financial education

Reviewed by Charles Potters
Fact checked by Vikki Velasquez

In capital budgeting, a number of approaches can be used to evaluate a project. Two very common methodologies are the internal rate of return (IRR) and net present value (NPV).

Each of these approaches produces a single number that management can use as an estimate of the contribution that a new investment or other initiative can make to the company in the future.

Each approach has distinct advantages and disadvantages.

Key Takeaways

• Both IRR and NPV are useful to decide what projects to green-light and what profitability a company can expect from them.
• Internal rate of return (IRR) estimates an expected percent return on the investment.
• Net present value (NPV) estimates the outcome in a positive or negative dollar amount.
• Though the net present value method is more flexible, it isn’t useful when trying to compare projects of different sizes or analyze a project’s return timeline.

What Is IRR?

The internal rate of return (IRR) estimates the profitability of potential investments using a percentage value rather than a dollar amount. It excludes external factors such as capital costs and inflation.

IRR is also referred to as the discounted flow rate of return or the economic rate of return.

The IRR method simplifies the potential of a project to a single return percentage that management can use to determine whether a project is economically viable.

Many companies establish an internal required rate of return to use as a benchmark and may decide to move forward with a project only if the IRR meets or exceeds this benchmark.

IRR Pros and Cons

The IRR is simple to use and does not require a hurdle or benchmark rate. However, it ignores the size of a project.

What Is NPV?

A company’s net present value (NPV) is expressed in a dollar amount. It is the difference between a company’s present value of cash inflows and its present value of cash outflows over a specific time period.

NPV is calculated by estimating a company’s future cash flows related to a project. Then, these cash flows are discounted to present value using a discount rate representing the project’s capital costs, risk, and desired rate of return.

The sum of all discounted cash flows represents the net present value, and the net present value is the difference between the project cost and the income it generates over time.

NPV Pros and Cons

NPV is easy to interpret: if the NPV is positive, the project is profitable. If the NPV is negative, it is not. However, NPV isn’t useful when trying to decide which projects to take on as size or timeline aren’t considered.

Problems With IRR

The primary benefit of IRR is its simplicity: It’s easy to calculate and easy to interpret the result. However, it has several drawbacks.

IRR only uses one discount rate, and the true discount rate can change substantially over time – especially if the investment is a long-term project. Without modification, IRR does not account for changing discount rates, so it’s just not adequate for longer-term projects with periods of varying risk or changes in return expectations. 

Another type of project for which a basic IRR calculation is ineffective is a project with a mixture of multiple positive and negative cash flows.

For example, consider a project for which the marketing department must reinvent the brand every couple of years to stay current in a trendy market.

The project has cash flows of:

• Year 1 = -$50,000 (initial capital outlay) 
• Year 2 = $115,000 return
• Year 3 = -$66,000 in new marketing costs to revise the look of the project.

A single IRR can’t be used in this case. Recall that IRR is the discount rate or the interest needed for the project to break even given the initial investment. If market conditions change over the years, this project can have multiple IRRs.

In other words, long projects with fluctuating cash flows and additional investments of capital may have multiple distinct IRR values, making it impossible to evaluate.

The IRR method is also problematic when the discount rate of a project is not known. If the IRR is above the discount rate, the project is feasible. If it is below, the project is not. If a discount rate is not known, there is no benchmark to compare the project return against.

In cases like this, the NPV method is superior as projects with a positive NPV are considered financially worthwhile. 

Using NPV

The advantage to using the NPV method over IRR using the example above is that NPV can handle multiple discount rates or varying cash flow directions. Each year’s cash flow can be discounted separately from the others, so the NPV method is more flexible when evaluating individual periods.

The NPV method is inherently complex and requires assumptions at each stage such as the discount rate or the likelihood of receiving the cash payment. 

The NPV can be used to determine whether an investment such as a project, merger, or acquisition will add value to a company. If an NPV is positive, the sum of discounted cash inflows is greater than the sum of discounted cash outflows. The company will receive more economic benefit than it puts out, so the project, assuming the return is material and no capacity constraints are met, is beneficial to the company.

A negative NPV indicates a company’s cash outflows over the life of a project exceed what it is expected to receive. When a project’s NPV is negative, the project is not profitable and should not go forward.

Like the IRR method, there are disadvantages to the NPV method. It may be difficult to determine the required rate of return or discount rate to use to discount cash flow. Also, NPV calculations are biased towards larger projects. One project may have a higher NPV, but its rate of return may be lower, and the total cash outlay may be higher than a smaller project.

Is IRR or NPV Better for Capital Budgeting?

The choice depends on the use.

IRR is useful when comparing multiple projects against each other. It also is more appropriate when it is difficult to determine a discount rate.

NPV is better in situations where there are varying directions of cash flow over time or multiple discount rates.

How Is IRR Calculated?

IRR is calculated by setting the NPV of a series of cash flows to zero and solving for the discount rate. IRR can be solved manually through trial and error, though it is more efficient to use software to do the calculations.

How Is NPV Calculated?

NPV is calculated by finding the present value of each cash flow for each period, including any initial cash outflow that occurs immediately. The discount rate used is self-selected as the required rate of return for the project. Once all discounted cash flows have been calculated, add all cash flows to arrive at the net present value.

The Bottom Line

Internal rate of return (IRR) and net present value (NPV) are two ways to arrive at a single number that indicates the potential return on a capital project that is being considered.

Each method has its uses and its drawbacks. IRR is easier to calculate. NPV is easier to interpret.

Reviewed by Margaret James

The originator of American currency, debatably, is among one of Massachusetts’ many claims to colonial fame. In 1690, the then–Massachusetts Bay Colony printed and circulated the soon-to-be nation’s first colonial currency. While other colonies quickly followed suit, by 1764 the British Parliament outlawed colonial currencies, making them decidedly illegal tender. When the Revolutionary War began in 1775, the Continental Congress issued its currency to finance the fight for liberty. Unsurprisingly, the British Parliament didn’t recognize this currency, either. Called “continentals,” these paper bills lacked the backing of gold or silver.

Since the British lost the Revolutionary War and the U.S. dollar officially became the nation’s legal tender, it’s become a lot easier to exchange currency in Boston. Whether you’re an American seeking foreign currency for a trip abroad or a foreign visitor in the U.S., here’s the best way to exchange currency in Boston.

key takeaways

• In Boston, as in most places, the best currency exchange rates are at banks and bank ATMs—though you need to watch out for fees when using the latter.
• Two recommended currency exchange stores in Boston are Currency Exchange International in Copley Place and various Rockland Trust Bank locations.
• TD Bank also has several Foreign Exchange Centers, including several in the Boston area.
• Avoid exchanging money at the airport, where rates tend to be the poorest.

Currency Exchange Options in Boston

Whether it’s dollars you need—or a handful of Thai baht or Danish krone—you could do well to head for the Boston branch of Currency Exchange International, which advertises its services with an appealing guarantee: It claims to match (or beat) any bank on the same product or service on the same day and same time of the exchange. Bills, as well as certain foreign coins, are accepted. Centrally located in Copley Place, it’s easily reachable by public transit, or the “T”: Take the Orange Line to the Back Bay Station or the Green Line to Copley Station.

You can also find a number of foreign currency exchange locations across the greater Boston area through Rockland Trust Bank. At Rockland Trust Bank locations, you are usually able to place foreign currency orders that can be delivered to a specific branch within a few days. It’s often advised to call in advance to confirm an order and better understand the timing. Its most central Boston location is on Franklin Street, though there are dozens of locations.

You can also exchange foreign currency at a few different TD Bank Foreign Exchange Centers. These are TD Bank locations that have up to 15 foreign currencies available for immediate exchange. There are TD Bank locations in Boston, Cambridge, and Andover, and these locations can usually exchange euros, pounds, Canadian dollars, pesos, yen, and others.

General Currency Exchange Tips

If you’re a foreign traveler, the cheapest way to exchange money is often to use your credit card or bank debit card at an ATM. These generally offer the lowest exchange rates between your home currency and U.S. dollars. However, it’s crucial to research your credit card’s or bank’s policy on overseas withdrawals, because there may be extra fees involved. If you make numerous withdrawals, these quickly add up.

Important

When using an ATM, if given the option, always choose for the fee to be charged in the local currency.

Many times, a traveler has returned home from a jaunt abroad to face not only jet lag but also the shock of finding countless charges on their checking account. The sticker shock doesn’t always end there. It’s common for banks to not only charge the equivalent of a $2 to $5 fee at foreign ATMs (one not part of their network) but also to take a small percentage on the amount of cash withdrawn. Called a foreign transaction fee, it varies from about 1% to 3% of the withdrawal. Many credit cards also sock you for foreign transactions or currency conversions.

It’s for that reason, among others, that some travelers prefer to patronize a currency exchange store. While currency exchanges rarely offer exchange rates that come in as favorably as ATMs, they tend to charge lower transaction fees; so do a quick calculation and see which option yields the most favorable result. Keep in mind that currency exchanges, especially in major tourist areas, work in fierce competition with one another. The fiercer the competition, the more likely you’ll be able to negotiate on the transaction fee—or even sweet-talk your way to a slightly more favorable rate.

That said, you may want to forgo the airport currency exchanges—they’re notorious for offering the worst exchange rates. These shops trade on their convenience—they’re usually the first option you see, once you clear customs—and the fact that you might need the coin of the realm to catch a bus, train, or taxi into town. Plus, you haven’t had a chance to suss out the going rates elsewhere. Even the Logan Airport American Express location gets low marks for exchange terms.

At best, use the airport outlets to exchange just enough money to get you into the city and the place you’re staying.

Plan in Advance

An alternative is to check before your trip to see whether your bank carries foreign currency, or if it will order it for you: Many banks offer convenient currency exchange services for account holders. While the conversion rate should be on par with the market, always check online to compare, and if your bank’s deal seems off, mention it to your banker.

It’s prudent to gain a pre-departure grasp of the exchange rate between your country’s currency and the U.S. dollar. Of course, markets are volatile, and currencies can drop or rise in a day, but usually—excepting war, political upheavals, natural disasters, or market crashes—checking in advance will give you a generally excellent picture of what you’ll get for your euro, pound, or yen. Once in Beantown (one of the city’s affectionate nicknames), keep up on currency news by checking with the local Boston Globe or The Wall Street Journal’s financial pages.

Whether you’re visiting Boston—or leaving it to travel outside the U.S.—it pays to research exchange rates in advance to make sure you’re being offered a fair rate. If you’re an American who travels abroad regularly, it pays to open an account at an online financial institution, such as Capital One 360 or Charles Schwab (the banking side of the securities broker), that doesn’t charge a transaction fee or a fee for using an overseas ATM. Such banks are rare, however, which is why a credit card with no foreign transaction fee that lets you withdraw cash from an ATM is a good thing to have in your wallet.

What Fees Are Associated With Currency Exchange?

Common fees include service charges, conversion fees (sometimes a percentage of the amount exchanged), ATM fees (if using an ATM), and sometimes a margin added to the exchange rate by the provider.

Can I Exchange Currency at the Airport?

Yes, currency exchange services are available at airports, but they often come with higher fees and less favorable exchange rates compared to other locations.

Is It Better to Use Cash or Card Abroad?

This depends on your destination and spending habits. Cards can offer better security, ease of tracking expenses, and potentially better exchange rates. However, cash is essential in places where card acceptance is limited, though it comes with bearer risk, which can be quite high if you’re carrying lots of cash.

What Documentation Is Needed for Currency Exchange?

Typically, you will need a valid form of identification, such as a passport or driver’s license, to exchange currency. Some exchange services may also ask for additional documents such as proof of travel, like airline tickets, or proof of residence.

The Bottom Line

In Boston, the best currency exchange rates are typically found at banks and bank ATMs, but be mindful of potential fees. Recommended exchange options include Currency Exchange International in Copley Place, Rockland Trust Bank locations, and TD Bank’s Foreign Exchange Centers, while airport exchanges should be avoided due to poor rates.

Reviewed by Ebony Howard

Real estate agents get listing agreements in a variety of different ways depending on their markets. A real estate agent in an expensive area of a city such as Manhattan—trying to win the listings of New York’s elite—might entertain potential clients with dinners and outings.

Other real estate agents might make a name for themselves through online strategies and community events. Regardless of the market, building an invaluable personal network and developing expertise in a particular area or region can lead to success as a real estate agent.

Key Takeaways

• Getting listings begins with building a strong network by creating and maintaining relationships.
• Build a brand through marketing strategies, using ads, social media accounts, and newsletters to present an aesthetic listing of your homes.
• Become an expert in a particular area or region, targeting demographics with a higher amount of bought and sold homes.

Getting Listings Through a Strong Network

Getting listings first begins with building a strong network. Real estate agents are constantly creating and maintaining relationships. Many start by connecting with everyone they know, including family, friends, and acquaintances.

Agents must meet many people, discuss real estate, follow any leads, and make it known that they are in the business. Even if the people they speak with might not currently be in the market for selling or buying properties, chances are they will be later or know people who are. New agents use the methods of warm calling and cold calling to drum up leads for listings as well.

Invest in Yourself

As a real estate agent, it is important to invest in yourself. To create a brand through marketing strategies, various ads, and an online presence is essential. Like anything else in a capitalist economy, you are marketing yourself as a brand to show why people should choose you over the competition.

As a brand, you must constantly work with integrity, do what is right for your clients, and provide the best possible value. If you do this and start making a name for yourself, it will lead to another great way to get listings, and that’s through recommendations. If people are happy with the service that you provide, then they will recommend you to the people that they know.

Social Media

In today’s digital age, an online presence is crucial. It is the quickest way to reach people with the furthest scope. Creating social media accounts on different platforms, sending out newsletters via email, presenting a certain aesthetic, and listing homes you have shown previously all help display who you are, and real estate stock is out there. Social media allows people to connect with you to see the types of homes you’re selling, get to know you, and help you build brand awareness. 

Be in Touch With the Community

Creating relationships with local home developers can help you learn about new listings. Developers typically have a pulse on the real estate market since they build new or convert existing properties.

By staying in touch with them, you can also create relationships with local real estate companies. You never know what kind of information or relationships they are also looking to build and work with.

Strategic Targeting

Specific demographics buy or sell homes more frequently than others, and it is important to be aware of these individuals in your market. For example, people who inherit homes might want to sell the home as they do not wish to carry the responsibility of maintaining another piece of real estate. The home might be located in an area they do not live in or requires too much maintenance. These people may look to sell the property and cash in.

Another demographic to focus on is recently divorced couples. A divorced couple may sell their shared property and buy two different homes. Or even if they do keep the current property, one of the individuals will be looking for a new place to start a new life. It can be your role as a real estate agent to help them in this difficult time and make the transitional process much easier.

As a real estate agent, one has to constantly network and keep abreast of what is happening in their community. Knowing as many people as possible, constantly contacting the right groups, and performing valuable services all help in generating new listings.

Warning

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report, either to the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).

How To Get Real Estate Listings without Cold Calling?

Building contacts, networking, and developing relationships through social media, open houses, community outreach, and marketing strategies can help real estate agents get more listings and succeed in their careers.

How Does a New Realtor Get Clients?

New realtors can access new clients through networking events, social media outreach, and speaking to friends and family. Getting involved in local communities can raise awareness of your brand and that you’re available to new clients.

How Do Real Estate Agents Get More Listings?

Real estate agents get listing agreements by networking, building a brand, using social media, staying active in the community, and targeting specific demographics. 

The Bottom Line

Real estate agents get listing agreements through various methods, including entertaining potential clients with dinners, outings, and open houses. Online and social media strategies can help enhance the brand of an agent, showing recently sold listings and current listings on the market. Building a network through community events and maintaining relationships allows real estate agents to network and build contacts.

They have a tax advantage but often come with high fees

Fact checked by Vikki Velasquez
Reviewed by Marguerita Cheng

What Is a Nonqualified Variable Annuity?

Nonqualified variable annuities are tax-deferred investment vehicles with a unique tax structure. While you won’t receive a tax deduction for the money you contribute, your account grows without incurring taxes until you take money out, either through an early withdrawal or as retirement income.

A nonqualified variable annuity is a retirement pension plan that is purchased with post-tax dollars. That is, you don’t get a tax break up front, as with an individual retirement account (IRA). Your money will grow untaxed until you start taking the money out, usually as retirement income. At that point, you’ll owe income taxes on the amount withdrawn.

Key Takeaways

• A nonqualified variable annuity doesn’t entitle you to a tax deduction in the years you contribute money, as is the case with a traditional IRA or 401(k) plan.
• You won’t be taxed on the gains in your account until you withdraw money.
• At that time, the gains will be taxed as ordinary income, not capital gains.
• Any money you take out before age 59½ will be subject to a 10% early withdrawal penalty in most cases.

How a Nonqualified Variable Annuity Works

Variable annuities are sold by insurance companies. In return for the money you invest, the insurer promises to pay you a regular stream of income. Normally, the payments begin at retirement age and continue for the rest of your life.

A qualified annuity is a type of retirement account, much like a traditional individual retirement account (IRA), that typically entitles you to a tax deduction for the amount you contribute, up to Internal Revenue Service (IRS) limits.

A non-qualified annuity is not considered a retirement account for tax purposes and doesn’t earn you a deduction—even if you are using it to save for retirement.

You make contributions to a nonqualified variable annuity with after-tax dollars, like adding money to a bank account or any other investment. The insurer invests your contributions in subaccounts, which are similar to mutual funds, of your choosing.

The value of the annuity will vary according to the performance of the investments you selected. With a fixed annuity, the insurer picks the investments and promises you a predetermined return.

The Tax Benefit

Although you don’t receive any upfront tax break with a nonqualified annuity, the earnings on your subaccounts grow tax-deferred. That is the unique tax advantage of these annuities.

With other nonqualified accounts—such as a brokerage account or mutual fund—the interest, dividends, and capital gains distributions your investments generate are taxed for the year in which you receive them. That’s true whether you take the money in cash or simply reinvest it.

The earnings in your variable annuity account become taxable only when you withdraw money or receive income from the insurer in the payout phase of the annuity.

At that point, the money you receive is taxed at the same rate as your ordinary income.

Tax on Withdrawals and Income

When you receive money from a nonqualified variable annuity, only your net gain—the earnings on your investment—is taxable. The money you contributed to the annuity isn’t taxed because you made it with after-tax dollars.

As a result, a portion of each payment you receive is treated as principal (that is, a return of your investment in the contract) for tax purposes.

How is this calculated? Essentially, the nontaxable portion of each payment is determined by the ratio of your investment in the contract to the account balance. More precisely, the tax-free and taxable portions of annuity payments are figured using a special computation explained in IRS Publication 575.

The insurance company will report the total annual payouts to you and to the IRS on Form 1099-R. The form will also show your taxable amount so that you won’t have to figure it out yourself.

Taxes at Death

The variable annuity contract may provide that at your death, a person you name as a beneficiary will receive a lump-sum death benefit. Depending on the terms of the contract, when a death benefit becomes payable to a beneficiary, some taxes may be due.

Even though this is an inheritance, the beneficiary must pay income tax on the portion of the payment in excess of your remaining investment in the contract. This is the unrecovered part of your cost for the contract that remained after the payments and withdrawals you received during your lifetime.

Whether the beneficiary is your spouse or someone else also makes a difference.

Spouse Beneficiaries

A spouse inheriting a nonqualified variable annuity usually has the option to continue the contract in his or her name. This is an option, selected up front, that sves the spouse from incurring any taxes until they start making withdrawals.

However, if the spouse chooses to take a lump-sum death benefit, the earnings become immediately taxable as ordinary income.

Other Beneficiaries

For beneficiaries who are not spouses, there are usually three options, depending on the terms of the contract: take a taxable lump-sum distribution (as mentioned above), withdraw the money over a 10-year period, or take distributions based on the beneficiary’s life expectancy.

The distributions must begin within one year after the original account owner’s date of death.

Important

Variable annuities often have high fees, including surrender charges if you need to terminate the contract early. Read the contract carefully to understand the fees you may encounter.

Other Considerations

There are other issues to consider with variable annuities, whether qualified or nonqualified.

Fees

Variable annuities entail considerable costs in the form of an insurance fee, which covers any guaranteed death benefit, as well as an administrative fee.

These fees are based on a percentage of the value of the contract and apply every year. They can average about 1.25% or more annually, depending on the insurance company and other factors.

You cannot deduct these amounts as investment expenses. They become part of your cost (investment) in the contract.

Additional Taxes

High-income taxpayers must include the taxable portion of their variable annuity income in calculating their 3.8% additional net investment income tax.

Early Distributions

As with other tax-deferred accounts intended for retirement, variable annuity withdrawals of any kind—whether a single withdrawal or a stream of monthly payments—taken before age 59½ are subject to a 10% early withdrawal penalty on the taxable portion of the payment.

The penalty does not apply if you are totally and permanently disabled. It also does not apply to a beneficiary who receives payments after your death, regardless of whether you or the beneficiary are under 59½.

Surrender Charges

If you surrender the contract, which means cashing it in before you start to receive annuity payments, you may face a significant surrender charge imposed by the insurer.

The portion of the money that represents your investment in the contract is tax-free, but any additional amount is taxable as ordinary income. If you receive less money than you paid into the contract after deducting the surrender fee, you can take a loss on your taxes.

Exchanges for Other Annuity Contracts

If you have an annuity and want to replace it, there is a way to do it that saves taxes.

Instead of cashing in a variable annuity to buy one with better terms (such as lower annual fees) and paying tax at that time on any increase over your investment, you can transfer to another contract in what is called a 1035 exchange.

The exchange is tax-free as long as the annuitants are the same in both contracts.

Withholding

The insurance company will automatically withhold taxes on the taxable portion of your annuity payments based on the rate that applies to ordinary income as if you are married with three withholding allowances (even if you are single).

You can opt out of withholding by filing IRS Form W-4P.

Why Would I Invest in an Annuity?

An annuity, qualified or nonqualified, is one way you can obtain a regular stream of income when you retire. As with any investment, you put money in over a long term, or pay it in a lump sum, and let the money grow until you are ready to retire.

There are pros and cons to annuities. They are, indeed, a guaranteed stream of money, based on the amount you pay into it during your working years. They are known for their high fees, so care before signing the contract is needed.

There’s a grim reality to annuities, too. They are sold by insurance companies. You’re betting that you’ll live long enough to get full value for your investment. The company is betting you won’t.

How Do I Choose Between a Qualified and a Non-Qualified Annuity?

Qualified annuities are most often offered by employers as a company benefit. If you don’t have access to one through an employer, you can buy an annuity directly from an insurance company and fund it with money in an IRA or other qualified retirement account.

Some qualified annuities allow pre-tax income to grow over time, with no taxes due until the money is withdrawn, usually after the person retires. Because of this tax benefit, they also are subject to IRS restrictions, including limits on the amount that can be deposited each year.

What Is a Fixed Annuity Vs. a Variable Annuity?

This is one of the choices you make when you sign a contract for an annuity. A fixed annuity guarantees you a specific rate of return. This is based mostly on the amount of money you have in the account and your life expectancy. With a variable annuity, the amount of your payment is determined by the performance of the investments you choose to put your money into. Your payment will vary from month to month.

The Bottom Line

Variable annuities can be attractive from a tax perspective because you can postpone paying taxes on your investment gains until you’re ready to retire.

However, at some point, you or your beneficiaries will have to pay tax on the income earned in the contract. What’s more, the tax will be at your rate for ordinary income rather than the more favorable capital gains rate you’d pay if you made the same investments in a regular taxable account.

Before taking withdrawals from a nonqualified variable annuity—or if you inherit money from one—it is important to seek professional tax advice. A wrong move could mean a hefty tax bill.

How to get money when time is of the essence

Reviewed by Khadija Khartit
Fact checked by Yarilet Perez

Whether you are facing an onslaught of unexpected medical bills, you recently lost your job, or your home has been hit by a hurricane or other natural disaster, one thing is certain—you need cash, and you need it now.

Unfortunately, when a financial emergency occurs, the vast majority of us are caught completely unprepared.

If you find yourself in this fix, know that you are not alone. About six out of 10 American households experience at least one financial emergency a year, and about one-third of American families have no savings at all, according to the Federal Emergency Management Agency (FEMA).

Meanwhile, Federal Reserve poll data updated in 2023 revealed that 37% of adults would not be able to cover an unexpected $400 expense with cash, savings, or by using a credit card and paying it off by the next statement.

If you need quick cash to cover an urgent expense, where do you turn? Here are seven smart ways to raise money quickly without causing irreparable harm to your finances.

Key Takeaways

• Selling personal belongings online—such as clothing, electronics, or books—may help you raise cash in an emergency.
• Consider taking on an odd job such as babysitting, dog walking, or yard work to help bring in extra money.
• You may be owed unclaimed property by the state, especially if you’ve moved around a lot.
• You might consider borrowing or withdrawing funds from your retirement account; in certain cases, you can avoid paying taxes on the distribution and a 10% penalty.
• If you borrow money from friends or family, it’s best to draw up a contract formalizing the terms of the loan.

1. Liquidate Your Assets

Does the corner of your jewelry box hold your dad’s Rolex, your mom’s engagement ring, or a diamond pin you rarely wear? What about goodies tucked away in your closet—perhaps a fancy bridesmaid dress or your inherited great-aunt’s fur coat?

One online platform ready and willing to pay cash for your clothes is ThredUp. Visit their Selling Guide page to find out how the selling process works. Or, you can try selling your clothing on eBay or Facebook Marketplace.

You also may be able to make fast cash by selling recent-model electronics, such as big-screen TVs, tablets, phones, laptops, and game consoles, as well as media like DVDs, CDs, books, and games. For these, check out sites such as Decluttr, Gazelle, and uSell, and marketplace sites like Swappa.

Or, try posting your items on Facebook Marketplace, Craigslist, and X (formerly Twitter); run an ad in your local newspaper; or peddle these pieces to friends and family members.

Depending on the quality of the garments, electronics, and media you’re willing to sell, you could quickly rake in hundreds—or more—in much-needed cash.

2. Take on Odd Jobs

If you don’t have any high-value items to unload, you can try selling your services instead, either as a second job but especially if you are out of work and have time on your hands.

You might babysit and/or start up a neighborhood dog-walking service. According to ZipRecruiter, the nationwide average hourly wage for a babysitter is $18 an hour. Dog walkers can typically earn almost $17 an hour, according to Payscale.

If you’re not up for dealing with dogs or kids, you might offer to mow the grass and wash cars for people in your neighborhood, or drive an elderly neighbor to their doctor appointments.

Or, if you enjoy driving, you might sign up to be a Lyft or Uber driver. According to Indeed, Uber drivers average an hourly rate nationally of $20.

You could also grocery shop for busy friends or older adults, or offer to repair and paint a friend’s or relative’s dilapidated fence. Depending on how many jobs you take on and how much you charge for each task, you could scrape together a few hundred bucks within a single weekend.

If you can’t find enough people who need work done, try signing up for jobs through websites such as TaskRabbit, Thumbtack, or skills-based work on Upwork, Freelancer, or Fiverr.

Important

An emergency fund can provide a financial cushion to help when unexpected costs associated with, for instance, medical treatment or the loss of a job occur. Start setting money aside for your fund as soon as you can.

3. Track Down Loose Change

At first glance, this advice may seem a little absurd, but it’s not a joke. According to The Wall Street Journal, Americans lose track of as much as $68 million of coins each year. That’s a lot of money stuffed in couch cushions, piggy banks, and old paint cans across the nation.

Hunt around the house to collect all those hidden coins. Once you dig up every last cent, haul the trove to your local bank or credit union. Some banks will count change for free for their customers. Others may require you to count and roll your change on your own.

Another way to track down lost money is to visit your state’s unclaimed property website. For any state you’ve lived in, there may be funds that belong to you (e.g., a check or a forgotten bank account). The state is required to hold on to these funds, and it publishes a list of those owed money. Once you follow the instructions to claim the funds, essentially you’ve found money that you forgot or never knew you had.

4. Organize a Garage Sale

One man’s trash is another man’s treasure, as the saying goes. While garage and yard sales require a lot of work, they can bring in a decent chunk of change for some sellers.

Be sure to advertise on Craigslist, Facebook (if you have a local group), Nextdoor, your local newspaper (online as well as print), and church bulletins. Put up large, easy-to-read signs with black lettering in key locations to bring in as many people as possible.

5. Tap Your Retirement Account

For significant amounts of money, the first four options above may not suffice. That’s when it may make sense to consider your 401(k). In most years, if you’re younger than 59½, you pay a 10% penalty for withdrawing from your 401(k) funds. But when you face especially trying times, it may be worth it.

Also, there are certain exceptions for which the 10% penalty may be waived, such as when you have unreimbursed medical expenses that exceed 7.5% of your modified adjusted gross income (MAGI). You can also borrow, rather than withdraw, money from your 401(k)—a better choice if you can manage it.

If you don’t have a 401(k) but you do have an individual retirement account (IRA), this could also be a source of funds, especially if it’s a Roth IRA. With a traditional IRA, your options are more limited, but even then, there are some situations in which you can withdraw retirement money at little cost to you.

6. Part With Your Plasma

Now we’re getting to the more extreme options. Plasma is a valuable resource used for a variety of medical treatments and research. Donating plasma is similar to giving blood, according to Octapharma Plasma Inc., a company that collects plasma used to create lifesaving medicines for patients worldwide.

Once your blood is drawn, it’s cycled through special equipment that separates plasma from the other parts of your blood. Your plasma is then collected in a container, while the other parts are safely returned to your body in a process called plasmapheresis.

Reports vary as to how much you can make, and it will depend on a variety of factors. According to the Octapharma Plasma website, hermatocrit, height, and weight drive payment amounts. First-time donors receive a bonus. Returning donors receive greater payment amounts depending on the frequency of donations.

7. Borrow Money From Friends or Family

We saved this one for last because it really should be a last resort. While borrowing money from friends and relatives may be a quick fix, it can lead to some adverse and unpleasant consequences. When a loved one lends you some cash, it can put a strain on your relationship—especially if you don’t pay the person back quickly.

Unpaid loans can lead to lingering bad feelings between the lender and borrower. If you plan on borrowing money, it’s probably best to draw up a contract that states when you must begin to pay back the lender, when you will finish paying, and any interest you’ll owe on the money borrowed.

How Much Should I Have in Emergency Savings?

Different financial advisors may give different answers. Some suggest a minimum of three months of living expenses, while others err on the side of caution and recommend six to 12 months. Be mindful of how your emergency savings goals may change if you were to move from one area to another that has a higher cost of living.

Where Should I Store My Emergency Fund?

Your emergency fund should be kept someplace safe and liquid. For this reason, a savings account may be the most logical place to start. You’ll be able to withdraw your money whenever you need it (and high-yield savings accounts may offer especially attractive interest rates). Put your savings in a financial institution that you trust and an account that you understand.

What Are the Tax Implications of Selling Things I Own?

If you were to make a profit on anything you own, that gain is technically taxable income. Your tax rate would ultimately depend on the length of time you possessed the good. Keep good records (sales receipts, emails, bank statements) of what you sell, especially if you sell things for less than what you paid for them. In some cases, your losses may be able to offset your taxable gains. A tax advisor can provide insight into the tax implications.

The Bottom Line

If you find yourself cash-strapped when a financial emergency strikes, you’re not alone. The vast majority of Americans don’t have enough cash on hand to pay for unexpected expenses.

At such a time, the worst thing you can do is drive up credit card debt or take out a payday loan, which will have exorbitant interest rates.

Fortunately, there are several ways to raise money quickly without decimating your finances. Whether you choose to sell some of your belongings, take on odd jobs, or borrow money from a parent or friend, one thing is sure. As soon as you recover from your financial calamity, start building an emergency fund.

Reddit makes money by selling ads and premium membership plans

Reviewed by Charles Potters

Reddit Inc. (RDDT) is a social media website that enables users to form online communities, share ideas, photos and videos, post the latest trends and breaking news, and vote on content posted by other users. The website is known for its discussion forums, including its popular “Ask Me Anything” format.

Reddit makes money by selling advertising space and from an optional premium membership plan that allows users to turn off ads and enjoy other benefits. Reddit also earns revenue from data licensing and various products in the user economy.

Key Takeaways

• Reddit is a social media website known for its discussion forums on politics, sports, entertainment, and other topics.
• The company generates revenue through advertising and an ad-free premium membership plan.
• Reddit operates in the application-software segment of the technology industry, providing software that allows users to share media content.
• Reddit went public in early 2024, and has a market cap of around $18 billion.

Reddit’s Industry

Reddit is a social media website that provides a network of communities where users canpost news stories, images, videos, and links. A user’s standing within these communities is determined by the content they share and its evaluation by other users, as determined by their upvotes and downvotes.

Reddit also is well known for its online discussion forums on politics, entertainment, and other topics such as r/cryptocurrency, r/politics, and r/wallstreetbets. Reddit faces a long list of competitors, including Meta Platforms Inc. (META, formerly Facebook Inc.), X Corp. (formerly Twitter, Inc.), and Google parent Alphabet Inc. (GOOGL). Some lesser-known competitors include Digg, Tumblr, Quora, 9GAG, and Gizmodo Media Group.

Reddit’s Financials

Reddit earned $1.3 billion of revenue in 2024, according to the company’s annual report filed on Feb. 13, 2025. That’s an increase of more than 60% from the $804 million Reddit earned in 2023, when it was still a private company. However, the company’s net losses also increased, from $90 million in 2023 to $484 million in 2024.

Reddit had over 101 million daily active users in the last three months of 2024, an increase of 39% from the same period a year earlier. 48 million of them were in the United States, and nearly 54 million in the rest of the world.

History and Leadership

The San Francisco, California-based company was founded in 2005 by Steve Huffman and Alexis Ohanian. The two were college roommates and founded the company soon after graduating from the University of Virginia. Reddit was acquired by Condé Nast Publications in 2006 and was subsequently spun off into an independent company in 2011.

Huffman is Reddit’s current CEO and serves as one of the company’s board members. Ohanian stepped down as a board member in June 2020, and asked that he be replaced by a Black candidate. Reddit subsequently named Y Combinator CEO Michael Seibel as Ohanian’s replacement.

Recent Developments

Reddit launched an initial public offering on March 21, 2024. The initial share price was $34, setting a total value for the company at $750 billion. Reddit shares jumped after the company launched and steadily grew over the following months, eventually reaching $225 per share in early 2025.

Prices have receded since then, falling to a price of around $100 per share in April 2025. Although significantly reduced, that still gives the company a market cap of $18 billion.

Has Reddit Ever Made a Profit?

As of 2025, Reddit has not made a profit on an annual basis, which is not uncommon for a relatively young company. However, it did have its second profitable quarter in the last quarter of 2024.

What Is Reddit Worth?

Reddit’s share price was $101 as of April 12, 2025, giving it a total market capitalization of $18.3 billion.

What Are Reddit’s Revenue Streams?

Reddit’s main revenue stream is advertising sales or premium subscriptions. It also has a user economy of monetized rewards and collectible avatars, although the revenue from these is not material as of 2025.

The Bottom Line

Since its founding in 2005, Reddit has grown to reach millions of active users, bringing in revenue from ad sales as well as premium memberships and other initiatives. As a social media company, it doesn’t have the reach of competitors like Facebook or X, but it’s still one of the top 10 most-visited websites in the world.

Reviewed by Margaret James

The HARP program helped borrowers who had mortgage loan balances that exceeded their property value by allowing them to refinance their loan—ideally, at a lower rate. However, this program expired at the end of 2018.

When interest rates fall, many homeowners will refinance their mortgage to lock in a lower interest rate, which can reduce a borrower’s monthly payment or allow a homeowner to build equity more quickly.

However, homeowners who typically have trouble refinancing are those with negative equity, meaning the mortgage exceeds the property value, securing the loan as collateral. In the third quarter of 2024, nearly one million homes were in negative equity.

In the past, borrowers with underwater mortgages could take advantage of lower interest rates by refinancing through the Home Affordable Refinance Program (HARP).

Discover the benefits that HARP provided to homeowners and available options for refinancing or modifying a mortgage.

Key Takeaways

• HARP was a government program designed to help underwater homeowners refinance mortgages at more attractive interest rates.
• The program started on April 1, 2009, and ended on December 31, 2018.
• By the end of Dec. 2018, HARP refinances totaled 3,494,395 since its inception in 2009.
• An option for distressed homeowners includes the Flex Modification program from Fannie Mae and Freddie Mac.

What Is the HARP Loan Program?

HARP was a government program established in April 2009 under the Federal Housing Finance Agency (FHFA) in response to the 2007-08 financial crisis. The idea was to help homeowners refinance loans on properties that were worth less than their outstanding mortgage. Approximately 3.45 million borrowers took advantage of the program.

HARP Loan-to-Value (LTV) Requirements

HARP aimed to help borrowers with a loan-to-value ratio (LTV) greater than 80%. Typically, these borrowers have trouble securing refinancing because of a lack of home equity, preventing them from benefiting from falling interest rates.

Originally, borrowers were eligible for HARP assistance if their LTV ratio was no greater than 105%. This cap was raised to 125% in July 2009, then lifted entirely in October 2011.

HARP by the Numbers

Between the program’s inception and February 2015, approximately 3.29 million mortgages were refinanced under HARP. Of these, 2.3 million had an LTV ratio of 80% to 105%. Over 567,000 mortgages had an LTV of 105% to 125%, while 421,522 loans had ratios greater than 125%.

HARP was originally scheduled to expire at the end of 2016, but the government extended the program by two years. By the end of Dec. 2018, HARP refinances totaled 3,494,395 since its inception in 2009.

What Were the Qualifying Criteria for a HARP Loan?

Homeowners were required to meet the following criteria to qualify for HARP:

• A basic requirement was a mortgage owned or guaranteed by Freddie Mac or Fannie Mae, closed on or before May 31, 2009.
• The original loan must have had an LTV ratio of at least 80%.
• Crucially, the borrower could not be delinquent on their mortgage payments. They could have no late payments over the past six months and no more than one 30-day late payment over the preceding 12 months.
• Borrowers needed to have a 660 minimum credit score.

The program didn’t actually lend money. Instead, HARP worked with lenders to offer refinancing. Homeowners could check with their current lender or access a HARP website to see if the lender participated in the program.

What Replaced the HARP Loan Program?

Although HARP has ended, Fannie Mae and Freddie Mac offer options for financially distressed borrowers to refinance or modify their loans.

Flex Modification

Fannie Mae and Freddie Mac offer a Flex Modification program for existing loans with past-due payments of more than 60 days. These are loan modification programs that help financially distressed borrowers lower their monthly payments by 20%.

The payment reduction can result from a series of steps that include:

• Reduction of loan’s interest rate (if eligible) 
• Loan term extension, such as 40 years versus the standard 30-year mortgage loan
• Forbearance of a portion of the loan principal (borrowed amount), which represents a temporary reduction or modification to the loan balance

Not all loan modifications may achieve the 20% payment reduction goal.

Freddie Mac High LTV Refinance

Freddie Mac offers borrowers a refinance with a 95% loan-to-value ratio (LTV) for a one-unit or single-family home. Borrowers can take a cash-out refinance but must have an 80% LTV.

Warning

Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report, either to the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).

How Did the HARP Loan Program Work?

The HARP mortgage program allowed borrowers with mortgage loan balances that exceeded their property values to refinance their loans at a lower interest rate. The government program began on April 1, 2009, and ended on December 31, 2018.

What Does It Mean When a Mortgage Is Underwater?

An underwater mortgage occurs when the loan balance exceeds the value of the home securing the loan as collateral. Borrowers can become underwater if the property value declines or the borrower withdraws too much of the home’s equity via a home equity loan, home equity line of credit (HELOC), or cash-out refinance.

What Are the Options for Financially Distressed Mortgage Loan Borrowers?

The Flex Modification program offered through Fannie Mae and Freddie Mac helps borrowers who have past-due payments of more than 60 days. The loan modification is designed to reduce the monthly mortgage payment by 20% by lowering the rate, extending the loan term, or forbearance, which temporarily reduces the loan balance.

The Bottom Line

Before HARP expired, the program helped millions of homeowners to refinance underwater mortgages. While HARP didn’t decrease the amount they owed, borrowers benefited from lower interest rates and monthly payments. Although HARP no longer exists, Fannie Mae and Freddie Mac offer programs for borrowers.

Reviewed by David Kindness
Fact checked by Michael Rosenston

What Is Other Comprehensive Income?

In corporate financial reporting and business accounting, other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized and are excluded from net income on an income statement. OCI represents the balance between net income and comprehensive income.

A common example of OCI is a portfolio of bonds that have not yet matured and, consequently, haven’t been redeemed. Gains or losses from the changing value of the bonds cannot be fully determined until the time of their sale; the interim adjustments are thus recognized in other comprehensive income.

Key Takeaways

• In business accounting and corporate financial reporting, other comprehensive income (OCI) includes revenues, expenses, gains, and losses that have yet to be realized.
• The accounting treatment of other comprehensive income is established in the Statement of Financial Accounting Standards No. 220, entitled “Income Statement-Reporting Comprehensive Income,” which is maintained and updated by the Financial Accounting Standards Board.
• A bond portfolio is a prime example of an asset that may be considered OCI, as long as the business does not classify the underlying bonds as held-to-maturity.

Understanding Other Comprehensive Income

Corporate income can be broken down in a multitude of ways, which can mislead interested parties. To compensate for this, the Financial Accounting Standards Board (FASB) requires companies to use universal measurements to help provide investors and analysts with clear, easily accessible information on a company’s financial standing.

The Statement of Financial Accounting Standards No. 220, published by the FASB and entitled “Income Statement–Reporting Comprehensive Income,” reads that an entity shall report comprehensive income in a single continuous financial statement or in two separate but consecutive financial statements. It must also present its components in two sections: net income and other comprehensive income.

Accumulated other comprehensive income or loss is the accumulation of unrealized gains and losses attributed to line items listed on the income statement in other comprehensive income over time. For example, if Company XYZ had $1.5 million in other comprehensive income in the first quarter and $1.2 million in the second, it would have $2.7 million in accumulated other comprehensive income listed on its second quarter balance sheet in the shareholders’ equity section.

Important

An unrealized gain or loss is when a hedging transaction, investment, or pension plan has increased or decreased in value, but there has been no sales transaction. Gains and losses are “realized” when there is a sale, which makes the value increase or decrease “real.”

Common Examples of Other Comprehensive Income

Any held investment classified as available for sale, which is not intended to be held until maturity, and isn’t a loan or a receivable, may be recognized as other comprehensive income.

Other examples of OCI include:

• The previously mentioned bond portfolio is included as long as the business does not classify the bonds as held-to-maturity. Any change in the value of the available-for-sale asset may be included.
• Foreign currency transactions can create gains or losses if the balance of a company’s currency holdings fluctuates, which they frequently do. But the only companies that truly need to pay attention to foreign currency-derived other comprehensive income are large firms that deal in many different currencies.
• Pension plans can also create other comprehensive income. If the value of the plan increases, the difference between the old and new values can be recognized as comprehensive, minus any distributions to pension recipients.
• Gains and losses on derivatives instruments that are designated as, and qualify as, cash flow hedges.

Where Does OCI Go On the Balance Sheet?

OCI is part of accumulated other comprehensive income, which is recorded on the balance sheet in the shareholders’ equity section.

What Is Included in Other Comprehensive Income?

OCI consists of revenues, expenses, gains, and losses that are unrealized and are excluded from net income.

What Is the Difference Between OCI and P&L?

Other comprehensive income is revenues, gains, and losses that are not yet recognized. Profit and loss is all revenues and expenses not included in OCI.

The Bottom Line

Other comprehensive income is an income statement line item that includes unrecognized gains and losses from a business’s financial activities. They include foreign currency translation adjustments, gains and losses associated with pension plans, gains or losses on derivatives designated as cash flow hedges, and more.

Classifying unrecognized gains and losses as other comprehensive income and subtracting them from net income helps a company demonstrate its financial position with transparency.

Reviewed by Natalya Yashina
Fact checked by Suzanne Kvilhaug

Private vs. Public Company: An Overview

A private company is held in private hands. The company is owned by its founders, management, and/or a group of private investors in most cases. The public isn’t privy to its business.

A public company is one that’s sold a portion of itself to the public via an initial public offering (IPO). Shareholders have a claim to part of the company’s assets and profits. Public disclosure of business and financial activities and performance is required of public companies.

Both private and public companies can contribute to the financial health and well-being of economies and nations through their business activities, employment opportunities, and building wealth.

Key Takeaways

• A private company is usually owned by its founders, management, and/or a group of private investors.
• Information about its operations and financial performance isn’t available to the public.
• A public company has sold a portion of itself to the public via an initial public offering (IPO).
• A public company usually trades on a public stock exchange after the IPO.
• The main advantage that public companies have over private companies is their ability to tap the financial markets for capital by selling stock (equity) or bonds (debt).

Private Companies

A popular misconception is that privately held companies are small and of little interest. Many big-name companies are privately held, however, including Mars, Cargill, Fidelity Investments, and Koch Industries.

Ownership

Private companies are owned by those who establish them and those who are invited to invest in them. The public at large can’t buy shares or otherwise invest in private companies at their discretion.

Privacy

They’re not owned by the public so private companies’ executives and management don’t have to answer to stockholders or provide any company information to the public. They aren’t required to file disclosure statements with the Securities and Exchange Commission (SEC).

Capital for growth

A private company can’t use public capital markets to raise funds when it needs money. It must turn to private funding. Private companies fund their growth with profits from operations and/or by borrowing money from banks, venture capitalists, or other types of investors.

A privately held company can’t rely on getting cash by selling stocks or bonds in public markets but it may still be able to sell a limited number of shares under Regulation D without registering with the SEC. Private companies can use shares of equity to attract investors in this way.

Note

It’s been said that private companies seek to minimize the tax bite while public companies look to increase profits for shareholders.

Public Companies

A public company is usually a very large business entity and is normally listed and traded on a public exchange. These exchanges require public companies to meet certain standards to continue trading publicly. The New York Stock Exchange requires that a public company maintain a market capitalization of $15 million.

Ownership

A public company’s stock shares can be bought and sold by people outside the company after the shares trade on public stock markets. The company is therefore owned by those within the organization who possess shares of company stock and by members of the general public. Members of the public who own shares have a stake in the company as a result. Company management can be influenced by their opinions regarding the company’s business.

Public disclosure

A public company is required to disclose certain business and financial information regularly to the public. This information includes annual reports, quarterly reports, and current reports such as 10-K, 10-Q, and 8-K forms that are filed with the SEC.

Important

Public companies are required to register and file company information with the SEC as part of its mission to protect investors, maintain fair, orderly, and efficient markets, and provide access to capital by companies and entrepreneurs.

Capital for growth

A significant advantage that publicly traded companies have is their ability to tap the financial markets for needed capital for expansion through mergers and acquisitions, for internal projects that can drive profits and growth, or for other needs. They do this by selling stock (equity) or bonds (debt).

A public company might issue bonds that investors purchase. Investors make loans to the company in this way. The company will have to repay these loans with interest but it won’t have to surrender any shares of ownership in the company to the investor.

Bonds can therefore be a good option for public companies that seek to raise money, especially in a depressed stock market. A company could also raise capital by selling additional shares, however. This may relieve the burden of repaying bonds.

Key Differences

Public and private companies are distinctly different in several ways.

Company ownership

Private companies are owned by their founders, executive management, and private investors. Public companies are owned by members of the public who purchase company stock as well as personnel within companies such as founders, managers, and employees who possess shares of company stock as a result of the IPO and purchases.

Public company shareholders who aren’t involved in the company in any way other than share ownership can have an impact on the management and operations of public companies because they’re entitled to a say.

Sources of capital

Private companies normally obtain needed capital from private sources such as their shareholding owners or private investors such as venture capitalists. They can also raise funds by taking loans from financial institutions.

Public companies obtain needed capital by selling shares in the public marketplace or by issuing debt. This makes capital easier to obtain for public companies compared to private companies.

Public disclosure

Public companies are required by the SEC to regularly inform shareholders and the public of their financial activities, business activities, and business results. They must file periodic reports and other materials with the government.

Private companies aren’t required to make their company information public or register with the SEC although legislation has been introduced in the U.S. Senate to require some to do so.

Welcome and unwelcome news about public companies is regularly reported by the press and other media. Private companies typically don’t experience such publicity.

Private Company

• Normally not subject to SEC regulation

• Owned by founders and private investors

• Access to capital through owners, investors, and through private loans

• Not subject to public scrutiny

Public Company

• Must register with SEC and file regular financial reports

• Owned by those inside and outside the company who possess/buy shares

• Access to capital through public markets, such as stock and bond markets

• As shareholders, members of the public can vote and share opinions about company matters (which can also be publicized by media)

Examples of Private vs. Public Companies

The 10 largest private companies as of 2024 measured by revenue:

1. Cargill, $160 billion
2. Koch Industries, $125 billion
3. Publix Super Markets, $57.1 billion
4. Mars, $50 billion
5. H-E-B, $46.5 billion
6. Reyes Holdings, $40 billion
7. Enterprise Mobility, $38 billion
8. C&S Wholesale Grocers, $34 billion
9. Fidelity Investments, $28.2 billion
10. Southern Glazer’s Wine & Spirits, $26 billion

The 10 largest public companies as of April 2025 measured by market capitalization:

1. Apple, $2.97 trillion
2. Microsoft, $2.88 trillion
3. NVIDIA, $2.69 trillion
4. Amazon, $1.95 trillion
5. Alphabet (Google), $1.91 trillion
6. Saudi Aramco, $1.67 trillion
7. Meta Platforms (Facebook), $1.37 trillion
8. Berkshire Hathaway, $1.12 trillion
9. Broadcom, $844.5 billion
10. TSMC, $814.3 billion

Why Do Private Companies Go Public?

Private companies may go public because they want or need to raise capital and establish a source of future capital.

Can a Public Company Become Private?

Yes, provided that a shareholder vote supports such an action. The company must normally buy back or already own enough of its shares to control the voting for this move.

Is a Private or Public Company More Transparent?

Both types of companies can be transparent about what they do, their financial performance, and business results. A public company is required to regularly provide a wealth of information about itself to the SEC and the public at large, however. A private company need only be transparent with its private owners.

The Bottom Line

Private and public companies can contribute to the economic health and financial well-being of their communities, states, and nations. Both types of companies broadly operate businesses to earn revenue and make profits but they differ in ownership, public disclosure needs, government oversight, and access to capital.

Fact checked by Suzanne Kvilhaug
Reviewed by Khadija Khartit

A Roth 401(k) can be rolled over into an existing or new Roth IRA or Roth 401(k). The rules are complex, so you must ensure you understand the five-year holding period, age limitations, whether the rollover is a qualified or non-qualified distribution, and any tax implications if taxes are triggered.

Key Takeaways

• Roth accounts are funded with after-tax dollars, and they grow tax-exempt.
• A Roth 401(k) can be rolled over to a new or existing Roth IRA or Roth 401(k).
• Transferring to a Roth IRA is generally the most desirable option because it facilitates a wider range of investment options.
• It’s best to move the money into an existing Roth IRA account if you have one due to a five-year rule that governs qualified distributions.
• Moving the funds to another Roth 401(k) may provide favorable tax treatment if you plan to withdraw the transferred funds soon.

Roth Rules

Roth IRAs and 401(k)s allow you to withdraw your contributions without penalty at any time, but to withdraw earnings or pre-tax deferrals without penalty, you must have had the account open for a minimum of five years and be 59½ (called a qualified distribution).

It’s important to understand that when making a non-qualified distribution, a ratio is used to calculate how much of it is earnings, and how much is contribution. This ratio is calculated by dividing the amount you’ve contributed by the total amount in the account.

For instance, imagine you’ve contributed $40,000, and your account balance is $42,000. Your ratio is $40,000 ÷ $42,000 = 0.95. You take a $5,000 distribution, so you multiply that number by your ratio. The contribution portion of this distribution is $4,762 (rounded up), so $238 of this distribution is earnings and taxable if non-qualified.

Rollovers are generally not subject to taxes, as long as one of the following methods is used.

Your Roth 401(k) Rollover Options

Your choices for a Roth 401(k) rollover are limited to Roth accounts. For example, you can transfer the funds from the Roth 401(k) into a Roth IRA, or you can roll the old Roth 401(k) into a new Roth 401(k) if available.

There are three ways you can roll a Roth 401(k) over:

• A direct rollover: Your plan custodian can cut a check made out to the new account, which you take or send to the new account custodian without penalty.
• Trustee-to-trustee: The old account and new account custodians handle the transfer for you without penalty. This is also called a direct transfer.
• 60-day rollover: You can take the funds out of the account as a distribution to place them in a new plan. You have 60 days to complete the transfer. If you don’t deposit the funds in another qualified retirement account within that time, you’ll pay any necessary taxes and fines.

Funds held inside 401(k)s are often well-protected against some legal judgments and from creditors.

Considerations When Rolling Into a Roth IRA

Roth IRA contributions can be withdrawn tax-free and penalty-free at any time regardless of age, but the rules for distributions of earnings vary. A qualified distribution from a Roth IRA meets the five-year rule and is also made at or after age 59½, after death, as the result of a disability, or for a first-time home purchase. These qualified distributions are free of both taxes and penalties.

Withdrawals of earnings from the account will be subject to both selective income taxes and a penalty if these conditions aren’t met. Income taxes will be levied pro-rata on earnings on your contributions, and a 10% penalty may apply to part of the distribution if you take a non-qualified distribution.

Note

IRAs frequently come with more investment options than 401(k)s. Your options in a 401(k) can sometimes be limited to mutual funds or a few different exchange-traded funds (ETFs), depending on the custodian, while you generally have more choices with an IRA.

Funds rolled from a Roth 401(k) into an existing Roth IRA that meets the five-year holding period inherit the Roth IRA’s five-year clock. However, this is not true if funds from a Roth 401(k) are rolled over to a new Roth IRA.

For example, assume that you opened your Roth IRA in 2016. You worked for your employer from 2019 to 2023 and then resigned. A full distribution from your Roth 401(k) rolled into the Roth IRA meets the five-year rule for qualified distributions because the Roth IRA that you’re rolling the funds into has existed for more than five years.

Considerations When Rolling Into a Roth 401(k)

The specific distribution rules from the new account will vary by the plan if you roll your old Roth 401(k) into a new Roth 401(k). Your new employer’s human resources department should be able to assist with this.

Some basic conditions apply, however. The number of years the funds were in the old plan should count toward the five-year period for qualified distributions if you decide to roll the funds from your old Roth 401(k) over to your new Roth 401(k) through a trustee-to-trustee transfer. The first employer must contact the new employer regarding the employee contributions being rolled over and confirm the first year they were made.

The five-year period would start again if you only did a partial rollover to the new Roth 401(k). You don’t get credit for the period the funds were in your old Roth 401(k).

Important

Speak with your tax or financial advisor about what may be best for you before making a decision. You might end up leaving the Roth 401(k) in your previous employer’s plan, depending on your circumstances and that plan’s rules.

How Does a Roth 401(k) Rollover Work?

You can contact your retirement plan manager and request a rollover. They should give ou a few options for how you want it to work, such as cutting a check and sending to the new retirement account custodian, transferring the balance to the new custodian, or cutting a check to you for the funds, which you must deposit within 60 days. Additionally, you can only rollover into another Roth-type account.

Does the 5-Year Rule Apply to a Roth 401(k) Rollover?

Yes. There are special circumstances such as a disability or a hardship withdrawal (which might be taxed).

What Are the Restrictions on a Roth 401(k)?

You can only contribute up to $23,500 and total combined contributions from you and your employer cannot exceed $70,000 in 2025 ($69,000 in 2024). If you’re 50 or older, you can contribute an additional $7,500 annually in catch-up contributions.

The Bottom Line

The rules for rolling over funds to a Roth 401(k) are complicated. Be sure to fully investigate the tax and other implications before you decide how to handle these funds after you leave the company whose plan held them—it’s best to consult a tax professional or advisor before rolling over your plan to make sure you’re not triggering unnecessary tax events.