Clark Howard

The traditional inheritance model is simple: You save your whole life, you die, and your kids get whatever is left. More and more retirees are questioning that sequence. If the money is going to your children anyway, why not give some of it while you’re around to see what it does for them?

It’s a fair question, and for a growing number of families, the answer is yes. But the order of operations matters enormously, and getting it wrong can damage both your retirement and your kids.

The Case for Giving While Living

Wes Moss, host of the Ask an Advisor segments on the Clark Howard Podcast, has watched plenty of families work through this decision.

“I’m very much in favor of sharing some of your inheritance while you’re here to watch your kids and grandkids enjoy it,” Moss says. “But only if your own retirement math truly works first.”

The appeal is obvious. A $50,000 gift toward a first home when your daughter is 32 changes her life in a way that the same $50,000 won’t if she inherits it at 60, likely after her own kids are grown, and her mortgage is paid off. Money delivered at the right moment does more work.

“For affluent families, helping with things like a first home, education, or big life goals can be incredibly rewarding,” Moss says, “and many boomers are already doing this through regular, thoughtful gifts rather than one giant transfer at the end.”

That last part is worth noting. The families doing this well aren’t writing one dramatic check. They’re making steady, planned gifts year after year, which happens to line up neatly with how the tax rules work.

The Tax Rules Are More Generous Than You Think

Many people assume large gifts trigger a tax bill. For nearly everyone, they don’t.

In 2026, you can give up to $19,000 per person to as many people as you want with no tax consequences and no paperwork. A married couple can combine their exclusions and give $38,000 per recipient. Two parents with three married kids could move $228,000 a year to their children and their spouses without filing a single form.

Go over that amount, and you file a gift tax return (Form 709), but that’s a reporting event, not a tax event. Amounts above the annual exclusion simply count against your lifetime gift and estate tax exemption, which is now $15 million per person ($30 million per couple) and permanent under current law. Unless you’re moving eight figures, federal gift tax is not your problem.

Two more exclusions make targeted help even easier. Tuition paid directly to a school and medical bills paid directly to a provider don’t count against the annual exclusion or the lifetime exemption at all. You could pay a grandchild’s entire college tuition and still give that grandchild $19,000 the same year.

Which Account the Money Comes From Matters

The gift tax rules are the easy part. The income tax consequences of raising the cash are where retirees get surprised.

If your wealth is mostly in traditional IRAs and 401(k)s, every dollar you withdraw to give away is taxed as ordinary income first. A $100,000 gift from a traditional IRA could cost you $125,000 or more after federal taxes. A withdrawal that size can also push you into a higher bracket, raise your Medicare premiums through IRMAA and increase how much of your Social Security gets taxed. Retirees in this position are usually better off spreading withdrawals over several years to stay within their current bracket rather than taking one big hit.

Roth IRA withdrawals and cash savings avoid this problem entirely, which is one more reason account diversification pays off in retirement.

One caution on gifting investments instead of cash: Appreciated stock you give away during your lifetime carries your original cost basis to the recipient. The same stock left in your estate gets a step-up in basis at death, wiping out the capital gains tax entirely. For highly appreciated holdings, dying with them is often the better tax move.

Where Early Giving Goes Wrong

Moss has seen the failure modes up close, and they come in two varieties.

“Where I’ve seen it go wrong is with parents whose own plan is tight,” he says, “or who accidentally keep their adult kids on the payroll and dependent on their money instead of helping them stand on their own two feet.”

The first mistake is a math problem. You can borrow to buy a house or to pay for a college education. Nobody will lend you money to fund your retirement. If a long retirement, a market downturn or a late-life health event could strain your plan, the money you gave away at 65 is money you may badly need at 85. Run your plan against conservative assumptions before you give anything, and if you’re not certain, a fee-only fiduciary advisor can stress test it for you.

The second mistake is a parenting problem. There’s a real difference between a gift that launches a child and a subsidy that becomes part of their monthly budget. A down payment helps your son buy a home he can afford on his own income. Covering his car payment and cell phone bill in his 30s teaches him that his lifestyle doesn’t have to match his paycheck. One builds independence. The other erodes it.

A Simple Rule of Thumb

Moss boils the whole decision down to one sentence:

“Don’t give so much, so early, that you jeopardize your own retirement or your children’s independence.”

Both conditions have to hold. Your plan has to be solidly funded under pessimistic assumptions, not just average ones. And your kids have to be the kind of people a gift will help rather than soften. If either test fails, wait.

But if both pass, the payoff goes well beyond the money.

Final Thoughts

“If you’re solidly funded and they’re responsible,” Moss says, “sharing part of the inheritance early can be one of the most joyful uses of wealth you’ll ever experience.”

You spent decades building the nest egg. Watching it matter, while you’re still here to see it, might be the best return it ever produces.
The post Should You Give Your Kids Their Inheritance While You’re Still Alive? appeared first on Clark Howard.

Losing a spouse changes almost every part of life, including your finances. While most people expect changes to Social Security or pension income, many don’t realize the tax bill can increase just as household income is shrinking.

That’s what’s commonly called the widow’s penalty. It’s not an actual tax. It’s the result of moving from the favorable tax rules for married couples to the much tighter rules for single filers, even though many living expenses — and often most retirement income — stay about the same.

The good news is that this is one retirement tax challenge you can often plan for. The most effective strategies happen while both spouses are still alive, making advance planning especially valuable. But there is still an opportunity to make strategic changes after a loss.

What is the Widow’s Penalty?

The widow’s penalty refers to what can happen when a surviving spouse loses the tax advantages of filing jointly while keeping much of the couple’s retirement income and living expenses. As a result, taxes can rise even as household income falls.

In the year a spouse dies, the survivor can still file a joint tax return. Starting the following year, however, most surviving spouses must file as single. (A qualifying surviving spouse status preserves the joint tax brackets for up to two additional years, but it requires a dependent child, so it rarely applies to retirees.)

That change affects two key parts of the tax code at once:

The standard deduction gets cut in half. In 2026, a married couple where both spouses are 65 or older gets a standard deduction of $35,500. A single filer over 65 gets $18,150. That means roughly $17,000 of income that was tax-free on the joint return is now taxable, even though nothing about the survivor’s spending or lifestyle changed.

The tax brackets shrink. For 2026, the 12% federal tax bracket extends to $100,800 of taxable income for joint filers. For a single filer, it ends at $50,400. A surviving spouse whose income fit comfortably in the 12% bracket while married can see a large slice of that same income taxed at 22% the very next year.

The reason this happens is that a surviving spouse’s income often holds up much better than the tax code assumes. Social Security pays the survivor only the larger of the two benefits, so the smaller check disappears. But that’s often the only income that goes away. Required minimum distributions from the couple’s retirement accounts continue at nearly the same level because the survivor typically inherits the deceased spouse’s IRA or 401(k). Interest, dividends and rental income aren’t affected by filing status at all.

As a result, a couple with $120,000 of annual income might leave a surviving spouse with $95,000, still enough to cover many of the same household expenses, but now taxed under rules designed for someone earning far less.

How the Widow’s Penalty Can Increase Medicare Premiums

The widow’s penalty doesn’t just affect income taxes. It can also increase what you pay for Medicare.

Medicare Part B and Part D premiums carry an income-based surcharge called IRMAA (the income-related monthly adjustment amount). The thresholds for single filers are exactly half those for married couples. In 2026, a couple filing jointly can have modified adjusted gross income up to $218,000 before the first surcharge applies. A single filer crosses the line at $109,000.

Consider a couple with $135,000 in retirement income: two Social Security checks and RMDs from their IRAs. Filing jointly, they’re nowhere near the IRMAA threshold. When one spouse dies, the survivor’s income might drop to $110,000. Lower income, but now over the single-filer line. Crossing just the first IRMAA tier adds roughly $1,150 a year to Medicare premiums.

IRMAA also works on a two-year lookback. Your 2026 premiums are based on your 2024 tax return. A new surviving spouse can end up paying higher premiums based on the couple’s old joint income, even though household income has already fallen

There’s a fix for that last part, and it’s frequently missed. The death of a spouse counts as a life-changing event under Social Security’s rules. The survivor can file Form SSA-44 and ask Social Security to recalculate IRMAA using current-year income instead of the old joint return. If you know a recent widow or widower paying elevated Medicare premiums, this one form can save them real money.

How to Reduce the Widow’s Penalty

Almost every tool for reducing the widow’s penalty depends on the wider joint brackets, and those disappear when the first spouse dies. The planning window is the years when both spouses are alive and, ideally, in a lower bracket than the survivor will face alone.

Consider annual Roth conversions during the joint years. This is the single biggest lever. Converting traditional IRA money to a Roth while married lets you pay the tax at joint rates, often 12% or 22%, instead of leaving it to be taxed at the survivor’s compressed single rates. Every dollar converted also shrinks future RMDs, which lowers the survivor’s taxable income for the rest of their life. The standard approach is to convert just enough each year to fill your current bracket without spilling into the next one, while keeping an eye on the IRMAA thresholds.

Use the final joint-filing year. In the year a spouse dies, the survivor can still file jointly. That’s one last shot at the wide brackets and the full standard deduction. A larger Roth conversion or a planned capital gain in that year is taxed far more gently than it will be in any year afterward.

Get the pension election right. If either spouse has a pension, the survivor benefit election is usually irrevocable at retirement. A single-life payout is bigger each month, but it dies with the pensioner. A joint-and-survivor option pays less now and protects the surviving spouse for life. Couples should make this decision with the survivor’s full tax picture in mind, not just the monthly difference.

Coordinate the Social Security claiming decision. The survivor keeps the larger of the two benefits. That means the higher earner delaying to age 70 isn’t just maximizing their own check. It’s setting the income floor the surviving spouse will live on, possibly for decades.

Use qualified charitable distributions after 70½. If you’re charitably inclined, giving directly from an IRA satisfies your RMD without the money ever touching your adjusted gross income. For a survivor sitting near an IRMAA threshold or a bracket line, a QCD can be the difference between staying under and going over.

Don’t sit on the house too long. Married couples can exclude up to $500,000 of gain on the sale of a primary home. A surviving spouse keeps the full $500,000 exclusion only if the home sells within two years of the spouse’s death. After that, the exclusion drops to $250,000. For long-held homes in appreciated markets, waiting can turn a tax-free sale into a taxable one.

Model the survivor scenario. Ask your advisor, or run the numbers yourself, on a simple question. If one of us died this year, what would the survivor’s tax return look like in two years? What bracket? What IRMAA tier? What RMDs? Most couples have never seen those numbers. Seeing them is what turns all of the moves above from abstract advice into a concrete plan.

After a Loss, There’s Still Time To Act

If you’ve already lost a spouse, don’t assume you’ve missed every planning opportunity. While some strategies are only available before a spouse dies, others remain available in the months and years that follow.

The final joint tax return can still be filed for the year of death.

Form SSA-44 may reduce Medicare premiums by updating your income after a life-changing event.

The two-year window for the full home sale exclusion may still be available if you’re considering selling your home.

The widow’s penalty often affects couples who saved consistently for retirement and built substantial traditional retirement accounts. Large traditional retirement accounts can create larger required minimum distributions, which are then taxed under a single filer’s tighter tax rules.

Whether you’re planning as a couple or navigating life after the loss of a spouse, understanding how the rules work can help you make informed decisions, avoid unnecessary taxes and keep more of the retirement income you’ve worked so hard to build.

Final Thoughts

No amount of tax planning can make losing a spouse easier. But understanding the widow’s penalty can help prevent an unexpected tax bill from adding to an already difficult time.

The most effective strategies often happen years before they’re needed, while both spouses are still alive and have the flexibility to make decisions together. Even after a loss, however, knowing the rules can uncover opportunities to reduce taxes and Medicare costs.

The widow’s penalty is one of the few retirement tax challenges that’s both predictable and manageable. Planning ahead won’t change what happens — but it can help the surviving spouse keep more of the retirement income you’ve spent a lifetime building.
The post How the Widow’s Penalty Works and How To Plan Around It appeared first on Clark Howard.

Travel credit cards with high annual fees offer some pretty flashy benefits.

And those can be really great … if you actually use them.

Team Clark believes that travel cards can be a fantastic tool for frequent travelers. Benefits like status upgrades with hotels and airlines, airport lounge access, travel protections, and bonus rewards for travel spending can be well worth the annual fee if you travel multiple times per month.

But what if you’re paying a premium annual fee (some of the higher-end cards now charge upwards of $900 per year!) and traveling just a couple of times per year?

The math can get murky.

Think of it in terms of a five-year period: That can be thousands of dollars that you’re paying for the privilege of carrying a premium card.

In this article, we’ll talk about how to determine whether you’re paying for a card you don’t need, explore an option to downgrade that card without closing it, and offer recommendations for more cost-effective travel cards, as well as options for ditching travel cards altogether.

Assess Your Annual Fee Cards and Consider a Downgrade if Needed

If you have a high-annual-fee card in your wallet and you’re not a frequent traveler, it’s time to complete an honest assessment.

Review the last 12 months of usage for this card. Check your multipliers to see if you’re getting the boosts you were expecting from spending with this card. Isolate the earnings you’re able to make above 2% back, which should be the baseline rewards you’d earn from a non-travel card. A year’s worth of spending is a fair assessment of your current spending patterns.

Review the benefits and credits you get from this card. Many of the high-end annual fee cards create “value” for cardholders via a vast menu of travel benefits and statement credit opportunities. Identify which of these benefits you’ve used in the last 12 months. Try to differentiate between benefits you’re using because you need them and ones that you’re using simply because the card offers them.

Compare the numbers from Steps 1 and 2 with your card’s annual fee. Once you’ve calculated the net benefit you’ve received from the card over the last 12 months, you can compare it to the annual fee you’re paying. If your benefits outweigh the cost, then you’re likely justified in continuing to pay for the card. If the number is breakeven or worse, you may want to consider making some changes.

Consider a Downgrade or Product Change if Needed

If you’ve done the math on your annual fee card and realized that you’re not receiving enough value, you should have some options beyond simply canceling the card.

Many high-end travel credit cards have a companion card that has a lower annual fee. These are often $95 annual fee cards that have similar branding but offer a different set of benefits that aren’t quite as enticing.

Contact your card issuer to inquire about downgrading your high-annual-fee card to its cheaper sibling card. This is a way to both protect your spending power and credit history without canceling the card and applying for a new one.

Alternatively, your card issuer may offer you the option to “product change” to one of their no-annual-fee cards as a way to remain an active customer without paying for the higher fee cards. Just make sure they’re not asking you to apply for a new line of credit in this process.

Downgrading or product changing can be a preferred alternative to canceling the card outright.

Travel Cards We Recommend with Manageable Annual Fees

If you feel like you need a travel card but don’t want to be stuck paying an extremely high annual fee, we have some options for you to consider.

The Capital One Venture X Rewards Credit Card is money expert Clark Howard’s favorite recommendation in this space and it is one that he carries in his personal wallet.

It has an annual travel credit and anniversary points bonus that essentially negate the annual fee.

Capital One Venture X Rewards Credit Card

card_name

Annual Fee:

$395

Card Description:

Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travelReceive a $300 annual credit for bookings through Capital One Travel, where you’ll get Capital One’s best prices on thousands of trip optionsGet 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary

Rewards Program Details:

2 Miles per dollar on every purchase, every day. 10 Miles per dollar on hotels and rental cars booked through Capital One Travel. 5 Miles per dollar on flights and vacation rentals booked through Capital One Travel.

At a lower annual fee price point, we also like the Chase Sapphire Preferred Card.

The card also has an anniversary statement credit for hotel purchases made through Chase Travel that can negate the impact of the modest $95 annual fee.

Chase Sapphire Preferred® Card

card_name

Annual Fee:

$95 (See Rates & Fees)

Card Description:

Earn 100,000 bonus points after you spend $5,000 on purchases in the first 3 months from account opening.Enjoy benefits such as 5x on travel purchased through Chase Travel℠, 3x on dining, 3x on vacation homes, 3x on gas & EV charging, 3x on top streaming services and online groceries (excluding Walmart, Target, and wholesale clubs), 2x on all other travel purchases, 1x on all other purchasesEarn up to $100 in statement credits each account anniversary year for hotel stays through Chase Travel

Maybe a No-Fee Cash Back Credit Card Is More Your Speed

If you’re trapped in the “travel rewards” ecosystem and find that it’s not lucrative for your spending habits, perhaps it’s time to consider a full strategy change.

You could switch from Team Travel to Team Cash Back.

Cash back credit cards don’t have the flashy travel benefits and rewards point ecosystems. They simply reward you with a percentage of your purchase back.

Clark recommends getting a no-annual-fee cash back credit card that awards unlimited 2% cash back on all your spending to use as a “catch all” or “everyday spender.”

You can carry that in your wallet with confidence, knowing that you’ll get what equates to a 2% discount on everything you purchase without having to worry about spending categories or restrictions.

There are several good 2% cash back cards on the market. Here are a few of our favorites:

Synchrony Premier World Mastercard®

Learn More →

Annual Fee:

$0*

Rewards Program Details:

2% Cash Back* on Every Purchase: Your cash back is unlimited and gets credited to your statement every month, automatically.

Wells Fargo Active Cash® Card

Learn More →

Annual Fee:

$0.00

Rewards Program Details:

Earn unlimited 2% cash rewards on purchases with no categories to track or quarterly activations.

Fidelity® Rewards Visa Signature®

Learn More →

Annual Fee:

$0.00

Rewards Program Details:

Earn unlimited 2% cash back on everyday spending when redeemed as deposit into Fidelity investment accounts.
You can spend your rewards or deposit them into any eligible Fidelity account, giving your money more chances to grow.

Once you have a 2% card in your wallet, you can enhance your cash back earnings by branching out to no-annual-fee cards that offer a higher rate of cash back in the categories in which you spend the most each month. Examples for many people include dining, groceries or gas purchases.

Team Clark has a cash back credit card tool to help you find the right match for your wallet based on your spending habits.

Are you paying for a card you don’t need? We’d love to hear about your experience in the Clark.com community.

Not all available financial products and offers from all financial institutions have been reviewed by this website.

The information related to Wells Fargo Active Cash® Card, Fidelity® Rewards Visa Signature® and Synchrony Premier World Mastercard® has been collected by Clark Howard, Inc. and has not been reviewed or provided by the issuer or provider of this product or service.

* CASHBACK REWARDS: Valid on net purchases (less credits, returns and adjustments) of goods and services made with a Synchrony Premier World Mastercard® earned will be applied as a statement credit within 2 billing periods after an eligible purchase is made. Cash advances, fees and interest charges do not qualify to earn cash back. Account must be open and in good standing at the time the purchase is made and the statement credit is applied. See the Synchrony Premier World Mastercard® Rewards Terms for details.

* NO ANNUAL FEE: For New Synchrony Premier World Mastercard Accounts as of January 1, 2026: Variable Purchase APR 17.49%, 26.49%, or 33.24%. Variable Bal Trans APR 17.49%, 26.49% or 33.24% and 4% Fee ($10 min). Variable Cash APR 20.49%, 29.49% or 36.24% and 5% Fee ($10 min). Variable Penalty APR 27.49%, 36.49% or 39.99%. Minimum Interest Charge is $2. Foreign Trans Fee is 3%.

The post Stop Paying for a Credit Card You Barely Use appeared first on Clark Howard.

Do you have an unlimited 2% cash back credit card in your wallet?

Money expert Clark Howard recommends that all credit card rewards chasers have one of these no-annual-fee options as a solid base of return on all types of spending. Knowing you can swipe one card in any situation and earn 2% back is huge. (Assuming you pay your bill in full each month to avoid interest charges.)

Clark carries the Navy Federal cashRewards Plus Credit Card in his wallet as his 2% back option. (You can read our full review of the card here.)

And if you want to join him in that card membership, now might be a good time to do your research on the card.

As part of a “Celebration America’s 250” promotion, Navy Federal is offering an enhanced welcome bonus for a limited time.

Here are the details:

“Get up to $300 with a new cashRewards card: Earn a $50 bonus when you join Navy Federal and open a cashRewards or cashRewards Plus card using the Special Offers link after becoming a member. Offer ends 07/31/2026.

Spend $2,500 within 90 days of account opening, and you’ll get another bonus of $250.

Plus, you’ll save with a 1.99% intro APR for 12 months from account opening on balance transfers made in the first 60 days. After that, a variable APR between 14.15% and 18% applies.”

What You Should Know About the Navy Federal cashRewards Plus Credit Card

Let’s start with the strong points: This card meets Clark’s major requirements (no annual fee, unlimited 2% cash back, reasonable APR, no junk fees). It also has some pretty cool perks, like no foreign transaction fees and auto rental insurance coverage.

Being able to earn $300 for opening up a 2% card that checks all these boxes sounds like a pretty great deal.

But there are a couple of major catches:

1. Credit Union Membership Requirement

Unfortunately, this offer is not for everyone.

Navy Federal Credit Union has membership requirements that would prevent many people from applying.

To gain membership and apply for the card, you must fall into one of these four buckets:

Active Duty U.S. Military: This includes members of the Army, Marine Corps, Navy, Air Force, Coast Guard, National Guard and Space Force.

U.S. Military Veterans: “No matter how long you served, you’re in!”

Immediate Family Members of U.S. Military: This includes spouses, siblings, parents, children, grandparents and grandchildren.

Department of Defense (DoD) Civilians: This includes employees, contractors, retirees and annuitants.

Clark met the qualifications thanks to his service with the Georgia State Defense Force.

2. Navy Federal Could Stick You With a Less Lucrative Card Instead

You may have noticed that this offer applies to both the Navy Federal cashRewards Plus Card AND the Navy Federal cashRewards Card.

While applicants with a top-tier credit history are likely to receive the green light on the 2% back “Plus” version of the card, it’s possible that Navy Federal could instead qualify you for the plain “cashRewards” card that only awards 1.5% cash back on everyday purchases.

This card would still qualify for the welcome offer, but may not be as desirable as an everyday spender for the long term.

Do you have this card? Would you consider it with this limited-time offer? We’d love to hear your thoughts in the Clark.com community.
The post Limited-Time Offer for One of Clark’s Favorite Credit Cards appeared first on Clark Howard.

Money expert Clark Howard recommends target date funds more often than any other investment. Pick the fund with the year closest to when you plan to retire, put your retirement money into it and let the fund handle the rest. That part is well covered.

But target date funds have some quirks that surprise even people who have owned them for years. A few of these quirks can cost you real money if you get them wrong. Here are six things you may not know.

1. They Belong in Retirement Accounts Only

This is the big one. Target date funds are designed for tax-advantaged accounts like a 401(k), traditional IRA or Roth IRA. They are a poor fit for a regular taxable brokerage account.

“With target date funds you should be investing inside a traditional IRA, Roth IRA, 401(k),” Clark says. “That would also include Simplified Employee Pensions (SEPs) and any other account where there are no tax implications to the mix of investments being changed over time.”

The reason comes down to how these funds work. A target date fund constantly sells stocks and buys bonds as it moves toward its target year. Inside a retirement account, all that trading is invisible to the IRS. Inside a taxable account, every one of those sales can generate capital gains that get passed on to you as a tax bill, even if you never sold a single share yourself.

“The very nature of a target date fund is that as you get closer to that target, they change that mix of investing,” Clark says. “So it keeps generating taxes for you if you own it in a regular investment account.”

If you think the risk sounds theoretical, consider what happened at Vanguard. In late 2020, Vanguard lowered the minimum for the institutional version of its target retirement funds, and large retirement plans rushed to switch. Those redemptions forced the regular investor funds to sell holdings, which triggered capital gains distributions dozens of times larger than normal. People who held the funds in 401(k)s and IRAs were fine. People who held the exact same funds in taxable accounts got surprise tax bills, some reportedly in the tens of thousands of dollars. Vanguard later agreed to pay more than $100 million to settle SEC charges over the episode.

If you want a simple all-in-one fund in a taxable account, Clark suggests a total stock market index fund or ETF or a balanced index fund instead.

2. Nothing Dramatic Happens When You Reach the Target Date

A common worry: “My fund says 2030. What happens in 2030? Does it all get sold? Does it go to cash?”

No. The target date is not an expiration date. The fund keeps operating, you keep owning it, and the portfolio keeps holding stocks.

“When we hit next year, it doesn’t suddenly all go into bunker mode. There will continue to be a need in that fund for years to come to have meaningful exposure to the stock market,” Clark says. “It goes into a retiree mode… And in retiree mode, the thinking is the portfolio has to be more defensive. So that in down years for the market, you go down a lot less than the market goes down. And in up years, you’ll go up less.”

The gradual shift from stocks to bonds is called a glide path, and it works more like a dimmer switch than an on-off switch. Even after the target year arrives, most funds keep 30% to 40% of the portfolio in stocks so your money can keep growing through what may be a 25- or 30-year retirement.

One housekeeping note: Years after the target date passes, many fund companies eventually fold the fund into their retirement income fund, which holds the final, most conservative mix. Your money moves over automatically. There is nothing you need to do, and there are no tax consequences inside a retirement account.

3. Two Funds With the Same Year Can Be Very Different

A 2045 fund at one company and a 2045 fund at another company can hold meaningfully different amounts of stock, both today and after the target date arrives.

Part of the difference is the “to” versus “through” design.

A “to” fund reaches its most conservative allocation right at the target year.

A “through” fund keeps reducing risk for years afterward, which means it holds more stock at the target date itself.

Neither approach is wrong, but they behave differently in a bad market right around your retirement.

The bigger trap is that a single company can sell two funds with nearly identical names and very different costs. Fidelity’s Freedom 2045 Fund charges 0.68% per year, while the Fidelity Freedom Index 2045 Fund charges 0.12%. Same company, same year, and in many cases the cheaper index version has performed better. Schwab similarly offers both Target Funds and Target Index Funds.

Clark’s rule is simple: Buy the version with “index” in the name.

4. You Don’t Have To Pick the Year You Actually Retire

The year in the fund name is a suggestion, not a contract. If you’re comfortable with more risk, you can pick a fund dated five or ten years past your planned retirement, and the fund will hold more stocks for longer. If a market drop close to retirement would keep you up at night, pick an earlier year and the fund will get conservative sooner.

Choosing a later date is also a reasonable move if you plan to work part-time in retirement or expect to leave much of the money untouched for years.

5. Pairing It With Other Funds Defeats the Purpose

A target date fund is designed to be your entire retirement portfolio. Its managers set a precise mix of U.S. stocks, international stocks and bonds for your stage of life. When you add an S&P 500 fund “for extra growth” or a bond fund “for extra safety” alongside it, you override that mix, usually without realizing by how much.

The same goes for holding several target date funds with different years. Clark has been asked whether laddering funds, say a 2040, 2050 and 2060, makes sense the way laddering CDs does. His answer is no. Pick one fund, put everything in it and let it do its job.

6. You May Already Own One Without Choosing It

Target date funds are the default investment in most workplace retirement plans. If you enrolled in your 401(k) and never made an investment election, there’s a good chance your money is sitting in the target date fund matched to the year you turn 65.

For most people, that default is a good outcome. But it’s worth logging in to confirm two things:

Check which target year the plan assigned you, since it’s based on your birth date and a retirement age you may not agree with.

Check the expense ratio. If your plan offers both an actively managed and an index version, the difference in cost over a career is substantial.

Final Thoughts

Target date funds remain one of the simplest ways to invest for retirement. You pick a fund based on your timeline, keep it in a tax-advantaged account, and let it automatically shift from growth to conservatism over time. For most investors, that level of simplicity is exactly the point.

But “simple” doesn’t mean you can ignore the details entirely. The account you use, the share class you choose, and whether you accidentally mix in other investments can all affect how well the strategy works in practice. Most issues don’t come from the fund itself — they come from how it’s used.

When used as intended in a 401(k) or IRA, a low-cost index target date fund remains one of the most effective, low-maintenance paths to long-term retirement investing. The key is making sure you’ve set it up cleanly so the fund can do exactly what it was designed to do — on autopilot.
The post 6 Things You May Not Know About Target Date Funds appeared first on Clark Howard.

Do you use your bank or credit union’s “bill pay” function to pay your bills each month?

You may want to consider changing this strategy. Using bill pay, especially when a paper check is involved, exposes your payment to a few different risk factors:

Potential delayed delivery of your payment.

Inability to track the status of your payment.

Checks lost or stolen in the mailing process.

Payments lost or misapplied by the recipient.

Money expert Clark Howard says that he ditched the convenience of using a bank or credit union’s service to pay all his bills for a more time-consuming method: Paying each vendor directly on their website or online payment portal.

He does this in the name of financial safety and transaction transparency. Read on to understand why.

Clark Cautions Against Using Bank Bill Pay, Advises Direct Payment Instead

During a recent episode of The Clark Howard Podcast, the risks associated with modern-day bill-pay services from your bank or credit union were a topic of discussion.

A listener wrote in to express frustration with an experience with USAA. Clark responded with some practical advice we all could use as we navigate our monthly expenses.

Johnny in Florida Writes:

“What do you know about USAA’s checking account processor change?  The new USAA system debits my checking account 1-2 days before the payment is sent.  This is not a problem for electronic payments.  However, with paper checks using Bill Pay, the payments are deducted from the account when the check is sent.  Customer service told me that I will not receive a canceled check image, and I will not get any confirmation that the check was actually cashed.  This only becomes a problem when the checks are not cashed.  Unfortunately, some of my Payees do not cash checks in a timely manner.  Some checks remain uncashed for several months due to a problem with the vendor’s business office.  My question to the Customer Service is where does the money go, if it is not in my account? The only status I get in the Bill Pay is ‘Processed.’ Sadly, the days of “floating a check” are gone with USAA.”

Clark Responds:

“Well, it’s actually a lot worse than that, Johnny. Any bill pay service that doesn’t have an electronic link to an organization to pay is printing out a paper check. This is creating hazard for you like you can’t imagine. So, think about this scenario: They deduct money from your account and then somebody steals the check in the mail process. You don’t know that the check’s been diverted, your money’s gone already from your account, and then maybe you had a dunning notice saying you’re past due on whatever you were paying through USAA’s billing service. You’re out the money, and they still want their money. It is a mess. And that’s why I don’t use bill pay service anymore.

“The problem is in how the bill pay system works now with most financial institutions, where the money for any paper check is deducted and then you are in a position where you don’t know what happened. Let me tell you: Ignorance is not bliss in this situation. So, what I have gone to — and I found that it’s worked much better — is that I am paying most of my bills at the site of the vendor. Vendors overwhelmingly now have the ability for you to pay in their payment portal. So, instead of just being able to conveniently go to one bill pay service at my financial institution, I have to go to every single one and pay bills there. It’s much safer and the audit trail of the payment is much clearer.“

How do you pay your bills? Have you had an experience that would add to this discussion? We’d love to hear your thoughts in the Clark.com community.
The post Why Clark Has Ditched Bill Pay and What He’s Doing Instead appeared first on Clark Howard.

For a limited time, new customers joining Ultra Mobile can save 15% on eligible six-month plans or 30% on eligible annual plans. Options start at $9.10/month for 4GB of high-speed data or at $23.80/month for unlimited data. 

In this article, I’ll share everything you need to know about Ultra Mobile’s latest deal. I’ll include what you’ll get for the price and how Ultra Mobile compares to other prepaid phone plans.

Save Up to $147 on Ultra Mobile’s Multi-Month Plans

Now through August 31, Ultra Mobile (Team Clark’s Review) is offering a 15% discount on select six-month plans and a 30% discount on annual plans.

With this deal, you can get a prepaid phone plan with 4GB of data per month for $9.10/month when prepaid annually. Alternatively, annual unlimited plans begin at $23.80/month with the Ultra Unlimited plan. For the most savings, Ultra Unlimited+ is available for $28.70/month for the first year, a total discount of $147.60.

In the table below, you can see each eligible plan, its discounted rate for new customers and total savings. 

6-Month Plan12-Month Plan

4GB$12.75/mo ($76.50)

Savings: $13.50$9.10/mo ($109.20)

Savings: $46.80

8GB$16.15/mo ($96.90)

Savings: $17.10$11.90/mo ($142.80)

Savings: $61.20

12GB$19.55/mo ($117.30)

Savings: $20.70$14/mo ($168)

Savings: $72

24GB$26.35/mo ($158.10)

Savings: $27.90$18.90/mo ($226.80)

Savings: $97.20

Ultra Unlimited$33.15/mo ($198.90)

Savings: $35.10$23.80/mo ($285.60)

Savings: $122.40

Ultra Unlimited+$39.95/mo ($239.95)

Savings: $42.30$28.70/mo ($344.40)

Savings: $147.60

To get this deal, visit Ultra Mobile’s website and choose any eligible plan. 

Know that the plan prices do not include taxes and fees. Once your plan expires, you can renew it at regular rates. Ultra Mobile is a prepaid cell phone service provider, and you can cancel your service at any time.

Ultra Mobile: An Affordable T-Mobile MVNO

If you aren’t familiar with Ultra Mobile, it’s a mobile virtual network operator (MVNO) that utilizes T-Mobile’s service towers. 

Compared to other T-Mobile MVNOs, Ultra Mobile offers fair prices at regular rates. You’ll find better deals on Ultra Mobile’s multi-month plans, especially if you can grab a new-customer discount (like the current 30% off annual plans deal). $9.10/month for 4GB of high-speed data or $11.90 for 8GB of high-speed data are great prices for light data users.

To compare, here are a few of our other favorite prepaid phone plans from providers on the same network:

Tello Mobile (Review): For $10/month, Tello Mobile offers 2GB of high-speed data. Other plans include 10GB for $15, 20GB for $20 and 50GB for $25.

Mint Mobile (Review): Light data users can get a 6GB plan for as low as $15/month, 17GB for $23/month, 20GB for $25/month or an unlimited plan for $30/month at regular rates when prepaid annually. New customers can join Mint Mobile and get any plan for $15/month for a limited time.

US Mobile (Review): The Light Plan includes 2GB of high-speed data for $10 monthly. If you prepay annually, you can get the same plan for $96 ($8/month), making it an excellent deal for very light data users. Unlimited plans are available from US Mobile starting at $25/month (70GB of high-speed data on the Light Speed network). The same plan is available annually for $270 ($22.50/month) at regular rates.

Before you switch to Ultra Mobile, check your phone’s compatibility online and make sure you’ll have service in your area by checking the coverage map. Also, be sure to read my full Ultra Mobile review.

For more options, check out our guide on the best cell phone plans and deals available now.

Are you thinking about switching to Ultra Mobile? Let us know in our Clark.com Community!
The post Ultra Mobile Deal: 30% off Annual Plans Starting at $9.10/Mo appeared first on Clark Howard.

This month only, new customers switching to Visible (Team Clark’s Review) can grab its top-tier annual unlimited plan for $75 off the first year. That brings the price to $31.25/month! 

In this article, I’ll share everything you need to know about Visible’s latest deal. I’ll include what you’ll get for the price, as well as how the plan compares to other prepaid unlimited plans.

Unlimited Premium Data for $31.25/Month

Now through July 31, Visible is offering a $75 discount on its best unlimited plan. This deal is available to new members who choose the annual Visible+ Pro plan. 

At regular rates, Visible+ Pro is available for $45/month or $450/year ($37.50/month). However, using the promo code FIREWORKS, you can get the same annual plan for $375 your first year. That brings the plan price to only $31.25/month! 

Here’s what you’ll get with the Visible+ Pro plan: 

Unlimited nationwide talk and text

Unlimited premium data on Verizon’s 5G Ultra Wideband network

Unlimited premium data on Verizon’s 5G & 4G/LTE networks

Smartwatch service included

Unlimited mobile hotspot data (15Mbps) 

Unlimited talk, text and roaming in and between Mexico and Canada

Calling to 85+ countries

Unlimited texting to 200+ countries

24 Global Pass days

4K UHD video streaming

You can check out the full details of this deal on Visible’s website. 

Alternatively, if you aren’t ready to prepay for a year of Visible service, you can still grab a discount on select monthly unlimited plans. Now through August 15, new customers can use the promo code SUMMER to save up to $10/month for the first 12 months of service.

Visible: An Affordable Prepaid Provider on Verizon Wireless’ Network

If you aren’t familiar with Visible, it’s a prepaid cell phone service owned by Verizon Wireless. Customers on Visible’s phone plans have access to Verizon Wireless’ network as the carrier runs on the same towers.

Visible offers only three cell phone plans, but each can be a great option for lowering your phone bill. This is especially true with the current new-customer offer on the Visible+ Pro annual plan. Less than $32/month for unlimited premium data on Verizon’s fastest network is a great deal!

To compare, here are a few of our other favorite affordable unlimited plans:

US Mobile (Team Clark’s Review): Unlimited plans start at $25/month or $270/year ($22.50/month) at regular rates. For this price, you can get 70GB of high-speed data and 10GB of mobile hotspot data on US Mobile’s Warp or Light Speed Networks. On the Dark Star network, the same plan includes unlimited high-speed data and 20GB of mobile hotspot data. Unlimited Premium, which includes truly unlimited high-speed data on any network, costs $44/month or $390/year ($32.50/month) at regular rates. 

Mint Mobile (Team Clark’s Review): For a limited time, new customers can get an unlimited plan for $15/month. At regular rates, the same plan costs $30/month when prepaid annually. It includes unlimited high-speed data; however, after 50GB/month, speeds may slow during network congestion. It also includes 20GB of mobile hotspot data per month.

Tello Mobile (Team Clark’s Review): For $25/month, customers can get an unlimited data plan that includes 50GB of high-speed data and 10GB of hotspot data. However, after 50GB of data usage, speeds will be throttled (reduced) until the next billing cycle.

Before you switch to Visible, check your phone’s compatibility online and make sure you’ll have service in your area by checking Visible’s coverage map. If you have a compatible phone, you can also sign up for a 15-day free trial of Visible without leaving your current carrier. This is a great way to decide whether or not the service will work for you!

I had a great experience testing out Visible myself, and if Verizon has strong service in your area, Visible could be a great way to access those towers for a fraction of the cost. To read about my experience using Visible, check out our full Visible review.

For more options, be sure to read our guide on the best cell phone plans and deals available now.

Are you thinking about switching to Visible? Let us know in our Clark.com Community! Also, be sure to check out the latest conversations about cell phones here.
The post Visible Deal: Save $75 on the Visible+ Pro Annual Plan appeared first on Clark Howard.

A week at the beach for twelve people. Flights for three generations. A cruise where you rent a block of cabins and take over the pool deck. These trips run into the thousands or tens of thousands, and plenty of families can’t make the math work. The ability to fund a big family vacation is a privilege, and for many people, it stays out of reach no matter how carefully they save.

For the families who can afford it, the question changes. It’s no longer “Can we?” Instead, it’s”Should we?” Is a trip like this money well spent, or a splurge you feel in your gut once the statement lands?

Experiences Beat Stuff

Decades of research on spending and happiness point in the same direction. The money you spend on things tends to give you a quick lift that wears off. You get used to the new car, the bigger TV, the kitchen remodel, and before long, it’s just the backdrop of your life. The money you spend on experiences works differently. You look forward to the trip, you live it, and then you carry it around as a memory you replay for years.

Family trips are the strongest version of that. You’re not paying for a hotel room. You’re paying for the week your kids talk about at Thanksgiving twenty years later, the photo that ends up framed in the hallway, the inside joke nobody outside the family understands.

What a Happiness Expert Sees

Fiduciary financial advisor Wes Moss has spent years studying what actually makes retirees happy, and the same answer keeps surfacing.

“When I talk to happy retirees about the best money they’ve ever spent, big family trips come up again and again,” Moss says.

He can list the trips his clients bring up without thinking twice.

“Whether it’s an annual beach week in 30A chasing redfish, a golf trip with grandpa, dad, and the boys, a European adventure to Prague, London, and Spain with a 16-year-old granddaughter, Disney with the whole crew, or summer escapes to Michigan or Canada, those trips become the stories everyone tells for decades.”

Some of it is expensive, like Europe or Disney for a crowd. Some of it is a rental cabin and a fishing rod. The price tag isn’t what makes the memory. The people are.

The One Condition

Wes doesn’t hand out a blank check. His endorsement comes with a string attached.

“As long as your overall retirement plan has room for it, I think of these family vacations as money that’s not just well spent, but most well spent.”

A trip that fits inside a plan you’ve already built is one thing. A trip you finance on a credit card at 20-plus percent interest, or one that dips into money you’ll need for the mortgage or a medical bill, is something else.

So, the trip should be a line item you can cover from savings or cash flow without derailing your retirement or your emergency fund. If that’s true for you, the spending stops being a splurge and becomes one of the better uses of your money.

Ways To Do It Without Breaking the Bank

If you are considering a big family trip, here are some ideas to keep the costs down.

Travel off-peak when you can. The same beach house often costs far less the week after the crowds leave.

Use the points and miles you’ve been sitting on. A family trip is exactly what that stash is for.

Rent one big house instead of a row of hotel rooms. For a group, it’s often cheaper and everyone’s under one roof.

Lock in the big costs early. Flights and lodging for a large group get more expensive and harder to coordinate the longer you wait.

Final Thoughts

Big family trips are worth it when they fit comfortably within your finances — and when the return isn’t measured in dollars, but in the time you get with the people who matter most.
The post Is Paying for a Big Family Trip Worth It? appeared first on Clark Howard.

There’s an urgent warning from the federal government that every single person using payment apps needs to hear. If you store money inside a payment app, you need to know right now that there is no FDIC insurance protecting that cash.

Regular listeners and readers know I’ve been sounding the alarm about peer-to-peer payment apps for years, usually focusing on rampant fraud, theft, and a lack of consumer protections. But this is a completely different kind of danger.

The Hidden Danger of Peer-to-Peer Apps

If you use Cash App, Venmo, or PayPal, your money is at serious risk if one of those companies ever gets into financial trouble.

Lately, a lot of people have started using these apps not just to instantly pay a friend back for dinner, but as a place to actually store their money. People are leaving hundreds or even thousands of dollars just sitting in their app balances.

When you do that, your money is completely vulnerable.

Now, let me be very clear: Do I know anything about any of these specific apps being in financial trouble right now? No, absolutely not. But the point the federal government is making is that your money is completely exposed if an unknown problem arises and any of these app owners go insolvent. If they go under, your money could evaporate, and you have no safety net to get it back.

This is money you have worked incredibly hard to save. It’s not money you are specifically trying to risk in the stock market or invest; it’s your hard-earned, idle cash that you just want to keep safe. You can’t afford to take a risk that causes that money to disappear overnight.

Rule for Using Payment Apps Safely

If you want to keep a very small amount of “convenience money” sitting in one of these apps — an amount where, if you lost it tomorrow, it wouldn’t be the end of the world — that is fine.

But if you are storing significant amounts of money inside Venmo, PayPal, or Cash App, that is a habit I want you to break immediately.

My recommendation: Use the apps for quick, real-time transfers if you must, but never let your cash sit there. Sweep your balances back into your FDIC-insured bank account or NCUA-insured credit union immediately. Don’t let your hard-earned money become collateral damage if an app goes bust.
The post Why You Shouldn’t Leave Cash in Payment Apps appeared first on Clark Howard.