Questions About IRAs, AARP, Cancelled Debt, Streaming Video, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. IRA after-tax question
2. Credit freeze for children
3. Baseball after cutting the cord
4. AARP worth it?
5. Planning for upcoming recession
6.
7. Cancelled debt and income taxes
8. Alternatives to offline Quicken
9. Credit card without credit check?
10. Things from secondhand stores
11. “Bond tent”?
12. Improving conversational skills

As I grow older, I’ve come to realize that I like short blasts of cold weather, but I actually don’t like months and months of sustained cold weather. I like a cold day in the fall, but I don’t like months of cold in the winter.

Maybe this is an indication that I should live further south than Iowa.

Q1: IRA after-tax question

I have a 401K from a previous job that I rolled over into an IRA. Now, when I rolled it over, I wasn’t well educated on investments and retirement savings: I started adding after tax funds to my pre-tax 401(k) (now IRA). Somewhere to the tune of $50 a month for about a year. After that, I stopped touching the thing and am totally lost as to how to move forward with those funds. There is about $1,300 in the IRA with e-Trade (I didn’t know where else to put it, and would like to move it to Betterment). Any advice you can offer would be so much appreciated!
– Kelly

So, to clarify, you’re saying that you have a traditional IRA that you would normally contribute to with pre-tax money but accidentally contributed to with after-tax money.

If you’ve already paid taxes on all of this, you’ll probably only be able to fix it by issuing a correction on your taxes for the year(s) in which you made those contributions. If you’re in, say, the 25% tax bracket and the total contributions only add up to $600, that will be about $150 in tax overpayment. In order to get that money back, you’ll have to file a correction for those one or two years, which may end up being more hassle than it is worth.

If you didn’t pay taxes on it (you probably have, but I’m not 100% sure), you could roll over the amount you contributed into a Roth IRA and then there are no tax issues. The investment firm you’re working with should be able to easily handle that.

My guess is that the question you need to ask yourself is whether that $150 (or so) in taxes is worth the effort in filing corrections to one or two years worth of old taxes. If you do it yourself, it’ll take some time; if you have a tax preparer that handles it, their fee will eat a lot of that $150.

Q2: Credit freeze for children

Do you have credit freezes on your children’s credit through the three credit unions? I just looked at Equifax and there’s no way to do it online, only mail. Is it really important/worth the effort?
– Jason

In my eyes, it’s one of those situations where you are choosing to do a little paperwork now to avoid some possibility of having to do a lot of paperwork later, but there’s also a large possibility of not having to do any paperwork later.

It’s worth noting that by spending a lot of time investigating your child’s credit report (or, preferably, lack thereof), you actually increase the exposure of your child’s identity to more potential sources for fraud.

Probably the easiest way to do a simple check with minimal possibility of additional fraud is to check online TransUnion.

Our plan is to simply thoroughly check our children’s credit report just before their sixteenth birthday, which is the age at which they’ll begin making credit decisions on their own. For now, we’re simply very protective of their identification and do everything we can to minimize all exposure.

Q3: Baseball after cutting the cord

Cancelled cable in June. Found myself at a sports bar last night watching Red Sox and Astros. Needed to get home for work and found myself at home wanting to watch the rest of the game but didn’t figure out how to do it. It was the first time I missed cable. Suggestions?
– Damon

Your best approach for watching live sports via streaming is to get an Amazon Fire or Roku device, attach it to your television, and then keep checking as to where the sport you want to watch is available via streaming.

My experience has been that the NFL is really hard to watch via streaming, but most other sports aren’t bad at all, even during the playoffs. It looks as though a lot of playoff baseball, for example, is available via the fuboTV app on both Amazon Fire and Roku, and that app has a free trial.

The only issue is that the rights to sports streaming seem to really be in flux. What works one year often doesn’t work the next year. You’ll have to keep Googling and paying attention to find out what works.

Q4: AARP worth it?

Reading up on AARP membership. Some of the discounts like hotel discounts are pretty good and it’s cheap to sign up. Worth it?
– Jim

The only drawback I’ve seen from older relatives joining AARP is that they seem to be inundated with insurance offers, as though they’ve been signed up for every insurance mailing list known to man.

If you’re willing to just toss all of that unsolicited mail right in the trash, then AARP might be worthwhile, particularly if you travel regularly.

It’s worth noting that online booking services like Hotels.com do not offer additional discounts that stack with AARP. If you’re using AARP for hotels, you’ll have to book directly with the hotels to be able to take advantage of the discount, so it might not end up being a great discount in the long run.

I guess I can’t give you a blanket “thumbs up” or “thumbs down,” because it depends on your personal spending habits. It definitely CAN be worth it, but isn’t guaranteed to be worth it.

Q5: Planning for upcoming recession

Recession is coming. What are you doing to prep for it?
– Andrew

Not a thing. I am not doing anything different to prep for a recession.

My plan for saving for retirement is in no way dependent on what the economy is doing this week or month or year. My plan for saving for retirement is on a 30 year scale, and on that scale, some recessions will happen. That’s a given.

To do anything based on when you think a recession will happen is a lot of guesswork, and the likelihood is that you will lose money by guessing incorrectly versus simply staying put with what you have.

Q6: Handling angry politics at work

There are four or five people at work who angrily argue about politics all the time and try really hard to draw other people into their arguments. One of them is our supervisor who thinks he is “scoring points” or something. They spend half the day screaming at each other and it’s distracting for work. Not sure what to do.
– Jenna

If this is becoming an obstacle for getting your work done, I’d suggest talking to your supervisor’s boss and see what can be done about it. It sounds like these political arguers are not only avoiding their own work, but are also distracting and interfering with the people around them, which isn’t helpful.

I have no problem with people arguing politics, it’s just that it doesn’t really fit in the workplace. Politics are inherently divisive and always seem to draw people into emotional responses.

Take it up the chain of command a little and see what you get.

Q7: Cancelled debt and income taxes

I am working on a tax return for a 100% disabled veteran. He had student loan debt incurred by his son of around $50,000. In 2017 the debt was cancelled by the Department of Education because of his veteran’s status of 100% disabled. I’m very curious to know if this cancelled debt is also exempt from income taxes.
– Arthur

Due to the Tax Cuts and Jobs Act of 2017, borrowers whose student loans are forgiven on or after January 1, 2018, due to “total and permanent disability” are no longer required to pay federal income taxes on those forgiven loans.

It should be noted that student loans that were forgiven prior to 2018 aren’t given this federal income tax exception, so if the forgiveness happened in 2017 or before, as you stated, your client is likely still on the hook.

You should contact the IRS and discuss a payment plan for that tax hit that’s within the bounds of what your client can afford.

Q8: Alternatives to offline Quicken

I used Quicken for many years, it used to be something you could just pay for once and not by the year, it was also much easier to use then this new version I would have to “rent.” Microsoft money has gone the way of the dodo and I guess I’m old school, when I pay for a product once that should be it and I don’t want to store it on the cloud, because it won’t be free forever and please lets not bring up how secure my information will be. Do you have any alternatives to my much missed Quicken that would not have run on my new computer even if I could find the disk? Unfortunately my old computer and I do mean old, so old it wouldn’t use the coupon printing software, died and took with it my Quicken program, data from 1995, I have an unusable backup disk of information I might turn into a dream catcher. I fear my arch enemy Excel is my only option and we do not get along, Excel is far from user friendly and eventually I won’t be able to use it with out paying for it by the year, which I consider a huge rip off. Considering going to a paper ledger system, a pain but easier then the Excel program I am staring at now.
– Anna

It seems to me that your requirements for a personal finance package are:
(1) it works without online access;
(2) it doesn’t require accounts or access to your other financial accounts;
(3) it doesn’t require a subscription of any kind;
(4) it’s not Excel.

If you’re not interested in using Excel, there really aren’t any robust personal finance packages that don’t rely on online connectivity to do their work these days and also come without a subscription option. Banktivity is the only one I know of that’s remotely well regarded, but that’s Mac-only. There are a few open source packages, but they’re pretty thin in terms of features and the user interfaces are kludgy.

This is a big hole in the personal finance software market, and I’m surprised that some company hasn’t stepped in to fill it. Intuit and YNAB and other companies have basically abandoned users who don’t want to subscribe and don’t want to incorporate their accounts.

Q9: Credit card without credit check?

I have bad credit I want to start building my credit again. Can i get credit card that will do that for me? One that doesn’t require a credit check?
– Nina

In general, no company will offer you an unsecured credit card without some form of credit check. That’s basically a recipe for the company to get repetitively ripped off by scammers.

If you want to get a credit card with really bad credit, your best approach is to get a secured credit card. A secured credit card is one in which you put down a deposit before you get the card so that if you build up a balance on the card and refuse to pay it (or can’t pay it), the card is cancelled and the initial deposit you made covers your bill. Financial institutions will often issue these cards to people with very bad credit, and it is a very effective tool for rebuilding credit.

If this is something you’re interested in, I’d recommend that you visit a local credit union, which will typically work with you to help you acquire a secured credit card.

Q10: Things from secondhand stores

Things I’ve bought at second hand stores in the past 12 months:

Odd plates/trays: To serve guests at my house or to take food to potlucks. At $1-$3 each, I can afford to leave behind if I need to and/or choose something seasonal

Wool socks – Usually less than $1 pair, especially for hiking in cold weather

Base layer clothing – $3 each piece – The wicking type fabric that is upwards of $30 new; no one will see the adverts on them since they are base layers; for hiking/working outside

Paperback books – 25 cents each – often cheaper than the overdue fines I might incur from the library; I pass on to homeless shelter or recycle to thrift store

Seasonal home décor – various prices purchased after the holiday (for my son and DIL for their new digs)

Books on CD – $1-$3 – Great to have in the car for road trips with no worries about being overdue; I share with a friend

Picture frames – $3-$5 – To frame my mom’s oil paintings; far cheaper than the $10-$50 to purchase new frames or even more to have them framed

Fabric, yarn, and patterns – Usually for a fraction of price of new – mostly to make items for things like Project Linus and similar charitable projects
– J

This is a list of secondhand purchases sent in as a follow up to my article about what I’ve bought at secondhand stores recently, and it reinforces quite well my key point that stores like Goodwill and Salvation Army and secondhand stores are about way more than worn or ill-fitting clothes.

You can find a lot of useful stuff if you shop at such stores consistently and use them as your “first pass” for shopping.

I think, for me, my favorite use for them is for “trial runs” of small kitchen appliances. I recently snagged a food processor there, actually after that article was written. I don’t think I’ll keep it long term but I never really used one before and I wanted to try one out.

Q11: “Bond tent”?

I have read several references to a “bond tent” recently but I don’t understand what it means. Help?
– Amy

A “bond tent” refers to a common practice where people invest very heavily in bonds in their retirement account as they approach retirement, rather than investing in stocks or real estate. During the early years of retirement, their withdrawals are taken mostly out of bonds, bringing them gradually back to their original asset allocation.

Let’s say that normally you have 75% stocks and 25% bonds. A person doing this practice might put all of their contributions into bonds as they approach retirement, bringing things closer to 50/50. Then, when they’re retired, they cash in their bonds almost exclusively for the first few years, eventually returning to 75/25.

There are a number of reasons for doing this, but the big one is to stabilize retirement savings right near retirement age, so that a big dip in the stock market doesn’t bring very difficult results to a new retiree.

Q12: Improving conversational skills

I read How to Win Friends and Influence People and it really helped me to feel more comfortable in mixed social situations. I am good at smiling and being polite and asking questions. The problem is that doesn’t seem to translate into meaningful conversation, mostly just small talk and listening. How do I get better at conversation?
– Bob

I agree with you that questions are useful but don’t translate perfectly into great conversations. A good conversation has a bit more back and forth; a bunch of questions can feel like an interview.

The book that jumps to mind here is Conversationally Speaking by Alan Garner, which is a great book on conversational skills. I found it incredibly valuable.

However, the best thing you can do after reading it is to put the ideas into practice as soon as possible and as frequently as possible. Just go to mixed social events and start conversations with people. Make that your goal – I’m going to start X conversations this evening.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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