payment fee from your credit card issuer, you still can save your score if you pay within this grace period.

What to do: If you missed a credit card payment, don't panic... but do be sure to pay at least the minimum amount due within 30 days of your original due date, preferably giving yourself a cushion of a few days so that you don't accidentally miss the deadline that would allow a delinquency to be reported.

PLAYING GAMES WITH REVOLVING DEBT

You know that paying only the minimum owed on a credit card invites hefty interest charges and ever-growing debt. But there's another big problem that comes with carrying a revolving credit card balance—even if you periodically pay off that balance. Lenders and the credit bureaus frown upon too much revolving credit card debt and favor borrowers with low "credit utilization ratios" (the percentage of your available credit that you currently are using). In the past, loan applicants with revolving credit card debt could get big bumps in their credit scores by simply paying what they owed in full just before applying for loans or credit.

But now lenders have a new weapon in the form of a 24-to-30- month chronology called "trended data." Trended data reveals whether applicants have consistently carried revolving debt over the past 24 to 30 months. And trended data soon will make it impossible to quickly fix the damage that carrying revolving debt does to your credit score. Fannie Mae, the government backed mortgage giant, already uses this technique, and an updated scoring system called VantageScore 4.0 gives trending data capabilities to all lenders starting in Fall 2017.

What to do: If possible, use credit cards only for purchases that you have the cash to cover, and pay the bill in full—or close to it—each month.

IGNORING LETTERS AND CALLS FROM CREDITORS

If you fall behind on payments, it might be tempting to ignore letters and calls from creditors because eventually they'll give up. That's technically true, but it's not the best outcome that you could achieve. Just because your phone stops ringing doesn't mean that your problems are over. Some lenders eventually will write off some uncollectible debt as a loss, but many times they'll hand it off to collection agencies or sell it to debt buyers, which are likely to hound you even more ruthlessly. A default looks terrible on your credit report and can crush your credit score for up to seven years.

What to do: Don't hide. Engage your creditors. Explain your situation to them, and ask them to work with you by reducing your minimum payments, lowering interest rates, eliminating penalties and/or extending your grace period. This will help to preserve your credit score and prevent default, which is all but inevitable if you ignore your creditors.

LETTING GOOD CARDS COLLECT DUST

Credit-scoring systems like to see lots of unutilized credit. But not using a credit card at all, even if you think of it as an emergency' card, can encourage the card issuer to classify the card as unused. If this happens, the issuer may cancel the card because of inactivity. When this happens, not only does the borrower lose the ability to use that card's credit line, but he/she also forfeits the positive effects of having that available credit. The more unused credit that a cardholder has, the lower his credit utilization ratio is. Scoring systems like to see credit-utilization ratios of no more than 10%.

What to do: For any credit card that you want to keep so that it counts toward your overall credit limit, use it for a small purchase every few months so that it is not canceled. Then pay your bill in full to avoid any finance charges. And if you have strong credit, you might ask a credit card issuer to increase the credit limit on your card so that your overall credit total expands and, as a result, your credit-utilization ratio drops.

LETTING UNPAID TAXES RUIN YOUR CREDIT

Many people think that not paying their taxes and having the government issue a tax lien—which is imposed on a person's property to secure payment of their taxes—won't affect their credit scores because the taxes did not involve borrowing money. This is wishful thinking. Not only are tax liens visible to lenders on credit reports, they also serve as warnings to potential lenders that the IRS has a legal right to the applicant's property, which makes the applicant a greater credit risk. Federal debt generally is in a class by itself, and it includes federally guaranteed student loans. Unlike virtually all other types of debt, unpaid tax liens and defaults on federally guaranteed student loans can stay on your credit report indefinitely instead of just for seven years. Also, almost all debt can be statutorily discharged through bankruptcy; but not tax liens or federal student loans. When the bankruptcy dust settles, they'll still be there.

What to do: Place federal debt and tax liens at the top of your if-you-can-pay-only-one-debt priority list.

This is good advice for anyone. - Webmaster

Terrell Owens originally was famous for his many National Football League records and over-the-top touchdown celebrations. But he's also famous for running through most of the $80 million he made during his 15-year career, thanks in part to bad investments and business deals. "Having a lot of money, it's good, but at the same time you have to be smart with it," Owens said. "You have to really find the right people to help you manage that money going down the road." Sports Illustrated once estimated that 78 percent of NFL players end up broke or under financial stress after they retire. In an interview with NerdWallet, Owens and his friend, Eric Dickerson, the Hall of Fame running back most famous for his time with the Los Angeles Rams, talked about their experiences and what young athletes should know about building a solid financial future.

Some of the challenges players face are unique; not many of us have to grapple with multimillion-dollar signing bonuses. But the destructive financial behaviors that many players demonstrate are also common outside professional sports. Here are some of the ways people sabotage their finances.

THEY ENABLE INSTEAD OF HELP

If you have some money, you may have family or friends who ask for loans, handouts or "investments" in their business schemes. Imagine what happens when you have big money. "Uncles ask for money, aunts, grandmothers, friends, all of a sudden they think it's a free-for-all," Dickerson said. People demanding money often don't know, or care, what the players' other financial obligations are. Players should learn to say no, both out of self-reservation and because unearned money breeds dependency, Dickerson said.

The takeaway: Make sure you can afford to help others. Gifts or loans shouldn't come at the expense of your own obligations, including saving for retirement. Also, be wary of giving money to people who chronically overspend or who aren't taking steps to support themselves. You may want to help, but you could be making things worse.

THEY TRUST THE WRONG PEOPLE
Some athletes get taken by fraudsters such as Robert Allen Stanford, who is serving a 110-year sentence for a $7 billion Ponzi scheme that snared several pro baseball players, or embezzlers like Brian Ourand, who admitted stealing from four athletes, including heavyweight boxer Mike Tyson. Others get fleeced by advisers who are incompetent or enrich themselves at the players' expense.

Too often, people turn over the keys of their financial lives to others and stop paying attention. Owens wishes he had learned about finances even though he was busy setting NFL records with the San Francisco 49ers, Dallas Cowboys and Philadelphia Eagles. "That was one of the biggest mistakes that I did is trusting (advisors) to manage my financial portfolio without keeping a close eye on it," Owens said.

The takeaway: Learn about money and pick a good financial adviser. At a minimum, advisers should have a significant credential such as a certified financial planner, certified public accountant or certified financial analyst. They also need to promise to be a fiduciary, which means they put your interests ahead of their own, and they should pass a background check.

THEY SPEND TOO MUCH
Ask anyone who was unprepared for a big windfall — a lottery win, a lawsuit settlement, an inheritance — and they'll likely tell you the money disappeared faster than expected. Or just ask a typical U.S. worker, who may earn $1 million over a lifetime but fail to save enough for a comfortable retirement.

Athletes can be so dazzled by the money coming that they don't consider the day when it will stop, Dickerson says. Also consider that what an NFL player is promised in a contract is often far more than he actually earns, Dickerson says, as careers may be shortened by injuries or getting cut from a team.

"Football is a sport that you can play really for three to four years if you're an average player. If you're a great player, you may have a 10 or 12 year career, but that's very rare," Dickerson says.

The takeaway: None of us is guaranteed a long career or ever-climbing paychecks. Living below our means during good times is the best way to survive when times are bad. Putting aside money for retirement and emergencies should be top priorities.

NO ONE WANTS TO PLAN for his or her own death. Maybe that’s why about half of Americans don't have a will. But people who die without written instructions force their families to endure potentially long and expensive probate court cases, and could subject minor children to the care of a hated relative. So do your friends and family a favor, and broach the topic of drafting a Will. Here's how to do that gently:

PREP WORK
The first step is to find out exactly how much and what there is to bequeath. So it is crucial to inventory the assets—financial accounts, jewelry, real estate, family heirlooms, and the like. Some financial accounts, such as life insurance policies, and IRA balances can be handed over directly Without reference to a will. It's best to assign or update beneficiaries to those accounts immediately.

OPENING LINE
"I saw what happened to Jill's family when she died without a Will. What can we do to avoid that?" Use a friend's passing (or perhaps news of a court battle over a will-less celebrity like Prince) to ease into the conversation providing some emotional distance. Though inevitable, our mortality is something most of us avoid contemplating. So focus instead on providing for loved ones. Start by deciding whom to include as heirs, and Whom to name as executor, the person responsible for paying claims against the estate and distributing assets to beneficiaries. A trusted friend, relative, or financial institution can play this role. If you're going with a professional executor, remember to set aside funds to pay for his or her fees.

TALKING POINTS
"Kara is old enough to support herself, but what about Jason? Who would look after him if something happens” The single most important aspect of a will is also often the hardest:
Who will take custody of minor children? Consider the personal bond between the child and potential guardian, as well as factors like their location, dependents, age, and other financial Obligations.

Remember:
If you don't make a selection, a judge will make the choice.

"It's tempting to split the money evenly between kids, but what if one is earning a lot more?" "Everyone's default when planning is to treat heirs equally, but fair isn't always equal," says Raleigh, N.C., financial planner Mike Palmer. Typical issues: Did one child receive a gift; say, financial support for an advanced degree—that the others didn't? Should a low-earning child receive more support than a high-earning one? Will biological and stepchildren be treated differently? If you are having difficulty deciding, try asking the heirs directly about what they think would be fair. You don't have to follow their wishes, but their input could help you find common ground.

"Do you feel comfortable giving the children their inheritance all at once? They are still so young who knows what they'd spend it on?"

If you want to influence either the timing of the inheritance or the way it gets spent, you'll need a trust. Incentive trusts can require, for instance, that an heir earn a college degree or pass a drug test before collecting money. Staggered trusts let your estate be paid out over a certain time span.

NEXT STEPS
Hire a lawyer to execute the plan you've outlined. A will drafted by an attorney averages about $375, according to LegalZoom. Finally, tell the heirs. You don't need to spell out how much they'll inherit, but you should talk about big decisions you've made. Says Cincinnati financial planner David Nienaber: "People are more upset when you die and they're left to figure out with their siblings why you did what you did."

In the world of credit cards, almost everything that you are told can be confusing or misleading and that includes ads, promotional offers, the contract you sign and even your monthly statement. And credit card issuers like it that way. Don’t let credit card companies fool you. Here are 10 tricky terms that credit card applicants and users need to understand...

“Grace period.” A credit card’s grace period is the time between the end of its monthly billing cycle and the date when payment is due. Many people think they have “a month,” but by law, grace periods can be as short as 21 days. Pay your bill before this grace period ends, and you typically will not face interest charges.
* What’s tricky: Grace periods generally do not apply if you carry a “revolving balance” on the credit card, that is, if you failed to pay off the entire balance by the end of the prior billing cycle.
* What to do: Pay off your credit card balance in full whenever possible. Having even a tiny balance left over at the end of a monthly billing cycle means interest charges will be imposed not only on this balance but also on new purchases made during the following billing cycle starting the day that those purchases are made.

“Due date.” This is the day by which your credit card payment must be received.
* What’s tricky: If you have been carrying a balance on a card, waiting to pay close to the due date even if you pay on time and in full, will cost you money. That’s because credit card interest compounds daily, so every day you wait to pay means additional interest.
* What to do: If you carry a balance, pay as soon as possible rather than waiting until the due date nears.

“0% interest rate.” Credit card promotions often promise that you will pay 0% interest, usually referred to as an “introductory” rate, for a certain period which sounds like a no-lose proposition.
* What’s tricky: The 0% rate might not apply to both new purchases and balance transfers (see below), and it almost certainly won’t apply to cash advances. If you’re late with a payment, your 0% rate could skyrocket, potentially all the way to a “penalty” rate that could be 25% or higher.
* What to do: Read the fine print of any 0% offer so that you understand exactly what this rate does and does not apply to it can vary widely from offer to offer.

“0% on balance transfers.” This is similar to the 0% purchase rate discussed earlier except that it applies specifically to a balance transferred from a different credit card, not to new purchases.
* What’s tricky: A 0% balance transfer rate does not mean a balance transfer will have no cost. Most card issuers impose a “balance-transfer fee,” typically around 3%. The other tricky aspects of 0% rates discussed above apply here, too.
* What to do: Use a balance transfer calculator (such as WalletHub.com/balance-transfer-calculator) to make sure it’s worth paying the card’s balance transfer fee. Or apply for a card that offers an introductory 0% interest rate on balance transfers and charges no balance transfer fee for some period a recent example is the Chase Slate card.

“5% cash back.” So-called cash-back cards offer small refunds on purchases, generally 1% or 2%, but card issuers know that there’s something compelling about increasing the offer to 5% back.
* What’s tricky: Cards that offer 5% cash back inevitably do so only with purchases in certain spending categories and usually up to a preset limit. Even worse, these spending categories might change every few months, and cardholders might have to contact the card issuer to “opt in” to the savings each time they do. It’s easy to lose track, and lots of cardholders don’t end up getting nearly the amount of cash back they envisioned when they signed up.
* What to do: If you don’t want to have to jump through hoops, choose a cash-back card such as Citi Double Cash that offers 2% cash back on virtually all purchases. If you tend to carry a balance, skip rewards cards entirely and instead choose a card that offers a low interest rate.

“Deferred interest.” Retailers sometimes advertise special programs that allow shoppers who use store branded cards to pay “no interest if paid in full within six [or 12] months.” These “deferred-interest” offers can be a good way to postpone payment.
* What’s tricky: If you do not pay off the whole balance by the end of the deferred interest period, you will be charged interest retroactively to the date of purchase on the entire purchase amount losing all the advantage of the offer.
* What to do: Take advantage of a deferred-interest offer only if you are certain you will pay off the bill in its entirety by the end of the deferred interest period. Do not make additional purchases using this store card until you have paid off the deferred interest purchase. Otherwise your payments to the card issuer might be applied to these additional purchases, making it more difficult to pay off the deferred interest balance by the deadline.

“Convenience checks.” Credit card issuers sometimes send their cardholders blank checks that they can use to obtain cash, pay off other cards’ balance, or make payments in places where credit cards are not accepted.
* What’s tricky: If these checks are used to obtain cash or make payments, your credit card’s cash advance interest rates likely will apply and these rates typically are very high, often 25% to 30%. You likely will be charged this interest rate starting the day that you use the check with no grace period and probably will be charged a fee as well, often 5% of the check amount. If the marketing materials provided with the convenience checks cite attractive terms, such as “0% interest,” these terms almost certainly apply only if the checks are used to transfer balances from other cards.
* What to do: Understand that the word “convenience” is intended to put you off guard. Do not use convenience checks to obtain cash or pay bills.

“Preapproved.” Consumers often receive marketing materials from credit card issuers informing them that they have been “preapproved” (or “preselected”) for a card.
* What’s tricky: “Preapproved” does not mean that you already are approved to receive the card. If you apply, you still could be rejected or approved under less attractive terms than described in the marketing. And because applying for a credit card can reduce your credit score, you could lose two ways if you are swayed to apply by a “preapproved” promise.
* What to do: Apply for a card because that card offers rates, rewards or other features that are better than the cards you already have, not because an issuer tells you that you’re preapproved.

“Foreign-transaction fee.” Most credit cards impose a fee, often between 2% and 4% of the purchase, when transactions are made outside the US.
* What’s tricky: Foreign transaction fees can apply even to purchases made in the US if the company you buy from is based abroad as many Internet retailers are.
* What to do: Use a card that charges no foreign-transaction fees at all. These include cards issued by Capital One, Discover and certain cards from other issuers.

“Currency conversion.” When you use a credit card to pay for something in a foreign country or to buy from a merchant in a foreign country when you are in the US, the merchant might offer to convert the purchase into US dollars as part of the purchase transaction rather than have the credit card issuer do the conversion.
* What’s tricky: If you agree to this currency conversion, the merchant likely will charge you a fee and/or impose an unfavorable exchange rate. You might end up paying 3% to 7% more than you expected and that’s on top of any foreign transaction fee that might be charged by your card issuer.
* What to do: Just say no when asked by a merchant whether you want a purchase converted into US dollars. Your credit card issuer will automatically convert the purchase into dollars on your credit card statement at a more favorable rate.

That offer you get in the mail to transfer your high-interest credit card debt to a card with a 0% introductory rate could cost you more than the original card. To avoid problems...

One of the most appealing features of a traditional individual retirement account (IRA) is that you don’t pay income tax on any investments until you withdraw the money, right? Well, in some cases, wrong!

Many investors are running into surprise tax bills because instead of limiting their IRAs to stocks, bonds and mutual funds, they have added so-called alternative investments. These include master limited partnerships (MLPs), which generally own and operate oil and gas pipelines, as well as hedge funds and private-equity funds. Many IRA custodians, including Fidelity and Charles Schwab, now allow customers to hold such investments in their accounts. When these investments generate income from businesses they own and pass it along to investors, the IRS considers the money taxable even if it is in a traditional IRA or a Roth, Simple or SEP IRA. Such income is known as “unrelated business taxable income” (UBTI). In addition, income you get from any real estate you own that is debt-financed qualifies as UBTI.

How UBTI affects your taxes: If your IRA earns more than $1,000 in UBTI in any calendar year, a tax return for your IRA must be filed. UBTI is subject to the tax rate for trusts. The maximum trust tax rate of 39.6% is triggered at $12,500 in income. The IRA also may be required to file quarterly estimated tax payments the following year. And even if the UBTI is taxed when it is generated, if that income is in a traditional, Simple or SEP IRA (but not a Roth), it will be taxed again at your personal income tax rate when it is withdrawn from the IRA.

Self-defense: If you plan to own an alternative investment in an IRA…

Discuss potential purchases with your tax adviser. You need to understand how much UBTI the investment may generate based on past years and keep a certain amount of liquid assets in your IRA because any taxes due must be paid directly from the IRA.

If the investment generates UBTI, make sure that the custodian that oversees the IRA files a tax return for the IRA and remits any taxes the IRA owes. Otherwise, the IRA could be hit with substantial late-payment penalties.

You might not be surprised if your homeowner’s insurance premium is increased after you file a costly claim. But did you know that the insurer might go a step further and cancel your coverage or refuse to renew it? And it isn’t just claims that can torpedo a policy. Insurers sometimes terminate a policy or raise premiums to prohibitively high levels for much more surprising reasons; ranging from a drop in your credit score to your purchase of a trampoline to a broken gutter. Having a policy terminated can be more than a minor inconvenience. When you seek to replace your policy elsewhere, other insurers might quote very steep premiums or decline to offer coverage at all. That’s because when an insurer terminates a policy, the insurer typically notes that it has done so in a database that other insurers check before approving applicants. That policy termination can scare off other issuers.

Here, seven surprising reasons your homeowner’s insurance could be terminated or your premiums pushed up…

Things Seemingly Unrelated to Your Home (or to You)

Credit score. A drop in your credit score could result in nonrenewal of your policy or a dramatic increase in your premiums. How dramatic? In 37 states, people with poor credit pay more than twice as much as people with excellent credit, on average, according to a 2014 study. Only three states; California, Massachusetts and Maryland; prohibit homeowner’s insurance issuers from considering credit scores. (Credit scores also seem to have little effect on homeowner’s insurance in Florida.) Insurers have determined that people who are responsible with credit also tend to be responsible with home maintenance and make fewer claims. If your insurer tells you that your credit score is among the reasons your policy is not being renewed or your rates are rising, examine your credit report for any inaccurate information that might be unfairly pulling down your score. (You can obtain a free copy of your report each year at AnnualCreditReport.com) If you find inaccuracies, inform your insurer of this and ask whether it would reconsider its decision if you get the problem sorted out. If not, resolve the credit problem as quickly as possible and then ask to be “re-rated” by the insurer.

Helpful: If there is no easy way to improve your score, apply for homeowner’s coverage through small and midsize regional homeowner’s insurance issuers, which are less likely to check scores. An insurance shopping website, insurance broker or your state department of insurance could help you locate these smaller issuers.

Driving infractions. Believe it or not, speeding tickets can affect your homeowner’s insurance. Insurers have concluded that irresponsible drivers tend to be irresponsible home owners, too. There are no hard-and-fast rules here, but if you get more than two moving violations that put points on your driving record in a year—or even one serious citation such as for a DUI; you could have trouble maintaining your homeowner’s insurance at a reasonable rate. It’s worth investigating whether your state offers any way to quickly remove some of the bad-driving “points” that will appear on your record, such as by taking a driver-safety course. It’s these points; not the violations themselves; that can catch the notice of homeowner’s insurance providers.

Insurance claims by your home’s previous owners. If the home’s previous owners filed multiple claims, that could increase the risk that your policy will not be renewed if you make even one or two claims. This is particularly likely if the claims are similar and point to a serious underlying problem with the home, such as wiring issues that have led to multiple fires.

What to do: If you have owned your home for less than seven years, request the property’s Comprehensive Loss Underwriting Exchange (CLUE) report. You can obtain this report for free as often as once per year at PersonalReports.LexisNexis.com (select “Insurance Report” under “FACT Act Disclosure Reports”). If you discover multiple claims by the prior owners, you should consider that an additional reason to pay for covered repairs of modest size out of pocket rather than file claims. (By law, CLUE reports can include claims only up to seven years old—less in some states—so if you have owned your home longer than that, there’s no reason to check for former owners’ claims.)

Helpful: Before purchasing a home, insist that the seller provide you with the property’s CLUE report. This report could point to underlying problems.

Things that Might Seem Inconsequential

Small claims. It isn’t just big claims that scare off home insurers. Repeated small claims can lead to termination, too. Insurers sometimes consider policyholders who file repeated small claims to be nuisances who are not worth the trouble.

What to do: Increase your deductible to at least $1,000 and preferably $2,000 or $2,500 to remove the temptation to make small claims. Use the money this saves you in premiums to pay for minor home repairs.

Asking questions. Call your insurer to discuss the possibility that making a claim could lead to an entry in your CLUE report. Having a number of CLUE entries that your insurer deems excessive can cause nonrenewal. Do not contact your insurer to discuss a potential claim unless it is extremely likely that you actually will make a claim. If you feel you must call your insurer to discuss the possibility of making a claim, speak in hypothetical terms and make it very clear that you are not currently making a claim. Example: “I’m not filing a claim, but in theory, if someone had the following happen, would it be covered?” There is anecdotal evidence that phrasing things this way reduces the odds that the call will be logged into your CLUE file, though it still is possible.

Home-maintenance issues visible from the road. Your insurer might be watching you. Insurers sometimes conduct unannounced drive-by inspections of properties. If your property is deemed to have maintenance issues, you might receive a letter threatening cancellation or nonrenewal if repairs are not made within 60 or 90 days. Inspectors often focus on things such as missing shingles or broken gutters that can lead to greater home damage and insurance claims, but even basic upkeep issues such as an unmowed lawn could trigger unwanted insurer attention. To insurers, such things can be signs that the home is not being well-maintained in other, more important ways.

Warning: It is especially important for landlords to keep the portion of property that is visible from the road well-maintained—drive-by inspections of rental properties are particularly common.

Trampolines, tree houses, swimming pools and dog breeds that are considered dangerous. Many home owners do not realize that their policies require them to inform the insurer if they obtain one of these potential liability risks. Some policies prohibit these things altogether or have detailed rules that must be followed if they are obtained; perhaps a fence is required around a pool, for example. Read your homeowner’s policy carefully before obtaining any of these things.

Similar: Many homeowner’s policies restrict or prohibit renting out the home, such as through Airbnb. Violating this rule could result in policy cancellation or nonrenewal.

What to Do If Your Policy Is Terminated Homeowner’s insurance policies can be terminated through either cancellation or nonrenewal. Cancellation means that the policy is ended during a contract period. Nonrenewal means that the insurer declines to continue covering the property when the policy term expires. Issuers generally must provide at least 30 or 60 days’ notice. Start shopping for a new policy as soon as you learn that your current one is ending; other issuers might be wary once the termination is on your record, so it might not be easy for you to find coverage at an appealing rate. If all the quotes you receive are significantly higher than what you previously paid, also contact your state’s insurance department to see if it has a high-risk insurance pool for home owners. (To find it, go to NAIC.org, select “Map” and then click on your state.) This coverage could be expensive and/or limited, but it might be your best option if private issuers do not want your business.

Collection agencies often buy up delinquent loans and unpaid bills from many years ago and then demand payment from the debtors. But the “zombie debts” these collection agencies try to bring back to life often are so old that consumers have little memory of the bills and whether they were paid. The collection agencies also might add steep fees and penalties. Sometimes they target the wrong person, harassing someone who simply shares the real debtor’s name.

If you receive a call from a collection agency about money that it says you owe from years ago…

Request a letter. Say, “Please send me the details about this debt in writing. It is not convenient for me to discuss this right now.” Collection agencies usually phone, but federal law requires that they provide details in writing within five days of your request. They also are barred from calling when it is inconvenient for the debtor, so saying “not convenient” should end the call.

Warning: Even if you know that the debt is yours, do not admit this fact and don’t agree to make even a tiny partial payment. This could reset the clock on statute-of-limitations laws, making it possible for collectors to sue you over this debt (more on this below). And do not believe a debt collector who claims that you will face additional penalties if you don’t immediately make at least partial payment—this often is an outright lie, and even if the collection agency does tack on an additional penalty, it almost certainly will agree to waive that penalty if you do eventually agree to pay the debt.

When you receive the letter, if you have any doubt at all about the validity or size of the debt, research it. Go through your old bank or credit card records and loan-payment receipts, etc., or contact the original biller to try to determine whether the debt is truly yours and whether you already have paid it. Try to confirm the size of the debt, too—collection agencies often tack on penalties and interest fees without disclosing that they have done so.

Next, try to determine whether the statute of limitations on the debt has expired. These laws vary by state and type of debt, but in many cases, the collection agency cannot legally sue for repayment if the debt went into default more than four to six years earlier, though there are exceptions. If you live in a different state than you did when you originally incurred the debt, it might be especially difficult to determine whether the statute of limitations has expired—in these ¬cases, it is up to the courts to decide which state’s laws apply. And in some cases, the original biller might have designated in a contract you signed that the laws of a different state would apply.

Of course, the fact that the statute of limitations may have expired so that you cannot legally be sued for ¬repayment would not mean that you do not have a moral obligation to pay a debt you owe. But it does dramatically improve your negotiating position if you cannot determine whether you truly owe the money…or if the collection agency is trying to tack penalties and fees onto the bill.

Helpful: Entering the following into a search engine will produce details for many, though not all, states’ statutes of limitations. Type “site: NationalList.com”…the name of your state…“statute of limitations”…and “consumer debt.”

Send the collection agency a certified letter explaining why the debt is not owed; or call and negotiate a payment. If the debt is not yours or already has been paid, explain this in simple terms in your letter—for example, “This debt is not mine. You have the wrong person” or “My records indicate this debt was paid on February 8, 2010. I have enclosed a copy of the check.” Be sure to include evidence that the debt is not yours (such as a different Social Security number than the one associated with the debt)…or that the debt has already been paid…or that the statute of limitations has expired. Also write, “Please do not contact me again.” Save a copy of this letter. Once you have told a collection agency not to contact you, it is legally barred from doing so unless it needs to inform you that it is suing.

If the debt is valid, negotiate before paying anything. Collection agencies often reduce balances, including interest and fees, on old debts. If the statute of limitations on the debt has expired, you are in an especially powerful negotiating position—make it clear to the collection agency that you know about this expiration.

What to do: Insist on written confirmation that once you make the negotiated payment, the debt’s balance will be listed as zero—and do not send any payment until you have received this confirmation. Since there is no clear-cut rule or law governing e-mail in an attempt to collect a debt, it is best to write a letter and send it by certified mail with return receipt.

If the collection agency sues you, show up in court to challenge it. Collection agencies generally are required to sue in a court system that is geographically convenient for the debtor. And you do not necessarily need to hire a lawyer. Many consumers who show up in court to plead their case are successful in having the debt dismissed. If you do not show up, the judge might issue a “default judgment” in the collection agency’s favor even if the debt is not legitimate.

Source: Gerri Detweiler, head of market education for Nav.com, a website that provides financial information for small-business owners. She has testified before Congress on consumer credit topics and is coauthor of the free e-book Debt Collection Answers. DebtCollectionAnswers.com

In September 2014, President Barack Obama and First Lady Michelle Obama dined at Estela, a New York City restaurant. The meal went well until the president’s credit card was declined. If the US president can have a card declined, it can happen to anyone, and occasionally it does, not just for a missed payment or breach of the credit limit but increasingly for reasons that have little to do with irresponsible card use. Having a charge declined can be mildly inconvenient, or it can cause a major disruption such as when you are traveling. Here are potential causes and how to reduce the odds that they will result in a rejection...

You make a purchase that does not fit your usual spending patterns.
Software is monitoring cardholder spending more closely than ever to prevent fraudulent charges by thieves. But it sometimes declines legitimate purchase s. Particularly likely to be declined are...
Purchases made in geographic areas — inside and outside the US—where the cardholder doesn’t typically shop.
Purchases larger than normal for the cardholder.

What to do: When possible, alert your card’s issuer before making purchases that are unusual for you, and especially if you will be traveling outside the US. If a charge is declined and you suspect this could be the cause, try a different card or try to contact your card issuer on the spot to straighten things out.

Hotel and car-rental “holds” have pushed you over your credit limit.
Hotels and car-rental companies often place temporary “holds” on a portion of a customers’ credit line to ensure that there will be enough credit available when the payment is processed. These holds can last for weeks and might be for hundreds of dollars more than the actual charge; the merchants want to protect themselves in case customers incur larger bills than expected. If you have several large holds in quick succession, it could push you over your card’s credit limit even if you haven’t spent more than that limit (Gas stations often impose holds, too, but these tend to be more modest in size and duration.)

What to do: If you spend money on hotels and/or car rentals multiple times within about a month, spread these charges among several cards or use a card that has many thousands of dollars of additional credit limit available. Or contact the issuer of the card that you wish to use prior to making charges that are likely to involve holds. Explain the situation, and ask whether your credit limit can be increased.

Your credit limit has been slashed.
Issuers occasionally cut a credit limit even though the cardholder has never missed a payment or broken a rule. This tends to occur when the cardholder has recently applied for multiple new cards; or when something negative pops up on a credit report; even it the credit report listing is in error.

What to do: Read the notices that you receive from your credit card issuers, or at least skim them, for any mention of changes to your credit limit. Issuers must provide 45 days’ written notice before reducing a credit limit.

Bottom Line Personal interviewed Bill Hardekopt, CEO of LowCards.com, which helps consumers compare credit cards. He is coauthor of The Credit Card Guidebook. LowCards.com

Retirement is not “golden” for all seniors. More than 25 million Americans age 60 and older are living with limited assets and incomes below $30,000 per year. And even with a higher income than that, it can be difficult to make ends meet. There are numerous financial- assistance programs, both public and private, that can help struggling seniors, as well as give relief to family members who help provide financial support for their loved ones. And because of a comprehensive resource called BenefitsCheckUp.org, a free service of the National Council on Aging, locating these benefits and applying for them have never been easier. The website is a confidential tool designed for people age 55 and older and their families. It includes information on more than 2,000 programs. Many are available to anyone in need who qualifies, while others are available only to older adults and can help them retain their independence. To use the site, you enter basic information about the person in need; date of birth, zip code, and check boxes for what the person needs assistance with. The site generates a report instantly, listing links to the programs and services that the person may qualify for. Some assistance programs can be applied for online, some have download-able application forms to be printed and mailed, faxed or e-mailed in, and some require that you contact the program’s administrative office directly. It’s also possible to get help in person at a Benefits Enrollment Center. There currently are 36 centers in 24 states, with 12 more centers being added in 2016. Visit NCOA.org/centerforbenefits/becs to locate a nearby center.

TYPES OF BENEFITS
Here are some benefits that a senior may be eligible for...
Food assistance. Programs such as the Supplemental Nutrition Assistance Program (SNAP);previously known as “food stamps”; can help pay for groceries. The average monthly SNAP benefit currently is around $126 per person. Other programs that may be available include The Emergency Food Assistance Program (TEFAP), Commodity Supplemental Food Program (CSFP), and the Senior Farmers’ Market Nutrition Program (SFMNP).
Health care. Medicaid and Medicare can help or completely pay for out- of-pocket healthcare costs. And there are special Medicaid waiver programs that provide in-home care and assistance. Prescription drugs. There are hundreds of programs offered through drug companies, government agencies and charitable organizations that help reduce or eliminate prescription drug costs, including the federal low-income subsidy known as “Extra Help” that pays premiums, deductibles and prescription copayments for Medicare Part D prescription drug plan beneficiaries.
Utility assistance. There’s the Low Income Home Energy Assistance Program (LIHEAP), as well as local utility companies and charitable organizations that provide assistance in lowering home heating and cooling costs.
Supplemental Security Income (SSI). Administered by the Social Security Administration, SSI provides monthly payments to very-low-income seniors, age 65 and older, as well as to people of any age who are blind or who have disabilities. SSI pays up to $733 per month for a single person and up to $1,100 for couples. In addition to these programs, there are numerous other benefits that are available such as HUD housing (affordable housing for low-income families, the elderly and people with disabilities), tax relief, veterans’ benefits, respite care (short-term care that gives regular caregivers a break), and free legal assistance.

What would happen if you or someone close to you could no longer drive? Here’s a rundown of transportation solutions...
Family and friends. Include all possible candidates you might call on for rides, and determine their availability and contact information.
Volunteer-driver programs. These types of programs—usually sponsored by nonprofit organizations that serve seniors and people with disabilities— typically offer flexible transportation to and from doctor appointments, shopping and other activities. Many charge a nominal fee or suggest donations, though some are free.
Examples: The Senior Corps Retired & Senior Volunteer Program (National Service.gov/programs/senior-corps/ rsvp), which offers volunteer-driver services in communities around the country, provides free transportation primarily to and from medical appointments. ITN America (iTN America.org) includes transportation programs in about 20 areas across the US and has more in development. It charges riders age 60 and older and visually impaired adults of any age annual membership dues of around $50, plus a $4 pick-up fee and a mileage fee of around $1.50 per mile.
iTN America programs (see above) offer a car trade-in program that lets you convert your car into a fund to pay for future rides, and a car-donation program that provides a tax deduction if you itemize on your tax returns.
Paratransit services, also called “dial-a-ride” or “elderly and disabled transportation services,” often are government-funded programs that charge a small fee, typically ranging from $0.50 to $10 per ride. Some serv ices may be free for people who can’t afford to pay. To locate a paratransit service in your area, contact your Area Agency on Aging (call 800-677-1 116 or visit ElderCare.gov).
Ride-sharing services. The two biggest ride-sharing services are Uber and Lyft, which operate in major cities across the US. You request a ride from a driver who uses his/her vehicle to transport you. Ride requests with Uber are made using the Uber smartphone app or at the Uber mobile website... with Lyft, you use its smartphone app only. Costs are comparable to taxi fares.
Private transportation services. Some hospitals, health clinics, senior centers, adult day centers, malls and other businesses offer free transportation for program participants or customers. And some nonmedical home-care agencies offer fee-based transportation services. Two excellent resources for finding local transportation options include your local Area Agency on Aging (see above) and a nonprofit service called Rides in Sight (855-607-4337, Rides InSight.org).

By J. Robert Hunter, Consumer Federation of America, as published in BOTTOM LINE PERSONAL October 1, 2015

Few home owners fully understand their homeowner’s insurance. The policies are written in in dense legalese... and many policyholders don’t even try to wade through them. As a result, many people are mistaken about their rights when dealing with insurers and are unaware of gaps in their coverage, some of which could cause financial ruin. This problem is growing worse— insurers have made crucial changes to policies that have escaped notice of many customers. Five common and potentially costly insurance myths...

Myth: If my home is destroyed, my insurance will pay what it costs to rebuild. Prior to Hurricane Andrew, which devastated parts of coastal Florida in 1992, most policies provided “guaranteed replacement cost coverage” that financed reconstruction whatever it cost. But this guarantee is no longer included in the vast majority of policies. These days, most policies cover only up to the dollar figure specifically listed as the cove rage amount or occasionally a bit more.
   Example: State Farm policies typically cover up to 20% above this amount. Even home owners who are aware of this change tend to assume that they are safe as long as the coverage amount listed in their policy is in line with the typical cost of rebuilding a home such as theirs. Unfortunately, because of a phenomenon called “demand surge,” that might not be sufficient if your home is destroyed in a major disaster. When many homes in an area require repairs, the cost of building supplies and labor tend to skyrocket—some insurers also have been eliminating “building code coverage” from policies. When a home is more than 50% destroyed, it must be rebuilt according to current building codes, not the codes that were in effect when that home was originally constructed. Without building code coverage, a policy will not pay any added costs involved with upgrading to stricter codes.
   What to do: Ask your insurer whether it offers a “demand surge” rider, especially if your home is in an area where hurricanes or wildfires are common— these are the disasters that most often cause sharp spikes in building costs. Ask at your town office whether any building code changes have taken effect since your home was built that would make it much pricier to rebuild the home today. If so, ask your insurer if it offers a code coverage rider.

Myth: Home owners must hire a contractor willing to do repairs for the amount the insurer says it will cover.
Your insurer says a repair can be done for a certain amount, but the contract or you want to use says it will cost more. Policyholders often assume that their only option is to work with the low-cost contractor recommended by the insureror to hire a lawyer and take the insurer to court, an expensive and uncertain proposition that most people prefer to avoid. However, it sometimes is possible to convince an insurer to pay the amount a contractor wants without resorting to lawyers.
   What to do: Contact your insurer’s claims department. Explain that your contractor is quoting a higher figure, and ask to have this amount covered. If the insurer refuses, ask to speak to a claims department manager and repeat the request. If the answer still is no, call your contractor and ask if he/she can contact your insurer on your behalf. Veteran contractors often have experience negotiating with insurers. Meanwhile, keep careful notes whenever you speak to your insurer’s adjuster, other insurance company employees, your contractor and anyone else involved. If your contractor cannot work things out for you, mail a letter to the claims department manager explaining unemotionally why you don’t believe you are being treated fairly. Include a detailed record of what you believe to be missteps by the insurer, such as dramatic ally underestimating the cost of specific building supplies or even times the adjuster missed appointments. Insurance executives often back down when they receive letters showing that the policy holder is too savvy to be pushed around.

Myth: Homeowner’s insurance protects against losses from most types of disaster except for floods and earthquakes.
Home owners who live in or near flood zones or earthquake-prone areas generally are aware that they are not financially protected against these types of disasters (unless they pay extra for flood insurance or an earthquake rider). And they may be aware that insurance doesn’t protect against such unlikely cataclysms as nuclear explosions or war. But many home owners are unaware that damage caused by other, more mundane types of disasters, such as mud slides, landslides, sinkholes and riots (germane to some urban areas), is excluded as well.
   What to do: Many insurers offer sinkhole, landslide/mud slide and riot riders for an added charge, generally well under $1 per $100 of coverage.

Myth: My homeowner’s insurance will pay the bills if someone is injured on my property.
Not always—there are some big gaps in the liability component of homeowner’s insurance. Your policy does not cover injuries to members of your household, for example. Policies generally do not cover injuries to people who visit your property for business purposes, either. And policies increasingly exclude injuries related to trampolines, tree houses and zip lines—some insurers won’t cover home owners who have these things at all. Other potential backyard hazards including swimming pools, hot tubs and climbing structures generally are covered—if they are disclosed to the insurance company and higher premiums are paid.
   What to do: If you have a home business, purchase commercial liability coverage or add a home business rider to your homeowner’s insurance policy. This is particularly important if clients, employees or delivery people visit the property for business reasons. (Adding a rider to an existing homeowner’s insurance policy usually is the less expensive option, but these riders sometimes have low coverage limits.) If you intend to rent out your home, contact your insurer to ask if your liability protection extends to paying guests. If not, you could rent out the property through a service such as Airbnb that provides liability protection to property owners... or purchase coverage specifically for rental properties from a company such as CBIZ (CBIZ.com) or Peers Marketplace (Peers.org).

Myth: Since I never bothered to make a record of my possessions, now that I’ve had a fire there’s no way for me to get compensated for all of the things I lost.
It certainly is wise to document your possessions before you ever suffer a fire (or burglary or flood or other disaster). It is much less likely that you will obtain the full amount you are entitled to for your lost property if you cannot remember everything you lost. . . or you cannot prove what you lost to the insura nce company, opening the door for it to question your claims. The easiest way to document your possessions is to simply walk through every room of your home with a digital camera, or even a smartphone, and record video. But all is not necessarily lost if you neglected to do this before suffering a big loss.
   What to do: If you have extensive damage to your home, go through the digital snapshots and videos you have taken in your home and uploaded to social-media accounts, shared with family members or backed up to the cloud. Ask family and friends who have come to your house for parties to forward to you any pictures or videos they took.

Shopping for Christmas and the New Year sales I thought I was going to wear out my bank card. A lot of merchants are having trouble getting the software for your new chip cards to run correctly. I only found 2 or 3 merchants to be able to accept chip cards out of the dozens of places I shopped. The only problem I had was one retailer who did not have the chip reader working, passed on the service charge (SVC) of 3.25% that their service provider was charging them for not having the chip card reader working to me without my prior consent.

OOOPPS! ! That is against the rules! The merchant can not add any charge to your total after you sign the receipt. What happened to me is my copy of the cash register receipt stated $123.45, and the cashier stated 'Your total is $123.45'. BUT my copy of the receipt from the credit card machine had an additional charge – SVC $12.34, and the total charged to my card was $135.79 I just made up these numbers for illustration purposes.

So check both receipts for matching amounts. If you get a single receipt, make sure your total amount charged to your card is correct and there are no extra charges added on after you were told the total amount. I have started to ask merchants if there is an extra fee for non-chip cards. Every retailer I asked looked horrified and said no.

If you find an unauthorized charge on your card dispute it. Call your card issuer and dispute just that charge.

By: Scott M. Estill, JD as Published in the Sept. 15, 2014 Bottom Line Personal Newsletter

You paid your taxes—but now the IRS says that you owe more. Each year, the IRS sends out millions of notices requesting additional payments from taxpayers who made math errors on their returns…neglected to report certain income…claimed tax credits or deductions that they were not entitled to…or made other mistakes.

But what if your tax return was right and it’s the IRS that’s wrong?

Taxpayers who receive notices from the IRS tend to just pay what they’re told they owe. But most IRS notices are generated by computers—computers that sometimes misinterpret data. And even if a notice was sent by an actual IRS agent, that agent might have misinterpreted the tax code. Taxpayers truly can take on the IRS. In fact, this June the IRS adopted a “Taxpayer Bill of Rights,” a list of 10 rights—including “The Right to Challenge the IRS’s Position and Be Heard.”

Here, a five-step plan to fight an IRS notice that you believe to be wrong…

Step 1: Look for instructions in the notice itself about what to do if you disagree.
Believe it or not, following these instructions often is all it takes to get a matter cleared up in your favor, particularly when the matter is fairly clear-cut—the IRS thinks you earned more from your employer than you actually did, and you have the W-2 to prove it, for example. But you should follow the instructions exactly.

Typically, you can check a box on the notice stating that you disagree…add a short note explaining why you ¬disagree…attach copies of any supporting documents…then return this section of the notice to the IRS mailing address listed. Send these materials—and any other letters to the IRS—by the deadline via certified mail with return receipt requested.

A short, to-the-point explanation will be more effective here than a long one.
Example: “My total income from ABC Corp was $50,000, not $100,000, and was fully reported on my tax return. Enclosed is a copy of my W-2.”

Be sure to keep copies of all your correspondence with the IRS.

Step 2: Decide whether it’s worth hiring a tax professional to assist you.
The key factor here is how much money is at stake. If the IRS is asking for a few thousand dollars or less, you’re probably better off not hiring an enrolled agent, CPA or tax attorney. There’s a good chance that you would have to pay that tax pro a few thousand dollars to challenge an IRS notice — potentially more with a tax attorney — even if the case appears straightforward. It is not worth spending that much money unless a significantly larger amount is at risk.

Step 3: Request supervisor involvement.
If you receive a notice that -rejects your challenge and it mentions a specific IRS employee, call this agent and very politely ask to speak to his/her supervisor—there’s probably no point in discussing it any further with the IRS employee mentioned by name, because he is the one who already rejected your written explanation. Don’t tell this named IRS employee that you want to talk to his boss because you think his decision was wrong—that would only build antagonism. Instead, frame the situation as a disagreement between honest, well-meaning people, both of whom want the same thing—an “agreed case” where the taxpayer and the IRS see eye to eye about the situation. IRS agents are evaluated in part by their success in obtaining agreed cases, so this is to the agent’s benefit, too.
Example: You might say, “Listen, obviously we both think we’re right. Can we take this to your supervisor? Maybe we can get an agreed case so that we can keep this out of the appeals process.”

The IRS is particularly anxious to make cases go away when the dollar amounts involved are very small—less than $1,000 or so. When you speak to the supervisor, present your case more or less as you did to the original agent. But if that original agent provided a specific reason why he disagreed with your position, you will also need to specifically explain why the agent was incorrect. (If the notice you receive stating that the IRS still believes you owe additional money does not mention a specific IRS agent’s name, send a certified letter to the address listed requesting that someone at the supervisory level reconsider your case.)

If the IRS doesn’t back down after your discussion with a supervisor…

Step 4: Take your case to the Office of Appeals.
The Office of Appeals is an independent unit within the IRS. It will give your case a fresh and fair hearing. By this point in the process, you might feel that you are presenting the same facts again and again, beating your head against a wall of bureaucracy. Well, that’s how you fight the IRS—you keep presenting your case to as many different IRS employees as possible until you find one who agrees with you. The notices you received from the IRS should include instructions on how to take your case to the Office of Appeals. Otherwise, go to the IRS website (IRS.gov/appeals) for more information about filing this appeal.

Step 5: Take your case to the US Tax Court as a last resort.
If $50,000 or less is in dispute, you can opt to represent yourself in a “small tax case” procedure. This is similar to small-claims court—there is no jury, and your inexperience with courtroom procedures will not be held against you. You just tell your side of the story one more time, present your evidence and answer the judge’s questions. The only real downside to a small tax case is that the decision of the Tax Court cannot be appealed. There’s little reason not to go to Tax Court if you’re representing yourself and you believe you’re right. (If you hire representation, your costs could climb well into four figures, sometimes higher.) All you have to lose is a few hours of your time, travel costs to the closest city where Tax Court is held, a $60 filing fee and potentially some interest charges. But at this point, your matter might not even get to court—an IRS attorney might offer to settle for less than the full amount tha t the IRS claims you owe before your case is heard. The notices you receive from the IRS should explain how to bring your case before the Tax Court. Or download the necessary form at USTaxCourt.gov (click on “Forms,” then “Petition”).

Seven Common IRS Mistakes

It receives duplicate income forms. If your employer accidentally files two W-2 forms for you with the IRS (or one of your small business’s clients or one of your investment companies accidentally files two 1099 forms), the IRS probably won’t figure out what happened. Instead, its computers likely will add up the two W-2s and conclude that you earned twice your actual salary.

Investments are sold. Calculations involving cost basis—what an investment costs you—can be complex, and it’s not uncommon for the IRS to make mistakes.

Taxes are not paid on a state tax refund. If you didn’t itemize your taxes last year (or you itemized but deducted your state sales tax rather than your state income tax), any resulting state tax refund should not be taxable.

A 1099 form goes to you personally, rather than to your business. If you’re self-employed and a client accidentally sends a 1099 form to you personally rather than to your business, the IRS computers won’t work out that the income was reported on your business’s return. It will just say that you failed to report income on your personal return and demand more money. Similarly, if a client mails you a payment in late December but you don’t receive it until early January, the IRS won’t figure out that the money is properly reported on next year’s return—it will say that you underpaid this year.

The alternative minimum tax (AMT) comes into play. The AMT is so complex that anyone can make mistakes—even the IRS. If more than a few hundred dollars is at stake, consider paying a CPA or an enrolled agent to double-check the IRS’s AMT calculations before paying anything.

Taxpayers claim complicated tax credits. If you claim a relatively complex tax credit, such as the Earned Income Tax Credit or Child Tax Credit, the IRS might say that you were not eligible for it, even if you were.

IRS computers misread figures. IRS computers sometimes misread numbers or misunderstand where a decimal point is placed, turning $50,000 into $5,000, for example.

Before you sell your annuity back to the insurance company be sure to do ALL of the math. Even a guaranteed rate of 3 or 4% can easily beat today’s guaranteed rates. Don’t forget the death benefits. You could easily cost your heirs $50,000 plus in inheritance.

Before you change your beneficiary from your spouse to your new trust, be sure your spouse won’t lose their income guarantee.

Excessive withdrawals could decimate your income guarantees. Again – do ALL the math before you make a financial decision.

Adapted from “Money” magazine May 2013.
MIT Professor Anant Agarwal is offering courses on circuits and electronics online for free! And so are many universities like Harvard, Princeton, Michigan, and many more. These classes are known as MOOC, aka Massive Open Online Course. MOOCs are different from the standard online course because there are thousands of students at a time; they are free; and no college credits toward a degree. And of course there are many variations on this theme. Some colleges have a onetime registration fee, others have a fee to obtain college credit, still others offer a final test w/fee to get credit, and some offer an alternative degree such as an MITx.
Even without the college credits MOOCs are a great way to beef up your knowledge and resume’.