Money Talk: Is it wise to have all your accounts under one roof?

Dear Liz: I’m setting up accounts post-divorce, while learning personal finance on the fly. Is it “safe” or advisable to have all of my larger accounts — IRAs, 401(k), cash management — with the same institution, or should I spread them around? 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 just fine having all their accounts in one place.

The Securities Investor Protection Corp. covers accounts up to $500,000, including up to $250,000 in cash. This insurance protects you if the brokerage fails and your cash or securities go missing.

Customers with multiple accounts often get more coverage. For example, IRAs and Roth IRAs would each get up to $500,000 in coverage, as do individual and joint brokerage accounts. A person with all four types of accounts would have $2 million in coverage. Accounts for corporations, trusts, estate executors and guardians of minors also get separate coverage. For more details, see SIPC’s brochure, “How SIPC Protects You.”

Your 401(k) has its own protections. Assets in 401(k)s are placed into trust accounts, separate from the investment firms that administer the plans and the employers that sponsor them. The money can’t be touched by creditors of either one.

A $100 fee to close a brokerage account? Really?

Dear Liz: My brokerage recently sent an updated fee list. They now are charging $100 to close an account. That seems an incredibly high fee should I choose to move my investments somewhere else. The fine print says the fee will not apply to anyone who holds at least $5 million in qualifying assets. Well that certainly isn’t me. So they’re hitting those who have the least with a ridiculously high fee when it comes time to end the account. Is this typical across the investment industry?

Answer: Unfortunately, yes, but the usual fee is closer to $75.

Many brokerages have lowered their fees in recent years, with many eliminating commissions. But the account closure fee has stuck around, probably because most people don’t think about the costs of shutting down an account after they’ve opened one.

Caught between Social Security’s two retirement ages

Dear Liz: I’ve received multiple conflicting answers from Social Security and hope you can clarify. My husband waited to collect until he was 70 and unfortunately passed away soon afterward. I am 66 and was instructed to apply for survivor benefits because I would be eligible to collect his enhanced benefit at age 66 plus two months. I received an “approval of application” letter in January 2024 and was expecting payment on March 20, but nothing! I went on the SSA.gov website and saw my status was “ineligible due to being employed or still working.” I’m an independent human resources consultant. I finally got through to Social Security on the phone and was told I wouldn’t be able to collect his benefits (which would be higher than mine due to his age and earnings) until I was at full retirement age, 66 plus six months. Is this true?

Answer: Yes. You just got squeezed between two different types of full retirement age.

Many people don’t realize they have two full retirement ages, one for retirement benefits and a slightly younger one for survivor benefits. At 66 and two months, you qualified for your full survivor benefit, meaning that the amount wasn’t reduced because of an early start. However, the earnings test applies because you hadn’t yet reached your full retirement age for retirement benefits. The earnings test reduces your benefit by $1 for every $2 you earn over a certain limit, which in 2024 is $22,320.

The good news is that the earnings test will end when you reach 66 years and six months, and you’ll start receiving your survivor benefit regardless of how much you get paid.

Liz Weston, Certified Financial Planner®, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.