Dear Liz: I recently obtained copies of my credit reports from all three major credit bureaus and discovered my brother’s home address in the personal information section. I am extremely worried about how and why this happened since I never lived with my brother. This brother is the executor of our father’s estate, and the address list was dated just prior to the distribution of that estate. What possible reason could my brother have for researching my credit history? I have no communication with him due to an ongoing dispute. He ignores all requests or inquiries. After discovering 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 would not appear on your credit reports in the unlikely event that he checked your credit. It might show up there if he committed identity theft using your information, but if nothing else was – 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 reporting information to the credit bureaus.
The federal Fair Credit Reporting Act limit who can access your credit reports. Only companies with a legitimate need to know information can do this, and often your permission is required. You can check who has accessed your credit in the past two years in the “inquiries” section of your credit reports.
You may never find out exactly how your brother’s address ended up on your file, but you took the right steps by disputing the error and freezing your credit reports.
For readers less knowledgeable about credit reports: you can access your reports for free at AnnualCreditReport.com. But be careful; many sites want to sell you your reports from Equifax, Experian and TransUnion. If you are asked for a credit card number, you are on the wrong site.
When you receive your reports, look for accounts that aren’t yours and any other suspicious activity. Consider freeze your credit reports at each of the offices to prevent someone from opening new accounts in your name. You can unfreeze the freeze whenever you need credit, also for free.
Think about taxes before retirement
Dear Liz: I started converting two 401(k)s from former employers to Roth IRAs. To mitigate the huge tax impact, I decided to do the conversions over a seven-year period. Even with that, the tax hit is higher than I thought and too painful. Now that partial conversions have started each year, do I need to complete the full conversion at 100%? Or can I stop halfway and leave the rest in the original accounts? Also, is there an age limit before which Roth conversions must be done?
Answer: You don’t have to keep converting. (Before 2018, you could even reverse conversions you had already made, but that’s no longer possible.) There’s also no age limit for conversions, but the older you get, the less conversions there are. likely to make financial sense.
Conversions are a good bet if you expect to be in the same tax bracket or higher in retirement. If you are young and in a low tax bracket, you can reasonably expect this to be the case.
As you approach retirement, however, the opposite may be true. Many people find that 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 find that you’ve accumulated so much money that your tax bill will skyrocket once you start receiving minimum distributions at age 72. If so, converting some of your retirement money could save you on taxes overall.
But you’ll want to discuss this with a tax professional or financial planner who can model how conversions are likely to affect your overall finances, including Medicare premiums, as these can increase with income.
IRS Changes on Required Withdrawals
Dear Liz: In advising me of my required minimum distribution for 2022, my brokerage apparently used a different distribution period than it used in previous years. This results in a payout amount that is significantly smaller. I remember there was talk of revising the IRS tables, but has that been done?
Answer: Yes. The The IRS has updated the life expectancy tables used to calculate how much people need to withdraw from their retirement accounts to reflect a longer lifespan. This is good news for people who only withdraw the minimum each year, as 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 Nerd Wallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “contact” form at asklizweston.com.