Dear Liz: I'm in the process of setting up post-divorce accounts, learning personal finance along the way. Is it “safe” or advisable to have all my larger accounts – IRAs, 401(k), cash management – at the same institution, or should I spread them out? I have smaller checking and savings accounts with a good credit union.
Answer: Using a single investment firm is certainly convenient, and most people will be fine with having all their accounts in one place.
The Securities Investor Protection Corp. covers bills up to $500,000, including up to $250,000 in cash. This insurance protects you if the brokerage fails and your money or securities are lost.
Customers with multiple accounts often receive more coverage. For example, IRAs and Roth IRAs would each get coverage of up to $500,000, as would individual and joint brokerage accounts. A person with all four types of accounts would have $2 million in coverage. Accounts for companies, trusts, executors of wills and guardians of minors also receive separate coverage. For more details, see the SIPC brochure, “How SIPC protects you.”
Your 401(k) has its own protections. Assets in 401(k)s are placed in trust accounts separate from the investment firms that manage the plans and the employers that sponsor them. The money cannot be touched by the creditors of either.
A $100 fee to close a brokerage account? Real?
Dear Liz: My brokerage recently sent out an updated fee schedule. They now charge $100 to close an account. That seems like an incredibly high fee if I chose to move my investments elsewhere. The fine print says the fee doesn't apply to anyone who owns at least $5 million in qualifying assets. Well, I'm certainly not. So they hit those who have the least with a ridiculously high fee when it comes time to close the account. Is this typical for the investment sector?
Answer: Unfortunately yes, but the usual fee is closer to $75.
Many brokers have lowered their rates in recent years, with many cutting commissions. But account closing fees have persisted, probably because most people don't think about the cost of closing an account after opening one.
Caught between the two Social Security retirement ages
Dear Liz: I have received several conflicting responses from Social Security and I hope you can clarify this. My husband waited until he was 70 to pick it up and unfortunately passed away shortly afterwards. I am 66 and was instructed to apply for survivor benefits because I would be eligible for his enhanced benefit benefit at age 66 plus two months. I received an application approval letter in January 2024 and expected payment on March 20, but nothing! I went to the SSA.gov website and saw that my status was “ineligible because I was employed or still working.” I am an independent HR advisor. I finally got on the phone with Social Security and was told that I wouldn't be able to collect his benefits (which would be higher than mine because of his age and earnings) until I reached full retirement age, 66 plus six months. Is this true?
Answer: Yes. You've just found yourself between two different types of full retirement age.
Many people don't realize that they have two full retirement ages: one for retirement benefits and a slightly younger age for survivor benefits. At 66 and two months, you became eligible for your full survivor benefit, meaning the amount was not reduced due to an early start. However, the income test applies because you have not yet reached your full retirement age pension advantages. The earnings test reduces your benefit by €1 for every €2 you earn above a certain limit, which is €22,320 in 2024.
The good news is that the means test ends when you reach 66 years and six months, and you start receiving your survivor's benefit regardless of how much you are paid.
Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions can be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact Us” form at asklizweston.com.
