finance

A home may be your largest investment—make sure you adequately protect it

Homeowners insurance can protect you from financial disaster if your home or its contents are damaged or destroyed or if you’re sued because someone is hurt on your property. If you own a home with a mortgage, your lender probably requires you to have a homeowners policy. Even if you aren’t required to have one, it’s a very good idea.

But exactly how much insurance is enough? This article explains how to figure that out.

Key Takeaways

• Homeowners insurance can protect you from financial losses if your home or possessions are seriously damaged or destroyed.
• It also provides some coverage against liability claims.
• While a homeowners policy covers many risks, exceptions can include floods and earthquakes, for which you may need other coverage.
• In deciding how much insurance to buy you’ll want to consider what it would cost to rebuild your home.

What Is Homeowners Insurance?

A standard homeowners insurance policy typically consists of several different types of coverage, each with its own dollar limits.

For example, a policy will generally cover:

1. The dwelling: This is the home itself and often unattached structures, such as a garage or tool shed.
2. Your personal belongings: Policies often cover your furniture and other possessions, both in your home and off-premises, such as items you take with you when traveling.
3. Liability: This coverage can provide financial protection if another person, or their property, are harmed by you or your pets.
4. Additional living coverage: This part of the policy can reimburse you for housing and related costs if your home becomes temporarily uninhabitable and you have to find another place to live for the time being.

These four types of coverage can differ from one policy to another, and you can choose how much of each you wish to purchase. We’ll discuss them in greater detail below.

What Homeowners Insurance Covers

A homeowners policy doesn’t protect you from every conceivable calamity. (In some cases, you may need to buy other kinds of insurance for that purpose.) But typically, it will cover financial losses related to certain specified “perils.”

According to the Insurance Information Institute, an industry trade group, the most common type of homeowners policy, known as HO-3, covers 16 specific perils. They are, to quote verbatim from the organization’s website:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Damage caused by aircraft
• Damage caused by vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Volcanic eruption
• Falling object
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
• Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
• Freezing of a plumbing, heating, air conditioning, or automatic, fire-protective sprinkler system, or of a household appliance
• Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)

While that’s a long list, the organization notes that policies typically “will not pay for damage caused by a flood, earthquake, or routine wear and tear.”

To protect against those risks, flood insurance from the National Flood Insurance Program (NFIP) is available through private insurers. In fact, mortgage lenders often require it for homes in flood-prone areas. Earthquake coverage is also available from many insurers, either as a separate policy or as an endorsement (or add-on) to a regular homeowners policy.

How Much Homeowners Insurance Do I Need?

Your lender, if you have a mortgage on your home, may specify a minimum amount of homeowners coverage that it expects you to carry. Otherwise it is your decision how much you want to have in homeowners insurance. You’ll want to weigh the financial risks you believe you face against the cost of insuring against them.

Here is a more detailed look at the four coverage types and how much coverage you might want to purchase.

Dwelling Coverage

Recommended coverage: Equal to your home’s replacement cost

Suppose your home burned to the ground in a fire or was flattened by a tornado. What would it cost to rebuild it, plus any other structures on your property, from scratch? That is your home’s replacement cost.

Bear in mind that replacement cost is not the same as your home’s market value, which is likely to be higher. For one thing, it doesn’t include the land beneath your home, which presumably survives intact.

Replacement costs can vary from one part of the country to another. An insurance agent or appraiser can help you estimate your replacement cost based on the home’s square footage and materials. There are also a number of calculators available online that will give you an estimate based on your ZIP code, although Investopedia hasn’t tested them and can’t vouch for their accuracy.

Some insurers offer guaranteed replacement cost coverage, which will pay to rebuild your home even if the cost exceeds the amount of coverage you purchased, such as due to an unexpected increase in construction or material costs. Others may offer extended replacement cost coverage, which covers the additional costs up to a certain percentage, such as 20% or 25%, of the policy limits.

However, in most cases, even guaranteed replacement cost coverage won’t reimburse you for any added expenses that are the result of changes to local building codes since your home was built. For that you may need to purchase an endorsement for your policy.

Important

In addition to coverage amounts, you’ll want to consider your policy’s deductibles—how much you’d have to pay out-of-pocket before your insurance kicks in. Higher deductibles mean lower costs but greater financial risk for policyholders.

Personal Property Coverage

Recommended coverage: Enough to replace all your belongings

Homeowners policies generally provide coverage for your personal possessions, calculated as a percentage (such as 50% to 70%) of your dwelling coverage.

That may or may not be adequate, depending on what you own. If you have some particularly valuable items, such as a jewelry or artwork, you might want to insure them with an additional endorsement or floater.

Whatever you decide, it’s a good idea to make a written inventory of your possessions periodically, complete with photographs, to refresh your memory in case you ever need to file a claim. In the aftermath of a fire or other disaster, it is easy to forget everything you’ve lost.

Liability Coverage

Recommended coverage: As much as you can afford

Many homeowners policies come with at least $100,000 in liability coverage. That could come in handy if, for example, a visitor trips on your property and hurts themselves, your dog bites someone, or your old oak tree damages a neighbor’s car.

Depending on what happened—and how inclined the injured party is to sue you—$100,000 may not be enough. For added protection and peace of mind you can increase your liability limits or purchase an umbrella policy. It can supplement the liability coverage on both your homeowners and auto insurance coverage and help safeguard your other assets from a costly legal judgment.

Additional Living Expenses (ALE) Coverage

Recommended coverage: 10% to 30% of your dwelling coverage

If your home becomes unlivable, you will have to stay somewhere while it is being restored to normal. That might mean you may need a hotel or a short-term rental, for weeks, months, or even years.

Additional living expenses (ALE) coverage will defray part of those bills, including the cost of some restaurant meals, for a certain period of time. Bear in mind that it won’t pick up the entire tab, only the portion that exceeds your normal, pre-calamity living expenses.

ALE coverage is usually calculated as a percentage of your dwelling coverage, and it’s often 20%. If you don’t think that’s enough and want to increase it, you may have the option of buying more.

What Is the Difference Between Home Warranty and Home Insurance?

A home warranty is a contract that promises to reimburse part or all of your costs if, for example, your dishwasher or central air conditioner go kaput. In other words, it covers some of the everyday repair expenses that homeowners policies don’t. A home warranty is entirely optional and may or may not be worth buying. Home insurance, on the other hand, covers serious damage to your home or other property and is often mandatory if you have a mortgage.

What Is the Difference Between Homeowners Insurance and Mortgage Insurance?

Homeowners insurance is intended to protect you, as well as your lender, from financial loss if your home or possessions are seriously damaged or destroyed. Mortgage insurance, on the other hand, exists to protect your lender’s financial interests if you’re unable to make your monthly payments. One commonality is that you are expected to pay for both of them.

Is Homeowners Insurance Mandatory?

Not always. Unless you have a mortgage, in which case the lender will likely require it, homeowners insurance is not required by law. However, you’re taking a big risk if you go without it.

The Bottom Line

Homeowners insurance can protect you from serious financial losses if your home is damaged or destroyed or if you’re sued for allegedly causing harm to another person or their property. Whether or not you’re required to buy a policy, having one and checking the coverage limits periodically to make sure they’re adequate, is a wise move from a financial perspective.

Hint: It’s Not Older Adults

For years, the narrative surrounding financial fraud has often centered on older adults as the primary targets. However, recent data paints a different picture, as younger adults have become an outsized proportion of those affected. This is driven, in part, by the online habits of younger generations, where their familiarity with digital platforms makes them better targets of scams.

“Younger adults often believe tech savviness equals scam immunity,” Adewale Adeife, a senior cybersecurity consultant at EY, told Investopedia. “That overconfidence lowers their guard and makes them ideal targets for fast-money schemes,”

In this article, we highlight the types of scams that target different age groups and the psychological factors that make younger adults particularly susceptible.

Key Takeaways

• U.S. Federal Trade Commission data shows that young adults lose money to scams at nearly twice the rate of older adults, upending conventional fraud stereotypes.
• Younger adults primarily encounter online scams like fake shopping sites, cryptocurrency fraud, and job offer schemes via social media.

Age-Based Vulnerabilities: Myth vs. Data

For years, conventional wisdom suggested older adults were the primary victims of financial fraud. However, recent research emphasizes a recurring finding in recent years: younger adults are losing money to fraud at rates that outpace those who are older, even as the “success” rate for scam artists (those where money is gained) is rising for all age groups.

Still, scammers are working to take advantage of online habits, social behaviors, finances, and psychology, all of which are affected by age. FTC data shows that in 2024, 44% of people ages 20 to 29 who reported fraud had financial losses, compared with 24% among those aged 70 to 79. Similarly, a 2024 PYMTS Intelligence and Featurespace study found that 83% of young adults were deceived at least once by a suspicious link in a message, with 39% of millennials and 36% of Gen Z reporting household losses to scams compared with only 19% of Baby Boomers and older adults.

Fraudsters are taking money from people of all demographics, and no one is too “savvy” to avoid being among those who are next. In one year alone, from 2023 to 2024, according to FTC data, the percentage of frauds where money was turned over rose 40%.

Digital Natives, Digital Prey

While young people are often called “digital natives,” this familiarity with technology doesn’t translate to some sort of scam immunity. A March 2025 study looking at Instagram users between 16 and 29 found that frequent social media use often leads to “quick, instinctive decisions instead of systematically evaluating risks,” Jennifer Klütsch, one of its authors, told the Wall Street Journal.

The study also found that younger people are both more likely to trust a sender they recognize without scrutinizing suspicious links and to make impulsive decisions driven by fear of missing out on social experiences. This vulnerability aligns all too well with scammers’ tactics. Klütsch and her colleagues’ work, building on previous research, found that messages from followers (versus non-followers) and messages offering social opportunities (compared with faux job or relationship prospects) substantially increased young people’s susceptibility to phishing, where scammers impersonate legitimate senders in emails and texts.

“Social media is valued as a trusted and habitually-used environment, [and] its design makes it also inherently conducive to the effectiveness of [social engineering] attacks,” Klütsch and her colleagues concluded.

Types of Scams Targeting the Young

Young adults face particular scams tailored to their digital habits and life stage:

• Employment scams: “We’re seeing a rise in job offer scams, where fake recruiters ask for training fees,” Adeife said. Other common tactics include fake check schemes where victims deposit fraudulent checks and transfer money for “training” or “equipment.”
• Online purchase scams: Young bank customers are more than twice as likely to use credit cards to pay scammers as those over 40. The top products used include event tickets, salon services, jewelry, clothing, and eyewear.
• Cryptocurrency scams: Cryptocurrency fraud is among the most remunerative for scam artists, with a “success” rate of 60% when targeting the young.
• Social media scams: Social media platforms have become primary arenas for fraud targeting younger adults. “[Scammers] pose as influencers or friends, adding urgency with fake threats like ‘Your account will be closed,’” Adeife said. Since 69% of Gen Z claim to be “always connected” to the internet (compared with 32% of Baby Boomers), scammers have far more access to them than with other generations. In addition, on platforms like Instagram, messages from supposed followers can exploit users’ trust in the platform itself.

The Bottom Line

“Young adults are a susceptible user group, prone to be targeted by phishers who exploit their needs and expectations,” Klütsch and her colleagues wrote in the March 2025 study. This accessibility for scamsters operating worldwide means that younger adults are being defrauded at rates far higher than other generations. “Many people think scams mostly affect older adults,” the FTC has noted. “But reports to the FTC…tell a different story: anyone can be scammed.”

Reviewed by Thomas Brock
Fact checked by Suzanne Kvilhaug

Gold often plays a defensive role in long-term portfolios as a hedge against inflation, currency risk, and market turmoil. This is because of its low correlation with other assets—it doesn’t simply rise and fall with the stock market, real estate, etc.

However, with short-term trades, gold mining exchange-traded funds (ETFs) offer a more dynamic opportunity. They’re more volatile, but also highly liquid, while tending to amplify gold’s price moves, which means more trading setups. These ETFs respond well to technical analysis indicators like the relative strength index (RSI) and moving average convergence divergence (MACD), and relative strength ratios, making them suitable for trend-based strategies.

Key Takeaways

• Some gold mining exchange-traded funds (ETFs) offer indirect leveraged exposure to gold prices and are great for short-term trading because of their volatility and liquidity.
• Technical analysis is very useful for navigating gold mining ETFs, helping to identify trends, confirm momentum, and manage risk.
• Other useful tools for confirming trend strength and gauging market sentiment are the GDX/GLD and GDXK/GDX ratios.
• Higher swing highs and lows in both gold and mining stocks signal trend sustainability and institutional conviction.

Understanding Gold Mining ETFs

Gold mining ETFs give traders and investors exposure to the performance of gold mining companies versus gold ETFs, which provide exposure to the physical metal. This makes gold mining ETFs more dynamic, but riskier, than a pure gold play.

These funds are driven not only by gold prices but also company-related and geographic factors like management and production costs. Generally, they’re more volatile but can outperform in bull markets thanks to operating leverage, and some even pay dividends. Gold itself is more stable and often used as a hedge against inflation or as a safe haven in a crisis.

Using Technical Analysis for Gold Mining ETFs

Technical analysis indicators and tools like moving averages, RSI, MACD, and volume indicators help traders identify trends, confirm momentum, and manage risk.

Support and resistance levels, swing highs and lows, are for timing entries and exits, while volume spikes often signal institutional moves. Moreover, studies show that trend-following strategies based on these signals can boost returns, making technical analysis especially useful in navigating trends in this sub-asset class.

Identifying Uptrends in Gold Mining ETFs

Finding a strong uptrend in gold and gold mining ETFs means keeping an eye on rising prices with higher highs and higher lows. This should be confirmed by strong volume and momentum indicators like RSI, MACD, and the average directional index (ADX).

A rising GDX/GLD ratio is a big plus. It shows that miners are leading the charge, which often signals bullish sentiment. Breakouts above resistance levels and intermarket cues, such as a declining U.S. dollar or declining real yields, can further validate the move.

With their leverage to gold, miners can deliver two to three times the returns in bull runs. Thus, utilizing a mix of technical signals can help confirm the trend and boost your confidence in specific trades.

Price Momentum and Confirmation

Gold and gold mining stocks are highly correlated—they tend to move together—and when both show higher highs and higher lows, it confirms the uptrend and that it is supported by institutional confidence.

Mining stocks often react strongly to changes in the price of gold, so if gold is rising and the gold mining ETFs follow suit, particularly with increasing volume and momentum, that would confirm the trend. A rising GDX/GLD ratio adds further conviction, while synchronized strength helps traders avoid false signals. Indeed, watching the price action is also suitable for setting stops or scaling into positions, especially when breakouts align across both markets.

Using Ratios for Confirmation

The GDX/GLD ratio helps to confirm trends. This ratio shows whether gold mining stocks are outperforming physical gold, a sign of growing risk appetite and bullish sentiment. If the ratio is increasing alongside gold, that’s a strong confirmation. Conversely, if it’s falling while gold climbs, that’s a red flag for weak momentum.

Traders often use this ratio with technical indicators like moving averages, RSI, or support and resistance levels to refine entries and exits. Nonetheless, the GDX/GLD ratio is not a stand-alone signal; it’s good for trend validation and spotting divergences that can hint at the next big move.

In addition, when junior gold miners outperform seniors, which can be observed with the GDXJ/GDX ratio, this often signals growing investor confidence and risk-on appetite.

Identifying Downtrends in Gold Mining ETFs

Downtrends can be identified on charts when price makes lower lows and lower highs, which is the inverse of an uptrend. Also, look for the price to move below popular moving averages like the 50- and 200-day. Volume on down days will often be up.

A falling GDX/GLD ratio, weak momentum, and limited buying interest on rallies will confirm these moves. Combined, this is a classic setup for a downtrend. Indeed, these moves often reflect broader risk-off sentiment, rising real yields, or a stronger dollar, all of which significantly impact the price of gold.

The Role of Junior Miners in Trend Analysis

Junior gold miners are high beta plays that react more sharply to gold price moves and shifts in sentiment, making them great indicators of the strength or weakness of the trend.

But if they lag during a gold rally, it could point to underlying skepticism. Traders watch this relationship closely, using it to confirm breakouts, spot early momentum, or catch signs of trend exhaustion. In bull market runs, juniors tend to surge after seniors, while in downturns, they often lead the way down, making them a valuable gauge of sentiment.

A Practical Example Using Technical Analysis

Here’s a typical setup for a swing trader focused on gold mining ETFs. The trader will usually monitor the GDX/GLD and GDXJ/GDX ratios on a longer-term time frame, either daily or weekly, to get a read on broader relative strength. If both ratios are trending higher, that’s a strong sign that miners are outperforming, and a green light to start looking for trades in GDX and GDXJ.

Once there is an understanding of the overall relative strength, the trader will then zoom in on the shorter-term time frames for the gold miner ETFs, using a moving average to gauge trend direction and indicators like the MACD and RSI to time entries. Volume spikes add further confirmation.

In this case, the GDX/GLD and GDXJ/GDX ratios are rising, and there is some bullish RSI divergence, positive moving average crossovers, and positive MACD crossovers, so the swing trader would most likely try to enter long positions in GDX and GDXJ.

Warning signs like bearish divergences, MACD crossovers to the downside, or a breakdown in relative strength ratios typically trigger exits. If the broader trend in those ratios remains bullish, the trader keeps running the playbook, waiting for the next signal to jump back in.

The Bottom Line

Gold mining ETFs give investors leveraged exposure to gold, reflecting not only the metal’s price but also equity factors, making them more volatile than the direct gold play. This is where technical analysis can help.

Tools like moving averages, RSI, MACD, and volume indicators help traders spot trends, confirm momentum, and manage risk in this relatively volatile space. Barometers include synchronized price action between gold and miners, GDX/GLD or GDXJ/GDX ratios, and classic uptrends or downtrends.

If you’re in your 20s, you may have just started your career with an entry-level salary and you may have a significant amount of debt if you attended college. You might not yet own a house or anything else of considerable financial value. The 20s are a time when many people have the tightest finances of their lives. It’s also typically when you start to build a financial foundation for the rest of your life.

Keen to know how your financial situation compares to other people your age? Forget income. For a more complete analysis, it’s better to look at net worth, the metric we use in this article.

Key Takeaways

• People in their 20s tend to have a lower net worth as they often earn smaller salaries, don’t own many valuable assets, and may owe lots of money.
• The average net worth for people in their 20s is $113,084, and the median is $7,638, according to a 2024 analysis by Empower.
• The best way to build net worth is to spend wisely, pay off debt, and start investing as soon as possible.

Average Net Worth of Americans in Their 20s

Empower, a financial services company, collected data from American users of its retirement-planning dashboard to determine average and median net worth in November 2024.

Age by decade	Average net worth	Median net worth
20s	$113,084	$7,638
30s	$317,171	$35,649
40s	$791,616	$125,370
50s	$1,406,887	$288,263
60s	$1,703,727	$439,154
70s	$1,626,996	$367,286
80s	$1,521,375	$342,552
90s	$1,292,056	$293,322

The average net worth for people in their 20s is $113,084, and the median net worth for that age group is $7,638, according to Empower’s analysis.

Net worth increases as people approach retirement age, then drops when they stop working. This shows how people accumulate more assets as they progress in their careers and then steadily spend this wealth when they retire.

There’s also a large difference between the average and median readings, reflecting how a few outliers (wealthier people) can skew the average. Consequently, the median figure is more representative of what is typical for this age group.

It’s worth noting that the groups surveyed in this type of report can be relatively small, and the Empower analysis looked specifically at people using its retirement-planning dashboard, a group that is likely to be more focused on saving money and planning for retirement. Therefore, the results might not be representative of the broader U.S. population. As a comparison, the U.S. Federal Reserve also releases net worth data. According to the Fed’s most recent Survey of Consumer Finances in 2022, family median and average net worth by age group were as follows:

Age	Median net worth	Average net worth
Less than 35	$39,000	$183,500
35-44	$135,600	$549,600
45-54	$247,200	$975,800
55-64	$364,500	$1,566,900
65-74	$409,900	$1,794,600
75+	$335,600	$1,624,100

The median net worth for families where the head of household is under 35 is $39,000, while the average net worth is $183,500. These figures are higher than Empower’s. That perhaps isn’t surprising because the Fed survey looks at family net worth, not individual net worth, and it includes people in their early 30s, who are likely to have accumulated more assets and earned higher salaries compared to people in their 20s.

How To Build Up Your Net Worth

Net worth can change throughout a person’s life, depending on what they own and owe, and it tends to increase with age.

People in their 20s who want to build their net worth should start by keeping tabs on spending habits, cutting out unnecessary expenses, and trying to save as much as possible each month. Excess funds can be used to pay down debt, especially high-interest credit card debt, and invest for long-term financial goals. Investing in a 401(k) and taking advantage of an employer match is a great place to start. The earlier you start investing, the more your money will be able to grow.

The Bottom Line

The median net worth for people in their 20s in the U.S. is $7,638, while the average is $113,084, according to an Empower analysis. The way people manage their finances during this phase of their lives plays a significant role in shaping their future financial stability. That’s why most financial experts recommend that people start investing as early as possible, allowing their portfolio to benefit from compounding returns and grow over time.

Reviewed by Lea D. Uradu
Fact checked by Yarilet Perez

All municipalities are different, but in general, any improvements that modify a home’s structure, roofing, electrical and plumbing systems, and heating and cooling systems require permits. Many jurisdictions have permit requirements for work that exceeds a certain amount of money.

There may be more permit requirements depending on where you live, but here are the basics of the permitting process and some significant projects that usually require a permit.

Key Takeaways

• Building permits are usually acquired through the appropriate city or county code enforcement office.
• Major changes that alter the footprint of your home require a permit.
• These changes might include decks, fencing, plumbing, electrical work, and siding projects.
• Failure to obtain permits—even if you hire a contractor—can stall your project or complicate the sale of your home.
• Renovations such as painting, flooring, countertops, and replacing faucets don’t require a permit.

The Permitting Process

Local municipalities issue permits based on city ordinances. Since there are no federal or state standards, building codes vary by city and county. The only way to know if you need a permit for a project is to contact the office.

If you hire a licensed contractor, they should know whether the job requires a permit, but as the homeowner, it’s your responsibility to ensure that all remodeling is completed lawfully. Don’t assume the permits were handled by the contractor.

Some municipalities charge a percentage of the total construction costs to issue the permit, and it may take several weeks to complete the required inspections. According to the National Association of Realtors (NAR), failing to obtain the proper permits may stop or stall the renovations you have planned, or complicate or cancel the sale of your home.

You must prove that you pulled the proper permits if you have a home inspection or appraisal done. If you put your house up for sale, there’s a very good chance that the lending bank won’t advance the loan if it learns that remodeling work was done without securing permits. There’s also the added hassle of paying fines or—even worse—having to tear down and redo the work.

Important

It is your responsibility as a homeowner to ensure all the proper permits are pulled for your project(s)—even if you hire a contractor to do the job.

Renovations That Likely Need a Permit

Building permits are often divided into categories, including those allotted for electrical, mechanical, and structural changes or new construction work. Before you apply for these, you should have plans drawn up that comply with local codes and ordinances. That’s because some renovations will alter the structure of your property, and regulators want to ensure that your property will be able to support the work you plan to do.

There’s a very good chance that you need a permit if you plan to make major changes to your home’s footprint. This includes things like more rooms, decking, garages, some sheds, and others, such as:

• Fences: Not all fences require a permit, but municipalities often place height restrictions on non-permitted fences. The city of Chicago, for example, requires a permit for a fence five feet or higher, while other cities allow for higher structures.
• New windows: Replacing an existing window doesn’t usually require a permit, but cutting a hole for a new window generally does. This includes skylights and new doors.
• Plumbing and electrical: A permit is probably required if you’re installing new or removing existing plumbing. Any job that includes installing a new electrical service to your home also requires a permit. Even something as simple as moving an outlet requires a permit.
• Siding: Most municipalities require a permit for siding projects.
• Water heater: You need a permit to replace your water heater. You may also need a permit for ventilation system changes.
• Total cost: Some municipalities require a permit if renovations or construction projects cost more than a certain amount—usually $5,000 or more.

Important

Every municipality has its own rules on what constructions require a permit. Always check with your local planning or building department before starting a renovation.

How Do I Get a Permit?

Permits are usually issued through your municipality’s permitting office. Depending on the project’s complexity, some permits are issued immediately, while others may require inspection of the plans.

During the renovation process, inspections will be required. Multiple inspections may be required for projects involving home additions. Once the work is complete, a final inspection occurs, and the project can conclude.

Renovations That Don’t Require a Permit

There are some things you can do to your home without going through the process of getting a permit. The majority of them are fairly minor—most of which you can do yourself without having to hire and pay for a contractor. Here are a few of the projects that may not require a permit:

• Painting or wallpapering
• Installing hardwood floors or carpeting
• Minor electrical repairs that don’t involve adding new or moving existing service
• Installing new countertops
• Replacing a faucet

Do I Need a Permit to Put Drywall in My Garage?

It depends on your local code. If you’re not changing the structure of your garage, you may not need a permit, but it’s best to check with your local building department beforehand.

Do I Need a Permit to Repair a Deck?

In many cases, permits are not needed for minor repairs on existing structures, but if the damage is bad enough, you might need one. Contact your local building department to learn if you need a permit.

What Can I Build Without a Permit?

It depends on your county and city laws, but in most cases, decks, large sheds, certain fencing, plumbing, electrical, and projects that meet specific costs require permits.

Considering renovations to personalize your home or boost property value? Check out our guide—Owning It: Investing In Your Home—to learn more about how to plan and pay for your project.

The Bottom Line

Most large projects that involve major changes to the structure of your home require a permit. Because each municipality has different rules, it’s essential to check your city’s website or call for clarification. Regardless of who does the work, the homeowner’s responsibility is to ensure that the project holds the proper permits.

Know which account withdrawals are best for saving on your taxes

Fact checked by Vikki Velasquez
Reviewed by Charlene Rhinehart

Retirement plan withdrawals depend heavily on how much you anticipate spending in your golden years. Your living expenses could decrease in retirement, but they could also increase if you have plans to travel internationally.

Regardless of what you want to do in retirement, it’s important to have a plan for withdrawing from your investments, as you’ve likely spent many decades saving up.

Key Takeaways

• Your retirement plan withdrawals depend largely on how much you anticipate spending in your golden years.
• Required minimum distributions (RMDs) may force you to take more than you need.
• Funding your retirement years ideally begins decades before you leave the workplace.
• The Internal Revenue Service (IRS) allows catch-up contributions to retirement plans for those who have reached age 50.
• The bucket approach provides a systematic plan for getting the most out of your retirement dollars.

How Much Will You Need?

Ideally, funding your retirement begins decades before you actually retire, but for some people, working longer may be necessary to afford retirement. Experts suggest starting with the 4% rule to help determine just how much you’ll need to save to meet your living expenses after retirement.

The rule limits retirement withdrawals from your savings to 4% of the total annually. This 4% can be reduced or increased after the first year depending on the inflation rate.

The 4% rule is often used in conjunction with the 25× rule. This one advises that you should save 25 times the amount of your anticipated annual expenses in retirement. Some experts recommend that you factor in any Social Security or pension benefits that you expect to receive during this time.

If you don’t have enough saved up by retirement age, you people may benefit from continuing to work, even if it’s just part-time. For example, you may consider a part-time job with flexible hours.

In a Federal Reserve survey completed in 2023, 80% of retirees said they were doing “okay financially.” However, a greater percentage of retirees (85%) who had wages and continued to earn income said they were doing “okay financially.”

“Having different income sources can take a weight off your shoulders,” says Taylor Kovar, certified financial planner and founder and CEO of 11 Financial in Lufkin, Texas. “You won’t be depending on just one for everything.”

Which Accounts Should You Use to Save for Retirement?

Retirement plans are a key component of overall retirement income, including workplace plans like 401(k)s and those you might establish yourself, such as an individual retirement account (IRA).

And even if you start investing later in life, it doesn’t have to derail your retirement plans. You can contribute more than the annual contribution limit beginning at age 50. These are referred to as catch-up contributions. The extra amount adjusts periodically to keep pace with inflation. The cap is $7,500 in 2025 for 401(k) plans, unchanged from 2024. It’s $1,000 for IRA plans.

401(k) plans often come with employer contribution matches as well. Your employer might contribute a percentage of every dollar you invest, helping you to increase your savings. However, you usually have to contribute at least a certain percentage of your salary to your 401(k) to receive the matching contribution.

The Bucket Approach

The bucket approach provides a way to put your various income sources to work. “You divide your savings into different buckets based on when you might need the money,” Kovar says. “You’d keep short-term funds in one bucket, money you’ll need in a few years in another, and long-term savings in a third. Each bucket gets different treatment depending on when you’ll need the funds.”

The approach typically includes three buckets dedicated to segregated retirement time spans and the most appropriate investments to include in them.

“Given uncertain economic conditions, it’s essential for individuals to consider inflation and opportunities for investments to grow so they can maintain their desired retirement lifestyle,” says Faron Daugs, certified financial planner and founder and CEO of Harrison Wallace Financial Group in Libertyville, Illinois.

The Short-term Bucket

The first bucket is dedicated to cash flow needs and includes safe, traditional savings options that will fund one to five years of basic living expenses. They can include:

• Savings accounts
• Money market accounts
• Certificates of deposit (CDs)
• Short-term Treasury bills with maturities of six months or less

“The purpose of bucket one is to provide stable income without concern for market volatility,” Daugs says. “I recommend keeping at least two years’ worth of anticipated distributions in investments that aren’t subject to market fluctuations or interest rate sensitivity.”

Note

Pension income and Social Security benefits would also go into this bucket.

You can replenish the first bucket as you spend from it by liquidating assets in your midterm bucket and moving the funds into these vehicles.

The Midterm Bucket

Your midterm bucket would hold assets intended to fund your retirement from the fifth through 10th years. These won’t be as conservative as those held in your short-term bucket. You’ll want assets here that will hopefully keep pace with inflation without exposing your principal to a great deal of risk.

“Bucket two is focused on generating income through dividends and interest. While there may be some market fluctuations, this bucket is designed to provide income with downside protection,” Daugs says. “Bucket two typically includes investments that offer downside risk protection such as hedged equities, buffered ETFs, or value-driven stocks with solid dividends, and may also include closed-end funds.”

The Long-term Bucket

This one is for your high-risk investments. It’s intended to fund your needs in years 10 and beyond. Most stocks, index funds, and high-yield bonds would fall into this category. The idea is to incrementally move the growth that’s produced here to your short-term and midterm baskets as needed.

“Bucket three is designed for growth. The last bucket aims to outpace inflation and preserve the purchasing power of portfolios over time. The purpose of bucket three is to help grow the portfolio, providing future purchasing power, and combating inflation,” Daugs says.

“A few examples of the types of investments in bucket three include growth stocks, and a mix of passive and active management strategies,” according to Daugs. “It’s important to note that bucket three should be regularly reviewed and adjusted, ideally with a financial advisor, so it continues to align with the client’s long-term goals.”

Withdrawal Strategies

Any plan you devise will be greatly affected by how and when you begin taking withdrawals from your retirement plans. Numerous tax rules that apply to 401(k) plans and IRAs must be factored into the equation.

Required Minimum Distributions

The Internal Revenue Service (IRS) doesn’t get to collect taxes from your retirement accounts—such as traditional IRAs and 401(k)s—until you withdraw money from them. Those withdrawals are then included in your taxable income. Required minimum distributions (RMDs) are the federal government’s way of preventing you from leaving your money in traditional retirement plans indefinitely, avoiding taxation for as long as possible.

You must take your first RMD from a traditional retirement plan by April 1 of the calendar year after the year in which you turn age 73. You have until Dec. 31 to take the withdrawal beginning in the next year.

Important

The U.S. Securities and Exchange Commission (SEC) provides an online calculator to help you determine how much your RMDs should be.

The IRS doesn’t dictate which plan you should tap first for your RMDs. The distributions must be calculated for each qualifying IRA plan you hold, and you must take the total by the applicable deadline. You can withdraw the total amount from just one of your accounts, although this rule doesn’t apply to 401(k) or 403(b) plans. Roth IRAs and designated Roth retirement plans aren’t subject to RMDs. They can continue to grow tax free.

You can be charged with a 10% to 25% tax penalty if you don’t take your RMDs.

Other Tax Rules

Traditional and Roth IRA and 401(k) plans are each subject to their own unique rules and tax treatment.

You can claim tax deductions for your annual contributions to traditional plans in the year you make them. Taxes don’t come due on this money until you take it out in retirement. You’ll pay taxes on the money you contribute to a Roth account at the time you contribute, but then you can take the money out tax free in retirement. Traditional IRAs also come with a 10% tax penalty if you take a withdrawal before age 59½.

The Bottom Line

It can be critical to educate yourself regarding the fundamental differences between various retirement plans and saving approaches. Consider touching base with a professional financial advisor if the bucket approach sounds like a good plan to you.

Trade wars reshape global investment flows, so it’s no surprise that President Donald Trump’s April 2025 tariff announcement sent investors worldwide scrambling to rethink their U.S. equity positions. The potential for prolonged economic fragmentation, supply chain disruptions, and declining corporate margins fundamentally shifted the thesis that had driven foreign investors to hold 17% of U.S. equities as of 2024, up from 9% in 2006.

But why would foreigners rotate out of the U.S. equities market, and why would that matter for Americans’ portfolios? We dig into this below.

Key Takeaways

• Foreign investors have ample reason to be shifting after a decade of U.S. market dominance.
• Diversification beyond U.S. markets has gained greater importance for portfolios, both for domestic and foreign investors.

From FOMO to GTFO

In the months before Trump’s tariff announcement, some analysts were worried about too much foreign investment, with billions rushing into American markets in late 2024 and early 2025. In 2024, the S&P 500, the quintessential U.S. large-cap index, rose 23.9%, almost five times that of the 4.9% return for the MSCI All-World Ex-USA Index, which tracks mid- and large-cap non-U.S. stocks.

With many world markets trading sideways since the pandemic—the U.S. economy was among the few to show significant growth in recent years—foreign investors feared missing out on the gains from the so-called Magnificent Seven (the likes of Apple Inc. [AAPL], NVIDIA Corp. [NVDA], Tesla, Inc. [TSLA], etc.) and other propulsive American stocks.

Pointing to data showing run-ups in foreign purchases of U.S. stocks before the 1987 crash, the dot-com bubble in 2000, and the 2008 financial crisis, Ed Yardeni wrote in his eponymous research newsletter, “Their buying has a record of being a contrary indicator. They tend to be big buyers right before bear markets.”

The April 2025 tariff announcement changed all that tout de suite, with the U.S. “exceptionalism premium”—the bump American stocks get from the perception of U.S. markets as uniquely stable and predictable—the first to go. “We tainted our brand—our U.S. brand,” Peter Boockvar, chief investment officer at Bleakley Financial Group, told Barron’s. “Foreigners have a huge amount of ownership of U.S. assets, and if they decide to take their money home,” prices for bonds, equities, and the dollar would see the effect.

Foreign investors fleeing U.S. equities would put pressure on their prices, increase market volatility, and potentially lead to higher interest rates and a weaker dollar. The weaker demand for these and other American assets could slow economic growth and put a dent in Americans’ retirement portfolios.

Foreign Flight Plans

In addition to seeking safe havens in their own domestic bonds and currencies, there are other reasons for capital rotation out of the U.S. They might amount to an end to a bullish era for foreign investors in U.S. stocks:

• U.S. vs. world: Besides the potential political reasons to not want funds in the U.S. during a trade war with one’s own country, there’s also a fundamental asymmetry: companies in every country would face U.S. tariffs, but not from other countries (except those previously in place); U.S. companies would potentially face tariffs from every country, a significant disadvantage in international trade, from which the U.S. pulled in $3.2 trillion for its exports in 2024.
• Margin compression for U.S. companies: Higher input costs from tariffs are very likely to squeeze profit margins for many U.S. corporations, cutting earnings and stock performance.
• Supply chain disruptions: U.S. companies with global supply chains—including members of the Magnificent Seven—will face significant problems rebuilding them due to the tariff regime.
• Relative valuation concerns: Foreign market equities have much lower “multiples” (cheaper for expected earnings) than the U.S. Invesco analysts pointed to China, in particular, where assets are “inexpensive and under-owned.”
• Significant fiscal stimulus elsewhere: While significant fiscal cuts are promised in the U.S., other countries are promising to end the era of fiscal austerity to help protect their industries; Germany has already done so, in a “regime change” that’s been dubbed a “potential game-changer” for Europe.
• Stagflation fears: Tariffs could set off stagflation in the U.S., limiting the U.S. Federal Reserve’s ability to cut interest rates to support economic growth.

The Bottom Line

Any significant rotation of foreign capital away from U.S. equities, closing a decade of American market dominance, would have significant implications for U.S. stock prices and American retirement portfolios.

What we’re seeing, Justin Leverenz, a chief investment officer at Invesco, said in a company memo, is “the end of [American] exceptionalism. And this may only be the beginning.”

Fact checked by Suzanne Kvilhaug

If you don’t pay the property taxes that you owe on your home, you could lose it.

When property taxes go unpaid, the amount you owe becomes a lien on your house. If you don’t pay off the amount you owe, the house could be sold in a tax sale. In other instances, the house may be put in foreclosure before being sold.

Key Takeaways

• You could lose your home if you fall behind on your property taxes. Your home may be put up for sale in one to three years.
• You do have the opportunity to get your house back by redeeming it and paying the taxes and interest owed or the sale price.
• To stay current on your property taxes, set aside some money each month for your property taxes. You’ll be ready with the full payment when the bill comes due.

How Soon You’ll Lose Your House

How quickly can a home with unpaid property taxes be sold? It typically takes one to three years.

“Paying property taxes on time is critical since not paying for as little as one year in some municipalities allows that municipality to place your property on the upcoming property auction list,” says Kassi Fetters, owner of Artica Financial Services.

Fetters went on to point out that once your property is auctioned off, that municipality will pay off your property tax debt, late fees, and auction fees for you. Then you get what’s left. “I’ve seen this happen for nonpayment of property taxes after only two years,” said Fetters.

Redeeming a House

If you have enough money, you may be able to get your house back. It is possible for a homeowner to redeem the property after a tax sale by paying the sale amount or back taxes owed plus interest. How long you have to redeem a property varies from state to state.

How to Avoid Being Late on Property Taxes

Using escrow is one way to make sure you have enough money to pay your property tax bill.

“This means that your property taxes are added to your mortgage payment, so it’s done automatically,” says Noah Damsky, a Principal at Marina Wealth Advisors. “This is the most convenient method because it’s built into your regular budget and doesn’t require you to make multiple one-off property tax payments each year.”

You can also make direct payments to your local tax collector. Start saving early in the year to have enough for your property tax payments.

“You can make one-off payments each year to your county property assessor online, so it’s convenient; you just have to make sure you make the deadlines. There are often soft deadlines that can be missed without penalty and firm deadlines weeks later that carry stiff late penalties,” Damsky says.

Make a plan for paying your property taxes. Put aside a little each month so you’ll have the full amount saved by the time your property taxes are due.

The Bottom Line

Falling behind on your property tax payments could cause you to lose your home. This could happen in a year to three years, so you could go from being a homeowner to living without a house in a short period of time.

If you still want to keep your home and you have saved enough money, you can redeem it after a tax sale by paying the sale amount of the house or taxes that are owed plus interest. To avoid falling behind on your property taxes, put aside some money each month so you’ll have enough to cover your property taxes when they come due.

The form for those 65 and older is easier to read and fill out

Reviewed by Lea D. Uradu
Fact checked by Suzanne Kvilhaug

To simplify taxes for those ages 65 and older, the Internal Revenue Service (IRS) offers Form 1040-SR, an optimized version of the standard Form 1040 featuring larger print and tax benefits for older adults.

Here’s a quick guide to understanding this form, who is eligible to use it, and when it makes sense.

Key Takeaways

• Form 1040-SR is a simplified version of Form 1040 that offers American taxpayers ages 65+ a way to file their taxes, whether or not they itemize deductions.
• Unlike its predecessor, Form 1040EZ, there are no income limits with Form 1040-SR.
• Those over 65 are not required to use Form 1040-SR to file. They can continue to use the standard 1040 form if they wish.

What Is Form 1040-SR?

Tax forms often use small, hard–to-read font and complex terminology, which can be challenging for older adults who complete their tax returns manually. The IRS introduced Form 1040-SR to improve the process as part of the Bipartisan Budget Act of 2018. This new form replaced Form 1040EZ and Form 1040A.

Form 1040-SR is identical to Form 1040 but has a layout designed for older adults. It also specifically highlights benefits for older adults, like a higher standard deduction for taxpayers 65 or older who do not itemize their deductions.

“The 1040-SR is actually the exact same as the standard 1040 in terms of substance—it just has bigger print, so it’s easier to read,” says Kari Brummond, an accountant with TaxCure.com. “It’s really up to seniors which form they want to use. If they pay a tax preparer, they can request their return in either format.”

There are no income limits using Form 1040-SR. Taxpayers may report a variety of income sources, regardless of income level, including:

• Wages
• Salaries
• Tips
• Taxable scholarship or fellowship grants
• Unemployment compensation
• Alaska Permanent Fund dividends
• Social Security benefits
• Distributions from qualified retirement plans
• Annuities or similar deferred-payment arrangements
• Interest and dividends
• Capital gains and losses

Form 1040-SR is available on the IRS website.

Tips for Filing Form 1040-SR

If you’re considering using Form 1040-SR, follow these tips for a smooth filing process.

Make Sure You’re Eligible

If you want to use Form 1040-SR for a specific tax year, you must be 65 by the end of that year, plus a day. That is, the IRS considers those turning 65 on Jan. 1 of the following year to be eligible (e.g., you can file Form 1040-SR for tax year 2025 if you will be 65 on or before Jan. 1, 2026).

Note

Eligibility is not dependent on employment status—working, non-working, and retired individuals who meet the age requirement all qualify. However, those who don’t meet the age requirement must use the standard Form 1040.

Know Which Schedule(s) You Need to File

You may need to include supplementary schedule(s) based on your additional income, deductions, and payments, regardless of whether you use Form 1040 or 1040-SR.

Here’s a quick breakdown:

• Schedule 1. Include this schedule if you have additional income, including unemployment compensation or prize money, or claimable deductions such as self-employment tax or student loan interest.
• Schedule 2. File this schedule if you owe additional taxes, like self-employment tax. 
• Schedule 3. This schedule is required if you claim credits not listed on the form, including education or foreign tax credits, or excess Social Security tax withholdings.

Brummond notes that some deductions available to older adults may also appear on these schedules.

“If you have small business income on a Schedule C, you can actually claim your Medicare premiums as self-employed health insurance,” Brummond says. “That gives you a top-line deduction that reduces your taxable income but doesn’t reduce your self-employment tax.”

Decide Whether You Should DIY or Hire a Tax Professional

While you may feel confident in filing your tax returns, getting professional assistance can reduce the risk of errors, according to Brummond. This is especially true for those with complex tax situations, like freelancers and small business owners. 

“If you have a more complicated tax situation… a tax professional can help you ensure you get all your business deductions and that you coordinate your business income with your retirement income in the most advantageous way possible for your tax situation,” Brummond says.

For seniors concerned about the cost of tax assistance, there are plenty of affordable options, including tax preparation software and local support services.

“Check your local library—they often offer tax prep help for people under a certain income,” Brummond says. “The IRS, along with the AARP, also hosts Tax Counseling for the Elderly (TCE) clinics to help seniors with tax prep.”

The Bottom Line

Those age 65 and older can simplify tax filing with Form 1040-SR. This option is only available to those who meet the age requirement—those under age 65 must use Form 1040. While using Form 1040-SR isn’t required, taxpayers who do may benefit from a filing process designed to be easier for older adults.

Reviewed by Charlene Rhinehart
Fact checked by Yarilet Perez

Accrual vs. Accounts Payable: An Overview

Both accrual and accounts payable are accounting entries that appear on a company’s financial statements. An accrual is an accounting adjustment for items (e.g., revenues, expenses) that have been earned or incurred, but not yet recorded. Accounts payable is a liability to a creditor that denotes when a company owes money for goods or services and is a type of accrual.

Key Takeaways

• Accruals and accounts payable refer to accounting entries in the books of a company or business.
• Accruals are earned revenues and incurred expenses that have yet to be received or paid.
• Accounts payable are short-term debts, representing goods or services a company has received but not yet paid for.
• Accounts payable are a type of accrued liability.
• Both accruals and accounts payable impact financial analysis based on how they’re reported and interpreted.

Accrual

Under the accrual accounting method, an accrual occurs when a company’s good or service is delivered prior to receiving payment, or when a company receives a good or service prior to paying for it.

For example, when a business sells something on predetermined credit terms, the funds from the sale are considered accrued revenue. The accruals must be added via adjusting journal entries so that the financial statements report these amounts.

Say a software company offers you a monthly subscription for one of their programs, billing you for the subscription at the end of every month. The revenue made from the software subscription is recognized on the company’s income statement as accrued revenue in the month the service was delivered—say, February.

At the same time, an accounts receivable asset account is created on the company’s balance sheet. When you actually pay your bill in March, the accounts receivable account is reduced, and the company’s cash account goes up.

There are several different types of accruals. The most common include goodwill, future tax liabilities, future interest expenses, accounts receivable (like the revenue in our example above), and accounts payable.

Important

All accounts payable are actually a type of accrual, but not all accruals are accounts payable.

Accounts Payable

Accounts payable is a specific type of accrual. It occurs when a company receives a good or service prior to paying for it, incurring a financial obligation to a supplier or creditor.

Accounts payable represent debts that must be paid off within a given period, usually a short-term one (under a year). Generally, they involve expenditures related to business operations. They do not include employee wages or loan repayments.

Under the accrual accounting method, when a company incurs an expense, the transaction is recorded as an accounts payable liability on the balance sheet and as an expense on the income statement.

As a result, if someone looks at the balance in the accounts payable category, they will see the total amount the business owes all of its vendors and short-term lenders. When the expense is paid, the accounts payable liability account decreases, and the asset used to pay for the liability also decreases.

For example, imagine a business buys some new computer software, and 30 days later, gets a $500 invoice for it. When the accounting department receives the invoice, it records a $500 debit in the office expenses account and a $500 credit to the accounts payable liability account.

The company then writes a check to pay the bill, so the accountant enters a $500 credit back to the checking account and enters a debit of $500 from the accounts payable column.

Impact on Financial Analysis

Both accruals and accounts payable impact how managers, investors, and analysts interpret a company’s financial health. Accruals are revenue earned or expenses incurred before cash changes hands, which helps match revenue and costs to the correct period.

However, high levels of accrued revenue may signal that large amounts of a company’s sales haven’t yet been recognized. This could raise concerns about potential cash flow returns despite the strong recorded profits.

Accounts payable, on the other hand, directly affect a company’s liquidity. Increasing levels of accounts payable could indicate a company is purposely conserving cash by delaying payments, or it might spell financial trouble if a company is actually having a hard time making those payments.

Additionally, the timing of these entries is important, especially during reporting periods. Companies can speed up revenue recognition or delay expenses to alter financial results. While this is technically legal under accounting laws, it distorts the actual financial performance.

Understanding the timing and effects of accruals and payables is important for investors and analysts to make smart, thoughtful decisions.

How Do You Improve Accounts Payable?

Improving accounts payable is about paying your company bills on time. To do this, streamline the process to make it as efficient as possible. Automate invoice approvals, pay digitally rather than with physical money (cash/checks), set up automatic payment reminders, and automate payments. Additionally, make sure there’s a process to review your payments in order to avoid double payment or any other errors.

What Is Accrual in Accounting?

Accrual in accounting is a process that records revenue and expenses when they’re earned or incurred, rather than when cash actually changes hands. For example, you deliver milk to an ice cream company in July but are paid for it in August. You’ll record the revenue in July because that’s when you earned it, even if you receive the money in August. The same is true for expenses. The point of accrual accounting is to create an accurate picture of a company’s health.

What Is the Difference Between Accounts Receivable and Accounts Payable?

Accounts receivable and accounts payable are both line items on a company’s balance sheet. Accounts receivable is an asset and represents the money owed to a company from customers that bought goods or services on credit. Accounts payable is a liability that represents money a company owes its suppliers for goods and services it has received. Accounts receivable is money coming in while accounts payable is money going out.

The Bottom Line

Accruals and accounts payable are two important aspects of financial accounting, however, they both paint a different picture of a company’s financial position. Accruals help match income and expenses to the right period, which gives a clear picture of performance. Accounts payable track short-term debts.

Understanding the role each plays in accounting and a company’s business will help investors and analysts get real insight into the financial health of the company, helping them make informed decisions.