financial

Fact checked by Vikki Velasquez

Many Americans approach filing taxes with trepidation. In fact, 64% of Americans report feeling stressed about tax season. The best way to alleviate tax-related stress is to take a deep breath and file your return early, however. You’ll lower your stress level and get your tax refund back faster if you get your return in well in advance of the April 15 deadline.

“Filing your taxes as soon as your documents are ready offers both financial and mental benefits. While many Americans procrastinate, taxes are inevitable so why hold on to unnecessary stress and mental fatigue? Filing early lifts that burden off your shoulders while also unlocking key tangible benefits,” says Zack Gutches, a certified public accountant and lead financial planner at True Riches Financial Planning.

Key Takeaways

• You’ll get a quicker refund if you file your tax return early.
• You’ll have more time to plan how you’ll pay your taxes if you prepare your taxes early.
• Early tax preparers have more time to fix mistakes and they may save on tax preparation costs.
• Filing early will help you avoid penalties and reduce stress.

Get Your Refund Faster

A big advantage of filing your taxes early is that you’ll get your tax refund more quickly if you’re due one.

“The IRS processes returns on a first-in, first-out (FIFO) basis, meaning the earlier you file, the sooner you’ll receive your refund,” Gutches says. “Instead of giving the government an interest-free loan, you can put your money to work sooner, whether that’s earning 4%+ in a high-yield savings account, investing in a money market fund, or allocating funds toward debt repayment, retirement savings, or college funding,”

Important

There have been some concerns that tax refunds could be delayed in 2025 due to pending IRS budget and staff cuts, but the New York Times reported in February that any effect shouldn’t be significant if you e-file your return and it’s not flagged for errors. And it’s another good reason to file as early as possible in case the cuts do take effect.

More Time to Plan If You Owe

Nobody likes a tax bill but you’ll have more time to consider your options for paying if you prepare your taxes early.

“Even if you owe taxes, you don’t have to pay until April 15. Filing early gives you extra time to plan how you’ll cover the payment, whether that’s adjusting your budget, shifting funds, or identifying missed deductions, credits, or pre-tax retirement contributions to lower your tax bill,” Gutches says.

Protect Against Identity Theft

Another advantage to preparing your tax return early is that it helps to guard against identity theft.

“Tax-related identity theft is a growing issue,” Gutches says. “Fraudsters will attempt to file a return using your Social Security number before you do, claiming a refund in your name. Filing early helps block identity thieves from beating you to the punch.”

More Time for Corrections

You’ll give yourself time to catch and fix mistakes if you prepare your tax return well ahead of the April 15 deadline.

“Filing early allows extra time to catch any mistakes or omissions. If you spot any errors on the return, taxpayers can fix them and finalize without the added stress of a looming deadline,” says Prudence Zhu, a certified public accountant and founder of Enso Financial.

You can submit an amended tax return to the IRS if you catch a mistake after you’ve filed your return.

Reduced Costs

You may catch a break on your tax prep costs by preparing your return early.

“Some preparers offer discounts for clients who submit their documents early, and tax software companies often provide promotional codes early in the filing season,” Zhu says. “On the other hand, if you file last minute, expect higher prices and limited service options. Tax preparers’ schedules fill up fast during tax season.”

Maximize Tax Benefits

Early tax preparers have more time to explore tax-saving benefits.

“By filing early, taxpayers have more time to strategize tax-saving opportunities such as making last-minute contributions to tax-advantaged accounts like IRAs or HSAs, which can lower taxable income. It also gives you time to explore any potential deductions or credits you might have missed,” Zhu says.

You can also submit an amended return to the IRS if you realize after you’ve filed that you’re eligible for a tax credit or deduction that you didn’t claim.

Avoid Penalties

File early and you won’t have to worry about late filing penalties.

“Filing early allows more time to prepare for payment, minimizing the risk of penalties and interest for late filing,” Zhu says.

The Bottom Line

Preparing taxes early saves you stress and money. File an early return, and you’ll receive your tax refund more quickly. You’ll give yourself more time to plan how you’ll pay the tax bill if you owe one, more time to explore tax benefits, and more time to correct errors. You’ll be able to avoid penalties for late filing by not leaving your return to the last minute and you may save money on tax prep costs.

Reviewed by Ebony Howard
Fact checked by Suzanne Kvilhaug

Unclaimed property generally consists of unclaimed money in financial and bank accounts that have been dormant for more than a year. Each state has a process by which unclaimed property can be identified and reclaimed; these returned assets are worth billions of dollars every year.

Find out how to check if you have any unclaimed property and how to claim it.

Key Takeaways

• Unclaimed properties are assets or funds for which the rightful owner cannot be located or has left the account dormant for a prolonged period.
• Typically unclaimed funds and property are handed over to the state where the assets are located after a dormancy period has passed.
• States have established processes whereby legal owners of assets can reclaim unclaimed funds.
• When claiming unclaimed funds that have risen in value, taxes may be assessed on the current value of the property.
• If you claim property, it will be treated as ordinary income and taxed accordingly unless the property is related to a tax refund.

Reclaiming Property

The process for reclaiming unclaimed or escheated property varies by state, as the federal government does not have a central website for finding unclaimed property. Most state websites are similar in format and often fairly simple to navigate. The office of the comptroller is usually the official agency tasked with managing the list of unclaimed property.

Funds associated with unclaimed property may be absorbed and used in state operating expenses. Still, unclaimed property funds are nearly universally kept track of as debt to the property owner on record.

Once you’ve identified the website where unclaimed property queries are made, you can use criteria such as first and last name, business name, ZIP code, and city associated with the property to locate it.

Important

Many government agencies are prohibited from contacting owners of unclaimed funds/assets by phone. Scammers are aware of this limitation and may attempt to defraud individuals by claiming to have records of unclaimed property.

Unclaimed Property and Dormancy Period

Unclaimed property is essentially property that has gone unclaimed beyond the dormancy period. The dormancy period is the amount of time between when a financial institution reports an account or asset as unclaimed and when the government deems that account or asset to be abandoned.

For most states, the dormancy period is five years. When a property is officially designated by the state as abandoned or unclaimed, it undergoes a process known as escheatment. The state assumes ownership of that property until the rightful owner files a claim.

Depending on the state, the comptroller or state treasury office may make attempts to locate the rightful owner of the unclaimed property. Methods may include mailing notifications to the last listed address of residence or employment.

Property can often go unclaimed when the owner fails to report a new mailing address so this method can be less successful. States may also subscribe to online contact databases that could have more up-to-date information.

Escheatment

After the dormancy period, dormant accounts become unclaimed property. At this point, states have escheatment statutes take effect.

Escheatment state laws require companies to transfer unclaimed property from dormant accounts to the state general fund. This fund takes over record-keeping and returning of lost or forgotten property to owners or their heirs if the owner has passed away. This protects the unclaimed funds from reverting to the financial institutions at which they are held.

Owners can gain back the unclaimed property by filing an application with their state at no cost or for a nominal handling fee. Because the state keeps custody of the unclaimed property in perpetuity, owners can claim their property at any time.

A dormant account with no activity for a long time, other than posting interest, is also a potential case of unclaimed property. A statute of limitations usually does not apply to dormant accounts, meaning that funds can be claimed by the owner or beneficiary at any time.

Note

Financial institutions are required by state laws to transfer resources held at dormant accounts to the state’s treasury after the accounts have been inactive for a certain period. The length of this period varies by state.

Unclaimed Property and Taxes

Types of unclaimed property include uncashed payroll checks, inactive stocks, court funds, dividends, checking and savings accounts, and estate proceeds. When property accounts go unclaimed, they are turned over to the state for reasons that may include:

• Death of the account holder
• Failure to register a forwarding address after changing residence
• Forgetting about an account

Unclaimed property is not taxed while it is filed as unclaimed; however, the property may be officially recognized as taxable income when it is reclaimed. Some unclaimed funds such as investments from a 401(k) or an IRA can be reclaimed tax-free.

Example of Unclaimed Property

According to the Office of the New York State Comptroller, the state returns $1.5 million in unclaimed property to people who file claims each day. As of March 2025, the state had returned $137 million since the start of the year.

In addition, every year, the Internal Revenue Service (IRS) has millions in unclaimed federal tax refunds. While there is no centralized database for unclaimed funds, you can visit USA.gov’s unclaimed money from the government page and check the various links to sites that can help you find unclaimed money.

What Kind of Assets Can Be Unclaimed Property?

Unclaimed property is often cash, such as dormant bank accounts, tax refunds, or payroll checks. However, it can also include a variety of assets, such as stocks, dividends, bonds, utility deposits, insurance payouts, and tangible property.

What Is an Example of Tangible Unclaimed Property?

Tangible unclaimed property is physical property, rather than intangible property such as an uncashed paycheck. An example of tangible unclaimed property could be the contents of a safety deposit box that was abandoned or inherited.

Do All States Have Unclaimed Property Laws?

All states have unclaimed property laws, however, these laws differ from state to state. Unclaimed property is managed by the rules and regulations of the state where the property is held, not the state in which you currently reside.

The Bottom Line

Unclaimed properties are assets for which the owner can’t be located. These properties can be tangible, such as the contents of a safety deposit box, or intangible, such as unclaimed tax refunds. Unclaimed property can also be accounts that have been dormant for a prolonged period.

Unclaimed property is usually handed over to the state in which the assets are located after the end of the dormancy period. States then have rules and regulations governing how the legal owners of these assets can reclaim their property. Reclaimed property is treated as income and subject to ordinary income tax rates unless it is related to a tax refund.

Captive insurance can have perfectly legal tax and financial benefits, but some companies go too far

Reviewed by Lea D. Uradu
Fact checked by Vikki Velasquez

All businesses need to protect themselves against financial risk, and that’s where insurance comes into the mix. But, businesses don’t always have to purchase insurance from another company.

With captive insurance, a business can provide its own coverage, offering better protection against the types of risks it may likely face as well as potential financial benefits for the business owners. Captive insurance is also sometimes promoted as a tax shelter, but using it that way has its hazards.

Key Takeaways

• Captive insurance is a form of self-insurance for businesses.
• A captive insurance company may insure a single business or a group of them.
• Captive insurance can be less expensive than commercial insurance and better tailored to the specific needs of particular types of businesses.
• Captive insurance can also provide tax and other financial benefits to business owners.
• The IRS can challenge captive insurance arrangements that it believes to be skirting the law.

How Captive Insurance Works

A captive insurance company is owned by the business or businesses it insures. Unlike mutual insurance companies, which are also owned by their policyholders (who may number in the many thousands), captive insurance companies are both owned and controlled by policyholders. In a nutshell, captive insurance is a form of self-insurance. However, a captive insurance company is subject to state regulations just like other insurance companies.

While policyholders own the captive insurer, their ownership interest is not an investment in the true sense of the word. Ownership ceases when insurance lapses, such as when the business owner no longer needs coverage and stops paying for it. The policyholder cannot sell, gift, or bequeath anything.

Captive insurance companies can be set up in a variety of ways:

• A pure captive insures only its parent company and affiliated companies.
• Group captives can have multiple owners and insure multiple companies.

For example, companies in a single industry might form a captive insurance company (a group captive) to meet their special risk needs.

Captive insurers are common in the U.S. and other jurisdictions worldwide. Each country has separate rules about capitalization and how much surplus these insurers must retain. According to the National Association of Insurance Commissioners (NAIC), there are more than 7,000 captive insurers worldwide and about 90% of Fortune 500 companies have captive subsidiaries.

Important

Businesses risk their own capital when they decide to create their own captive insurance company.

Captive Insurance As a Tax Shelter

Captive insurance can have legitimate tax benefits for business owners. Premiums paid to a captive insurer can be tax-deductible if the arrangement meets certain risk-distribution standards. Thus, the business gets a current year write-off even though losses may never occur.

The Internal Revenue Service (IRS) laid out the rules (in publications in Rev. Rul. 2002-89 and Rev. Rul. 2002-90) under which captive insurance constitutes insurance for federal income tax purposes so that premiums are deductible.

There are two safe harbors under which captive insurance is viewed as real insurance (i.e., premiums are deductible):

• Fifty percent third-party insurance safe harbor. If the captive insurance company gets at least 50% of its premiums from unrelated third-party insureds, there is sufficient risk distribution.
• Twelve insured safe harbor. If the captive insurance company has at least 12 insureds, each having between 5% and 15% of the total risk, then there is sufficient risk distribution, too.

Risks of Captive Insurance

The IRS may still challenge premium deductions where it believes stopgaps thwart risk distribution, such as reinsurance or tax-shelter-like arrangements.

In 2016, the IRS identified micro-captive insurance transactions as a potential risk for tax avoidance or evasion. Such arrangements are still singled out as abusive tax shelters on the IRS’s “dirty dozen” list of tax scams and schemes.

As the IRS explains:

“Abusive micro-captives involve schemes that lack many of the attributes of legitimate insurance. These structures often include implausible risks, failure to match genuine business needs, and in many cases, unnecessary duplication of the taxpayer’s commercial coverages.”

How Captive Insurance Protects Businesses

Traditional insurance products may not meet a particular company’s needs, at least not at an affordable price. Captive insurance can provide coverage that is better tailored than is available through existing products. For example, professional services businesses and construction companies may find captive insurance appealing.

Trade associations may also offer captive insurance for their members. For instance, the Coin Laundry Association used captive insurance for many years because its members could not obtain traditional coverage for their 24-hour businesses.

The extent of this special type of coverage can be limited. According to the International Risk Management Institute, the typical captive insurance limit is $250,000 per occurrence.

The captive insurer does not protect losses over and above that limit, but companies with captive insurance can use reinsurance to cover losses that exceed the limit.

What Financial Advantages Does Captive Insurance Provide?

While the main reason for captive insurance is risk management, an ancillary benefit for businesses is that they stand to profit if the company’s underwritings are sound. Captive insurers generally distribute dividends to owners.

One way to increase these returns is to reduce claims. This can be done by better business practices aimed at safety so that claims are minimized or avoided. Another way is to control operating expenses. Captive insurance companies can run leaner operations than commercial insurers and don’t, for example, need the big advertising budgets that their commercial counterparts often have.

Who Regulates Captive Insurance Companies?

Like other types of insurance companies, captives are regulated primarily on the state, rather than federal, level. As the Insurance Information Institute notes, “A captive insurance firm must be licensed in each state in which it does business or must use a fronting insurer to do business across state lines. Most jurisdictions have established a specific regulatory framework based on the structure and operation of captives.”

The III adds: “Captives that are owned by publicly held companies also must comply with all the regulatory compliance and governance requirements stipulated by the Sarbanes-Oxley Act, enacted in 2002 to increase the accountability of boards of publicly held companies to their shareholders.”

What Is Reinsurance?

Reinsurance is a means by which insurance companies spread their financial risk through contracts with other insurance companies. Spreading the risk to other insurers allows ceding insurance companies to remain solvent by reducing the net liability from large or multiple losses.

What Are the Disadvantages of Captive Insurance?

A major potential downside of captive insurance is that the owners are putting their own capital at risk. Another is that it represents a long-term commitment.

As a 2021 report from the Insurance Information Institute notes, “Companies must commit significant capital in order to comply with minimum capitalization requirements…While considerably less capital is required when joining a member-owned group captive versus a single parent captive, member companies are generally expected to make a long-term commitment when joining the captive and it likely would not make sense unless they planned to remain in for at least three to five years.”

The Bottom Line

Captive insurance can meet risk-management needs for a small or large company while providing financial rewards for its owners. But this type of insurance is not for everyone.

Typically, initial premiums can run into the hundreds of thousands of dollars or even millions. And there are considerable start-up costs—often more than a quarter of a million dollars, to create a captive insurance company and cover fees to actuaries, attorneys, and others.

Fact checked by Vikki Velasquez

There are many reasons why teens should invest. The most significant advantage is the time they have to allow their investments to grow and increase in value, benefiting from the time value of money and compounding. 

The other not-so-obvious reasons are teenagers bring their views of the world as they see them from their generation, activities, interests, values, and culture. These might give them their own investment opinions about companies to invest in based on the products they sell, the culture, or the brand.

For instance, Millennials and Gen Z had an important role in driving environmental, social, and governance (ESG) investing because they voted about issues such as the environment and social equity through their investing. 

Sometimes it might seem confusing where to begin, but it does not have to be. There are many strategies and tools to help young people as they begin their investment journey. In this article, we break down the most important things that teens should know about investing.

Some people may have a misconception that investing is off-limits for people who are not yet legal adults. But unlike the casino or the bar, there are no age restrictions on investing. It is true that you generally need to be at least 18 years old to open your own brokerage account, but people younger than that have plenty of options to invest—although they require varying levels of supervision or collaboration with an adult.

Key Takeaways

• People who have not yet reached the age of legal adulthood have various options to begin investing in coordination with a parent or responsible adult.
• Beginning to invest at a young age provides significant advantages, as investments have a longer time to grow and benefit from the power of compounding.
• Although many brokerages and trading platforms have age restrictions, there are apps specifically geared toward teen investors.

The Importance of Investing Early

Beyond just being allowed to invest, younger people have an upper hand—quite simply, the sooner you begin investing, the more time your money has to grow. This early-mover advantage for younger investors is magnified by the power of compounding.

As you reinvest your capital gains and interest to generate additional returns, the value of your account can snowball higher, making it even more beneficial to start investing while time is on your side.

A quick example can illustrate the advantages of getting an early start. Let’s say you begin to invest for retirement when you begin your career at age 22.

If you consistently set aside $100 per month and earn a healthy 10% return on your investment (compounded annually), you will have $710,810.83 when you reach age 65. However, if you had started investing at age 15, you would have $1,396,690.23, or nearly double the amount.

Riley Adams, CPA, is the founder and publisher of the financial literacy website WealthUpdate and an expert on teen investing (as well as investing for all ages). For Adams, helping young people understand the benefits of investing early is an important step in encouraging their financial empowerment.

“The one thing, the last true edge in investing, is really time in the market,” Adams explains. People who realize this edge and begin to take advantage of it sooner in life increase their chances of financial success.

Custodial Accounts

In a custodial account, an adult controls the investments on behalf of a minor until they reach 18 or 21 years of age, depending on the state. Custodial accounts under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfers to Minors Act (UTMA) are a great way to transfer assets to a child or teen, but the custodian adult maintains the legal responsibility and the final say over the investment decisions.

People younger than 18 can even get an early start on retirement planning through a custodial Roth individual retirement account (Roth IRA), but they will need earned income from a job or another paid activity to begin contributing.

There are also joint brokerage accounts that allow minors to share legal ownership with an adult, which may help younger people take a more active role, although investment decisions are generally subject to approval by the adult co-owner.

Are You Ready to Invest?

The benefits of investing when you’re young are clear enough, but some teenagers may still be wondering if they’re prepared to take the leap. Here are a few questions teens may want to ask themselves as they consider whether the time is right to make their first investments:

• Do you have money from a job or another source that you won’t need to access immediately?
• Can you afford to lose this money if your investments don’t play out as planned?
• If you’re under age 18, do you have a parent or another adult willing to help you invest?
• Do you know what you’re getting into? In other words, do you understand the investment you’re considering and how it works?

According to Adams, companies that teenagers frequently interact with can spark an interest in investing. Buying shares of a familiar company is a way to enter the stock market while following the critical advice of investing in what you know.

“Being engaged with companies you see on a regular basis gets you interested, makes you want to understand how they tick, how they grow, how they make decisions,” Adams says. “And then once you kind of understand that, digging a little deeper and asking the question of: Do I think this is good, do I think this is going in the right direction, and then do I have money that I want to invest in it?”

The Risk of Investing

Just as younger people need to be aware of the upside of investing early and often, it’s important for them to know the risks. Of course, the main downside to investing is that it’s possible to lose some—or all—of your money.

While the reality of potential losses is impossible to escape, different types of investments are riskier than others, allowing you to control the amount of risk you would like to take on. As a general rule, the riskier the investment, the greater its potential to provide you with higher returns.

Understanding this tradeoff is key for all investors—young and old—in determining their strategy. But yet again, youth has its advantages. Since younger investors have a longer time frame to remain in the markets, they can afford to take more risks, thereby increasing their potential rewards. When the inevitable market downturn strikes, younger investors have time to wait for the markets to recover.

This explains why the classic investment advice says that you should take more risks when your goals are far in the future but become more conservative as you approach the time when you’ll need to access your money. However, no matter your age, it’s important to discover your own style as an investor, ensuring that you’re OK with the level of risk you’re facing.

“People have different risk tolerances, and I think you need to be honest with yourself,” Adams advises. “If someone walks you through the logic of ‘You’re young, you should take on risk, you should let it grow’—but you just don’t feel comfortable with it, you absolutely should not do that. You should look for lower-risk investments that might not have as much upside but also might not have as much downside.”

Note

People younger than 18 can get an early start on retirement planning through a custodial account. In a custodial account, an adult controls investments on behalf of a minor until they reach 18 or 21 years of age, depending on the state. Note that the conditions for different types of accounts may vary by the financial institution providing the service.

What Teens Can Invest In

Once you get a sense of your own risk tolerance, you can begin researching investments with the characteristics that you believe will best help you reach your goals. Depending on what you hope to accomplish and in what time frame, here are a few of the more common types of investments, or asset classes, that you may choose to buy.

Stocks

When you buy a stock, you take over a small share of ownership, or equity, in a publicly traded company. Stocks can earn you money in two ways:

1. Many companies make payments known as dividends to their shareholders.
2. Stock prices fluctuate based on the market’s determination of the company’s value, and if the price of your stock goes up, you can sell it for a profit.

Because of their changes in value, known in the markets as volatility, stocks can be risky. If the company that you invested in begins to struggle, you may be left with shares that are worth less than you paid for them. However, with this risk comes higher potential returns, making stocks a useful investment for younger people with longer time horizons.

Funds

Whereas stocks represent a share in a single company, you can also buy shares of funds that invest in multiple stocks and other types of assets.

Directed by professional money managers, mutual funds invest in an array of assets based on an objective outlined in their prospectus. Exchange-traded funds (ETFs) also own a basket of different investments, but they are designed to track a specific market index, sector, or other assets, and unlike mutual funds, they are available to trade on the stock market.

Funds offer numerous advantages to younger investors. Since they comprise multiple investments in one, funds offer built-in diversification. In other words, investors in a fund automatically own a variety of assets, so if one component loses value, they won’t see their investment completely wiped out.

While some mutual funds charge steep fees for taking an active role in managing the portfolio, passively managed and index-tracking funds generally have low fees and a proven history of providing solid returns, particularly over the long term.

Bonds

Instead of equity, or ownership in a company, bonds are a type of debt instrument. When you buy a bond, you are essentially making a loan to the bond issuer, who agrees to pay back the principal amount borrowed along with interest payments. Bond issuers include governments as well as corporations.

Bonds are considered fixed-income investments because they provide preset payments over a particular time period. They are particularly useful for investors looking to generate a regular income. However, they are less risky than stocks and by extension offer lower return potential, making them less suitable for young investors seeking long-term growth.

Other Investments

Other types of investment assets could be suitable for certain young investors. For instance, certificates of deposit (CDs) allow you to earn a fixed interest rate on your investment over a specific time frame.

CDs work a lot like a savings account, but since you agree to leave the money alone for the duration of the investment, you generally earn a higher interest rate. CDs are more conservative than stocks or bonds, with a more moderate risk profile but lower return potential.

The list of potential investments does not stop there. From high-risk cryptocurrencies to derivatives including futures and options, there are plenty of ways to put your money to work. However, since these instruments are riskier and more complex, they are more suitable for advanced investors than for those who are just getting started.

5 Steps to Start Investing as a Teen

For a young person who has decided to invest some of their money, the question is: What’s next? Here’s a step-by-step guide to help teens get started along their investment journey:

1. Educate yourself about investing: There are plenty of online and printed materials to help you grasp the basics. You can also ask your parents or another person with investment experience to share their knowledge.
   
2. Set your investment goals: It’s important to be upfront about your end game. What do you want to do with the money? Is your goal far in the future? Setting clear goals will help you determine an investment strategy that works for you.
   
3. Select investments: With so many options available, researching potential investments can seem overwhelming. It is key to ask yourself what type of investment has the best chance of helping you reach your goals.
4. Open a brokerage account: You will need to open an account where you can buy and hold your investment assets. Although you will be unable to open a brokerage account on your own if you are under the age of majority, you can work with a parent, guardian, or trusted adult to open a custodial or joint account that will allow you to begin investing.
5. Buy your selected investment: Now it’s time to put your investment plan into action. The process may vary based on the investment you’ve chosen, but you should be able to buy almost any asset on your brokerage platform’s website or mobile app.

How Do You Invest If You Are Under Age 18?

If you are younger than 18, you cannot be the outright owner of a regular brokerage account. However, with the help of a parent, guardian, or another trusted adult, you are never too young to start putting your money to work for you. With adult supervision, you can open a custodial account, where the adult manages the investments on your behalf until you reach the age of majority, at which point you can take over official ownership. Alternatively, you can open a joint account where you and an adult legally share ownership of the assets.

Is It Illegal to Start Investing Under 18?

Although there are certain restrictions, no laws prohibit people from investing when they are underage. It is generally impossible for minors to open their own brokerage account, but custodial accounts and joint accounts allow young people to begin their investing journey with varying amounts of adult supervision.

How Can I Build My Wealth at 16?

It is never too early to think about your long-term financial future. At age 16, there are some restrictions on how you can invest, but you can get started fairly easily with the collaboration of a parent, guardian, or another dependable adult. The conventional wisdom is that, at a young age, you can afford to take more risks with your investments, which will help you maximize your returns over time. In practice, this means concentrating on stocks and funds that have the potential to appreciate in value over time.

What Is the Child Poverty Rate in the U.S.?

Child poverty rates in the U.S. have fluctuated across the decades but remain persistent and structural. According to the U.S. Census Bureau, child poverty is higher than the national poverty rate. In 2023 (latest information) child poverty was at 13.7% while the national rate was 11.1%.

Some of the highest rates of poverty are found among Black, Hispanic, American Indian, and Alaskan Native children rather than their White counterparts. This means that for many children and young people, finding the resources to invest may not be as realistic as it is for other groups.

The Bottom Line

Although underage individuals will need to collaborate with a parent or another adult to begin investing, teens have a leg up—the supreme advantage of having time on their side. Custodial accounts and joint accounts provide an opportunity for teens to get a head start on building their wealth.

Fact checked by Vikki Velasquez
Reviewed by Katie Miller

Corporate business travel involves the movement of individuals representing their organizations for work-related reasons. Whether it’s attending client meetings, industry conferences, or sealing business deals, this practice covers a range of activities essential for professional growth.

In the interconnected global business environment, where face-to-face connections matter, corporate business travel plays a central role in sustaining and expanding enterprises across borders. Businesses face challenges in optimizing this crucial element of their operations. Strategic considerations must be taken into account to use this element of business to its greatest potential.

Key Takeaways

• Corporate business travel can unlock new opportunities for business growth, offering the possibility of reaching new markets, connecting with a wider pool of prospects, or developing brand presence and reputation.
• Traveling for business has many benefits for individuals as well, providing them the chance to meet fellow employees, grow their careers by participating in different opportunities, and network within the industry, not to mention experience new destinations.
• Business traveler safety and security are top priorities during corporate travel.
• To ensure that travel goes smoothly and stays within budget, companies should implement corporate travel policies and best practices for employees traveling on behalf of the company.

Importance of Corporate Business Travel

There are many business-related reasons to travel. It can encourage team building, promote learning, offer different perspectives, provide connection to a wider network, open up new markets, and drive sales. And whether or not the trip is for a specific purpose (such as a conference or a retreat), the benefits for employees and companies alike can extend beyond the stated intent of the trip, building confidence, cultural competency, relationships, and company reputation.

Many employees consider the opportunity to travel for work a desirable job perk, as it can offer the chance to venture somewhere that they may not ordinarily go, or to have a trip paid for by their company. And although expenses are associated with travel from a corporate perspective, they may be well worth the return on investment in terms of potential leads or sales—plus, many travel expenses are tax deductible.

Types of Corporate Business Travel

Corporate travel can take many forms, including the chance for employees and executives to attend events, such as meetings, conferences, industry networking sessions, and fairs. Or a trip may take advantage of educational opportunities such as training sessions, seminars, and workshops. Retreats and guided trips can make for valuable team-building time in new contexts that unlock different perspectives and strengthen working relationships.

Businesses may send their employees to a different location to network, sell, teach, learn from, or generally connect with external contacts or internal employees in regional offices, or to act on behalf of the company in some way.

Additionally, from a client perspective, business travel may occur as a form of due diligence, ensuring that your vendors or suppliers are legitimate, legal, and compliant organizations—for example, traveling for regular audits to confirm that what you think is happening at your supplier organizations is actually happening.

Creating a Corporate Travel Policy

From a company perspective, travel can be a challenge to administer and manage. Costs can easily balloon out of control; travel logistics can be time-intensive to arrange; employees traveling on behalf of the company must be granted a great deal of trust; and like any form of travel, business travel can open up risks to safety, security, and health.

No matter the size of the business or the frequency or complexity of travel, a corporate travel policy can be a helpful tool for any company to set expectations for its employees, communicate guidelines and processes, keep expenses within budget, and streamline booking and logistics.

In creating a corporate travel policy, companies might consider the following for both domestic and international travel, as applicable:

• Purpose(s) of travel
• Which employees are eligible to travel
• Booking and expense approval processes
• Risks and liabilities of travel and how to manage them
• Expectations for employee behavior, including acceptable and secure uses of technology, personal vs. leisure time, communication, and entertainment while traveling
• Eligible expenses for employees while traveling, including per diem rates if applicable
• Determine if employees will be reimbursed for their expenses or given a corporate credit card to use
• Financial tracking, recordkeeping, and reimbursement processes
• Acceptable booking practices and costs, including preferred agents or vendors
• Travel insurance

Of course, policies must also be communicated and enforced to ensure compliance and fairness. Including a travel policy as part of a corporate handbook or reviewing it in an onboarding or training module can be a good way to ensure that all employees receive and understand the information. Making it easily accessible for future reference on a shared drive or company portal will encourage employees to refer to it often.

Note

Business travel managers estimate, on average, that spending on domestic and international corporate travel is at 77% and 74%, respectively, of where it was before the COVID-19 pandemic. And two-thirds (67%) of business travel professionals are optimistic or very optimistic about the industry outlook for 2025.

Corporate Business Travel Best Practices

There are many best practices that both employees and companies can keep in mind around corporate business travel to ensure that it is a successful experience. These encompass everything from administration and financing to employee behavior and well-being.

Booking Corporate Travel

Booking travel can be labor-intensive and time-consuming. To improve the booking process, save on costs, and streamline expense reporting, it can be helpful to designate preferred travel agencies, online platforms, vendors, and lodgings for employees and executives to book with. If the size of the company allows, it can also be helpful to hire an employee or team specifically to oversee and administer corporate travel, or designate this duty as part of an employee’s broader job description.

Managing Travel Expenses and Budgeting

There are many financial considerations when it comes to corporate business travel, and expenses and budgets must be carefully managed to keep costs under control. Many travel expenses are tax deductible and can be written off, representing potentially significant savings for a company. Setting a budget and clear guidelines for employees about what can be an expense and what cannot is a must, as is creating and enforcing policies and procedures around tracking and reporting expenses.

Many corporate credit cards offer travel rewards and cost-saving opportunities for business travel, as do many other vendors and suppliers in the corporate travel industry. Businesses can take advantage of these to reduce inefficiencies and save on costs.

Ensuring Traveler Safety and Security

As with any trip, business trips are not without safety and security risks, including the potential for political or civil unrest, crime, illness, injury, accidents, emergencies, natural disasters, cybersecurity breaches, or theft.

To protect their employees against unexpected and undesirable circumstances, at a minimum, businesses will want to have a travel insurance plan in place. It’s also helpful for businesses and employees to undertake some form of travel risk assessment to aid them in navigating potential risks, and outline safety and emergency preparedness guidelines within a corporate travel policy.

Employees should also know how to call if something goes sideways, such as hotel booking issues. A travel agent? A supervisor? If there’s a hurricane, you don’t have a car, and your flight is canceled, can you book another last-minute flight to get around the weather to get home? These details should be planned ahead for.

Maximizing Productivity During Business Trips

The overlap of business and leisure, sometimes referred to as “bleisure,” is one of the main draws of corporate business travel. However, there can also be pitfalls associated with this gray area. It can be difficult to stay productive while working remotely, whether due to the many distractions of a new environment (positive and negative), or because the trip entails an increased workload or time spent away from day-to-day job duties.

Employees looking to manage their time efficiently while away should get clarity on the intended purpose and expected outcome of their trip, and their employer’s and teammates’ expectations for their workload and communication frequency. They can also plan ahead to make the most of their travel time and downtime, and anticipate time zone differences to ensure smooth communication and adjustment to jet lag.

It’s important for employees to maintain work-life balance while traveling on behalf of work. Researching food, entertainment, and fitness options and preparing accordingly can pay off in terms of mental and physical wellness, especially for frequent travelers.

Tips for Business Travel Etiquette

Traveling anywhere, whether domestically or internationally, comes with responsibilities and expectations regarding employee behavior. Perception is one of the most important factors to remember when traveling as a representative of your company. You represent your company out in the public, so you need to ensure you’re displaying any key values that your company represents when interacting with vendors, clients, and peers.

This applies to cultural sensitivity as well. Travelers should do research in advance of their trip to ensure that they can be mindful of local customs and professional etiquette and behave with awareness and respect. Even the basics, such as learning appropriate forms of greeting or how to handle money and payment, and committing a few common words or phrases to memory can go a long way toward demonstrating good intentions and building a new relationship across cultures.

Sustainable and Responsible Business Travel

Recognizing that corporate travel can have a negative impact on the environment, many businesses and individuals are reexamining their travel practices and policies to see where they can make improvements. One example is reducing emissions by booking different means of transportation when possible. In general, seeking out vendors or companies that promote sustainable travel practices and responsible tourism, and that support local communities and ecosystems, can be a good first step to reduce environmental impact.

Technology and Tools for Corporate Business Travel

Software and technology tools can be immensely useful across all aspects of corporate business travel. Travel management and booking platforms; apps for tracking expenses, navigation, or converting currency; and translation and communication tools are all things that employees and businesses alike can take advantage of before, during, and after traveling.

When it comes to technology, it’s important to account for cybersecurity risks and only bring what is necessary to reduce the potential impact of damage, loss, or theft.

What Is an Example of Corporate Business Travel?

There are many work-related reasons to travel, but many businesses will have their employees travel for conferences, events, sales and networking, seminars, meetings, team building, retreats, and to open up new business growth potential.

How Does Corporate Business Travel Work?

Corporate travel is simply travel for business-related purposes, so the nature of the trip will depend on its length and purpose. Companies whose employees travel frequently on behalf of the business should consider creating a corporate travel policy with information and guidelines for their employees.

Who Handles Corporate Business Travel?

Some businesses employ internal teams or individuals to manage corporate travel and business trips. At other times, employees are responsible for making their own arrangements within guidelines laid out by the company. There are also corporate travel agencies that businesses can leverage to streamline and optimize their bookings and costs.

What’s New About Corporate Business Travel in 2025?

Corporate business travel trends for 2025 include travel planning assisted by artificial intelligence (AI), continuing growth in sustainable and responsible travel, inclusive travel policies, virtual tours of hotels and meeting spaces before booking, the New Distribution Capability (NDC) data interface, travel safety apps, continuing growth of in-person events, personalized travel experiences, and continuing use of travel apps and platforms.

The Bottom Line

Corporate business travel can be an invaluable path to both business growth and individual career development, building strong relationships and teams. No matter what form it takes, it’s prudent for companies to collect, implement, and communicate best practices for business travel to their employees in a company handbook or corporate travel policy. This should incorporate areas such as expense and booking management, safety and security, productivity, sustainability, technology, and employee behavior and etiquette.

Reviewed by Lea D. Uradu

Home Equity Loan vs. Personal Loan: An Overview

A home equity loan and a personal loan both offer one-time, lump-sum payments that are required to be paid back in installments over an agreed-upon period of time. However, the main difference is that home equity loans are a specific form of secured loan in which the borrower’s home is used as collateral. Personal loans, on the other hand, can be secured or unsecured by collateral and are a much broader and varied category.

As personal loans tend to have a less intensive approval process than that of a home equity loan, they can generally be quicker and more straightforward to obtain. While home equity loans usually will take longer to be approved, they tend to offer a lower interest rate than a personal loan and potentially a higher loan amount as well. Before pursuing either option, however, it’s important to consider the amount you need and the intended purpose of your loan. 

Key Takeaways

• Home equity loans and personal loans both offer lump-sum payments to be paid back in installments over a specified time period.
• A home equity loan is a type of secured loan in which the borrower’s home is used as collateral, whereas personal loans can be secured or unsecured by collateral.
• Personal loans tend to be quicker and more straightforward to approve, while home equity loans require a property appraisal and a lengthier application and approval process.
• Home equity loans usually offer a lower interest rate than personal loans, but both usually offer lower interest rates than credit cards. 
• Both loan types can be used for a variety of purposes, though home equity loans can offer larger amounts, depending on the borrower’s home equity.

Loan Structure and Purpose

In a home equity loan, money is borrowed using the value of your home (more specifically, your home equity) as collateral. The Federal Trade Commission (FTC) defines home equity as “the difference between what you owe on your mortgage and how much money you could get for your home if you sold it.” This is why a home equity loan is sometimes referred to as a second mortgage.

Many personal loans are unsecured, but secured personal loans, which can be backed by collateral like a certificate of deposit (CD), stocks, a vehicle, or savings, are also available.

Personal loans can be used for a variety of purposes, including consolidating credit card debt, paying off higher-interest debt, paying for large expenses (such as a major home appliance or a vacation), or even establishing or improving your credit score. 

Home equity loans also can be used for a range of purposes, such as debt consolidation, large one-time expenses, or educational or medical expenses. Keep in mind that a home equity loan is a lump-sum payment, so a home equity line of credit (HELOC) may be a better fit for situations (such as a lengthy home renovation project or starting a business venture) where a large amount of ongoing funding is required or money will be needed continually over a period of time. 

In considering which loan to access for financing in the specific case of home renovations or improvements, a home equity loan may be a better option than a personal loan. This is because in most cases, the interest paid on personal loans is not tax deductible; however, home equity interest payments are—on the condition that the home equity loan is used to “buy, build or substantially improve the taxpayer’s home that secures the loan.”

Loan Application and Approval

Personal Loan Application and Approval

When applying for a personal loan, the following usually will be taken into consideration by the lender:

• Your credit score and credit report
• Your income and employment status 
• Any debt you may have (specifically, your debt-to-income (DTI) ratio)
• The interest rate permitted by the applicable state law 
• Collateral (if applying for a secured loan)

The loan amount and the length of the repayment term are also important factors that will determine the loan’s interest rate.

Keep in mind that personal loans may also include fees such as:

• Origination fee
• Fees for processing documents and paperwork
• Credit insurance (optional)
• Disability insurance (optional)
• Non-filing insurance (for secured loans)
• Late penalty fees

Home Equity Loan Application and Approval

When you apply for a home equity loan, a lender will calculate your loan-to-value (LTV) ratio or combined loan-to-value (CLTV) ratio to consider how much money they will allow you to borrow. This calculation essentially answers this question: If the house is sold, would it cover the amount owed by your original mortgage and this additional loan, and by how much? It is also a large factor in determining the interest rate of your loan. Usually, the lower your LTV, the lower your interest rate. 

To determine the value of your home, there is usually an appraisal process similar to that of getting a conventional mortgage. This can entail various fees and closing costs. Your income and credit history also will be taken into consideration. The maximum amount that you can borrow is usually equal to around 80% of your home equity. Keep in mind that lenders may have a minimum amount that they will lend in this type of loan agreement.

Interest Rates and Payment Terms

The interest rate on a personal loan can be fixed or variable, and it can be lower than that of a credit card but usually higher than that of a home equity loan (especially in the case of unsecured personal loans). In general, evaluate a personal loan interest rate by comparing it to the national average: If it’s lower, that’s a good sign. Personal loan terms can range in length—it’s advisable to choose the shortest loan term for which you can afford monthly payments.

Home equity loan interest rates are usually fixed, and they tend to be lower than both personal loans and credit cards because the home is used as collateral. However, the risk here is that if the loan is not paid off, the lender can repossess and sell the home to cover the remaining debt. It also means that if the value of your home decreases, you may end up underwater—the amount that you owe may exceed the value of the home.

Other Considerations 

When considering any loan, it’s important to shop around and compare the terms and deals offered by different banks, credit unions, and financial companies. Under the Truth in Lending Act (TILA), lenders are required to disclose the following information before borrowers sign any loan agreement so that they can understand and compare different offers:

• The full amount you are borrowing 
• Repayment amounts and their due dates
• How much it costs to borrow the money (referred to as the finance charge and includes interest and any fees applicable to the loan)
• The annual percentage rate (APR) 
• Any penalties that may apply for late payments
• The consequence(s) of not paying back the loan and actions that the lender may take
• Any penalties that may apply for paying the loan back early

Try using a loan calculator to get an idea of how much you’ll end up paying. 

How Do People Use Personal Loans?

Investopedia commissioned a national survey of 962 U.S. adults between Aug. 14, 2023, and Sept. 15, 2023, who had taken out a personal loan to learn how they used their loan proceeds and how they might use future personal loans. Debt consolidation was the most common reason people borrowed money, followed by home improvement and other large expenditures.

What Is the Difference Between a Personal Loan and a Home Equity Loan?

The biggest difference between a personal loan and a home equity loan is the structure. A home equity loan is a specific type of secured loan that uses the borrower’s house as collateral. While both offer lump-sum payments, the amounts for each can vary, and the approval process is different (usually significantly shorter in the case of personal loans).

What Is the Downside of a Home Equity Loan?

Perhaps the biggest downside of a home equity loan is that your house is used as collateral. If you default on the loan, then your lender may be able to seize your home.

Does a Personal Loan Have Lower Interest Rates Than a Credit Card?

Personal loans can have lower interest rates than a credit card, but not necessarily. It will depend largely on the length and type of the loan (e.g., secured vs. unsecured) as well as the borrower’s credit history. 

The Bottom Line

In considering whether to pursue a personal loan vs. a home equity loan, it’s important to determine whether either option is best for your financial situation (or whether another type of credit, such as a line of credit or a refinancing option, might be more suitable). Use a loan calculator to get an idea of how much you will potentially be spending. Considering the purpose of the loan and the amount that you’ll need, shop around for the best options among various lenders, and ensure that you understand the entire agreement and any associated fees before signing anything.

Reviewed by Eric Estevez

Nike, Inc. (NKE) is a leading textile, apparel, footwear, and accessories company with a market capitalization of $107.4 billion as of March 2025.

Phil Knight, Chairman Emeritus, started the company by selling shoes from his car. Nike began as Blue Ribbon Sports in 1964 and was incorporated as Nike in 1971. It launched its initial public offering (IPO) in 1980. Nike operates in North America, Western Europe, Central and Eastern Europe, Japan, and China.

Key Takeaways

• Nike is a global brand that makes sneakers and athletic wear for sports professionals and retail consumers.
• Nike has steadily increased its annual dividend since its founding.
• Nike’s first quarterly dividend payout was $0.05.

Dividend Policy

Nike, Inc.’s annual dividend was $1.60 as of Mar. 13, 2025 with a yield of 2.17%. The average dividend yield of the consumer goods sector is 2.22%.

Nike has paid quarterly dividends ranging from $0.5 to $0.88 per share, adjusting for its stock splits. Nike’s dividend initially increased by an average of 15.8% annually. Two of Nike’s competitors include Under Armour and Adidas. UA does not pay shareholder dividends. Adidas’ annual dividend was $0.239 on Mar. 13, 2025 with a yield of 0.2%.

Note

In 2024, analysts projected Nike is poised to become an S&P 500 dividend aristocrat. A dividend aristocrat must have increased its dividend for 25 consecutive years and be included in the S&P 500 Index.

Earnings Trends

For quarterly and annual reports, Nike includes operating segments for the NIKE and Jordan Brands in North America, Europe, Middle East/Africa, Greater China, and Asia Pacific/Latin America. Converse is also a reportable operating segment and reports for the design, marketing, licensing, and selling of casual sneakers, apparel, and accessories.

For fiscal year (FY) 2024, annual revenues increased 1% to $51.4 billion from $51.2 billion in FY 2023. Footwear represented 68% of yearly revenue. The North America segment accounted for 43% of revenue.

Dividend Ratios

In FY 2024, Nike returned $6.4 billion to shareholders through share repurchases and dividends. The company reported an annual EPS of $3.73, a 15.48% increase from 2023. In the most recent data, Nike’s dividend payout ratio was 40.64% in 2023. The dividend payout ratio indicates the portion of EPS paid to investors in cash dividends.

Nike’s Future Outlook

Earnings results for the quarter ended February 2025 are expected to show a year-over-year decline in earnings based on lower revenues. Nike lowered revenue expectations for 2025 but continues to focus on innovation and franchises. In 2024, Nike introduced the AlphyFly 3 to basketball and the Sabrina 1, a shoe that works across genders. 

Risks in 2025 include a volatile global economy, including sustained high inflation and interest rates. Fluctuations in the markets and exchange rates for foreign currencies impact global markets. Nike depends on the availability and acceptable pricing for commodities and raw materials such as cotton or petroleum derivatives.

How Often Does Nike Pay Shareholder Dividends?

The company pays a quarterly dividend to shareholders in or around January 5, April 5, July 5, and October 5.

Has Nike Ever Had a Stock Split?

Nike has offered a 2 for 1 stock split to investors seven times from 1983 to 2015.

Who Is the CEO of Nike?

As of 2025, Elliott Hill is the President and CEO of Nike, Inc.

The Bottom Line

Nike, Inc. is considered a dividend leader and projected to be a “dividend aristocrat,” S&P stocks that have consistently increased shareholder payouts. Nike returned $6.4 billion to shareholders through share repurchases and dividends in FY 2024.

You could be saving too much if you do these things

Reviewed by Ebony Howard
Fact checked by Vikki Velasquez

Saving for retirement takes time and a lot of discipline. You also need to make sure that you’re setting aside enough money to maintain your lifestyle and do some of the things you couldn’t do during your working years. Failing to tailor your savings plan and overestimating how much you’ll need can be just as bad as not saving at all. That’s why you need to strike the right balance between saving so you’re not putting away too much.

Key Takeaways

• It’s possible to save too much for retirement if you rely on general assumptions to calculate how much you’ll need.
• Don’t overestimate your retirement income replacement rate or how much you will spend on housing.
• To save the right amount, figure out your timeline, don’t use the standard replacement rate, research living and medical expenses, and tally your expected retirement income.

Not Personalizing Retirement Planning

One big reason you may be saving too much is that retirement planning is too generalized. With the rise of online calculators and personal finance software, tech providers have built too many general assumptions into their technology.

But, not all assumptions work for all people. Everyone’s situation is different, so it cannot be easily packaged into a smartphone app or represented by a few numbers entered into an online calculator.

For example, it’s unlikely that any automated program will accurately predict how much of your pre-retirement income you will need and what the return rates, inflation, and spending will be throughout your retirement years.

Overestimating Your Replacement Rate

The replacement rate is the percentage of the pre-retirement income you need to maintain your standard of living in retirement. Overestimating your rate can cause you to save much more than you need for retirement.

A general rule often cited by researchers is to estimate that you will need 80% of your current income to maintain a comfortable lifestyle in retirement. But David Blanchett, head of retirement research at Morningstar, found that replacement rates vary when other factors are also considered, including different income levels and life expectancy.

His research concluded that the range of replacement rates is between 54% and 87%. If you plan for 80% and only need 55%, you’ll likely end up saving a sizable amount of money that you probably won’t need.

Important

The perils of saving too much for retirement include causing unnecessary financial stress, such as struggling to pay your mortgage or for one of life’s unexpected and costly emergencies.

Incorrect Housing Cost Forecasts

Where you live during retirement is one of the biggest costs you will face. How you plan for and manage this aspect of your life will have a big impact on how much you need to save for retirement.

“Spending on housing in retirement is extremely difficult to estimate,” says Mark Hebner, founder and president of Index Fund Advisors. “Most retirees will spend most of their retirement in their own home.”

If you plan to stay in your home as long as possible, your costs will be lower than if you move to an assisted living or continuing care facility. This is especially true if your mortgage is paid off.

The cost of housing was 32.9% of annual income, according to the Bureau of Labor Statistics. Assuming your household earns $50,000 a year and spends 30% of that annually on housing, you would reduce your costs by about $15,000 in retirement if your mortgage is paid off. If you factor that in over 30 years in retirement, you’ll need to save a lot less money than you had planned.

Note

As many as one in five Americans over 50 may not be saving enough money for retirement, while 61% of people say they may not have enough money to support themselves after they leave the workforce, according to a survey from AARP.

How to Save the Right Amount

So how do you know if you are saving too much or not enough? Taking these steps will help you save the right amount.

Figure Out Your Retirement Timeline

The first step is to determine how far from retirement you are. If you are more than 10 years out, it’s likely best to save a generic percentage. That’s because the further away from retirement you are, the harder it is to get the numbers exactly right. Experts often recommend between 10% to 15%.

If you are within 10 years of quitting work for good, you can do some more detailed planning that will shape how much you need to save in the years just before you retire.

“The easiest starting point is to assume the same standard of living in retirement as in one’s working years,” says Hebner. “Chances are, most will not spend that much money since they will no longer have to save for retirement, probably pay less in taxes, and also have certain costs like transportation go down significantly.”

Don’t Use the Standard Replacement Rate

Don’t just use the 80% of income as a replacement rate. Calculate how much you spend now, subtract expenses you will no longer have, and add in new expenses that will occur in retirement.

For example, you may relocate or, in the early years, travel more than you currently do. You may still have children in college or the early stages of their careers when you’re ready to retire. Or you may have grandchildren or other relatives you’re helping to support.

Once you have a realistic estimate of expenses, you can use that to figure out how much you need to save to be able to pay for them.

Research and Plan for Healthcare Expenses

Research and create plans for healthcare expenses. Since this is the biggest unknown in your budget, understanding your options will help you estimate the right amount to save. Research Medicare, long-term care insurance, assisted living costs, and in-home care costs. 

Tally Expected Retirement Income

Finally, tally up what you expect to receive from pensions if you have one, and Social Security. The more you have from these resources, the less you will need to save in retirement accounts.

What Is the Average Retirement Age in the U.S.?

The average retirement age in the United States is 64, according to Madison Trust Company. But, the age varies by state, ranging from 61 to 67. The normal retirement age, calculated by the Social Security Administration (SSA) is 67 for people born in or after 1960.

What Factors Should I Consider as I Save for Retirement?

There are some important factors you must consider when you save for retirement. They are:

• The age at which you plan to retire
• Your desired lifestyle
• Where you intend to live
• Your health

Understanding these points can help you determine how much you’ll need to set aside for your retirement. You may want to speak to a financial professional to help you plan.

Is It too Late to Save for Retirement in Your 40s?

No. Although you have less time to grow your nest egg and may have to save more than you would have if you started in your 20s, it’s never too late to start saving for retirement. Keep in mind that you may not be able to tolerate risky investments because you don’t have time to recover if market volatility eats away at your returns.

The Bottom Line

Planning how much you need for retirement is not an easy task. There are many variables to consider. With a little extra time and effort, you can figure out the amount to save that’s right for you. And remember: If it turns out that you’re saving too much, you could consider retiring sooner or using some of that money now instead. Make sure you’re also saving enough for emergencies.

Reviewed by Somer Anderson
Fact checked by Suzanne Kvilhaug

Recessions are difficult times for most individuals and businesses. Some people suffer financially, and even more worry that they might become subject to the negative aspects of an economic slowdown.

But for a select group of professionals and businesses, a recession may actually be an opportunity to thrive and grow. Here are nine examples.

Key Takeaways

• Not all businesses and industries feel the same pain during economic downturns.
• Some businesses benefit as consumers cut back on various products and services. These companies may offer cheaper alternatives to luxuries or discretionary purchases.
• Other businesses that do well during recessions provide the consumer staples that are needed by most people and which they must continue to buy.
• There are also fundamental services that consumers can’t do without, even in hard times.

1. Accountants

No matter what the economy is like, individuals and businesses have to pay taxes and keep their finances in order. In fact, these responsibilities can be even more important in tougher economic times.

Accountants are likely to experience an increase in business during a recession. That’s because many people and small businesses may require the help of a professional to ensure that they’re making use of all of the tax benefits that are available to them. They may need professional guidance that ensures that they have a clear understanding of their income and expenditures as cash flow tightens.

Also, it has become common for new government benefit programs, loan guarantees, and financial regulations to be rolled out, updated, or expanded during recessions and other economic crises. Accountants can help people understand and navigate the new requirements and benefits of these changes for their businesses and personal finances.

At the very worst, some people may require the services of an accountant if they’re forced to file for bankruptcy.

2. Healthcare Providers

If any industry can be said to be recession-proof, it’s healthcare. People get sick in good times and bad, so the healthcare sector isn’t likely to have the same level of cutbacks or job losses that other sectors may experience.

3. Financial Advisors

People who have substantial assets or assets that are crucial to their well-being want to ensure that their money and property are well taken care of, especially during a recession.

Financial advisors often see an increase in demand for their work as people become concerned about the stability of their investments and seek guidance on how to protect their assets.

Beyond matters of personal finance, businesses also seek advice and insight regarding current and future economic trends or paths to recovery.

Economic Uncertainty

When the future of the economy is in doubt, demand for financial and economic advice from a range of professionals goes up.

4. Auto Repair and Maintenance Technicians

In tough economic times, people are less likely to purchase a new car. Instead, they’ll repair their current car. Auto repair and maintenance shops can do quite well during a recession.

One counterexample, however, is the Cash for Clunkers program that was instituted during the Great Recession, which spurred a modest spike in new car sales.

5. Home Maintenance Stores

Many people will choose a do-it-yourself (DIY) home renovation or upgrade rather than consider selling and moving during a recession. Depending on credit conditions, borrowing to buy a new home is usually not an option for most people during a recession.

Companies in the business of providing tools and materials for home improvement, maintenance, and repair projects are likely to see stable or even increasing demand during a recession. So do many appliance repair service people.

New home builders, though, do not get in on the action. They are among the worst hit as bank lending gets tighter, demand for new homes dries up, and home sales slump.

6. Home Staging Experts

It can be difficult to sell a home during a recession, but some people have to do it. People who specialize in home staging thrive as the housing market becomes increasingly competitive.

Home staging specialists might be real estate agents or interior design professionals, or both. A staging expert increases the appeal of a home—and the likelihood of a sale—by furnishing and decorating it to look its best to potential buyers.

7. Rental Agents and Property Management Companies

People who may not be able to afford to buy a home during a recession, and people who were forced to sell for financial reasons, still need a place to live. The answer for many, at least in the short term, is a rental.

Rental agents, landlords, and property management companies can thrive during a recession, when renting is likely to become a more appealing housing option.

Roommates

Recessions often lead to an increase in shared living arrangements. Many people move in with parents or extended family members.

8. Grocery Stores

For many, dining out during a recession becomes a financial extravagance at a time when money may be short. Supermarkets often see an increase in sales as people choose to cook more meals at home and entertain their friends at home more often. 

9. Bargain and Discount Stores

People cut back on luxuries during a recession, but that doesn’t mean they avoid spending on items that aren’t strictly necessary. There’s even a tongue-in-cheek economic theory called the Lipstick Index, which argues that sales of cosmetics will always rise during bad times because they’re a relatively affordable luxury.

When a recession reduces sources of income or threatens livelihoods, people look for less expensive products, whether they are discretionary or not. Importantly, for products considered staples—those items needed every day by individuals—bargain and discount stores offer solutions.

Bargain and discount stores see a great deal of traffic in a tough economy. People from all economic classes, including those who otherwise would never step into a dollar store, rethink their shopping habits when a recession hits.

How Can I Invest in Rental Properties as a Recession Opportunity?

You can start by investigating real estate investment trusts (REITs). REITs invest in multiple structures and holdings that may perform better in tough times. In particular, you may want to focus on rental real estate, where rental income is stable and perhaps high, given the need for people to have a roof over their head after they’ve sold their previous dwelling.

How Can I Invest in the Healthcare Sector?

Consider exchange-traded funds (ETFs) that contain a variety of healthcare holdings, from hospital companies to medical supply companies. Diversity is key, as some sectors—for example, elective surgeries—will likely underperform due to recessionary conditions.

How Can I Take Advantage of the Turn to Do-It-Yourself (DIY) Products and Retailers?

Look into an ETF that covers the home improvement sector, with investments in companies such as The Home Depot, Inc. (HD) or Lowe’s Companies, Inc. (LOW). Beware of any home building companies, such as Lennar Corporation (LEN) or Hovnanian Enterprises, Inc. (HOV), which are likely to bear the brunt of any downturn as new home sales slump during a recession.

The Bottom Line

Not every company is affected to the same degree by an economic downturn. On the one hand, some companies and sectors that are reliant on household disposable income may suffer during a recession as households tighten their belts and reduce discretionary purchases. But on the other hand, some businesses will thrive, or at least not suffer as much as the rest of the market.

Among the latter group are companies that provide basic necessities and can be seen as recession-proof compared to the rest of the market. Companies that cater to low-cost spending, such as dollar stores or DIY home improvement stores, can actually retain a positive outlook.

For investors, ETFs that cover recession-proof sectors may offer attractive returns and diversify holdings at the same time.

You can save on interest—but you’ll also put your home at risk

Reviewed by Ebony Howard

If you have large outstanding balances on your credit cards and struggle to pay them off, a home equity loan can help consolidate your debt at a much lower interest rate and lower your monthly payment. If you can only afford to make the minimum monthly payments on your credit cards, the high interest rates can compound the interest charged to you, increasing your debt over time.

If you have sufficient equity in your home or own your home outright, a home equity loan can help save you money in the long term. However, you’ll also want to consider the risks and some possible alternatives.

Key Takeaways

• A home equity loan can consolidate high-interest credit card debt, saving money and potentially lowering your monthly payment.
• Home equity loans generally charge much lower interest rates than most credit cards.
• A risk associated with home equity loans is that the lender could repossess or foreclose on your home if you are unable to make the payments.

What Is a Home Equity Loan?

A home equity loan is a second mortgage. It allows you to borrow against the equity accumulated in your home over the years. It’s based on the value of the home minus your outstanding mortgage loan balance. For example, if you own a home that’s currently worth $300,000 and you owe $200,000 on your mortgage, you have $100,000 in equity.

Based on your available home equity, a bank, credit union, or other lender may approve you for a home equity loan equal to a portion of your equity. You will need to apply for a home equity loan through the lender of your choice. Loan approval will be determined by factors other than your equity, including your income and credit score.

Most lenders require borrowers to have some form of income, a credit score of 600 or higher, and equity of at least 15% to 20% of their home’s value. However, if you don’t meet these requirements, you may still qualify but might get charged a higher interest rate.

A home equity loan does not get added to your mortgage, meaning you’re taking on additional debt on top of your mortgage and will be required to make two monthly payments for both the mortgage and the home equity loan.

Important

Many people take out home equity loans to repair and renovate their homes.

Advantages and Disadvantages of Paying Off Debt With a Home Equity Loan

Advantages

Using a home equity loan to pay off multiple credit cards can help simplify your finances since you’ll make one monthly loan payment instead of several. Also, the loan payment could be lower than the total of your monthly credit card payments. As a result, you can have extra funds in your monthly budget, which will allow you to save or pay down other debts.

Another advantage of using a home equity loan to pay off credit card debt is that the loan’s interest rate will likely be much lower than the rate on your credit cards. For instance, the average interest rate on a home equity loan can range from 6.92% to 8.24% as of Dec. 31, 2024, while the average credit card in Investopedia’s database charged approximately 24%.

Warning

One former advantage of home equity loans has been suspended, at least for some time. At one time, the interest you paid on a home equity loan was tax-deductible, while credit card interest was not. As a result of the Tax Cuts and Jobs Act (TCJA) of 2017, the interest on home equity loans is deductible only if you use the loan to “buy, build, or substantially improve” the home that secures the loan. That provision is slated to remain in effect at least until 2026.

Disadvantages

The major downside to taking out a home equity loan, whether that’s to pay off debt or for any other purpose, is that you’ll be putting your home on the line. Because your home serves as collateral for the loan, just as it does for your original mortgage, the lender could seize and sell it if you are unable to pay your loan back—a process called foreclosure.

When you can’t repay credit card debt, you’ll also face serious financial consequences, of course, especially for your credit score. However, since credit card debt is not secured by your home, you’ll be at far less risk of losing it. Even if you have to declare bankruptcy because of your debts, you can often keep your principal residence.

As noted above, a home equity loan adds to your debt because it is a separate loan, meaning you must make your mortgage payment in addition to the home equity loan payment each month.

Pros

• Lower interest rate

• One bill to pay off each month

• Less in total monthly payments

Cons

• Securing your loan with your home can be risky

• May impact your credit score

• Additional payment on top of your mortgage payment

Other Ways to Pay Off Credit Card Debt

A home equity loan is not your only option when it comes to paying off credit card debt. There are a few others you might consider.

Low-Interest Credit Card

Some credit cards allow you to transfer your balances over from other cards. This can make sense if you’re able to obtain a significantly lower interest rate on the new card.

Many balance transfer credit cards also offer promotional periods of six to 18 months for which they charge 0% interest on the transferred balance. Of course, moving a balance from one card to another won’t eliminate the debt. But it can help you pay it off faster—especially if you get a really great rate.

Debt Consolidation Loan

A debt consolidation loan from a bank, credit union, or other reputable lender could provide the money you need to pay off your credit card balances. This allows you to pool together a number of different debts into one. So, if you have multiple credit cards, loans, or any other outstanding debts, you can get a larger loan to pay them off.

Debt consolidation loans tend to charge significantly lower interest rates than credit cards. And you also have the added benefit of making one monthly payment to a single creditor rather than many payments to different lenders.

Borrow From Your 401(k)

Some 401(k) plans allow you to borrow from the money you’ve accumulated in your account. If your plan comes with a loan provision, you may be able to borrow as much as $50,000. What’s more, the interest you pay on the loan goes back into your account. Loans from a 401(k) do have a few caveats.

Keep in mind that you should only use this as a last resort. For one thing, the money you’ve pooled is intended for your retirement and should be kept for that purpose. If you withdraw the money, you’ll lose out on compounding, which is when you earn interest on your interest.

Typically, you must repay a 401(k) loan within five years or sooner if you leave your job. For another, if you’re unable to repay the loan, it will be treated as a withdrawal, subjecting you to income taxes and a possible 10% penalty on the unpaid balance.

How Long Does It Take to Get a Home Equity Loan?

The process of getting a home equity loan, from application to approval, depends on a few factors. In general, it can take a few weeks to a couple of months. The process could go smoothly and quickly if you’re prepared with all the required paperwork. However, there may be certain holdups that are beyond your control, including the underwriting process, the timing of the appraisal, and the closing.

Should I Get a Home Equity Loan or Refinance?

A home equity loan differs from refinancing. A home equity loan is an additional loan for your existing mortgage, meaning you’ll make two monthly payments. A home equity loan can provide additional cash for whatever you wish, such as a renovation or paying off other debts. A refinancing, on the other hand, pays off your existing mortgage with a new mortgage with different terms, such as a lower interest rate. In some cases, you can refinance and add the value of additional equity into your new loan.

How Can You Use a Home Equity Loan?

Home equity loans can be used for any purpose. If you meet your lender’s requirements and are approved, you can use the money to make improvements or repairs to your home, pay off other debt, or pay for other expenses. Keep in mind that you must make your monthly mortgage payment in addition to the one for your loan.

The Bottom Line

A home equity loan can be a good way to pay off high-interest credit card debt as long as everything goes according to plan. In deciding whether it’s a viable option, consider the strength of your financial situation. If you have a secure job (and/or a spouse with one) and are confident that you’ll have no trouble keeping up with the payments, it could make sense. However, a home equity loan could be risky if your job is on shaky ground and you have no emergency fund to fall back on. Remember, it can cost you your home in the worst-case scenario.