financial education

Here’s how to navigate the unwritten rules during the holiday season

Reviewed by David Kindness
Fact checked by Yarilet Perez

The holidays are a time for goodwill and expressing appreciation for others, but there is always the chance of an awkward moment when you receive a gift from or give a gift to someone you don’t know that well. Even gift-giving among close friends and family can be awkward at times. To avoid embarrassing moments, read our brief guide to holiday gift-giving.

Key Takeaways

• Everyone has their own rules for giving gifts, but a little common sense goes a long way.
• Every situation is different, so keep in mind what is appropriate for, say, a co-worker at the office, vs. in-laws, vs. a host at a dinner party.
• Try to be culturally aware, as well as aware of the situation, and always show gratitude when receiving a gift.

Should a Gift Given in Exchange Be of Equal Value?

When giving gifts, you should aim to spend an amount that you are comfortable with, not what you assume your recipient is spending.

Some people feel compelled to give a gift equal in value to the gift they receive. However, this isn’t necessary. The value can be difficult to assess, and most people are not concerned with the monetary value of a gift. The thought that goes along with the gift is typically more meaningful.

In addition, spending excessive amounts on a gift may make the receiver feel uncomfortable. Depending on your relationship with the recipient, you may feel inclined to explain that you got a good deal on their gift (perhaps you got a gift card at a discount) to ease their concern.

Similarly, assessing the value of a gift you have received is relegating the act of giving gifts to material gain, which is not what the holidays or gift giving should be about. Instead, if you have given some thought to what type of gift the recipient would like, the price tag is irrelevant.

Important

You may be concerned because you are short of funds this holiday season and unable to buy as many gifts as you would like. If this is the case, explain to friends and family that you will not be able to buy extravagant gifts this year. Those closest to you are bound to understand, and they might even feel relief because the expectations surrounding mutual gift-giving are lowered.

Gifts for All

Another common gift-giving conundrum is whether you have to give a gift to everyone within a particular group or segment of your life if you give a gift to one person within that group. For example, you may give someone you frequently have lunch with at work a gift and wonder whether you should do the same for the whole office.

A general rule is that you don’t have to give a gift to everyone in a group. But you should do so discreetly in order to not make others feel excluded. In the case of the lunch companion, give the gift when the two of you are alone rather than in front of other colleagues.

Show Appreciation

If you receive a gift, even if you don’t give one in return, always show your appreciation, regardless of whether you like the gift or not. If you are presented with the gift in person, smile and thank the gift giver. If you receive a gift by mail, call the gift giver as soon as you can to alert them that the gift has arrived. For certain events, like a wedding, it’s appropriate to send a hand-written thank you note.

Honor Your Host

When invited to someone’s home during the holidays, it is good etiquette to bring a token of appreciation in exchange for the invite. This gift should not be extravagant. A bottle of wine, a box of chocolates, a candle, or flowers will suffice.

Be Culturally Aware

Not all cultures celebrate the holiday season in the same way. Make sure you understand the traditions and norms of anyone you plan to give a gift to so that you do not offend or embarrass them.

For example, it is a cultural norm in North America to publicly unwrap a gift when it is received. However, in many cultures, such as some in Asia, the proper etiquette is for the receiver to wait until they are in private to open a gift.

Workplace Giving

Giving gifts in the workplace can be awkward for many reasons. When giving corporate gifts, be aware that sending out gifts with large corporate logos can appear tacky. 

Additionally, depending upon your workplace, you may receive tax benefits from gift-giving. This can include gifts that come in the form of charitable donations. Many countries, including the U.S., allow some tax write-offs from corporate gifts.

Have you ever given a gift once and felt that the tradition had to continue indefinitely? You may wish to consider this before beginning a new gift-giving tradition. Some traditions, once begun, are hard to end.

What Do People Spend on Holiday Gifts, on Average?

In 2024, consumers said they expected to spend an average of $902 on holiday gifts, according to the National Retail Federation.

How Much Should You Spend on a Wedding Gift?

The average wedding gift is between $100 and $150, according to Brides.com. But if it’s a destination wedding and you’ve invested a significant amount of money to make it there, you may consider a more modest gift—or even allow your presence to be the gift.

How Much Is Appropriate for a Baby Shower Gift?

Baby shower gifts typically cost between $30 and $100.

The Bottom Line

What we give as gifts and how we receive them says a lot about us as individuals. Though awkwardness may arise, it doesn’t need to be inevitable. Bear in mind that many people give gifts to show appreciation, and a simple thank you in return is all that is required.

It depends on an individual’s circumstances

Reviewed by Marguerita Cheng
Fact checked by Pete Rathburn

Most financial advisors will tell you that the best age for starting an income annuity is between 70 and 75, which allows for the maximum payout. However, only you can decide when it’s time for a guaranteed stream of income.

Key Takeaways

• Annuities provide a fixed monthly income either for a set period of time or for the rest of your life.
• The amount of monthly lifetime payments is determined by your age at purchase and your life expectancy.
• An annuity should not be your sole source of retirement income, as over the years inflation reduces its value.

A Secure Income Stream

For most retirees, the overriding concern is for a secure income stream for the future. As people live longer and rely more heavily on their own savings, the notion of converting a portion of that capital into a guaranteed income stream has its appeal.

Annuities traditionally had one purpose: to convert a lump sum of capital into a stream of income for life, or for a certain time period. They were designed for people who were retiring or otherwise needed a fixed, guaranteed monthly income. Today, there are various types of annuities that can be used to accumulate capital through investment, in addition to providing a guaranteed income.

When you buy an income annuity—also known as an immediate annuity or an immediate payment annuity—you enter into a contract with a life insurance company in which the insurer agrees to make fixed monthly income payments in exchange for a lump sum of money. This type of annuity starts paying income as soon as the policy has been initiated, in contrast with a deferred annuity, which doesn’t start to pay out until years later.

Note

Income annuity payments are guaranteed for your lifetime or for a specified number of years.

Fixed vs. Variable Annuities

Fixed annuities guarantee a minimum interest rate on money invested in the contract for some period. Then there is a renewal interest rate after that period ends.

The interest on variable annuities, in contrast, can fluctuate because it is based on the performance of the owner’s investment portfolio for the annuity. Thus, fixed annuities have more predictable returns than variable ones.

How an Income Annuity Works

The monthly payout amount of an annuity is based on a number of factors, including your age and gender, interest rates, and the amount of capital invested.

Annuities are designed to pay out the full amount of principal and interest by the end of a certain period. If you want payments made for a 10-year period, for example, the payment amount will be based on the principal and total interest to be earned during that period, divided into 120 monthly payments.

If you want a lifetime income, the payment amount is calculated based on the number of months between your current age and your life expectancy age. If you are 65 and your life expectancy age is 80, the payment amount is based on 180 months. Even if you live beyond your life expectancy, the monthly payments will continue.

How Long Should I Wait to Buy An Annuity?

This depends on how long you expect to live, and what your lifestyle goals are.

In general, a shorter annuity payout period results in a higher monthly payment. If you want to maximize the guaranteed monthly payment, your best option is to wait as long as possible to annuitize your capital. Put another way: the longer you wait to annuitize your capital, the larger your monthly payment will be.

Waiting until a later age, of course, assumes that you’re continuing to work or have other sources of income, such as a 401(k) plan, a pension, and/or Social Security benefits.

Can a 40 Year Old Buy An Annuity?

Any adult can buy an annuity. However, it is relatively uncommon among younger people. Annuities typically come with higher fees than other investment vehicles, and some financial advisors recommend maxing out other options—such as a 401(k)—before turning to annuities. Many younger investors cannot afford to do so, so annuities are typically reserved for older adults.

When Should You Not Buy an Annuity?

It is generally not advisable to tie up all—or even most—of your assets in an income annuity, because it is less liquid than other vehicles. And if you have enough savings in retirement plans, such as a 401(k), an annuity might not be right for you at all. If you’re sure that you won’t outlive your savings, there’s no reason to sign up for an annuity and pay the comparatively high fees.

The Bottom Line

Investing in an income annuity should be considered as part of an overall strategy that includes growth assets that can help offset inflation throughout your lifetime. While a guaranteed income via an annuity may be highly desirable as insurance protection against longevity, it is a fixed income, which means it will lose purchasing power to inflation over time.

The best age to get an annuity depends on a number of factors, including your current circumstances and investments, risk tolerance, longevity prospects, and expected income needs in retirement. Given these factors, the best age to get an annuity is when you are able to optimize its benefits for your individual needs.

Fact checked by Betsy Petrick

If you’re married, there’s a good chance you have joint bank accounts to pay your bills and save money. However, one type of account you can’t hold jointly is a Roth individual retirement account (IRA). These accounts are meant to benefit and be held in one person’s name. As an alternative, you can open a spousal IRA or name your spouse as your beneficiary.

Key Takeaways

• Retirement accounts are tax-advantaged and are meant for individual ownership, which is why they cannot be jointly held, even by spouses.
• You can name your spouse as a beneficiary to inherit your Roth IRA when you die.
• You can open a spousal IRA in your spouse’s name and fund it with your income even if they aren’t working.

What Is a Roth IRA?

A Roth IRA is a type of individual retirement account that allows you to save after-tax dollars for retirement. You can invest in many types of securities in your Roth IRA, including stocks, bonds, exchange-traded funds (ETFs), money market funds, and certificates of deposit (CDs).

Contributions are capped and adjusted annually. The limit for IRA contributions, including to a Roth, is $7,000 in 2025, with an additional $1,000 as a catch-up contribution for those 50 or older.

Your contributions, along with the earnings, grow tax-free in a Roth IRA until you turn 59½, provided you held the account for at least five years. Any money you withdraw from the account (as long as you meet the age and holding requirement) is also tax-free, and there are no penalties.

The Internal Revenue Service (IRS) allows you to continue contributing to a Roth IRA even after you reach 70½ and, unlike other retirement accounts, you can leave money there for as long as you wish. Although these rules give you some leeway to fund and use your Roth IRA, you cannot have a joint Roth IRA with your spouse.

Warning

You can have more than one IRA, such as a traditional IRA and a Roth IRA, but the contribution limits set by the IRS apply to all of your IRA accounts. This means the combined total of the contributions made to all of your IRAs cannot exceed the cap set each year.

Why Opening a Roth IRA With Your Spouse Is Not an Option

Many financial products allow joint ownership, but that doesn’t apply to retirement accounts, including Roth IRAs. The IRS doesn’t allow this because retirement accounts are tax-advantaged.

Due to their nature, these accounts must be held solely in one person’s name. This means you and your spouse must have separate accounts. This same rule applies to anyone in your household, so a parent and child cannot hold a joint Roth IRA.

One thing to remember is that if you file a joint tax return with your spouse, your combined income may preclude you from opening or funding a Roth IRA. Married couples filing jointly with a modified adjusted gross income (MAGI) over $246,000 in 2025 are barred from participating in Roth IRAs.

Important

A Roth IRA is different from a traditional IRA. If you open a traditional IRA, you can save pre-tax dollars that grow on a tax-deferred basis. You are taxed on your distributions when you retire. These withdrawals are taxed as ordinary income.

What Are the Alternatives?

Even though you can’t hold a joint Roth IRA with your spouse, there are ways they can benefit from your retirement savings.

Beneficiary

When you open a Roth IRA, you can name a beneficiary on your account. This guarantees your assets go to someone of your choosing rather than probate. You can add whomever you choose, including your spouse. Keep in mind that if you don’t name one, most states consider your spouse to be your default beneficiary (or your estate if you aren’t married).

In the event of your death, your Roth IRA is passed on to your spouse, who can choose to complete a spousal transfer, open an inherited IRA, or take a lump sum distribution.

Spousal IRA

Another option is to open a spousal IRA as long as you file a joint return. This type of account allows you to open and make contributions toward your spouse’s retirement savings—even if they are unemployed or have very little income. However, the total amount of combined contributions cannot exceed the taxable income reported on your joint return.

Contribution limits remain the same, but if you have an IRA in your name and open one for your spouse, you both can contribute up to the maximum to each. This means $7,000 for you and $7,000 for your spouse, for a total of $14,000 if you are both under 50. You can add $1,000 as a catch-up contribution if one or both of you are 50.

Although you make the contributions, the account and the investments held in it are in their name. This means they have control over the account. But, you stand to benefit because the contributions you make effectively lower your taxable income.

The Bottom Line

Retirement savings vehicles like the Roth IRA are tax-advantaged accounts and are intended for individuals. This is why the IRS doesn’t allow joint ownership of these accounts—even if you’re spouses. Although you and your spouse can’t share a Roth IRA, that doesn’t mean there aren’t other options. You can name them as a beneficiary or you can open a spousal IRA to help them save. If you’re unsure of how to proceed, speak with a financial professional to see what your options are to meet your retirement goals.

Fact checked by Giselle Cancio

The standard tax deduction is a fixed amount that taxpayers can subtract from their income to lower their taxable income. The amount you save will depend on your income and tax bracket. That being said, although the amounts have gone up for 2025, the differences from last year aren’t huge.

Single taxpayers and married individuals filing separately in the 2025 tax year will be eligible to claim $400 more in their standard tax deduction compared to 2024, as the standard deduction for this category of taxpayer has risen to $15,000 from $14,600.

For married couples filing jointly, the standard deduction for 2025 is $30,000, allowing them to claim $800 more as compared to 2024. And for heads of households, the 2025 standard deduction is $22,500, an increase of $600 as compared to the 2024 tax year.

Key Takeaways

• The standard tax deduction is a flat amount of money that taxpayers are eligible to subtract from their annual gross income, lowering their amount of taxable income for the year. 
• The 2025 standard tax deduction will allow single taxpayers to deduct $15,000 ($400 more compared to 2024); heads of households can deduct $22,500 (an increase of $600 compared to 2024).
• If you’re not eligible for the standard deduction, or you expect that your allowable deductions might exceed the standard deduction amount, you can use the itemized deduction method using Schedule A on Form 1040.

What Is a Standard Tax Deduction?

When you file your taxes, you’re eligible to subtract a certain amount of money from your gross income each year. This lowers the amount of money you’re obligated to pay taxes on. The Internal Revenue Service (IRS) releases these numbers as part of its annual inflation adjustments each year; the 2025 figures were announced in October 2024.

Here are the standard deduction amounts for 2024 and 2025 by filing status:

Standard Deduction Amounts for 2024 and 2025
Filing Status	2024	2025
Single taxpayer	$14,600	$15,000
Married couple filing jointly	$29,200	$30,000
Head of household	$21,900	$22,500

Important

If you’re age 65 or older at the end of the tax year, you are allowed an additional standard deduction amount of $1,600 for 2025. Blind taxpayers are also eligible for this deduction amount.

How to Calculate Your Taxable Income Using the Standard Deduction

To calculate your taxable income manually, subtract the standard deduction from your total income for the year. This will give you your taxable income. From there, you can apply the tax rate that corresponds to your income bracket. If you’re using tax software, it will do these calculations for you automatically.

Standard Tax Deduction vs. Itemized Deduction Method

The standard deduction is a fixed amount, but the itemized deduction method allows you to deduct specific expenses if they exceed the standard amount. You might also need to use the itemized method if you’re not eligible for the standard method. Itemized deductions can include amounts paid during the taxable year for:

• State and local income
• Sales taxes
• Real property taxes
• Personal property taxes
• Mortgage interest
• Disaster losses
• Gifts to charities
• Medical and dental expenses 

Note that certain dollar limitations and other limitations apply to the above categories, and that you will need to submit receipts to back up each item included in case you are audited.

The Bottom Line

The IRS adjusts the standard deduction amount each year for inflation, and although it has increased for the 2025 tax year, the amounts aren’t likely to make a huge difference as compared to 2024. Depending on your situation, it may be worth taking the time to track and save receipts for anything that might be claimed under the itemized method if you anticipate that the amount might be higher than the standard deduction amount.

Fact checked by Vikki Velasquez

When you make a significant purchase like a refrigerator, laptop, smartphone, or car, you’re often presented with the option to buy an extended warranty. While it may seem like the best way to protect against the potentially high cost of repairs once the standard warranty expires, the likelihood of you needing to use the warranty is low.

In fact, if the product is well-built and reliable, extended warranties are more of an unnecessary expense than a worthwhile investment.

Key Takeaways

• Extended warranties offer protection beyond the standard warranty.
• The likelihood of needing an extended warranty is low, especially if the product is durable and reliable.
• The cost of an extended warranty may be more than the cost of repair or replacement of the product.

How Extended Warranties Work

Extended warranties are service contracts that surpass the manufacturer’s standard warranty, covering repair costs, replacement, and sometimes even accidental damage for a specific period.

These warranties give the buyer peace of mind by ensuring they won’t be stuck paying a hefty repair bill if the standard warranty has expired. However, extended warranties vary in terms of coverage and pricing.

In a sense, extended warranties are a type of insurance, which is why many people consider them a smart investment when purchasing big-ticket items like cars.

“An extended warranty is for the ‘what-if,’ just like car insurance. You don’t buy insurance expecting to get T-boned; you buy it in case something happens. Same thing here,” said Tomislav Mikula, automotive consultant and founder of Delivrd.

What to Consider When Purchasing an Extended Warranty

Before purchasing an extended warranty, carefully evaluate whether this added protection aligns with your needs and the value it provides for the item you’re buying.

Specifically, you’ll want to factor in the cost, coverage, coverage period, claims process, type of product, and source.

Cost: Compare the warranty price to potential repair or replacement costs to ensure it is a worthwhile investment. Some warranties come with deductibles, which add an additional cost beyond the purchase price.

Coverage: Confirm what is covered by the warranty, as well as exclusions and limitations. Certain types of damage may not be covered, leaving you to cover the cost of repair or replacement, which defeats the purpose of the warranty.

Coverage Period: How long does the extended warranty last beyond the standard warranty?

Claims Process: Be sure you understand how the claims process works. How long does it take to process a claim? Where will your product be repaired?

Type of Product: Evaluate the type of product you are purchasing to determine its reliability. For example, items like appliances or cars are built to last and may not need extra coverage if they’re from a reliable brand. However, smartphones, which last an average of three years, might benefit from an extended warranty.

Source of Warranty: Whether it’s from the manufacturer or a third party can impact coverage, reliability, and claims process, so it’s important to understand the difference between the two.

“Not all warranties are created equal. Every warranty has different coverage, and even if two seem similar, manufacturer-backed extended warranties are almost always better than third-party ones. My rule of thumb is if the manufacturer offers extended coverage, go with that,” Mikula said.

Why Extended Warranties Might Not Be Worth It

Despite the global extended warranty market being projected to reach $286.4 billion by 2032, many consumers are paying for coverage they may never need.

Ideally, if you buy reliable and durable products, the likelihood of them needing repairs after the manufacturer’s warranty expires is low. In many cases, the cost of repair exceeds the cost of the warranty, and if you don’t end up using the warranty, it’s money wasted.

“Buying a warranty comes down to one simple question: Do you value peace of mind? Nobody should buy a warranty hoping they’ll need it. If you’re worried your car is going to break down, take a step back and ask yourself: Why are you even buying this car?” Mikula recommended.

Consumers can also rely on other options like emergency funds or credit card protection to cover unexpected repairs, making extended warranties unnecessary.

The Bottom Line

Extended warranties can offer peace of mind, functioning as a safety net for certain purchases. However, many products are reliable, so the cost of an extended warranty might outweigh the benefits. This doesn’t mean they are always unnecessary, but it’s important to evaluate each purchase individually to determine if it’s worth the extra cost.

Making smart moves now can prevent financial hardships later

Fact checked by Vikki Velasquez
Reviewed by Samantha Silberstein

After a lifetime of work, many older Americans or retirees have built a portfolio of assets. Many have retirement accounts, like IRAs, pensions, or money in non-retirement accounts. They may own a home or other real estate and have valuable possessions, such as art, antiques, or collectibles.

Key Takeaways

• Some retirement accounts are protected from creditors, while others are more vulnerable.
• Older adults with mortgages on their homes can risk losing them through foreclosure if they miss multiple payments.
• Having adequate homeowners and liability coverage can help protect an older person’s home and other assets.

Protecting Finances

• Retirement accounts. Many older adults have the bulk of their wealth in retirement accounts. Assets held in retirement accounts are usually protected from creditors, although the rules vary according to the type of plan. Money in an employer plan, such as a 401(k), is off-limits to most creditors. Savings controlled by the individual, such as an individual retirement account (IRA), have fewer protections. The rules differ from state to state, with some states shielding IRAs from most creditors.
• Other accounts. Money in non-retirement accounts, such as regular brokerage and bank accounts, is more vulnerable. If an older person is sued, that money could be at risk. One way to provide some protection is with insurance. Automobile and homeowners policies should carry an adequate amount of liability coverage. An umbrella policy provides additional liability coverage of $1 million or more.
• Qualifying for Medicaid. Sometimes confused with Medicare, Medicaid is the joint federal and state health insurance program for low-income individuals, including older adults. Medicaid helps pay for most custodial care, which many people need toward the end of their lives. Custodial care refers to help with everyday activities, such as bathing and dressing. Medicaid beneficiaries must meet both income and asset requirements which vary by state.
• Long-term care insurance. For those unlikely to qualify for Medicaid or who don’t want to deplete their assets to become eligible, buying long-term care insurance is another option. A comprehensive long-term care policy will cover in-home and nursing home care. However, many adults may be uninsurable due to preexisting conditions, such as using a walker or needing help with daily activities. Individuals may buy policies in their 50s but face years of annual premiums.
• Financial scams. Scam artists commonly prey on older adults. In 2024, people aged 70 or more lost $2.3 billion to fraud, according to the Federal Trade Commission. Family members or caretakers may explore legal options, such as obtaining a power of attorney authority to help protect an older person’s assets.

$3,875

In 2024, the average annual cost of a long-term care policy for a married couple, age 55.

Protecting Homes

• Insurance. Sufficient liability coverage in case of an accident at their home, or involving their car, is one crucial line of defense for older adults. A homeowners policy will protect them against unmanageable home repair costs in case of a fire or other covered calamity.
• Mortgage debt. Many people reach retirement age with years to go on their loans. The danger is that if a financial emergency strikes—such as a big, unexpected medical bill older adults may fall behind in their mortgage payments and risk foreclosure.
• Reverse mortgages. Reverse mortgages are commonly pitched to people ages 62 and older to draw on the equity they’ve accumulated in their homes. Mortgagees receive monthly income or a lump sum, and the lender gets its money back, with interest, by selling the property after the owner leaves it permanently. While a reverse mortgage lender can’t foreclose due to missed payments, the homeowner must keep the home in good repair and pay the property taxes. Also, a surviving spouse could lose the property if care wasn’t taken to protect their rights.
• Medicaid estate recovery. In general, a person can keep their home while receiving Medicaid benefits, but after they die, Medicaid may attempt to recover a portion of what it paid for their care. Typically, however, a spouse can remain in the home until their death. These rules, like many involving Medicaid, can vary from state to state. Individuals can learn more about a particular state’s program at its Medicaid website or through the federal Benefits.gov website. 

How Can Older Adults Preserve Their Estate for Heirs?

Older adults who hope to preserve an estate for their heirs may want to consult a knowledgeable attorney who offers strategies like asset protection trusts.

What If an Individual Moves Out During a Reverse Mortgage Situation?

If an individual stops living in their home for 12 consecutive months, the reverse mortgage comes due. Sometimes this occurs due to a medical condition or if the homeowner goes into a rehabilitation facility or nursing home for a period.

What Should Someone Do if They Think They’ve Been Scammed?

Individuals should listen to their suspicions, gather evidence, and report it to the authorities if a scam happens. The U.S. Department of Justice’s Office for Victims of Crime has a National Elder Fraud Hotline, (833) 372-8311, to report abuses and scams.

The Bottom Line

Individuals can ward off potential dangers and take steps to keep crucial assets safe and sound. A financial advisor or attorney can help older adults get their financial accounts in order and complete tasks associated with insurance, inheritance, and medical matters.

Fact checked by Betsy Petrick

Carrying debt can be stressful, especially if you hold too much and don’t have the income to support it. Common debt relief strategies, such as credit counseling, debt consolidation, and debt settlement, can help alleviate the burden.

If you’re struggling right now, we recommend starting with credit counseling to speak with a trained professional. But there are several options available. Keep reading to learn how to use a variety of strategies to find some relief from your debt.

Key Takaways

• Debt relief refers to any one of several strategies to help you better manage and pay down your debt. You can try debt relief on your own or work with a debt relief company.
• Consolidating your debt with a loan or credit card can reduce your monthly payment and your interest rate.
• A credit counselor can help you learn effective strategies to manage your debt and budget your money.
• Debt payoff apps can help you set and stick to a plan to pay down debt.
• Debt settlement and bankruptcy should be your last choice as they can negatively impact your credit score.

Household debt reached $18.04 trillion as of the fourth quarter of 2024. Credit cards remained among the highest balances held by consumers in the U.S., hitting $1.21 trillion, which is an increase of $45 billion from the same period a year ago. The average American’s debt topped $105,000 in 2024, according to Experian (including home loans).

What Is Debt Relief?

Debt relief can describe many different strategies to help consumers deal with their debts. It can refer to credit cards, personal loans, auto loans, student loans, and even mortgages. People often seek debt relief when they can’t manage their debt load.

Consider some of these common debt relief strategies; these are generally applicable for unsecured debt, rather than secured debt:

• Credit counseling: Credit counseling refers to working with a trained financial counselor who can educate you on how to manage your debt. Your counselor may negotatiate a debt management plan with your creditors to help you pay down your debt at a lower interest rate.
• Debt payoff apps: There are mobile and desktop apps designed to help you budget your money and pay off your debts. Link your accounts and commit to using a payoff strategy, such as the avalanche or snowball tactic, to reach your goals.
• Debt consolidation/refinance: Debt consolidation involves using a personal loan or balance transfer credit card to pay off several existing debts. Ideally, you end up with a single, lower monthly payment with a lower interest rate.
• Debt settlement: You can negotiate debt settlement with your creditors yourself or work with a debt settlement company. Instead of paying your debt as normal, you set money aside and then pay off the entire debt for a lower lump-sum payment. This is a risky strategy and may be used by people who don’t want to file for bankruptcy, but bankruptcy can actually be preferable.
• Bankruptcy: Declaring bankruptcy is an appeal for full or partial debt forgiveness. Depending on the results, it may give you a fresh start.

Keep in mind that certain debt relief strategies, notably debt settlement and bankruptcy, can negatively impact your credit score in a significant way for years to come.

Credit Counseling Companies

Credit counseling is a good first stop for anyone struggling with debt. You can speak with a certified credit counselor, who will help you figure out your financial situation and develop effective ways to manage your debt now and going forward.

This can include devising a monthly budget and developing a debt management plan. Your credit counselor can help you obtain and read your credit reports and give you the educational tools to get your financial life back on track.

You can find a credit counselor through your state’s consumer protection or attorney general’s office. There also are lists available through the U.S. Department of Justice, the Financial Counseling Association of America, and the National Foundation for Credit Counseling. Or, check our picks for the best credit counseling services available.

Tip

Access free copies of your credit reports from Equifax, Experian, and TransUnion through AnnualCreditReport.com or learn about the best credit monitoring services and how they can help you keep tabs on your credit.

Debt Payoff Apps

A debt payoff app is a mobile or desktop app that you download onto your smartphone or computer, or use on a website. They often work by linking your financial accounts and helping you create a repayment plan to get you out of debt, although some apps require you to input data manually. The app may suggest that you use the debt avalanche (where you pay off high-interest debt first) or debt snowball (where you tackle low balances first) strategy.

These apps don’t reduce the amount of money you owe. They’re designed to keep you on track and monitor your progress, which can help you save money by being more financially self-aware.

Debt Consolidation/Refinance With Personal Loans

A debt consolidation loan is a new loan you use to pay off your existing debts. If you need quick debt relief, it only makes sense to take out a consolidation loan if you’ll wind up with a lower overall monthly payment. Depending on your credit, you may be able to get a loan at a lower rate than your existing debts—that’s why people tend to use personal loans with lower rates to pay off high-interest credit card debt.

You can get debt consolidation loans through banks, credit unions, and online lenders. You’ll need to apply and be approved by the lender, which means meeting certain requirements that may include a certain credit score, income threshold, and debt-to-income (DTI) ratio.

Debt Consolidation/Refinance With Credit Cards

You may qualify for a balance transfer credit card to consolidate and refinance your debt. If you’re approved, you can transfer the balance of your outstanding debts onto this new card.

Many card issuers give new cardholders introductory or teaser rates of 0% for a certain period, usually from 12 to 21 months. This means you won’t have to pay interest during that time, although you may have to pay a balance transfer fee, which is a percentage of the balance. You will have to make minimum monthly payments, however, and if you miss a payment you can lose the 0% APR and get stuck with a very high penalty APR.

You’ve probably received offers in the mail for new cards, which is a great place to start. Many lenders allow you to see if you pre-qualify for a card without impacting your credit.

If you take a balance transfer offer, be sure to make every monthly payment on time. When the introductory rate ends, your balance will convert to the normal APR, which is likely to be quite high. It’s a good idea to divide your card balance by the number of months you have to pay it down, and make that your monthly payment (unless that would be smaller than your required minimum monthly payment—in that case, just make the required minimum payment).

Debt Settlement

In debt setltement, the goal is to pay off your debt for less than you owe, typically with a single lump-sum payment. Debt settlement can be done on your own or through a debt settlement company. Debt settlement companies can’t do anything you can’t do yourself, but like a tax professional, they may be worth hiring if you want help dealing with your debt and creditors.

In a typical debt settlement process, you cease making regular payments to your creditors. Instead, that money is put into a savings account, sometimes known as a “war chest.” This money is used to negotiate with your creditors. By no longer making regular payments and instead offering a lump sum, your creditors are placed in the position of either getting something or potentially nothing.

But debt settlement is very risky. If you fail to pay back your debts, you’re violating the agreement you originally signed, and in some cases creditors take such borrowers to court. When you fail to pay, your debts will likely be sold to collection agencies.

There’s no guarantee that debt settlement will work—creditors aren’t obligated to accept debt settlements. When you stop paying your debts, your credit score will take a large hit. There will be further credit damage if you actually achieve a debt settlement. And if you work with a debt settlement company, you’ll be charged a fee—which can be very large—based on the percentage of debt you had.

Despite the risks, if you’re facing overwhelming debt this strategy may be suitable if you don’t qualify or don’t want to file for bankruptcy.

Bankruptcy

Bankruptcy is generally seen as a last resort, although it can be preferable to debt settlement. Each one severely damages your credit, but bankruptcy may cost less overall while taking less time, and it may be more of a sure thing.

Bankruptcy is considered one of the quickest ways to come out of debt. You don’t come out unscathed—your credit score will take a nosedive and the bankruptcy stays on your credit reports for up to 10 years. The negative effects diminish over time before that, however, and your credit score may start to rebound more quickly than you expect.

To file for bankruptcy, you must meet with a bankruptcy lawyer and fulfill several requirements. These include providing relevant financial information and filling out forms. You may be required to undergo credit counseling and pay some relatively small fees before your lawyer can file the paperwork.

Keep in mind that you may qualify for free legal services through the American Bar Association or the Legal Services Corporation if paying for an attorney is too burdensome.

How to Avoid Debt Relief Scams

Debt relief (and credit repair) scams are aimed at people with a significant amount of debt, notably high credit card balances. They make false guarantees to negotiate, lower, or settle a consumer’s debt with their creditors if they pay an upfront fee.

It’s difficult to determine how many people are affected by these schemes because many people don’t report them. But you can avoid being duped by one of these scams if you’re conscious of the following warning signs:

• Unsolicited requests: Be suspicious of any emails, phone calls, or text messages you may receive for debt relief. Credit report information is not private, so legitimate debt relief companies may reach out if you have debts listed on your credit reports. But don’t respond directly and most importantly, don’t click on any links you’re sent. Instead, visit company websites or check trusted recommendations to inquire into their services.
• Demands for upfront payments: Be wary of promises to eliminate your debt in exchange for a large upfront fee. Legitimate debt settlement services negotiate your debt first and generally take a percentage (15% to 25%) of your enrolled debt after a negotiation is successful. You will likely have to pay a fee to open a savings account at the beginning of the program, however.
• Watch out for guaranteed results and government backing: Some scammers use terms like “guaranteed results” or “new government program” to legitimize their scams and entice consumers. But debt relief companies can’t guarantee results because there are no legal obligations for creditors to accept settlement, and the government doesn’t provide debt relief.

Negotiating with creditors can be a long process, which is why legitimate debt relief companies don’t promise extra-fast results and don’t make guarantees. Look for companies that are accredited and recommended. Look for customer reviews and ratings if you’re unsure.

Frequently Asked Questions (FAQs)

How Do I Qualify for Debt Relief?

The qualifications for debt relief depend on the type of assistance you’re seeking. If you want to get help from a debt settlement agency, you generally need to be past due on your payments, experiencing financial hardship, and holding a certain amount of unsecured debt. On the other hand, if you’re seeking debt consolidation, you must meet the lender’s income and credit score requirements.

Can I Get Debt Relief With Bad Credit?

Yes, you can get debt relief with bad credit. Although it may be challenging, debt consolidation is one option. You also may find debt relief through credit counseling and debt management plans. Debt settlement and bankruptcy should remain the very last options as they will can be costly and will stay on your credit reports for up to 10 years.

How Is My Credit Affected by Debt Settlement?

Debt settlement is likely to have a severely negative effect on your credit. First, your credit will suffer when you stop making payments on your accounts. You’ll accumulate late payments and delinquent accounts. Then, debt settlement itself is a severe derogatory mark. Overall, the effects of debt settlement will remain on your credit reports for seven years, although their negative effects will diminish over time.

What Is the Best Way To Get Out of Credit Card Debt?

Consider the following ways to quickly get out of credit card debt:

• Make more than just the minimum payment
• Consider a debt consolidation loan
• Use the avalanche method to pay off high-interest debt first
• Use the snowball method to pay off the smallest balances first

Is There a Free Debt Relief Program?

Credit counseling agencies usually offer certain basic services for free to anyone, like initial credit consulations and basic financial advice. These agencies have paid services as well, like debt management plans, but you can receive a full or partial discount if you’re unable to pay full price.

The Bottom Line

If you’re saddled with debt and can’t find a way out, remember that there are organizations that may be able to provide some measure of help. Start with credit counseling to get organized and gain a clear picture of your financial situation. Their expertise may give you clarity and options you didn’t think could work for you.

Debt payoff apps are another relatively easy way to get started that won’t impact your credit score. If you’ve tried everything else, a debt settlement company or bankruptcy lawyer may be the right strategy.

Reviewed by JeFreda R. Brown

March Madness is big business for the National Collegiate Athletic Association (NCAA), when its most anticipated basketball games tip off. The men’s tournament brought in more than $900 million in fiscal year 2024.

Key Takeaways

• The NCAA earned $1.38 billion in revenue in fiscal year 2024, with much of it coming from March Madness. The men’s tournament brought in more than $900 million.
• Despite the huge sums of money raked in by the NCAA, the players have historically received zero compensation. This may be changing, thanks to a pending $2.78 billion settlement.
• Following a U.S. Supreme Court ruling, 2022 was the first year when players could earn money from endorsement deals and sponsorships.
• The NCAA shares its March Madness revenues with the participating athletic conferences based on the performance of their member schools.
• Broadcast rights to college sports (Turner and CBS) continue to be the major source of income for the NCAA, bringing in $873 million in 2024.

What Is the Size of the Pot?

In the 2024 fiscal year, college athletics’ governing body earned $1.38 billion in revenue, with broadcast rights (Turner and CBS) accounting for $873 million of that.

On the surface, that seems like cause for outrage, especially in light of how much the players earn: nothing. Though that may change, thanks to a pending $2.78 billion settlement that will be decided this spring.

While players make no money from March Madness (yet), they can now get paid for endorsement deals, following a U.S. Supreme Court ruling in 2021. This was after the NCAA blocked players from earning money for decades.

Important

A 2021 rule change allows NCAA athletes to earn money from their names, images, and likenesses (NIL), though they’re still prohibited from being paid to play while in school. Many states have also passed NIL laws.

How Tournament Money Gets Divided

The NCAA doesn’t keep all of the money it receives from March Madness-related media and marketing deals, but distributes much of it to its member sports conferences, based on the number of tournament games their teams played in.

The conferences then divide the money among all their teams, using their own formulas. In 2024, the total amount of money awarded for games during the men’s basketball tournament was about $226 million. That’s broken down further. In 2023, for example, Southeastern Conference (SEC) teams played in 17 tournament games and earned the highest estimated payout of $34 million. Big 12 conference teams were next, playing in 16 games and earning an estimated $32 million, according to Sportico.

Of course, each conference wants to see as many of its member schools in the tournament as possible, to raise the payout that it receives. For smaller, lesser-known conferences, that money can represent a major portion of their annual income.

When a surprise team that is virtually unknown makes it through multiple rounds, the payout can represent a much-needed cash injection for its conference. For larger conferences, however, such as the Atlantic Coast Conference (ACC) or the Big Ten, the money is more like financial icing on the cake than a major source of revenue.

How Earnings Are Shared Within Conferences

The NCAA urges conferences to divide the money equally among their member schools, and many conferences do just that. Larger conferences, which have multiple sources of income, routinely divide up most of the money and send it to their member schools’ athletics programs. Smaller conferences, however, may count on that money to cover their own expenses. Only whatever is left over goes to member schools.

Note

In 2025, Americans will legally wager an estimated $3.1 billion on March Madness (up from $2.7 billion in 2024), according to the American Gaming Association.

How Much Are the NCAA’s Annual Revenues?

For the 2024 fiscal year, the NCAA generated $1.38 billion in revenues. March Madness accounts for most of that, in the form of broadcast rights, ticket sales, corporate sponsorships, and television advertising.

When Was the First NCAA Basketball Tournament?

The first NCAA men’s basketball tournament took place in 1939, with eight teams participating. The University of Oregon played The Ohio State University in the finals, with Oregon winning 46-33.

How Many Teams Play During March Madness?

A total of 68 teams currently play in the NCAA tournament, a number that’s narrowed down through seven rounds. For 2025, March Madness began with Selection Sunday on March 16, when the NCAA announced the teams and brackets, and culminates on April 7, with the NCAA championship game.

The Bottom Line

There’s been plenty of criticism over the years regarding the funding model used by the NCAA. The colleges receive only a portion of the money they generate through sports competitions, and the players see none at all. However, new NCAA rules and state laws have made it possible for at least some athletes to benefit from the marketing of their names, images, and likenesses. And under a pending $2.78 billion settlement, players would begin receiving compensation via a new revenue-sharing plan. A settlement hearing is scheduled for April 7, and a judge is expected to issue a decision in the coming months.

Fact checked by Vikki Velasquez

Benjamin Franklin is credited with saying that nothing is certain in this world but death and taxes. That was back in 1789 and it still holds in the U.S. more than 230 years later.

U.S. taxation has thrived and faltered from implementing the first income tax to various attempts at tax reform. Some changes have been more taxpayer-friendly than others. Here’s a closer look at the history of the U.S. tax system.

Key Takeaways

• The need to finance the Civil War created one of the first versions of a federal income tax in 1862.
• The U.S. income tax was officially born on Feb. 3, 1913, when Congress ratified the 16th amendment to the U.S. Constitution.
• Less than 1% of Americans had to pay the tax in its earliest days.
• Major tax reforms have been ongoing for decades.
• Some consumer dollars can effectively be taxed twice when excise taxes come into play.

Early History of U.S. Taxation

Benjamin Franklin spoke on taxation well before the U.S. officially launched an income tax. Before the Civil War, the nation derived most of its income from banknotes. The tax rate imposed on individuals was minimal, from 1% to 1.5%. American citizens received virtually nothing in exchange. Civil services and protections on the frontier and coasts were minimal.

The need to finance the Civil War prompted some changes, effectively creating the first version of an income tax in 1862. President Lincoln signed a law that created the Commissioner of Internal Revenue and imposed an income tax on individuals ranging from rates of 3% on incomes of $600 to $10,000 and 5% on incomes over $10,000.

This version of the tax was repealed 10 years later but it came back to life in 1894 with the Wilson Tariff Act. The act levied a 2% tax on incomes over $4,000. The U.S. Supreme Court ruled one year later that the tax was unconstitutional.

“Through the Civil War and beyond, income tax was tried, disputed in the courts, and finally resolved with the passage of the 16th Amendment in 1913, constitutionally establishing income taxes,” according to Thomas J. Cryan, an attorney and the author of Disrupting Taxes.

Birth of the Federal Income Tax

The federal income tax as we know it was officially born on Feb. 3, 1913, when Congress ratified the 16th Amendment to the U.S. Constitution after an on-again-off-again start that lasted decades.

The amendment read, “Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and regard to any census or enumeration.”

However, less than 1% of Americans had to pay the tax in the first days after its inception, thanks to the amendment’s provisions for numerous taxpayer-friendly deductions and exemptions. The rate was only 1% of net income at that point. Congress later added a 6% rate for incomes of more than $500,000.

Numerous tweaks and add-ons occurred in the 1940s. The Revenue Act of 1942 increased tax rates and the number of citizens who had to pay it. The Current Tax Payment Act passed a year later, heralding the beginning of the tax withholding process by employers. Standard deductions were created in 1944 with the passage of the Individual Income Tax Act.

“The withholding system was implemented simply because the collection was easy,” says Cryan, “not because it was the soundest, most equitable, or most efficient tax system.”

However, the Internal Revenue Service attempted to make the tax process more efficient over the years. The first toll-free telephone line was introduced in 1965. Electronic filing began in 1986 although it was limited at first. Taxpayers who owed money were able to electronically file their returns beginning in 1992.

Tax Reforms and Major Changes

Reforms have been ongoing. The federal government has incrementally made some major changes to the tax system.

The Alternative Minimum Tax (AMT)

Annette Nellen, a certified public accountant (CPA) and attorney who serves as a professor and the director of the MST Program at San Jose State University cites the alternative minimum tax (AMT) as a major adjustment. The AMT was created in 1969 because “it was found that a few hundred high-income individuals were able to use a combination of exclusions, deductions, and credits to pay little or no income tax,” Nellen says.

The Tax Reform Act (TRA)

Nellen also mentions the Tax Reform Act that was launched in 1986. She says it broadened the AMT so more high-income individuals would be subject to it.

“The Tax Reform Act of 1986 made numerous changes to the tax law including taxing ordinary and capital gains income at the same rate and there were only two brackets (15% and 28%). It also added passive activity loss limitation rules that shut down a tax shelter industry that many middle- to high-income individuals had been using to minimize their taxes.”

The American Taxpayer Relief Act (ATRA)

The American Taxpayer Relief Act (ATRA) restored the top income tax rate to 39.6% in 2012 after it was cut to 35% by President George W. Bush’s tax cuts in 2001 and 2003.

The Tax Cuts and Jobs Act (TCJA)

President Trump signed the Tax Cuts and Jobs Act (TCJA) into law in 2017 and introduced some sweeping changes to the U.S. tax system. They included significantly increasing standard deductions and reducing personal income tax rates. The 35% top rate created by ATRA had increased back to 39.6% but the TCJA dropped it to 37%. The 15%, 25%, 28%, and 33% rates imposed on lower-income earners were cut to 12%, 22%, 24%, and 32% respectively.

The cap on the itemized deduction for interest paid on home mortgages was reduced, however, and a reduced limit was imposed on the state and local tax (SALT) itemized deduction as well. Some miscellaneous itemized deductions were eliminated entirely.

Important

The TCJA expires at the end of 2025 unless Congress takes steps to renew some or all of its provisions.  

The Inflation Reduction Act

The Inflation Reduction Act (IRA) came along in 2022. According to Nellen, “The IRA included numerous new and modified energy credits for individuals and businesses. It’s possible that some of these credits may be repealed or downsized as part of any extension of expiring provisions of the TCJA or new tax breaks such as not imposing income tax on tips or overtime pay of employees.”

Excise and “Sin” Taxes

Taxation doesn’t begin and end with those imposed on income and earnings. Excise taxes, often called “sin” taxes, can take a hefty bite out of taxpayers’ bank accounts as well. These taxes are imposed on the sale of specific products and services.

They’re generally paid by retailers, producers, and wholesalers but these entities pass them down to the consumers who purchase them. Commonly affected purchases include alcohol, tobacco, health insurance, and gasoline. The excise tax on cigarettes averages about $1 a pack. Beer and wine are typically taxed at a lower rate than distilled spirits.

“The key purpose of excise taxes on alcohol and tobacco is to tax undesired behavior, particularly the purchase of cigarettes by young people,” Nellen says, “and to generate a small amount of revenue. There are several federal excise taxes, but the ones on alcohol, tobacco, and gasoline are best known. Excise taxes are a small part of government tax collections, representing less than 2% of total federal tax revenues. For 2023, excise taxes were $75.8 billion, representing 1.7% of total tax collections of $4.4 trillion.”

Cryan agrees about the deterrent nature of these taxes. “Excise taxes on alcohol and tobacco traditionally lean to increased prices at the time of the retail sale. This price increase will often reduce consumption which can have the follow-along effect of a decrease in consumption related to less health harms.”

Numerous consumers continue to spend that extra dollar on a pack of cigarettes, but it’s a safe guess that their wallets will feel the effect because they also have to deal with income tax on that money.

The Bottom Line

Taxation in the U.S. has always been a shapeshifting beast and this can be exacerbated by all its various applications from income to that modest purchase you just made at your favorite liquor store. Tax laws don’t just change every five to ten years. They can occur annually just as you’re getting used to the last ones that were imposed.

They’re inevitable, however, just as Benjamin Franklin asserted. Taxpayers can benefit from keeping a watchful eye on the ever-evolving changes and checking in with a tax professional when changes are looming so they can best prepare for the impact whether it be affirmative or negative.

Fact checked by Vikki Velasquez

If your 401(k) isn’t performing as well as you wish, there are things you can do about it. First, determine the reasons for the sluggish performance, and then make some changes toward a more profitable 401(k) plan.

Here are five reasons why a 401(k) plan may be underperforming.

Key Takeways

• To rev up an underperforming 401(k), swap out a target date fund with a large-cap growth fund.
• Exchange 401(k) investments with high fees for cheaper investments that meet your financial aims.
• Instead of chasing the highest performance, choose an investment that meets your financial needs and stick with it for the long term.
• Switch more conservative, lower-performing investments to a more aggressive stock fund.
• Contribute enough in your 401(k) to qualify for a matching contribution from your employer.

Choosing a Target Date Fund

Target date funds make investing a breeze, but they may not give you the type of return you are looking for in your 401(k).

“This is a fund that tries to get near your 65th birthday as a retirement year; e.g., 2030, 2035 … 2060, 2065. They start off with a higher allocation to stocks vs. bonds the younger you are and then progress to get more conservative by having more in bonds than stocks as you approach retirement,” says Jarrod Sandra, certified financial planner at Chisholm Wealth Management.

If you don’t choose another investment in a 401(k) plan, you may be automatically invested in a target date fund.

“Target date funds are now the leading default investment for employees within 401(k) plans, and most target date funds are underperforming the market because of their asset allocation,” says John Bovard, a certified financial planner at Incline Wealth Advisors. “401(k) participants can log in to their account and rebalance into an S&P 500 fund or some other large-cap growth fund to become more aggressive.”

You don’t need to be wealthy to benefit from having a financial guru on your side. Consider hiring a financial advisor to help you create a comprehensive plan covering retirement, taxes, estate planning, insurance needs, and major life transitions.

High Investment Fees

If you are paying large fees on your 401(k) investments, this may cause your 401(k) to underperform. Evaluate 401(k) fees by reviewing your Participant Fee Disclosure document.

“Check the list of fund options in your 401(k), and you should be able to see the expense ratio for each fund,” says Carla Adams, founder and financial planner at Ametrine Wealth.

If the fees you are paying are higher than you like, choose a more cost-effective investment option that is still in line with your financial goals. Look for investments with low expense ratios.

“Each 401(k) plan has its own option of investments to choose from, so you may not have access to super-low-cost funds, but ideally you should be investing in only funds with expense ratios of under 0.20%,” Adams says.

Performance Chasing

If you keep moving around your 401(k) investments in search of the highest returns, you may end up with an underperforming 401(k).

“Rather than choosing funds off of recent performance, come up with a long-term strategy of which fund you plan to invest in and stick with it for the long run,” Adams says.

If you come across a poorly performing fund in a 401(k), report this fund to the plan administrator.

“401(k) administrators also have an obligation to regularly review the funds they’re offering in the plan, so if any funds are consistently underperforming, the plan may end up removing the fund and replacing it with a better option,” Adams says.

Conservative Investments

If you choose to invest in more conservative assets such as bonds, you can expect a lower return on your investments.

“How is your 401(k) allocated between stocks and bonds? If you are heavily invested in bonds, then you should expect your 401(k) to underperform the stock market more often than not, so comparing your performance to the S&P 500 is not appropriate,” Adams says.

If your investments are too conservative for your financial goals, you can change them to more aggressive options.

“This is an opportunity to shift your portfolio more into stock funds, so long as you understand that with a higher expected return, you should expect more volatility as well,” Adams says.

Not Contributing Enough

Some 401(k) investors have lower-than-expected returns in their 401(k) because they are not contributing enough to receive an employer’s free matching contribution.

“A company matching contribution is like an immediate 100% return on investment,” says Kyle Harper, a certified financial planner with Harper Financial Planning.

So don’t miss out on this free money from your employer. If your company offers a 3% matching contribution, invest 3% into your 401(k), and receive the additional 3% contribution from your employer for your retirement savings.

The Bottom Line

Discovering that your 401(k) is underperforming is not good news. But there are things you can do to gain a greater return on your investment.

If you have been investing in a target date fund, you may want to move to a more aggressive investment, such as a large-cap growth fund. If you are paying high fees in your 401(k), switch to investments with low fees aligned with your financial goals. If you bounce around from investment to investment, seeking higher returns, choose an investment that will meet your financial needs and stick around for the long term.

If you’ve been conservative with your investments, you may want to move to a more aggressive stock fund. Finally, don’t forget to contribute enough money into 401(k) to qualify for a company’s matching contribution. That’s free money from your employer that you can use for your 401(k) investments.