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There Are No Dumb Money Questions

Money Questions You're Afraid to Ask

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Everything you've always wanted to know about money ... but were afraid to ask.

En español |  It can be hard to admit when you don't know something, especially if you're afraid of appearing dumb or you think you should already know the answer at this stage of your life.

But when it comes to financial matters, what you don't know can definitely hurt you. So there's no shame in admitting your lack of knowledge or seeking clarity on a subject that can affect you financially.

Here are the answers to six money questions you may have been too embarrassed to ask.

What should I do if I can't afford my medicine?

Not taking medically prescribed pills, liquids or injections can be hazardous to your health and can cause even more money problems down the road. So if you can't afford recommended medicines, tell your physician. Your doctor can prescribe a generic drug or may have samples to tide you over until you find a longer-term solution.

Also, if you're enrolled in the Medicare Part D prescription drug program, you may be eligible for assistance through Extra Help, which helps those with limited incomes pay for prescription drugs. The assistance is estimated to be worth up to $4,000 a year. Information is available at medicare.gov.

Or, consult the Partnership for Prescription Assistance (PPA), a national service that helps consumers find free or nearly free brand-name medicines from more than 475 existing patient programs. You can reach PPA's support line at 888-4-PPA-NOW (888-447-2669) or visit the group online. Additionally, the PPA website offers a clinic finder to locate free or low-cost providers and clinics in your area.

What is the difference between a traditional IRA and a Roth IRA?

The main difference is the tax treatment of these individual retirement accounts.

With a traditional IRA, you may be eligible for a state and federal tax deduction in the year you make a contribution, depending on your income. (Those with a retirement plan at work, for instance, can deduct all or some of their contribution for 2017 on their federal tax return if they're single with income below $72,000 or married with income of less than $119,000.) Once you retire and you take money out of this IRA, though, your withdrawals will be taxed at regular income tax rates. By contrast, you do not get any upfront tax breaks for making contributions to a Roth IRA. However, your withdrawals, including earnings, are tax free — provided you have the account open for five years and take the money out after age 59 1/2. (Income limits apply here too: You can make a full or partial contribution for 2017 if you're single with income below $133,000 or married with income under $196,000.)

"If you think you're going to be in a higher tax bracket today versus tomorrow [in retirement], then the traditional IRA might be better for you," says Judith Ward, senior financial planner with T. Rowe Price in Baltimore. "But if you think your tax rate might be higher in the future, then the Roth IRA would be more beneficial."

Ultimately, though, since none of us truly knows what our tax rates will be the future, "having each, a traditional and a Roth IRA, provides you with greater diversification, flexibility and a hedge against that uncertainty," Ward says.

Be aware, too, that traditional IRAs will require that you make minimum withdrawals after you reach age 70 1/2, while the Roth has no such requirement.

Do I still need life insurance at my age?

Life insurance is meant to replace income. "So if you're at a point in your life where you don't have dependent children, it's possible that you don't need that replacement income. But it shouldn't be totally disregarded," Ward says.

For starters, consider whether you have a spouse who might require ongoing financial support or who may need life insurance funds to pay off an existing mortgage.

Also, don't forget that a small life insurance policy — say, for $10,000 or so — can be used to pay your burial costs.

"If something happens to you, and your family needs immediate funds for funeral expenses, they can get those life insurance proceeds very quickly with the right documentation," Ward says.

"If something happens to you, and your family needs immediate funds for funeral expenses, they can get those life insurance proceeds very quickly with the right documentation," Ward says.

What happens to my existing debts if I pass away?

How your debts get treated after your death depends on several factors, including the type of liability, whether cosigners are involved, your state of residence and marital status, says Bruce McClary, spokesman for the National Foundation for Credit Counseling.

Cosigners are still on the hook for the outstanding debt.

"But if you're concerned about how much debt you owe and what's going to happen to it after you pass, it's best to get out in front of it," McClary says. "Be open with your beneficiaries and let them know your circumstances because, in general, what you owe is going to be taken out of your estate and then if there's anything left over your beneficiaries will receive that, according to your will."

As for specific consumer debts, such as credit card bills, "once your estate runs out of available funds, credit card companies have to write off that debt. In general, it's uncollectible," McClary says. "But be aware that in community property states, spouses can be responsible for that debt, so a creditor could then go to the surviving spouse for payment."

The nine community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In Alaska and Tennessee, the community property system is optional for spouses.

Is it too late for me to become a homeowner?

Owning a home is a big part of the American dream for many. The good news, even if you've always rented, is that you're never too old to become a homeowner. You might even find that owning a home is cheaper than renting if you move to a less-expensive locale. The bad news is, unless you have the cash, you'll likely have to borrow to buy a house — and that may not be a wise financial move.

Federal law bans credit discrimination based on age. When deciding whether you qualify for a mortgage, lenders will consider factors such as your credit history and if you have enough income to repay the home loan. If you're still employed, your earnings will help you qualify. If retired, other acceptable forms of income include pensions, interest income, Social Security benefits and capital gains from investments.

Still, you shouldn't make this major decision based solely on whether a bank will approve a home loan.

"It all boils down to affordability and what you can afford to maintain as a part of your budget," even during your retirement years, says NFCC's McClary.

"I would caution retirees about taking on significant amounts of debt because retirement is precisely the time when people really need to avoid debt as much as possible," McClary adds.

Unfortunately, the exact opposite is happening for many U.S. retirees.

According to a 2016 report from the Urban Institute, 35 percent of U.S. homeowners age 65 and older still had a mortgage in 2012, up from 23.9 percent in 1998. Furthermore, mortgage debt among those 65 and above has nearly doubled during that time, going from a median of $44,000 to $82,000.

What can I do if a relative or caregiver takes financial advantage of me?

Elder financial abuse is a widespread problem in America that takes many forms. Sadly, family members, friends and paid caregivers can steal money from accounts, make unauthorized financial transactions or misuse an older person's credit.

If you find yourself in this situation, let another trusted family member, friend or third party know.

"It's tough because the person [committing financial abuse] is probably someone that they trust," says T. Rowe Price's Ward. "But if they do think there's something wrong going on, a phone call is not going to hurt, and it could actually save them from much further harm later on."

You can contact Adult Protective Services to get help in your local area. If you live in a nursing home or an assisted living facility, a long-term care ombudsman can offer assistance.

Finally, if the financial abuse involves a scam, file a complaint with the Federal Trade Commission.

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