You have three days to cancel a home equity loan; after that, you must repay it

Fact checked by Vikki Velasquez
Reviewed by Doretha Clemon

A home equity loan can be a good way to access some of the equity you’ve built up in your home, particularly to finance home improvements. With a home equity loan, you receive a lump sum and pay back the loan over a set period at a set interest rate. This interest rate is generally quite low because just as in a mortgage you put your house up as collateral.

In some cases, you might want to get out of a home equity loan early. If you’ve just taken out the loan, you have a short period (three business days) to back out, no questions asked. After that, you’ll generally have to pay the loan back in order to get rid of it, and there are several ways you can raise the money to do that. In this article, we’ll look at your options.

What You Need to Know

• When you take out a home equity loan, you have three business days during which you can cancel it without consequence. If you choose to exercise this right, your lender must return any fees or payments. 
• After this period, you’ll have to pay back the loan in order to get rid of it. If you have the cash on hand, you can pay your lender directly. 
• If you sell the house, you can use the sale’s proceeds to repay the home equity loan.
• Alternatively, you can refinance the loan by taking out a new one. 
• Just be aware that some home equity loans have early repayment penalties, so check with your lender before you make a final decision.

Canceling a Home Equity Loan

At the broadest level, there are two main ways you can get out of a home equity loan: cancel it, or pay it back,

The right to cancel the refinancing of a mortgage is technically known as the right of rescission and only applies during the three business days after you sign up for a home equity loan. This right was established by the Truth in Lending Act (TILA) and was created to protect consumers from unscrupulous lenders, giving borrowers a cooling-off period and time to change their minds. Not all mortgage transactions offer the right of rescission. The right of rescission exists only on home equity loans, home equity lines of credit (HELOCs), and refinances of existing mortgages in which the refinancing is done with a lender other than the current mortgagee. It doesn’t apply to vacation or second homes.

If you’ve missed this three-day window, either by a couple of days or a decade, you have just one option when it comes to getting rid of your home equity loan—pay it back.

Important

You have the right to cancel a home equity loan within three days of signing up for it. If you cancel the loan within this period, your home is no longer collateral and can’t serve as payment for the lender. Your lender must also refund you all of the fees they’ve charged: That includes application fees, appraisal fees, or title search fees, whether they’re paid to the lender or to another company that is part of the credit transaction.

Paying Back or Refinancing a Home Equity Loan

When your home equity loan is active, the only way to get out of it is to pay it back. If you’ve just received the money from your loan or are lucky enough to have the cash on hand, you can do this directly. Just make sure you understand the penalties that might apply if you do so: Some lenders will charge you for early repayment of the loan.

If your loan has been running for a while and you don’t have enough cash on hand to repay it, there are several common ways of raising the funds needed to pay off the balance and get out of the loan:

• You can sell your home, even if you have an active home equity loan taken out against it. As long as your house has increased in value since you took out the loan, this is a fairly straightforward way to get out of the loan because you can use the money you receive from the sale to pay off the home equity loan (alongside your primary mortgage).
• You can refinance your home equity loan. If it’s been a few years since you took out your home equity loan, and your house has increased in value or interest rates have decreased, it might make sense to take out another loan. It’s possible to take out another home equity loan to repay the first, or to repay a home equity line of credit (HELOC). It’s even possible to roll a home equity loan into your primary mortgage.

Though this last option will allow you to pay off your home equity loan, you are essentially converting it into another form of debt. That means that you will still have to make monthly payments, even if these are lower than they were for your home equity loan.

Can I Cancel a Home Equity Loan?

Yes, but you have a short window to do so. The Truth in Lending Act (TILA) protects your right to cancel a home equity loan within three business days of agreeing to it. Your lender must return any fees they have charged and refund you for any payments you’ve made. They have 20 days in which to do so.

Can I Sell a House With a Home Equity Loan?

Yes. You can sell a house even if there is an active home equity loan taken out against it. In this case, you can use the money from the house sale to repay the loan. If your home has decreased in value since you took out the loan, however, you may not receive enough money to repay it. In this case, some lenders will write off the remaining balance; in other cases, you’ll have to find the funds elsewhere.

Can I Refinance a Home Equity Loan?

Yes. You can use a new loan to pay off an existing home equity loan. If your house has increased significantly in value since you took out the original loan or interest rates have gone down, this could make financial sense.

The Bottom Line

When you take out a home equity loan, you have three business days during which you can cancel it without consequence. If you choose to exercise this right, your lender must return any fees or payments. 

After this period, you’ll have to pay back the loan in order to get rid of it. If you have the cash on hand, you can pay your lender directly. If you sell the house, you can use the sale proceeds to repay the home equity loan. Alternatively, you can refinance the loan using a new one. Just be aware that some home equity loans have early repayment penalties, so check with your lender before you make a final decision.

These government-insured loans are the most common type of reverse mortgage

Fact checked by Timothy Li
Reviewed by Doretha Clemon

The Federal Housing Administration (FHA) is the federal agency that insures many reverse mortgages. If you meet certain requirements, you can get some of your home equity in the form of a lump sum, monthly payments, or a line of credit. Here is how FHA reverse mortgage loans work.

Key Takeaways

• The Federal Housing Administration (FHA) insures the most common type of reverse mortgage, which is known as a home equity conversion mortgage (HECM).
• HECMs are offered only through FHA-approved lenders.
• Borrowers who meet the requirements can receive a portion of their home equity in the form of a lump sum, monthly payments, or a line of credit.
• Other types of reverse mortgages include proprietary reverse mortgages and single-purpose reverse mortgages.

What Is an FHA Reverse Mortgage Loan?

The Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD), provides insurance for a type of reverse mortgage known as a home equity conversion mortgage (HECM). The insurance protects the lender in case the borrower defaults on the loan.

HECMs are the most common reverse mortgages today. Like other reverse mortgages, they allow homeowners to tap the equity that has accumulated in their homes over the years without having to sell the home. The homeowner can take the money in the form of a lump sum, a series of monthly payments, or a line of credit.

Unlike with a regular mortgage, the homeowner doesn’t have to make payments until they eventually sell the home, move out, or die. Instead, the amount that they owe accumulates over time, and the loan is paid off either when the home is finally sold or by the homeowner’s heirs if they wish to keep it.

Who Is Eligible for an FHA Reverse Mortgage Loan?

 To qualify for an HECM insured by the FHA, the homeowner must:

• Be at least age 62
• Have paid off their home or at least a substantial portion of it
• Occupy the home full time as its primary residence
• Not be delinquent on any federal debt
• Have adequate financial resources to cover future property taxes, homeowners insurance premiums, and any other required fees

The homeowner must also participate in an information session with a HUD-approved counselor to determine whether an HECM is right for them.

What Types of Homes Are Eligible for FHA Reverse Mortgage Loans?

 The applicant’s home also needs to satisfy certain FHA requirements. Specifically, it must be:

• A single-family home or a two- to four-unit home with one unit occupied by the borrower
• A HUD-approved condominium project
• An individual condominium unit that meets FHA requirements
• A manufactured home that meets FHA requirements

In addition, the home must meet HUD property standards and flood requirements. During the home appraisal process for the loan, the lender’s appraiser, who must be HUD-approved, will evaluate whether the home meets those requirements or requires repairs or other improvements.  

Reverse mortgage lenders generally require at least 50% equity in the home.

Types of FHA Reverse Mortgage Loans

HECMs can be either fixed-rate or variable-rate loans. In the case of a fixed-rate loan, the borrower must take the money as a lump sum.

A variable-rate HECM can provide income in the form of monthly payments, a line of credit for the homeowner to draw on as they choose, or some combination of the two.

Where to Get an FHA Reverse Mortgage Loan

Although the FHA insures HECMs, it does not issue them. Instead, they are issued by FHA-approved lenders, including banks and credit unions. HUD has a search tool on its website that borrowers can use to find approved lenders in their area.

FHA Reverse Mortgage Loan Costs

Like other types of mortgages, HECMs can have a long list of closing costs and other fees. Those can include: 

Mortgage insurance premiums: The borrower must pay an initial, one-time premium for the FHA insurance equal to 2% of the loan amount. After that, the premium is 0.5% of the outstanding loan balance annually. Because the balance on a reverse mortgage grows every year, those premiums will grow as well.

Origination fee: This is a fee that goes to the lender at closing. It will be $2,500 or 2% of the first $200,000 of the home’s value (whichever is greater) plus 1% of the amount over $200,000. By law, HECM origination fees can’t exceed $6,000.

Servicing fees: The loan servicer, which handles loan disbursements, account statements, and other ongoing tasks associated with the mortgage, can charge either $30 or $35 a month, depending on the type of HECM.

Other closing costs: The borrower also may have to pay appraisal, inspection, title search, and recording fees, among others.

Many of these fees can vary from lender to lender, so borrowers should try to shop around.

Alternatives to FHA Reverse Mortgage Loans

HECMs are not the only reverse mortgages that are available. Some lenders offer proprietary reverse mortgages. These loans are not government-insured but can have higher lending limits than the FHA’s current 2025 HECM limit of $1,209,750.

Another type of reverse mortgage is the single-purpose reverse mortgage. State and local agencies and some nonprofit organizations issue these loans to low- and moderate-income homeowners. As their name suggests, the proceeds must be used for a specific purpose, such as home repairs or paying property taxes.

How Much Can You Borrow With a Reverse Mortgage?

The amount that you can borrow with a reverse mortgage will depend on the market value of your home, your age, and current interest rates. Government-insured reverse mortgages are capped at a maximum of $1,209,750, but some lenders offer larger loans.

Does the U.S. Department of Veterans Affairs (VA) Offer Reverse Mortgages?

No. The U.S. Department of Veterans Affairs (VA) doesn’t have a reverse mortgage program.

What Happens If You Inherit a Home With a Reverse Mortgage?

That depends on your relationship with the borrower. Non-spouses who inherit a home have to pay off the reverse mortgage, either by selling the home or with their own funds if they wish to keep it. To do so, they must pay the lender the full loan balance or 95% of the home’s appraised value, whichever is less. In the latter case, Federal Housing Administration (FHA) insurance makes up the difference to the lender.

Spouses can often remain in the home for the rest of their lives, but the rules are complicated and depend on whether they were co-borrowers on the loan or non-borrowing spouses. Anyone, spouse or otherwise, who inherits a home with a reverse mortgage should contact the loan servicer and/or a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor as soon as possible after the borrower’s death to find out what steps they need to take and what the deadlines are.

The Bottom Line

FHA reverse mortgage loans, formally known as home equity conversion mortgages (HECMs), are the most common type of reverse mortgage. HECMs are insured by the government to protect lenders in case the borrower defaults on the mortgage. To be eligible for an HECM, the borrower must meet certain requirements, including a session with a housing counselor to make sure that a reverse mortgage is appropriate for them.

Not automatically, but there are ways to increase your credit limit

Fact checked by Amanda Jackson
Reviewed by Lea D. Uradu

If you have a home equity line of credit (HELOC), don’t expect your credit line to increase automatically along with your home value.

As home values have increased in the last five years, homeowners have become wealthier. The average house is worth over 40% more than it was five years ago, lifting home equity to record highs nationwide. But to access any new equity, you need to apply for home equity products like a home equity loan or a HELOC, even if you already have one.

Key Takeaways

• Lenders won’t automatically add to your credit limit if your home rises in value.
• To tap into more of your home equity, you need to ask the lender to modify your existing home equity loan or apply for a new home equity line of credit (HELOC).
• Lenders generally won’t let you increase your credit limit until a certain amount of time has passed since you last took out a HELOC.
• When you making an adjustment to your HELOC, you will likely pay extra fees.

If My Home Appreciates in Value, Does My HELOC Limit Automatically Increase?

A HELOC uses your home as collateral to provide you with a revolving line of credit.

If you have a HELOC, you may wonder whether a higher home value automatically gives you a larger line of credit, but HELOCs don’t work that way. To increase your line of credit, you would have to modify the terms of your current HELOC. You have to ask for this because lenders are generally not willing to extend you a larger line of credit automatically.

If your home depreciates in value, however, a HELOC lender may automatically amend the amount of credit it extends to reduce your line of credit. Lenders can “freeze or reduce your line of credit if the value of the home declines significantly below the appraised amount,” according to the Federal Trade Commission (FTC).

How to Adjust Your HELOC Limit

Two benefits of using a HELOC are that you don’t need to draw all of the money available to you, and that you only pay interest on the amount that you borrow. Keep in mind that lenders will likely charge you more for higher HELOC limits.

If you already have an existing HELOC, you have two main choices if you want to increase your lending limit: Modify your loan or refinance into a new HELOC with a higher limit. Let’s look at each option in more detail.

Loan modification

For a loan modification, contact your lender first about your options for changing the terms. In some cases, you may just need to submit some additional information to get an increase to your line of credit. Your lender will review your creditworthiness, including factors like your credit score and income, along with the current market value of your home.

Warning

Lenders usually limit how often borrowers can increase their loan. Bank of America, for example, requires that the account be open for at least nine months, and the borrower cannot receive a credit increase more than once a year or twice in five years.

New HELOC

If you can’t modify an existing agreement, or if you prefer to shop around for a loan from another lender, you can apply for new line of credit. You can use a new line of credit in two ways:

1. You can refinance your outstanding balance into a new, larger HELOC with different terms and conditions, as well as a different repayment deadline.
2. You can take out a new HELOC in addition to your original HELOC and carry two lines of credit.

Weigh the Pros and Cons

Securing a larger line of credit can provide you with cash to pay for major expenses like a renovation or your child’s college education. But it has downsides to ponder as well. For example, you’re likely to face fees, a higher interest rate, and the risks that come with a loss of equity. Let’s look at each downside in more detail.

New fees

Before amending a loan, calculate the cost of fees. The new or amended loan might include charges, such as application fees and closing costs. Some lenders charge an origination fee that is either a flat fee or a percentage of the amount that you want to borrow.

Less attractive rates

When you get an increased line of credit, either by modifying an existing HELOC or refinancing into a new one, the terms generally will be different. In some cases, they may not be better. For example, a larger credit limit or a different interest rate environment could result in an increase to your HELOC’s interest rate. 

Underwater risk

When you maximize the use of your home equity, you run the risk that if home values decline, your loans could go underwater. This means that you would owe more on the home than it is worth. If that happens, you won’t be able to sell or refinance your home unless you can pay for the loss out of pocket.

What increases equity in your home?

Your home can gain equity, or the difference between your home’s value and what you owe, in two ways. First, you can pay down your mortgage and decrease the principal that you owe. Second, your home can gain equity when its value increases.

How long does a home equity line of credit (HELOC) last?

Home equity line of credit (HELOC) terms can vary depending on the lender. Many lenders offer a 10-year draw period, or the time when you can use the line of credit before the repayment period starts.

Can I open a HELOC and not use it?

You can open a HELOC and not use it. You can access as much or as little as of your line of credit as you like. You will only pay interest on what you actually withdraw. Keep in mind that opening a HELOC often entails fees.

The Bottom Line

If you want to turn your home’s extra value into a bigger line of credit, you will need to either modify your existing HELOC or refinance it into a new, larger one. However, weigh the pros and cons of opening new credit carefully. A new line of credit may offer terms not as good as your current agreement, and the costs to change it could be too high to justify having access to a bit more cash.

There is no one right answer to this venerable question

Fact checked by Vikki Velasquez
Reviewed by Lea D. Uradu

When applying for a home equity loan, you’ll need to decide whether you want to be charged a fixed percentage or prefer to take your chances on interest rates in the wider economy. Borrowing costs on these loans are typically fixed, although some lenders do offer adjustable options.

The fixed versus variable debate isn’t one to shrug off. Borrowers ought to be aware of the difference because choosing one over the other could drastically alter their finances and mental well-being. But the answer isn’t simple; each choice has its benefits and drawbacks.

Key Takeaways

• Home equity loans are typically charged at a fixed interest rate, although some lenders do offer adjustable options.
• This choice can affect your monthly payments and the total cost of your loan over time.
• A fixed-rate loan has the same interest rate for the duration of the borrowing period, whereas variable rates can move up and down.
• The certainty offered by fixed borrowing charges comes at a cost: higher initial fees and the potential to pay more for the entire duration of the loan.
• A variable rate starts out cheaper and could save you a fortune, but it can also result in unmanageable borrowing costs, default, and foreclosure.

What’s the Difference Between a Fixed and Variable Rate?

When you take out a loan, it’s common to pay the lender something extra on top of the amount borrowed to make it worth their while. This charge is what refer to as interest, and it can be either fixed or variable.

A fixed-rate loan applies the same interest rate for the duration of the borrowing period. The cost to borrow the money is set before you agree to take on the loan and remains the same until the debt is repaid unless otherwise specified.

Variable-rate loans work in the opposite way. When taking this path, borrowing costs periodically fluctuate, moving up and down.

Variable rates are tied to the movements of a specific financial index tasked with reflecting how much the wider economy is paying for credit. The index on which your loan is based will be listed in your loan documents. Common benchmarks include:

• The one-year constant maturity Treasury (CMT)
• Federal Cost of Funds Index (replaced The 11th District Cost of Funds Index (COFI) as of January 2022)
• The London Interbank Offered Rate (LIBOR)
• The Wall Street Journal prime rate

Important

Interest rates on home equity loans are determined by inflation prospects, general borrowing costs, and the applicant’s individual circumstances, such as their credit score, debt-to-income (DTI) ratio, and combined loan-to-value (CLTV) ratio.

Pros and Cons of Fixed-Rate Home Equity Loans

The most obvious benefit of a fixed-rate home equity loan is certainty. Before you sign the contract, you’ll know exactly what your monthly payments will be as well as the total borrowing costs.

Fixed rates make budgeting easier and can reduce stress. Choose this option and you’ll know for certain how much to put aside each month. You won’t be in for any surprises—good or bad.

Unfortunately, this certainty comes at a cost. With a fixed-rate loan, you will likely start out paying more than you would on a variable one. Playing it safe commands a slight premium because it is a popular choice and can end up leaving the lender out of pocket if inflation soars.

Of course, the odds could also work against you. Many people opt for fixed-rate loans because they are scared their repayments might go up. However, there is also a decent chance that the variable rate will leave you better off.

If rates fall, you do have the option to refinance the loan, although there may be a penalty for doing so.

Pros and Cons of Variable Rate Home Equity Loans

The main attraction of a variable-rate loan is that it can save the borrower quite a bit of money. Should inflation and interest rates fall and then remain low for the duration of the loan, the amount you’re charged to borrow could be significantly less. On the other hand, interest rates could rise and make your loan more expensive.

One thing that’s at least pretty much guaranteed is a lower initial borrowing cost. If, for example, a lender offers a fixed rate of, say, 6%, its variable rate will usually begin several percentage points lower. Barring economic conditions drastically changing at the outset, the variable rate is likely to remain cheaper for a while, potentially yielding significant savings at the very time when the loan balance on which you’re charged a percentage is at its highest.

It’s the not knowing that kills most people. Yes, the savings can be notable with a variable rate. However, there’s also a chance that the cost of living skyrockets, interest rates soar, and your loan repayments suddenly balloon and become unaffordable. Should that happen, you may lose the home you put up as collateral.

Without a crystal ball, there’s no saying how expensive your loan will be in the future. Some people are willing to take their chances, while others have limited financial flexibility and prefer to play it safe.

Which Should I Choose?

There’s no right answer to this question. Both strategies have merits.

If you’re confident that interest rates will go down further in the future and have enough money tucked away to absorb any potential upsets, a variable rate is probably your best option. This may also work if interest rates are especially high, making the lower initial rate of a variable loan more appealing. Going with fluctuating charges can also make sense if you’re planning to pay off the loan quickly, thanks to the more appealing introductory rates.

Of course, with persistent inflationary pressure, interest rates could go even higher. If the thought of not knowing how much you’ll owe in the future makes you uneasy, you should probably choose the fixed option. Certainty may come at a high price, but sometimes the peace of mind it affords is worth every cent.

What Is the Benefit of a Fixed-Rate Home Equity Loan?

Certainty. When you opt for a fixed rate, you know exactly how much you will be charged and can budget for it without having to worry about the possibility of rising interest rates.

Are There Closing Costs on a Home Equity Loan?

Yes. As with most other real estate transactions, home equity loans are subject to closing costs. The amount you pay depends on the lender and generally ranges from 2% to 5% of the loan value.

How Do You Determine Your Home Equity?

Home equity is your ownership stake in your property, and it can be calculated by subtracting your mortgage balance (and any other liens) from the property’s current fair market value.

The Bottom Line

One of the most important choices when taking out a home equity loan is whether to opt for a fixed or variable rate. This decision needs careful consideration because it can affect your finances—and blood pressure—for years to come.

The cash that home equity loans provide can help make your dreams come true. However, those dreams can quickly turn into nightmares if you walk into this transaction carelessly and choose the wrong method of repayment.

It depends on whether your priority is price or choice

Reviewed by Khadija Khartit

There’s a lot to consider when renting a house or an apartment. While a variety of personal factors go into signing a lease—ranging from the regularity of your cash flow to the urgency of a move—knowing what time of year to start hunting for a rental can help you snag a better deal. The real estate market tends to be cyclical and seasonal. By paying attention to these cycles, you might have a better chance of landing your dream home at a price you can afford.

If you’re looking for the widest range of choices, you should plan to move between May and September. For the best prices, you should plan to move between October and April. Here’s why—and here are a few other tips for timing your home-hunting.

Key Takeaways

• The real estate market tends to be seasonal and cyclical. Paying attention to these cycles can affect the price you’ll pay for a rental.
• Apartment inventory is higher between the months of May and September, given the considerable turnover during these months. Rental rates also tend to be higher during the summer months. 
• The lowest rental rates are found during the winter months—October through April—with demand and prices reaching their nadir between January and March. 
• An apartment search should begin in the middle of the month prior to the target move month.

Summer Months Are Best for Rental Selection

The busiest moving period tends to be between the months of May and September. The reason for this is fairly straightforward: A number of life changes tend to occur in these months. Many high school graduates are leaving home for college or jobs. Many college graduates are seeking real estate close to where they will start their careers. And, of course, for families with kids, it’s between school years.

Also, it’s easier to move during warmer weather: to drive, to load and unload furniture, and carry boxes.

These life changes and weather conditions mean a much higher turnover rate in real estate. Thus, finding an apartment is easier, and there is a wider selection of apartments from which to choose, during the summer season. However, precisely because the summer season sees the highest levels of rental activity, the demand for rental space is also extremely high. This boosts rent prices and rental fees, sometimes up to double what might be negotiated during the off-peak seasons.

It can also be a more stressful time to hunt: You might face more competition in your quest for the perfect space.

Would-be renters often have to be ready to act fast—sometimes even signing on the spot—if they find a space they like.

Winter Months Are Best for Rental Savings

As the temperature drops, so do prices. The lowest rental rates are usually found between October and April, particularly right after the December holiday season. Fewer people are interested in moving—the weather’s bad, schools are in session, etc. So this is when you’ll typically find the best rental bargains. However, low levels of moving activity and turnover typically mean that it is more difficult to find exactly the type of property you’d like at this time.

How Early to Apartment Hunt

Once you’ve determined a target moving season, narrow the choice down to a specific month. Let’s say that you plan to move in August. The ideal time to begin the search for an appropriate apartment is at the end of the month prior to the target move month; so, in this example, begin the apartment hunt during the last two weeks of July.

While this tactic may seem last minute, it’s really optimal, because the majority of renters have leases that expire at the end of a month or within the first few days of the next month. Renters who are about to leave vacancies will have given or will be giving their 30-day notices during this time, which means you are apt to get the first choice of available space if you begin your apartment search within that time frame.

Individuals willing to take a gamble or who have the flexibility to move on a moment’s notice could employ a different apartment-hunting approach. Waiting until the second week of the move-in month can prove lucrative, as landlords trying to fill vacancies become more eager to secure new renters.

Warning

Discrimination during the rental process is illegal. If you think you’ve been discriminated against in the course of your search, based on your race, religion, sex, marital status, national origin, disability, or age, there are steps you can take—such as filing a complaint with the U.S. Department of Housing and Urban Development (HUD)’s Office of Fair Housing and Equal Opportunity. 

What’s the Average Rent in the U.S.?

The average monthly rent for a two-bedroom apartment in the U.S. was $1,317 as of November 2023.

How Many People Rent in the U.S.?

There were about 45 million housing units occupied by renters in 2023.

Are More People Renting Than Before?

The number of renters is rising as of 2023.

The Bottom Line

The best time to rent depends largely on your circumstances: your desired housing and price, as well as your moving flexibility. If you’re concerned about having the greatest amount of choice, you should target May through September for your searches. If you’re focused primarily on the best prices, you should time your move from October through April.

Fact checked by Kirsten Rohrs Schmitt
Reviewed by JeFreda R. Brown

Accountants usually classify computer software as a long-term asset that falls under fixed assets like buildings and land.

However, there are circumstances in which software can be treated as property, plant, & equipment (PP&E) rather than a long-term asset.

Key Takeaways

• While software is not physical or tangible in the conventional sense, accounting rules allow businesses to capitalize software as if it were a tangible asset.
• Software that is purchased by a company that meets certain criteria can be treated as if it were property, plant, & equipment (PP&E).
• By capitalizing software as an asset, companies can delay full recognition of the expense on their balance sheets.

Software as Assets

Intangible assets are typically nonphysical expenditures that are used over the long term. Intangible assets are often intellectual assets, making it difficult to assign a value to them because of the uncertainty of future benefits.

Tangible assets are physical and measurable assets that are used in a company’s operations. Equipment is a tangible asset.

Property, plant, and equipment (PP&E) is a category of long-term assets that includes expenditures that are vital to a company’s operations and have a definite physical component.

Under most circumstances, computer software is classified as an intangible asset because of its nonphysical nature. However, accounting rules state that there are exceptions that permit the classification of computer software as PP&E.

Two accounting standards describe how and when computer software should be classified as PP&E:

• Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standards (SFFAS) No. 10, Accounting for Internal Use Software.
• Governmental Accounting Standards Board (GASB) Statement No. 51, Accounting and Financial Reporting For Intangible Assets.

What Is PP&E?

Several criteria define assets that can be described as PP&E:

• They have estimated useful lives of two years or more.
• They are not intended for sale in the ordinary course of operations.
• They have been acquired or constructed with the intention of being used or being available for use by the entity.

Criteria for Capitalization as PP&E

Several rules determine whether software must be capitalized as PP&E or expensed. If the software meets the criteria of property, plant, and equipment as stated above, it can be classified as PP&E. According to SFFAS No. 10:

“Entities should capitalize the cost of software when such software meets the criteria for general property, plant, and equipment (PP&E). General PP&E is any property, plant, and equipment used to provide goods and services.”

• Management has some discretion since there are no dollar amount thresholds for the cost of computer software whether it’s internal or new software.
• Capitalization thresholds should be established by management in accordance with PP&E guidelines. For example, for bulk software purchases, both the bulk cost and the useful life of the software should be included in the calculation. If it is contractor-developed software, the amount paid to the vendor for development and implementation should be classified.
• Capitalization of software doesn’t include software that is an integral part of property, plant, and equipment. According to SFFAS No. 10 Section 38 & 39:

“For example, if the software is a part of a weapons systems, it would not be capitalized but included in the cost of investing in that weapons system. On the other hand, software used to accumulate the cost of acquiring that weapons system or to manage and account for that item would meet the criteria for general PP&E and should be capitalized.”

• The capitalization cutoff is not determined by an amount but rather when the testing stage of the software has been completed. According to SFFAS 10, paragraph 20:

“Costs incurred after final acceptance testing has been successfully completed should be expensed. Where the software is to be installed at multiple sites, capitalization should cease at each site after testing is complete at that site.”

What Is Property, Plant, and Equipment (PP&E)?

Property, plant, and equipment (PP&E) is an accounting category for long-term tangible assets that are vital to a company’s operations. They are the company’s fixed assets.

What Are Intangible Assets?

Intangible assets include contracts, patents, trademarks, and goodwill. They have value to a company even though they don’t exist in physical form. They can be difficult to place a value on because their future worth is largely unknown.

What Are Tangible Assets?

Tangible assets are a company’s physical possessions. They usually have monetary value. Land, buildings, equipment, and inventory are tangible assets.

The Bottom Line

It’s important to review the financial accounting standards before making any decisions on whether to expense or capitalize on computer software as PP&E. This article touches on a few key topics, but other accounting standards might need to be applied in instances such as cloud computing, multi-use software, developmental software, and software that is shared between divisions.

Reviewed by Thomas J. Catalano
Fact checked by Amanda Jackson

Buying a big tract of undeveloped land is an option open to the wealthiest investors. People with a more modest stake can earn a reasonable return by investing in land that is already realizing its potential.

The categories, broadly speaking, include residential, commercial, and agricultural uses. But that breaks down into many options for the investor, from mineral-rich lands to vineyards, livestock ranches, and residential developments.

The investment vehicles include real estate investment trusts (REITs), exchange-traded notes (ETNs), and exchange-traded funds (ETFs).

Key Takeaways

• Raw land is a risky investment that may take generations to produce a gain, if it ever does.
• Investable land options include current or planned residential and commercial development properties; cropland and livestock-raising land; vineyards and orchards; mineral production land, and recreational land.
• Specialized land investments are available through exchange-traded funds (ETFs), exchange-traded notes (ETNs), and real estate crowdfunding sites.
• Real estate investment trust (REIT) ETFs are a solid, cost-effective choice because they do not require direct management, are broadly diversified, and can be purchased and sold on an exchange. 
• Many ETFs and ETNs focus on specific land-based investment categories such as timber, minerals, and farmland.

Types of Land Investments

There are 10 general categories of potential land investments:

• Residential development land
• Commercial development land
• Row crop land
• Livestock-raising land
• Timberland
• Mineral production land
• Vegetable farmland
• Vineyards
• Orchards
• Recreational land

Residential and Commercial Land Investments

Residential and commercial land development offers a feasible entryway into land investment because an unlimited number of opportunities can be structured to meet an investor’s capital and time constraints.

Real estate investment trust exchange-traded funds are a good choice. They do not require direct management by the investor, they are broadly diversified by property type, they are geographically diversified, they can be purchased or sold on a real-time basis, and they are affordable for the small investor.

Some specialize in a type of real estate, but others, such as the Vanguard REIT ETF (VNQ), provide diversified exposure to industrial, office, retail, healthcare, public storage, and residential property developments.

Of course, these types of investments don’t grant the investor the right to use the land. If you dream of running a vineyard or digging for gold, these hands-off options are not for you.

Farmland and Livestock Operations

Land purchased for row crop farming or running a livestock operation gives the investor a hands-on option.

It’s not an option for everyone. The scale required to operate a row crop operation or livestock operation has to be very large to be financially viable. It demands a significant upfront capital outlay far beyond what most people can afford. 

Moreover, the ongoing fixed costs associated with running these types of farming operations are high.

This means that the financial leverage and business risks for such operations are very high as well. The stress level can far exceed the benefits that people yearn for as landowners. 

While owning a traditional row crop or livestock farming operation is probably not feasible for most small investors, many agricultural investment options provide acceptable investment exposure to traditional farming enterprises. 

Your choices include funds that provide exposure to soybeans, corn, wheat, cotton, sugar, coffee, soybean oil, live cattle, feeder cattle, cocoa, lean hogs, Kansas City wheat, canola oil, and soybean meal. 

ETN Options

A number of exchange-traded notes (ETNs) invest in specific types of traditional farming operations. 

For example, the iPath Bloomberg Agriculture Subindex Total Return ETN (JJA) provides investment exposure to soft commodities such as corn, wheat, soybeans, sugar, cotton, and coffee. The iPath Series B Bloomberg Livestock Subindex Total Return ETN (COW) provides investment exposure to cattle and hogs.

Investors need to perform due diligence before choosing this type of fund. Some use derivative instruments such as futures contracts, adding to the level of risk in the investment.

The right ETFs or ETNs offer a good opportunity for investing in traditional large-scale farming operations.

Small Farm Investment Opportunities

For small investors who want to truly engage in land ownership, the options include timber farms, mineral development lands, vegetable gardens, orchards, vineyards, and recreational land. 

The scale of the land purchase can be tailored to meet the investor’s capital constraints. These operations have the potential to generate an ongoing income stream.

With that said, a host of ETFs and ETNs are directly tied to these types of farming endeavors. Small investors could consider this hands-off option if they don’t want to commit all of their time and resources.

The Invesco MSCI Global Timber ETF (CUT) is designed to track the performance of timber companies around the world and includes holdings in firms that own or lease forested land and harvest the timber for commercial use and sale of wood-based products.

The SPDR S&P Oil & Gas Exploration & Production ETF Fund (XOP) is one of the many investment options that provide exposure to mineral land development.

Buying Row Land

If you decide to buy raw land for potential development, be prepared to deal with legal and regulatory issues. Some of the potential barriers to land development include:

• Land-use restrictions that curtail how the land can be used by its owner
• Land easements that grant access to the property to an unrelated party
• The conveyance of mineral rights that can grant authorization to extract and sell minerals from the land to an unrelated party
• Riparian and littoral rights that define the access that the landowner has to adjacent waterways
• Restraints on development if the property lies in a flood plain.

All of these potential issues can be identified in advance of any purchase. The legal specification for a parcel of land can be found in a document known as a land deed. Deeds are usually available to the public via the Internet or can be obtained by visiting the land records and deeds division of the appropriate county clerk’s office.

In addition to legal issues, investors must consider the land’s access to basic utilities such as electricity or telecommunications and consider its distance from the nearest community.

Investors should also check the land’s annual property tax obligation.

How to Value Land

Investors considering a raw land purchase are engaging in a speculative investment. Undeveloped land does not generate any income. Any return on investment will come from the potential capital gain when the land is sold. 

With this in mind, the cost of debt for a farm real estate loan can be used to help conduct a preliminary investment analysis. Like any loan rates, these change with the times.

Another major consideration is the cost of development of a small farming operation.

Valuation reports are readily available and can be used to estimate the capital requirements of developing agricultural land. The agricultural departments of state universities are often a valuable resource.

An investor who wants to establish a timber farm, vegetable farm, vineyard, or orchard should be able to find a comprehensive and timely analysis that explains how to establish the operation, the amount of work involved, the capital outlay required, the length of time necessary to get a return on investment, and the likely return on investment that a small-farm operation can achieve over time.

Who Are America’s Largest Landowners?

The largest landowner in the U.S. according to The Land Report, is the Emmerson family, which owns an enormous conifer seedling nursery in Northern California.

Famous names on its top 10 list of landowners include CNN founder Ted Turner, who owns two million acres of land in the Western U.S.

Its list of “trending landowners” who are acquiring large tracts include Microsoft founder Bill Gates and Amazon founder Jeff Bezos.

What Is Raw Land?

Raw land is property that is undeveloped. It is not used for any income-producing activity like farming, mining, or housing. It is off-the-grid, with no public utilities and little or no road access. In the U.S., most raw land is in remote rural areas.

What Is Row Cropping?

Row cropping, or row farming, is a system of growing crops along horizontal lines rather than in clumps. Machinery can be used to reduce some of the labor involved. Row cropping has other benefits, including maximizing sunlight exposure and regulating wind flow.

The Bottom Line

In most cases, buying raw land is an option for the very wealthy.

Most of the rest of us can satisfy a yearning for land ownership by investing in productive land through ETFs and ETNs. Unlike raw land, they can immediately generate a reasonable return on investment without a substantial investment of time and money

Sports betting has grown into a multi-billion-dollar industry, and one of its most popular forms is betting against the spread. While casual bettors might focus on simply picking a winner, more experienced gamblers may pursue greater risk and greater opportunity by betting the spread. In this article, we’ll look at what that means and how it works.

Key Takeaways

• Covering the spread means a team wins by more than the point spread or loses by fewer points than the spread.
• Sportsbooks set the spread to balance betting and adjust it based on betting trends.
• A team can win a game but fail to cover the spread if they don’t win by enough points.
• A push happens if the outcome of the game is the same amount as the spread; in this case, bets are returned.
• Betting the spread differs from the money line, which is a straight bet on which team wins.

What Is the Spread?

The point spread is a margin set by oddsmakers to even the odds between two teams of different skill levels. Instead of simply choosing the winning team, bettors must decide whether a team will win or lose by a certain number of points.

For example, if one team is favored by 7 points, oddsmakers will assign them a point spread. In this case, it would be (-7). This means this team must win by more than 7 points for a bet on them to succeed. On the other hand, the underdog (+7) needs to either win outright or lose by fewer than 7 points for its bettors to win. The underdog may lose the match, but those who bet on the underdog can still win their bet if the underdog “covers the spread”.

In many ways, the spread is like a handicap. It does not influence the actual game, and no real points are awarded during the real match. However, it gives the underdog an advantage in the betting world by giving them a “head’s start”. In the example above, you could interpret the spread as the underdog starting the match with a 7-0 lead. For the rest of the match, the favorite must outscore the underdog by at least that much to “win” in the betting world.

How Does Covering the Spread Work?

Covering the spread means that the favored team wins by more than the assigned spread, or the underdog keeps the game closer than expected. In the example above, if a favorite is given a -7 spread and wins by more than 7 points, they have covered the spread. If they win by less than 6 points or outright lose, they fail to cover, meaning the underdog bet wins.

On the other hand, you can cover the spread even if the team loses. In this example we’ve been losing, the underdog could lose by only 6 points; in this case, they would have covered the spread.

What Happens If the Spread Is Not Covered?

There’s two things that happened if a team fails to cover the spread. The first is simply that team lost their part of the bet. If an underdog’s spread is +7 and they lose by 14, they failed to cover the spread. Any bettor that placed money on them to cover the spread has lost.

Another outcome is for there to be a “push”. A push occurs when the outcome is exactly that of the spread. In the example above, if the favorite wins by exactly 7, all bets are generally returns and nobody wins. For this reason, oddsmakers try to set spreads that can’t be achieved (i.e. in the example above, the spread would likely be 6.5 points or 7.5 points).

What Factors Influence the Spread?

Oddsmakers take into consideration a lot of factors when setting the spread. This includes everything from team performance, injuries, weather conditions, and even betting trends. Sometimes underappreciated aspects of a game such as team fatigue, home-field advantage, and even travel schedules influence how oddsmakers calculate the spread.

Public perception also matters in how the spread is set. If a large percentage of the betting public heavily favors one team, sportsbooks may adjust the spread to encourage balanced action on both sides. This ensures that the bookmaker minimizes risk while maintaining an even playing field for bettors.

Some sportsbooks offer opportunities for bettors to move the spread in either direction to get better or worse odds. For instance, in the example above, if you were confident the favorite would win by at least 10 points, you could “sell” points and move the margin that the team would have to cover. To be compensated for this risk, you would face a better payout. Alternatively, if you’re less confident, you can “buy down” the spread (say, to 4 points). However, you’d face worse payout amounts.

Once the spread is set, it can shift based on betting patterns. If heavy action comes in on one team, sportsbooks may adjust the spread to balance the risk. There may always be factors that emerge as the game gets closer, such as key players needing to sit or unexpected personnel illnesses.

Example of Covering the Spread

In Super Bowl LIX, the Philadelphia Eagles defeated the Kansas City Chiefs by 18 points. Though the spread would have varied across sportsbooks, one such example was the spread of Kansas City (-1.5) and Philadelphia (+1.5). This means that oddsmakers thought the game would have been much closer than it was, and this sportsbook thought Kansas City was the favorite.

The Philadelphia Eagles could have lost and still covered the spread. For example, if they lost by only 1 point, they would have still covered. However, by winning (regardless of how many points they won by), they covered the spread and rewarded all bettors who put money on them.

Note

If you have a gambling problem, call the National Problem Gambling Helpline at 1-800-522-4700, or visit ncpgambling.org/chat to chat with a specialist.

Covering the Spread vs. Money Line Bet

Covering the spread involves wagering on a team not just to win, but to either exceed a predetermined margin (if they are the favorite) or stay within that margin (if they are the underdog). Another popular betting option is a money line bet. This is a straightforward wager on which team will win, regardless of the final score or margin of victory.

Since spread bets account for performance beyond simply winning or losing, the odds are usually set around -110 for both teams, meaning bettors must wager $110 to win $100. Money line odds, however, reflect the perceived probability of a team winning outright. A heavy favorite might have odds of -250 or worse, requiring a bettor to risk $250 just to win $100. Conversely, betting on an underdog on the money line, such as at +200, could yield a $200 profit on a $100 bet if they pull off an upset.

The main takeaway here is, generally speaking, it’s more difficult to cover the spread as opposed to just picking the outright winner. However, oddsmakers know this, so they adjust payout amounts to reflect the extra amount of risk bettors take trying to cover the spread.

What Does It Mean to Cover the Spread?

Covering the spread means that a team has either won by more than the required point spread (if they are the favorite) or lost by fewer points than the spread (if they are the underdog).

How Is the Point Spread Determined?

They use statistical models and market analysis to establish a fair spread that attracts equal betting on both sides. If too much money is placed on one side, the sportsbook may adjust the spread to encourage balanced action. That statistical model analyzes everything including but not limited to team performance, history between the two teams, personnel available, injuries, and weather conditions.

What Happens If a Team Wins but Doesn’t Cover the Spread?

If a favorite wins the game but fails to win by a margin greater than the spread, they do not cover the spread, and bets on them lose. For example, if a team is favored by 7 points (-7) but wins by only 3 points, bets on the favorite lose while bets on the underdog win (even though the underdog lost the actual game).

In Which States Is Sports Betting Legal?

As of January 2025, sports betting is legal in 38 states plus Washington, D.C.

What Is a Push?

A push occurs when the final margin of victory matches the exact point spread, resulting in a tie for betting purposes. For example, if a team is favored by 6 points (-6) and wins by exactly 6, neither side wins, and all bets are refunded.

The Bottom Line

Understanding how to cover the spread is essential for anyone serious about sports betting. It adds complexity to wagering, making it more strategic than simply picking winners and losers. By analyzing trends, managing risk, and staying informed, bettors can improve their chances of long-term success.

Reviewed by Somer Anderson
Fact checked by Vikki Velasquez

Regardless of your financial status, keeping tabs on the ultrarich—whether with admiration, envy, or resentment—is probably more pleasurable and less demanding than researching a mortgage, shopping for online brokers, or studying finance and economics.

The appeal of wealthy families reflects a culture that idolizes wealth and fetishizes the rich. Those in the upper echelons of business are celebrities in many people’s eyes, and they are scrutinized for their ability (or failure) to maintain this elite status.

This list is limited to families who originally made their fortunes through business (even if some of the current heirs enjoy the family inheritance without ever having contributed to it.)

Key Takeaways

• At over $430 billion, the Walton family is the richest family in the world.
• The Hermès family—purveyors of scarves, neckties, perfumes, and handbags—is the fourth-richest family in the world at $170.6 billion.
• The royal families of Qatar, Abu Dhabi, and Saudi Arabia are near the top of the list, thanks to their countries’ abundant oil wealth.
• The fourth generation of the Mars family, with a fortune worth $133 billion, currently runs the eponymously named Mars candy company.
• By focusing solely on families, this list does not include the richest people in the world, including Jeff Bezos and Elon Musk.

Walton Family

Estimated Wealth: $432.4 billion

Company: Walmart

The Waltons are once again the richest family in the world, after being briefly eclipsed by the Al Nahyan family in 2023. At the top of the value chain, Jim, Rob, and Alice Walton are each worth around $75 billion and ranked No. 18, 19, and 21, respectively, on Forbes‘ billionaire list as of Dec. 24, 2023.

Walmart is a retail behemoth. Founded by Sam Walton in Arkansas in 1962, Walmart is the world’s largest company by revenues in fiscal year 2024, with $648 billion in revenues and over 2.1 million global associates.

Walmart operates over 10,600 retail stores worldwide and 5,206 stores in the U.S. as of Feb. 2025.

Best known for big-box stores in rural and suburban America, Walmart is celebrated for its low-priced products and criticized for its labor practices. The company failed to bring its big-box consumer lifestyle to New York City, unlike its competitor, Target.

Al Nahyan Family

• Estimated Wealth: $323.9 billion
• Company: Abu Dhabi Royal Family

The Al Nahyan family, also referred to as the “House of Nahyan,” is the second richest family in the world. The leader of the family, Sheikh Mohammed bin Zayed Al Nahyan, is the ruler of Abu Dhabi and the President of the United Arab Emirates (UAE). The economy of the UAE (and the finances of its rulers and royal families) has been transformed by the vast oil reserves in the country. Abu Dhabi is one of the richest emirates, and especially oil-rich.

Sheikh Mohamed became the ruler of Abu Dhabi and the President of the UAE in 2022. Before that, his brother, Sheikh Khalifa, was the country’s leader from 2004 to 2022. And before that, his father, Sheikh Zayed bin Sultan Al Nahyan, was the President of the country, from its founding in 1971 until 2004, when his son succeeded him.

The family’s fortune has been amassed via ownership of billions of barrels of oil reserves, in addition to extremely profitable wealth funds.

Al Thani Family

Estimated Wealth: $172.9 billion

Company: Royal Family of Qatar

The Al Thani family has ruled Qatar since the middle of the 19th century. The family’s reign has lasted through the founding of modern Qatar, wars, and two coup attempts.

Sheikh Hamad bin Khalifa Al Thani turned Qatar into a major world power during his 18 years in power. (He gained complete power of Qatar by deposing his father in a bloodless coup in 1995. This involved freezing all of his father’s assets to prevent any counter-coups.)

The country’s natural gas production skyrocketed as a result of mining offshore gas fields and the discovery of untapped oil fields. In 2010, the average income in the country was $86,440 a year per person.

In addition to his income made from oil and gas, Sheikh Hamad invested billions of dollars in businesses, including Volkswagen, Total, Sainsbury’s, and Barclays bank. In 2018, Sheikh Hamad abdicated the throne to his fourth son, Sheikh Tamin bin Hamad al Thani.

Hermès Family

• Estimated Wealth: $170.6 billion
• Company: Hermès

French fashion house and luxury purveyor Hermès has dazzled the world with its signature scarves, neckties, and perfumes, as well as its iconic Kelly and Birkin handbags. Back in the 19th century, Thierry Hermès fashioned riding apparel for the aristocracy.

Today, the company dresses basketball royalty such as LeBron James. Fusing old-school and new technology, Hermès Apple Watches sell for $1,249 and up. Axel Dumas currently serves as the company’s executive director, and Pierre-Alexis Dumas is the artistic executive vice president.

Koch Family

Estimated Wealth: $148.5 billion

Company: Koch Industries

Charles Koch owes his staggering fortune to an oil business founded by his father, but today, he is perhaps better known to the general public for his politics, digging into his deep pockets to place his stamp on it—financing candidates and libertarian think tanks, funding university professorships, and lobbying for policy positions, all aimed at furthering a conservative agenda.

Charles partnered with his brother David until the latter died in 2019. Charles is worth an estimated $58.5 billion, ranked No. 25 on the Forbes‘ billionaires list. David’s widow, Julia Koch, and family are in 23rd place with a net worth of $64.3 billion as of Feb. 15, 2025.

Al Saud Family

Estimated Wealth: $140 billion

Company: Saudi Royal Family

The House of Saud, the Saudi royal family, has a monarchical history extending back nearly a century. The family’s massive fortune, estimated at $140 billion, has grown thanks to decades of payments from the Royal Diwan, the king’s executive office.

Ties with Saudi Aramco, one of the world’s most profitable companies and a behemoth of the oil industry, ensure that the Saudi royal family continues to accumulate wealth. It’s difficult to accurately assess the wealth of the House of Saud, in part because the family contains as many as 15,000 extended members, many of whom have founded businesses, received government contracts, and more.

Mars Family

• Estimated Wealth: $133.8 billion
• Company: Mars Incorporated

Mars is the Walmart of candy—a multigenerational family business that is ubiquitous and wildly popular. Today, the company is better known for making M&Ms than for its eponymous Mars bar. In 2017, the world’s largest candy company diversified with the purchase of VCA, a pet care company, for $9.1 billion.

Siblings Jacqueline and John Mars, whose grandfather, Frank Mars, founded the company, each have a net worth of $38.5 billion and are tied for No. 35 on Forbes‘ list of billionaires as of Feb. 15, 2025. The company is now being run by some of their children, the fourth generation of Mars family members.

2,781

The world had 2,781 billionaires in 2024, the highest number ever.

Ambani Family

• Estimated Wealth: $99.6 billion
• Company: Reliance Industries

Indian industrial conglomerate Reliance Industries, the only Asian company on our list, might be the least well-known to average readers.

Nevertheless, CEO Mukesh Ambani, whose late father founded the company in 1957, is ninth on Forbes‘ billionaires list with a net worth of $90.3 billion as of Feb. 15, 2025, overseeing the company’s refining, petrochemicals, oil, gas, and textiles; his brother, Anil, manages telecommunications, asset management, entertainment, and power generation.

Wertheimer Family

• Estimated Wealth: $88 billion
• Company: Chanel

French high-fashion house Chanel is legendary for the timeless “little black dress,” the No.5 perfume, and the late high-profile designer Karl Lagerfeld, who died on Feb. 19, 2019.

Brothers Alain and Gerhard Wertheimer now co-own the company that their grandfather staked with founder Gabrielle Coco Chanel. The brothers are both ranked 40th on the Forbes billionaires list, with a net worth of $36.8 billion each as of Feb. 15, 2025.

Thomson Family

• Estimated Wealth: $87.1 billion
• Company: Thomson Reuters

The Thomson family garners its wealth from Thomson Reuters, the media company. The family got its start in the 1930s when Roy Thomson started a radio station in Ontario, Canada, and later moved into newspapers.

Roy Thomson’s grandson, David Thomson, is the chairman of Thomson Reuters. He ranks 22nd on Forbes‘ billionaires list with a net worth of $67.8 billion on Feb. 15, 2025.

What Is the Richest Family on Earth?

The Waltons are the richest family in the entire world with a combined net worth of over $432 billion.

Which 10 Families Are the Wealthiest?

The top 10 richest families in 2025 by estimated wealth are:

1. The Walton family with $432 billion
2. The Al Nahyan family with $323 billion
3. The Al Thani family of Qatar with $172 billion
4. The Hermès family with $170.6 billion
5. The Koch family with $148.5 billion
6. The Saudi royal family with $140 billion
7. The Mars family with $133.8 billion
8. The Ambani family with $99.6 billion
9. The Wertheimer family with $88 billion
10. The Thomson family with $87.1 billion

Who Are the Wealthiest People in the World?

The top three wealthiest people in the world as of Feb. 15, 2025, are Tesla CEO Elon Musk, Amazon founder Jeff Bezos, and Facebook founder Mark Zuckerberg.

How Rich Are the British Royal Family?

While the British royal family is a tremendous source of curiosity for many people, and the Windsor’s have accumulated many properties, jewels, and art over 100 years of rule, we may never know exactly how much wealth the family has accrued. Assessing the wealth of the British royal family is difficult because of the vast array of its holdings, the historical value of these holdings, and a tradition of secrecy about financial particulars.

The Bottom Line

This list of wealthy families focused on those who built their wealth by starting a family business. Some of these family businesses—like Walmart—are now publicly traded businesses. Others, like Mars Incorporated and Koch Industries, are still privately held family businesses.

This list may read as a naked celebration of wealth at a time of rising global inequality and a vanishing middle class. It may also be seen as condoning heedless consumption at a time when the future of wealth itself is in question. Moreover, the focus on families means the list doesn’t include the world’s three richest individuals.

Find the right mix of dividend-paying stocks with dividend growth potential.

Reviewed by Khadija Khartit
Fact checked by Pete Rathburn

The single greatest worry of anyone planning for retirement is probably the fear of outliving your savings. No matter how much money you sock away in your 401(k) or your IRAs, you worry that it might not be enough.

One possible solution is to focus your portfolio on dividend-paying stocks, mutual funds, and exchange traded funds (ETFs). Hang onto your principle. Create a regular cash flow that will supplement your other income, such as Social Security and a pension.

Key Takeaways

• Dividend-producing investments can get you a regular stream of dividend income while preserving your principal.
• Identifying the right mix of dividend-paying stocks with dividend growth potential is vital.
• ETFs can be used to build a diversified portfolio of dividend growth and high-dividend-yield stocks.

It’s All About Dividend Growth

Unlike the interest from bonds, stock dividends tend to grow over time, and dividend growth has historically outpaced inflation.

That’s a good reason for dividend-paying stocks to be a part of every investor’s portfolio.

For investors with a long timeline, this fact can be used to create a portfolio that is aimed at dividend-income living after retiring.

Reinvesting Dividends

A smart strategy for people who are still saving for retirement is to use the dividends to buy more shares of stock. That way, they will collect even more dividends and be able to buy even more shares until they need the income.

For example, assume you bought 1,000 shares of a stock that traded for $100, for a total investment of $100,000. The stock has a 3% dividend yield, so you received $3 per share over the past year, which is $3,000 in dividends. You then take the dividends and buy more stock, so your total investment is $103,000.

Assume the stock price doesn’t move much, but the company increases its dividend by 6% a year. In the second year, you will get a dividend yield of 3.18% on $103,000 for a dividend of about $3,275. However, that is a yield on cost of about 3.28%.

This dividend reinvestment strategy continues to increase the yield on cost over time. After ten years, this hypothetical portfolio will produce around $7,108 in dividends. After 20 years, you will receive more than $24,289 a year in dividends.

What If You Are Already Retired?

The compounding of dividend income is of great advantage for those who have a long time horizon, but what about if you are near retirement? For these investors, dividend growth plus a little higher yield could do the trick.

First, retired investors looking to live off their dividends may want to ratchet up their yield. High-yielding stocks and securities, such as master limited partnerships, REITs, and preferred shares, generally do not generate much in the way of distribution growth. On the other hand, investing in them increases your current portfolio yield.

That could go a long way toward helping to pay today’s bills without selling off securities.

Note

Dividends paid in a Roth IRA are not subject to income tax.

Retired investors shouldn’t shy away from classic dividend growth stocks like Procter & Gamble (PG). These stocks will increase dividend income at or above the inflation rate and help power income into the future.

By adding these types of stocks to a portfolio, investors sacrifice some current yield for a larger payout down the line.

While an investor with a small portfolio may have trouble living off dividends as a sole source of income, the rising and steady payments will reduce their principal withdrawals.

Dividend ETFs

It can be hard to find the right stocks for dividends. Furthermore, achieving sufficient diversification is even more challenging.

Fortunately, some ETFs deploy dividend strategies for you. Dividend growth ETFs focus on stocks that are likely to grow their dividends in the future. If you are looking for current income, high-dividend-yield ETFs are a better choice.

What Is Dividend Yield?

Dividend yield is the amount of money that an investor is paid for owning a share of a stock, expressed as a percentage of the stock’s current price. This is displayed on the stock’s quote page on any business site.

A stock’s forward dividend yield is the amount it expects to pay over the next period of time, usually annually.

For example, the forward dividend yield of Microsoft stock was $3.21, or 0.81%, as of Feb. 16, 2025.

Are Dividend Stocks Better Than Bonds?

Dividend-paying stocks tend to reward investors better than bonds over the long term. The yields on bonds fluctuate up and down with interest rates. They pay relatively poorly when interest rates are low. A company that issues stock dividends, on the other hand, is under pressure to keep its dividend steady or even raise it over time as a reward to its investors.

What’s the Difference Between Common Stock Dividends and Preferred Stock Dividends?

A preferred stock share comes with a guarantee of a specific dividend return. It’s a sort of mix of a stock and a bond.

Common stock shares do not come with a guarantee that a dividend will be paid. The decision is made by the company’s directors based on its latest financial performance.

Many common stocks pay no dividends and never have paid them.

The Bottom Line

Most portfolio withdrawal methods involve combining regular asset sales with interest income from bonds, but there is another way. By investing in quality dividend stocks with rising payouts, both young and old investors can benefit from the stocks’ compounding, and historically inflation-beating, distribution growth. All it takes is a little planning to augment your retirement income with a dividend payment stream.