Enjoy Travel

HerMoney Podcast Episode 224: Using Credit Card Rewards When You Can’t Travel 

Kathryn Tuggle  |  July 29, 2020

You may not want to fly the friendly skies right now, but that doesn’t mean you can’t use your rewards and get the most out of them. 

When’s the last time you took a trip somewhere other than your local grocery store, doctor’s office, or hometown coffee shop? 66% of leisure and business travelers said their plans have been impacted by COVID-19, according to a survey from Destination Analysts. That same survey also showed that coronavirus will continue to impact the destinations that travelers choose in years to come, and 26% of people said they’re unsure if they’ll continue to travel even after the coronavirus situation is resolved. 

Many travelers (myself included) love love love our credit cards that offer travel rewards that enable us to go places and see things that we might not otherwise be able to. Sometimes it’s even fun to do the math and see which cards offer the most possible rewards points and miles that we can then redeem for a cruise, a nice hotel, or a business class flight to somewhere exotic… but now that most of us aren’t traveling, what do we do with all those miles and points we’ve been accruing? Do we try to use them now? If so, for what? And should we stop trying to earn them, at least until we have a little more travel clarity? It’s a complicated topic right now, which is why we were so excited to sit down this week with the leading expert in this field — The Points Guy himself — Brian Kelly. 

In this episode, Brian and Jean talk about all things air travel, including Brian’s most recent travel experiences and what they were like. (Hint: You won’t get the full dining experience these days, even in first class.) Brian tells us all how to get the safest flight possible for the best price, and which airlines are taking the greatest precautions with safety. 

Brian also talks about credit card strategy right now — many credit card companies have made changes to their earning system over the last few months, and some people may be finding that they simply need a new kind of card if they aren’t going to be traveling as much. For those of us who do have points and miles accrued that we want to use, Brian walks us through some of the best things to do with those points right now, and what to think about when it comes to expirations, refundable fares and cancellation policies. 

“Even if a flight is cheap, save that money and use your points instead, because the airlines have actually really loosened up the ability to get your points back, pretty much for any reason. They want people to be using points and traveling, so they’ve made it really easy,” he says. 

In Mailbag, Jean and Kathryn talk through credit freezes for 5-year-olds, how to allocate retirement investments, and UTMA/UGMA accounts for children. In Thrive, we dish on some of the major car insurance companies that are paying quarantine refunds. 

This podcast is proudly supported by Edelman Financial Engines. Let our modern wealth management advice raise your financial potential. Get the full story at EdelmanFinancialEngines.com. Sponsored by Edelman Financial Engines – Modern wealth planning. All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416

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The HerMoney podcast is supported by      Edelman
All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416


Brian Kelly: (00:01)
Even if a flight is cheap, save that money and use your points instead because the airlines have actually really loosened up the ability to get your points back pretty much, for any reason. They want people to be using points and traveling. So they’ve made it really easy,

Jean Chatzky: (00:23)
HerMoney is supported by Fidelity Investments. You work too hard for your money to let it sit on the sidelines. Fidelity can show you how to demand more from your money every day. Visit Fidelity.com/HerMoney to learn more.


Jean Chatzky: (00:33)
Hey everybody. I’m Jean Chatzky. Thank you so much for joining me today on HerMoney. So, I got a question for you. When was the last time you left your house? Or better yet, when was the last time you left your neighborhood, your city, your village? And you took a trip somewhere other than say, your local grocery store or the dentist office. Coronavirus has hit us all so hard with travel restrictions. We have had a canceled spring break. We’ve had canceled destination weddings and local weddings. We’ve had vacations that were scheduled months. If not years, ahead that were canceled. Business travel, canceled, canceled, canceled. In fact, 66% of leisure and business travelers said that their plans were impacted by COVID-19. This is according to a survey from destination analysts. And this survey also showed that coronavirus will continue to impact the destinations that travelers choose in the years to come. 26% of people even said they are unsure if they’ll continue to travel, even after coronavirus is resolved. Well, I’ve got to say, this is hitting home for me. I often travel for work, or at least I did before all of this hit, which is how I’ve been able to meet so many of you personally at events nationwide. And because of my travel schedule, I’ve always made it a point to maximize my use of credit cards that earned me the most possible rewards and frequent flyer miles. And then once a year or so, my family and I would redeem those for a great vacation. Believe me, I have devoted a lot of time to this. But now that most of us aren’t going anywhere. What do we do with all of that? Do we need to change strategy? Should we be using these cards? Should we be putting them in a drawer? It is a complicated topic, which is why we asked the number one expert in this field, The Points Guy himself, Brian Kelly, to join us today and talk through all of it. Hey, Brian.

Brian Kelly: (03:02)
Thanks for having me.

Jean Chatzky: (03:03)
Thank you so much for being here. I’m actually really, really looking forward to digging into this. But let me just tell everybody a little bit about The Points Guy cause it is a behemoth. I mean, I started talking to you when you first started a blog 10 years ago, and now you’ve got more than 10 million unique monthly visitors from around the world. So, you’ve really created something. Congratulations on that.

Brian Kelly: (03:30)
Thank you very much. Yeah. I kind of pinch myself some days because you know, I was working on Wall Street, traveling a lot and just started The Points Guy as a fun side gig. I didn’t even want to monetize it. And it’s kind of cool now that we’ve got a hundred points guys and girls all around the world and we help millions of people save money and travel the world. So, it’s been a huge blessing, but certainly we are in unchartered territory.

Jean Chatzky: (03:56)
And you’ve been flying lately I hear. How’s that like?

Brian Kelly: (04:01)
You know, my first flight was early March. I went from Newark to LA and visited friends in Palm Springs. And it was very different for sure. It was a little bit apocalyptic in that I was at Newark Airport at a 5:00 PM on a Friday and it was empty. And then I was like, well maybe apocalypse isn’t so bad because I got through security in 30 seconds. And it actually wasn’t nearly as stressful as I thought it would be. But it is sad. I mean, the airports are empty. But I personally believe that wearing a mask, socially distancing, bringing as much with you as possible, we can create safer travel environments. So, it’s certainly a challenge and I don’t recommend it for everyone. But I’ve had COVID and I have the antibodies. So my personal assessment is that I’m comfortable taking smart travel decisions, but I completely understand for people who want to see this play out a lot more before getting on the road or a plane.

Jean Chatzky: (05:01)
I have to ask, did you get COVID on a plane?

Brian Kelly: (05:04)
I didn’t. I actually, funny enough, podcasted with a fellow travel blogger. He had just landed from Paris. And at the time we weren’t allowing visitors from any of the level three countries, which were like China and Hong Kong at the time. Unbeknownst to us, so much of the virus was actually coming from Europe. He ended up getting it pretty bad. I had a light stomach ache. I didn’t really even know I had it until I got the antibody test. So, I was very fortunate, a little bit of a scratchy throat. So, I’m kind of fortunate that I already have had it. Although, having the antibodies, we still don’t know what that means longterm, but I’m pretty confident that for me, to spread it now, because of the antibodies, my level of transmission is much lower.

Jean Chatzky: (05:52)
You said you’ve been traveling. Since that first trip in March, what kind of a travel cadence have you been on and how have things changed?

Brian Kelly: (06:03)
Well, you know, on the plane, definitely wearing a mask is something, I don’t think it’s that difficult and I highly recommend it. It’s now actually mandated. And for people who don’t want to wear a mask on a flight, you’re very likely to get kicked off and potentially even banned from an airline. So, I highly recommend, get a comfortable mask that you can breathe in, that’s adjustable because it’s not just for your safety, it’s for everyone’s. And in flight, the service is limited. I flew business class to LA, so I highly recommend using miles and points to upgrade since so many business travelers like yourself are not on planes. Actually getting those upgrades is easier than in the past. But you’re not going to get the full dining experience even in first class. A lot of airlines aren’t even serving food. Some on international flights, but I don’t know everyone, some airlines like Delta and Southwest are actually blocking middle seats. Delta goes as far as blocking 50% of first class seats. So it’s kind of nice in terms of space, but it’s definitely stripped down which is understandable.

Jean Chatzky: (07:10)
Yeah. And I guess those longer haul flights are probably a little, maybe not less comfortable in terms of the seating, but in terms of the experience. I had a long conversation with my internist, my doctor, last week about travel. And she said, you just keep your mask on the entire flight. And I said, well, you know, if it’s six hours and you’re thirsty, what do you do? And she said, use a straw. So, I get it. People are taking this very, very seriously as they should. You mentioned it’s easier to use your points these days. So, I want to talk about points and miles and cashing in a couple of different ways. Let’s talk about using them first. Is now a good time to be using them in general? Should we be using them for travel? Should we be using them for other things? Do we have to worry about them expiring? That’s like 12 questions.

Brian Kelly: (08:05)
Yes. Yeah, no. So to answer your question, yes. Now is the time to use them. High level, you know, these loyalty programs are huge profit centers. I mean, actually we saw recently American Airlines and United, they both collateralized their loyalty programs. They’re worth anywhere from 20 to $30 billion. Just the loyalty programs, not the airlines. So they’re big business. They’re not going away. If an airline does go bankrupt, there is a chance, the value of those miles could be gone forever. So, for an example, Virgin Atlantic, they’re currently in a dicey situation, looking for funding. So I recommend use them because there is a chance always that you could lose them. With the big airlines, they got bailed out by the government. We don’t foresee that happening, but you just never know. We don’t know what’s going to happen anymore. We truly are in the most unchartered time. This crisis has hit that the travel industry several times as bad as 9/11. Although we are seeing an uptick in travel. So yes, use your points, especially for travel. Because even though airlines and hotels have loosened up the change rules, if you’re not comfortable traveling, they won’t hit you with all those fees, but you’re not going to get your cash back.

Jean Chatzky: (09:15)
Uh huh.

Brian Kelly: (09:15)
And in this economy, cash is king. We still don’t know where the economy’s going. And you if you’re going to potentially lose your job or get furloughed, you want to preserve as much cash as possible for that rainy day fund. So, even if a flight is cheap, save that money and use your points instead because the airlines have actually really loosened up the ability to get your points back pretty much, for any reason. They want people to be using points and traveling. So they’ve made it really easy. So if you pay cash, they’ll let you change for free, but they’re not going to give you that cash back unless they cancel the flight. Unlike miles and points where, even if you want to cancel, most airlines will give you all your points back. So a lot of people say, oh, should I get travel insurance? I say, no. Use your miles and points because you can get it all back. Because the travel insurance that covers the pandemic, the cancel for any reason coverage, it’s super expensive. And you’re only going to get back up to 75% of the cash you outlay. So I personally view miles and points as a great flexible currency that allows you to maximize your cash and give you the most flexibility to cancel your trip for any reason.

Jean Chatzky: (10:23)
You mentioned upgrades and I have found over the past few years, at least before COVID hit, upgrades really, really difficult to get with miles, even with a lot of miles. Has that changed in this crisis?

Brian Kelly: (10:37)
It has changed. Business travel has fallen off a cliff. Companies paying top dollar for last minute tickets. You know, the airlines would hold upgrade space until the last minute because they want to sell that seat to the corporate traveler at a premium. You can’t blame them. Airlines are businesses. This is travel, you know, companies now, liability reasons, it really has not bounced back at all. Which means for consumers who want to book a cheap poach ticket, and coach fares are really cheap, you can upgrade using points or in advance. We’ve seen a huge increase in the amount availability that airlines are making to use your frequent flyer miles. So, yes. You can use your points to just redeem outright for first class. Now I will say travel’s coming back. The airlines have taken tons of flights out of service. So, even though a fraction of people are traveling than before, it doesn’t mean that every plane is empty. In fact, many flights are going out jam packed today, which is why I really recommend, you know, normally I would say book, business class, splurge, have a glass of wine, live a little. But now, public health experts – we’ve interviewed lots of doctors at The Points Guy – the less people you are in direct contact with, the better. It’s all about harm reduction, risk reduction. So, frankly, sitting in a pod in business class, which I did when I went to LA, you’re still within six feet, but you’re in your own little cocoon. That dramatically reduces your risk. So, I actually look at it, use your points and miles for first and business classes for your health.

Jean Chatzky: (12:10)
Well, can we take that one step further actually. Because I was booking a ticket for my son to get him home from LA. And what ran through my mind, cause I was booking him in first for that very reason, using points was, okay. They are now boarding the flights from the back of the plane first to the front of the plane. So do I book him in the very first row where I hate sitting because they make me put my bag up.

Brian Kelly: (12:38)
Absolutely. You’re last on first off. Row one or two. The bulkhead is, you know, I think it’s basically the same. But absolutely. And I also recommend, wear glasses. I don’t personally wear glasses, but I wear clear sunglasses on flights. So I’m not touching my eyes. Which, even though they’ve said that the risk of you touching a surface and then getting it is pretty low, since it’s mostly through droplets in the air. But yeah, that’s a great tip. Also window seats in general, because you don’t have anyone on one side of you, reduce your risk. And then also put on your air vent above. You can actually blow away droplets. If someone across the aisle sneezes and you’ve got your air vent on, it’s little, but it can help push away those droplets, which the main way the virus is transmitted.

Jean Chatzky: (13:26)
So important. All this information. I want to talk about the choice of credit cards and how we need to strategize a little differently in order to earn points these days. But before we do that, let me just remind everyone that HerMoney is proudly sponsored by Fidelity Investments. It is no secret that women are on a different financial journey than men. So, it’s important to plan for those differences when thinking about retirement, social security investing and more. Fidelity can help. They’re taking steps to help women demand more from their money. Because you’ve worked too hard to get where you are to keep your money on the sidelines. So, get the skills and investment advice you need to put it to work for you. Visit Fidelity.com/HerMoney to learn more. I am talking with Brian Kelly, founder and CEO of The Points Guy. We are talking about all things credit card rewards, points, and miles. So, let’s talk about earning rewards these days. I know that some cards have made changes in the way that they are allowing rewards to be earned and, if you have statement credits, allowing those to be used. Can you tell us in a general way what you’re seeing? And then I’d like to dig into a few specifics.

Brian Kelly: (14:46)
So, in general, you know, we focus on premium credit cards that offer travel rewards. In general, since people aren’t traveling and dining out, like they used to, which are the key categories that a lot of credit cards will give you bonus points, we’ve seen the credit card companies increase the categories in which you can earn and redeem your points. And a lot of these travel credit cards are all about travel perks. Lounges, well, airline lounges are closed. So you’re paying a hefty fee for a card. The perks you’re not getting and the points you’re not earning because you’re not spending like we used to. Credit card habits have changed dramatically. So, it’s interesting. We’ve seen travel credit cards start offering bonus categories for groceries or allowing you to redeem travel credits instead for streaming. So, credit card companies have made these tweaks, but I don’t believe they’re fundamental enough. Because as you mentioned in the surveys, it’s going to take years and potentially travel habits, maybe changed forever. So, this is a great time for consumers to think big picture. Think about your personal risk assessment. Talk to your doctor. If you’re not going to be traveling for years, you probably shouldn’t be banking the same points that you were several months ago when were going on that mega-cruise to Europe or whatever it is that your dreams were. So as your future travel changes, you should tweak the credit cards that you’re using.

Jean Chatzky: (16:10)
So what does that mean exactly? I mean, when we look at travel credit cards and when we look at rewards credit cards, there are the premier travel cards. The Amex platinum, the Chase Sapphire Reserve. They cost $500-600 a year. Then, there’s a tier of those cards that are closer to $200 a year that don’t have the same lounge access and other things, but do allow you to accrue points. And then there are the cash back cards. So, how do you know when it’s time to ditch that travel card? The one that earns you, the $500 or $600 card, and go for a cash back card instead?

Brian Kelly: (16:55)
Well, I would say first take an assessment. How many points do you have? And if you’re stockpiling, let’s just say American Express points. You know, the platinum card is great. It gets five X points on airfare. If you have no plans to buy airfare or go to a Centurion Lounge, which currently are all closed and TBD on when they reopen then paying $550, last year it was great. They had 200 Uber credits. I haven’t taken an Uber in months. So, look at your habits and say, am I really going to get the value back in the perks? If not, I don’t recommend closing a credit card outright, especially if you’ve had that account open for years, cause that contributes to a healthy FICO score, but a lot of credit card companies will let you downgrade to a lower or no fee card. So, you keep the credit line open and the average age isn’t impacted. And some of the no annual fee cards give great cash back. So, I think in general, the top cash back credit cards will give you about a 2% return. Citi Double Cash is basically 1% when you spend in 1% when you pay it off in full, which you should be doing every month to avoid those crazy interest fees. So, when you think about the return on your credit card spend, you should be getting 2 cents per dollar that you spend. If you’re earning one Delta sky mile, for example, on a Delta card, that generally is worth only about a cent in value when you redeem for travel. So you’re only earning 1% back in value, unless, you’re earning in those bonus categories. So, for people who aren’t going to travel, you’re probably better off getting a 2%, no annual fee cash back credit card because cash is king, you’re getting more value and you can use it at a lot more places. Most loyalty programs, airline mileage programs, and even Amex. Amex will only give you seven tenths of a cent per point when you want to redeem for statement credit. It’s a terrible value and you’re much better off getting a card that just gives you straight up cash and doesn’t make you jump through hoops to redeem it for cash equivalent, like statement credit.

Jean Chatzky: (19:01)
Are you seeing anything great in terms of bonus offers for people who are thinking they want to switch up their portfolios these days?

Brian Kelly: (19:10)
Currently, no. The way I see it, the credit card industry has been shocked by this near 20% plus unemployment. All the credit models that the credit card companies use to determine if someone has good credit had been flipped upside down. So, I do believe in the future credit, so credit card companies have really gotten much tighter in who they give credit to as they just try to figure out what is going on. Where’s the economy actually going? We saw Chase and American Express put away billions into their stockpiles to pay, in case there were mass unemployment, people don’t pay the credit card bills. So, credit card companies are not currently in a mode of come on, come get a card from me. You know, they’re tweaking these offers to make sure people don’t cancel by adding extra, you know, Chase just added the ability to use your points, pay yourself back for groceries and other credits. But they’re fundamentally not coming out with huge budgets to try to conquest new customers. So you can switch cards. There are some okay deals out there. But I would think that, once we get through the economic uncertainty and we’re back on an upswing with unemployment going down, that’s when I think the credit card companies will say, okay, let’s get back to business and let’s lure customers with new hire offers. But we’re not there yet.

Jean Chatzky: (20:28)
I know you are leaving us and heading to the airport. How does it feel to be going on a vacation?

Brian Kelly: (20:34)
So I am headed to the Island of Antigua, which is one of the few places Americans can go right now. I have to say, the American passport is historically been one of the strongest passports in the world. We have the ability, you know, Europeans have fill out an online visa waiver to come to the U S. We can book a last minute ticket and go anywhere. Or at least we could. I actually was supposed to be in Iceland this week. And three days prior, the government changed their rules and said, Americans, not quite yet. Because our cases were on the rise. The EU just said, uh, yeah, we don’t think Americans are gonna come into the block this summer. And you know, frankly, our cases are currently spiking. And if we don’t get it under control, Americans may face a very, very long road. Most countries don’t want us coming in, which is a really weird feeling. So, I’m headed to the Island of Antiga. The Caribbean is reopening currently. So, it feels good. I got my COVID test last night. It wasn’t cheap. It was $150 for a rapid test. I may still need to get tested on arrival. But I feel confident because I had COVID. My main concern is carrying the virus to an Island like Antigua that doesn’t have the infrastructure and then spreading it. That’s something I’m very concerned about as a traveler. So, I feel like I’ve done the right things, but, it’s a tough travel world out there for sure.

Jean Chatzky: (21:54)
It is. And meantime, we will be taking more road trips than ever I think. At least in the short term. Brian Kelly, ThePointsGuy.com is where we find you. Thank you so much for being here.

Brian Kelly: (22:07)
Thank you so much for having me. And I normally sign off with saying safe travels, but stay safe.

Jean Chatzky: (22:14)
You stay safe too. We hope to talk to you soon.

Brian Kelly: (22:16)
Thanks Jean.

Jean Chatzky: (22:16)
HerMoney’s Kathryn Tuggle has joined me for our mailbag. I know you’re heading off on a trip too, but you’ll be on the road.

Kathryn Tuggle: (22:34)
I am. A road trip like everybody else I think this year. Just taking the car down from New York to see family in Alabama. We’re going to stop and see my aunt and Memphis. So it’ll be a nice little Southern tour.

Jean Chatzky: (22:46)
But you’re taking precautions, too. I mean, we talked about this as you were making your plans about the fact that it’s a 16 hour drive. You gotta stay somewhere, unless you’re going to go straight through, which you shouldn’t do.

Kathryn Tuggle: (22:58)

Jean Chatzky: (22:59)
And so you were talking about calling Hilton, where you have points, and asking for a room where it hasn’t been occupied for the past 72 hours. I thought that was a good idea. Is that we ended up doing?

Kathryn Tuggle: (23:12)
Yeah. We don’t have actual destinations for each night. We’re just going to see where the day takes us and how long we just want to spend on the road for the day. So, once we get to a stopping point, I will take a look at my app and see what hotel is nearby. And call and specifically ask that question. You know, what are the rates? And if we do stay the night, can you guarantee a room that somebody hasn’t been in for awhile? And I feel like it’s probably gonna be pretty easy for them to offer that because I suspect that there’s just fewer travelers and giving me a room that somebody hasn’t been in for a month might even be possible.

Jean Chatzky: (23:50)

Kathryn Tuggle: (23:51)
So, yeah. We’re just going to call ahead, and we’re gonna get takeout, and sit in parks to eat along the way, and sanitize after we use a gas pump, and do all the things that one has to do.

Jean Chatzky: (24:06)
Well, both the New York Times, and I believe the Wall Street Journal, but maybe the Washington Post, recently published stories on how to be as clean as possible in a public restroom. So, I’m going to send them your way before you go.

Kathryn Tuggle: (24:22)

Jean Chatzky: (24:22)
Because I think everybody’s reading about what happens when you don’t close the lid on the toilet and how it just creates poofs of air and droplets. This is just getting way too disgusting. But the point is you’ve got to take extra precautions when you are using a restroom that is not in your home. So, I want you to be safe there too.

Kathryn Tuggle: (24:43)
Thank you so much, Jean. I’m going to be so safe. Every time I’m in a public restroom now, I’m going to think of you.

Jean Chatzky: (24:49)
Oh, God forbid. All right, let’s go ahead and tackle our mailbag.

Kathryn Tuggle: (24:53)
Our first question comes to us from Kim Parker. She writes, hi Jean. I have a quick question. I have a five-year-old, should I freeze his credit to be safe? I already have mine frozen. Hashtag, I listen to Jean.

Jean Chatzky: (25:05)
I would say absolutely. And you can freeze credit, just for anybody who’s wondering, if you’re a parent, for any child under 16. So, by all means, they’re certainly not going to be paying attention to it. They have no reason to have credit. And the risk is that somebody has gotten hold of their social security number and is using that information in order to apply for credit. So, when your child gets to the age of majority, if they go ahead and try to apply for it on their own, and they have this preexisting credit file, that’s just going to make life difficult. So, my feeling is absolutely. Go ahead.

Kathryn Tuggle: (25:44)
Fantastic. Our second question comes to us from Cathy. She writes, I’m 51 years old and live in South Florida. With the exception of one of my stepchildren, who’s still in high school, our children are in college or have graduated college. My husband is financially secure, is currently well set up for retirement and provides a wonderful and secure life for us. I think I’ve done a fairly good job of putting money away in emergency savings and retirement funds. However, I know that I must continue to invest for my future. My problem is that I become overwhelmed with all of the information that’s out there and then I can’t make decisions about how to reallocate existing investments and make new investments. I’m hoping you can give me the kickstart. I so desperately need with the following question. I inherited about $40,000 in a Schwab IRA and an additional $150,000 in a Nationwide Monument Advisor Variable Annuity last year, from my beloved grandmother who was a mentor to both my children and me. I’m emotionally attached to this money and would like to see the majority of it grow for many years. Since I’ll be to make withdrawals on the Schwab IRA, can I consider this account as an emergency savings account? I’d like to take $7,000 out of my $16,000 savings account to contribute to my Roth for 2020. Can I contribute the leftover money from my savings toward my daughter’s school? Or should I take that from the IRA? How should I reallocate or reinvest the variable annuity? My primary goal is to not be a financial burden on my children when I’m old. So I’m considering longterm healthcare if you think it’s something I should purchase now. I would also like to contribute about $15,000 each to my two daughters, if and when they decide to marry. And I’d like to provide $5,000 to $10,000 to help one of my daughters through grad school starting this year, I’ve kept your book, Money Rules, in my bedroom for many years, often referring to it for reminders and I look forward to listening to your podcast each week. Thanks for all you do. I’m excited to hear your thoughts.

Jean Chatzky: (27:37)
Oh, thank you so much for writing Cathy. And I’m sorry about your grandmother. I think what you have in front of you is a really great opportunity to create a plan that takes into account the life that you say that your husband has provided for you, but also takes into account the saving that you’ve already done yourself. I can’t tell from the details in this letter, how much you’ve already put away for your own retirement and how well situated you are for that. And so, without those details, it’s a little harder for me to give you pointed advice about the money that you inherited from your grandmother. And so, I will give you my thoughts on, on your specific questions, but my overarching thought is that I’d love to see you take a little bit of that money and sit down with a financial advisor and really chart out your course, from now until your retirement, taking into consideration, the money that you want to contribute for your daughter’s weddings and for grad school. You asked about using the Schwab IRA as an emergency savings account. I think you can probably do that. The rules on an inherited IRA from a grandmother are that you have to take the money out within five years. You actually have six years because for 2020, thanks to COVID, you don’t have to take a required minimum distribution. But since you do have to pull the money out, I think it’s okay to treat it as emergency savings if that’s something that you want to do. As far as getting the money out of the annuity, you have choices. You can pull it out in a lump sum. You can spread it out over, I believe, five years. The will be taxable and so you’re going to have to look at how much is there after taxes, as well as how the flows of those funds line up with your gifts that you’re looking to make. Finally, longterm care insurance, I think it is likely something that you should think about and at the very least consider. But again, without those details about the overall size of your assets, your nest egg, it’s hard for me to figure out how much money should be put toward that goal. What I can tell you is that now is the right time to start looking at it. We like to see people who are going to buy longterm care insurance, making that purchase somewhere around 50 or 55 years old, because sooner than that, you pay the premiums for too long. After that you end up paying too much, or you get excluded from the ability to qualify for a policy for health reasons. So financial advisor, make a plan. Yes to the emergency savings and yes to starting to shop around for longterm care insurance. And if you want to talk through all of this again, because I get this can be really, really overwhelming, please feel free to write us again. But I do think that one of the jobs, one of the services, a good financial advisor provides is being that filter. So, I hope that you find a good one to work with, and thanks so much for listening.

Kathryn Tuggle: (31:17)
Absolutely. A good financial advisor will be a sounding board and they can help walk you through that and be that calming voice. You should always feel more calm when you leave your financial advisor’s office than you did walking in.

Jean Chatzky: (31:28)
Absolutely. And there are a lot of moving pieces here, and a lot of complicated moving pieces that she hasn’t dealt with before. So, getting help I think is well worth a small piece of that inheritance.

Kathryn Tuggle: (31:39)
Absolutely. Our last question is from Maggie. She writes hi, Jean and Kathryn. My husband and I welcomed our first baby in October and we’re fortunate to have several family members who want to help contribute to her financial future. We started a 529 account for her, but my parents also have some money they want to invest, so she could use it for non-educational purposes, like a house down payment or starting a business. We’ve looked into UTMA and UGMA accounts and my main question is, what are the pros and cons of putting money legally in a child’s name while they are a minor versus keeping money in your accounts with the intention of gifting it to the child, once they reach adulthood. Thanks so much for all you do. I look forward to your podcast every week.

Jean Chatzky: (32:19)
Thanks Maggie for the letter. It’s a really, really good question because there are pros and cons to UTMA and UGMA accounts. These are uniform gift to minors accounts, uniform trust for minors accounts. And two things to keep in mind with these. The first is that the money becomes your child’s money when they hit the age of majority. It varies between 18 and 21 depending on which of those accounts that you choose. But that’s a very young age. And depending on how your child turns out, I am very, very hopeful that your child will want to use the money for the purpose that your parents intend them to use the money for. But that’s a long way down the road. And we really have no idea if that is going to happen. And so that’s one risk. The other risk is that the money in these accounts is an asset of the child and it can cause problems when it comes to applying for and receiving as much financial aid as possible. And so, I actually think keeping the money in your parents’ name and gifting it to the child once they reach adulthood is probably the better way to go. You could also have them talk to an estate planner about a variety of other sorts of trusts that could be funded through their wills if they were to predecease your child’s getting to adulthood. But that’s sort of my 2 cents on this. I do think that these accounts can be useful for families where they believe that no financial aid will enter the picture. But these days that is something that fewer and fewer families are finding because the cost of college is so expensive. Congratulations though, on the baby. And, you’re lucky to have a family that wants to step in and help.

Kathryn Tuggle: (34:32)
Yeah. Congrats. I mean, that’s so wonderful that the family’s trying to set her up before she even can say her first words.

Jean Chatzky: (34:39)
Lucky, lucky baby. Absolutely. Thank you, Kathryn.

Kathryn Tuggle: (34:43)
Thanks Jean.

Jean Chatzky: (34:43)
In today’s Thrive, we’ve got car insurance companies but he’s paying quarantine refunds. We’ve been driving a lot less during the pandemic and with fewer cars on the roads, getting into fewer accidents, reducing the number of claims, those insurance premiums have contributed to an estimated $2 billion in additional monthly premiums for insurers. Many car insurance companies have acknowledged that policyholders are in a tight financial spot and are offering a break on insurance premiums. The most common offering, according to a recent Value Penguin survey is a 15% credit or refund applied to two months worth of premiums. Insurify, an insurance comparison site, looked into which car insurance companies were sharing their profits with policyholders. It found that nine out of the top 20 auto insurers had paid direct refunds to policy holders, including Allstate, American Family, Liberty Mutual and Nationwide. Note, the amount each customer receives typically depends on what you pay in premium, but according to Value Penguin, the average total savings from 25 major carriers ranges from $13 to $61. And if you haven’t heard anything about a refund from your insurer yet, well pick up the phone and give them a call. You know what they say about a squeaky wheel. Thank you so much for joining me today on HerMoney. Thanks to Brian Kelly for talking us through all the ins and outs of using our points, earning our miles and cashing in even during these difficult times. If you like what you hear, I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review because we love hearing what you think. As always, we’d like to thank our sponsor, Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper. Thanks so much for joining us and we’ll talk soon.

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