Filing your federal tax return to the Internal Revenue Service (IRS) starts with having the right forms in hand. Whether you choose to e-file or submit a paper return, being well-prepared is essential to submitting your tax return on time and without mistakes.

This guide will help you find the IRS forms you need, submit them securely, and avoid common tax filing errors.

Key Takeaways

• All federal tax forms are available for free at IRS.gov.
• The right tax software can help you identify and complete the right forms for your situation.
• E-filing is faster and more secure than mailing a paper return.
• If you’re missing a form, check your IRS transcript or file a substitute form to avoid delays.

How to Find Tax Forms on the IRS Website

The IRS makes all current tax forms available for free on IRS.gov. To find a form, you can:

• Visit the “Find forms & instructions” section and search by form number or name
• Use the site’s search bar to locate a specific form quickly

If you’re using tax software, you don’t need to search for forms manually. These programs include the necessary forms and guide you through questions about your income, deductions, and other details to complete your return accurately.

Important

Tax Day usually falls on April 15, unless it lands on a weekend or holiday. Federal tax returns for 2024 are due on Tuesday, April 15, 2025.

Common Forms and Schedules You Might Need

Most taxpayers use Form 1040. Seniors 65 and up can use Form 1040-SR. Depending on your tax situation, you may also need additional schedules. Some of the most common ones include:

• Schedule A for itemizing deductions
• Schedule B for interests and dividends
• Schedule C for freelance or self-employed income
• Schedule D for capital gains and losses
• Schedule 8812 for the Child Tax Credit

The IRS website offers a complete list of schedules and instructions for each.

Prepare to File

Filing your taxes on time and accurately requires preparation. Here are the steps you’ll need to take.

• Track your tax forms: Keep an eye on any investment or side income forms (such as 1099s). Set reminders to download them and upload them to your tax software.
• Organize your documents: Store all your tax forms, receipts, and prior-year returns in a secure folder, whether digital or physical. Use a checklist based on last year’s return to make sure you don’t forget anything.
• Use secure systems: Electronic filing or “e-filing” is safe through trusted tax software or the IRS website. Use a secure Wi-Fi connection and up-to-date antivirus software, and avoid filing on public networks or computers.
• Know your deadlines: The IRS began accepting 2024 returns on January 27, 2025. Taxes are due by April 15. You can file for an extension, but payment is still due by the deadline to avoid penalties.

Filing Options: Online or By Mail

You can file your federal tax return either electronically or by mailing a paper form.

E-filing is typically faster and includes automatic error checks. The IRS also partners with tax software providers through Free File to offer no-cost e-filing. To be eligible, your Adjusted Gross Income (AGI) must have been below $84,000 in 2024.

If you prefer to mail your return, you can download fill-able PDFs from the IRS website, enter your information, print the forms, and send them by mail. Paper returns can take longer to process, but some filers prefer this method for privacy reasons or because of limited internet access.

Advisor Insight

“If you use a paid preparer to file your tax returns, make sure that they have you sign an e-file signature authorization, such as Form 8879, before they electronically file your return,” cautioned Logan Allec, a CPA and owner of tax relief company Choice Tax Relief. “Also make sure that the amounts on lines 1-5 of this form match the information on your Form 1040.”

What to Do If You’re Missing a Form

If you haven’t received a form, follow these steps:

1. Check your email and financial accounts: Many issuers send forms electronically instead of mailing them.
2. Review your IRS transcript: Log into your IRS Individual Online Account and check for a Wage and Income Transcript, which shows forms already sent to the IRS by employers or banks. Keep in mind that it may be incomplete early in the season.
3. Use a substitute form: If you are missing a W-2 or 1099-R and cannot get a corrected version before the deadline, the IRS allows you to use Form 4852 as a substitute to report your income.

“Round up rather than down when estimating income. The IRS penalizes under-reporting, not overstatement made in good faith,” explained Chad D. Cummings, CPA, Esq., Attorney and CPA at The Law Office of Chad D. Cummings.

Reminder

If you are close to the deadline, file an extension. Just remember, an extension gives you more time to file, not more time to pay. Estimate what you owe and pay by Tax Day.

Cummings also recommends, “Add a memo to your return describing the reconstruction method used. This establishes a paper trail and gives you audit protection. You may amend later with the actual form if received post-deadline, but you will avoid late filing penalties and interest accrual.”

The Bottom Line

Finding and filing your federal tax forms doesn’t have to be stressful. With the right preparation, you can find the tax forms you need, choose the best way to file, and submit your return accurately and on time.

Whether you are e-filing with tax software or mailing paper forms, staying organized and using tools like IRS.gov or your IRS transcript can make the process easier. If a form is missing, take action early and consider options like filing an extension or substitute form to stay on track. Just be sure to estimate and pay any taxes owed by Tax Day to avoid penalties.

Fact checked by Vikki Velasquez

With its small-town charm, surprising affordability, and special combination of history, culture, and easy access to nature, it makes sense that the city of Utica, New York, has been ranked a top retirement destination. This Oneida County city of just over 63,000—once a key part of the Rust Belt textiles industry—has revitalized itself as a popular destination for outdoor enthusiasts and culture mavens alike.

Key Takeaways

• Utica, New York, offers a lower cost of living than other parts of New York and the U.S.
• The city boasts rich cultural and historical attractions like the Munson Pratt Art Museum and the Stanley Theatre.
• Outdoor and recreational activities are abundant, with proximity to the Adirondack Mountains.
• A strong sense of community and engaging lifestyle options are available for retirees.
• Oneida County, where Utica is located, provides over 300 health care establishments and 14 hospitals.

Cost of Living in Utica, NY

One of the most important factors for many individuals approaching retirement is the cost of living. For those without a steady income, keeping costs to a minimum while maximizing opportunities for enriching experiences and being part of a lively community is key. Fortunately, Utica offers a compelling case as an affordable destination for retirees.

Oneida County has a median household income of just $68,819, while the median household income nationwide as of 2023 was $80,610. At the same time, the median home value for the county is $171,100, which is less than half the median sale price of a home across the U.S. of $419,200.

Monthly housing and food costs for Oneida County are also well below average, at $961 and $636, respectively. Compare that with the average monthly housing and food costs across the country for 2023, which came in at around $2,120 and $832. Monthly taxes for Oneida County are, on average, $689.

Note

The state of New York does tax withdrawals from retirement accounts like some IRAs, 401(k)s, and pensions, although the first $20,000 of retirement income is tax-exempt.

Health Care and Accessibility

Health care is an important consideration when planning a retirement destination, and fortunately, Utica has access to a large number of facilities and services. With 379 health care establishments and 14 hospitals in Oneida County, Utica residents have many options to choose from. For comparison, that means Oneida County has the same number of hospitals as the entire state of Hawaii.

Utica is located about 240 miles northwest of New York City and about 95 miles west of Albany. While a number of regional and smaller airports are easily accessible from Utica, the closest major airport to the center of Oneida County is Bradley International in Hartford, Connecticut, about 169 miles away.

The city also offers public transportation through the Centro of Oneida bus service. What’s more, Utica residents can take advantage of the city’s rich history as a railway hub by hopping an Amtrak train to New York City (about 5 hours and 36 minutes in total) or any number of other destinations across the northeast and farther afield.

Lifestyle and Recreational Activities

With its gorgeous Philip Johnson-designed building, the Munson Pratt Museum is a haven for art and architecture enthusiasts in upstate New York. But that’s not the only place of interest for those passionate about arts and culture. The Stanley Theatre presents theater, music, comedy shows, and more, while a range of breweries, distilleries, and restaurants in and around the historic downtown appeal to lovers of food and drink.

Retirees interested in history will find plenty in Oneida County, which has a history dating back to the colonial era. The county has an impressive 92 arts and entertainment establishments to keep residents busy.

Close to the Adirondack Mountains, Utica is a wonderful starting place for those interested in hiking, biking, winter sports, and other outdoor activities. Further, with a relatively low climate risk level by FEMA, Oneida County is not likely to experience significant impacts from climate change in the near term.

The Bottom Line

Utica is often overlooked by those looking to retire in the northeast. However, this small city has an impressive combination of affordability relative to the region and the entire country more broadly. It offers easy access to health care and plenty of arts, culture, and outdoor recreation opportunities to cater to various interests. Though it may be an under-the-radar option, it’s worth considering Utica, New York, as a potential retirement destination.

Fact checked by Suzanne Kvilhaug

As Americans juggle the rising cost of living, the decline of pensions, longer lifespans, and other complex factors, median retirement savings stand at only $82,000—far below the $1.5 million that Americans believe is enough to retire comfortably.

Taking the time to improve your longevity literacy can be worth the effort—it could help you get your retirement on track. Here’s what you need to know.

Key Takeaways

• Longevity literacy is knowing the length of your lifespan and how it will impact your retirement planning.
• To make sure you don’t outlive your savings, be realistic about how long you’ll need to be in the workforce. You may need to work longer than you previously thought.
• You can also improve your skills, which may bring in more income or more types of income.
• Invest based on the stage of life that you’re in. In general, when you’re young, stocks should comprise most of your portfolio. As you age, some stocks should be replaced by bonds.

What Is Longevity Literacy?

Longevity literacy is knowing how long you’re likely to live, particularly in relation to retirement planning. It includes knowing not just life expectancy averages but also the likelihood of living past certain ages and the financial implications of an increased lifespan for your quality of life in retirement.

Some experts believe that those with low longevity literacy tend to be less financially secure than they might think. In fact, a 2023 TIAA Institute survey found that most American adults have poor longevity literacy—meaning they couldn’t tell you the life expectancy of a 60-year-old in the U.S.

The TIAA Institute says its mortality tables factor in a tendency toward longer life expectancy due to factors such as education level, type of work a person did, the amount they made, and their access to medical care. According to their data, they assume a 67-year-old will live, on average, another 23 years, with a 25% chance of living 28 years and a 10% chance of making it all the way to age 100. That means saving more for retirement than many people do.

Tips for Building Savings That Outlive You

To answer the question of how long you’re going to live, you can use a life expectancy calculator, like the one provided by the Social Security administration. Simply enter your sex and date of birth, and you’ll learn how many years, on average, you have left, and the age you’ll be when you die. This information, while a bit morbid, is crucial for retirement planning. But be aware it may underestimate your number based on all the same factors that TIAA takes into account.

Knowing your number will help you build financial resilience and cultivate a stronger quality of life. 

“The years you spend planning for and living in retirement are two fundamentally different seasons of your life—and can be equally long,” says Michael Kuplic, CRPC, a financial advisor at Ameriprise.

The following tips can help you build a healthy nest egg and be better prepared for the number of years you’ll be in retirement.

1. Increase Your Retirement Savings

While it’s easier said than done, contributing more to your savings account will help bridge the gap between your targeted amount and the actual outcome. To do so, it’s important to set up a plan based on how you would like to live in retirement. 

“While having enough money for retirement is important, it is also imperative to ask yourself, What am I retiring to?”, Kuplic says. “Knowing what you truly want and need out of retirement is the first step in designing a specific plan to turn those wishes into action.”

Auto-enrollment plans are another avenue for building your retirement savings. You can structure these so that contribution amounts auto-escalate over time. As a general rule of thumb, try to contribute at least 15% of your paycheck. At minimum, contribute enough to qualify for your employer’s matching contribution.

2. Consider Working Longer

Working for longer is a great way to build financial stability in retirement. You might expand your skillset, move into a consultant-type role, or take on part-time opportunities.

Note

Working in your ’60s isn’t uncommon.

According to a study from the Pew Research Center, about one in five (nearly 20%) of American workers are 65 or older. That’s nearly double what it was three decades ago. And those age 65 and older report greater job satisfaction compared to younger generations.

3. Invest Based on Your Life Stage

Making the most out of your retirement savings involves adjusting your investment strategy based on your life stage. 

“These two phases have fundamentally different goals, risks, and complexities, often needing separate investing and financial planning strategies,” Kuplic says.

Equities historically offer higher returns than bonds. You can afford to place more of your diversified portfolio in stocks when you’re younger. As you age, you’ll need to shift the mix toward bonds. For example, short-term bonds can provide an income stream in retirement. 

It may be a good idea to consult a financial professional to guide you.

The Bottom Line

As lifespans grow longer, the average expected retirement age among people who haven’t retired yet is rising. In 2022, it was 66 years old (compared to 60 years old in 1995), according to a Gallup poll. By contributing more to your retirement account(s), working longer, and investing based on your life stage, you can improve your chances of success during your retirement years.

Fact checked by Suzanne Kvilhaug

Your 401(k) balance is important, but it’s not the best indicator of whether you’re on track for retirement. Instead, your rate of return tells you how efficiently your investments are growing over time. A strong return means your money is working harder for you—regardless of short-term market fluctuations.

Understanding this number can help you make smarter decisions and maximize your savings. Here’s why your rate of return matters, how to interpret it, and what to do if yours seems a bit low.

Key Takeaways

• Your 401(k) balance fluctuates with the markets, but your rate of return shows how well your investments are growing over time.
• Comparing returns to coworkers or the stock market itself can be misleading. It’s better to focus on your own investment strategy and retirement plan.
• If your rate of return seems low, assess your investment mix, fees, and long-term goals before making changes.

Why Rate of Return Matters More Than Balance

Your 401(k) balance only tells you how much money is in your account today. It’s a snapshot in time. Your rate of return, on the other hand, reflects how your investments have performed over time. It accounts for market fluctuations and is typically calculated on an annual basis. Even if the market dips, a solid rate of return means you’re still on track.

“I don’t want to minimize the importance of balance because, ultimately, if your balance isn’t big enough, you may not be able to spend enough,” said Chris Kampitsis, a Wealth Advisor and Financial Services Executive at Barnum Financial Group. “But rate of return ultimately indicates how hard your money is working for you. As investors, we want our money compounding, earning interest, and growing over the years.”

Common Misconceptions About Rate of Return

Many investors misjudge their returns, often comparing them to others or to benchmarks like the S&P 500. Here are some common mistakes:

• Comparing returns to coworkers: Different asset allocations and risk levels mean individual returns will vary.
• Benchmarking against the S&P 500: If your portfolio isn’t 100% stocks, this comparison doesn’t give you a full picture.
• Panicking over short-term drops: Long-term growth matters more than daily or yearly fluctuations.

“Very often investors will focus on their rate of return in comparison to the person at the cubicle or office next to them. They might compare in comparison to a benchmark like the stock market, i.e., the S&P 500. But they don’t necessarily give context to their particular asset allocation,” Kampitsis explained. “So that’s not a fair measuring stick to hold yourself to.”

Instead of comparing your rate of return to others, focus on whether your investments align with your long-term retirement goals.

How Risk Tolerance and Life-Stage Factor Into Your Rate

Your personal comfort level with risk tolerance and the stage of life you’re in can directly influence how aggressive or conservative your portfolio should be.

You may face a choice between taking on more risk for higher long-term returns or opting for a more conservative approach that sacrifices some growth for stability.

“In general, our rate of return should compensate us for the level of risk we’re taking on over the long term,” Kampitsis explained. “A more aggressive, more equity-focused investor should have a higher long-term rate of return, but they will also have much more deviation from that long-term average in any one or two given years.”

Important

Adjusting your risk tolerance based on short-term market conditions can backfire. Selling assets in a downturn locks in losses, while staying invested allows for recovery.

What to Do If Your 401(k) Rate of Return Seems Low

If you’re concerned about your rate of return, consider these steps.

Review Your Investment Choices

“Number one, we want to figure out why it’s under-performing,” says Kampitsis. He recommends that investors look at their invested funds and how each is performing versus their benchmarks, not just the S&P 500. Also, check if your plan includes high-fee or under-performing funds.

“Most 401(k) plans have fiduciary oversight, so funds should be monitored for reasonable fees and performance,” says Kampitsis. “But it’s not always the case. Not every menu is going to be perfect. Some funds will under-perform, that’s just how that works.”

Assess Your Asset Allocation

Make sure your investment mix aligns with your risk tolerance. Asset allocation refers to how your portfolio is divided among asset classes, like stocks, bonds, and cash. Be cautious with target-date funds as they may shift too conservative, too soon.

Focus on the Long-Term Goals

Your 401(k) is designed for decades, not short-term gains. Try to avoid “emotional investing,” which can lead to buying high and selling low.

“What is your distance to retirement and how long do you anticipate your retirement lasting once you’re there? While some of your money you will spend the first day of retirement, it’s important to remember that this is still a very long term journey,” Kampitsis warned.

Taxes, Fees, and Other Hidden Factors

Even a strong rate of return can be eroded by fees and taxes. 401(k) fees reduce your earnings over time, especially if your plan has high expense ratios. Taxes on withdrawals can also impact your net income, especially if you’re in a higher tax bracket.

“Fees are definitely a major component because ultimately that does represent a drag on our rate of return that, when compounded over many years, is a substantial number,” Kampitsis noted. “Taxes similarly can ultimately be a huge impediment to us netting the right amount of money that we need.”

If you’re unsure about your 401(k) fees or tax implications, a financial planner can help you optimize your strategy.

The Bottom Line

Your 401(k) rate of return is one of the most important numbers on your statement because it shows how effectively your money is growing. Rather than comparing your returns to others, focus on your own investment mix and long-term goals.

If your returns seem low, take a closer look at your fund choices, risk level, and fees. To reduce the impact of taxes and fees, consider Roth contributions and diversification.

If you review your 401(k) regularly and make thoughtful adjustments, you can stay on track and build a more secure retirement.

Reviewed by Charlene Rhinehart
Fact checked by Vikki Velasquez

Current Assets vs. Fixed Assets: An Overview

Every company owns a variety of resources for different purposes. Two of the main asset categories listed on a company’s balance sheet are current assets and fixed assets.

The balance sheet shows a company’s resources or assets while also showing how those assets are financed; whether through debt, as shown under liabilities, or through issuing equity, as shown in shareholder’s equity.

Current assets are short-term assets held for less than a year. Fixed assets are typically long-term assets, held for more than a year. However, there are other differences.  

Key Takeaways

• Current assets are used in the day-to-day operations of a business. Inventory is an example.
• Fixed assets are used over the long term. Office furniture is an example.
• Knowing where a company is allocating its capital and how it finances those investments is critical information for making an investment decision.
• It’s also important to know how the company plans to raise capital for its big projects; whether the money comes from a new issuance of equity or financing from a bank or private equity firm.

Current Assets

Current assets are defined as resources that can be converted into cash within one fiscal year or one operating cycle. They are used in the day-to-day operation of the business.

Importantly, they are considered liquid assets, meaning they can be readily converted into cash.

Examples of current assets include:

• Cash and cash equivalents, such as certificates of deposit
• Marketable securities, such as equity or debt securities
• Accounts receivable, or money owed to the company for selling their products and services to their customers 
• Inventory
• Prepaid expenses

Fixed Assets

Fixed assets are business resources that have a life of more than one year. They are recorded on the balance sheet and listed as property, plant, and equipment (PP&E).

Fixed assets are long-term assets and may be referred to as tangible assets, meaning they can be physically touched. 

Examples of fixed assets include:

• Vehicles like trucks
• Office furniture
• Machinery
• Buildings
• Land

Key Differences

Fixed assets undergo depreciation, which divides a company’s cost for non-current assets to expense them over their useful lives.

Depreciation helps a company avoid a major loss on its balance sheet when it makes a fixed asset purchase by spreading the cost out over many years. Current assets are not depreciated because of their short-term life.

Noncurrent assets (like fixed assets) cannot be easily liquidated to meet short-term operational expenses or investments. Fixed assets have a useful life of over one year, while current assets are expected to be liquidated within one fiscal year or one operating cycle. Companies can rely on the sale of current assets if they quickly need cash, but they cannot with fixed assets.

For example, if the economy is in a downturn and a company is not making any profits but still needs to make a debt payment next month, it can sell its marketable securities within a few days to raise the cash. It could not sell a factory or a parcel of land within a few days.

Special Considerations

Capital investment is money invested in a company with the goal of advancing its commercial objectives.

Capital Investment and Fixed Assets

Capital investment decisions are major planned business expenditures that include fixed assets. The money to fund these ventures can come from many sources, including angel investors, banks, equity investors, and venture capital firms.

Capital investments might include purchases of equipment and machinery or a new manufacturing plant to expand a business.

In short, capital investments for fixed assets mean a company plans to use the assets for several years. These purchases are also known as capital expenditures.

Capital Investment and Current Assets

Although capital investments are typically used for long-term assets, some companies use them to provide working capital. Current asset capital investment decisions are short-term funding decisions essential to a firm’s day-to-day operations. Current assets are essential to the ongoing operation of a company to ensure it covers recurring expenses. 

Capital investment decisions require analysis of many components, such as project cash flows, incremental cash flows, pro forma financial statements, operating cash flow, and asset replacement. The objective is to find the investment that yields the highest return while ignoring any sunk costs.

Return on invested capital (ROIC) is a calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments. Return on invested capital gives a sense of how well a company is using its money to generate returns.

There are several methods used in determining how to allocate capital to one investment versus another, including incremental analysis, whereby a company can calculate the differences in cost between different investment options.

What Are a Business’s Assets?

A business’s assets include everything of value that it owns, both physical and intangible. Physical assets include current assets, like its inventory, and fixed assets, such as the factory equipment that the company uses to build its products. Its intangible assets include trademarks, patents, mineral rights, the customer database, and the reputation of the brand.

Intangible assets are difficult to assign a book value, but they are certainly considered when a prospective buyer looks at a company.

How Are Tangible Assets Recorded on a Balance Sheet?

Long-term tangible assets are reduced in value over time through depreciation. Other tangible assets are recorded on a company’s balance sheet at the cost paid to acquire them.

How Are Intangible Assets Recorded on a Balance Sheet?

Intangible assets are recorded on a balance sheet only if they are acquired by the company rather than developed internally. They are listed as long-term assets and valued according to their price and amortization schedule.

The Bottom Line

Every company has both current assets and long-term assets. The stock on the shelves is a current asset, ready for immediate sale. The long-term assets include the business premises and all of the physical objects and machinery that the company needs to keep the business running.

Reviewed by Lea D. Uradu
Fact checked by Jared Ecker

The early part of the 2000s was a godsend for many consumers. Credit flowed with relative ease, making it nearly impossible to be declined for a loan, credit card, or mortgage. Subprime loans were rampant, giving investors and mortgage lenders big profits, but they also helped many people live out the American dream by letting them become homeowners.

While they were a blessing for many people, the economic evils of that period helped trigger the mortgage crisis and the Great Recession. As a nation, we had to pay for our indiscretions, resulting in five consequences due to the subprime mortgage crisis.

Key Takeaways

• The subprime mortgage crisis occurred following lofty real estate values and easy lending for borrowers with low or subprime credit scores.
• The Great Recession ensued, leading to high unemployment and foreclosure rates.
• Although the economy has improved since then, nearly 25% of Americans say they live paycheck-to-paycheck.

The Subprime Crisis: An Overview

Just before the subprime mortgage meltdown, the economy was on the verge of a recession because of the tech bubble. Companies in this sector saw a sharp increase in their valuations, and investment in the industry was also very lofty. In response to this, central bank authorities tried to stimulate the global economy by cutting interest rates. As a result, investors hungry for higher returns began turning to riskier investments.

Mortgage lenders did, too, as they started approving mortgages to people with poor credit scores. Some of these people also had no income and no assets. Lenders repackaged these loans into special investment vehicles—mortgage-backed securities (MBSs)—and sold them to investors.

In addition, lending companies offered consumers risky subprime loans with high interest rates that borrowers could not repay. Brokers also aggressively marketed loan products that they knew would fail.

However, as demand heightened, the housing bubble collapsed, wreaking havoc within the global economy.

Find out the 5 steps to scoring a mortgage.

The Rise of the Slumburb

The crisis spurred an avalanche of home foreclosures that left large sections of once-prosperous suburban neighborhoods vacant and in disrepair. According to the Brookings Institution, the suburbs also saw a sharp rise in poverty, which housed roughly one-third of the nation’s population living below the poverty line.

This phenomenon was perhaps most noticeable in and around Midwestern cities such as Grand Rapids, Michigan, and Youngstown, Ohio. The shift from quiet suburbia to troubled neighborhoods resulted from a combination of factors, including the housing bubble and rampant foreclosures, immigration, changes in the workforce—income levels and higher unemployment—as well as a spike in the population.

More work remains to help low-income earners since nearly 37 million people, or 11% of the U.S. population, were in poverty as of 2023.

The Foreclosure Mess

Besides putting people in the position of having to find somewhere else to live, foreclosure can potentially damage the prospects of a comfortable retirement because a home often represents a sizeable asset. Also, foreclosure can damage a homeowner’s credit score or creditworthiness.

The wave of foreclosures that accompanied the economic meltdown was not as high as the subprime crisis, but people continued to lose their homes. However, during the height of the COVID-19 pandemic, the federal government set a moratorium on foreclosures and evictions, and while the moratorium ended in July 2021, some states extended it.

Perhaps due to these extensions, foreclosures fell to all-time lows in 2021 and edged higher in 2022 but remain near historic lows.

Unemployment

The national unemployment rate hovered near the 10%-mark following the subprime mortgage meltdown but has been trending downward since then.

Although recovery wasn’t easy, the economy has recovered with a 4.2% unemployment rate as of March 2025, compared to the 10% unemployment rate in 2009.

Tighter Credit

Like low unemployment, quick home loan approvals, and unfettered access to credit are things of the past. Whereas just about anybody could get a credit card or be approved for a mortgage before the economy cratered, even those considered well-qualified borrowers can have a hard time getting approved. By some estimates, only one out of 10 applications for a home loan was approved following the market crash.

Tougher Time Making Ends Meet

The recovery has been challenging since the crisis hit, especially for the middle class. In fact, 49% of Americans surveyed by the First National Bank of Omaha said they would probably live paycheck-to-paycheck in 2020.

During a late 2021 survey, more than one in four adults said they found it very difficult to cover their usual household expenses. This information is indicative of the effects of the COVID-19 pandemic, which caused severe financial upheaval for millions of Americans.

In 2024, nearly 25% of U.S. households reported living paycheck-to-paycheck.

Warning

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

What Was the Mortgage Crisis?

The mortgage crisis, actually referred to as the “subprime” mortgage crisis, occurred after real estate markets were oversaturated with high-value homes sold to individuals who were less than creditworthy but approved for large mortgage loans.

The real estate market plummeted, and these individuals could no longer afford mortgage payments on homes whose values had fallen during the U.S. recession of 2007 to 2009.

What Is Foreclosure?

Foreclosure refers to the legal process that occurs when a lender tries to recover the money owed on a defaulted loan. When this occurs, the lender takes ownership of the property owned by the borrower in default. A borrower must have missed a specific number of payments before a foreclosure is set into motion.

What Does Underwater in Your Home Mean?

The term “underwater” on your mortgage means you owe the mortgage lender more than your home is worth. From 2007 to 2009, many homeowners found themselves “underwater” on their mortgages when real estate values fell, and interest rates on mortgage payments rose.

The Bottom Line

The mortgage crisis or subprime mortgage crisis occurred following excessive real estate values combined with easy-lending policies that offered mortgages to less than-creditworthy borrowers.

As the real estate market crashed, unemployment and foreclosure rates soared. Although the economy has improved markedly since then, millions of people struggle with poverty or live paycheck-to-paycheck.

Learn how to calculate the ratio of marginal consumption to marginal income

Fact checked by Suzanne Kvilhaug
Reviewed by Caitlin Clarke

What Is Marginal Propensity to Consume (MPC)?

Marginal propensity to consume (MPC) is the proportion of extra income a person spends instead of saving after an increase in income. The term and its formula are based on observations made by famed British economist John Maynard Keynes in the 1930s during the Great Depression. He noted that individuals have the propensity or tendency to consume more when their income increases. Marginal propensity to consume is useful because it relates to how a government stimulus might affect the economy.

Key Takeaways

• Marginal propensity to consume (MPC) measures how much more individuals will spend for every additional dollar of income.
• MPC is calculated as the ratio of marginal consumption to marginal income.
• MPC is related to the so-called Keynesian multiplier, where MPC can help predict the economic growth from a government stimulus.
• The multiplier effect refers to a chain reaction of consumption by various entities brought about by an initial increase in income.
• An MPC of one means a person spent all additional income. An MPC of zero means they spent none of it and, instead, invested it.

How to Calculate Marginal Propensity to Consume (MPC)

The formula used to calculate the marginal propensity to consume is change in consumption divided by change in income:

MPC = ∆C/∆Y

Where:

• ∆C = Change in spending
• ∆Y = Change in income

To make this calculation, you first must determine the change in income and the resulting change in spending (consumption).

For example, if your income increases by $5,000 and spending increases by $4,500, the calculation would be MPC = 4,500/5,000. For this brief example, your MPC would be .9, or 90%.

Origins of Marginal Propensity to Consume

Keynes formally introduced the concept of marginal propensity to consume in his 1936 book The General Theory of Employment, Interest, and Money. Keynes argued that all new income must either be spent (consumption) or invested (savings).

Keynes understood that classical thinking, which held that supply would create its own demand, did not always work. He noted that the main problem was a lack of aggregate demand. He believed that government spending could add to aggregate demand and that this fiscal stimulus would create a multiplier effect. This effect would result from increases in income and consumer spending that caused a chain reaction of spending by various other beneficiaries of the spending.

Despite the relative simplicity of Keynes’ argument about identifying MPC, macroeconomists have not been able to develop a universally accepted method of measuring MPC in the real economy. Much of the problem is that new income is considered to be both a cause and an effect on the relationship between consumption, investment, and new economic activity, which generates new or additional income.

Example of Marginal Propensity to Consume

Imagine an employee who works for Company ABC. They receive a raise in salary and increase their spending. What is MPC in this instance? Since the formula for MPC is change in consumption divided by change in income, you must first determine those two changes.

If the worker’s salary rose from $65,000 to $75,000, the change in income is $10,000 ($75,000 minus $65,000).

For the change in consumption, you’ll need to determine levels of spending before and after the salary increase. Imagine the employee spent $60,000 of the $65,000 before the increase. They put the remaining $5,000 into savings. After the salary rose to $75,000, they spent $65,000. The change in consumption is $5,000 ($65,000 minus $60,000).

To calculate the marginal propensity to consume, insert those changes into the formula:

• MPC = ∆C/∆Y
• MPC = 5,000/10,000
• MPC = .5 or 50%

This means that for the given period, the individual spent 50% of their added income on goods and services.

Note

MPC tends to vary according to income. Typically, the MPC is lower at higher incomes and higher at lower incomes.

Interpreting Marginal Propensity to Consume

An MPC equal to one means that a change in income (∆Y) led to the same proportionate change in consumption (∆C). That is, a person spent 100% of the additional income on goods and services and saved none of it. There are several broad ways to interpret MPC calculations:

• An MPC of less than one means that a change in income produced a proportionally smaller change in consumption. A person spent less than the added income received.
• An MPC equal to zero means that a change in income led to no change in consumption. So, a person spent none of the change in income and, instead, put it into savings.
• An MPC that is higher than one means that additional income led to spending that surpassed the amount of additional income.

Special Considerations When Calculating MPC

When calculating MPC, there are some nuances you should keep in mind. First, think of your time frame. In the short term, individuals may respond differently to changes in income compared to the long term. Short-term windfalls like bonuses or tax refunds often result in higher MPCs as people are more likely to spend this extra income immediately.

MPC may also vary based on income or wealth. Lower-income households typically have a higher MPC because they allocate a larger proportion of their income to basic necessities like food, housing, and healthcare. Higher-income households tend to have a lower MPC as they allocate more of their income to savings, investments, and discretionary spending.

MPC calculations can vary based on debt preference as well. People with high levels of debt may prioritize debt repayment over consumption when they receive additional income. This means people with more debt who prioritize payments have a lower MPC.

As with many economic factors, there are cultural norms and individual behavioral tendencies that influence the MPC. In some cultures, saving may be emphasized over consumption. In other contexts, certain genders may have certain behavioral tendencies. It’s important to understand the broader context of who the MPC is being calculated for as any given collection of individuals may lead to varying results for reasons other than economical.

Lastly, the government can influence the aggregate MPC. Governments may want to encourage spending or may want to dissuade consumers from spending. It’s important to understand broader macroeconomic stances when looking at MPC data, especially over time.

MPC and Economic Policy

MPC plays an important role in broader macroeconomic conversations and strategic policy development.

During times of economic downturn or recession, the Federal Reserve may initiate quantitative easing to stimulate economic growth by injecting liquidity into the financial system. The expectation is that the lower cost of debt will encourage consumers to spend more, thereby increasing aggregate demand and supporting economic recovery.

Therefore, the effectiveness of government policy in stimulating consumer spending depends partly on the MPC. If households have a high MPC, they are more likely to spend the additional income generated which helps with economic development.

Conversely, if the MPC is low and households choose to save a significant portion of their additional wealth or income, the stimulative effect of monetary policy may be limited. If MPC is low, governments may need to further incentivize consumers to spend in order to stimulate the economy.

What Is Meant by Marginal Propensity to Consume?

Marginal propensity to consume is a figure that represents the percentage of an increase in income that an individual spends on goods and services.

What Does a the Value of 0.7 MPC Indicate?

A high MPC (closer to 1.0) indicates that the proportion of increased income spent on goods and services approached the actual amount of that increase. Conversely, a low MPC (closer to 0.1) means an individual spent less of that increase in income and instead, put the money into savings.

What Causes MPC to Increase?

Marginal propensity to consume increases when consumption represents more of the amount of the added income rather than less. In other words, a person spends more and saves less. Typically, lower income levels produce a higher MPC than higher income levels.

The Bottom Line

The marginal propensity to consume is the proportion of added income that is spent vs. saved. To calculate the MPC, you need to know the change in income as well as the change in spending (or consumption).

Calculating an aggregate marginal propensity to consume can show how sensitive households or economies are to increases in income.

Fact checked by Hans Daniel Jasperson
Reviewed by Amy Soricelli

Is selling life insurance a good career path? Actually, selling life insurance is a tough way to make a living, and it’s even more difficult to sustain a lucrative, long-lasting career. Some industry analysts report agents burning out within a year.

Life insurance agents face many challenges. The pay is usually straight commission. Finding qualified customers yourself is difficult, and the few leads that your company may give you have usually been contacted by agents already.

Still, selling life insurance has its advantages, too.

Read on to find out more about a career in life insurance sales.

Key Takeaways

• Successful careers in selling life insurance take time and perseverance. 
• Life insurance agents are paid in commissions and must find customer leads on their own in a competitive market.  
• Life insurance sales can add up to passive income, as once you sell a policy, you continue to earn a commission on it, providing the owner of the policy pays their monthly premiums. 

What Is Insurance Sales?

Insurance sales is selling people the various types of insurance that they need. This can include life insurance, as well as car, health, disability, and home insurance. People who sell insurance policies are known as insurance agents or insurance brokers. Insurance agents might focus on different areas of insurance sales, such as selling to companies or to individuals.

Insurance agents can set up shop in a variety of ways. Some may work for larger brokerage firms or agencies, selling the different policies they offer. They might also work for individual insurance carriers or be self-employed. It is more common for insurance agents to work on commission than to make a salary. This means that they make money when they make a sale.

Advantages and Disadvantages of Selling Life Insurance

On the bright side, selling life insurance offers a few benefits that are difficult to find in other careers. First, life insurance sales jobs are abundant and easy to find. Second, commission percentages are very high compared to other insurance sales, such as health insurance.

Best of all, life insurance agents get paid commission renewals for as long as a sold policy is in force. This creates a passive income stream.

However, even when you locate a good prospect, the product itself is hard to sell. People are loathe to discuss or even acknowledge their own mortality. Moreover, unlike a new car or cellphone, life insurance provides none of the instant gratification that can cause people to make impulse purchases.

Pros

• Many job prospects

• Potential for high salary

• Renewal commissions

Cons

• Commission-based pay

• Effort of customer acquisition

• Difficult sales process

Disadvantages Explained

Commission-Based Pay

The majority of life insurance companies classify their agents as independent contractors. They offer neither base salaries nor benefits. This means an agent can work a full week, but if the agent puts no sales on the books, they go without a paycheck.

The upside to not being classified as an employee is the company cannot force you to work set hours. You set your own schedule. That said, life insurance sales, particularly during the first few years, requires working a ton of hours if you want any chance at making a decent living. 

A few companies do offer employee status, which comes with a small base salary and benefits. Agents at these companies are held to rigid production quotas. Miss your monthly sales target more than once or twice and you could be shown the door.

Effort of Customer Acquisition

Finding qualified life insurance prospects is fraught with difficulty. Even with harnessing the power of the internet, good leads are hard to come by. Lead vendors abound online, but most of their leads are nonexclusive, meaning they get sold to multiple agents.

Exclusive leads, when you can find them, are very high in price. So with exclusive leads, your close rate—the percentage of leads you actually sell—has to be phenomenal just to break even. And employers who provide leads almost always make you take a lower commission in return. 

For these reasons, many life insurance agents drum up business the old-fashioned way: cold-calling and door-knocking. These methods still work, even in the 21st century, but being a successful insurance agent requires a lot of perseverance and a very thick skin.

Difficult Sales Process

Even when pitching to the most-qualified prospect, do not assume you have an easy sell. Life insurance is a very difficult product to sell. Simply getting your prospect to acknowledge and discuss the fact they are going to die is a hard first step. When and if you clear that hurdle, your next task is creating urgency so they buy right away.

This is also difficult, because the product provides no instant gratification and leaving the appointment without signed paperwork almost always means you have lost that prospect forever.

On the flip side of all of these difficulties, there are benefits, too.

Advantages Explained

Many Job Prospects

Compared to most finance careers, becoming a life insurance agent is easy. No educational requirements exist beyond a high school diploma. Some states require you to take a licensing course and pass an exam, but these are quite manageable.

Jobs selling life insurance are everywhere. Online job search sites are full of them. Because most companies offer commission-based pay with no guaranteed income, they have no incentive to limit hiring. They offer jobs to anyone interested, and hope a small percentage of hires become productive agents.

Important

Most companies will reimburse you for the cost of obtaining your license—but only after you sell a certain amount of premiums.

Potential for a High Salary

By far, life insurance sales offer the largest commissions in the insurance industry. For example, most auto insurance salespeople earn a percentage of the policy that is purchased. With life insurance, you earn a percentage of the policy when it is sold, and then you get another commission each time it is renewed.

The U.S. Bureau of Labor Statistics reports that insurance sales agents earn a wide range of salaries. The bottom 10% only earn an estimated $35,000 a year, but in the high range (90%) earn $134,000. The median salary comes in at over $59,000 a year.

In addition to high commissions, some life insurance companies advance their agents a specific amount of commission based on calculating the agent’s earning potential rather than making them take it as earned, but others do not. So, for example, on a $100 per month policy, with a six-month advance, you would receive a check for $600 the day the policy is issued.

The downside occurs if the policy lapses within the first six months; if that happens, your employer charges back the unearned portion of your advance.

Renewal Commissions

The commission you earn on a life insurance policy sale is not limited to the first year. Rather, you keep getting paid as long as the policy is in force. Your commission percentage on a policy drops after the first year, but you keep earning 5% to 10% as long as the policyholder pays their monthly premium. This is the passive income you receive each month without even having to get out of bed.

Most life insurance agents do not last a year in the business, and even fewer make it five years. The ones who persevere, however, are rewarded immensely with renewal commissions.

How to Excel at Insurance Sales

Selling insurance is a business that depends on developing good relationships with potential clients. This leads to more sales, as well as potential referrals down the line. There are several ways to develop these professional relationships.

Learn About Customer Service

If you’ve worked in customer service already, those skills will translate directly to selling insurance. If not, you may want to find a course or interview successful agents to learn more about how to interact with customers.

Focus on Solving Problems

When a customer comes to you, they don’t necessarily know what they want to buy, but they know they have a problem that needs to be solved. If you can demonstrate the ways your product can solve their problem, you’re more likely to make a sale.

Build a Network

Even outside an office setting, you can build a professional network. It’s important to focus on building relationships rather than sales. Connect with more experienced agents who may be able to mentor you or provide advice about starting your career. As you build your network, you will find that many of these relationships can help you expand your business.

Make a Professional Impression

If you’re working in an office, it’s easy to know how to make a professional impression. But if you’re self-employed, meeting with clients at places other than an office, or connecting over the phone, it can be harder to do. Consider how you dress and communicate in order to present a professional appearance.

Play the Long Game

It will often take a lead multiple times of interacting with you before they are ready to make a purchase. Focus on developing a relationship and understanding their needs. If you are willing to be patient and play the long game, you are more likely to secure a long-term customer who is willing to refer you to other potential customers than if you are pushy or too focused on making a sale.

Is Selling Life Insurance a Good Way to Make Money?

You can make a good living selling life insurance, especially if you continue to earn commissions on policies you have already sold. However, it is not an easy career, as it requires constantly working to find leads, build relationships, and make sales.

How Much Money Can You Make Selling Life Insurance?

Annual income for a life insurance agent can vary from around $35,000 per year (bottom 10%) to over $134,000 per year (top 10%). The median salary is about $59,000. How much money you can make selling life insurance will depend on a variety of factors, including your ability to convert leads to customers.

What Is the Most Profitable Type of Insurance to Sell?

On average, life insurance is one of the most profitable types of insurance to sell. Whether you are selling them to employers or individuals, these policies tend to be large, with significant annual premiums. In the first year, a life insurance agent can earn anywhere from 30% to 90% of this premium, along with 5% to 10% of premiums paid in later years.

The Bottom Line

Life insurance agents make a living selling insurance policies to individuals and businesses. They are generally paid on commission and must find customer leads on their own. Being successful in this type of career takes time and perseverance. However, once you build a professional network and start to acquire clients, life insurance sales can add up to passive income. Once you sell a policy, you can continue to earn a commission on it as long as the owner continues to pay their monthly premiums. 

Reviewed by Ebony Howard

The tax law for Canadian homeowners differs from the United States, including the tax treatment of interest on mortgages for a principal private residence.

For homeowners in Canada, mortgage interest is not tax-deductible, but realized capital gains from the sale of a home are tax-exempt.

Canadians can effectively deduct mortgage interest, but it involves increasing your assets by building an investment portfolio, decreasing your debts by paying off your mortgage faster, and improving your cash flow by paying less tax. Effectively, you would increase your net worth and cash flow simultaneously.

Key Takeaways

• Canadians can effectively deduct mortgage interest by building their investment portfolios.
• A Canadian homeowner can borrow money against their existing mortgage to purchase income-producing investments and claim the interest on the loan as a tax deduction.
• This strategy calls for the homeowner to borrow back the principal portion of every mortgage payment and invest it in an income-producing portfolio.

How to Create a Tax-Deductible Mortgage Strategy

Every time you make a mortgage payment, a portion of the payment gets applied to interest, while the rest is applied to the principal. That principal payment increases the equity in the home and can be borrowed against, usually at a lower rate than you’d get for an unsecured loan.

If the borrowed money is used to purchase an income-producing investment, the interest on that loan becomes tax-deductible. This makes the effective interest rate on the loan even better. This strategy calls for the homeowner to borrow back the principal portion of every mortgage payment and invest it in an income-producing portfolio. Under the Canadian tax code, interest paid on monies borrowed to earn an income is tax-deductible.

As time progresses, your total debt remains the same, as the principal payment is borrowed back each time you make a payment. However, a larger portion of it becomes tax-deductible debt. In other words, it’s considered good debt and less remains of non-deductible or bad debt.

Traditional vs. Tax-Deductible Mortgage Strategy

To better demonstrate the strategy, we can compare a traditional mortgage payoff to the tax-deductible mortgage strategy. First, we look at an example of a Canadian couple who pays off a mortgage traditionally and contrast that to the tax-deductible method.

Traditional Mortgage

Suppose Couple A buys a $200,000 home with a $100,000 mortgage amortized over 10 years at 6%, with a monthly payment of $1,106. After the mortgage is paid off, they invest the $1,106 that they were paying for the next five years, earning 8% annually. After 15 years, they own their home and have a portfolio worth $81,156.

Tax-Deductible Mortgage Strategy

Now, let’s say Couple B buys an identically priced home with the same mortgage terms. Every month, they borrow back the principal and invest it. They also use the annual tax return they receive from the tax-deductible portion of their interest to pay off the mortgage principal.

They then borrow that principal amount back and invest it. After 9.42 years, the mortgage will be 100% good debt and will start to produce an annual tax refund of $2,340, assuming a marginal tax rate (MTR) of 39%. After 15 years, they own their home and have a portfolio worth $138,941. That’s a 71% increase.

Note

Canadians must submit their annual tax returns to the Canada Revenue Agency (CRA) by April 30 each year.

Tax-Deductible Mortgage Benefits

This strategy aims to increase cash flow and assets while decreasing liabilities, creating a higher net worth for the individual implementing the strategy. It also aims to help you become mortgage-free faster and start building an investment portfolio faster than you could have otherwise.

• Become mortgage-free faster: You are technically mortgage-free when your investment portfolio reaches the value of your outstanding debt. This should be faster than a traditional mortgage because the investment portfolio should grow as you make mortgage payments. The mortgage payments made using the proceeds of the tax deductions can pay down the mortgage even faster.
• Build an investment portfolio while paying our house down: This is a great way to start saving. It also helps free up cash that you might otherwise not have been able to invest before paying off your mortgage.

Know the Risks of the Tax-Deductible Mortgage Strategy

This strategy may not be for everyone since it can be risky if you don’t know how to navigate it. Missing or skipping a mortgage payment could derail any progress. Borrowing against your home can be psychologically difficult. Worse, if the investments don’t yield the expected returns, this strategy could yield negative results.

By re-borrowing the equity in your home, you are removing your cushion of safety if the real estate or investment markets, or both, take a turn for the worse. By creating an income-producing portfolio in an unregistered account, you may also face additional tax consequences.

Be sure you consult with a professional financial advisor to determine whether this strategy is for you. If it is, have the professional help you tailor it to your and your family’s personal financial situation.

Example of a Tax-Deductible Canadian Mortgage

To explain this better, refer to the example below, where you can see that the mortgage payment of $1,106 per month consists of $612 in principal and $494 in interest.

As you can see, each payment reduces the amount owed on the loan by $612. After every payment, the $612 is borrowed back and invested. This keeps the total debt level at $100,000, but the portion of the loan that is tax-deductible grows with each payment. You can see in the above figure that after one month of implementing this strategy, $99,388 is still non-deductible debt, but the interest on $612 is now tax-deductible.

This strategy can be taken a step further: The tax-deductible portion of the interest paid creates an annual tax refund, which could then be used to pay down the mortgage even more. This mortgage payment would be 100% principal (because it is an additional payment) and could be borrowed back in its entirety and invested in the same income-producing portfolio.

The steps in the strategy are repeated monthly and yearly until your mortgage is completely tax-deductible. As you can see from the previous figure and the next figure, the mortgage remains constant at $100,000, but the tax-deductible portion increases each month. The investment portfolio grows with the monthly contributions and the income and capital gains it produces.

As seen above, a fully tax-deductible mortgage would occur once the last bit of principal is borrowed back and invested. The debt owed is still $100,000; however, 100% of this is tax-deductible now. At this point, the tax refunds that are received could be invested as well to help increase the rate at which the investment portfolio grows.

Warning

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

What Are the Mortgage Rates in Canada?

According to the Bank of Canada, the average interest rate for a five-year conventional mortgage was 6.49%. The average rates for a three-year and one-year conventional mortgage were 6.54% and 6.09% as of April 2025.

How Much of My Canadian Mortgage Interest Is Tax-Deductible?

The interest on your mortgage is 100% tax-deductible in Canada, provided the property is used for investment income purposes. This means that the property must be rented out and generate rental income for you (for the entire year) if you wish to claim the deduction for mortgage interest.

Can U.S. Homeowners Claim Mortgage Interest on Their Taxes?

Homeowners in the U.S. can deduct a portion of the interest on their principal residences to lower their taxable income. You can deduct the interest on the first $750,000 of your mortgage if you are a married couple filing jointly, a single filer, or a head of household. That amount drops to $375,000 if you are a married couple filing separately.

If your mortgage was incurred before Dec. 16, 2017, the previous limit of $1 million applies for married couples filing jointly, single filers, and heads of household, and $500,000 for married couples filing separately.

The Bottom Line

If you’re a homeowner in Canada, you may be able to use the equity in your principal residence and take out a loan to buy an investment property. Interest on a mortgage for income-driven properties is fully tax-deductible, which allows you to lower your tax liability and save some money. But just like any other venture, it’s important to outweigh the benefits and the risks. If this is something you’d like to investigate, consider talking to a financial professional before you make any decisions.

Why they did it and the impact it had

Reviewed by Michael J Boyle
Fact checked by Vikki Velasquez

During the modern era, Americans are accustomed to seeing a U.S. president run with the same vice president when seeking re-election. This was not always the case, as many presidents were re-elected to subsequent terms with a different second-in-command. The reasons for the changes varied and sometimes had an effect on the nation’s economic policies.

Key Takeaways

• In the early days of the U.S., the candidate who received the second greatest number of electoral votes became vice president.
• In some cases, the replacement of a vice president had an impact on economic and foreign policy.
• Nine vice presidents have ascended to the White House due to the death or resignation of an incumbent president.
• Franklin Roosevelt had three different vice presidents—a record.

Early Days of the Republic

The first president to have multiple vice presidents was Thomas Jefferson, who served two terms in office beginning in 1801. This was not Jefferson’s preference, but the Constitution originally did not require separate votes for the two offices and specified that the candidate who received the second greatest number of electoral votes would become vice president. This led to the possibility of the president and vice president being from different political parties.

Jefferson sought the support of Northern states in the election of 1800 and recruited Aaron Burr of New York as his symbolic vice-presidential running mate. Jefferson and Burr both received 73 electoral votes and the House of Representatives elected Jefferson to the presidency over Burr.

The Constitution was changed with the adoption of the 12th Amendment in 1804, which called for separate ballots for the two offices. Jefferson won re-election that same year with George Clinton as his official vice presidential running mate.

Jefferson’s having a different vice president for his second term had little impact. Clinton was also from New York and that undoubtedly helped Jefferson with Northern voters. Jefferson’s margin of victory was so large, the support seemed unnecessary.

Note

Burr did find his place in history in 1804 when, while still serving as vice president, he killed Alexander Hamilton in a duel in New Jersey.

VP Vacancies

James Madison succeeded Jefferson as president and also had different vice presidents during his eight years in office. Clinton ran as the vice-presidential candidate in the election of 1808 and served until his death in 1812. At that time, there was no process specified in the Constitution to replace a vice president and the office sat empty for almost one year.

Madison won re-election in 1812 with Elbridge Gerry as his vice president. Gerry was from Massachusetts and was chosen by Madison to cement support from the North. Gerry also died in office, leaving the post vacant for several years.

A Trifecta of Vice Presidents

Franklin Roosevelt served as President for three consecutive terms and was elected for a fourth, but died shortly after his fourth term began. Roosevelt took office in 1933 and remained in the White House until his death in 1945. He had three different vice presidents during his time in office, a record that still stands.

Roosevelt’s first vice president was John Nance Garner, who was elected along with Roosevelt in 1932 and 1936. Garner also sought the Democratic nomination as president in 1932 and threw his support and delegates behind Roosevelt in exchange for the vice presidency.

Roosevelt and Garner had good relations during their first term in office, but clashed over several major issues during the second term. Garner opposed Roosevelt’s efforts to pack the Supreme Court with additional judges and also publicly opposed Roosevelt’s pro-labor programs and other aspects of his New Deal agenda.

Henry Wallace was Roosevelt’s second vice president, elected along with him in the election of 1940. Wallace served one term as vice president and was replaced by Roosevelt in the election of 1944 by Harry Truman. Roosevelt succumbed to pressure from some elements of the Democratic Party, which considered Wallace too liberal.

Important

The decision by Roosevelt to replace Wallace with Truman had a major impact on the future course of U.S. economic and foreign policy.

Ahead of His Time?

Roosevelt died shortly after his fourth term began, elevating Truman to the White House. Wallace had been appointed Secretary of Commerce by Roosevelt and continued to serve in this capacity under President Truman.

After World War II ended, he opposed the hard-line foreign policy taken against the Soviet Union and was fired by Truman after making this opposition public. Wallace soon formed the Progressive Party and ran an unsuccessful campaign for the presidency in 1948.

1948 Election

Wallace’s campaign opposed the Truman Doctrine, which called for an aggressive program to stop Soviet and communist expansion across the globe. The party platform also opposed the Marshall Plan and advocated spending the money on education, welfare, and other domestic programs.

Wallace’s Progressive Party was ahead of its time on civil rights and advocated the end of segregation in the U.S. armed forces and federal employment. The platform also called for the passage of legislation to ban discrimination and support fair employment practices. On economic policy, the platform supported the establishment of a federal minimum wage, national health insurance, and scholarships to pay for higher education for Americans. Wallace was soundly defeated in the 1948 election and ended his career in politics.

If Wallace had run with Roosevelt in 1944 and ascended to the White House, he would have had nearly four years in office before facing the voters and would have been able to influence the foreign and economic policy of the United States. The Cold War began in earnest soon after World War II ended, and a more lenient policy against the Soviet Union might have led to more influence and power by that nation. Also, an aggressive stance for equal rights for Black Americans in the late 1940s might have launched the civil rights era a decade earlier.

Who Verifies if a Candidate is Qualified to Run for President?

The best answer is party members who sponsor them and the media, which performs deep investigations into candidates.

Wha Is the Constitutional Role of the Vice President?

The vice president is primarily the president’s replacement if something were to happen, in addition to being the President of the Senate, only voting to break ties.

What Are the 5 Requirements to be Vice President?

Vice presidential candidates must be natural-born citizens of the U.S., be at least 35, and have been a permanent resident of the U.S. for at least fourteen years.

The Bottom Line

Garner said that the vice presidency is not “worth a warm bucket of spit” (or “piss,” depending on the account) and most occupants of the office have agreed. Despite this pessimistic view, nine vice presidents have ascended to the White House due to the death or resignation of a sitting president, making the selection of a running mate one of the most important decisions for a president.