Expensive Liz: I’ve too many bank cards that I opened to get frequent flier factors. I perceive that closing a bank card lowers your credit score scores. How lengthy does the ding final? How lengthy ought to I wait earlier than closing one other card? Do you may have another recommendation on this topic? You most likely have mentioned this in earlier columns however it may be price repeating.
Reply: When you’ve got a number of playing cards, closing a couple of is unlikely to considerably harm your credit score scores so long as you achieve this strategically.
An enormous chunk of your credit score scores is set by how a lot of your out there credit score you’re utilizing. You need a big hole between the quantities you cost and your credit score limits. Attempt to maintain open the playing cards with the very best credit score limits. When you’ve got a number of playing cards with the identical issuer, ask if the credit score restrict from a card you’re closing will be transferred to 1 you’re holding.
Even when your scores do dip due to a closure, the impact is prone to be short-lived in case you proceed utilizing credit score responsibly.
Ideally, you’d evaluation your portfolio of bank cards yearly or so to find out which playing cards to maintain and which to shut. Journey rewards playing cards sometimes have annual charges, typically vital ones, so that you’ll wish to be sure that each card you may have is at the least paying for itself in annual rewards and advantages.
Additionally contemplate the psychological load concerned. As you age, it’s possible you’ll discover it tougher to watch a number of accounts and maintain observe of all the small print. You could wish to simplify your funds by winnowing your playing cards right down to only one or two. At that time, holding your funds manageable will likely be extra necessary than sustaining the very best potential credit score scores.
Expensive Liz: If somebody inherits my retirement account, is there any means they’ll keep away from having their Medicare premiums elevated for one 12 months?
Reply: A big-enough retirement account may have an effect on their Medicare premiums for as much as 10 years, not only one.
Usually inheritances aren’t taxable, however retirement accounts are the exception. Withdrawals from inherited retirement accounts are normally taxable as earnings, and most non-spouse inheritors should drain a retirement account inside 10 years. Withdrawals from inherited Roth accounts aren’t taxable, however the accounts nonetheless should be drained by the heir inside a decade.
If the heir is on Medicare, taxable withdrawals may increase earnings sufficient to extend their Medicare premiums, because of the income-related month-to-month adjustment quantities (IRMAA). This surcharge begins as soon as modified adjusted gross earnings exceeds sure quantities, which in 2025 is $106,000 for single filers and $212,000 for married {couples} submitting collectively.
Anybody who inherits a retirement plan ought to get recommendation from a tax professional, however that’s significantly necessary when withdrawals may have an effect on tax brackets and Medicare premiums. The professional may help decide how rapidly or slowly the cash ought to be withdrawn to maximise how a lot the heir will get to maintain.
Expensive Liz: I waited till age 70 to begin amassing Social Safety. My spouse turns 65 this 12 months so her full retirement age is 67. Can she begin amassing Social Safety advantages now primarily based on my profit or ought to we wait till her full retirement age?
Reply: If she applies for Social Safety now, she could be “deemed” to be making use of for each her personal profit and her spousal profit and given the bigger of the 2. She wouldn’t be allowed to change to the opposite profit later.
Most individuals are higher off ready at the least till their full retirement age to use, and plenty of will maximize their lifetime advantages by delaying till age 70. Her mileage might fluctuate, after all, so it’s price utilizing a Social Safety claiming calculator and contemplate getting recommendation from an goal supply, equivalent to a fee-only monetary advisor.
Liz Weston, Licensed Monetary Planner, is a private finance columnist. Questions could also be despatched to her at 3940 Laurel Canyon, No. 238, Studio Metropolis, CA 91604, or by utilizing the “Contact” kind at asklizweston.com.
