Dear Liz: I recently obtained copies of my credit reports from the three major credit bureaus and discovered my brother’s home address listed in the personal information section. I am extremely concerned about how and why this happened since I have never lived with my brother. This brother is the executor of our father’s estate, and the address listing was dated just before the distribution of that estate. What possible reason could my brother have for searching my credit background? I have zero communication with him because of an ongoing feud. He ignores any requests or inquiries. After I discovered this, I asked the bureaus to remove the address and put security freezes on all three credit reports, which I probably should have done sooner.
Answer: Your brother’s address wouldn’t show up in your credit reports in the unlikely event he had checked your credit. It might show up there if he had committed identity theft using your information, but if nothing else was amiss – you didn’t spot a credit account or loan you didn’t recognize, for example – then most likely the error was made by a creditor or other company that reports information to the credit bureaus.
The federal Fair Credit Reporting Act limits who can access your credit reports. Only businesses with a legitimate need to know the information can do so, and often your permission is required. You can check who has accessed your credit during the last two years in the “inquiries” section of your credit reports.
You may never discover exactly how your brother’s address wound up in your file, but you took the right steps in disputing the error and in freezing your credit reports.
For readers not as credit-report savvy: You can access your reports for free at AnnualCreditReport.com. But be careful; lots of sites want to sell you your reports from Equifax, Experian and TransUnion. If you’re asked for a credit card number, you’re on the wrong site.
When you get your reports, look for accounts that aren’t yours and other suspicious activity. Consider freezing your credit reports at each of the bureaus to prevent someone from opening new accounts in your name. You can thaw the freeze whenever you need credit, also for free.
Consider taxes before retirement
Dear Liz: I began converting two 401 (k) s from previous employers to Roth IRAs. To lessen the huge tax hit, I decided to do the conversions over the course of seven years. Even with that, the tax hit is higher than I realized and too painful. Now that partial conversions have begun annually, am I required to complete the total conversion to 100%? Or can I stop midway and leave the remainder in the original accounts? Also, is there an age limit before which Roth conversions must be completed?
Answer: You don’t have to continue making conversions. (Before 2018, you could have even reversed conversions you already made, but that’s no longer possible.) There’s also no age limit for conversions, but the older you get, the less likely conversions are to make financial sense.
Conversions are a good bet if you expect to be in the same or a higher tax bracket in retirement. If you’re young and in a low tax bracket now, you can reasonably expect that to be the case.
As you approach retirement, though, the opposite may be true. Many people find their tax bracket drops once they retire. Why pay a big tax bill now if you can access the money at a lower tax rate later?
Then again, if you’re a good saver, you may discover you’ve accumulated so much that your tax bill will soar once you’re required to start taking minimum distributions at age 72. If that’s the case, then converting some of your retirement money might save you on taxes overall.
But you’ll want to discuss this with a tax pro or financial planner who can model how the conversions are likely to affect your overall finances, including any Medicare premiums, since those can increase with income.
IRS changes on required withdrawals
Dear Liz: When informing me of my required minimum distribution for 2022, my brokerage has apparently used a distribution period that differs from the one used in past years. This results in a distribution amount that’s noticeably smaller. I recall there was some talk of revising the IRS tables, but has this been done?
Answer: Yes. The IRS has updated the life expectancy tables used to calculate how much people must withdraw from their retirement accounts to reflect longer lifespans. That’s good news for people who withdraw only the minimums each year, since their required distributions will be smaller and the rest of their balances can continue to grow tax deferred.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her di lei at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “contact” form at asklizweston.com.