Retired felons still get Social Security, in case you were wondering

Dear Liz: If someone has a felony, is it true they cannot claim Social Security retirement benefits? If so, what is the best option: a Roth IRA account or a brokerage account? How do they get started without a lot of money?

Answer: A felony does not prevent you from claiming Social Security in the future if you work enough years to qualify for benefits. If you were already receiving retirement benefits when you were convicted, your payments would typically be suspended while you were incarcerated but resumed when you got out.

That said, Social Security usually isn’t enough to live on, so you’ll want to have money in retirement accounts as well. An IRA or a Roth IRA are both good options. The IRA reduces your taxes upfront while Roth IRAS reduce your taxes in the future. Low- and moderate-income taxpayers also can get a tax credit, called the Savers Credit, for retirement contributions.

If you don’t have a lot of money to invest,

look for brokerages that have low fees and no account minimums, such as Fidelity, Etrade, TD Ameritrade and Charles Schwab, among others.

Once you open the account, you’ll need to figure out how to invest.

If you’re new to investing, consider using target date funds. These investments are labeled by year, and you pick the year that’s closest to your future retirement. The fund does the rest of the work such as picking the stocks and bonds, rebalancing the mix and getting more conservative as the retirement date approaches.

Robo-advisers such as Betterment or Sofi are another low-cost solution that do most of the work for you.

Backdoor Roth IRA contributions

Dear Liz: You mentioned in a previous column that a backdoor Roth contribution could be expensive if you have a large pre-tax IRA. I was in that situation, and opted to first roll my IRA into my employer’s 401(k). I then made a nondeductible contribution to a new IRA and shortly afterward converted it to a Roth. This allowed me to get money into a Roth without a big tax bill.

Answer: That’s a great solution for those who have access to 401(k) plans that accept such transfers, and many do.

For those who don’t know, backdoor Roths are a two-step process for people whose incomes are too high to contribute directly to a Roth. Instead, they contribute to a regular IRA and then convert that money to a Roth because there’s no income limit on conversions.

Taxes are usually owed on Roth conversions, based on how much pre-tax money you have in IRAS. But the conversion can be tax free if the contribution was nondeductible, you convert shortly after the contribution and you don’t already

have a pre-tax money IRA.

Some questioned the legality of this loophole, but Congress blessed it in 2017 as part of the Tax Cut and Jobs Act of 2017.

2020 taxes bring another stimulus shot

Dear Liz: My 2019 tax return was electronically submitted May 11 and my income was low enough to qualify for a stimulus payment. I got my refund at the end of July but was told I wouldn’t get a stimulus check because my 2018 income was too high. The IRS agent on the phone said I could request the money when I filed my 2020 taxes. But isn’t that past the deadline? The agent sounded like he was just trying to get me off the phone.

Answer: He probably

was, but he gave you the correct information. The IRS used the tax returns they had on hand this spring when they started sending out stimulus payments. Since your 2019 return hadn’t been filed, they used your 2018 income to determine how much, if anything, to send you.

People who didn’t get checks or got too little aren’t out of luck. The stimulus checks were an advance payment of a credit that will be added to people’s 2020 tax returns. If you should have received a check but didn’t, you’ll get the full credit added to your refund next year.

Weston is a certified financial planner. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604. Distributed by No More Red Inc.